EXHIBIT 4.1
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LOAN AND SECURITY AGREEMENT
DATED AS OF JULY 15, 2003
BY AND BETWEEN
DRKW HOLDINGS, INC., AS LENDER,
AND
BELAIR CAPITAL FUND LLC, AS BORROWER
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TABLE OF CONTENTS
PAGE
1. DEFINITIONS...........................................................1
2. THE LOAN..............................................................9
2.1 Loan.........................................................9
2.2 Note.........................................................9
2.3 Borrowing Notice............................................10
2.4 Interest....................................................10
2.5 Alternate Rate of Interest..................................10
2.6 Default Interest............................................10
2.7 Repayment and Termination...................................11
2.8 Optional Prepayments........................................11
2.9 Manner of Payments..........................................11
2.10 Change in Circumstances.....................................11
3. ESTABLISHMENT OF SECURITIES ACCOUNT; PLEDGE OF COLLATERAL............13
3.1 Establishment of the Securities Account.....................13
3.2 Other Account Provisions....................................13
4. PLEDGE AND SECURITY AGREEMENT........................................13
4.1 Grant of Security Interest..................................13
5. SPECIAL AGREEMENTS WITH RESPECT TO PLEDGED SECURITIES................14
5.1 Liquidation of Pledged Securities...........................14
6. REPRESENTATIONS AND WARRANTIES.......................................15
6.1 Collateral..................................................15
6.2 Due Organization............................................16
6.3 Power and Authority; Binding Agreements.....................16
6.4 No Violation................................................16
6.5 No Consents.................................................16
6.6 No Litigation...............................................17
6.7 Compliance with Laws........................................17
6.8 No Material Adverse Change..................................17
6.9 Solvency....................................................17
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TABLE OF CONTENTS
PAGE
6.10 Organization; Place of Business.............................17
6.11 Full Disclosure.............................................17
6.12 Sole Business...............................................17
6.13 Investment Company Act......................................17
6.14 Private Placement Memorandum................................18
6.15 Pledged Securities..........................................18
6.16 Subsidiaries................................................18
6.17 Belair Real Estate Corporation..............................18
6.18 Preferred Equity Interests..................................18
7. AFFIRMATIVE COVENANTS................................................18
7.1 Maintenance of Existence....................................19
7.2 Compliance with Laws........................................19
7.3 Payment of Taxes............................................19
7.4 Books and Records...........................................19
7.5 Audit Rights................................................19
7.6 Maintenance of Collateral...................................19
7.7 Notices.....................................................19
7.8 Bankruptcy..................................................19
7.9 Financial and Credit Information............................20
7.10 Financial Statements........................................20
7.11 Report; Compliance Certificate..............................21
7.12 Liens.......................................................21
7.13 Government Approval.........................................21
7.14 Use of Proceeds.............................................21
7.15 Valuation Covenants.........................................21
7.16 Formation of Additional Subsidiaries........................22
8. NEGATIVE COVENANTS OF THE BORROWER...................................22
8.1 No Indebtedness.............................................22
8.2 No Liens....................................................22
8.3 No Mergers, Etc.............................................23
8.4 No New Business.............................................23
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8.5 No Trading..................................................23
8.6 No Distributions............................................23
8.7 No Amendments...............................................23
8.8 Manager, Investment Adviser and Custodian...................24
8.9 Limitation on Restriction on Subsidiary Dividends
and Other Distributions, etc................................24
9. CONDITIONS PRECEDENT TO CLOSING......................................24
9.1 Conditions Precedent to Loan................................24
10. DEFAULTS; REMEDIES...................................................26
10.1 Events of Default...........................................26
10.2 Remedies....................................................28
11. The INVESTMENT MANAGER...............................................29
11.1 Investment Manager..........................................29
12. MISCELLANEOUS........................................................29
12.1 Expenses....................................................29
12.2 Cost of Collection..........................................29
12.3 Indemnities.................................................30
12.4 Delay in Enforcement; No Waiver.............................31
12.5 Statements and Notices......................................31
12.6 Waivers.....................................................31
12.7 Non-Recourse................................................31
12.8 Further Assurances..........................................32
12.9 Successors and Assigns......................................32
12.10 GOVERNING LAW AND JURISDICTION..............................32
12.11 Effectiveness...............................................33
12.12 WAIVER OF JURY TRIAL........................................33
12.13 Amendments..................................................34
12.14 Headings....................................................34
12.15 Severability................................................34
12.16 Entire Agreement............................................34
12.17 Execution in Counterparts...................................34
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12.18 Confidentiality.............................................34
12.19 Acknowledgment and Acceptance of Investment Manager.........35
EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Report
Exhibit C Opinion of Counsel
Exhibit D Form of Borrowing Notice
Exhibit E Form of Compliance Certificate
Exhibit F Form of Account Control Agreement
Exhibit G Form of Intercreditor Agreement
Exhibit H Form of Amendment to Swap Agreement
SCHEDULES
Schedule 2.8 Optional Prepayment Conditions
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LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT dated as of July 15, 2003 (as the same may be
amended, supplemented or otherwise modified, renewed or replaced from time to
time, the "Agreement"), by and between Belair Capital Fund LLC, a Massachusetts
limited liability company (the "Borrower") and DrKW Holdings, Inc., a Delaware
corporation, as lender (the "Lender"). This Agreement establishes the terms and
conditions that will govern the Loan from the Lender to the Borrower.
RECITALS
All terms not otherwise defined above or in this Introductory Statement are
as defined in Article 1 hereof, or as defined elsewhere herein.
The Borrower has requested the Lender to make available to the Borrower a
term loan in the aggregate principal amount of $515,000,000. The Borrower wishes
to pledge the Collateral to the Lender as security for the Loan.
Pursuant to the Investment Servicing and Administration Agreement (as
hereinafter defined), the Lender has appointed Wells Fargo Bank Minnesota,
National Association as investment manager to, among other things, enforce
certain rights of the Lender under the terms of this Agreement.
The Borrower is entering into the Overflow Agreement (as hereinafter
defined) concurrently herewith.
The Obligations are to be secured by a pledge by the Borrower of the
Collateral (as hereinafter defined), including securities owned by the Borrower
and held in the Securities Account (as hereinafter defined) established and
maintained with Investors Bank & Trust Company.
Subject to the terms and conditions set forth herein, the Lender is willing
to make the Loan to the Borrower.
Accordingly, the parties hereto hereby agree as follows:
1. DEFINITIONS
For the purposes hereof unless the context otherwise requires, the
following terms shall have the meanings indicated. Unless the context otherwise
requires, any of the following terms may be used in the singular or the plural,
depending on the reference:
"1934 Act" shall have the meaning given to such term in Section 5.1(f).
"Acceptable Securities" shall have the meaning set forth in the Private
Placement Memorandum.
"Account Control Agreement" shall mean the Account Control Agreement among
the Borrower, the Lender, the Swap Provider, the Overflow Agent, the Investment
Manager and the Custodian of even date herewith, substantially in the form of
Exhibit F hereto.
"Affiliate" shall mean with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person. A Person shall be deemed to control a Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such other Person, whether through ownership of
voting securities, by contract or otherwise.
"Alternate Rate" shall mean a floating rate of interest equal to the
Federal Funds Effective Rate plus 0.75% per annum. The Alternate Rate shall
change when and as the Federal Funds Effective Rate changes. A written statement
delivered to the Borrower by the Lender of the Alternate Rate shall be
conclusive evidence of such rate.
"Amendment to Swap Agreement" shall mean the Amendment to the Swap
Agreement, substantially in the form of Exhibit H hereto, among the Borrower and
the Swap Provider.
"Applicable Law" shall mean all provisions of statutes, rules, regulations
and orders of the United States, any state thereof or municipality therein, the
Federal Republic of Germany or of any foreign governmental body or of any
regulatory agency applicable to the Person in question, and all orders and
decrees of all courts and arbitrators in proceedings or actions in which the
Person in question is a party.
"Belvedere Capital" shall mean Belvedere Capital Fund Company LLC.
"Borrowing" shall mean the Loan made by the Lender.
"Borrowing Notice" shall have the meaning given to such term in Section
2.3.
"BRC" shall mean Belair Real Estate Corporation, a Delaware corporation.
"Business Day" means a day (other than a Saturday or Sunday) on which
deposits in Dollars and any other relevant currency may be dealt in on the
London Interbank Market and banks are open in London and New York City.
"Cash Equivalents" shall mean (i) marketable securities issued, or directly
and fully guaranteed or insured, by the United States of America or any agency
or instrumentality thereof (provided that the full faith and credit of the
United States of America is pledged in support thereof) having maturities of not
more than twelve months from the date of acquisition, (ii) time deposits, demand
deposits, certificates of deposit, acceptances or prime commercial paper or
repurchase obligations for underlying securities of the types described in
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clause (i) entered into with, any Lender or any commercial bank having a
short-term deposit rating of at least A-2 or the equivalent thereof by Standard
& Poor's Corporation or at least P-2 or the equivalent thereof by Moody's
Investors Service, Inc., (iii) commercial paper with a rating of A-1 or A-2 or
the equivalent thereof by Standard & Poor's Corporation or P-1 or P-2 or the
equivalent thereof by Moody's Investors Service, Inc. and in each case maturing
within twelve months after the date of acquisition or (iv) any mutual fund or
other pooled investment vehicle which invests principally in the foregoing
obligations.
"Closing Date" shall mean the Business Day on which (i) the Lender shall
have received counterparts of this Agreement executed by the Borrower and the
Lender and (ii) all conditions precedent to the making of the Loan as set forth
in Article 9 have been satisfied or waived.
"Collateral" shall mean all personal property of the Borrower, tangible and
intangible, wherever located or situated and whether now owned or hereafter
acquired or created, including without limitation, all goods, accounts,
documents, instruments, chattel paper, cash, bank accounts, inventory, contract
rights, general intangibles, equipment, securities entitlements and securities
(including, but not limited to the Pledged Securities) and financial assets and
any proceeds thereof or income therefrom, specifically including, but not
limited to:
(a) the Securities Account and all stocks, bonds, financial assets or other
securities (whether certificated or uncertificated) or property now or hereafter
in the Securities Account and all security entitlements in respect thereof;
(b) all credit balances, accounts, contract rights, general intangibles,
instruments, documents, money, certificates of deposit and all other property of
whatever kind or description now or hereafter in the Securities Account;
(c) all rights to any securities described in confirmations and other
reports delivered by Custodian to the Borrower or the Secured Party in
connection with the Securities Account, which securities are deemed to be in the
Securities Account for purposes of this Agreement;
(d) all dividends, interest and proceeds of any of the property described
in clauses (a), (b) or (c) above, including without limitation, proceeds of such
proceeds;
(e) all its right, title and interest in and to all monies, debts, claims,
securities and other property deposited with or owed or owing to the Borrower by
any member of the Merrill Lynch Group; and
(f) all its rights, title and interest in and to bullion, precious metals
or other trades made on behalf of the Borrower (directly or indirectly);
PROVIDED, HOWEVER, that assets encumbered by a lien to a person other than the
Secured Party (or any secured party under the Swap Agreement and the Overflow
Agreement) not otherwise prohibited by Section 8.2 of this Agreement shall be
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excluded from this definition of Collateral for such period as the underlying
obligation which is secured by such lien exists; and provided further, that the
term Collateral as used herein shall not include any preferred stock of BRC
issued from time to time which are temporarily held by the Borrower pending
donation to one or more charitable organizations as contemplated by the Private
Placement Memorandum.
"Compliance Certificate" shall have the meaning given to such term in
Section 2.3.
"Custodian" shall mean Investors Bank & Trust Company.
"Default" shall mean any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"Designated Funds" shall include Belcrest Capital Fund LLC, Belshire
Capital Fund LLC, Belvedere Equity Fund LLC, Belrose Capital Fund LLC, Belport
Capital Fund LLC and Belmar Capital Fund LLC.
"Dollars" or "$" shall mean the lawful currency of the United States of
America.
"Event of Default" shall have the meaning given to such term in Section
10.1.
"Excluded Real Estate Investment" shall mean any direct or indirect
investment in real property of any type made by the Borrower, BRC or any of
their subsidiaries, other than Preferred Equity Interests.
"Existing Credit Agreement" shall mean the Loan and Security Agreement,
dated as of February 5, 1998 among Merrill Lynch International Bank Limited, the
Borrower and the Swap Provider.
"Federal Funds Effective Rate" shall mean for any day, the rate per annum
(expressed as a decimal) equal to the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers on such day, as published by the Federal Reserve Bank
of New York on the Business Day next succeeding such day; provided, (i) if such
day is not a Business Day, the Federal Funds Effective Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if no such rate is so
published, the Federal Funds Effective Rate for such day shall be such rate of
interest as the Lender, using any reasonable method, shall determine.
"Fundamental Documents" shall mean this Agreement, the Note, the Account
Control Agreement, the Swap Agreement and any other ancillary documentation
which is required to be or is otherwise executed by the Borrower and delivered
to the Lender or the Swap Provider in connection with this Agreement or any
other Fundamental Document.
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"GAAP" shall mean United States generally accepted accounting principles
consistently applied (except for accounting changes in response to FASB releases
or other authoritative pronouncements).
"Governmental Authority" shall mean any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
or any court, in each case whether of the United States or any foreign
jurisdiction.
"Indebtedness" of any Person means (a) any liability of such Person (i) for
borrowed money, or under any reimbursement obligation related to a letter of
credit or bond or performance bond facility, or (ii) evidenced by a bond, note,
debenture or other evidence of indebtedness (including a purchase money
obligation) representing extensions of credit or issued in connection with the
acquisition of any business, property, service or asset of any kind (other than
trade accounts payable and securities transaction settlements in the ordinary
course of business) (iii) under swap, cap or other interest rate or foreign
currency hedging agreements and options, financial future contracts and options
on financial futures contracts or (iv) under margin accounts or other securities
transactions conducted by the Borrower on margin or (v) with respect to a
capital lease; (b) any liability of others either for any lease, dividend or
letter of credit or for any obligation described in the preceding clause (a)
that (i) the Person has guaranteed or that is otherwise its legal liability
(whether contingent or otherwise or direct or indirect, but excluding
endorsements of negotiable instruments for deposit or collection in the ordinary
course of business) or (ii) is secured by any Lien, charge, easement, mortgage,
pledge, security interest or other encumbrance or any restriction or limitation
of any kind on any property or asset owned or held by that Person, regardless of
whether the obligation secured thereby shall have been assumed by or is a
personal liability of that Person and (c) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of the
types referred to in clauses (a) and (b) above.
"Intercreditor Agreement" shall mean an Intercreditor Agreement among the
Borrower, the Lender, the Investment Manager, the Overflow Agent and the Swap
Provider, substantially in the form of Exhibit G hereto or such other form as
may be acceptable to the Lender.
"Interest Payment Date" shall mean the 25th day of each month or if such
25th day is not a Business Day, the first Business Day immediately following,
commencing July 25, 2003.
"Interest Period" shall mean a period of approximately one month which
begins on an Interest Payment Date and ends on the next succeeding Interest
Payment Date, except that the first Interest Period shall begin on the Closing
Date and end on the first Interest Payment Date.
"Interest Rate" shall mean a rate per annum of LIBOR, reset for each
Interest Period, plus 0.30%.
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"Investment Advisor" shall mean Boston Management and Research, a
subsidiary of Eaton Vance Management.
"Investment Advisory Agreement" shall mean the agreement dated as of
February 6, 1998, as amended by Amendment No. 1 dated as of January 2, 2001,
between the Borrower and the Investment Advisor.
"Investment Manager" shall mean Wells Fargo Bank Minnesota, National
Association, in its capacity as investment manager for the Lender or such
successor Investment Manager as may be appointed by the Lender.
"Investment Servicing and Administration Agreement" shall mean the
Investment Servicing and Administration Agreement dated as of June 30, 2003 by
and between Wells Fargo Bank Minnesota, National Association and DrKW Holdings,
Inc.
"Lender" shall mean the financial institution whose name appears on the
signature page of this Agreement and any assignee of the Lender pursuant to
Section 12.9.
"LIBOR" shall mean, for each Interest Period, the rate of interest per
annum that is the U.S. Dollar London Interbank Offered Rate for one month
periods as published on page BBAM by Bloomberg L.P. as of 11:00 a.m., London
time two Business Days before the first day of such Interest Period. If such
interest rate is not offered or published for any period, then during that
period LIBOR means the London Interbank Offered Rate for one month periods as
published in The Wall Street Journal in its regular column entitled "Money
Rates" two Business Days before the first day of such Interest Period.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance (excluding restrictions on the transfer of securities
arising under Federal or state securities laws or by reason of contract), lien
(statutory or other), preference, priority or other security agreement of any
kind or nature whatsoever (including, without limitation, any conditional sale
or other title retention agreement, any financing or similar statement or notice
filed under the Uniform Commercial Code or any other similar recording or notice
statute, and any lease having substantially the same effect as any of the
foregoing).
"Liquidation" shall have the meaning given to such term in Section 5.1(c).
"Loan" shall mean collectively, the loan made by the Lender to the Borrower
under this Agreement pursuant to Section 2.1(i) and any loans made by the Lender
to the Borrower under this Agreement pursuant to Section 2.1(ii).
"Manager" shall mean Eaton Vance Management.
"Maturity Date" shall mean June 25, 2010, or such earlier date on which the
Loan shall become due in accordance with Section 10.2.
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"Merrill Lynch Group" shall mean Merrill Lynch & Co., Inc. ("MLC"),
together with any company (whether now existing or hereafter formed) of which
MLC is or becomes a Subsidiary and all companies (whether now existing or
hereinafter formed or acquired) including, but not limited to, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, and any partnership, association, firm or
other organization (whether now existing or hereafter formed or acquired) during
the period it is directly or indirectly owned or controlled by MLC and/or any
such company and/or one or more of their Subsidiaries.
"Note" shall have the meaning given to such term in Section 2.2.
"Obligations" shall mean the obligations of the Borrower to make due and
punctual payment of principal and interest on the Loan and all other monetary
obligations of the Borrower owed to the Lender or the Swap Provider under this
Agreement, the Note, the Swap Agreement or any other Fundamental Document.
"Operating Agreement" shall mean the Amended and Restated Operating
Agreement of the Borrower dated as of February 6, 1998.
"Overflow Agent" shall mean Merrill Lynch Mortgage Capital, Inc., in its
capacity as agent for the Lenders under the Overflow Agreement.
"Overflow Agreement" shall mean the Loan and Security Agreement dated as of
July 15, 2003 by and among the Overflow Agent, the Lenders referred to therein,
the Swap Provider and the Borrower.
"Overflow Exposure" shall have the meaning given such term in the Overflow
Agreement.
"Person" shall include any individual, company, corporation, firm,
partnership, joint venture, association, organization, trust, state or agency of
a state (in each case, whether or not having separate legal personality).
"Pledged Securities" shall mean all securities and security entitlements
held in the Securities Account, including but not limited to all Qualifying
Assets and Acceptable Securities, and all shares of Belvedere Capital and BRC
owned by the Borrower.
"Portfolio" shall mean the Tax-Managed Growth Portfolio, an open-end
management investment company.
"Preferred Equity Interests" shall mean income-producing, preferred equity
interests issued by real estate operating partnerships or limited liability
companies that are affiliated with publicly traded real estate investment
trusts.
"Private Placement Memorandum" shall mean the Confidential Private
Placement Memorandum of the Borrower dated October 28, 1997 and any supplements
thereto.
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"Qualifying Assets" shall mean any assets, including but not limited to
Preferred Equity Interests and Excluded Real Estate Investments acquired by the
Borrower or BRC or other subsidiaries in order for the exchange of Acceptable
Securities for shares of the Borrower to be non-taxable.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System of the United States of America, as from time to time in
effect, and all official rulings and interpretations thereunder or thereof.
"Report" shall have the meaning given to such term in Section 7.11.
"Required Amount" shall mean an amount equal to the "Net Market Quotation"
(as hereinafter defined), if such amount is positive; provided, however, that if
and for so long as the principal amount of the Loan outstanding shall be less
than the greater of (i) $25,000,000 and (ii) 15% of the notional amount of all
Transactions under the Swap Agreement, then the Required Amount shall mean an
amount equal to the sum of (x) 3.7% of the notional amount of the Transactions
under the Swap Agreement and (y) if positive, the amount of the Net Market
Quotation. The "Net Market Quotation" is the sum of all Market Quotations (both
positive and negative) for all Transactions under the Swap Agreement; provided,
that the Swap Provider need not obtain quotations from Reference Market-Makers,
but shall determine the Market Quotation on the basis of their customary methods
of valuation using mid-market swap rates and a zero coupon yield curve for the
purpose of discounting to the present value. A positive Market Quotation shall
mean that the Swap Provider is exposed to the Borrower, a negative Market
Quotation shall mean the Borrower is exposed to the Swap Provider. Terms used in
this definition and not otherwise defined in this Agreement shall have the
meaning ascribed to them in the Swap Agreement.
"Secured Party" shall mean the Lender.
"Securities Account" shall mean the securities account, number 4922,
established with the Custodian which shall be known as the Belair Capital Fund
LLC - Collateral Account for DrKW Holdings, Inc., Merrill Lynch Mortgage
Capital, Inc. and Merrill Lynch Capital Services, Inc." or such other title
acceptable to the Lender to reflect its interest therein. The Borrower agrees,
as a condition to the Lender's obligation to make the Loan to place the Pledged
Securities in the Securities Account, subject to the terms and provisions of the
Account Control Agreement.
"Security Interest" shall have the meaning given to such term in Section
4.1.
"Shareholder" shall have the meaning given to such term in the Private
Placement Memorandum.
"Shares" shall have the meaning given to such term in the Private Placement
Memorandum.
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"Swap Agreement" shall mean the ISDA Master Agreement dated as of February
5, 1998, including the schedule and all exhibits thereto, and any "Transactions"
and "confirmations" thereunder which shall supplement, form a part of and be
subject to the ISDA Master Agreement, all as they may be amended, supplemented
or otherwise modified from time to time, by and between Merrill Lynch Capital
Services, Inc. and the Borrower.
"Swap Provider" shall mean Merrill Lynch Capital Services, Inc.
"Value" shall mean, at any time and with respect to any Collateral, the
value of such Collateral (expressed in Dollars) determined by the Borrower for
use in its financial reports using the methodology described in the Private
Placement Memorandum.
2. THE LOAN
2.1 Loan. The Lender agrees, on the terms and conditions set forth herein,
(i) to make a Loan to the Borrower on the Closing Date in an aggregate principal
amount of $515,000,000 and (ii) concurrently with any prepayment made by a
Designated Fund under a loan facility provided by the Lender to such Designated
Fund in connection with a transfer of assets from such Designated Fund to the
Borrower, to make an additional Loan to the Borrower in an aggregate principal
amount equal to the amount of such prepayment.
2.2 Note.
(a) The Loan made by the Lender shall be evidenced by a single promissory
note substantially in the form of Exhibit A hereto (the "Note"), payable to the
order of the Lender, duly executed by the Borrower and dated the date hereof.
(b) On or before each date the Lender makes any additional Loans to the
Borrower pursuant to Section 2.1(ii) hereof, the Borrower shall issue and
deliver to the Lender a new Note, in an aggregate principal amount equal to the
sum of (x) $515,000,000 minus the aggregate amount of any payments of principal
of the Loan made by the Borrower prior to such date pursuant to the terms of
this Agreement, (y) the aggregate principal amount of any prior Loans made
pursuant to Section 2.1(ii) hereof and (z) the amount of such additional Loan to
be made pursuant to Section 2.1(ii) hereof, payable to the order of the Lender,
duly executed by the Borrower and dated the date of such additional Loan. Any
Note issued and delivered pursuant to this Section 2.2(b) shall be exchanged for
and shall replace the prior Note delivered by the Borrower and such prior Note
shall be canceled.
(c) The Note shall bear interest on the outstanding principal balance
thereof as set forth in Section 2.4 hereof. The Lender is hereby authorized by
the Borrower, but not obligated, to enter the amount of the Loan and the amount
of each payment or prepayment of principal or interest thereon in the
appropriate spaces on the reverse of or on an attachment to the Note.
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2.3 Borrowing Notice.
(a) The Borrower shall give the Lender notice of the Borrowing
(substantially in the form of Exhibit D hereto or in such other form as may be
mutually agreed upon by the Borrower and the Lender (a "Borrowing Notice")) not
later than 11:00 a.m. (New York City time) at least one Business Day prior to
the Closing Date specifying (i) such Closing Date and (ii) the principal amount
of such Borrowing, and certifying the matters contained in Section 9.1(c), (d),
(e) and (f) hereof. Such notice shall be irrevocable to the extent that the
Lender has relied on the notice to its own detriment or incurred costs and
expenses in connection therewith; provided that the Borrower may revoke such
notice, in any case, if the Borrower fully reimburses the Lender for any
reasonable costs and expenses associated with its reliance on such notice. In
addition to such notice, the Borrower shall deliver a Compliance Certificate
substantially in the form of Exhibit E hereto or in such other form as may be
mutually agreed upon by the Borrower and the Lender (a "Compliance Certificate")
to the Lender.
(b) Upon satisfaction or waiver of the conditions precedent specified
herein, the Lender shall make the proceeds of the Loan available to the Borrower
on the Closing Date by causing an amount of same day funds in Dollars equal to
the proceeds of the Loan to be disbursed via Federal Funds wire transfer to the
Borrower's account at the Custodian, ABA No. 011-001-438, Account No. 5821-5013
Control Wire, Re: Belair Capital Fund LLC - 4922, or to such other account as to
which the Borrower shall instruct the Lender in writing.
2.4 Interest. Interest shall accrue on the unpaid principal amount of the
Loan at the Interest Rate from and including the Closing Date to but excluding
the date of any principal payment whether upon acceleration or otherwise.
Interest accrued on the Loan shall be payable on each applicable Interest
Payment Date and on any day on which the Loan is repaid whether due to
acceleration or otherwise. Notwithstanding anything in this Agreement to the
contrary, the interest rate on the Loan shall in no event be in excess of the
maximum interest rate permitted by Applicable Law. All interest shall accrue
daily and shall be calculated on the basis of a 360-day year and the actual
number of days elapsed.
2.5 Alternate Rate of Interest. If the Lender reasonably determines that
for any reason deposits in Dollars are not offered to the Lender by leading
banks in the London Interbank Market in an amount comparable to the proposed
Loan for which renewal of the Interest Period has been requested and for a
period equal to the requested Interest Period for the Loan, the Lender shall so
notify the Borrower and, until the circumstances giving rise to such notice no
longer exist, interest shall accrue and be payable on the Loan at the Alternate
Rate, subject to the terms and conditions of this Agreement.
2.6 Default Interest. So long as an Event of Default shall have occurred
and be continuing (after as well as before judgment), the Borrower shall pay
interest on the unpaid principal amount of the Loan and on any interest, fees
and other amounts payable hereunder, at the times specified in Section 2.4
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hereof and on demand at a rate per annum equal (i) in the case of the principal
amount of the Loan, the Interest Rate then applicable to the Loan plus 2% per
annum and (ii) in the case of such other amounts, an amount equal to the
Alternate Rate plus 2% per annum.
2.7 Repayment and Termination. The Borrower shall repay the outstanding
principal amount of the Loan on the Maturity Date.
2.8 Optional Prepayments. Subject to Section 12.3, the Borrower may at any
time and from time to time (i) from the Closing Date until the date that is the
first anniversary thereof, provided that after giving effect to any prepayment
made pursuant to this Section 2.8(i) all of the conditions set forth on Schedule
2.8 hereto would be satisfied, and (ii) at any time thereafter, upon five
Business Days' prior written notice to the Lender, pay the outstanding principal
amount of the Loan, in whole or in part, without prepayment penalty, together
with accrued interest to the date of such prepayment on the principal amount
prepaid, provided that each partial principal repayment shall be in a minimum
aggregate amount of $1,000,000 or any integral multiple of $100,000 in excess
thereof. Each notice of prepayment shall specify the prepayment date and the
principal amount of the Loan to be prepaid, shall be irrevocable and shall
commit the Borrower to prepay the Loan in the amount and in the date stated
therein.
2.9 Manner of Payments. All payments by the Borrower hereunder and under
the Note shall be made by the Borrower on the date when due without offset or
counterclaim in Dollars in federal or other immediately available funds by wire
transfer to the account of DrKW Holdings, Inc., at Wells Fargo Bank, National
Association, ABA No. 121000248, Account No. 0001038377, Name: Corporate Trust
Clearing Account, OBI: FFC 14825700, reference; DrKW Holdings, Inc., or in
accordance with any other wire transfer instructions provided by the Lender to
the Borrower from time to time. Any such payment received after 11:00 a.m. New
York City time on any Business Day shall be deemed received on the following
Business Day.
2.10 Change in Circumstances.
(a) In the event that after the date hereof any change in Applicable Law or
in the official interpretation or administration thereof (including, without
limitation, any request, guideline or policy not having the force of law) by any
authority charged with the administration or interpretation thereof or, with
respect to clause (ii), (iii) or (iv) below any change in conditions, shall
occur which shall:
(i) subject the Lender to, or increase the net amount of, any tax,
levy, impost, duty, charge, fee, deduction or withholding with respect to
the Loan for which the Interest Rate is based upon LIBOR (other than
withholding tax imposed by the United States of America or any political
subdivision or taxing authority thereof or any other tax, levy, impost,
duty, charge, fee, deduction or withholding (x) that is measured with
respect to the overall net income of the Lender, and that is imposed by the
United States of America, or by the jurisdiction in which the Lender is
incorporated, or in which the Lender has its principal office (or any
11
political subdivision or taxing authority thereof or therein), or (y) that
is imposed solely by reason of the Lender failing to make a declaration of,
or otherwise to establish, non-residence, or to make any other claim for
exemption, or otherwise to comply with any certification, identification,
information, documentation or reporting requirements prescribed under the
laws of the relevant jurisdiction, in those cases where the Lender may
properly make such declaration or claim or so establish non-residence or
otherwise comply); or
(ii) change the basis of taxation of any payment to the Lender of
principal or any interest on the Loan for which the Interest Rate is based
upon LIBOR (except as limited in clause (i) above); or
(iii) impose, modify or deem applicable any reserve, deposit or
similar requirement against any assets held by, deposits with or for the
account of or loans or commitments by an office of the Lender with respect
to the Loan for which the interest rate is based upon LIBOR; or
(iv) impose upon the Lender or the London Interbank Market any other
condition with respect to the Loan for which the interest rate is based
upon LIBOR or this Agreement;
and the result of any of the foregoing shall be to increase the actual cost to
the Lender of making or maintaining the Loan hereunder or to reduce the amount
of any payment (whether of principal, interest or otherwise) received or
receivable by the Lender in connection with the Loan hereunder, or to require
the Lender to make any payment in connection with the Loan hereunder, in each
case by or in an amount which the Lender in its sole and reasonable judgment
shall deem material, then and in each case the Borrower shall pay to the Lender,
as provided in paragraph (b) below, such amounts as shall be reasonably
necessary to compensate the Lender for such cost, reduction or payment.
(b) The Lender shall deliver to the Borrower from time to time, one or more
certificates setting forth the amounts due to the Lender under paragraph (a)
above, the changes as a result of which such amounts are due, the manner of
computing such amounts and the manner of computing the amounts allocable to the
Loan hereunder pursuant to paragraph (a) above. Each such certificate shall be
conclusive in the absence of demonstrable error. The Borrower shall pay to the
Lender the amounts shown as due on any such certificate within 10 Business Days
after its receipt of the same. No failure on the part of the Lender to demand
compensation under paragraph (a) above on any one occasion shall constitute a
waiver of its rights to demand compensation on any other occasion. The
protection of this Section shall be available to the Lender regardless of any
possible contention of the invalidity or inapplicability of any law, regulation
or other condition which shall give rise to any demand by the Lender for
compensation thereunder.
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3. ESTABLISHMENT OF SECURITIES ACCOUNT; PLEDGE OF COLLATERAL
3.1 Establishment of the Securities Account. The Borrower shall establish
with the Custodian the Securities Account. The Borrower agrees at all times to
maintain the Pledged Securities in the Securities Account, until the Borrower
has satisfied all of the Obligations in full.
3.2 Other Account Provisions. The Borrower acknowledges that the Securities
Account shall be subject to the terms and conditions of the Account Control
Agreement.
4. PLEDGE AND SECURITY AGREEMENT
4.1 Grant of Security Interest.
(a) As security for the Obligations, the Borrower hereby assigns, pledges,
grants and conveys to the Secured Party a continuing first priority lien and
security interest (the "Security Interest") in the Collateral, except to the
extent provided for herein and in the Intercreditor Agreement.
(b) The Borrower will take all action which the Secured Party requests and
which is reasonably necessary to assure that the Secured Party has a continuing
perfected first priority Security Interest in the Collateral while this
Agreement is in effect, except to the extent provided for herein and in the
Intercreditor Agreement. Upon the request of the Secured Party, the Borrower
will promptly execute and deliver to the Secured Party financing statements
conforming to the Uniform Commercial Code in effect in the Commonwealth of
Massachusetts, the State of Delaware and any other state or jurisdiction deemed
appropriate by the Secured Party and such other documents as may be required in
order to perfect the Security Interest, all in a form the Secured Party deems to
be acceptable. Upon the request of the Secured Party, the Borrower also agrees
to promptly execute and deliver continuation statements conforming to the
Uniform Commercial Code in effect in the Commonwealth of Massachusetts, the
State of Delaware and any other state or jurisdiction deemed appropriate by the
Secured Party and in a form the Secured Party deems to be acceptable. If the
Borrower fails to promptly deliver to the Secured Party financing statements or
continuation statements required by the Secured Party, the Secured Party may, to
the extent permitted by law and without limiting its other rights under this
Agreement and the Note, execute and file in the Borrower's name, as the
Borrower's attorney-in-fact, such documents.
(c) If the jurisdiction of the Borrower's organization or the location of
the Borrower's principal executive office changes, the Borrower will promptly
notify the Secured Party in writing to that effect and will execute and deliver
to the Secured Party any additional financing statements or similar
documentation the Secured Party may reasonably request to assure the continued
effectiveness of the Security Interest. Once the Secured Party agrees that the
Borrower has fully and indefeasibly performed the Obligations, the Security
13
Interest in any Collateral will be terminated, any such Collateral will be
returned to the Borrower and the Secured Party will, at the Borrower's expense,
execute and deliver to the Borrower such documents as the Borrower may
reasonably request to evidence such termination.
5. SPECIAL AGREEMENTS WITH RESPECT TO PLEDGED SECURITIES
On a continuing basis, the Borrower covenants with the Secured Party that:
5.1 Liquidation of Pledged Securities.
(a) Subject to the Account Control Agreement, the Borrower may direct the
Custodian to release from the Securities Account and pay to the Secured Party
proceeds of the Pledged Securities sufficient to provide for payment then due on
the Loan (whether principal or interest) or any other amounts hereunder. Nothing
in this section shall affect the Secured Party's rights to direct the
application of the Collateral to the payment of amounts due on the Loan upon
acceleration thereof. Upon the release of any Collateral from the Securities
Account to the Secured Party in accordance with the terms of this section, the
security interest evidenced by this Agreement in such released Collateral will
automatically terminate and be of no further force and effect.
(b) If an Event of Default has occurred and is continuing, the Secured
Party shall be entitled to take market action against any securities held in the
Securities Account in accordance with this Agreement, and where appropriate, the
Secured Party may execute and file the requisite number of S.E.C. Forms 144 on
behalf of the Borrower.
(c) In the event that upon the occurrence and continuation of an Event of
Default, the Secured Party sells, assigns and delivers or otherwise transfers
any of the Pledged Securities under this Agreement (a "Liquidation"), the
Borrower will cooperate with the Secured Party in taking any and all action that
the Secured Party deems necessary or appropriate to effect or facilitate such
Liquidation. The Borrower agrees that upon the occurrence and continuation of an
Event of Default, the Secured Party may, in its sole and absolute discretion,
sell, or instruct the Custodian to sell, all or any part of the Pledged
Securities at private sale in such manner and under such circumstances as the
Secured Party may deem necessary or advisable in order that the sale may be
lawfully conducted, provided, however, that, without prejudice to the foregoing,
to the extent notice of any such sale shall be required by law, the Borrower
agrees that at least ten days' notice to the Borrower of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The purchaser of any or all Collateral so
sold shall thereafter hold the same absolutely free from any claim, encumbrance
or right of any kind whatsoever created by or through the Borrower. Any sale of
the Collateral conducted in conformity with reasonable commercial practices of
banks, insurance companies, commercial finance companies, or other financial
institutions disposing of property similar to the Collateral shall be deemed to
14
be commercially reasonable. The Secured Party may, in its own name or in the
name of a designee or nominee, buy any of the Collateral at any public sale and,
if permitted by applicable law, at any private sale. All expenses (including
court costs and reasonable attorneys' fees, expenses and disbursements) of, or
incident to, the enforcement of any of the provisions hereof shall be
recoverable from the proceeds of the sale or other disposition of the
Collateral.
(d) Without limiting the foregoing, the Secured Party may (i) approach and
negotiate with a limited number of potential purchasers, and (ii) restrict the
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing the Pledged Securities for their own account for investment
and not with a view to distribution or resale thereof. In the event that any of
the Pledged Securities are sold at private sale, the Borrower agrees that if the
Pledged Securities are sold for a price which the Secured Party in good faith
believed to be reasonable, then (a) the sale will be deemed to be commercially
reasonable in all respects and (b) the Secured Party will not incur any
liability or responsibility to the Borrower in connection therewith,
notwithstanding the possibility that a substantially higher price might have
been realized at a public sale.
(e) Any surplus of such cash or cash proceeds held by the Secured Party and
remaining after payment in full of the Loan (and any accrued interest thereon)
shall be paid over to the Borrower or to whomsoever may be lawfully entitled to
receive such surplus.
(f) The Borrower understands and acknowledges that it or its Shareholders
may incur monetary liability to the issuer of certain of the Pledged Securities
under Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), in connection with a sale of such Pledged Securities, whether
initiated by it or by the Lender under this Agreement. The Borrower acknowledges
that any such liability is strictly personal to it and/or its Shareholders, and
the Borrower agrees to indemnify and hold the Lender and any agent acting on
behalf of the Lender harmless from and against any and all losses, costs,
liabilities or expenses arising out of or relating to a purchase or sale of any
of the Pledged Securities under Section 16(b) of the 1934 Act at any time
whatsoever.
6. REPRESENTATIONS AND WARRANTIES
On the date hereof and on each Borrowing Date, the Borrower represents and
warrants to the Lender that:
6.1 Collateral.
(a) Except for (i) the Secured Party's rights established under this
Agreement and the Account Control Agreement, (ii) the Swap Provider's rights
established under the Swap Agreement and the Account Control Agreement and (iii)
the Overflow Agent's rights under the Overflow Agreement and the Account Control
Agreement, the Borrower owns the Collateral (including without limitation the
shares of common stock of BRC and the interests in Belvedere Capital owned by
15
the Borrower) free of any interest or Lien in favor of any third party or any
restriction on transfer, other than pursuant to the Operating Agreement.
(b) The Security Interest is and shall remain a perfected and valid first
priority Lien and security interest upon the Collateral.
6.2 Due Organization. The Borrower is a limited liability company and BRC
is a corporation, and each of them is duly organized and validly existing under
the jurisdiction of its organization and has the power and authority to own its
assets and to conduct the business which it conducts. Each of the Borrower and
BRC is in good standing under the laws of the jurisdiction of its organization
or formation and is duly qualified to do business in all jurisdictions in which
the nature of its activities requires such qualification.
6.3 Power and Authority; Binding Agreements. The Borrower has the full
right, power and authority to make, execute, deliver and perform its obligations
under this Agreement and the execution, delivery and performance of the
documents contemplated by this Agreement and consummation of the transactions
contemplated by this Agreement have been duly authorized by all necessary action
on the part of the Borrower. The Agreement and the Note constitute the legal,
valid and binding obligation of the Borrower, enforceable in accordance with
their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
6.4 No Violation. Neither the execution, delivery or performance by the
Borrower of this Agreement and the related documents, the consummation of the
transactions contemplated by this Agreement, nor compliance with the provisions
of this Agreement will (i) violate any law, regulation, order, judgment or
decree binding on the Borrower, (ii) violate or conflict with, as applicable,
the Borrower's certificate of organization, Operating Agreement or other
organizational or governing documents, (iii) conflict with, cause a breach of,
constitute a default under, be cause for the acceleration of the maturity of, or
create or result in the creation or imposition of any Lien, charge or
encumbrance (other than in favor of the Lender) on any of the Borrower's
property under, any agreement, notice, indenture, instrument or other
undertaking to which the Borrower is a party.
6.5 No Consents. No order, consent, license, authorization, recording or
registration is required to authorize or is required in connection with the
execution, delivery and performance by the Borrower or the legality, validity,
binding effect or enforceability of this Agreement upon or against the Borrower,
any documents executed by the Borrower in connection with this Agreement or any
transactions contemplated by this Agreement other than (i) the filing of UCC-1
financing statements, (ii) the registration of the shares of Belvedere Capital
and BRC in the name of the Custodian or the Custodian's nominee and (iii) the
written consent of the manager of Belvedere Capital to the Borrower's pledge of
its shares of Belvedere Capital.
16
6.6 No Litigation. There are no actions, suits, litigation or
investigations, pending or, threatened, against the Borrower that could (i) have
a material adverse effect on the business, condition (financial or otherwise),
or operations, properties or prospects of the Borrower or (ii) affect the
Borrower's ability to enter into and perform its obligations under this
Agreement or any of the transactions contemplated by this Agreement.
6.7 Compliance with Laws. The operations of the Borrower are and have been
in compliance in all material respects with all federal, state, local and
foreign laws and regulations applicable to it, including, without limitation,
tax, environmental and health and safety laws and regulations.
6.8 No Material Adverse Change. Since March 31, 2003, there has been no
material adverse change in the business, condition (financial or otherwise),
obligations, operations, performance or properties of the Borrower.
6.9 Solvency. After giving effect to the Loan, the Swap Agreement and the
Borrower's Obligations, (i) the present fair value of the Borrower's assets
exceeds the total amount of the Borrower's liabilities (including, without
limitation, contingent liabilities), (ii) the Borrower has capital and assets
sufficient to carry on its businesses, (iii) the Borrower is not engaged and is
not about to engage in a business or a transaction for which its remaining
assets are unreasonably small in relation to such business or transaction and
(iv) the Borrower does not intend to incur or believe that it will incur debts
beyond its ability to pay as they become due. The Borrower will not be rendered
insolvent by the execution, delivery and performance of documents relating to
this Agreement or by the consummation of the transactions contemplated under
this Agreement.
6.10 Organization; Place of Business. The Borrower was organized under the
laws of the Commonwealth of Massachusetts, and the address of the principal
executive office of the Borrower as indicated on the signature page hereto is
correct.
6.11 Full Disclosure. Neither this Agreement nor the Private Placement
Memorandum nor any, agreement, document, certificate or statement furnished to
the Lender or the Swap Provider by the Borrower in connection with the
transactions contemplated hereby, at the time it was furnished or delivered,
contained any untrue statement of a material fact or omitted to state a material
fact, under the circumstances under which it was made, necessary in order to
make the statements contained herein or therein not misleading.
6.12 Sole Business. Neither of the Borrower and BRC is engaged in any
business other than as described in the Private Placement Memorandum.
6.13 Investment Company Act. The Borrower is not an investment company
required to be registered under the Investment Company Act of 1940, as amended.
17
6.14 Private Placement Memorandum. All transactions contemplated by this
Agreement are consistent in all material respects with the descriptions thereof,
if any, contained in the Private Placement Memorandum and neither of the
Borrower and BRC has entered into any agreements which would otherwise prohibit,
restrict or limit the transactions contemplated by this Agreement or the Private
Placement Memorandum other than agreements as a holder of interests of Belvedere
Capital to be bound by the operating agreement of Belvedere Capital, agreements
as a holder of shares of common stock of BRC to be bound by the Certificates of
Incorporation of BRC, and agreements entered into or made in connection with the
acquisition of Qualifying Assets which restrict the transfer of such Qualifying
Assets.
6.15 Pledged Securities. Any outstanding certificates representing the
Pledged Securities will be physically held in the United States by the Custodian
or an authorized sub-custodian or agent of the Custodian.
6.16 Subsidiaries. As of the Closing Date, other than BRC, there are no
subsidiaries of the Borrower.
6.17 Belair Real Estate Corporation. As of the Closing Date, the authorized
capitalization of BRC consists of (i) 7,000 shares of common stock, par value
$0.01 per share of which 3,955.507103 shares are outstanding and owned by the
Borrower on the date hereof and (ii) 3,000 shares of preferred stock, par value
$0.01 per share, of which 2,100 shares have been designated as Class A preferred
stock with a liquidation preference of $100 per share, all of which preferred
stock has been issued to the Borrower and donated by the Borrower to charitable
organizations as contemplated by the Private Placement Memorandum.
6.18 Preferred Equity Interests. To the Borrower's knowledge: (i) each
issuer of Preferred Equity Interests which are included in the Collateral is a
limited partnership or limited liability company duly organized and validly
existing under the laws of the state of its organization and has all requisite
power and authority to conduct its business as now conducted; (ii) each
Preferred Equity Interest which is included in the Collateral has been issued
pursuant to a written partnership agreement or limited liability company
agreement, a true and correct copy of which has been made available to the
Secured Party, has been duly authorized, executed and delivered by all parties
thereto, has not been amended or otherwise modified (except as disclosed to the
Secured Party), is in full force and effect and is binding upon and enforceable
against all parties thereto in accordance with its terms. There exists no
default under any such partnership agreement or limited liability company
agreement by the Borrower or, to Borrower's knowledge, by any other Person,
which default is material in the context of this Agreement.
7. AFFIRMATIVE COVENANTS
Until this Agreement has terminated and all Obligations have been
indefeasibly paid in full, the Borrower will and will cause its subsidiaries to:
18
7.1 Maintenance of Existence. Preserve and maintain its existence and
material rights and franchises.
7.2 Compliance with Laws. Comply in all material respects with all
Applicable Laws, statutes, codes, ordinances, regulations, rules, orders,
awards, judgments, decrees, injunctions, approvals and permits applicable to it.
7.3 Payment of Taxes. Pay all taxes, assessments and governmental charges
imposed upon it or upon its property and all claims (including, without
limitation, claims for labor, materials, supplies or services) which might, if
unpaid, become a lien upon its property, unless, in each case, the validity or
amount thereof is being contested in good faith by appropriate proceedings and
it has maintained adequate reserves with respect thereto.
7.4 Books and Records. Maintain or cause to be maintained at all times true
and complete books and records of its financial and business operations in
accordance with GAAP, except that the valuation of the Pledged Securities shall
be in accordance with the valuation procedures described in the Private
Placement Memorandum.
7.5 Audit Rights. Permit any representative of the Lender to examine the
Borrower's, and its consolidated subsidiaries' books and records and to make
copies and take extracts therefrom, and to discuss the Borrower's affairs,
finances and accounts with the Manager and with the Borrower's independent
accountants, all at such reasonable times upon reasonable prior notice and as
often as the Lender may reasonably request.
7.6 Maintenance of Collateral. Maintain the Pledged Securities and other
Collateral in the Securities Account; provided, however, that withdrawals,
releases, distributions and transfers of Pledged Securities and other Collateral
may be made in accordance with the terms of the Account Control Agreement.
7.7 Notices. Furnish to the Secured Party: (i) within ten (10) days of
becoming aware of the occurrence of any Default or Event of Default, notice of
the occurrence and nature of such Default and of the steps that are being taken
to cure such Default or Event of Default; and (ii) promptly after (a) the
occurrence thereof, notice of the institution of or any material adverse
development in any action, suit or proceeding or any governmental investigation
or any arbitration, before any court or arbitrator or any Governmental Authority
(involving in excess of $500,000, or otherwise material) against the Borrower or
any material property of the Borrower, or (b) actual knowledge thereof, notice
of the threat of any such action, suit, proceeding, investigation or
arbitration.
7.8 Bankruptcy. Notify the Secured Party in writing before filing any
petition seeking the protection of any bankruptcy, insolvency or any similar
statutes, and neither the Borrower nor any of its subsidiaries will take any
action (or fail to take any necessary action) which may cause a petition in
bankruptcy, insolvency or any similar law or procedure to be filed against the
Borrower or Belvedere Capital.
19
7.9 Financial and Credit Information.
(a) Notify the Secured Party immediately, in writing, of any material
change in the Borrower's or any of its subsidiaries' financial condition which
would adversely affect the Borrower's ability to repay any obligation(s) to the
Lender or the Swap Provider according to the terms of this Agreement, the Note
or the Swap Agreement.
(b) Supply to the Secured Party such current financial information or other
information as the Secured Party may reasonably request from time to time.
(c) Permit the Secured Party to share with any of its Affiliates, or any
Person authorized by the Borrower, for legitimate business purposes, any
information about the Borrower which it may currently possess or obtain in the
future.
(d) Permit the Secured Party to answer any questions about its credit
experience with the Borrower.
(e) Comply with any reasonable requests from the Secured Party for
additional documentation required to be filed or executed by the Borrower from
time to time by Applicable Law or the policies and procedures of the Secured
Party.
7.10 Financial Statements. Furnish the Secured Party:
(a) within 90 days after the end of the first six-month fiscal period of
the Borrower, semi-annual, unaudited, consolidated financial statements
consisting of a consolidated balance sheet of the Borrower and its subsidiaries
and consolidated statements of operations and cash flows of the Borrower and its
subsidiaries, for such period, all in reasonable detail and certified by the
Manager of the Borrower, that such statements are correct and fairly present the
consolidated financial condition of the Borrower and its subsidiaries, as at the
end of such fiscal period (subject to normal year-end audit adjustments);
(b) within 90 days after the end of each fiscal year of the Borrower,
annual, audited, consolidated financial statements of the Borrower and its
subsidiaries, consisting of a consolidated balance sheet as of the close of such
fiscal year and related consolidated statements of operations and cash flows for
such year, attached to which shall be a report of Deloitte & Touche LLP or such
other independent certified public accountants of recognized standing acceptable
to the Secured Party and which statement shall have been prepared in accordance
with GAAP, except that the valuation of the Pledged Securities shall be in
accordance with the valuation procedures described in the Private Placement
Memorandum;
(c) upon receipt by the Borrower, copies of all financial reports
distributed by or on behalf of Belvedere Capital;
(d) concurrently with such distributions, copies of all financial reports
distributed by or on behalf of the Borrower to all Shareholders; and
20
(e) promptly upon their becoming available, copies of (i) all registration
statements, proxy statements, and all reports which the Borrower shall file with
any securities exchange or with the Securities and Exchange Commission or any
successor agency and (ii) all reports, financial statements, press releases and
other information which the Borrower shall release, send or make available to
its Shareholders generally.
7.11 Report; Compliance Certificate. Provide the Secured Party, within ten
Business Days after the end of each calendar month, a Statement in the form of
Exhibit B hereto (the "Report") and a Compliance Certificate. The Secured Party
reserves the right to request such additional information in connection with the
Report and any Pledged Security as it deems appropriate.
7.12 Liens. Defend the Collateral (including the Pledged Securities)
against any and all Liens, claims and other impediments howsoever arising, other
than (i) the Lien in favor of the Secured Party created hereunder and (ii) Liens
not otherwise prohibited under Section 8.2.
7.13 Government Approval. If any further authorizations, approvals,
registrations or filings with any governmental or public regulatory body or
authority of the United States, any state thereof or any other jurisdiction
required for the performance by the Borrower of this Agreement should hereafter
become necessary, obtain or make, or cause to be obtained or made, all such
authorizations, approvals, registrations or filings.
7.14 Use of Proceeds. The Borrower shall use the proceeds of the Loan to
refinance certain existing indebtedness, to pay loan facility expenses of the
Borrower, for liquidity needs, and for other general purposes, including payment
of interest and fees hereunder.
7.15 Valuation Covenants. Maintain:
(a) the Value of the total assets of the Borrower and its consolidated
subsidiaries (less the Value of its assets pledged to any Person other than the
Secured Party and less (without duplication) the Value of all Excluded Real
Estate Investments), at an amount equal to or in excess of 250% of the sum of
the Required Amount plus the outstanding principal balance of the Loan, plus
accrued and unpaid interest on the Loan, plus any liability of the Borrower for
which the termination value on any swap exceeds the collateral held for such
swap, plus the Overflow Exposure;
(b) the Value of the Qualifying Assets, other than Excluded Real Estate
Investments, at an amount not in excess of 40% of the market value of the
Collateral;
(c) the Value of all securities of any single issuer held by the Borrower
by reason of its indirect interest in the securities which are directly held by
the Portfolio at an amount not in excess of 5% of the Value of all Collateral
held in the Securities Account; provided that such restriction shall not apply
21
to the Borrower's direct investments in (w) Qualifying Assets, (x) shares in
Belvedere Capital or BRC, (y) the Borrower's indirect investment in shares of
the Portfolio (as distinguished from the underlying securities held by the
Portfolio) held through its direct investment in shares of Belvedere Capital or
(z) BRC's investments in Qualifying Assets; and
(d) the Value of all securities held by the Borrower of issuers primarily
engaged in any one industry by reason of its indirect interest in the securities
which are directly held by the Portfolio at an amount not to exceed 25% of the
Value of all Collateral held in the Securities Account; provided that such
restriction shall not apply to the Borrower's direct investments in (w)
Qualifying Assets, (x) shares in Belvedere Capital or BRC, (y) the Borrower's
indirect investment in shares of the Portfolio (as distinguished from the
underlying securities held by the Portfolio) held through its direct investment
in shares of Belvedere Capital or (z) BRC's investments in Qualifying Assets.
In the event that any of the foregoing restrictions contained in clauses
(b), (c) and (d) above are exceeded, the Value for that portion of the excess
shall not be included for purposes of determining the Value of the total assets
of the Borrower and its consolidated subsidiaries for purposes of clause (a)
above.
7.16 Formation of Additional Subsidiaries. Promptly following the creation
thereof, notify the Secured Party of any additional subsidiary and the purpose
for which it is being created.
8. NEGATIVE COVENANTS OF THE BORROWER
Until this Agreement has terminated and all Obligations have been
indefeasibly paid in full, the Borrower will not and it will not allow its
subsidiaries to:
8.1 No Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness, except for (i) Indebtedness of the Borrower under this Agreement
and the Note, the Overflow Agreement and the Swap Agreement, (ii) Indebtedness
in respect of (x) swap, cap or other interest rate or foreign currency hedging
arrangements (in each case, where used for hedging purposes) and (y) options,
financial futures contracts and options on financial futures contracts (in each
case, where used for hedging purposes), (iii) Indebtedness in respect of
purchases of securities on short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities as described in the
Private Placement Memorandum, (iv) overdrafts extended by the Custodian under
the Account Control Agreement, (v) Indebtedness of a subsidiary of the Borrower
incurred in connection with the acquisition by such subsidiary of an Excluded
Real Estate Investment, provided that such Indebtedness is without recourse to
the Borrower and BRC except to the extent of a so-called "bad boy" guaranty by
the Borrower or BRC on terms and conditions consistent with the past practice of
the Borrower and similar entities advised by the Investment Advisor or an
Affiliate thereof. Nothing contained in this Section 8.1 shall prohibit the
incurrence of the Required Amount.
8.2 No Liens. Create, incur, assume or suffer to exist any Lien on any of
its properties or assets except (i) Liens on assets of the Borrower (but not
BRC) in respect of Indebtedness permitted under Sections 8.1(i)-(iv), (ii) liens
22
on assets of subsidiaries of BRC to secure Indebtedness incurred by such
subsidiaries in connection with the acquisition by such subsidiaries of Excluded
Real Estate Investments, (iii) Liens for taxes, assessments or similar charges
incurred in the ordinary course of business which are not delinquent or which
are being contested in good faith and by appropriate proceedings diligently
conducted, and for which adequate reserves have been set aside in accordance
with GAAP, provided that proceedings to enforce such Liens have not been
commenced or have been stayed pending such contest, (iv) statutory Liens arising
by operation of law such as mechanics, materials, carriers', warehouse liens,
(A) which occur in the ordinary course of business, (B) secure normal trade debt
which is not yet due and payable, (C) do not secure Indebtedness for borrowed
money, (D) which are being contested in good faith and by appropriate
proceedings diligently conducted, and (E) for which adequate reserves have been
set aside in accordance with GAAP, provided that enforcement of such Liens is
stayed pending such contest, (v) Liens arising out of judgments or decrees which
are being contested in good faith and by appropriate proceedings diligently
conducted, and for which adequate reserves have been set aside in accordance
with GAAP, provided that enforcement thereof is stayed pending such contest,
(vi) Liens of the Custodian under the Account Control Agreement and (vii) Liens
created pursuant to this Agreement, the Overflow Agreement and the Account
Control Agreement.
8.3 No Mergers, Etc. Enter into any transaction of merger or consolidation
or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution).
8.4 No New Business. Engage in any business other than as described in the
Private Placement Memorandum.
8.5 No Trading. Conduct any sale of any Qualifying Assets (other than (i)
in connection with a distribution or redemption not otherwise prohibited under
this Agreement, (ii) if the proceeds of such sale will be utilized to purchase
(x) other Qualifying Assets which are comparable Qualifying Assets being sold or
(y) cash equivalents, but only if such investment in cash equivalents will not
result in the Borrower being treated as an investment company within the meaning
of Section 351 of the Internal Revenue Code or (iii) if the proceeds of such
sale will be utilized to repay the Loan) without providing three Business Days
prior notice to the Lender.
8.6 No Distributions. Make any distributions or honor any requests for
redemptions if such distributions or withdrawals, if made, would result in the
occurrence of a Default or an Event of Default of the type specified in Sections
10.1(a)(i), 10.1(b), 10.1(h) or 10.1(i).
8.7 No Amendments. Amend or modify, or permit to be amended or modified the
Private Placement Memorandum or Operating Agreement of the Borrower or the
organizational documents of any of its subsidiaries, without the prior written
consent of the Secured Party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, the Borrower and its subsidiaries may make
23
ministerial or other non-material changes, changes required to comply with
statutory or regulatory requirements or revisions or changes reflecting matters,
events or circumstances which should be described in the Private Placement
Memorandum, provided, however, that the Borrower shall promptly notify the
Secured Party of such changes.
8.8 Manager, Investment Adviser and Custodian. Terminate the services or
accept the resignation of the Manager or Investment Adviser or Custodian without
the prior written consent of the Secured Party.
8.9 Limitation on Restriction on Subsidiary Dividends and Other
Distributions, etc. Create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of BRC to (a)
pay dividends or make any other interest or participation in its profits owned
by the Borrower other than such restrictions as are set forth in BRC's
certificates of incorporation or BRC's Certificate of Designation of Class A
preferred stock, or pay any indebtedness owed to the Borrower, (b) make loans or
advances to the Borrower, or (c) transfer any of its properties or assets to the
Borrower.
9. CONDITIONS PRECEDENT TO CLOSING
9.1 Conditions Precedent to Loan. It shall be a condition precedent to the
making of the Loan hereunder that:
(a) the Lender shall have received, the following, in form and substance
satisfactory to the Lender in its sole discretion:
(i) evidence that the Borrower is duly authorized to enter into this
Agreement and all transactions contemplated hereby and to execute and
deliver this Agreement, the Note and all documents to be executed in
connection therewith;
(ii) a certificate of the Manager of the Borrower attesting, among
other things, (w) that true, correct and complete copies of the Borrower's
certificate of formation and Operating Agreement, together with all
amendments thereto, have been delivered to the Lender, (x) that provisions
of the Operating Agreement authorize the Manager to authorize the
execution, delivery and performance in accordance with their terms of the
Agreement, the Note and the other documents and transactions contemplated
thereby and the borrowings hereunder and the Manager has so authorized and
such authorization is in full force and effect, (y) that all
representations and warranties made in connection with this Agreement are
true, accurate and correct in all material respects and (z) to the
incumbency of the Manager, or any other Person executing this Agreement,
the Note and any related documents on behalf of the Borrower;
(iii) (w) a copy of the certificate of formation of each of the
Borrower and BRC filed in each entity's jurisdiction of organization, (x) a
copy of the by-laws of BRC, (y) a copy of BRC's Certificate of Designation
24
of Class A preferred shares and (z) a certificate of good standing from
each of the Borrower's and BRC's jurisdiction of organization and the
jurisdiction in which its principal executive office is located, if
different;
(iv) the Account Control Agreement duly executed on behalf of the
Lender, the Swap Provider, the Borrower, the Overflow Agent, the Investment
Manager and the Custodian;
(v) evidence that the Securities Account has been established and that
the Pledged Securities have been deposited into the Securities Account;
(vi) the appropriate UCC-1 Financing Statements;
(vii) the Private Placement Memorandum;
(viii) evidence that the Existing Credit Agreement and all liens in
connection therewith have been terminated;
(ix) the Investment Advisory Agreement;
(x) instructions from the Borrower in connection with the payment from
the proceeds of the Loan of certain existing indebtedness;
(xi) the favorable opinion of Testa, Hurwitz & Thibeault, LLP, counsel
to the Borrower in the form of Exhibit C hereto;
(xii) the Note, dated as of the date hereof, duly executed on behalf
of the Borrower;
(xiii) (x) the Swap Agreement and all Exhibits thereto and the
Amendment to Swap Agreement, duly executed on behalf of the Borrower and
(y) evidence that the Borrower has executed the "Confirmation" relating to
the Swap Agreement;
(xiv) the Intercreditor Agreement; and
(xv) a Form G-3 executed by the Borrower and the Lender.
(b) the Lender shall have received such other documents as the Lender may
reasonably request.
(c) the representations and warranties contained in Article 6 are true and
correct in all material respects on and as of the Closing Date, except to the
extent such representations and warranties specifically relate to an earlier
date.
(d) no event has occurred or is continuing or would result from the making
of the Loan, which would constitute a Default or an Event of Default.
25
(e) the Borrower has delivered to the Lender the Borrowing Notice and
Compliance Certificate required pursuant to Section 2.3 hereof.
(f) after giving effect to the Loan, (a) the Value of the total assets of
the Borrower (less the Value of its assets pledged to any Person other than the
Secured Party and less (without duplication) the Value of all Excluded Real
Estate Investments), shall be equal to or in excess of 250% of the sum of the
Required Amount plus the outstanding principal balance of the Loan, plus accrued
and unpaid interest on the Loan, plus any liability of the Borrower for which
the termination value on any swap exceeds the collateral held for such swap,
plus the Overflow Exposure.
10. DEFAULTS; REMEDIES
10.1 Events of Default. An event of default ("Event of Default") will occur
under this Agreement and the Note if:
(a) the Borrower fails (i) to make any payment when it is due as required
by this Agreement and such default continues unremedied, in the case of payments
of any amounts other than principal, for five days after such amount becomes due
or (ii) to observe or perform any covenant or agreement contained in Article 8
of this Agreement or Section 4 of the Account Control Agreement or (iii) to
observe or perform any other covenant or agreement contained in this Agreement
and such default continues unremedied for 30 days;
(b) the Value of the Collateral falls below the requirement contained in
Section 7.15, and the Borrower has not, within two Business Days after demand by
the Lender, reduced the outstanding principal balance of the Loan or deposited
in the Securities Account additional funds and/or securities as Collateral with
a Value sufficient to increase the Value of the Collateral to at least that
required pursuant to Section 7.15;
(c) the Borrower makes, or the Lender discovers that the Borrower has made,
a material misrepresentation under this Agreement or in any certificate,
financial statement or other document delivered in connection with this
Agreement, the Note or the Loan;
(d) default shall be made (and not cured within any applicable grace
period) with respect to the payment of any Indebtedness or other obligation of
the Borrower, the outstanding amount of which exceeds $1,000,000 or a default
shall have occurred under the Swap Agreement;
(e) (i) an attachment is levied against all or any portion of the
Securities Account or (ii) the Custodian shall have breached any provision of
the Account Control Agreement in any material respect;
(f) the Secured Party reasonably determines that the Security Interest (in
whole or in part) hereby created is not in full force and effect or does not
have the priority stated herein;
26
(g) final judgment for the payment of money in excess of $1,000,000 shall
be rendered against the Borrower or BRC and within thirty (30) days from the
entry of judgment shall not have been discharged or stayed pending appeal or
shall not have been discharged within thirty (30) days from the entry of a final
order of affirmance or appeal;
(h) the Borrower or BRC shall admit in writing its inability to pay its
debts generally as they become due, or shall make a general assignment for the
benefit of creditors; or the Borrower or BRC shall commence any case, proceeding
or other action seeking to have an order for relief entered on its behalf as a
debtor or to adjudicate it a bankrupt or insolvent or seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition of it or its
debts under any law relating to bankruptcy, insolvency, reorganization or relief
of debtors or seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its property or
shall file an answer or other pleading in any such case, proceeding or other
action admitting the material allegations of any petition, complaint or similar
pleading filed against it or consenting to the relief sought therein; or the
Borrower shall take any action to authorize any of the foregoing;
(i) any involuntary case, proceeding, or other action against the Borrower
or BRC shall be commenced seeking to have an order for relief entered against it
as debtor or to adjudicate it as bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or composition
of it or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property, and such case, proceeding or other action (i)
results in the entry of any order for relief against it or (ii) shall remain
undismissed for a period of thirty (30) days;
(j) the Borrower is subject to dissolution or termination as the result of
(i) a vote to dissolve by the Shareholders, (ii) the election by Manager to
terminate the operations of the Borrower or (iii) the expulsion, bankruptcy or
dissolution of a Shareholder, unless within 90 days thereafter, the Shareholders
holding at least a majority of the interests in the Borrower vote to continue
the operations of the Borrower;
(k) any event occurs which would entitle the beneficiary of any limited
recourse guaranty permitted by clause (v) of Section 8.1 to demand payment in
excess of $500,000 from BRC pursuant to the terms of such limited recourse
guaranty;
(l) the ratio of Belvedere Capital's total assets to total liabilities
(excluding the amount of any Shares submitted for redemption but not yet
redeemed in the ordinary course of business) shall at any time be less than
10:1;
(m) a material adverse change in the business, condition (financial or
otherwise), obligations, operations, performance or properties of the Borrower
shall have occurred; or
27
(n) the occurrence of an Event of Default (as defined in the Overflow
Agreement) under the Overflow Agreement.
10.2 Remedies.
(a) Upon the occurrence and during the continuation of an Event of Default,
the Lender may, without prejudice to any other right or remedy of the Lender, at
law, by contract or otherwise, by notice to the Borrower declare the Loan,
accrued interest thereon and any other sum then payable hereunder to be
immediately due and payable by the Borrower whereupon such amounts shall become
so due and payable. If an Event of Default specified in clause (h) or (i) above
shall have occurred, the Note shall automatically become due and payable, both
as to interest and principal, without presentment, demand, protest or other
notice of any kind. Upon the occurrence and continuation of an Event of Default,
the Lender may, to the extent permitted by Applicable Law, set-off, against any
amount owing to it under this Agreement and the Note, any securities, cash or
other property of the Borrower in the Lender's or any agent of the Lender's
possession.
(b) Upon the occurrence and continuation of an Event of Default, the
Secured Party may, at its option, instruct the Custodian to cancel any open
orders and close any and all outstanding financial contracts referred to in
subparagraph (a)(iii) of the definition of Indebtedness, transfer any or all of
the Pledged Securities to the Secured Party or its designee, transfer the whole
or any part of the Collateral into its name or the name of its nominee or to
notify the obligors on any Collateral to make payment to the Secured Party or
its nominee of any amounts due thereon and to take control or grant its nominee
the right to take control of any proceeds of the Collateral, liquidate the
Pledged Securities or other Collateral, withdraw and/or sell any such Pledged
Securities or other Collateral and apply any such Collateral as well as the
proceeds of any such Pledged Securities or other Collateral to all unpaid
Obligations in such order as the Lender defines in its sole discretion. The
Borrower will be responsible for any decrease in the value of the Collateral
occurring prior to liquidation. Upon the occurrence and continuation of an Event
of Default, the Secured Party may, to the extent permitted by Applicable Law,
also set-off, against any amount owing to it under this Agreement, the Note or
the Swap Agreement, any securities, cash or other property of the Borrower in
the possession of any such Person.
(c) The Secured Party may exercise any or all of the rights contained in
this Section without further demand for additional Collateral, or notice of sale
or purchase, or other notice or advertisement. Any sales or purchases made
pursuant to this Section may be made at the Secured Party's discretion on any
exchange or other market where such business is usually transacted, or at public
auction or private sale, and the Secured Party or its agent or any Affiliate of
the Secured Party or its agent may be the purchaser for the Secured Party or its
agent or such Affiliate's or its agent's own account. It is understood that the
giving of any prior demand or call or prior notice of the time and place of such
sale or purchase by the Secured Party or its agent will not be considered a
waiver of the Lender's right to sell or buy without any such demand, call or
notice except as provided in this Agreement.
28
(d) In addition to the Secured Party's rights and remedies described in
this Agreement, the Secured Party has the right to exercise any one or more of
the rights and remedies of a secured creditor under the Uniform Commercial Code
in effect in the State of New York. All the rights and remedies which are
available to the Lender under this Agreement are cumulative and are in addition
to any and all other rights and remedies which are otherwise available to the
Lender either at law, equity or otherwise. The Secured Party may exercise any
one or more of such rights and remedies simultaneously or successively.
11. THE INVESTMENT MANAGER
11.1 Investment Manager.
(a) The Borrower acknowledges, agrees and consents that the Lender has
assigned its rights under Sections 5.1(b), 5.1(c), 7.5, 7.9(b)-7.9(e), 10.2 and
12.8 of this Agreement to the Investment Manager, and that the Investment
Manager may, but is not obligated to, exercise such rights.
(b) The Borrower shall provide directly to the Investment Manager all
notices that the Borrower is required to provide to the Secured Party pursuant
to Sections 7.7, 7.8, 7.9(a), 7.10, 7.11 and 7.16 of this Agreement. Such
notices shall be delivered to the Investment Manager in the time and manner set
forth in each such section.
12. MISCELLANEOUS
12.1 Expenses. Whether or not the transactions hereby contemplated shall be
consummated, Merrill Lynch Group agrees to pay all reasonable expenses incurred
by the Borrower and the Lender in connection with, or growing out of, the
negotiation, preparation, execution and delivery of this Agreement (including
any amendment hereto) and any other documentation contemplated hereby, the Note
and the Collateral (including the Pledged Securities), including, but not
limited to, the reasonable fees and disbursements of any counsel for the Lender.
The Borrower agrees to pay all reasonable expenses incurred by the Lender in
connection with, or growing out of, any waiver, modification or enforcement and
administration of this Agreement (including any amendment hereto) and any other
documentation contemplated hereby, the Note and the Collateral (including the
Pledged Securities), including, but not limited to, the reasonable fees and
disbursements of any counsel for the Borrower and the Lender.
12.2 Cost of Collection. If the Borrower fails to make any payment under
this Agreement as and when required, the Borrower must pay, to the extent
permitted by Applicable Law, the Secured Party's court and collection costs,
including legal fees, any costs incurred in the disposition of the Collateral,
and, if the Loan is referred for collection to any attorney not employed by the
Lender or one of its Affiliates, the Lender's reasonable attorney fees.
29
12.3 Indemnities. The Borrower shall on demand indemnify the Lender and the
Investment Manager to the extent the Lender or the Investment Manager has
sustained or suffered:
(i) Any increased cost in maintaining all or any part of the Loan or
any other amount outstanding under this Agreement or any reduction in the
effective return to the Lender under this Agreement or in the rate of
overall return on its capital below that which it would have been able to
achieve but for its entering into or giving effect to the Agreement, in
each case, which is sustained or incurred directly or indirectly as a
consequence of, or of compliance with, any change after the date hereof in
any law, regulation, guideline, order or any directive or the like (whether
or not having the force of law) of any governmental or other regulatory
body or authority affecting the manner in which the Lender allocates
capital resources to its obligations under this Agreement or any
interpretation by any such governmental or regulatory body or authority;
(ii) Any funding and any other cost, expense or liability (including
loss of profit, legal fees and taxes) sustained or incurred by the Lender
or the Investment Manager (1) to render this Agreement (including the
Security Interest created by this Agreement) enforceable, (2) in connection
with protecting or enforcing the Lender's or the Investment Manager's
rights under this Agreement and/or any amendment thereto, (3) as a result
of the occurrence or continuance of any Default, or (4) as a result of the
receipt or recovery by the Lender of all or any part of the Loan (other
than a Loan interest on which is calculated by reference to the Alternate
Rate) or an overdue sum otherwise than on the last day of an Interest
Period applicable to the Loan;
(iii) Any stamp, documentary, registration or similar tax payable in
connection with the entry into, registration, performance, enforcement or
admissibility in evidence of the Agreement and/or any such amendment,
supplement or waiver, promptly and in any event before any interest or
penalty becomes payable, together with any liability with respect to or
resulting from any delay in paying or omission to pay any such tax;
(iv) Any claims, demands, losses, judgments, damages and liabilities
(including liabilities for penalties) incurred by the Lender or the
Investment Manager and/or their directors, officers, employees and agents
(each an "Indemnified Party") as a result of, or arising out of, or in any
way related to, or by reason of, any investigation, litigation or other
proceeding (whether or not either the Lender or the Investment Manager is a
party thereto) related to the entering into and/or the performance of this
Agreement, or the use of the proceeds of the Loan hereunder or the
consummation of any other transaction contemplated by this Agreement,
including, without limitation, the reasonable fees and disbursements of
counsel incurred in connection with any such investigation, litigation or
other proceeding (but excluding any such losses, liabilities, claims,
damages or expenses of an Indemnified Party to the extent incurred (i) by
30
reason of the gross negligence or willful misconduct of such Indemnified
Party or (ii) as a result of any dispute between Indemnified Parties or any
conflicting instructions given to the Borrower by Indemnified Parties); and
(v) Any claims, demands, losses, judgments, damages and liabilities
(including liabilities for penalties) incurred by the Lender or the
Investment Manager as a result of, or arising out of, or in any way related
to, or by reason of, any loss incurred by any Shareholder whether as a
result of an adverse tax situation or otherwise, arising from or in any way
related to any act or failure to act by the Secured Party in connection
with the Collateral or this Agreement.
12.4 Delay in Enforcement; No Waiver. The Secured Party can choose to delay
or not to enforce any of its rights under this Agreement without losing such
rights. If the Secured Party chooses not to exercise or enforce (or is prevented
from exercising or enforcing) any of such rights, the Borrower agrees that the
Secured Party is not waiving the right to enforce such rights at a later time or
any of its other rights. Any waiver of the Secured Party's rights under this
Agreement must be in writing.
12.5 Statements and Notices. Statements and notices will be sent to the
address for the Borrower indicated on the signature page hereto, unless the
Borrower notifies the Lender in writing of a change in address. The Borrower
agrees to provide the Lender with 30 Business Days' prior written notice of any
change of address or name. The Borrower agrees to send correspondence to the
Lender and the Investment Manager at the respective addresses for the Lender and
the Investment Manager indicated on the signature page or as otherwise provided
by the Lender or the Investment Manager, as applicable.
12.6 Waivers. To the extent permitted by Applicable Law, the Borrower
waives the Borrower's rights to require the Lender, (a) to demand payments of
amounts due (known as "presentment"); (b) to give notice that amounts due have
not been paid (known as "notice of dishonor"); and (c) to obtain an official
certification of non-payment (known as "protest").
12.7 Non-Recourse. The Secured Party hereby agrees for the benefit of each
and every Shareholder of the Borrower, the Manager of the Borrower, each
employee, officer and trustee of the Manager and of the Borrower, the Investment
Advisor, and any successor, assignee, heir, estate, administrator or personal
representative of any such person (a "Non-Recourse Person") that: (a) no
Non-Recourse Person shall have any personal liability for any obligation of the
Borrower under this Agreement or the Note or the Account Control Agreement or
the Swap Agreement or any other instrument or document delivered pursuant hereto
or thereto; (b) no claim against any Non-Recourse Person may be made for any
obligation of the Borrower under this Agreement, the Note, the Account Control
Agreement or any other instrument or document delivered pursuant hereto or
thereto, whether for payment of principal of, or interest on, the Loan or for
any fees, costs, expenses or other amounts payable by the Borrower hereunder or
thereunder, or otherwise; and (c) the obligations of the Borrower under this
31
Agreement, the Note, the Account Control Agreement or the Swap Agreement or
other document or instrument delivered pursuant hereto or thereto are
enforceable against the Borrower and the Borrower's properties and assets.
Nothing contained in this Section shall be construed as limiting the Secured
Party's rights against the Custodian in its capacity as custodian and account
carrier under the Account Control Agreement.
12.8 Further Assurances. The Borrower agrees that upon the request of the
Secured Party, it shall execute and/or deliver any additional agreements,
documents and instruments as may be reasonably requested by the Secured Party
from time to time, including, without limitation, opinions of counsel with
respect to the continuing authority of the Borrower to perform its obligations
under this Agreement (which counsel shall be satisfactory to the Secured Party
in its sole discretion), which agreements, documents or instruments shall be
satisfactory to the Secured Party in its sole discretion.
12.9 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the benefit of the
successors and permitted assigns of all the parties to this Agreement. The
Lender may assign at its sole option all or part of its rights, obligations and
remedies under this Agreement to any member of the Merrill Lynch Group. In the
event that the Lender wishes to assign all or part of its rights, obligation and
remedies under this Agreement to anyone other than a member of the Merrill Lynch
Group, such assignment is subject to the written consent of the Borrower (which
consent shall not unreasonably be withheld); provided however, that no consent
by the Borrower shall be required for any assignment which is made while an
Event of Default has occurred or is continuing. Any such assignee of such rights
and obligations shall be entitled to the full benefit of this Agreement to the
same extent as if it were an original party in respect of the rights or
obligations assigned or transferred to it. The Lender may disclose to a
potential assignee (or any other Person who has entered or proposes to enter
into contractual arrangements with the Lender in relation to or concerning this
Agreement), such information about the Borrower, and this Agreement as it may
deem appropriate provided that such assignee (or any other Person who has
entered or proposes to enter into contractual arrangements with the Lender in
relation to or concerning this Agreement) is subject to the provisions set forth
in Section 12.18. The Borrower may not assign its rights or obligations under
this Agreement.
12.10 GOVERNING LAW AND JURISDICTION.
(a) THIS AGREEMENT AND THE NOTE HAVE BEEN DELIVERED BY THE BORROWER IN THE
STATE OF NEW YORK AND IN ALL RESPECTS SHALL BE GOVERNED BY AND INTERPRETED UNDER
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED WHOLLY WITHIN SUCH STATE.
(b) THE BORROWER HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF
ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY AND TO THE JURISDICTION OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE
PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON
32
THIS AGREEMENT OR THE SUBJECT MATTER HEREOF BROUGHT BY THE LENDER OR ITS
SUCCESSORS OR ASSIGNS. THE BORROWER, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
(A) HEREBY WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
SUBJECT PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT ITS
PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION
OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER OR THAT THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, AND (B) HEREBY WAIVES THE RIGHT
TO ASSERT IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY OFFSET OR COUNTERCLAIM,
EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY. THE BORROWER HEREBY CONSENTS TO THE
SERVICE OF PROCESS BY MAIL AT ITS NOTICE ADDRESS SET FORTH IN SECTION 12.5. THE
BORROWER AGREES THAT ITS SUBMISSION TO JURISDICTION AND CONSENT TO SERVICE OF
PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE SECURED PARTY. FINAL
JUDGMENT AGAINST THE BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING SHALL BE
CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (X) BY SUIT, ACTION OR
PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF THE INDEBTEDNESS OR
LIABILITY OF THE BORROWER OR (Y) IN ANY OTHER MANNER PROVIDED BY OR PURSUANT TO
THE LAWS OF SUCH OTHER JURISDICTION; PROVIDED, HOWEVER, THAT THE SECURED PARTY
MAY AT ITS OPTION BRING SUIT OR INSTITUTE OTHER JUDICIAL PROCEEDINGS AGAINST THE
BORROWER OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED STATES
OR OF ANY COUNTRY OR PLACE WHERE THE BORROWER OR SUCH ASSETS MAY BE FOUND.
12.11 Effectiveness. The Borrower hereby acknowledges that (i) this
Agreement shall become effective with respect to the Lender only at such time as
the Lender has accepted this Agreement and the Lender shall not have any
liability or obligation hereunder until such time, (ii) the Lender may execute
this Agreement by telecopy and provide executed originals to the Borrower.
12.12 WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
BORROWER HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS AGREEMENT, THE NOTE OR THE SUBJECT MATTER HEREOF OR THEREOF, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR
33
TORT OR OTHERWISE. THE BORROWER ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE
SECURED PARTY THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL
INDUCEMENT UPON WHICH THE SECURED PARTY HAS RELIED, IS RELYING AND WILL RELY IN
ENTERING INTO THIS AGREEMENT, THE NOTE AND ANY OTHER DOCUMENT RELATED THERETO.
THE SECURED PARTY MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE BORROWER TO THE WAIVER OF ITS
RIGHTS TO TRIAL BY JURY.
12.13 Amendments. No amendment, modification or waiver of any provision of
this Agreement and no consent to any departure by the Borrower herefrom, shall
be effective unless the same shall be in writing and signed by the Lender and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. In addition, no amendment, modification or
waiver of any provision of this Agreement which effects the Investment Manager
shall be effective unless the same shall be in writing and signed by the
Investment Manager.
12.14 Headings. The heading of each provision of this Agreement is for
descriptive purposes only and shall not be deemed to modify or qualify any of
the rights or obligations described in each such provision.
12.15 Severability. If any provision of this Agreement is held to be
invalid, illegal, void or unenforceable, by reason of any law, rule,
administrative order or judicial or arbitral decision, such decision shall not
affect the validity of the remaining provisions of this Agreement.
12.16 Entire Agreement. This Agreement and the Account Control Agreement
constitute the entire agreement between the parties and supersede any and all
prior agreements (whether written or oral).
12.17 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall constitute an original, but all of
which when taken together shall constitute one and the same instrument.
12.18 Confidentiality. The Lender agrees to keep confidential any written
or oral information (a) provided to it by or on behalf of the Borrower pursuant
to or in connection with this Agreement or (b) obtained by the Lender based on a
review of the books and records of the Borrower; provided that nothing herein
shall prevent the Lender from disclosing any such information (i) to any
assignee, transferee, prospective assignee or prospective transferee which
agrees to comply with the provisions of this Section, (ii) to its affiliates,
employees, directors, agents, attorneys, accountants and other professional
advisors, (iii) upon the request or demand of any governmental or other
34
regulatory body or authority, (iv) in response to any order of any court or
other governmental or other regulatory body or authority or as may otherwise be
required pursuant to any present or future law or regulation or any directive or
the like (whether or not having the force of law) of any governmental or other
regulatory body or authority, (v) which has been publicly disclosed other than
in breach of this Section or (vi) in connection with the exercise of any remedy
hereunder.
12.19 Acknowledgment and Acceptance of Investment Manager. The
acknowledgment and Acceptance of the Investment Manager shall only apply to its
respective rights and obligations set forth in Section 11 of this Agreement.
[Signature page to follow]
35
IN WITNESS WHEREOF, the parties hereto have caused this Loan and Security
Agreement to be duly executed by its authorized officer as of the day and year
first written above. Borrower:
BELAIR CAPITAL FUND LLC, as Borrower
By: EATON VANCE MANAGEMENT, as Manager
By: /s/ Thomas E. Faust Jr.
------------------------------------
Name: Thomas E. Faust Jr.
Title: Executive Vice President
Address: The Eaton Vance Building
255 State Street
Boston, Massachusetts 02109
Telephone No.: (617) 482-8260
Telecopier No.: (617) 482 3836
36
Lender:
DRKW HOLDINGS, INC., as Lender
By: /s/ Neil Winward
------------------------------------
Name: Neil Winward
Title: President
Address: 1301 Avenue of the Americas
New York, New York 10019
Telephone No.: (212) 969-7909
Telecopier No.: (212) 969-7850
37
ACKNOWLEDGED AND ACCEPTED
Investment Manager:
WELLS FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION, as Investment Manager
By: /s/ Joe Nardl
------------------------------------
Name: Joe Nardl
Title: Assistant Vice President
Address: Sixth Street and Marquette Avenue
MAC N9311-161
Minneapolis, MN 55479
Attention: Corporate Trust
Services/Asset-
Backed Administration
Telephone No.: (612) 667-8058
Telecopier No.: (617) 667-3539
38
SCHEDULE 2.8
OPTIONAL PREPAYMENT CONDITIONS
The Borrower may make prepayments of principal pursuant to Section 2.8(i) of the
Agreement only if any such prepayment is made in accordance with the following
conditions:
1. Prepayments of principal may be made in an amount up to, but not
exceeding, an amount received by the Borrower in respect of any
principal redemptions or prepayments with respect to the Borrower's
Qualifying Assets received in accordance with the terms of such
Qualifying Asset.
2. Prepayments of principal may be made in such principal amount as shall
be determined by the Borrower to ensure continued compliance with the
collateral coverage requirement, but only if and to the extent that
the excess of the collateral value over the amount of the collateral
coverage requirement does not exceed 15% of the collateral coverage
requirement.
3. Prepayments of principal may be made in an amount up to, but not
exceeding, the proceeds of a disposition of Qualifying Assets, that
the Borrower determines it is no longer required to hold by reason of
the redemption of Shares of the Borrower at the request of
Shareholders.
4. Prepayments of principal may be made in an amount up to, but not
exceeding, the amount drawn down by a Transferee Fund* on its
respective loan from the Lender in connection with the transfer of a
Qualifying Asset from the Borrower to such Transferee Fund.
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* Transferee Funds: Belcrest Capital Fund LLC, Belshire Capital Fund LLC,
Belvedere Equity Fund LLC and Belrose Capital Fund LLC