Exhibit 10.1
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CREDIT AGREEMENT
dated as of October 30, 1998
among
AMERICAN CAPITAL STRATEGIES, LTD.
VARIOUS FINANCIAL INSTITUTIONS
and
LASALLE NATIONAL BANK,
as Agent
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TABLE OF CONTENTS
SECTION 1 DEFINITIONS.................................................1
1.1 Definitions.................................................1
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1.2 Other Interpretive Provisions..............................12
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SECTION 2 COMMITMENTS OF THE BANKS; BORROWING AND
CONVERSION PROCEDURES......................................12
2.1 Revolving Loan Commitment..................................12
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2.2 Loan Procedures............................................13
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2.2.1 Various Types of Loans............................13
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2.2.2 Borrowing Procedures..............................13
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(b) Failure to Make Available.........................13
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2.2.3 Conversion and Continuation Procedures............14
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2.3 Commitments Several........................................15
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2.4 Certain Conditions.........................................15
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SECTION 3 NOTES EVIDENCING LOANS.....................................15
3.1 Notes......................................................15
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3.2 Recordkeeping..............................................15
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SECTION 4 INTEREST...................................................15
4.1 Interest Rates.............................................16
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4.2 Interest Payment Dates.....................................16
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4.3 Setting and Notice of Eurodollar Rates.....................16
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4.4 Computation of Interest....................................16
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SECTION 5 FEES.......................................................16
5.1 Non-Use Fee................................................16
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5.2 Upfront Fees...............................................17
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5.3 Agent's Fees...............................................17
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SECTION 6 REDUCTION OR TERMINATION OF THE REVOLVING COMMITMENT
AMOUNT.....................................................17
6.1 Reduction or Termination of the Revolving Commitment
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Amount.....................................................17
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6.1.1 Voluntary Reduction or Termination of the Revolving
Commitment Amount.................................17
6.1.2 Mandatory Reductions of Revolving Commitment
Amount............................................17
6.1.3 All Reductions of the Revolving Commitment
Amount............................................17
6.2 Prepayments................................................17
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6.2.1 Voluntary Prepayments.............................17
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6.3 All Prepayments............................................18
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SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES............18
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7.1 Making of Payments.........................................18
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7.2 Application of Certain Payments............................18
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7.3 Due Date Extension.........................................18
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7.4 Setoff.....................................................18
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7.5 Proration of Payments......................................18
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7.6 Taxes......................................................19
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SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR LOANS 20
8.1 Increased Costs............................................20
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8.2 Basis for Determining Interest Rate Inadequate or Unfair...21
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8.3 Changes in Law Rendering Eurodollar Loans Unlawful.........21
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8.4 Funding Losses.............................................22
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8.5 Right of Banks to Fund through Other Offices...............22
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8.6 Discretion of Banks as to Manner of Funding................22
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8.7 Mitigation of Circumstances; Replacement of Banks..........22
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8.8 Conclusiveness of Statements; Survival of Provisions.......23
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SECTION 9 WARRANTIES.................................................23
9.1 Organization...............................................23
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9.2 Authorization; No Conflict.................................24
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9.3 Validity and Binding Nature................................24
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9.4 Financial Condition........................................24
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9.5 No Material Adverse Change.................................24
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9.6 Litigation and Contingent Liabilities......................24
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9.7 Ownership of Properties; Liens.............................24
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9.8 Subsidiaries...............................................25
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9.9 Pension Plans..............................................25
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9.10 Investment Company Act.....................................25
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9.11 Public Utility Holding Company Act.........................25
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9.12 Regulation U...............................................26
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9.13 Taxes......................................................26
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9.14 Solvency, etc..............................................26
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9.15 Environmental Matters......................................26
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9.16 Year 2000 Problem..........................................27
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9.17 Insurance..................................................27
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9.18 Real Property..............................................27
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9.19 Information................................................27
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9.20 Intellectual Property......................................28
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9.21 Burdensome Obligations.....................................28
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9.22 Labor Matters..............................................28
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9.23 No Default.................................................28
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SECTION 10 COVENANTS..................................................28
10.1 Reports, Certificates and Other Information................28
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10.1.1 Annual Report.....................................28
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10.1.2 Interim Reports...................................29
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10.1.3 Compliance Certificates...........................29
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10.1.4 Reports to the SEC, 1940 Act Reports and Reports to
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Stockholders......................................29
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10.1.5 Notice of Default, Litigation and ERISA Matters...30
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10.1.6 Borrowing Base Certificates.......................30
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10.1.7 Management Reports................................31
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10.1.8 Projections.......................................31
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10.1.9 Subordinated Debt Notices.........................31
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10.1.10 Year 2000 Problem.................................31
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10.1.11 Valuations........................................31
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10.1.12 Other Information.................................31
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10.2 Books, Records and Inspections.............................31
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10.3 Maintenance of Property; Insurance.........................32
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10.4 Compliance with Laws; Payment of Taxes and Liabilities.....32
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10.5 Maintenance of Existence, etc..............................33
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10.6 Financial Covenants........................................33
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10.6.1 Consolidated Tangible Net Worth...................33
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10.6.2 Leverage Ratio....................................33
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10.6.3 Consolidated Pre-Tax Income.......................33
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10.6.4 Asset Coverage Ratio..............................33
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10.7 Limitations on Debt........................................33
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10.8 Liens......................................................34
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10.9 Operating Leases...........................................35
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10.10 Restricted Payments........................................35
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10.11 Mergers, Consolidations, Sales.............................35
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10.12 Modification of Organizational Documents...................35
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10.13 Use of Proceeds............................................36
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10.14 Further Assurances.........................................36
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10.15 Transactions with Affiliates...............................36
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10.16 Employee Benefit Plans.....................................36
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10.17 Environmental Matters......................................36
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10.18 Unconditional Purchase Obligations.........................36
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10.19 Inconsistent Agreements....................................37
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10.20 Business Activities........................................37
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10.21 Investments................................................37
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10.22 Fiscal Year................................................37
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10.23 Limitations on Equity......................................37
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SECTION 11 EFFECTIVENESS; CONDITIONS OF LENDING, ETC..................38
11.1 Initial Credit Extension...................................38
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11.1.1 Notes.............................................38
11.1.2 Resolutions.......................................38
11.1.3 Consents; Certificates, etc.......................38
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11.1.4 Incumbency and Signature Certificates.............38
11.1.5 Guaranty..........................................38
11.1.6 Security and Pledge Agreement.....................39
11.1.7 Custody Control Agreement.........................39
11.1.8 Opinions of Counsel...............................39
11.1.9 Insurance.........................................39
11.1.10 Copies of Portfolio Investments; Certain Documents.39
11.1.11 Payment of Fees....................................39
11.1.12 Search Results; Lien Terminations..................39
11.1.13 Filings, Registrations and Recordings..............39
11.1.14 Closing Certificate................................40
11.1.15 Borrowing Base Certificate.........................40
11.1.16 Other..............................................40
11.2 Conditions.................................................40
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11.2.1 Compliance with Warranties, No Default, etc.......40
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11.2.2 Confirmatory Certificate..........................40
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SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT.........................40
12.1 Events of Default..........................................40
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12.1.1 Non-Payment of the Loans, etc.....................40
12.1.2 Non-Payment of Other Debt.........................41
12.1.3 Other Material Obligations........................41
12.1.4 Bankruptcy, Insolvency, etc.......................41
12.1.5 Non-Compliance with Loan Documents................41
12.1.6 Warranties........................................41
12.1.8 Judgments.........................................42
12.1.9 Invalidity of Guaranty, etc.......................42
12.1.10 Invalidity of Collateral Documents, etc............42
12.1.11 Invalidity of Subordination Provisions, etc........42
12.1.12 Change of Control..................................42
12.1.13 Investment Company Act.............................43
12.1.14 Material Adverse Effect............................43
12.2 Effect of Event of Default.....................................43
SECTION 13 THE AGENT..................................................43
13.1 Appointment and Authorization..............................43
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13.2 Delegation of Duties.......................................44
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13.3 Liability of Agent.........................................44
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13.4 Reliance by Agent..........................................44
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13.5 Notice of Default..........................................44
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13.6 Credit Decision............................................45
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13.7 Indemnification............................................45
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13.8 Agent in Individual Capacity...............................46
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13.9 Successor Agent............................................46
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13.10 Collateral Matters.........................................46
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SECTION 14 GENERAL....................................................47
14.1 Waiver; Amendments.........................................47
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14.2 Confirmations..............................................47
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14.3 Notices....................................................47
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14.4 Computations...............................................47
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14.5 Regulation U...............................................48
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14.6 Costs, Expenses and Taxes..................................48
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14.7 Subsidiary References......................................48
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14.8 Captions...................................................48
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14.9 Assignments; Participations................................48
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14.9.1 Assignments.......................................48
14.9.2 Participations....................................50
14.10 Governing Law..............................................50
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14.11 Counterparts...............................................51
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14.12 Successors and Assigns.....................................51
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14.13 Indemnification by the Company.............................51
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14.14 Nonliability of Lenders....................................51
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14.15 Forum Selection and Consent to Jurisdiction................52
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14.16 Waiver of Jury Trial.......................................52
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SCHEDULES
Pricing Schedule
SCHEDULE 2.1 Banks and Pro Rata Shares
SCHEDULE 9.2 Conflicts
SCHEDULE 9.6 Litigation and Contingent Liabilities
SCHEDULE 9.8 Subsidiaries
SCHEDULE 9.15 Environmental Matters
SCHEDULE 9.17 Insurance
SCHEDULE 9.18 Real Property
SCHEDULE 9.22 Labor Matters
SCHEDULE 10.8 Existing Liens
SCHEDULE 10.21 Investments
SCHEDULE 11.1 Debt to be Repaid
SCHEDULE 12.1.12 Key Executives
SCHEDULE 14.3 Addresses for Notices
EXHIBITS
EXHIBIT A Form of Note (Section 3.1)
EXHIBIT B Form of Compliance Certificate (Section 10.1.3)
EXHIBIT C Form of Guaranty (Section 1.1)
EXHIBIT D Form of Security and Pledge Agreement (Section 1.1)
EXHIBIT E Form of Borrowing Base Certificate (Section 1.1)
EXHIBIT F Form of Assignment Agreement (Section 14.9.1)
EXHIBIT G Form of Opinion (Section 11.1.8)
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of October 30, 1998 (this "Agreement")
is entered into among AMERICAN CAPITAL STRATEGIES, LTD., a Delaware corporation
(the "Company"), the financial institutions that are or may from time to time
become parties hereto (together with their respective successors and assigns,
the "Banks") and LASALLE NATIONAL BANK (in its individual capacity, "LaSalle"),
as agent for the Banks.
WHEREAS, the Banks have agreed to make available to the Company a
revolving credit facility upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SECTION 1 DEFINITIONS.
1.1 Definitions. When used herein the following terms shall have the
following meanings:
ACSLR - see Section 10.5.
Affected Loan - see Section 8.3.
Affiliate of any Person means (a) any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person and (b) any officer or director of such Person. A Person shall be deemed
to be "controlled by" any other Person if such Person possesses, directly or
indirectly, power to vote 5% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or managers or
power to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.
Agent means LaSalle in its capacity as agent for the Banks hereunder
and any successor thereto in such capacity.
Agreement - see the Preamble.
Asset Coverage Ratio means on a consolidated basis for the Company and
its Consolidated Subsidiaries the ratio which the value of total assets, less
all liabilities and Debt not represented by senior securities (all as determined
pursuant to the 1940 Act and any orders of the SEC issued to the Company
thereunder), bears to the aggregate amount of senior securities representing
Debt of the Company and its Consolidated Subsidiaries.
Assignment Agreement - see Section 14.9.1.
Attorney Costs means, with respect to any Person, all reasonable fees
and charges of any counsel to such Person, the reasonable allocable cost of
internal legal services of such Person, all reasonable disbursements of such
internal counsel and all court costs and similar legal expenses.
Bank - see the Preamble. References to the "Banks" shall include the
Issuing Bank; for purposes of clarification only, to the extent that LaSalle (or
any successor Issuing Bank) may have any rights or obligations in addition to
those of the other Banks due to its status as Issuing Bank, its status as such
will be specifically referenced.
Base Rate means at any time the greater of (a) the Federal Funds Rate
plus 0.5% and (b) the Prime Rate.
Base Rate Loan means any Loan which bears interest at or by reference
to the Base Rate.
Borrowing Base means an amount equal to 50% of the Value of Eligible
Investment Assets from time to time and shall be net of such reserves and
allowances as the Agent deems necessary in its reasonable discretion; provided,
that the Borrowing Base shall be automatically reduced by any amount necessary
for the Company to maintain the Asset Coverage Ratio required hereunder and
under the 1940 Act.
Borrowing Base Certificate means a certificate substantially in the
form of Exhibit E.
Business Day means any day on which LaSalle is open for commercial
banking business in Chicago, Illinois and, in the case of a Business Day which
relates to a Eurodollar Loan, on which dealings are carried on in the London
interbank eurodollar market.
Capital Lease means, with respect to any Person, any lease of (or other
agreement conveying the right to use) any real or personal property by such
Person that, in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of such Person.
Cash Equivalent Investment means, at any time, (a) any evidence of
Debt, maturing not more than one year after such time, issued or guaranteed by
the United States Government or any agency thereof, (b) commercial paper,
maturing not more than one year from the date of issue, or corporate demand
notes, in each case (unless issued by a Bank or its holding company) rated at
least A-l by Standard & Poor's Ratings Group or P-l by ▇▇▇▇▇'▇ Investors
Service, Inc., (c) any certificate of deposit (or time deposits represented by
such certificates of deposit) or banker's acceptance, maturing not more than one
year after such time, or overnight Federal Funds transactions that are issued or
sold by any Bank or its holding company or by a commercial banking institution
that is a member of the Federal Reserve System and has a combined capital and
surplus and undivided profits of not less than $350,000,000 and (d) any
repurchase agreement entered into with any Bank (or other commercial banking
institution of the stature referred to in clause (c)) which (i) is secured by a
fully perfected security interest in any obligation of the type described in any
of clauses (a) through (c) and (ii) has a market value at the time such
repurchase agreement is entered into of not less than
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100% of the repurchase obligation of such Bank (or other commercial banking
institution) thereunder.
CERCLA - see Section 9.15.
Closing Date - see Section 11.1.
Code means the Internal Revenue Code of 1986, as amended.
Collateral Documents means the Security and Pledge Agreement, the
Custody Control Agreement and any other agreement or instrument pursuant to
which the Company, any Subsidiary or any other Person grants collateral to the
Agent for the benefit of the Banks.
Commitment means, as to any Bank, such Bank's commitment to make Loans
under this Agreement. The initial amount of each Bank's Pro Rata Share of the
Revolving Commitment Amount is set forth on Schedule 2.1.
Company - see the Preamble.
Computation Period means each period of four consecutive Fiscal
Quarters ending on the last day of a Fiscal Quarter.
Consolidated Pre-Tax Income means, with respect to the Company and its
Consolidated Subsidiaries for any period, the net income (or loss) of the
Company and its Consolidated Subsidiaries for such period before payment or
distribution of federal, state and local income taxes, excluding any gains from
sales of Portfolio Investments, any extraordinary gains and any gains from
discontinued operations.
Consolidated Stockholders' Equity means for the Company and its
Consolidated Subsidiaries (without duplication) the sum of the capital stock,
capital in excess of par and stated value of shares of its capital stock,
retained earnings and any other account, including any special account for
common stock subject to redemption, which, in accordance with GAAP, constitutes
stockholders' equity (or such other appropriate account designation), as
determined in accordance with GAAP.
Consolidated Subsidiaries means any Subsidiary which is required to be
consolidated on financial statements of the Company prepared in accordance with
GAAP.
Consolidated Tangible Net Worth means, as of any particular date, (a)
Consolidated Stockholders' Equity, minus (b) the value of the Company's
unamortized debt discount and expense, prepaid expenses, deposits, unamortized
deferred charges, goodwill, organization costs, non-competition agreements,
patents, copyrights, trademarks and other intangible items and amounts due from
officers, employees, stockholders and Affiliates, plus (c) the outstanding
principal balance of Subordinated Debt, all determined in accordance with GAAP.
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Controlled Group means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Company, are treated as a single employer under Section 414 of the Code or
Section 4001 of ERISA.
Custodian means LaSalle in its capacity as custodian under the Custody
Control Agreement, or any other custodian approved in writing by the Required
Banks and permitted under the Custody Control Agreement.
Custody Control Agreement means the Custody Control Agreement between
the Custodian (which initially shall be LaSalle), the Agent and the Company
pursuant to which the Agent acts as custodian and the perfection and control
agent for the purpose of perfecting the Agent's security interest in Portfolio
Investments.
Debt of any Person means, without duplication, (a) all indebtedness of
such Person for borrowed money, whether or not evidenced by bonds, debentures,
notes or similar instruments, (b) all obligations of such Person as lessee under
Capital Leases which have been or should be recorded as liabilities on a balance
sheet of such Person in accordance with GAAP, (c) all obligations of such Person
to pay the deferred purchase price of property or services (excluding trade
accounts payable in the ordinary course of business), (d) all indebtedness
secured by a Lien on the property of such Person, whether or not such
indebtedness shall have been assumed by such Person, (e) all obligations,
contingent or otherwise, with respect to the face amount of all letters of
credit (whether or not drawn) and banker's acceptances issued for the account of
such Person, (f) all Hedging Obligations of such Person, (g) all Suretyship
Liabilities of such Person and (h) all Debt of any partnership of which such
Person is a general partner.
Debt to be Repaid means Debt listed on Schedule 11.1.
Disposal - see the definition of "Release".
Dollar and the sign "$" mean lawful money of the United States of
America.
Eligible Investment Assets means any Portfolio Investment or Cash
Equivalent Investment which meets each of the following requirements:
(1) the Company is the legal and beneficial owner of such
Portfolio Investment or Cash Equivalent Investment free and clear of
any Liens or adverse claims;
(2) such Portfolio Investment consists of senior or
subordinated loans;
(3) the Portfolio Company under such Portfolio Investments is
not more than thirty days past due in the payment of principal or
interest under such Portfolio Investment;
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(4) such Portfolio Investment does not include promissory
notes or instruments (i) representing capitalized interest or
payment-in-kind interest or payment obligations relating to exercise of
"put" rights or (ii) owing from a single Portfolio Company representing
more than 10% of the total amount of Portfolio Investments held by the
Company; provided, that such Portfolio Investment shall only be
ineligible to the extent of such instruments or any portion thereof
related to payment-in-kind interest or any portion thereof in excess of
such 10% limit;
(5) all documents evidencing and governing such Portfolio
Investments or Cash Equivalent Investments have been delivered to Agent
pursuant to the Custody Control Agreement, together with endorsements,
stock powers and other assignments or perfection instruments required
by the Agent;
(6) the Agent has a legal, valid and binding perfected,
first-priority security interest in such Portfolio Investment or Cash
Equivalent Investment and such Portfolio Investment or Cash Equivalent
Investment is freely transferable to the Agent or its assignee upon the
occurrence of an Event of Default;
(7) the Portfolio Company of such Portfolio Investment is not
subject to any bankruptcy, insolvency, liquidation or similar
proceeding;
(8) such Portfolio Investment or Cash Equivalent Investment
satisfies all applicable requirements of the Investment Policy; and
(9) such Portfolio Investment or Cash Equivalent Investment
complies with all applicable regulatory guidelines (including the 1940
Act and Regulation U).
Any Eligible Investment Asset which ceases to meet all of the criteria
set forth above shall automatically at such time cease to be an Eligible
Investment Asset until such time as such Eligible Investment Asset shall satisfy
such criteria. If the loan documents relating to any Eligible Investment Asset
are amended, modified, extended or restructured, or payments thereunder are
waived, extended or reduced (any such action, a "Modification"), such Eligible
Investment Asset shall upon the consummation of such Modification be excluded
from the Borrowing Base (and the Company shall provide the Agent with a revised
Borrowing Base Certificate reflecting such exclusion and a copy of all material
documents relating to such Modification promptly after consummation of such
Modification) and not constitute an Eligible Investment Asset unless and until
either (x) the Required Banks have approved such Modification in writing, or (y)
such Eligible Investment Asset has been valued (in accordance with the standards
set forth herein for determining the Value of Eligible Investment Assets) taking
into account such Modification and a revised Borrowing Base Certificate
reflecting such valuation has been provided to the Agent.
Environmental Claims means all claims, however asserted, by any
governmental, regulatory or judicial authority or other Person alleging
potential liability or responsibility for violation of any Environmental Law, or
for release or injury to the environment.
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Environmental Laws means all present or future federal, state or local
laws, statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any governmental authority,
in each case relating to Environmental Matters.
Environmental Matters means any matter arising out of or relating to
health and safety, or pollution or protection of the environment or workplace,
including any of the foregoing relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal, distribution,
discharge, release, control or cleanup of any Hazardous Substance.
ERISA means the Employee Retirement Income Security Act of 1974.
Eurocurrency Reserve Percentage means, with respect to any Eurodollar
Loan for any Interest Period, a percentage (expressed as a decimal) equal to the
daily average during such Interest Period of the percentage in effect on each
day of such Interest Period, as prescribed by the FRB, for determining the
aggregate maximum reserve requirements applicable to "Eurocurrency Liabilities"
pursuant to Regulation D or any other then applicable regulation of the FRB
which prescribes reserve requirements applicable to "Eurocurrency Liabilities"
as presently defined in Regulation D.
Eurodollar Loan means any Loan which bears interest at a rate
determined by reference to the Eurodollar Rate (Reserve Adjusted).
Eurodollar Margin means 2.50% per annum.
Eurodollar Office means with respect to any Bank the office or offices
of such Bank which shall be making or maintaining the Eurodollar Loans of such
Bank hereunder. A Eurodollar Office of any Bank may be, at the option of such
Bank, either a domestic or foreign office.
Eurodollar Rate means, with respect to any Eurodollar Loan for any
Interest Period, a rate per annum equal to the offered rate for deposits in
Dollars for amounts approximately equal to such Eurodollar Loan and for a period
equal or comparable to such Interest Period which appears on Telerate page 3750
as of 11:00 A.M. (London time) two Business Days prior to the first day of such
Interest Period. ATelerate Page 3750 A means the display designated as APage
3750" on the Telerate Service (or such other page as may replace page 3750 on
that service or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates for Dollar deposits).
Eurodollar Rate (Reserve Adjusted) means, with respect to any
Eurodollar Loan for any Interest Period, a rate per annum (rounded upwards, if
necessary, to the nearest 1/16th of 1%) determined pursuant to the following
formula:
Eurodollar Rate........... Eurodollar Rate
(Reserve Adjusted)......... 1-Eurocurrency
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Reserve Percentage.
Event of Default means any of the events described in Section 12.1.
Federal Funds Rate means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor
publication, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 A.M. (New York City time) on
that day by each of three leading brokers of Federal funds transactions in New
York City selected by the Agent.
Fiscal Quarter means a fiscal quarter of a Fiscal Year.
Fiscal Year means the fiscal year of the Company and its Subsidiaries,
which period shall be the 12-month period ending on December 31 of each year.
References to a Fiscal Year with a number corresponding to any calendar year
(e.g., AFiscal Year 1998") refer to the Fiscal Year ending on December 31 of
such calendar year.
FRB means the Board of Governors of the Federal Reserve System or any
successor thereto.
GAAP means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.
Group - see Section 2.2.1.
Guaranty means a guaranty substantially in the form of Exhibit C.
Hazardous Substances - see Section 9.15.
Hedging Agreement means any interest rate, currency or commodity swap
agreement, cap agreement or collar agreement, and any other agreement or
arrangement designed to protect a Person against fluctuations in interest rates,
currency exchange rates or commodity prices.
Hedging Obligation means, with respect to any Person, any liability of
such Person under any Hedging Agreement.
Interest Period means, as to any Eurodollar Loan, the period commencing
on the date such Loan is borrowed or continued as, or converted into, a
Eurodollar Loan and ending on the date one, two
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or three months thereafter as selected by the Company pursuant to Section 2.2.2
or 2.2.3, as the case may be; provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, such Interest Period shall be
extended to the following Business Day unless the result of
such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period
shall end on the preceding Business Day;
(ii) any Interest Period that begins on a day for
which there is no numerically corresponding day in the
calendar month at the end of such Interest Period shall end on
the last Business Day of the calendar month at the end of such
Interest Period; and
(iii) the Company may not select any Interest Period
which would extend beyond the scheduled Termination Date.
Investment Policy means the investment policy of the Company as recited
in its registration statement filed with the SEC under Securities Act of 1933,
as amended.
Investment means, relative to any Person, any investment in another
Person, whether by acquisition of any debt or equity security, by making any
loan or advance or by becoming obligated with respect to a Suretyship Liability
in respect of obligations of such other Person (other than travel and similar
advances to employees in the ordinary course of business), including any
Portfolio Investment.
LaSalle - see the Preamble.
Leverage Ratio means, as of the last day of any Fiscal Quarter, the
ratio of (i) Total Liabilities as of such day to (ii) Consolidated Tangible Net
Worth as of such day.
Lien means, with respect to any Person, any interest granted by such
Person in any real or personal property, asset or other right owned or being
purchased or acquired by such Person which secures payment or performance of any
obligation and shall include any mortgage, lien, encumbrance, charge or other
security interest of any kind, whether arising by contract, as a matter of law,
by judicial process or otherwise.
Loan Documents means this Agreement, the Notes, the Guaranty and the
Collateral Documents.
Loan Party means the Company and each Subsidiary.
Loans means Revolving Loans.
8
Margin Stock means any "margin stock" as defined in Regulation U.
Material Adverse Effect means (a) a material adverse change in, or a
material adverse effect upon, the financial condition, operations, assets,
business, properties or prospects of the Company and its Subsidiaries taken as a
whole, (b) a material impairment of the ability of the Company or any Subsidiary
to perform any of its obligations under any Loan Document or (c) a material
adverse effect upon any substantial portion of the collateral under the
Collateral Documents or upon the legality, validity, binding effect or
enforceability against the Company or any Subsidiary of any Loan Document.
Multiemployer Pension Plan means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which the Company or any member of the
Controlled Group may have any liability.
Non-Use Fee Rate means .25% per annum.
Note - see Section 3.1.
PBGC means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
Pension Plan means a "pension plan", as such term is defined in Section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer
Pension Plan), and to which the Company or any member of the Controlled Group
may have any liability, including any liability by reason of having been a
substantial employer within the meaning of Section 4063 of ERISA at any time
during the preceding five years, or by reason of being deemed to be a
contributing sponsor under Section 4069 of ERISA.
Person means any natural person, corporation, partnership, trust,
limited liability company, association, governmental authority or unit, or any
other entity, whether acting in an individual, fiduciary or other capacity.
Portfolio Company means any corporation, partnership or limited
liability company issuing securities to the Company constituting Portfolio
Investments.
Portfolio Investments means each investment by the Company in a
Portfolio Company by acquisition of any debt or equity securities in accordance
with the Investment Policy.
Pro Rata Share means, with respect to any Bank, the percentage
specified opposite such Bank's name on Schedule 2.1 hereto, as adjusted from
time to time in accordance with the terms hereof.
Prime Rate means, for any day, the rate of interest in effect for such
day as publicly announced from time to time by LaSalle as its prime rate
(whether or not such rate is actually
9
charged by LaSalle). Any change in the Prime Rate announced by LaSalle shall
take effect at the opening of business on the day specified in the public
announcement of such change.
RCRA - see Section 9.15.
Regulation D means Regulation D of the FRB.
Regulation U means Regulation U of the FRB.
Release has the meaning specified in CERCLA and the term "Disposal" (or
"Disposed") has the meaning specified in RCRA; provided that in the event either
CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply as of the effective date of such
amendment; and provided, further, that to the extent that the laws of a state
wherein any affected property lies establish a meaning for "Release" or
"Disposal" which is broader than is specified in either CERCLA or RCRA, such
broader meaning shall apply.
Required Banks means Banks having Pro Rata Shares aggregating 66 2/3%
or more.
Revolving Commitment Amount means $25,000,000 as reduced from time to
time pursuant to Section 6.1.
Revolving Loan - see Section 2.1.1.
Revolving Outstandings means, at any time, the aggregate principal
amount of all outstanding Revolving Loans.
SEC means the Securities and Exchange Commission or any other
governmental authority succeeding to any of the principal functions thereof.
Security and Pledge Agreement means a security agreement substantially
in the form of Exhibit D.
Senior Debt means all Debt of the Company and its Subsidiaries other
than Subordinated Debt.
Subordinated Debt means any unsecured Debt of the Company which has
subordination terms, covenants, pricing, amount, holder and other terms which
have been approved in writing by the Required Banks.
Subsidiary means, with respect to any Person, a corporation,
partnership, limited liability company or other entity of which such Person
and/or its other Subsidiaries own, directly or indirectly, such number of
outstanding shares or other ownership interests as have more than 50% of the
ordinary voting power for the election of directors or other managers of such
corporation, partnership, limited liability company or other entity; provided,
that no Portfolio Company shall constitute
10
a Subsidiary of the Company. Unless the context otherwise requires, each
reference to Subsidiaries herein shall be a reference to Subsidiaries of the
Company.
Suretyship Liability means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to or otherwise to invest in a
debtor, or otherwise to assure a creditor against loss) any indebtedness,
obligation or other liability of any other Person (other than by endorsements of
instruments in the course of collection), or guarantees the payment of dividends
or other distributions upon the shares of any other Person. The amount of any
Person's obligation in respect of any Suretyship Liability shall (subject to any
limitation set forth therein) be deemed to be the principal amount of the debt,
obligation or other liability supported thereby.
Termination Date means the earlier to occur of (a) October 30, 2000, or
(b) such other date on which the Commitments terminate pursuant to Section 6
or 12.
Total Liabilities means all liabilities of the Company and its
Consolidated Subsidiaries, determined in accordance with GAAP, including all
Debt of the Company and its Consolidated Subsidiaries.
Unmatured Event of Default means any event that, if it continues
uncured, will, with lapse of time or notice or both, constitute an Event of
Default.
Value of Eligible Investment Assets means, with respect to each
Eligible Investment Asset, the lesser of (a) the original principal amount of
such Eligible Investment Asset and (b) if such Eligible Investment Asset has
been reduced in value below the original principal amount thereof (other than as
a result of allocation of a portion of the original principal amount to
warrants) the fair market value of such Eligible Investment Asset, as determined
in accordance with the 1940 Act and any orders of the SEC issued to the Company
thereunder.
Wholly-Owned Subsidiary means, as to any Person, another Person all of
the shares of capital stock or other ownership interests of which (except
directors' qualifying shares) are at the time directly or indirectly owned by
such Person and/or another Wholly-Owned Subsidiary of such Person.
Year 2000 Problem means the risk that computer applications and
embedded microchips in non-computing devices may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior to and
any date after December 31, 1999.
1940 Act - see Section 9.10.
1.2 Other Interpretive Provisions. (a) The meanings of defined terms
are equally applicable to the singular and plural forms of the defined terms.
11
(b) Section, Schedule and Exhibit references are to this Agreement
unless otherwise specified.
(c) The term "including" is not limiting and means "including without
limitation."
(d) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including"; the words "to"
and "until" each mean "to but excluding", and the word "through" means "to and
including."
(e) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
shall be construed as including all statutory and regulatory provisions
amending, replacing, supplementing or interpreting such statute or regulation.
(f) This Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and each
shall be performed in accordance with its terms.
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the Company,
the Banks and the other parties thereto and are the products of all parties.
Accordingly, they shall not be construed against the Agent or the Banks merely
because of the Agent's or Banks' involvement in their preparation.
SECTION 2 COMMITMENTS OF THE BANKS; BORROWING AND CONVERSION
PROCEDURES.
2.1 Revolving Loan Commitment. On and subject to the terms of this
Agreement, each Bank, severally and for itself alone, agrees to make loans on a
revolving basis ("Revolving Loans") from time to time until the Termination Date
in such Bank's Pro Rata Share of such aggregate amounts as the Company may
request from all Banks; provided that the Revolving Outstandings will not at any
time exceed the lesser of (x) the Revolving Commitment Amount and (y) the
Borrowing Base.
2.2 Loan Procedures.
2.2.1 Various Types of Loans. Each Revolving Loan shall be divided into
tranches which are, either a Base Rate Loan or a Eurodollar Loan (each a "type"
of Loan), as the Company shall specify in the related notice of borrowing or
conversion pursuant to Section 2.2.2 or 2.2.3. Eurodollar Loans having the same
Interest Period are sometimes called a "Group" or collectively "Groups". Base
Rate Loans and Eurodollar Loans may be outstanding at the same time, provided
that not more than five different Groups of Eurodollar Loans shall be
outstanding at any one time.
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All borrowings, conversions and repayments of Revolving Loans shall be effected
so that each Bank will have a pro rata share (according to its Pro Rata Share)
of all types and Groups of Loans.
2.2.2 Borrowing Procedures. (a) The Company shall give written notice
or telephonic notice (followed immediately by written confirmation thereof) to
the Agent of each proposed borrowing not later than (i) in the case of a Base
Rate borrowing, 11:00 A.M., Chicago time, on the proposed date of such
borrowing, and (ii) in the case of a Eurodollar Rate borrowing, 11:00 A.M.,
Chicago time, at least three Business Days prior to the proposed date of such
borrowing. Each such notice shall be effective upon receipt by the Agent, shall
be irrevocable, and shall specify the date, amount and type of borrowing and, in
the case of a Eurodollar Rate borrowing, the initial Interest Period therefor.
Promptly upon receipt of such notice, the Agent shall advise each Bank thereof.
Not later than 1:00 P.M., Chicago time, on the date of a proposed borrowing,
each Bank shall provide the Agent at the office specified by the Agent with
immediately available funds covering such Bank's Pro Rata Share of such
borrowing and, so long as the Agent has not received written notice that the
conditions precedent set forth in Section 11 with respect to such borrowing have
not been satisfied, the Agent shall pay over the funds received by the Agent to
the Company on the requested borrowing date. Each borrowing shall be on a
Business Day. Each Base Rate borrowing shall be in an aggregate amount of at
least $100,000 and an integral multiple of $100,000 and each Eurodollar Rate
borrowing shall be in an aggregate amount of at least $500,000 and an integral
multiple of at least $100,000.
(b) Failure to Make Available. Unless the Agent shall have
been notified by any Bank prior to the date of any proposed borrowing that such
Bank does not intend to make available to the Agent such Loan on such date, the
Agent may assume that such Bank has made such amount available to the Agent on
such date and the Agent in its sole discretion may, but shall not be obligated
to, make available to the Company a corresponding amount on such date. If such
corresponding amount is not in fact made available to the Agent by such Bank by
1:00 P.M., Chicago time, on the Business Day of such proposed borrowing (it
being understood that any such notice received after noon, Chicago time, or any
Business Day shall be deemed to have been received the next following Business
Day), such Bank agrees to pay and the Company agrees to repay to the Agent
within two Business Days of demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Company until the date such amount is paid or repaid to the Agent, at the
interest rate applicable to such borrowing. If such Bank shall pay to the Agent
such amount, such amount so paid shall constitute such Bank's Pro Rata Share of
such borrowing, and if both such Bank and the Company shall have paid and
repaid, respectively, such corresponding amount, the Agent shall promptly pay
over to such Borrower such corresponding amount in same day funds, but the
Company shall remain obligated for all interest thereon to the extent not
already paid by the Company pursuant to the preceding sentence. Nothing in this
Section 2.2.2 shall be deemed to relieve any Bank of its obligation hereunder to
make its Pro Rata Share of any borrowing on any date specified in any borrowing
notice.
2.2.3 Conversion and Continuation Procedures. (a) Subject to Section
2.2.1, the Company may, upon irrevocable written notice to the Agent in
accordance with clause (b) below:
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(i) elect, as of any Business Day, to convert any
Loans (or any part thereof in an aggregate amount not less
than $500,000 a higher integral multiple of $100,000) into
Loans of the other type; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any Eurodollar Loans having
Interest Periods expiring on such day (or any part thereof in
an aggregate amount not less than $500,000 or a higher
integral multiple of $100,000) for a new Interest Period;
provided that after giving effect to any prepayment, conversion or continuation,
the aggregate principal amount of each Group of Eurodollar Loans shall be at
least $500,000 and an integral multiple of $100,000.
(b) The Company shall give written or telephonic (followed
immediately by written confirmation thereof) notice to the Agent of each
proposed conversion or continuation not later than (i) in the case of conversion
into Base Rate Loans, 11:00 A.M., Chicago time, on the proposed date of such
conversion and (ii) in the case of conversion into or continuation of Eurodollar
Loans, 11:00 A.M., Chicago time, at least three Business Days prior to the
proposed date of such conversion or continuation, specifying in each case:
(i) the proposed date of conversion or continuation;
(ii) the aggregate amount of Loans to be converted or
continued;
(iii) the type of Loans resulting from the proposed
conversion or continuation; and
(iv) in the case of conversion into, or continuation
of, Eurodollar Loans, the duration of the requested Interest
Period therefor.
(c) If upon the expiration of any Interest Period applicable
to Eurodollar Loans, the Company has failed to select timely a new Interest
Period to be applicable to such Eurodollar Loans, the Company shall be deemed to
have elected to convert such Eurodollar Loans into Base Rate Loans effective on
the last day of such Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of
a notice of conversion or continuation pursuant to this Section 2.2.3 or, if no
timely notice is provided by the Company, of the details of any automatic
conversion.
(e) Any conversion of a Eurodollar Loan on a day other than
the last day of an Interest Period therefor shall be subject to Section 8.4.
2.3 Commitments Several. The failure of any Bank to make a requested
Loan on any date shall not relieve any other Bank of its obligation (if any) to
make a Loan on such date, but no
14
Bank shall be responsible for the failure of any other Bank to make any Loan to
be made by such other Bank.
2.4 Certain Conditions. Notwithstanding any other provision of this
Agreement, no Bank shall have an obligation to make any Loan, or to permit the
continuation of or any conversion into any Eurodollar Loan, if an Event of
Default or Unmatured Event of Default exists.
SECTION 3 NOTES EVIDENCING LOANS.
3.1 Notes. The Loans of each Bank shall be evidenced by a promissory
note (each a "Note") substantially in the form set forth in Exhibit A, with
appropriate insertions, payable to the order of such Bank in a face principal
amount equal to such Bank's Pro Rata Share of the Revolving Commitment Amount.
The Commitment shall terminate and all Revolving Loans shall be due and payable
on the Termination Date.
3.2 Recordkeeping. Each Bank shall record in its records, or at its
option on the schedule attached to its Note, the date and amount of each Loan
made by such Bank, each repayment or conversion thereof and, in the case of each
Eurodollar Loan, the dates on which each Interest Period for such Loan shall
begin and end. The aggregate unpaid principal amount so recorded shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on such
Note. The failure to so record any such amount or any error in so recording any
such amount shall not, however, limit or otherwise affect the obligations of the
Company hereunder or under any Note to repay the principal amount of the Loans
evidenced by such Note together with all interest accruing thereon.
SECTION 4 INTEREST.
4.1 Interest Rates. The Company promises to pay interest on the unpaid
principal amount of each Loan for the period commencing on the date of such Loan
until such Loan is paid in full as follows:
(a) at all times while such Loan is a Base Rate Loan, at a rate per
annum equal to the Base Rate from time to time in effect; and
(b) at all times while such Loan is a Eurodollar Loan, at a rate per
annum equal to the sum of the Eurodollar Rate (Reserve Adjusted) applicable to
each Interest Period for such Loan plus the Eurodollar Margin from time to time
in effect;
provided that at any time an Event of Default exists, if requested by the
Required Banks, the interest rate applicable to each Loan shall be increased by
2%.
4.2 Interest Payment Dates. Accrued interest on each Base Rate Loan
shall be payable in arrears on the last day of each calendar month and at
maturity. Accrued interest on each Eurodollar Loan shall be payable on the last
day of each Interest Period relating to such Loan (and,
15
in the case of a Eurodollar Loan with an Interest Period in excess of three
months, on the three-month anniversary of the first day of such Interest Period)
and at maturity. After maturity, accrued interest on all Loans shall be payable
on demand.
4.3 Setting and Notice of Eurodollar Rates. The applicable Eurodollar
Rate for each Interest Period shall be determined by the Agent, and notice
thereof shall be given by the Agent promptly to the Company and each Bank. Each
determination of the applicable Eurodollar Rate by the Agent shall be conclusive
and binding upon the parties hereto, in the absence of demonstrable error. The
Agent shall, upon written request of the Company or any Bank, deliver to the
Company or such Bank a statement showing the computations used by the Agent in
determining any applicable Eurodollar Rate hereunder.
4.4 Computation of Interest. Interest shall be computed for the actual
number of days elapsed on the basis of a year of 365 days. The applicable
interest rate for each Base Rate Loan shall change simultaneously with each
change in the Base Rate.
SECTION 5 FEES.
5.1 Non-Use Fee. The Company agrees to pay to the Agent for the account
of each Bank a non-use fee, for the period from the Closing Date to the
Termination Date, at the Non-Use Fee Rate in effect from time to time of such
Bank's Pro Rata Share (as adjusted from time to time) of the unused amount of
the Revolving Commitment Amount. For purposes of calculating usage under this
Section, the Revolving Commitment Amount shall be deemed used to the extent of
the aggregate principal amount of all outstanding Revolving Loans. Such non-use
fee shall be payable in arrears on the last day of each calendar quarter and on
the Termination Date for any period then ending for which such non-use fee shall
not have previously been paid. The non-use fee shall be computed for the actual
number of days elapsed on the basis of a year of 365 days.
5.2 Upfront Fees. The Company agrees to pay to the Agent for the
account of each Bank on the Closing Date an upfront fee in the amount previously
agreed to between the Company and the Agent (and the Agent agrees to promptly
forward to each Bank a portion of such upfront fee in the amount previously
agreed to between the Agent and such Bank).
5.3 Agent's Fees. The Company agrees to pay to the Agent such agent's
fees as are mutually agreed to from time to time by the Company and the Agent.
SECTION 6 REDUCTION OR TERMINATION OF THE REVOLVING COMMITMENT AMOUNT
6.1 Reduction or Termination of the Revolving Commitment Amount.
6.1.1 Voluntary Reduction or Termination of the Revolving Commitment
Amount. The Company may from time to time on at least five Business Days' prior
written notice received by the
16
Agent (which shall promptly advise each Bank thereof) permanently reduce the
Revolving Commitment Amount to an amount not less than the Revolving
Outstandings. Any such reduction shall be in an amount not less than $100,000 or
a higher integral multiple of $100,000. Concurrently with any reduction of the
Revolving Commitment Amount to zero, the Company shall pay all interest on the
Revolving Loans and all non-use fees, determined pursuant to Section 5.1 hereof.
6.1.2 Mandatory Reductions of Revolving Commitment Amount. If on any
day the Revolving Outstandings exceed the Borrowing Base, the Company shall
immediately prepay the Loans in an amount sufficient to eliminate such excess.
6.1.3 All Reductions of the Revolving Commitment Amount. All reductions
of the Revolving Commitment Amount shall reduce the Commitments pro rata among
the Banks according to their respective Pro Rata Shares.
6.2 Prepayments.
6.2.1 Voluntary Prepayments. The Borrowers may from time to time prepay
the Loans in whole or in part; provided that the Borrowers shall give the Agent
(which shall promptly advise each Bank) notice thereof not later than 11:00
A.M., Chicago time, one Business Day prior to such prepayment (in the case of
Base Rate Loans) and three Business Days prior to such prepayment (in the case
of Eurodollar Rate Loans) (which shall be a Business Day), specifying the Loans
to be prepaid and the date and amount of prepayment. Any such partial prepayment
shall be in an amount equal to $100,000 or a higher integral multiple of
$100,000.
6.3 All Prepayments. Each voluntary partial prepayment shall be in a
principal amount of $100,000 or a higher integral multiple of $100,000. Any
partial prepayment of a Group of Eurodollar Loans shall be subject to the
proviso to Section 2.2.3(a). Any prepayment of a Eurodollar Loan on a day other
than the last day of an Interest Period therefor shall include interest on the
principal amount being repaid and shall be subject to Section 8.4.
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES.
7.1 Making of Payments. All payments of principal of or interest on the
Notes, and of all fees, shall be made by the Company to the Agent in immediately
available funds at the office specified by the Agent not later than noon,
Chicago time, on the date due; and funds received after that hour shall be
deemed to have been received by the Agent on the following Business Day. The
Agent shall promptly remit to each Bank its share of all such payments received
in collected funds by the Agent for the account of such Bank. All payments under
Section 8.1 shall be made by the Company directly to the Bank entitled thereto.
7.2 Application of Certain Payments. Each payment of principal shall be
applied to such Loans as the Company shall direct by notice to be received by
the Agent on or before the date of such payment or, in the absence of such
notice, as the Agent shall determine in its discretion. Concurrently with each
remittance to any Bank of its share of any such payment, the Agent shall advise
such Bank as to the application of such payment.
17
7.3 Due Date Extension. If any payment of principal or interest with
respect to any of the Loans, or of any fees, falls due on a day which is not a
Business Day, then such due date shall be extended to the immediately following
Business Day (unless, in the case of a Eurodollar Loan, such immediately
following Business Day is the first Business Day of a calendar month, in which
case such due date shall be the immediately preceding Business Day) and, in the
case of principal, additional interest shall accrue and be payable for the
period of any such extension.
7.4 Setoff. The Company agrees that the Agent and each Bank have all
rights of set-off and bankers' lien provided by applicable law, and in addition
thereto, the Company agrees that at any time any Event of Default exists, the
Agent and each Bank may apply to the payment of any obligations of the Company
hereunder, whether or not then due, any and all balances, credits, deposits,
accounts or moneys of the Company then or thereafter with the Agent or such
Bank.
7.5 Proration of Payments. If any Bank shall obtain any payment or
other recovery (whether voluntary, involuntary, by application of offset or
otherwise, but excluding any payment pursuant to Section 8.7 or 14.9 and
payments of interest on any Affected Loan) on account of principal of or
interest on any Loan in excess of its pro rata share of payments and other
recoveries obtained by all Banks on account of principal of and interest on the
Loans then held by them, such Bank shall purchase from the other Banks such
participations in the Loans held by them as shall be necessary to cause such
purchasing Bank to share the excess payment or other recovery ratably with each
of them; provided that if all or any portion of the excess payment or other
recovery is thereafter recovered from such purchasing Bank, the purchase shall
be rescinded and the purchase price restored to the extent of such recovery.
7.6 Taxes. All payments of principal of, and interest on, the Loans and
all other amounts payable hereunder shall be made free and clear of and without
deduction for any present or future income, excise, stamp or franchise taxes and
other taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, excluding franchise taxes and taxes
imposed on or measured by any Bank's net income or receipts (all non-excluded
items being called "Taxes"). If any withholding or deduction from any payment to
be made by the Company hereunder is required in respect of any Taxes pursuant to
any applicable law, rule or regulation, then the Company will:
(a) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(c) pay to the Agent for the account of the Banks such
additional amount or amounts as is necessary to ensure that the net
amount actually received by each Bank will equal the full amount such
Bank would have received had no such withholding or deduction been
required.
18
Moreover, if any Taxes are directly asserted against the Agent or any Bank with
respect to any payment received by the Agent or such Bank hereunder, the Agent
or such Bank may pay such Taxes and the Company will promptly pay such
additional amounts (including any penalty, interest or expense) as is necessary
in order that the net amount received by such Person after the payment of such
Taxes (including any Taxes on such additional amount) shall equal the amount
such Person would have received had such Taxes not been asserted.
If the Company fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent, for the account of the
respective Banks, the required receipts or other required documentary evidence,
the Company shall indemnify the Banks for any incremental Taxes, interest or
penalties that may become payable by any Bank as a result of any such failure.
For purposes of this Section 7.6, a distribution hereunder by the Agent or any
Bank to or for the account of any Bank shall be deemed a payment by the Company.
Each Bank that (a) is organized under the laws of a jurisdiction other
than the United States of America and (b)(i) is a party hereto on the Closing
Date or (ii) becomes an assignee of an interest under this Agreement under
Section 14.9.1 after the Closing Date (unless such Bank was already a Bank
hereunder immediately prior to such assignment) shall execute and deliver to the
Company and the Agent one or more (as the Company or the Agent may reasonably
request) United States Internal Revenue Service Forms 4224 or Forms 1001 or such
other forms or documents, appropriately completed, as may be applicable to
establish that such Bank is exempt from withholding or deduction of Taxes. The
Company shall not be required to pay additional amounts to any Bank pursuant to
this Section 7.6 to the extent that the obligation to pay such additional
amounts would not have arisen but for the failure of such Bank to comply with
this paragraph.
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR LOANS.
8.1 Increased Costs. (a) If, after the date hereof, the adoption of, or
any change in, any applicable law, rule or regulation, or any change in the
interpretation or administration of any applicable law, rule or regulation by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or any
Eurodollar Office of such Bank) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency
(i) shall subject any Bank (or any Eurodollar Office of such
Bank) to any tax, duty or other charge with respect to its Eurodollar
Loans, its Note or its obligation to make Eurodollar Loans, or shall
change the basis of taxation of payments to any Bank of the principal
of or interest on its Eurodollar Loans or any other amounts due under
this Agreement in respect of its Eurodollar Loans or its obligation to
make Eurodollar Loans (except for changes in the rate of tax on the
overall net income of such Bank or its Eurodollar Office imposed by the
jurisdiction in which such Bank's principal executive office or
Eurodollar Office is located);
19
(ii) shall impose, modify or deem applicable any reserve
(including any reserve imposed by the FRB, but excluding any reserve
included in the determination of interest rates pursuant to Section 4),
special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by any Bank (or any
Eurodollar Office of such Bank); or
(iii) shall impose on any Bank (or its Eurodollar Office) any
other condition affecting its Eurodollar Loans, its Note or its
obligation to make Eurodollar Loans;
and the result of any of the foregoing is to increase the cost to (or to impose
a cost on) such Bank (or any Eurodollar Office of such Bank) of making or
maintaining any Eurodollar Loan, or to reduce the amount of any sum received or
receivable by such Bank (or its Eurodollar Office) under this Agreement or under
its Note with respect thereto, then upon demand by such Bank (which demand shall
be accompanied by a statement setting forth the basis for such demand and a
calculation of the amount thereof in reasonable detail, a copy of which shall be
furnished to the Agent), the Company shall pay directly to such Bank such
additional amount as will compensate such Bank for such increased cost or such
reduction.
(b) If any Bank shall reasonably determine that any change in, the
adoption or phase-in of, any applicable law, rule or regulation regarding
capital adequacy, or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Bank or any
Person controlling such Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Bank's or such controlling Person as a consequence of such Bank's
obligations hereunder to a level below that which such Bank or such controlling
Person could have achieved but for such change, adoption, phase-in or compliance
(taking into consideration such Bank's or such controlling Person's policies
with respect to capital adequacy) by an amount deemed by such Bank or such
controlling Person to be material, then from time to time, upon demand by such
Bank (which demand shall be accompanied by a statement setting forth the basis
for such demand and a calculation of the amount thereof in reasonable detail, a
copy of which shall be furnished to the Agent), the Company shall pay to such
Bank such additional amount as will compensate such Bank or such controlling
Person for such reduction.
8.2 Basis for Determining Interest Rate Inadequate or Unfair. If with
respect to any Interest Period:
(a) deposits in Dollars (in the applicable amounts) are not
being offered to the Agent in the interbank eurodollar market for such
Interest Period, or the Agent otherwise reasonably determines (which
determination shall be binding and conclusive on the Company) that by
reason of circumstances affecting the interbank eurodollar market
adequate and reasonable means do not exist for ascertaining the
applicable Eurodollar Rate; or
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(b) the Required Banks advise the Agent that the Eurodollar
Rate (Reserve Adjusted) as determined by the Agent will not adequately
and fairly reflect the cost to such Banks of maintaining or funding
Eurodollar Loans for such Interest Period (taking into account any
amount to which such Banks may be entitled under Section 8.1) or that
the making or funding of Eurodollar Loans has become impracticable as a
result of an event occurring after the date of this Agreement which in
the opinion of such Banks materially affects such Loans;
then the Agent shall promptly notify the other parties thereof and, so long as
such circumstances shall continue, (i) no Bank shall be under any obligation to
make or convert into Eurodollar Loans and (ii) on the last day of the current
Interest Period for each Eurodollar Loan, such Loan shall, unless then repaid in
full, automatically convert to a Base Rate Loan.
8.3 Changes in Law Rendering Eurodollar Loans Unlawful. If any change
in, or the adoption of any new, law or regulation, or any change in the
interpretation of any applicable law or regulation by any governmental or other
regulatory body charged with the administration thereof, should make it (or in
the good faith judgment of any Bank cause a substantial question as to whether
it is) unlawful for any Bank to make, maintain or fund Eurodollar Loans, then
such Bank shall promptly notify each of the other parties hereto and, so long as
such circumstances shall continue, (a) such Bank shall have no obligation to
make or convert into Eurodollar Loans (but shall make Base Rate Loans
concurrently with the making of or conversion into Eurodollar Loans by the Banks
which are not so affected, in each case in an amount equal to the amount of
Eurodollar Loans which would be made or converted into by such Bank at such time
in the absence of such circumstances) and (b) on the last day of the current
Interest Period for each Eurodollar Loan of such Bank (or, in any event, on such
earlier date as may be required by the relevant law, regulation or
interpretation), such Eurodollar Loan shall, unless then repaid in full,
automatically convert to a Base Rate Loan. Each Base Rate Loan made by a Bank
which, but for the circumstances described in the foregoing sentence, would be a
Eurodollar Loan (an "Affected Loan") shall remain outstanding for the same
period as the Group of Eurodollar Loans of which such Affected Loan would be a
part absent such circumstances.
8.4 Funding Losses. The Company hereby agrees that upon demand by any
Bank (which demand shall be accompanied by a statement setting forth the basis
for the amount being claimed, a copy of which shall be furnished to the Agent),
the Company will indemnify such Bank against any actual loss or expense which
such Bank may sustain or incur (including any actual loss or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Bank to fund or maintain any Eurodollar Loan), as reasonably determined by
such Bank, as a result of (a) any payment, prepayment or conversion of any
Eurodollar Loan of such Bank on a date other than the last day of an Interest
Period for such Loan (including any conversion pursuant to Section 8.3) or (b)
any failure of the Company to borrow, convert or continue any Loan on a date
specified therefor in a notice of borrowing, conversion or continuation pursuant
to this Agreement. For this purpose, all notices to the Agent pursuant to this
Agreement shall be deemed to be irrevocable.
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8.5 Right of Banks to Fund through Other Offices. Each Bank may, if it
so elects, fulfill its commitment as to any Eurodollar Loan by causing a foreign
branch or Affiliate of such Bank to make such Loan; provided that in such event
for the purposes of this Agreement such Loan shall be deemed to have been made
by such Bank and the obligation of the Company to repay such Loan shall
nevertheless be to such Bank and shall be deemed held by it, to the extent of
such Loan, for the account of such branch or Affiliate.
8.6 Discretion of Banks as to Manner of Funding. Notwithstanding any
provision of this Agreement to the contrary, each Bank shall be entitled to fund
and maintain its funding of all or any part of its Loans in any manner it sees
fit, it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if such Bank had actually funded and
maintained each Eurodollar Loan during each Interest Period for such Loan
through the purchase of deposits having a maturity corresponding to such
Interest Period and bearing an interest rate equal to the Eurodollar Rate for
such Interest Period.
8.7 Mitigation of Circumstances; Replacement of Banks. (a) Each Bank
shall promptly notify the Company and the Agent of any event of which it has
knowledge which will result in, and will use reasonable commercial efforts
available to it (and not, in such Bank's sole judgment, otherwise
disadvantageous to such Bank) to mitigate or avoid, (i) any obligation by the
Company to pay any amount pursuant to Section 7.6 or 8.1 or (ii) the occurrence
of any circumstances described in Section 8.2 or 8.3 (and, if any Bank has given
notice of any such event described in clause (i) or (ii) above and thereafter
such event ceases to exist, such Bank shall promptly so notify the Company and
the Agent). Without limiting the foregoing, each Bank will designate a different
funding office if such designation will avoid (or reduce the cost to the Company
of) any event described in clause (i) or (ii) of the preceding sentence and such
designation will not, in such Bank's sole judgment, be otherwise disadvantageous
to such Bank.
(b) If the Company becomes obligated to pay additional amounts to any
Bank pursuant to Section 7.6 or 8.1, or any Bank gives notice of the occurrence
of any circumstances described in Section 8.2 or 8.3, the Company may designate
another bank which is acceptable to the Agent and the Issuing Bank in their
reasonable discretion (such other bank being called a "Replacement Bank") to
purchase the Loans of such Bank and such Bank's rights hereunder, without
recourse to or warranty by, or expense to, such Bank, for a purchase price equal
to the outstanding principal amount of the Loans payable to such Bank plus any
accrued but unpaid interest on such Loans and all accrued but unpaid fees owed
to such Bank and any other amounts payable to such Bank under this Agreement,
and to assume all the obligations of such Bank hereunder, and, upon such
purchase and assumption (pursuant to an Assignment Agreement), such Bank shall
no longer be a party hereto or have any rights hereunder (other than rights with
respect to indemnities and similar rights applicable to such Bank prior to the
date of such purchase and assumption) and shall be relieved from all obligations
to the Company hereunder, and the Replacement Bank shall succeed to the rights
and obligations of such Bank hereunder.
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8.8 Conclusiveness of Statements; Survival of Provisions.
Determinations and statements of any Bank pursuant to Section 8.1, 8.2, 8.3 or
8.4 shall be conclusive absent demonstrable error. Banks may use reasonable
averaging and attribution methods in determining compensation under Sections 8.1
and 8.4, and the provisions of such Sections shall survive repayment of the
Loans, cancellation of the Notes and termination of this Agreement.
SECTION 9 WARRANTIES.
To induce the Agent and the Banks to enter into this Agreement and to
induce the Banks to make Loans, the Company warrants to the Agent and the
Banks that:
9.1 Organization. The Company is a corporation validly existing and in
good standing under the laws of the State of Delaware; each Subsidiary is
validly existing and in good standing under the laws of the jurisdiction of its
organization; and each of the Company and each Subsidiary is duly qualified to
do business in each jurisdiction where, because of the nature of its activities
or properties, such qualification is required, except for such jurisdictions
where the failure to so qualify would not have a Material Adverse Effect.
9.2 Authorization; No Conflict. Each Loan Party is duly authorized to
execute and deliver each Loan Document to which it is a party, the Company is
duly authorized to borrow monies hereunder and each Loan Party is duly
authorized to perform its obligations under each Loan Document to which it is a
party. Except as set forth on Schedule 9.2, the execution, delivery and
performance by the Company of this Agreement and by each Loan Party of each Loan
Document to which it is a party, and the borrowings by the Company hereunder, do
not and will not (a) require any consent or approval of any governmental agency
or authority (other than any consent or approval which has been obtained and is
in full force and effect), (b) conflict with (i) any provision of law (including
the 1940 Act), (ii) the charter, by-laws or other organizational documents of
the Company or any other Loan Party or (iii) any agreement, indenture,
instrument or other document, or any judgment, order or decree, which is binding
upon the Company or any other Loan Party or any of their respective properties
or (c) require, or result in, the creation or imposition of any Lien on any
asset of the Company, any Subsidiary or any other Loan Party (other than Liens
in favor of the Agent created pursuant to the Collateral Documents).
9.3 Validity and Binding Nature. Each of this Agreement and each other
Loan Document to which the Company or any other Loan Party is a party is the
legal, valid and binding obligation of such Person, enforceable against such
Person in accordance with its terms, subject to bankruptcy, insolvency and
similar laws affecting the enforceability of creditors' rights generally and to
general principles of equity.
9.4 Financial Condition. The audited financial statements of the
Company and its Consolidated Subsidiaries as at December 31, 1997 and the
unaudited financial statements of the Company and its Consolidated Subsidiaries
as at June 30, 1998, copies of each of which have been delivered to each Bank,
were prepared in accordance with GAAP (subject, in the case of such unaudited
statements, to the absence of footnotes and to normal year-end adjustments) and
present fairly the consolidated financial condition of the Company and its
Consolidated Subsidiaries as at such dates and the results of their operations
for the periods then ended.
23
9.5 No Material Adverse Change. Since December 31, 1997, there has been
no material adverse change in the financial condition, operations, assets,
business, properties or prospects of the Company and its Subsidiaries taken as a
whole.
9.6 Litigation and Contingent Liabilities. No litigation (including
derivative actions), arbitration proceeding or governmental investigation or
proceeding is pending or, to the Company's knowledge, threatened against any
Loan Party which might reasonably be expected to have a Material Adverse Effect,
except as set forth in Schedule 9.6. Other than any liability incident to such
litigation or proceedings, no Loan Party has any material contingent liabilities
not listed on Schedule 9.6 or permitted by Section 10.7.
9.7 Ownership of Properties; Liens. Each Loan Party owns good title to
all of its properties and assets, real and personal, tangible and intangible
(including each Portfolio Investment), of any nature whatsoever free and clear
of all Liens, charges and claims, except as permitted under Section 10.8.
9.8 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those listed on Schedule 9.8. ACSLR has no material
assets or liabilities.
9.9 Pension Plans. (a) During the twelve-consecutive-month period prior
to the date of the execution and delivery of this Agreement or the making of any
Loan, (i) no steps have been taken to terminate any Pension Plan and (ii) no
contribution failure has occurred with respect to any Pension Plan sufficient to
give rise to a Lien under Section 302(f) of ERISA. No condition exists or event
or transaction has occurred with respect to any Pension Plan which could result
in the incurrence by any Loan Party of any material liability, fine or penalty.
(b) All contributions (if any) have been made to any Multiemployer
Pension Plan that are required to be made by the Company or any other member of
the Controlled Group under the terms of the plan or of any collective bargaining
agreement or by applicable law; neither the Company nor any member of the
Controlled Group has withdrawn or partially withdrawn from any Multiemployer
Pension Plan, incurred any withdrawal liability with respect to any such plan or
received notice of any claim or demand for withdrawal liability or partial
withdrawal liability from any such plan, and no condition has occurred which, if
continued, might result in a withdrawal or partial withdrawal from any such
plan; and neither the Company nor any member of the Controlled Group has
received any notice that any Multiemployer Pension Plan is in reorganization,
that increased contributions may be required to avoid a reduction in plan
benefits or the imposition of any excise tax, that any such plan is or has been
funded at a rate less than that required under Section 412 of the Code, that any
such plan is or may be terminated, or that any such plan is or may become
insolvent.
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9.10 Investment Company Act. The Company is a closed end investment
company that has elected to be regulated as a business development company under
Section 54 of the Investment Company Act of 1940 (together with all amendments
thereto and any successor or substitute therefore and all regulations, orders
and opinions issued thereunder, the "1940 Act". The Company and its Subsidiaries
are in compliance with the requirements of the 1940 Act. No order, notice or
application has been received by the Company (and the Company has no knowledge
of any threatened or pending order, notice or application, or any basis for any
such order, notice or application) to revoke or suspend the status of the
Company under the 1940 Act as a business development company. The Loans
constitute a senior security permitted by the 1940 Act. Neither the Company nor
its Subsidiaries nor any of their Affiliates, after diligent inquiry, is related
to the Agent or any Bank or any of its or their Affiliates in the manner
described in Section 57(b) of the 1940 Act or an Affiliated Person or Affiliated
Company of the Agent or any Bank, under the 1940 Act. The transactions
contemplated by this Agreement and the Loans do not constitute transactions that
are unlawful or prohibited by Section 57 of the 1940 Act.
9.11 Public Utility Holding Company Act. No Loan Party is a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935.
9.12 Regulation U. No Loan Party is engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock. None of the Portfolio Investments includes
Margin Stock.
9.13 Taxes. Each Loan Party has filed all tax returns and reports
required by law to have been filed by it, unless the failure to file such tax
returns and reports would not have a Material Adverse Effect, and has paid all
taxes and governmental charges thereby shown to be owing, except any such taxes
or charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books. The Company is qualified and treated as a regulated
investment company under the Code.
9.14 Solvency, etc. On the Closing Date, and immediately prior to and
after giving effect to each borrowing hereunder and the use of the proceeds
thereof, (a) the Company's assets will exceed its liabilities and (b) the
Company will be solvent, will be able to pay its debts as they mature, will own
property with fair saleable value greater than the amount required to pay its
debts and will have capital sufficient to carry on its business as then
constituted.
9.15 Environmental Matters.
(a) No Violations. Except as set forth on Schedule 9.15, no
Loan Party, nor any operator of any Loan Party's real properties, is in
violation, or alleged violation, of any judgment, decree, order, law, permit,
license, rule or regulation pertaining to environmental matters, including those
arising under the Resource Conservation and Recovery Act ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 or any
other Environmental Law which (i) in any single case, requires expenditures in
any three-year period of $100,000 or more by any Loan Party in penalties and/or
for investigative, removal or remedial actions or (ii) individually or in the
aggregate otherwise might reasonably be expected to have a Material Adverse
Effect.
25
(b) Notices. Except as set forth on Schedule 9.15 and for
matters arising after the Closing Date, in each case none of which could singly
or in the aggregate be expected to have a Material Adverse Effect, no Loan Party
has received notice from any third party, including any Federal, state or local
governmental authority: (a) that any one of them has been identified by the U.S.
Environmental Protection Agency as a potentially responsible party under CERCLA
with respect to a site listed on the National Priorities List, 40 C.F.R. Part
▇▇▇ ▇▇▇▇▇▇▇▇ ▇; (b) that any hazardous waste, as defined by 42 U.S.C. ss.
6903(5), any hazardous substance as defined by 42 U.S.C. ss. 9601(14), any
pollutant or contaminant as defined by 42 U.S.C. ss. 9601(33) or any toxic
substance, oil or hazardous material or other chemical or substance regulated by
any Environmental Law (all of the foregoing, "Hazardous Substances") which any
one of them has generated, transported or disposed of has been found at any site
at which a Federal, state or local agency or other third party has conducted a
remedial investigation, removal or other response action pursuant to any
Environmental Law; (c) that it must conduct a remedial investigation, removal,
response action or other activity pursuant to any Environmental Law; or (d) of
any Environmental Claim.
(c) Handling of Hazardous Substances. Except as set forth on
Schedule 9.15, (i) no portion of the real property of any Loan Party has been
used for the handling, processing, storage or disposal of Hazardous Substances
except in accordance in all material respects with applicable Environmental
Laws; and no underground tank or other underground storage receptacle for
Hazardous Substances is located on such properties; (ii) in the course of any
activities conducted by each Loan Party or the operators of any real property of
any Loan Party, no Hazardous Substances have been generated or are being used on
such properties except in accordance in all material respects with applicable
Environmental Laws; (iii) there have been no Releases or threatened Releases of
Hazardous Substances on, upon, into or from any real property of any Loan Party,
which Releases singly or in the aggregate might reasonably be expected to have a
material adverse effect on the value of such real property or assets; (iv) there
have been no Releases on, upon, from or into any real property in the vicinity
of the real property of any Loan Party which, through soil or groundwater
contamination, may have come to be located on, and which might reasonably be
expected to have a material adverse effect on the value of, the real property or
other assets of any Loan Party; and (v) any Hazardous Substances generated by
any Loan Party have been transported offsite only by properly licensed carriers
and delivered only to treatment or disposal facilities maintaining valid permits
as required under applicable Environmental Laws, which transporters and
facilities have been and are operating in compliance in all material respects
with such permits and applicable Environmental Laws.
9.16 Year 2000 Problem. Each Loan Party has reviewed the areas within
its business and operations which could be adversely affected by, and has
developed or are developing a program to address on a timely basis, the Year
2000 Problem. Based on such review, program and inquiries, the Company
reasonably believes that the "Year 2000 Problem" will not have a Material
Adverse Effect.
26
9.17 Insurance. Set forth on Schedule 9.17 is a complete and accurate
summary of the property and casualty insurance program of each Loan Party as of
the Closing Date (including the names of all insurers, policy numbers,
expiration dates, amounts and types of coverage, annual premiums, exclusions,
deductibles, self-insured retention, and a description in reasonable detail of
any self-insurance program, retrospective rating plan, fronting arrangement or
other risk assumption arrangement involving each Loan Party).
9.18 Real Property. Set forth on Schedule 9.18 is a complete and
accurate list, as of the Closing Date, of the address of all real property owned
or leased by each Loan Party, together with, in the case of leased property, the
name and mailing address of the lessor of such property.
9.19 Information. All information heretofore or contemporaneously
herewith furnished in writing by any Loan Party to the Agent or any Bank for
purposes of or in connection with this Agreement and the transactions
contemplated hereby is, and all written information hereafter furnished by or on
behalf of any Loan Party to the Agent or any Bank pursuant hereto or in
connection herewith will be, true and accurate in every material respect on the
date as of which such information is dated or certified, and none of such
information is or will be incomplete by omitting to state any material fact
necessary to make such information not misleading in light of the circumstances
under which made (it being recognized by the Agent and the Banks that any
projections and forecasts provided by any Loan Party is based on good faith
estimates and assumptions believed by the Company to be reasonable as of the
date of the applicable projections or assumptions and that actual results during
the period or periods covered by any such projections and forecasts may differ
from projected or forecasted results).
9.20 Intellectual Property. Each Loan Party owns and possesses or has a
license or other right to use all patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, service marks, service ▇▇▇▇ rights and
copyrights as are necessary for the conduct of the business of each Loan Party,
without any infringement upon rights of others which could reasonably be
expected to have a Material Adverse Effect.
9.21 Burdensome Obligations. No Loan Party is a party to any agreement
or contract or subject to any corporate or partnership restriction which might
reasonably be expected to have a Material Adverse Effect.
9.22 Labor Matters. Except as set forth on Schedule 9.22, no Loan Party
is subject to any labor or collective bargaining agreement. There are no
existing or threatened strikes, lockouts or other labor disputes involving any
Loan Party that singly or in the aggregate could reasonably be expected to have
a Material Adverse Effect. Hours worked by and payment made to employees of each
Loan Party are not in violation of the Fair Labor Standards Act or any other
applicable law, rule or regulation dealing with such matters.
9.23 No Default. No Event of Default or Unmatured Event of Default
exists or would result from the incurring by the Company of any Debt hereunder
or under any other Loan Document.
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SECTION 10 COVENANTS.
Until the expiration or termination of the Commitments and thereafter
until all obligations of the Company hereunder and under the other Loan
Documents are paid in full, the Company agrees that, unless at any time the
Required Banks shall otherwise expressly consent in writing, it will:
10.1 Reports, Certificates and Other Information. Furnish to the Agent
and each Bank:
10.1.1 Annual Report. Promptly when available and in any event within
90 days after the close of each Fiscal Year: (a) a copy of the annual audit
report of the Company and its Consolidated Subsidiaries for such Fiscal Year
(and with respect to any Subsidiary that is not a Consolidated Subsidiary, its
unaudited financial statements), including therein balance sheets and statements
of earnings and cash flows of the Company and its Consolidated Subsidiaries (or
other Subsidiary) as at the end of such Fiscal Year, certified without
qualification by Ernst & Young LLP or other independent auditors of recognized
standing selected by the Company and reasonably acceptable to the Required
Banks, together with (i) a written statement from such accountants to the effect
that in making the examination necessary for the signing of such annual audit
report by such accountants, nothing came to their attention that caused them to
believe that the Company was not in compliance with any provision of Section
10.6, 10.7, 10.9 or 10.10 of this Agreement insofar as such provision relates to
accounting matters or, if something has come to their attention that caused them
to believe that the Company was not in compliance with any such provision,
describing such non-compliance in reasonable detail and (ii) a comparison with
the budget for such Fiscal Year and a comparison with the previous Fiscal Year;
and (b) consolidating balance sheets of the Company and its Consolidated
Subsidiaries (and with respect to any Subsidiary that is not a Consolidated
Subsidiary, its balance sheet) as of the end of such Fiscal Year and a
consolidating statement of earnings for the Company and its Consolidated
Subsidiaries (or other Subsidiary) for such Fiscal Year, certified by the Chief
Financial Officer or the Treasurer of the Company.
10.1.2 Interim Reports. Promptly when available and in any event within
45 days after the end of each Fiscal Quarter (except the last Fiscal Quarter of
each Fiscal Year), consolidated and consolidating balance sheets of the Company
and its Consolidated Subsidiaries as of the end of such Fiscal Quarter (and with
respect to any Subsidiary that is not a Consolidated Subsidiary, its balance
sheet), together with consolidated and consolidating statements of earnings and
cash flows for such Fiscal Quarter and for the period beginning with the first
day of such Fiscal Year and ending on the last day of such Fiscal Quarter,
together with a comparison with the corresponding period of the previous Fiscal
Year and a comparison with the budget for such period of the current Fiscal
Year, certified by the Chief Financial Officer or the Treasurer of the Company.
10.1.3 Compliance Certificates. Contemporaneously with the furnishing
of a copy of each annual audit report pursuant to Section 10.1.1 and each set of
quarterly statements pursuant to Section 10.1.2, a duly completed compliance
certificate in the form of Exhibit B, with appropriate insertions, dated the
date of such annual report or such quarterly statements and signed by the Chief
Financial Officer or the Treasurer of the Company, containing a computation of
each of the financial ratios and restrictions set forth in Section 10.6 and to
the effect that such officer has not become aware of any Event of Default or
Unmatured Event of Default that has occurred and is continuing or, if there is
any such event, describing it and the steps, if any, being taken to cure it.
28
10.1.4 Reports to the SEC, 1940 Act Reports and Reports to
Stockholders. Promptly upon the filing or sending thereof, copies of all
regular, periodic or special reports of the Company or any Subsidiary filed with
the SEC (including Forms 12b-25, 10-K, 10-Q and 8-K); copies of all registration
statements of the Company or any Subsidiary filed with the SEC (other than on
Form S-8); and copies of all proxy statements or other communications made to
security holders generally; copies of all filings, reports and notices made
under or pursuant to the 1940 Act (including Section 6(c) of the 1940 Act and
any no action letters submitted to the SEC staff on behalf of or relating to the
Company).
10.1.5 Notice of Default, Litigation and ERISA Matters. Promptly upon
becoming aware of any of the following, written notice describing the same and
the steps being taken by the Company or the Subsidiary affected thereby with
respect thereto:
(a) the occurrence of an Event of Default or an Unmatured
Event of Default;
(b) any litigation, arbitration or governmental investigation
or proceeding not previously disclosed by the Company to the Banks
which has been instituted or, to the knowledge of the Company, is
threatened against the Company or any Subsidiary or to which any of the
properties of any thereof is subject which might reasonably be expected
to have a Material Adverse Effect;
(c) the institution of any steps by any member of the
Controlled Group or any other Person to terminate any Pension Plan, or
the failure of any member of the Controlled Group to make a required
contribution to any Pension Plan (if such failure is sufficient to give
rise to a Lien under Section 302(f) of ERISA) or to any Multiemployer
Pension Plan, or the taking of any action with respect to a Pension
Plan which could result in the requirement that the Company furnish a
bond or other security to the PBGC or such Pension Plan, or the
occurrence of any event with respect to any Pension Plan or
Multiemployer Pension Plan which could result in the incurrence by any
member of the Controlled Group of any material liability, fine or
penalty (including any claim or demand for withdrawal liability or
partial withdrawal from any Multiemployer Pension Plan), or any
material increase in the contingent liability of the Company with
respect to any post-retirement welfare plan benefit, or any notice that
any Multiemployer Pension Plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or
the imposition of an excise tax, that any such plan is or has been
funded at a rate less than that required under Section 412 of the Code,
that any such plan is or may be terminated, or that any such plan is or
may become insolvent;
(d) any cancellation or material change in any insurance
maintained by any Loan Party;
29
(e) any other event (including (i) any violation of any
Environmental Law or the assertion of any Environmental Claim or (ii)
the enactment or effectiveness of any law, rule or regulation) which
might reasonably be expected to have a Material Adverse Effect; or
(f) any event which would cause any Eligible Investment Asset
to cease to be an Eligible Investment Asset (including any Modification
and all details and copies of all documents relating thereto).
10.1.6 Borrowing Base Certificates. Within 30 days of the end of each
month (or 45 days in the case of a month that is also the end of a Fiscal
Quarter), a Borrowing Base Certificate dated as of the end of such month and
executed by the Chief Financial Officer or the Treasurer of the Company on
behalf of the Company (provided that (i) the Company may deliver a Borrowing
Base Certificate more frequently if it chooses and (ii) at any time an Event of
Default exists, the Agent may require the Company to deliver Borrowing Base
Certificates more frequently). Each quarterly Borrowing Base Certificate shall
contain a valuation analysis of Portfolio Investments taking into account the
criteria for Eligible Investment Assets and include all calculations thereunder.
10.1.7 Management Reports. Promptly upon the request of the Agent or
any Bank, copies of all detailed financial and management reports submitted to
the Company by independent auditors in connection with each annual or interim
audit made by such auditors of the books of the Company.
10.1.8 Projections. As soon as practicable, and in any event within 60
days prior to the commencement of each Fiscal Year, financial projections for
the Company and its Subsidiaries for such Fiscal Year (including an operating
budget and a cash flow budget) prepared in a manner consistent with the
projections delivered by the Company to the Banks prior to the Closing Date or
otherwise in a manner reasonably satisfactory to the Agent, accompanied by a
certificate of the Chief Financial Officer or the Treasurer of the Company on
behalf of the Company to the effect that (i) such projections were prepared by
the Company in good faith, (ii) the Company has a reasonable basis for the
assumptions contained in such projections and (iii) such projections have been
prepared in accordance with such assumptions.
10.1.9 Subordinated Debt Notices. Promptly from time to time, copies of
any notices (including notices of default or acceleration) received from any
holder or trustee of, under or with respect to any Subordinated Debt.
10.1.10 Year 2000 Problem. Promptly upon the request of the Agent or
any Bank, such updated information or documentation as may be requested from
time to time regarding the efforts of any Loan Party to address the Year 2000
Problem.
10.1.11 Valuations. Within 45 days of the end of each Fiscal Quarter, a
consolidated statement of Portfolio Investments (with detail as to cost versus
value by Portfolio Company and indicating each investment component (senior
debt, subordinated debt, warrants, preferred or common stock, government
securities, etc.) for each Portfolio Investment) accompanied by a servicing and
delinquency status report and detail as to unrealized gains and losses for
Portfolio Investments. Promptly upon receipt, copies of all other valuation
reports or appraisals or information or reports modifying previous valuations
relating to Portfolio Investments received from any Person, including any
Portfolio Company or any advisor to a Portfolio Company or the Company's
auditors.
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10.1.12 Other Information. Promptly from time to time, such other
information concerning any Loan Party as any Bank or the Agent may reasonably
request.
10.2 Books, Records and Inspections. Keep, and cause each Loan Party to
keep, its books and records in accordance with sound business practices
sufficient to allow the preparation of financial statements in accordance with
GAAP; permit, and cause each Loan Party to permit, any Bank or the Agent or any
representative thereof to inspect the properties (including all documents,
relating to Portfolio Investments) and operations of each Loan Party at any
reasonable time and with reasonable notice (or at any time without notice if an
Event of Default exists); and permit, and cause each Loan Party to permit, at
any reasonable time and with reasonable notice (or at any time without notice if
an Event of Default exists), any Bank or the Agent or any representative thereof
to visit any or all of its offices, to discuss its financial matters with its
officers and its independent auditors (and the Company hereby authorizes such
independent auditors to discuss such financial matters with any Bank or the
Agent or any representative thereof), and to examine (and, at the expense of the
Company or the applicable Loan Party, photocopy extracts from) any of its books
or other records; and permit, and cause each Loan Party to permit, the Agent and
its representatives to inspect the tangible assets of the Company or such Loan
Party, to perform appraisals of the equipment of the Company or such Loan Party,
and to inspect, audit, check and make copies of and extracts from the books,
records, computer data, computer programs, journals, orders, receipts,
correspondence and other data relating to any collateral. All such inspections
or audits by the Agent shall be at the Company's expense.
10.3 Maintenance of Property; Insurance. (a) Keep, and cause each Loan
Party to keep, all property useful and necessary in the business of the Company
or such Loan Party in good working order and condition, ordinary wear and tear
excepted.
(b) Maintain, and cause each Loan Party to maintain, with responsible
insurance companies, such insurance as may be required by any law or
governmental regulation or court decree or order applicable to it and such other
insurance, to such extent and against such hazards and liabilities, as is
customarily maintained by companies similarly situated; and, upon request of the
Agent or any Bank, furnish to the Agent or such Bank a certificate setting forth
in reasonable detail the nature and extent of all insurance maintained by the
Company and each Loan Party. The Company shall cause each issuer of an insurance
policy to provide the Agent with an endorsement (i) showing loss payable to the
Agent with respect to each policy of property or casualty insurance and naming
the Agent and each Bank as an additional insured with respect to each policy of
insurance for liability for personal injury or property damage, (ii) providing
that 30 days' notice will be given to the Agent prior to any cancellation of,
material reduction or change in coverage provided by or other material
modification to such policy and (iii) reasonably acceptable in all other
respects to the Agent.
10.4 Compliance with Laws; Payment of Taxes and Liabilities. (a)
Comply, and cause each Loan Party to comply, in all material respects with all
applicable laws, rules, regulations, decrees, orders, judgments, licenses and
permits, except where failure to comply could not reasonably be expected to have
a Material Adverse Effect; and (b) pay, and cause each Loan Party to pay, prior
to delinquency, all taxes and other governmental charges against it or any of
its property, as well as claims of any kind which, if unpaid, might become a
Lien on any of its property; provided that the foregoing shall not require the
Company or any Loan Party to pay any such tax or charge so long as it shall
contest the validity thereof in good faith by appropriate proceedings and shall
set aside on its books adequate reserves with respect thereto in accordance with
GAAP.
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10.5 Maintenance of Existence, etc. Maintain and preserve, and (subject
to Section 10.11) cause each Loan Party to maintain and preserve, (a) its
existence and good standing in the jurisdiction of its organization and (b) its
qualification to do business and good standing in each jurisdiction where the
nature of its business makes such qualification necessary (except in those
instances in which the failure to be qualified or in good standing does not have
a Material Adverse Effect). The Company shall maintain its status as a
closed-end business development company under the 1940 Act and as Person
qualifying for treatment as a regulated investment company under the Code. The
Company shall not withdraw the registration of its common stock under Section 12
of the Securities Exchange Act of 1934. Notwithstanding the foregoing, the
Company shall be permitted to cease operations of and dissolve or liquidate
American Capital Strategies Labor Research, Inc., a Delaware corporation
("ACSLR") and the Agent shall be permitted to release ACSLR from any of its
obligations under the Loan Documents (which dissolution and release is hereby
approved by the Required Banks); provided, that such dissolution or liquidation
occurs within 180 days of the date hereof.
10.6 Financial Covenants.
10.6.1 Consolidated Tangible Net Worth. Not permit Consolidated
Tangible Net Worth to be less than $140,000,000 at any time.
10.6.2 Leverage Ratio. Not permit the Leverage Ratio at the end of
any Fiscal Quarter to exceed 1 to 1 for the Computation Period ending on such
Fiscal Quarter.
10.6.3 Consolidated Pre-Tax Income. Not permit Consolidated Pre-Tax
Income at the end of any Fiscal Quarter to be less than $10,000,000 for the
Computation Period ending on such Fiscal Quarter.
10.6.4 Asset Coverage Ratio. Not permit the Asset Coverage Ratio to
be less than 2 to 1 at any time.
10.7 Limitations on Debt. Not, and not permit any Loan Party to,
create, incur, assume or suffer to exist any Debt, except:
(a) obligations under this Agreement and the other Loan
Documents;
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(b) Debt secured by Liens permitted by Section 10.8(d), and
extensions, renewals and refinancings thereof; provided that the
aggregate amount of all such Debt at any time outstanding shall not
exceed $1,000,000;
(c) Subordinated Debt;
(d) Hedging Obligations incurred for bona fide hedging
purposes and not for speculation;
(e) the Debt to be Repaid (so long as such Debt is repaid on
the Closing Date with the proceeds of the initial Loans hereunder).
(f) short term borrowings incurred to purchase Cash Equivalent
Investments to the extent necessary to maintain its status as a
regulated investment company; and
(g) guaranty obligations of Portfolio Companies of up to
$10,000,000 in the aggregate at any time.
10.8 Liens. Not, and not permit any Loan Party to, create or permit to
exist any Lien on any of its real or personal properties, assets or rights of
whatsoever nature (whether now owned or hereafter acquired), except:
(a) Liens for taxes or other governmental charges not at the
time delinquent or thereafter payable without penalty or being
contested in good faith by appropriate proceedings and, in each case,
for which it maintains adequate reserves;
(b) Liens arising in the ordinary course of business (such as
(i) Liens of carriers, warehousemen, mechanics and materialmen and
other similar Liens imposed by law and (ii) Liens incurred in
connection with worker's compensation, unemployment compensation and
other types of social security (excluding Liens arising under ERISA) or
in connection with surety bonds, bids, performance bonds and similar
obligations) for sums not overdue or being contested in good faith by
appropriate proceedings and not involving any deposits or advances or
borrowed money or the deferred purchase price of property or services
and, in each case, for which it maintains adequate reserves;
(c) Liens described on Schedule 10.8;
(d) subject to the limitation set forth in Section 10.7(b),
(i) Liens arising in connection with Capital Leases (and attaching only
to the property being leased), (ii) Liens existing on property (other
than Portfolio Investments) at the time of the acquisition thereof by
the Company or any Loan Party (and not created in contemplation of such
acquisition) and (iii) Liens that constitute purchase money security
interests on any property (other than Portfolio Investments) securing
debt incurred for the purpose of financing all or any part of the cost
of acquiring such property, provided that any such Lien attaches to
such property within 60 days of the acquisition thereof and attaches
solely to the property so acquired;
33
(e) attachments, appeal bonds, judgments and other similar
Liens, for sums not exceeding $100,000 arising in connection with court
proceedings, provided the execution or other enforcement of such Liens
is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(f) easements, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens not interfering in any
material respect with the ordinary conduct of the business of the
Company or any Loan Party;
(g) Liens arising under the Loan Documents; and
(h) Liens on Cash Equivalent Investments not included in
Eligible Investment Assets purchased with Debt permitted by Section 10.7(f).
10.9 Operating Leases. Not permit the aggregate amount of all rental
payments under Operating Leases made (or scheduled to be made) by the Company
and its Subsidiaries (on a consolidated basis) to exceed $1,000,000 in any
Fiscal Year.
10.10 Restricted Payments. Not, and not permit any Loan Party to, (a)
make any distribution to any of its stockholders, (b) purchase or redeem any of
its capital stock or other equity interests or any warrants, options or other
rights in respect thereof, (c) pay any management fees or similar fees to any of
its shareholders or any Affiliate thereof, (d) make any redemption, prepayment,
defeasance or repurchase of any Subordinated Debt or (e) set aside funds for any
of the foregoing. Notwithstanding the foregoing, (i) any Subsidiary may pay
dividends or make other distributions to the Company or to a Wholly-Owned
Subsidiary; and (ii) so long as no Event of Default or Unmatured Event of
Default exists or would result therefrom, the Company may (A) pay dividends in
the ordinary course of business, (B) purchase in the open market shares of its
capital stock or other equity interests, warrants, options or other rights in
respect thereof, and (C) purchase shares of its capital stock issued pursuant to
the Company's 1997 Stock Option Plan, in accordance with the call provisions
thereof.
10.11 Mergers, Consolidations, Sales. Not, and not permit any Loan
Party to, be a party to any merger or consolidation, or purchase or otherwise
acquire all or substantially all of the assets or any stock of any class of, or
any partnership or joint venture interest in, any other Person, or, except in
the ordinary course of its business, sell, transfer, convey or lease all or any
substantial part of its assets, or sell or assign with or without recourse any
receivables, except for (a) any such merger, consolidation, sale, transfer,
conveyance, lease or assignment of or by ACSLR or any Wholly-Owned Subsidiary
into the Company or into, with or to any other Wholly-Owned Subsidiary; (b) any
such purchase or other acquisition by the Company or any Wholly-Owned Subsidiary
of the assets or stock of any Wholly-Owned Subsidiary; and (c) so long as no
Event of Default or Unmatured Event of Default exists or would result therefrom,
sales and dispositions of Portfolio Investments in the ordinary course of
business for not less than the value of such Portfolio Investments included in
the most current Borrowing Base Certificate.
34
10.12 Modification of Organizational Documents. Not permit the
Certificate or Articles of Incorporation, By-Laws or other organizational
documents of the Company or any Loan Party to be amended or modified in any way
which might reasonably be expected to materially adversely affect the interests
of the Banks.
10.13 Use of Proceeds. Use the proceeds of the Loans solely for general
corporate purposes; and not use or permit any proceeds of any Loan to be used,
either directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of "purchasing or carrying" any Margin Stock.
10.14 Further Assurances. Take, and cause each Loan Party to take, such
actions as are necessary or as the Agent or the Required Banks may reasonably
request from time to time (including the execution and delivery of guaranties,
security agreements, pledge agreements, mortgages, deeds of trust, financing
statements and other documents, the filing or recording of any of the foregoing,
and the delivery of stock certificates and other collateral with respect to
which perfection is obtained by possession) to ensure that (a) the obligations
of the Company hereunder and under the other Loan Documents (i) are secured by
substantially all of the assets of the Company and (ii) guaranteed by all of its
Subsidiaries (including, promptly upon the acquisition or creation thereof, any
Subsidiary acquired or created after the date hereof) by execution of a
counterpart of the Guaranty and (b) the obligations of each Subsidiary under the
Guaranty are secured by substantially all of the assets of such Subsidiary.
10.15 Transactions with Affiliates. Not, and not permit any Loan Party
to, enter into, or cause, suffer or permit to exist any transaction, arrangement
or contract with any of its other Affiliates (other than the Company and its
Subsidiaries) which is on terms which are less favorable than are obtainable
from any Person which is not one of its Affiliates. Without limitation on the
foregoing, not, and not permit any Loan Party to enter into, or cause, suffer or
permit to exist any transaction, arrangement or contract prohibited by or
unlawful under the ▇▇▇▇ ▇▇▇.
10.16 Employee Benefit Plans. Maintain, and cause each Loan Party to
maintain, each Pension Plan in substantial compliance with all applicable
requirements of law and regulations.
10.17 Environmental Matters. (a) If any Release or Disposal of
Hazardous Substances shall occur or shall have occurred on any real property of
any Loan Party, the Company shall, or shall cause the applicable Loan Party to,
cause the prompt containment and removal of such Hazardous Substances and the
remediation of such real property or other assets as necessary to comply with
all Environmental Laws and to preserve the value of such real property or other
assets. Without limiting the generality of the foregoing, the Company shall, and
shall cause each Loan Party to, comply with any valid Federal or state judicial
or administrative order requiring the performance at any real property of any
Loan Party of activities in response to the Release or threatened Release of a
Hazardous Substance.
35
(b) To the extent that the transportation of "hazardous waste" as
defined by RCRA is permitted by this Agreement, the Company shall, and shall
cause each Loan Party to, dispose of such hazardous waste only at licensed
disposal facilities operating in compliance with Environmental Laws.
10.18 Unconditional Purchase Obligations. Not, and not permit any Loan
Party to, enter into or be a party to any contract for the purchase of
materials, supplies or other property or services if such contract requires that
payment be made by it regardless of whether delivery is ever made of such
materials, supplies or other property or services.
10.19 Inconsistent Agreements. Not, and not permit any Loan Party to,
enter into any agreement containing any provision which would (a) be violated or
breached by any borrowing by the Company hereunder or by the performance by the
Company or any Loan Party of any of its obligations hereunder or under any other
Loan Document, (b) prohibit the Company or any Loan Party from granting to the
Agent, for the benefit of the Banks, a Lien on any of its assets or (c) create
or permit to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (i) pay dividends or make other distributions to
the Company or any other applicable Subsidiary, or pay any Debt owed to the
Company or any other Subsidiary, (ii) make loans or advances to the Company or
(iii) transfer any of its assets or properties to the Company.
10.20 Business Activities. Not, and not permit any Loan Party to,
engage in any line of business other than the businesses engaged in on the date
hereof and businesses reasonably related thereto in accordance with the
Investment Policy.
10.21 Investments. Not, and not permit any Loan Party to, make or
permit to exist any Investment in any other Person, except (without duplication)
the following:
(a) Cash Equivalent Investments held with the Agent as
collateral pursuant to the Collateral Documents for the Company's obligations
hereunder;
(b) Portfolio Investments; and
(c) Investments listed on Schedule 10.21;
provided that (x) any Investment which when made complies with the requirements
of the definition of the term "Cash Equivalent Investment" may continue to be
held notwithstanding that such Investment if made thereafter would not comply
with such requirements; (y) no Investment otherwise permitted by (c) shall be
permitted to be made if, immediately before or after giving effect thereto, any
Event of Default or Unmatured Event of Default exists.
10.22 Fiscal Year. Not change its Fiscal Year.
10.23 Limitations on Equity. Without the prior written consent of the
Required Banks, not, and not permit any Loan Party to, issue any capital stock
or other equity interest or any options or warrants to purchase, or securities
convertible into, capital stock or equity interests, except (a) pursuant to the
Company's 1997 Stock Option Plan (or any similar option plans adopted by the
Company's board of directors), (b) issuances of capital stock to the Company's
Employee Stock Ownership Plan in accordance with the terms hereof, and (c)
pursuant to exercise of 442,751 warrants issued to Friedman, Billings, ▇▇▇▇▇▇ &
Co., Inc., in connection with the Company's initial public offering.
Notwithstanding the foregoing, the Company shall be permitted to issue capital
stock or other equity interests so long as no Event of Default or Unmatured
Event of Default exists or would result therefrom, if concurrently with the
receipt of cash proceeds (net of direct costs of issuance, including sales and
underwriter's commissions) from any such issuance the Company makes a prepayment
of the Revolving Loans (but not a permanent reduction in the Commitment) equal
to 50% of the amount of such proceeds.
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SECTION 11 EFFECTIVENESS; CONDITIONS OF LENDING, ETC.
The obligation of each Bank to make its Loans is subject to the
following conditions precedent:
11.1 Initial Credit Extension. The obligation of the Banks to make the
initial Loans is, in addition to the conditions precedent specified in Section
11.2, subject to the conditions precedent that (1) all Debt to be Repaid has
been (or concurrently with the initial borrowing will be) paid in full, and that
all agreements and instruments governing the Debt to be Repaid and that all
Liens securing such Debt to be Repaid have been (or concurrently with the
initial borrowing will be) terminated and (2) the Agent shall have received all
of the following, each duly executed and dated the Closing Date (or such earlier
date as shall be satisfactory to the Agent), in form and substance satisfactory
to the Agent (and the date on which all such conditions precedent have been
satisfied or waived in writing by the Agent and the Required Banks (which date
shall not be later than November 30, 1998 or the Commitment shall terminate) is
called the "Closing Date"):
11.1.1 Notes. The Notes.
11.1.2 Resolutions. Certified copies of resolutions of the Board of
Directors of the Company authorizing the execution, delivery and performance by
the Company of this Agreement, the Notes and the other Loan Documents to which
the Company is a party; and certified copies of resolutions of the Board of
Directors of each other Loan Party authorizing the execution, delivery and
performance by such Loan Party of each Loan Document to which such entity is a
party.
11.1.3 Consents; Certificates, etc. Certified copies of all documents
evidencing any necessary corporate or partnership action, consents and
governmental approvals (if any) required for the execution, delivery and
performance by the Company and each other Loan Party of the documents referred
to in this Section 11, including certificates/articles of incorporation,
by-laws, and good standing certificates for the Company and each other Loan
Party.
11.1.4 Incumbency and Signature Certificates. A certificate of the
Secretary or an Assistant Secretary (or other appropriate representative) of
each Loan Party certifying the names of the officer or officers of such entity
authorized to sign the Loan Documents to which such entity is a party, together
with a sample of the true signature of each such officer (it being understood
that the Agent and each Bank may conclusively rely on each such certificate
until formally advised by a like certificate of any changes therein).
37
11.1.5 Guaranty. A counterpart of the Guaranty executed by each
Subsidiary.
11.1.6 Security and Pledge Agreement. A counterpart of the Security and
Pledge Agreement executed by the Company and each Subsidiary.
11.1.7 Custody Control Agreement. A Custody Control Agreement
executed by the Company and the Agent.
11.1.8 Opinions of Counsel. The opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇
substantially in the form of Exhibit G.
11.1.9 Insurance. Evidence satisfactory to the Agent of the existence
of insurance required to be maintained pursuant to Section 10.3(b), together
with evidence that the Agent has been named as a lender's loss payee and an
additional insured on all related insurance policies.
11.1.10 Copies of Portfolio Investments; Certain Documents. Copies,
certified by the Secretary of the Company, of all documents relating to each
Portfolio Investment (including copies of all notes and certificates issued
thereunder) and copies of any financial advisory or management agreement to
which the Company or any Subsidiary is a party. Originals of all documents
relating to each Portfolio Investment shall have been delivered to the
Custodian.
11.1.11 Payment of Fees. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Closing Date, together with all Attorney Costs of the Agent to the extent
invoiced prior to the Closing Date, plus such additional amounts of Attorney
Costs as shall constitute the Agent's reasonable estimate of Attorney Costs
incurred or to be incurred by the Agent through the closing proceedings
(provided that such estimate shall not thereafter preclude final settling of
accounts between the Company and the Agent).
11.1.12 Search Results; Lien Terminations. Certified copies of Uniform
Commercial Code Requests for Information or Copies (Form UCC-11), or a similar
search report certified by a party acceptable to the Agent, dated a date
reasonably near to the Closing Date, listing all effective financing statements
which name the Company and each Subsidiary (under their present names and any
previous names) as debtors and which are filed in the jurisdictions in which
filings are to be made pursuant to the Collateral Documents, together with (i)
copies of such financing statements, (ii) executed copies of proper Uniform
Commercial Code Form UCC-3 termination statements, if any, necessary to release
all Liens and other rights of any Person in any collateral described in the
Collateral Documents previously granted by any Person (other than Liens
permitted by Section 10.8) and (iii) such other Uniform Commercial Code Form
UCC-3 termination statements as the Agent may reasonably request.
11.1.13 Filings, Registrations and Recordings. The Agent shall have
received each document (including Uniform Commercial Code financing statements)
required by the Collateral Documents or under law or reasonably requested by the
Agent to be filed, registered or recorded in order to create in favor of the
Agent, for the benefit of the Banks, a perfected Lien on the collateral
described therein, prior and superior to any other Person, in proper form for
filing, registration or recording. The Agent shall have received such stock
powers, assignments in blank, note powers, endorsements in blank, notices of
assignment, assignments and other documents and instruments as it may require in
order to perfect in favor of the Agent, for the benefit of the Banks, a security
interest in each Portfolio Investment.
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11.1.14 Closing Certificate. A certificate signed by an authorized
officer of the Company dated as of the Closing Date, affirming the matters set
forth in Section 11.2.1 as of the Closing Date.
11.1.15 Borrowing Base Certificate. A Borrowing Base Certificate dated
as of the Closing Date.
11.1.16 Other. Such other documents as the Agent or any Bank may
reasonably request.
11.2 Conditions. The obligation of each Bank to make each Loan is
subject to the following further conditions precedent that:
11.2.1 Compliance with Warranties, No Default, etc. Both before
and after giving effect to any borrowing the following statements shall be true
and correct:
(a) the representations and warranties of the Company and each
Loan Party set forth in this Agreement and the other Loan Documents
shall be true and correct in all material respects with the same effect
as if then made (except to the extent stated to relate to a specific
earlier date, in which case such representations and warranties shall
be true and correct as of such earlier date); and
(b) no Event of Default or Unmatured Event of Default shall
have then occurred and be continuing.
11.2.2 Confirmatory Certificate. If requested by the Agent or any Bank,
the Agent shall have received (in sufficient counterparts to provide one to each
Bank) a certificate dated the date of such requested Loan and signed by a duly
authorized representative of the Company as to the matters set out in Section
11.2.1 (it being understood that each request by the Company for the making of a
Loan be deemed to constitute a warranty by the Company that the conditions
precedent set forth in Section 11.2.1 will be satisfied at the time of the
making of such Loan), together with such other documents as the Agent or any
Bank may reasonably request in support thereof.
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT.
12.1 Events of Default. Each of the following shall constitute an
Event of Default under this Agreement:
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12.1.1 Non-Payment of the Loans, etc. Default in the payment when due
of the principal of any Loan; or default, and continuance thereof for five days,
in the payment when due of any interest, fee or other amount payable by the
Company hereunder or under any other Loan Document.
12.1.2 Non-Payment of Other Debt. Any default shall occur under the
terms applicable to any Debt of the Company or any Subsidiary in an aggregate
amount (for all such Debt so affected) exceeding $250,000 and such default shall
(a) consist of the failure to pay such Debt when due (after the lapse of any
applicable grace period), whether by acceleration or otherwise, or (b)
accelerate the maturity of such Debt or permit the holder or holders thereof, or
any trustee or agent for such holder or holders, to cause such Debt to become
due and payable (after the lapse of any applicable grace period) (or require the
Company or any Subsidiary to purchase or redeem such Debt) prior to its
expressed maturity.
12.1.3 Other Material Obligations. Default in the payment when due
(after the lapse of any applicable grace period), or in the performance or
observance of, any material obligation of, or condition agreed to by, the
Company or any Subsidiary with respect to any material purchase or lease of
goods or services where such default, singly or in the aggregate with all other
such defaults, might reasonably be expected to have a Material Adverse Effect.
12.1.4 Bankruptcy, Insolvency, etc. The Company or any Subsidiary
becomes insolvent or generally fails to pay, or admits in writing its inability
or refusal to pay, debts as they become due; or the Company or any Subsidiary
applies for, consents to, or acquiesces in the appointment of a trustee,
receiver or other custodian for the Company or such Subsidiary or any property
thereof, or makes a general assignment for the benefit of creditors; or, in the
absence of such application, consent or acquiescence, a trustee, receiver or
other custodian is appointed for the Company or any Subsidiary or for a
substantial part of the property of any thereof and is not discharged within 60
days; or any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is commenced in respect of the Company or any
Subsidiary, and if such case or proceeding is not commenced by the Company or
such Subsidiary, it is consented to or acquiesced in by the Company or such
Subsidiary, or remains for 60 days undismissed; or the Company or any Subsidiary
takes any action to authorize, or in furtherance of, any of the foregoing.
12.1.5 Non-Compliance with Loan Documents. (a) Failure by the Company
to comply with or to perform any covenant set forth in Sections 10.5 through
10.15, and 10.20 through 10.22, or failure by the Company to permit access and
inspections in accordance with Section 10.2; or (b) failure by the Company to
comply with or to perform any other provision of this Agreement or any other
Loan Document (and not constituting an Event of Default under any other
provision of this Section 12) and continuance of such failure described in this
clause (b) for 30 days.
12.1.6 Warranties. Any warranty made by the Company or any Subsidiary
herein or any other Loan Document is breached or is false or misleading in any
material respect, or any schedule, certificate, financial statement, report,
notice or other writing furnished by the Company or any Subsidiary to the Agent
or any Bank in connection herewith is false or misleading in any material
respect on the date as of which the facts therein set forth are stated or
certified.
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12.1.7 Pension Plans. (i) Institution of any steps by the Company or
any other Person to terminate a Pension Plan if as a result of such termination
the Company could be required to make a contribution to such Pension Plan, or
could incur a liability or obligation to such Pension Plan, in excess of
$250,000; (ii) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA; or (iii) there
shall occur any withdrawal or partial withdrawal from a Multiemployer Pension
Plan and the withdrawal liability (without unaccrued interest) to Multiemployer
Pension Plans as a result of such withdrawal (including any outstanding
withdrawal liability that the Company and the Controlled Group have incurred on
the date of such withdrawal) exceeds $250,000.
12.1.8 Judgments. Final judgments which exceed an aggregate of $250,000
shall be rendered against the Company or any Subsidiary and shall not have been
paid, discharged or vacated or had execution thereof stayed pending appeal
within 30 days after entry or filing of such judgments.
12.1.9 Invalidity of Guaranty, etc. The Guaranty shall cease to be in
full force and effect with respect to any Subsidiary; or any Subsidiary (or any
Person by, through or on behalf of such Subsidiary) shall contest in any manner
the validity, binding nature or enforceability of the Guaranty with respect to
such Subsidiary.
12.1.10 Invalidity of Collateral Documents, etc. Any Collateral
Document shall cease to be in full force and effect; or the Company or any
Subsidiary (or any Person by, through or on behalf of the Company or any
Subsidiary) shall contest in any manner the validity, binding nature or
enforceability of any Collateral Document.
12.1.11 Invalidity of Subordination Provisions, etc. Any subordination
provision in any document or instrument governing Subordinated Debt, or any
subordination provision in any guaranty by any Subsidiary of any Subordinated
Debt, shall cease to be in full force and effect, or the Company shall contest
in any manner the validity, binding nature or enforceability of any such
provision.
12.1.12 Change of Control. (a) Any Person or group of Persons (within
the meaning of Section 13 or 14 of the Securities Exchange Act of 1934 shall
acquire beneficial ownership (within the meaning of Rule 13d-3 promulgated under
such Act) of more than 51% of the outstanding securities (on a fully diluted
basis and taking into account any securities or contract rights exercisable,
exchangeable or convertible into equity securities) of the Company having voting
rights in the election of directors under normal circumstances; or (b) a
majority of the members of the Board of Directors of the Company shall cease to
be Continuing Members; or (c) a period of 30 consecutive days shall have elapsed
during which any two of the individuals named in Schedule 12.1.12 shall have
ceased to hold executive offices with the Company at least equal in seniority
and responsibility to such individuals' present offices, as set out in such
Schedule 12.1.12, excluding any such individual who has been replaced by another
individual or individuals reasonably satisfactory to the Required Banks (it
being understood that any such replacement individual shall be deemed added to
Schedule 12.1.12 on the date of approval thereof by the Required Banks). For
purposes of the foregoing, "Continuing Member" means a member of the Board of
Directors of the Company who either (i) was a member of the Company's Board of
Directors on the day before the Closing Date and has been such continuously
thereafter or (ii) became a member of such Board of Directors after the day
before the Closing Date and whose election or nomination for election was
approved by a vote of the majority of the Continuing Members then members of the
Company's Board of Directors.
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12.1.13 Investment Company Act. (a) Any election by the holders of
voting securities to change the Investment Policy; (b) any election by the
holders of voting securities to become an open end investment company under the
1940 Act; (c) any withdrawal by the Company of election to be a business
development company under the 1940 Act; (d) any action taken by the SEC to
suspend or revoke the status of the Company as a business development company
under the 1940 Act; or (e) the Company violates the 1940 Act in a manner which
could have a Material Adverse Effect.
12.1.14 Material Adverse Effect. The occurrence of any event having a
Material Adverse Effect.
12.2 Effect of Event of Default. If any Event of Default described in
Section 12.1.4 shall occur, the Commitments (if they have not theretofore
terminated) shall immediately terminate and the Loans and all other obligations
hereunder shall become immediately due and payable, all without presentment,
demand, protest or notice of any kind; and, if any other Event of Default shall
occur and be continuing, the Agent (upon written request of the Required Banks)
shall declare the Commitments (if they have not theretofore terminated) to be
terminated and/or declare all Loans and all other obligations hereunder to be
due and payable, whereupon the Commitments (if they have not theretofore
terminated) shall immediately terminate and/or all Loans and all other
obligations hereunder shall become immediately due and payable, all without
presentment, demand, protest or notice of any kind. The Agent shall promptly
advise the Company of any such declaration, but failure to do so shall not
impair the effect of such declaration. Notwithstanding the foregoing, the effect
as an Event of Default of any event described in Section 12.1.1 or Section
12.1.4 may be waived by the written concurrence of all of the Banks, and the
effect as an Event of Default of any other event described in this Section 12
may be waived by the written concurrence of the Required Banks.
SECTION 13 THE AGENT.
13.1 Appointment and Authorization. Each Bank hereby irrevocably
(subject to Section 13.9) appoints, designates and authorizes the Agent to take
such action on its behalf under the provisions of this Agreement and each other
Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duty or
responsibility except those expressly set forth herein, nor shall the Agent have
or be deemed to have any fiduciary relationship with any Bank, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against the Agent.
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13.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
13.3 Liability of Agent. None of the Agent nor any of its directors,
officers, employees or agents shall (i) be liable for any action taken or
omitted to be taken by any of them under or in connection with this Agreement or
any other Loan Document or the transactions contemplated hereby (except for its
own gross negligence or willful misconduct), or (ii) be responsible in any
manner to any of the Banks for any recital, statement, representation or
warranty made by the Company or any Subsidiary or Affiliate of the Company, or
any officer thereof, contained in this Agreement or in any other Loan Document,
or in any certificate, report, statement or other document referred to or
provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or any security interest created thereunder or for the priority or
perfection thereof, or for any failure of the Company or any other party to any
Loan Document to perform its obligations hereunder or thereunder. The Agent
shall not be under any obligation to any Bank to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Company or any of the Company's Subsidiaries
or Affiliates. Without limitation on the foregoing, the Agent shall have no duty
or responsibility for the validity, legality, enforceability, recordability,
genuineness, authorization, collectability, insurability, effectiveness or
suitability of any Portfolio Investment or for determining the accuracy or
validity of any Borrowing Base Certificate or any valuation or certifications
made therein.
13.4 Reliance by Agent. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Company), independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Required Banks as it deems appropriate and, if it
so requests, confirmation from the Banks of their obligation to indemnify the
Agent against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Required Banks and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Banks.
13.5 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Event of Default or Unmatured Event of
Default except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Agent for the account of the Banks, unless
the Agent shall have received written notice from a Bank or the Company
referring to this Agreement, describing such Event of Default or Unmatured Event
of Default and stating that such notice is a "notice of default". The Agent will
notify the Banks of its receipt of any such notice. The Agent shall take such
action with respect to such Event of Default or Unmatured Event of Default as
may be requested by the Required Banks in accordance with Section 12; provided
that unless and until the Agent has received any such request, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Event of Default or Unmatured Event of Default as
it shall deem advisable or in the best interest of the Banks.
43
13.6 Credit Decision. Each Bank acknowledges that the Agent has not
made any representation or warranty to it, and that no act by the Agent
hereafter taken, including any review of the affairs of the Company and its
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agent to any Bank. Each Bank represents to the Agent that it has,
independently and without reliance upon the Agent and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Company and its Subsidiaries, and
made its own decision to enter into this Agreement and to extend credit to the
Company hereunder. Each Bank also represents that it will, independently and
without reliance upon the Agent and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Company. Except for notices,
reports and other documents expressly herein required to be furnished to the
Banks by the Agent, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
prospects, operations, property, financial or other condition or
creditworthiness of the Company which may come into the possession of the Agent.
13.7 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Banks shall indemnify upon demand the Agent and its
directors, officers, employees and agents (to the extent not reimbursed by or on
behalf of the Company and without limiting the obligation of the Company to do
so), pro rata, from and against any and all Indemnified Liabilities; provided
that no Bank shall be liable for any payment to any such Person of any portion
of the Indemnified Liabilities resulting from such Person's gross negligence or
willful misconduct. Without limitation of the foregoing, each Bank shall
reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Company. The undertaking in
this Section shall survive repayment of the Loans, cancellation of the Notes,
expiration or termination of the Letters of Credit, any foreclosure under, or
modification, release or discharge of, any or all of the Collateral Documents,
termination of this Agreement and the resignation or replacement of the Agent.
44
13.8 Agent in Individual Capacity. LaSalle and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company, and its
Subsidiaries and Affiliates and any Portfolio Company, as though LaSalle were
not the Agent or the Issuing Bank hereunder and without notice to or consent of
the Banks. The Banks acknowledge that, pursuant to such activities, LaSalle or
its Affiliates may receive information regarding the Company or its Affiliates
(including information that may be subject to confidentiality obligations in
favor of the Company or such Affiliate) and acknowledge that the Agent shall be
under no obligation to provide such information to them. With respect to their
Loans (if any), LaSalle and its Affiliates shall have the same rights and powers
under this Agreement as any other Bank and may exercise the same as though
LaSalle were not the Agent and the Issuing Bank, and the terms "Bank" and
"Banks" include LaSalle and its Affiliates, to the extent applicable, in their
individual capacities.
13.9 Successor Agent. The Agent may resign as Agent upon 30 days'
notice to the Banks. If the Agent resigns under this Agreement, the Required
Banks shall, with (so long as no Event of Default exists) the consent of the
Company (which shall not be unreasonably withheld or delayed), appoint from
among the Banks a successor agent for the Banks. If no successor agent is
appointed prior to the effective date of the resignation of the Agent, the Agent
may appoint, after consulting with the Banks and the Company, a successor agent
from among the Banks. Upon the acceptance of its appointment as successor agent
hereunder, such successor agent shall succeed to all the rights, powers and
duties of the retiring Agent and the term "Agent" shall mean such successor
agent, and the retiring Agent's appointment, powers and duties as Agent shall be
terminated. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Section 13 and Sections 14.6 and 14.13 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement. If no successor agent has accepted appointment as Agent by
the date which is 30 days following a retiring Agent's notice of resignation,
the retiring Agent's resignation shall nevertheless thereupon become effective
and the Banks shall perform all of the duties of the Agent hereunder until such
time, if any, as the Required Banks appoint a successor agent as provided for
above.
13.10 Collateral Matters. The Banks irrevocably authorize the Agent, at
its option and in its discretion, (a) to release any Lien granted to or held by
the Agent under any Collateral Document (i) upon termination of the Commitments
and payment in full of all Loans and all other obligations of the Company
hereunder; (ii) constituting property sold or to be sold or disposed of as part
of or in connection with any disposition permitted hereunder; or (iii) subject
to Section 14.1, if approved, authorized or ratified in writing by the Required
Banks; or (b) to subordinate its interest in any collateral to any holder of a
Lien on such collateral which is permitted by clause (d)(i) or (d)(iii) of
Section 10.8 (it being understood that the Agent may conclusively rely on a
certificate from the Company in determining whether the Debt secured by any such
Lien is permitted by Section 10.7(b)). Upon request by the Agent at any time,
the Banks will confirm in writing the Agent's authority to release, or
subordinate its interest in, particular types or items of collateral pursuant to
this Section 13.10.
SECTION 14 GENERAL.
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14.1 Waiver; Amendments. No delay on the part of the Agent or any Bank
in the exercise of any right, power or remedy shall operate as a waiver thereof,
nor shall any single or partial exercise by any of them of any right, power or
remedy preclude other or further exercise thereof, or the exercise of any other
right, power or remedy. No amendment, modification or waiver of, or consent with
respect to, any provision of this Agreement or the Notes shall in any event be
effective unless the same shall be in writing and signed and delivered by Banks
having an aggregate Pro Rata Share of not less than the aggregate Pro Rata Share
expressly designated herein with respect thereto or, in the absence of such
designation as to any provision of this Agreement or the Notes, by the Required
Banks, and then any such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No amendment, modification, waiver or consent shall change the Pro Rata
Share of any Bank without the consent of such Bank. No amendment, modification,
waiver or consent shall (i) increase the Revolving Commitment Amount, (ii)
extend the date for payment of any principal of or interest on the Loans or any
fees payable hereunder, (iii) reduce the principal amount of any Loan, the rate
of interest thereon or any fees payable hereunder, (iv) release the Guaranty or
all or any substantial part of the collateral granted under the Collateral
Documents or (v) reduce the aggregate Pro Rata Share required to effect an
amendment, modification, waiver or consent without, in each case, the consent of
all Banks. No provision of Section 13 or other provision of this Agreement
affecting the Agent in its capacity as such shall be amended, modified or waived
without the consent of the Agent.
14.2 Confirmations. The Company and each holder of a Note agree from
time to time, upon written request received by it from the other, to confirm to
the other in writing (with a copy of each such confirmation to the Agent) the
aggregate unpaid principal amount of the Loans then outstanding under such Note.
14.3 Notices. Except as otherwise provided in Sections 2.2.2 and 2.2.3,
all notices hereunder shall be in writing (including facsimile transmission) and
shall be sent to the applicable party at its address shown on Schedule 14.3 or
at such other address as such party may, by written notice received by the other
parties, have designated as its address for such purpose. Notices sent by
facsimile transmission shall be deemed to have been given when sent; notices
sent by mail shall be deemed to have been given three Business Days after the
date when sent by registered or certified mail, postage prepaid; and notices
sent by hand delivery or overnight courier service shall be deemed to have been
given when received. For purposes of Sections 2.2.2 and 2.2.3, the Agent shall
be entitled to rely on telephonic instructions from any person that the Agent in
good faith believes is an authorized officer or employee of the Company, and the
Company shall hold the Agent and each other Bank harmless from any loss, cost or
expense resulting from any such reliance.
14.4 Computations. Where the character or amount of any asset or
liability or item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for the
purpose of this Agreement, such determination or calculation shall, to the
extent applicable and except as otherwise specified in this Agreement, be made
in accordance with GAAP, consistently applied; provided that if the Company
notifies the Agent that the Company wishes to amend any covenant in Section 10
to eliminate or to take into account the effect of any change in GAAP on the
operation of such covenant (or if the Agent notifies the Company that the
Required Banks wish to amend Section 10 for such purpose), then the Company's
compliance with such covenant shall be determined on the basis of GAAP in effect
immediately before the relevant change in GAAP became effective, until either
such notice is withdrawn or such covenant is amended in a manner satisfactory to
the Company and the Required Banks.
46
14.5 Regulation U. Each Bank represents that it in good faith is not
relying, either directly or indirectly, upon any Margin Stock as collateral
security for the extension or maintenance by it of any credit provided for in
this Agreement.
14.6 Costs, Expenses and Taxes. The Company agrees to pay on demand all
reasonable out-of-pocket costs and expenses of the Agent (including Attorney
Costs) in connection with the preparation, execution, syndication, delivery and
administration of this Agreement, the other Loan Documents and all other
documents provided for herein or delivered or to be delivered hereunder or in
connection herewith (including any amendment, supplement or waiver to any Loan
Document), and all reasonable out-of-pocket costs and expenses (including
Attorney Costs) incurred by the Agent and each Bank after an Event of Default in
connection with the enforcement of this Agreement, the other Loan Documents or
any such other documents. In addition, the Company agrees to pay, and to save
the Agent and the Banks harmless from all liability for, (a) any stamp or other
taxes (excluding income taxes and franchise taxes based on net income) which may
be payable in connection with the execution and delivery of this Agreement, the
borrowings hereunder, the issuance of the Notes or the execution and delivery of
any other Loan Document or any other document provided for herein or delivered
or to be delivered hereunder or in connection herewith and (b) any fees of the
Company's auditors in connection with any reasonable exercise by the Agent and
the Banks of their rights pursuant to Section 10.2. All obligations provided for
in this Section 14.6 shall survive repayment of the Loans, cancellation of the
Notes, expiration or termination of the Letters of Credit and termination of
this Agreement.
14.7 Subsidiary References. The provisions of this Agreement relating
to Subsidiaries shall apply only during such times as the Company has one or
more Subsidiaries.
14.8 Captions. Section captions used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
14.9 Assignments; Participations.
14.9.1 Assignments. Any Bank may, with the prior written consents of
the Agent and (so long as no Event of Default exists) the Company (which
consents shall not be unreasonably delayed or withheld and, in any event, shall
not be required for an assignment by a Bank to one of its Affiliates), at any
time assign and delegate to one or more commercial banks or other Persons (any
Person to whom such an assignment and delegation is to be made being herein
called an "Assignee") all or any fraction of such Bank's Loans and Commitment
(which assignment and delegation shall be of a constant, and not a varying,
percentage of all the assigning Bank's Loans and Commitment) in a minimum
aggregate amount equal to the lesser of (i) the amount of the assigning Bank's
Pro Rata Share of the Revolving Commitment Amount and (ii) $5,000,000; provided
that (a) no assignment and delegation may be made to any Person if, at the time
of such assignment and delegation, the Company would be obligated to pay any
greater amount under Section 7.6 or Section 8 to the Assignee than the Company
is then obligated to pay to the assigning Bank under such Sections (and if any
assignment is made in violation of the foregoing, the Company will not be
required to pay the incremental amounts) and (b) the Company and the Agent shall
be entitled to continue to deal solely and directly with such Bank in connection
with the interests so assigned and delegated to an Assignee until the date when
all of the following conditions shall have been met:
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(x) five Business Days (or such lesser period of time as the
Agent and the assigning Bank shall agree) shall have passed after
written notice of such assignment and delegation, together with payment
instructions, addresses and related information with respect to such
Assignee, shall have been given to the Company and the Agent by such
assigning Bank and the Assignee,
(y) the assigning Bank and the Assignee shall have executed
and delivered to the Company and the Agent an assignment agreement
substantially in the form of Exhibit F (an "Assignment Agreement"),
together with any documents required to be delivered thereunder, which
Assignment Agreement shall have been accepted by the Agent, and
(z) except in the case of an assignment by a Bank to one of
its Affiliates, the assigning Bank or the Assignee shall have paid the
Agent a processing fee of $3,500.
From and after the date on which the conditions described above have been met,
(x) such Assignee shall be deemed automatically to have become a party hereto
and, to the extent that rights and obligations hereunder have been assigned and
delegated to such Assignee pursuant to such Assignment Agreement, shall have the
rights and obligations of a Bank hereunder and (y) the assigning Bank, to the
extent that rights and obligations hereunder have been assigned and delegated by
it pursuant to such Assignment Agreement, shall be released from its obligations
hereunder. Within five Business Days after effectiveness of any assignment and
delegation, the Company shall execute and deliver to the Agent (for delivery to
the Assignee and the Assignor, as applicable) a new Note in the principal amount
of the Assignee's Pro Rata Share of the Revolving Commitment Amount and, if the
assigning Bank has retained a Commitment hereunder, a replacement Note in the
principal amount of the Pro Rata Share of the Revolving Commitment Amount
retained by the assigning Bank (such Note to be in exchange for, but not in
payment of, the predecessor Note held by such assigning Bank). Each such Note
shall be dated the effective date of such assignment. The assigning Bank shall
▇▇▇▇ the predecessor Note "exchanged" and deliver it to the Company. Accrued
interest on that part of the predecessor Note being assigned shall be paid as
provided in the Assignment Agreement. Accrued interest and fees on that part of
the predecessor Note not being assigned shall be paid to the assigning Bank.
Accrued interest and accrued fees shall be paid at the same time or times
provided in the predecessor Note and in this Agreement. Any attempted assignment
and delegation not made in accordance with this Section 14.9.1 shall be null and
void.
48
Notwithstanding the foregoing provisions of this Section 14.9.1 or any
other provision of this Agreement, any Bank may at any time assign all or any
portion of its Loans and its Note to a Federal Reserve Bank (but no such
assignment shall release any Bank from any of its obligations hereunder).
14.9.2 Participations. Any Bank may at any time sell to one or more
commercial banks or other Persons participating interests in any Loan owing to
such Bank, the Note held by such Bank, the Commitment of such Bank, or any other
interest of such Bank hereunder (any Person purchasing any such participating
interest being herein called a "Participant"). In the event of a sale by a Bank
of a participating interest to a Participant, (x) such Bank shall remain the
holder of its Note for all purposes of this Agreement, (y) the Company and the
Agent shall continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations hereunder and (z) all amounts payable by
the Company shall be determined as if such Bank had not sold such participation
and shall be paid directly to such Bank. No Participant shall have any direct or
indirect voting rights hereunder except with respect to any of the events
described in the fourth sentence of Section 14.1. Each Bank agrees to
incorporate the requirements of the preceding sentence into each participation
agreement which such Bank enters into with any Participant. The Company agrees
that if amounts outstanding under this Agreement and the Notes are due and
payable (as a result of acceleration or otherwise), each Participant shall be
deemed to have the right of setoff in respect of its participating interest in
amounts owing under this Agreement and any Note to the same extent as if the
amount of its participating interest were owing directly to it as a Bank under
this Agreement or such Note; provided that such right of setoff shall be subject
to the obligation of each Participant to share with the Banks, and the Banks
agree to share with each Participant, as provided in Section 7.5. The Company
also agrees that each Participant shall be entitled to the benefits of Section
7.6 and Section 8 as if it were a Bank (provided that no Participant shall
receive any greater compensation pursuant to Section 7.6 or Section 8 than would
have been paid to the participating Bank if no participation had been sold).
Notwithstanding anything to the contrary set forth in this Section
14.9, no Assignee or Participant may be an Affiliate (as such term is defined
herein but giving effect to any broader definition under the ▇▇▇▇ ▇▇▇) of the
Company or any of its Affiliates under the 1940 Act and each Assignee and
Participant hereby warrants (upon becoming an Assignee or Participant) that it
is not such an Affiliate.
14.10 Governing Law. This Agreement and each Note shall be a contract
made under and governed by the internal laws of the State of Illinois applicable
to contracts made and to be performed entirely within such State. Whenever
possible each provision of this Agreement shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. All obligations of the Company and rights of the Agent and the Banks
expressed herein or in any other Loan Document shall be in addition to and not
in limitation of those provided by applicable law.
14.11 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement.
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14.12 Successors and Assigns. This Agreement shall be binding upon the
Company, the Banks and the Agent and their respective successors and assigns,
and shall inure to the benefit of the Company, the Banks and the Agent and the
successors and assigns of the Banks and the Agent.
14.13 Indemnification by the Company. In consideration of the execution
and delivery of this Agreement by the Agent and the Banks and the agreement to
extend the Commitments provided hereunder, the Company hereby agrees to
indemnify, exonerate and hold the Agent, each Bank and each of the officers,
directors, employees, Affiliates and agents of the Agent and each Bank (each a
"Bank Party") free and harmless from and against any and all actions, causes of
action, suits, losses, liabilities, damages and expenses, including Attorney
Costs (collectively, the "Indemnified Liabilities"), incurred by the Bank
Parties or any of them as a result of, or arising out of, or relating to (i) any
tender offer, merger, purchase of stock, purchase of assets or other similar
transaction financed or proposed to be financed in whole or in part, directly or
indirectly, with the proceeds of any of the Loans, (ii) the use, handling,
release, emission, discharge, transportation, storage, treatment or disposal of
any hazardous substance at any property owned or leased by the Company or any
Subsidiary, (iii) any violation of any Environmental Laws with respect to
conditions at any property owned or leased by the Company or any Subsidiary or
the operations conducted thereon, (iv) the investigation, cleanup or remediation
of offsite locations at which the Company or any Subsidiary or their respective
predecessors are alleged to have directly or indirectly disposed of hazardous
substances or (v) the execution, delivery, performance or enforcement of this
Agreement or any other Loan Document by any of the Bank Parties, except for any
such Indemnified Liabilities arising on account of the applicable Bank Party's
gross negligence or willful misconduct. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Company hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. All
obligations provided for in this Section 14.13 shall survive repayment of the
Loans, cancellation of the Notes, any foreclosure under, or any modification,
release or discharge of, any or all of the Collateral Documents and termination
of this Agreement.
14.14 Nonliability of Lenders. The relationship between the Company on
the one hand and the Banks and the Agent on the other hand shall be solely that
of borrower and lender. Neither the Agent nor any Bank shall have any fiduciary
responsibility to the Company. Neither the Agent nor any Bank undertakes any
responsibility to the Company to review or inform the Company or any matter in
connection with any phase of the Company's business or operations. The Company
agrees that neither the Agent nor any Bank shall have liability to the Company
(whether sounding in tort, contract or otherwise) for losses suffered by the
Company in connection with, arising out of, or in any way related to the
transactions contemplated and the relationship established by the Loan
Documents, or any act, omission or event occurring in connection therewith,
unless it is determined in a final non-appealable judgment by a court of
competent jurisdiction that such losses resulted from the gross negligence or
willful misconduct of the party from which recovery is sought. Neither the Agent
nor any Bank shall have any liability with respect to, and the Company hereby
waives, releases and agrees not to ▇▇▇ for, any special, indirect or
consequential damages suffered by the Company in connection with, arising out
of, or in any way related to the Loan Documents or the transactions contemplated
thereby.
50
14.15 Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS
OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS; PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION, IN THE
COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.
THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT
THE STATE OF ILLINOIS. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
14.16 Waiver of Jury Trial. EACH OF THE COMPANY, THE AGENT AND EACH
BANK HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN
DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING
FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
51
Delivered at Chicago, Illinois, as of the day and year first above written.
AMERICAN CAPITAL STRATEGIES, LTD.
By
-------------------------------
Title
-------------------------
LASALLE NATIONAL BANK, as Agent
By
-------------------------------
Title
-------------------------
LASALLE NATIONAL BANK, as a Bank
By
-------------------------------
Title
-------------------------
52
SCHEDULE 2.1
BANKS AND PRO RATA SHARES
----------------------------------------------------------------------------
Pro Rata Share
of Revolving
Bank Commitment Amount Pro Rata Share
---------------------------------------------------------------------------
LaSalle National Bank $25,000,000 100%
TOTALS $25,000,000 100%
-------------------------------------------------------------------------
53
SCHEDULE 9.2
CONFLICTS
54
SCHEDULE 9.6
LITIGATION AND CONTINGENT LIABILITIES
55
SCHEDULE 9.8
SUBSIDIARIES
56
SCHEDULE 9.15
ENVIRONMENTAL MATTERS
57
SCHEDULE 9.17
INSURANCE
58
SCHEDULE 9.18
REAL PROPERTY
59
SCHEDULE 9.22
LABOR MATTERS
60
SCHEDULE 10.8
EXISTING LIENS
61
SCHEDULE 10.21
INVESTMENTS
62
SCHEDULE 11.1
DEBT TO BE REPAID
63
SCHEDULE 12.1.12
KEY EXECUTIVES
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ -------------------
▇▇▇▇▇ ▇▇▇▇▇▇ -------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ -------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ -------------------
64
SCHEDULE 14.3
ADDRESSES FOR NOTICES
AMERICAN CAPITAL STRATEGIES, LTD.
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇; x34
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
LASALLE NATIONAL BANK, as Agent, Issuing Bank and a Bank
Notices of Borrowing , Conversion and Continuation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: _________________
Telephone: (312)____________
Facsimile: (312) ___________
All Other Notices
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
[OTHER BANKS]
65
EXHIBIT A
FORM OF
NOTE
-------,-------
$__________________ Chicago, Illinois
The undersigned, for value received, promises to pay to the order of
______________ (the "Bank") at the principal office of LaSalle National Bank
(the "Agent") in Chicago, Illinois, the aggregate unpaid amount of all Loans
made to the undersigned by the Bank pursuant to the Credit Agreement referred to
below (as shown on the schedule attached hereto (and any continuation thereof)
or in the records of the Bank), such principal amount to be payable on the dates
set forth in the Credit Agreement.
The undersigned further promises to pay interest on the unpaid
principal amount of each Loan from the date of such Loan until such Loan is paid
in full, payable at the rate(s) and at the time(s) set forth in the Credit
Agreement. Payments of both principal and interest are to be made in lawful
money of the United States of America.
This Note evidences indebtedness incurred under, and is subject to the
terms and provisions of, the Credit Agreement, dated as of [Date of Agreement]
(as amended or otherwise modified from time to time, the "Credit Agreement";
terms not otherwise defined herein are used herein as defined in the Credit
Agreement), among the undersigned, certain financial institutions (including the
Bank) and the Agent, to which Credit Agreement reference is hereby made for a
statement of the terms and provisions under which this Note may or must be paid
prior to its due date or its due date accelerated.
This Note is made under and governed by the laws of the State of
Illinois applicable to contracts made and to be performed entirely within such
State.
AMERICAN CAPITAL STRATEGIES, LTD.
By:
-------------------------------
Title:
-------------------------
A-1
--------------------------------------------------------------------------------
SCHEDULE ATTACHED TO NOTE DATED ___________, _____ OF AMERICAN CAPITAL
STRATEGIES, LTD.. PAYABLE TO THE ORDER OF
-----------
--------------------------------------------------------------------------------
------------------------- ----------------------- ---------------------- -------
Date and Date and Amount of
Amount of Loan or of Repayment or of
Conversion Conversion Interest
from another into another type of Period/Unpaid
type of Loan Notation Loan Maturity Date Principal Balance Made by
------------------------- ----------------------- ---------------------- ----------------------- ----------------------
-----------------------------------------------------------------------------------------------------------------------
1. BASE RATE LOANS
-----------------------------------------------------------------------------------------------------------------------
------------------------- ----------------------- ---------------------- ----------------------- ----------------------
------------------------- ----------------------- ---------------------- ----------------------- ----------------------
------------------------- ----------------------- ---------------------- ----------------------- ----------------------
------------------------- ----------------------- ---------------------- ----------------------- ----------------------
-----------------------------------------------------------------------------------------------------------------------
2. EURODOLLAR LOANS
-----------------------------------------------------------------------------------------------------------------------
------------------------- ----------------------- ---------------------- ----------------------- ----------------------
------------------------- ----------------------- ---------------------- ----------------------- ----------------------
------------------------- ----------------------- ---------------------- ----------------------- ----------------------
------------------------- ----------------------- ---------------------- ----------------------- ----------------------
A-2
EXHIBIT B
FORM OF COMPLIANCE CERTIFICATE
To: LaSalle National Bank, as Agent
Please refer to the Credit Agreement dated as of October 30, 1998 (as
amended or otherwise modified from time to time, the "Credit Agreement") among
American Capital Strategies, Ltd. (the "Company"), various financial
institutions and LaSalle National Bank, as agent. Terms used but not otherwise
defined herein are used herein as defined in the Credit Agreement.
I. Reports. Enclosed herewith is a copy of the [annual
audited/quarterly/monthly] report of the Company as at _____________,
____ (the "Computation Date"), which report fairly presents in all
material respects the financial condition and results of operations
[(subject to the absence of footnotes and to normal year-end
adjustments)] of the Company as of the Computation Date and has been
prepared in accordance with GAAP consistently applied.
II. Financial Tests. The Company hereby certifies and warrants to you that
the following is a true and correct computation as at the Computation
Date of the following ratios and/or financial restrictions contained in
the Credit Agreement:
A. Section 10.6.1 - Minimum Consolidated Tangible Net Worth
1. Consolidated Stockholders' Equity $___________
2. (Intangibles) $___________
3. Subordinated Debt $___________
4. Consolidated Tangible Net Worth $140,000,000
5 Compliance yes/no
B. Section 10.6.2 - Maximum Leverage Ratio
1. Total Liabilities $___________
2. Consolidated Tangible Net Worth $___________
3. Ratio of (1) to (2) ____ to 1
4. Maximum allowed 1 to 1
5. Compliance yes/no
B-1
C. Section 10.6.3-Minimum Consolidated Pre-Tax Income
1. Consolidated Pre-Tax Income $____________
2. Minimum required $10,000,000
3. Compliance yes/no
D. Section 10.1.4 Asset Coverage Ratio
1. Value of total assets $___________
less all liabilities and
Debt not represented by
senior securities ($__________)
2. Amount of Senior Securities $____________
3. Ratio (1): to (2): __________
4. Requirement: 2:1
5. Compliance: yes/no
The Company further certifies to you that no Event of Default or
Unmatured Event of Default has occurred and is continuing.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed and delivered by its duly authorized officer on _________, ____.
AMERICAN CAPITAL STRATEGIES, LTD.
By
--------------------------------
Title
---------------------------
B-2
EXHIBIT E
FORM OF BORROWING BASE CERTIFICATE
To: LaSalle National Bank, as Agent
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Please refer to the Credit Agreement dated as of October 30, 1998 (as
amended or otherwise modified from time to time, the "Credit Agreement") among
American Capital Strategies, Ltd. (the "Company"), various financial
institutions and LaSalle National Bank, as agent. This certificate (this
"Certificate"), together with supporting calculations attached hereto, is
delivered to you pursuant to the terms of the Credit Agreement. Capitalized
terms used but not otherwise defined herein shall have the same meanings herein
as in the Credit Agreement.
The Company hereby certifies and warrants to the Agent and the Banks
that at the close of business on ______________, ____ (the "Calculation Date"),
the Borrowing Base was $_____________, computed as set forth on the schedule
attached hereto.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed and delivered by its officer thereunto duly authorized on ___________,
------.
AMERICAN CAPITAL STRATEGIES, LTD.
By
--------------------------------
Title
---------------------------
E-1
Borrowing Base
(Date: ______________)
I. Eligible Investment Assets:
-----------------------------------------------------------------------------------------------------------------------
A. Total Value of Portfolio Investments (from Schedule 1): $____________
-----------------------------------------------------------------------------------------------------------------------
Exclude Portfolio (1) the Company is the legal and beneficial owner of such
------------------ Portfolio Investment or Cash Equivalent Investment
Investments not [indicate excluded Portfolio Investment, if any] (____________)
----------------
satisfying each
----------------
of the following
----------------
(without (2) such Portfolio Investment consists of senior or
--------- subordinated loans
duplication): [indicate excluded Portfolio Investment, if any] (____________)
------------
---------------------------- -------------------------------------------------------------------- ---------------------
(3) the Portfolio Company under such Portfolio
Investments is not more than thirty days past due
in the payment of principal or interest
[indicate excluded Portfolio Investment, if any] (____________)
---------------------------- -------------------------------------------------------------------- ---------------------
(4) such Portfolio Investment does not include promissory
notes or instruments (i) representing capitalized interest or
payment-in-kind interest or payment obligations relating to
exercise of "put" rights or (ii) owing from a single Portfolio
Company representing more than 10% of the total amount of
Portfolio Investments held by the Company; provided, that such
Portfolio Investment shall only be ineligible to the extent of
such instruments or portions thereof related to payment-in-kind
interest or portions thereof in excess of such 10% limit
[indicate excluded Portfolio Investment, if any] (____________)
-
---------------------------- -------------------------------------------------------------------- ---------------------
(5) all documents evidencing and governing such Portfolio
Investments or Cash Equivalent Investments have been delivered to
Agent pursuant to the Custody Control Agreement, together with
endorsements, stock powers and other assignments or perfection
instruments required by the Agent
[indicate excluded Portfolio Investment, if any] (____________)
---------------------------- -------------------------------------------------------------------- ---------------------
(6) the Agent has a legal, valid and binding perfected,
first-priority security interest in such Portfolio Investment or
Cash Equivalent Investment and such Portfolio Investment or Cash
Equivalent Investment is freely transferable to the Agent or its
assignee upon the occurrence of an Event of Default
[indicate excluded Portfolio Investment, if any] (____________)
---------------------------- -------------------------------------------------------------------- ---------------------
(7) the Portfolio Company of such Portfolio
Investment is not subject to any bankruptcy,
insolvency, liquidation or similar proceeding
[indicate excluded Portfolio Investment, if any] (____________)
---------------------------- -------------------------------------------------------------------- ---------------------
(8) such Portfolio Investment or Cash Equivalent
Investment satisfies all applicable requirements of
the Investment Policy
[indicate excluded Portfolio Investment, if any] (____________)
---------------------------- -------------------------------------------------------------------- ---------------------
(9) such Portfolio Investment or Cash Equivalent Investment
complies with all applicable regulatory guidelines (including the
1940 Act and Regulation U)
[indicate excluded Portfolio Investment, if any] (____________)
---------------------------- -------------------------------------------------------------------- ---------------------
(10) exclude an Portfolio Investment subject to a Modification: (____________)
-----------------------------------------------------------------------------------------------------------------------
B. Total Eligible Investment Assets (Borrowing Base) ____________
------------------------------------------------------------------------------------------------- ---------------------
C. Revolving Outstandings (____________)
------------------------------------------------------------------------------------------------- ---------------------
D. Total Availability $____________
------------------------------------------------------------------------------------------------- ---------------------
E-2
Schedule 1
--------------- --------------------- ------------------ ------------------- ----------------------- -----------------------
Portfolio Current Valuation
Investment Debt (attach most recent Change from
Portfolio (Describe Acquired Cost valuation analysis) Previous Valuation
Company Investment)
--------------- --------------------- ------------------ ------------------- ----------------------- -----------------------
--------------- --------------------- ------------------ ------------------- ----------------------- -----------------------
--------------- --------------------- ------------------ ------------------- ----------------------- -----------------------
--------------- --------------------- ------------------ ------------------- ----------------------- -----------------------
--------------- --------------------- ------------------ ------------------- ----------------------- -----------------------
----------------------------------------------------------------------------------------------------------------------------
TOTAL: $___________________
----------------------------------------------------------------------------------------------------------------------------
E-3
EXHIBIT F
FORM OF
ASSIGNMENT AGREEMENT
Date:____________________
To: American Capital Strategies, Ltd.
and
LaSalle National Bank, as Agent
Re: Assignment under the Credit Agreement referred to below
Gentlemen and Ladies:
Please refer to Section 14.9.1 of the Credit Agreement dated as of
October 30, 1998 (as amended or otherwise modified from time to time, the
"Credit Agreement") among American Capital Strategies, Ltd. (the "Company"),
various financial institutions and LaSalle National Bank, as agent (in such
capacity, the "Agent"). Unless otherwise defined herein or the context otherwise
requires, terms used herein have the meanings provided in the Credit Agreement.
_______________ (the "Assignor") hereby sells and assigns to
___________ (the "Assignee"), and the Assignee hereby purchases and assumes from
the Assignor, that interest in and to the Assignor's rights and obligations
under the Credit Agreement as of the date hereof equal to ____% of all of the
Loans, of the participation interests in the Letters of Credit and of the
Commitments, such sale, purchase, assignment and assumption to be effective as
of __________, ____, or such later date on which the Company and the Agent shall
have consented hereto (the "Effective Date"). After giving effect to such sale,
purchase, assignment and assumption, the Assignee's and the Assignor's
respective Percentages for purposes of the Credit Agreement will be as set forth
opposite their names on the signature pages hereof.
The Assignor hereby instructs the Agent to make all payments from and
after the Effective Date in respect of the interest assigned hereby directly to
the Assignee. The Assignor and the Assignee agree that all interest and fees
accrued up to, but not including, the Effective Date are the property of the
Assignor, and not the Assignee. The Assignee agrees that, upon receipt of any
such interest or fees, the Assignee will promptly remit the same to the
Assignor.
F-1
The Assignee hereby confirms that it has received a copy of the Credit
Agreement and the exhibits thereto, together with copies of the documents which
were required to be delivered under the Credit Agreement as a condition to the
making of the initial Loans thereunder. The Assignee acknowledges and agrees
that it (i) has made and will continue to make such inquiries and has taken and
will take such care on its own behalf as would have been the case had its
Commitment been granted and its Loans been made directly to, the Company without
the intervention of the Agent, the Assignor or any other Bank and (ii) has made
and will continue to make, independently and without reliance upon the Agent,
the Assignor or any other Bank and based on such documents and information as it
has deemed appropriate, its own credit analysis and decisions relating to the
Credit Agreement. The Assignee further acknowledges and agrees that neither the
Agent nor the Assignor has made any representation or warranty about the
creditworthiness of the Company or any other party to the Credit Agreement or
with respect to the legality, validity, sufficiency or enforceability of the
Credit Agreement or any other Loan Document or the value of any security
therefor. This assignment shall be made without recourse to the Assignor.
The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim.
The Assignee represents and warrants to the Company and the Agent that,
as of the date hereof, the Company will not be obligated to pay any greater
amount under Section 7.6 or 8 of the Credit Agreement than the Company is
obligated to pay to the Assignor under such Section.
Except as otherwise provided in the Credit Agreement, effective as of
the Effective Date:
(a) the Assignee (i) shall be deemed automatically to have become
a Party to the Credit Agreement and to have all the rights and
obligations of a "Bank" under the Credit Agreement as if it
were an original signatory thereto to the extent specified in
the second paragraph hereof, and (ii) agrees to be bound by
the terms and conditions set forth in the Credit Agreement as
if it were an original signatory thereto; and
(b) the Assignor shall be released from its obligations under the
Credit Agreement to the extent specified in the second
paragraph hereof.
The Assignee hereby advises each of you of the following administrative
details with respect to the assigned Loans and Commitment:
(A) Institution Name:
Address:
Attention:
Telephone:
Facsimile:
(B) Payment Instructions:
F-2
Please evidence your receipt hereof and your consent to the sale,
assignment, purchase and assumption set forth herein by signing and returning
counterparts hereof to the Assignor and the Assignee.
Percentage = ____% [ASSIGNEE]
By:
---------------------------
Title:
------------------------
Adjusted Percentage = ____% [ASSIGNOR]
By:
---------------------------
Title:
------------------------
ACKNOWLEDGED AND CONSENTED TO
this _____ day of ________, ____
LASALLE NATIONAL BANK, as Agent
By:
---------------------------
Title:
------------------------
ACKNOWLEDGED AND CONSENTED TO
this ___ day of ________, ____
AMERICAN CAPITAL STRATEGIES, LTD.
By:
---------------------------
Title:
------------------------
F-3