EXHIBIT 4.2
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LOAN AND SECURITY AGREEMENT
DATED AS OF JULY 15, 2003
BY AND AMONG
MERRILL LYNCH MORTGAGE CAPITAL, INC., AS AGENT,
THE LENDERS REFERRED TO HEREIN,
MERRILL LYNCH CAPITAL SERVICES, INC.,
AND
BELAIR CAPITAL FUND LLC
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TABLE OF CONTENTS
PAGE
1. DEFINITIONS...........................................................1
2. THE LOAN.............................................................10
2.1 Loans.......................................................10
2.2 Note........................................................10
2.3 Borrowing Notice............................................11
2.4 Interest....................................................11
2.5 Alternate Rate of Interest..................................12
2.6 Default Interest............................................12
2.7 Repayment and Termination...................................12
2.8 Optional Prepayments........................................12
2.9 Manner of Payments..........................................12
2.10 Commitment Fee and Other Fees...............................13
2.11 Reduction or Termination of Commitment......................13
2.12 Change in Circumstances.....................................13
2.13 Letters of Credit...........................................15
3. ESTABLISHMENT OF SECURITIES ACCOUNT; PLEDGE OF COLLATERAL............19
3.1 Establishment of the Securities Account.....................19
3.2 Other Account Provisions....................................19
4. PLEDGE AND SECURITY AGREEMENT........................................19
4.1 Grant of Security Interest..................................19
5. SPECIAL AGREEMENTS WITH RESPECT TO PLEDGED SECURITIES................20
5.1 Liquidation of Pledged Securities...........................20
6. REPRESENTATIONS AND WARRANTIES.......................................21
6.1 Collateral..................................................21
6.2 Due Organization............................................22
6.3 Power and Authority; Binding Agreements.....................22
6.4 No Violation................................................22
6.5 No Consents.................................................22
6.6 No Litigation...............................................23
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6.7 Compliance with Laws........................................23
6.8 No Material Adverse Change..................................23
6.9 Solvency....................................................23
6.10 Organization; Place of Business.............................23
6.11 Full Disclosure.............................................23
6.12 Sole Business...............................................23
6.13 Investment Company Act......................................24
6.14 Private Placement Memorandum................................24
6.15 Pledged Securities..........................................24
6.16 Subsidiaries................................................24
6.17 Belair Real Estate Corporation..............................24
6.18 Preferred Equity Interests..................................24
7. AFFIRMATIVE COVENANTS................................................25
7.1 Maintenance of Existence....................................25
7.2 Compliance with Laws........................................25
7.3 Payment of Taxes............................................25
7.4 Books and Records...........................................25
7.5 Audit Rights................................................25
7.6 Maintenance of Collateral...................................25
7.7 Notices.....................................................25
7.8 Bankruptcy..................................................26
7.9 Financial and Credit Information............................26
7.10 Financial Statements........................................26
7.11 Report; Compliance Certificate..............................27
7.12 Liens.......................................................27
7.13 Government Approval.........................................27
7.14 Use of Proceeds.............................................27
7.15 Valuation Covenants.........................................27
7.16 Formation of Additional Subsidiaries........................28
8. NEGATIVE COVENANTS OF THE BORROWER...................................28
8.1 No Indebtedness.............................................28
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8.2 No Liens....................................................29
8.3 No Mergers, Etc.............................................29
8.4 No New Business.............................................29
8.5 No Trading..................................................29
8.6 No Distributions............................................30
8.7 No Amendments...............................................30
8.8 Manager, Investment Adviser and Custodian...................30
8.9 Limitation on Restriction on Subsidiary Dividends
and Other Distributions, etc................................30
9. CONDITIONS PRECEDENT TO CLOSING......................................30
9.1 Conditions Precedent to Initial Loan........................30
9.2 Conditions Precedent to All Loans...........................32
10. DEFAULTS; REMEDIES...................................................32
10.1 Events of Default...........................................32
10.2 Remedies....................................................34
11. THE AGENT............................................................36
11.1 Administration by Agent.....................................36
11.2 Advances and Payments.......................................36
11.3 Sharing of Setoffs and Cash Collateral......................37
11.4 Notice to the Lenders.......................................37
11.5 Liability of Agent..........................................37
11.6 Reimbursement and Indemnification...........................38
11.7 Rights of Agent.............................................39
11.8 Independent Investigation by Lenders........................39
11.9 Agreement of Required Lenders...............................39
11.10 Notice of Transfer..........................................39
11.11 Successor Agent.............................................39
12. MISCELLANEOUS........................................................40
12.1 Expenses....................................................40
12.2 Cost of Collection..........................................40
12.3 Indemnities.................................................40
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12.4 Delay in Enforcement; No Waiver.............................41
12.5 Statements and Notices......................................42
12.6 Waivers.....................................................42
12.7 Non-Recourse................................................42
12.8 Further Assurances..........................................42
12.9 Successors and Assigns; Loan Sales; Participations..........43
12.10 GOVERNING LAW AND JURISDICTION..............................43
12.11 Effectiveness...............................................45
12.12 WAIVER OF JURY TRIAL........................................45
12.13 Amendments..................................................45
12.14 Headings....................................................46
12.15 Severability................................................46
12.16 Entire Agreement............................................46
12.17 Execution in Counterparts...................................46
12.18 Confidentiality.............................................46
12.19 Survival....................................................46
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 1.1. Schedule of Commitments
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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 among Belair Capital Fund LLC, a Massachusetts
limited liability company (the "Borrower"), the Lenders referred to herein,
Merrill Lynch Mortgage Capital, Inc., a Delaware corporation, as agent (the
"Agent") and Merrill Lynch Capital Services, Inc., a Delaware corporation (the
"Swap Provider"). This Agreement establishes the terms and conditions that will
govern the Loans from the Lenders 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 Lenders to make available to the Borrower a
revolving credit facility in the aggregate amount of $100,000,000 or such lesser
amount as indicated herein, including a Letter of Credit sub-facility not to
exceed the amount of $10,000,000. The Borrower wishes to pledge the Collateral
to the Agent for the benefit of the Lenders as security for the Loans and to the
Swap Provider as security for Borrower's obligations under the Swap Agreement.
The Borrower is entering into the Term Loan 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 Agent is willing
to act as agent for the Lenders, and each Lender is willing to make Loans to the
Borrower in amounts in the aggregate at any one time outstanding not in excess
of its Commitment hereunder, all as set forth on the Schedule of Commitments
attached hereto as Schedule 1.1.
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 Agent, the Term Lender, the Investment Manager, the Swap
Provider 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.
"Agent" shall mean Merrill Lynch Mortgage Capital, Inc., in its capacity as
agent for the Lenders hereunder or such successor Agent as may be appointed
pursuant to Section 11.11 of this Agreement.
"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 Agent 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 a group of Loans initially made by the Lenders (or
continued into a subsequent Interest Period) on the same day and having the same
Interest Period.
"Borrowing Date" shall have the meaning given to such term in Section 2.3.
"Borrowing Notice" shall have the meaning given to such term in Section
2.3.
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"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
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 date on which (i) the Agent shall have
received counterparts of this Agreement executed by the Borrower, each of the
Lenders and the Swap Provider and (ii) all conditions precedent to the making of
the Loans 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 either Secured Party in
connection with the Securities Account, which securities are deemed to be in the
Securities Account for purposes of this Agreement;
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(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 Parties (or any secured party under the Term Loan Agreement) not
otherwise prohibited by Section 8.2 of this Agreement shall be 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.
"Commitment" shall mean (i) the commitment of each Lender to make Loans to
the Borrower on the terms and subject to the conditions set forth herein up to
an aggregate principal amount, at any one time outstanding, not in excess of the
amount set forth opposite its name in the Schedule of Commitments appearing on
Schedule 1.1 hereto, as such amount may be reduced from time to time in
accordance with the terms of this Agreement and, included therein, (ii) the
commitment of the Agent to cause the issuance of Letters of Credit up to
$10,000,000 face amount, at any one time outstanding.
"Commitment Fee" shall have the meaning given to such term in Section 2.10.
"Commitment Termination Date" shall mean June 25, 2010, or such earlier
date on which (i) the Loans shall become due in accordance with Section 10.2 or
(ii) the Borrower terminates the Commitment pursuant to Section 2.11.
"Compliance Certificate" shall have the meaning given to such term in
Section 2.3.
"Custodian" shall mean Investors Bank & Trust Company.
"Default" shall mean any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"Dollars" or "$" 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.
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"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 Agent, using any reasonable method, shall determine.
"Fundamental Documents" shall mean this Agreement, the Notes, 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 Agent or the Swap Provider in connection with this Agreement or any other
Fundamental Document.
"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
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(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 Agent, the Term Lender, the Investment Manager and the Swap
Provider, substantially in the form of Exhibit G hereto or such other form as
may be acceptable to the Agent and all Lenders.
"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 0.38%.
"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 Term Lender or such
successor Investment Manager as may be appointed by the Term Lender.
"L/C Exposure" shall mean, at any time, the amount expressed in Dollars of
the aggregate face amount of all drafts which may then or thereafter be
presented by beneficiaries under all Letters of Credit then outstanding plus
(without duplication), the face amount of all drafts which have been presented
or accepted under all Letters of Credit but have not yet been paid or have been
paid but not reimbursed, whether directly or from the proceeds of a Loan
hereunder.
"Letter of Credit" shall mean a letter of credit caused to be issued by the
Agent pursuant to Section 2.13 hereof.
"Lender" and "Lenders" shall mean the financial institutions whose names
appear on the signature page of this Agreement and any assignee of a Lender
pursuant to Section 12.9.
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"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" or "Loans" shall mean individually or collectively, as the context
so requires, the loans made by the Lenders to the Borrower under this Agreement.
"Manager" shall mean Eaton Vance Management.
"Maturity Date" shall mean June 25, 2010, or such earlier date on which the
Loans shall become due in accordance with Section 10.2.
"Maximum Loan Amount" shall mean $100,000,000.
"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 Loans, any reimbursement
obligations in respect of Letters of Credit, the Commitment Fee and all other
monetary obligations of the Borrower owed to the Agent, any Lender or the Swap
Provider under this Agreement, the Notes, the Swap Agreement or any other
Fundamental Document.
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"Operating Agreement" shall mean the Amended and Restated Operating
Agreement of the Borrower dated as of February 6, 1998.
"Overflow Exposure" shall mean, at any time, the amount expressed in
Dollars of the aggregate outstanding principal balance of the Loans, plus
accrued and unpaid interest on the Loans, plus the then current L/C Exposure.
"Percentage" shall mean, with respect to any Lender, a percentage equal to
the ratio obtained by dividing the applicable Commitment of such Lender by the
applicable aggregate Commitments of the Lenders.
"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.
"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
(A) if and for so long as the principal amount of the Loans 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 or (B) if the Commitment shall be
terminated, then the Required Amount shall mean an amount equal to the sum of
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(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.
"Required Lenders" shall mean (i) the Swap Provider, (ii) the Agent and
(iii) the Lenders (including the Agent) holding a majority of the aggregate
principal amount of Loans then outstanding, or if no Loans are then outstanding,
Lenders (including the Agent) holding a majority of the Commitments.
"Secured Parties" shall mean the Agent, for the benefit of the Lenders
referred to herein, and the Swap Provider.
"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 Agent to reflect its interest therein. The Borrower agrees, as a condition
to the Lenders' obligation to make Loans 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.
"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.
"Term Lender" shall mean DrKW Holdings, Inc., in its capacity as lender
under the Term Loan Agreement.
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"Term Loan Agreement" shall mean the Loan and Security Agreement dated as
of July 15, 2003 by and between the Term Lender and the Borrower.
"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 Loans.
(a) Each Lender severally but not jointly agrees, on the terms and
conditions set forth herein, from and including the date hereof through and
including the Commitment Termination Date to make Loans to the Borrower from
time to time in an amount not to exceed its Commitment less the principal amount
of any outstanding Loans; provided, however, that (i) the minimum amount of any
Borrowing shall be $500,000 (or such lesser amount as shall equal the available
portion of the Commitment) or such greater amount which is a multiple of
$100,000 and (ii) the aggregate outstanding principal amount of all Loans and
L/C Exposure shall not at any time exceed the Maximum Loan Amount.
(b) Subject to the terms of this Agreement, the Borrower may borrow, repay
and reborrow Loans at any time prior to the Commitment Termination Date.
(c) Each Loan requested hereunder on any date shall be made by each Lender
in accordance with its respective Percentage, except as otherwise indicated on
the Schedule of Commitments attached as Schedule 1.1 hereto.
2.2 Note.
(a) The Loans made by each Lender shall be evidenced by a single promissory
note substantially in the form of Exhibit A hereto (each a "Note" and
collectively the "Notes"), in the face amount of such Lender's Commitment,
payable to the order of such Lender, duly executed by the Borrower and dated the
date hereof.
(b) Each Note shall bear interest on the outstanding principal balance
thereof as set forth in Section 2.4 hereof. Each Lender and the Agent on its
behalf is hereby authorized by the Borrower, but not obligated, to enter the
amount of each 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 Notes.
2.3 Borrowing Notice.
(a) The Borrower shall give the Agent notice (substantially in the form of
Exhibit D hereto or in such other form as may be mutually agreed upon by the
Borrower and the Agent (a "Borrowing Notice")) not later than 11:00 a.m. (New
York City time) at least two Business Days before the proposed borrowing date
10
(the "Borrowing Date") of any Borrowing specifying (i) the Borrowing Date of
such Borrowing which shall be a Business Day and (ii) the principal amount of
such Borrowing, and certifying the matters contained in Section 9.2 hereof. Such
notice shall be irrevocable to the extent that the Lenders or the Agent have
relied on the notice to their 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 Lenders and the Agent for any
reasonable costs and expenses associated with their 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 Agent (a "Compliance Certificate")
to the Agent.
(b) The Agent shall promptly notify each Lender of its share of each
Borrowing under this Section 2.3, the date of such Borrowing and the Interest
Period applicable thereto. On the Borrowing Date specified in such notice, each
Lender shall make its share of the Borrowing available at the office of the
Agent no later than 1:00 p.m. New York City time in Federal or other immediately
available funds. Upon receipt of the funds to be made available by the Lenders
to fund each Borrowing hereunder, the Agent shall disburse such funds 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 Agent
in writing.
2.4 Interest.
(a) Interest shall accrue on the unpaid principal amount of each Loan at
the Interest Rate from and including the date of the Loan to but excluding the
date of any principal payment whether upon acceleration or otherwise. Interest
accrued on each Loan shall be payable on each applicable Interest Payment Date
and on any day on which Loans are repaid whether due to acceleration or
otherwise. Notwithstanding anything in this Agreement to the contrary, the
interest rate on the Loans or with respect to any drawing under a Letter of
Credit 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.
(b) Until the Maturity Date, the Borrower may elect from time to time to
renew the Interest Period for all or part of an outstanding Loan by requesting
such renewal from the Agent, which request must be received not later than 11:00
a.m. (New York city time) three Business Days prior to the last day of the
Interest Period for such Loan and shall specify (i) the renewal date for such
Loan (which shall be the last day of the Interest Period for such Loan) and (ii)
the aggregate amount of the Loans to be renewed as part of the same Borrowing
(which shall not be less than $500,000 and integral multiples of $100,000 in
excess thereof). All requests made under this Section 2.4(b) shall be
irrevocable. If the Borrower shall fail to request the renewal of any Interest
Period for any Loan by the required time, the Interest Period for such Loan
11
shall be renewed after the last day of the Interest Period for such Loan for a
successive Interest Period having the same duration as the Interest Period in
effect as of the date the renewal request should have been received and interest
shall accrue and be payable on such Loan at the Interest Rate determined by the
Agent for such Interest Periods for amounts comparable to the unpaid balance of
such Loan, subject to the provisions of this Agreement.
2.5 Alternate Rate of Interest. If the Agent reasonably determines that for
any reason deposits in Dollars are not offered to any Lender by leading banks in
the London Interbank Market in an amount comparable to a proposed Loan or an
unpaid advance for which renewal of the Interest Period has been requested and
for a period equal to the requested Interest Period for such Loan, the Agent
shall so notify the Borrower and, until the circumstances giving rise to such
notice no longer exist, interest shall accrue and be payable on such 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 all Loans and on any interest, fees
and other amounts payable hereunder, at the times specified in Section 2.4
hereof and on demand at a rate per annum equal (i) in the case of the principal
amount of Loans, the Interest Rate then applicable to such Loans 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 all Loans on the Maturity Date.
2.8 Optional Prepayments. Subject to Section 12.3, the Borrower may at any
time and from time to time, upon two Business Days' prior written notice to the
Agent, pay the outstanding principal amount of the Loans, 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, each Loan to be prepaid and the principal amount thereof,
shall be irrevocable and shall commit the Borrower to prepay such Loan in the
amount and in the date stated therein.
2.9 Manner of Payments. All payments by the Borrower hereunder and under
the Notes 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 Merrill Lynch Mortgage Capital, Inc. at Bankers
Trust, ABA No. 021001033, Account No. 0081294, Attn: MLMCI, or in accordance
with any other wire transfer instructions provided by the Agent 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 Commitment Fee and Other Fees. The Borrower agrees to pay in arrears
to the Agent for the account of each Lender on the last Business Day of each
March, June, September and December in each year (commencing on the last
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Business Day of September 2003), prior to the Commitment Termination Date and on
the Commitment Termination Date, a fee (the "Commitment Fee") of 1/10 of 1% per
annum, computed on the basis of the actual number of days elapsed over a year of
360 days, on the average daily amount by which such Lender's Commitment, as such
Commitment may be reduced in accordance with the provisions of this Agreement,
exceeds the sum of the principal balance of such Lender's outstanding Loans,
and/or such Lender's then current L/C Exposure during the preceding period or
quarter. Such Commitment Fee shall commence to accrue on and including the date
on which this Agreement is fully executed and shall cease to accrue on and
excluding the Commitment Termination Date.
2.11 Reduction or Termination of Commitment.
(a) The Borrower shall have the right, upon at least five (5) Business
Days' prior written notice to the Agent, to reduce permanently the Commitments
in whole at any time, or in part from time to time, to an amount not less than
the aggregate principal balance of the Loans then outstanding (after giving
effect to any contemporaneous prepayment thereof in accordance with Section 2.8)
in the case of the Commitments to make Loans, and the then current L/C Exposure
in the case of Commitments to issue Letters of Credit, in either case, without
premium or penalty and provided that each partial reduction of the Commitments
shall be in an amount equal to $1,000,000 or such greater amount which is an
integral multiple thereof. Any partial reduction of the Commitments shall be
made among the Lenders in accordance with their respective pro rata share of the
Commitments of the applicable type, except as otherwise set forth on the
Schedule of Commitments attached as Schedule 1.1 hereto.
(b) Simultaneously with each such termination or reduction of the
Commitments, the Borrower shall pay to the Agent for the benefit of each Lender
all accrued and unpaid Commitment Fees on the amount of the Commitment so
terminated or reduced through the date of such termination or reduction.
2.12 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 any Lender to, or increase the net amount of, any tax,
levy, impost, duty, charge, fee, deduction or withholding with respect to
any 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 such Lender, and that is imposed by
the United States of America, or by the jurisdiction in which such Lender
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is incorporated, or in which such Lender has its principal office (or any
political subdivision or taxing authority thereof or therein), or (y) that
is imposed solely by reason of any 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 a 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 any Lender of
principal or any interest on any 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 any Lender with respect
to any Loan for which the interest rate is based upon LIBOR; or
(iv) impose upon any Lender or the London Interbank Market any other
condition with respect to any Loans 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
such Lender of making or maintaining any Loan hereunder or to reduce the amount
of any payment (whether of principal, interest or otherwise) received or
receivable by such Lender in connection with any Loan hereunder, or to require
such Lender to make any payment in connection with any Loan hereunder, in each
case by or in an amount which such Lender in its sole and reasonable judgment
shall deem material, then and in each case the Borrower shall pay to the Agent
for the account of such Lender, as provided in paragraph (b) below, such amounts
as shall be reasonably necessary to compensate such Lender for such cost,
reduction or payment.
(b) Each Lender shall deliver to the Borrower and the Agent from time to
time, one or more certificates setting forth the amounts due to such 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 Loans hereunder pursuant to paragraph (a) above. Each such
certificate shall be conclusive in the absence of demonstrable error. The
Borrower shall pay to the Agent for the account of each such 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 any 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 each 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 such Lender for compensation thereunder.
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2.13 Letters of Credit.
(a) (i) Upon the terms and subject to the conditions hereof and of
Applicable Law, the Agent agrees, upon the request of the Borrower, to cause
Letters of Credit payable in Dollars to be issued from time to time at and after
the Closing Date and prior to the Commitment Termination Date (and to cause
Letters of Credit previously issued hereunder to be extended); provided,
however, that (A) the Borrower shall not request, and the Agent shall not cause
to be issued, any Letter of Credit if, after giving effect thereto, (x) the then
current L/C Exposure would exceed the aggregate Commitments to issue Letters of
Credit then in effect or (y) the aggregate outstanding principal amount of all
Loans and L/C Exposure would exceed the Maximum Loan Amount and (B) the Borrower
shall not request, and the Agent shall not cause to be issued or extend, any
Letter of Credit having an expiration date (x) later than the tenth day prior to
the Commitment Termination Date or (y) more than one year after its date of
issuance; provided, however, that a Letter of Credit may, if requested by the
Borrower, provide that such Letter of Credit is renewable for successive periods
of one year or less unless the Agent shall have delivered a notice of
non-renewal to the beneficiary of such Letter of Credit.
(ii) Immediately upon the issuance of each Letter of Credit, each
Lender shall be deemed to, and hereby agrees to, have irrevocably purchased
from the issuer thereof a participation in such Letter of Credit in
accordance with such Lender's Percentage.
(iii) Each Letter of Credit may, at the option of the Agent, provide
that the issuer thereof may (but shall not be required to) pay all or any
part of the maximum amount which may at any time be available for drawing
thereunder to the beneficiary thereof upon the occurrence or continuation
of an Event of Default and the acceleration of the maturity of the Loans,
provided that, if payment is not then due to the beneficiary, the Agent
shall cause the funds in question to be deposited in a segregated account
with the Agent to secure payment to the beneficiary, and any funds so
deposited shall be paid to the beneficiary of the Letter of Credit if
conditions to such payment are satisfied or returned to the Agent (or, if
all Obligations shall have been paid in full in cash, to the Borrower) if
no payment to the beneficiary has been made and the final date available
for drawings under the Letter of Credit has passed. Each payment or deposit
of funds by the Agent as provided in this paragraph shall be treated for
all purposes of this Agreement as a drawing duly honored by the issuer of
the related Letter of Credit.
(b) Whenever the Borrower desires the issuance of a Letter of Credit, it
shall deliver to the Agent a written notice no later than 2:00 p.m. (New York
City time) at least three (3) Business Days prior to the proposed date of
issuance. That notice shall specify (i) the proposed date of issuance (which
shall be a Business Day), (ii) the face amount of the Letter of Credit, (iii)
the expiration date of the Letter of Credit and (iv) the name and address of the
beneficiary. Such notice shall be accompanied by a brief description of the
underlying transaction and, upon request of the Agent, the Borrower shall
provide additional details regarding the underlying transaction. Concurrently
15
with the giving of written notice of a request for the issuance of a Letter of
Credit, the Borrower shall provide a precise description of the documents and
the verbatim text of any certificate to be presented by the beneficiary of such
Letter of Credit which, if presented by such beneficiary prior to the expiration
date of the Letter of Credit, would require the issuer thereof to make payment
under the Letter of Credit; provided, however, that the Agent, in its reasonable
discretion, may require customary changes in any such documents and certificates
to be presented by the beneficiary.
(c) The acceptance and payment of drafts under any Letter of Credit shall
be made in accordance with the terms of such Letter of Credit and the Uniform
Customs and Practice for Documentary Credits, International Chamber of Commerce
Publication No. 500, as adopted or amended from time to time. The issuer of a
Letter of Credit shall be entitled to honor any drafts and accept any documents
presented to it by the beneficiary of such Letter of Credit in accordance with
the terms of such Letter of Credit and believed by the issuer in good faith to
be genuine. The issuer of a Letter of Credit shall not have any duty to inquire
as to the accuracy or authenticity of any draft or other drawing documents which
may be presented to it, but shall be responsible only to determine in accordance
with customary commercial practices that the documents which are required to be
presented before payment or acceptance of a draft under any Letter of Credit
have been delivered and that they comply on their face with the requirements of
that Letter of Credit.
(d) If the issuer of any Letter of Credit shall make payment on any draft
presented under a Letter of Credit (regardless of whether a Default or Event of
Default or acceleration has occurred), the Agent shall give notice of such
payment to the Lenders and each Lender hereby authorizes and requests the Agent
to advance for its account pursuant to the terms hereof its share of such
payment based upon its Percentage participation in the Letter of Credit and
agrees promptly to reimburse the Agent in immediately available funds for the
Dollar equivalent of the amount so advanced on its behalf. If such reimbursement
is not made by any Lender in immediately available funds on the same day on
which the issuer shall have made payment on any such draft, such Lender shall
pay interest thereof to the Agent at a rate per annum equal to the Agent's cost
of obtaining overnight funds in the New York Federal Funds Market.
(e) The Borrower is absolutely, unconditionally and irrevocably obligated
to reimburse all amounts drawn under each Letter of Credit. If any draft is
presented under a Letter of Credit, the payment of which is required to be made
at any time on or before the Commitment Termination Date, then payment by the
issuer of such draft shall constitute a Loan hereunder and interest shall accrue
from the date such issuer makes payment on such draft under such Letter of
Credit. If any draft is presented under a Letter of Credit, the payment of which
is required to be made after the Commitment Termination Date or at a time when
an Event of Default or Default shall have occurred and then be continuing, then
the Borrower shall immediately pay to the Agent, in immediately available funds,
the full amount of such draft together with interest thereon at a rate per annum
of 2% in excess of the Alternate Rate from the date on which the issuer of the
relevant Letter of Credit makes such payment of such draft until the date it
receives full reimbursement for such payment from the Borrower. The Borrower
16
further agrees that the Agent may reimburse itself or the issuer for such
drawing from the balance in any other account of the Borrower maintained with
the Agent or any of its Affiliates.
(f) The Agent agrees to notify the Borrower if payment on any draft is made
by the issuer of any Letter of Credit hereunder; provided, however, that an
inadvertent failure by the Agent to so notify the Borrower shall not be a breach
by the Agent of such obligation.
(g) The Borrower agrees to pay to the Agent or directly to the issuer of
any Letter of Credit issued hereunder with respect to any such Letters of Credit
any and all charges imposed by any issuing, confirming or advising bank.
(h) If by reason of (i) any change in Applicable Law after the Closing
Date, or in the interpretation or administration thereof (including, without
limitation, any request, guideline or policy not having the force of law) by any
Governmental Authority charged with the administration or interpretation thereof
or (ii) compliance by the Agent or any Lender with any direction, request or
requirement (whether or not having the force of law) issued after the Closing
Date by any Governmental Authority or monetary authority, including, without
limitation, any change whether or not proposed or published prior to the Closing
Date and any modifications to Regulation D occurring after the Closing Date:
(A) the Agent or any Lender shall be subject to any tax, levy,
impost, duty, fee, charge, deduction or withholding of any nature with
respect to any Letter of Credit (other than withholding tax imposed by
the United States of America or any other tax, levy, impost, duty,
fee, charge, deduction or withholding (1) that is measured with
respect to the overall net income of the Agent or such Lender , and
that is imposed by the United States of America, or by the
jurisdiction in which the Agent or such Lender is incorporated, or the
Agent or such Lender has its principal office or a presence which is
not otherwise connected with, or required by, this transaction (or any
political subdivision or taxing authority thereof or therein) or (2)
that is imposed solely by reason of the Agent or such 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 Agent or such Lender may properly make the
declaration or claim or so establish non-residence or otherwise
comply), or to any variation thereof or to any penalty with respect to
the maintenance or fulfillment of its obligations under this Section
2.13, whether directly or by such being imposed on or suffered by the
Agent or such Lender;
(B) the basis of taxation of any fee or amount payable hereunder
with respect to any Letter of Credit or any participation therein
shall be changed;
17
(C) any reserve, deposit or similar requirement is or shall be
applicable, imposed or modified in respect of any Letter of Credit
caused to be issued by the Agent; or
(D) there shall be imposed on the Agent, any Lender or any issuer
of a Letter of Credit any other condition regarding this Section 2.13,
any Letter of Credit or any participation therein;
and the result of the foregoing is to directly or indirectly increase the cost
to the Agent, any Lender or the issuer of any Letter of Credit of issuing,
making or maintaining any Letter of Credit or of purchasing or maintaining any
participation therein, or to reduce the amount receivable in respect thereof by
the Agent, any Lender or any such issuer, then and in any such case the Agent
may, at any time, notify the Borrower, and the Borrower shall promptly pay the
Agent upon its demand such amounts as the Agent may specify to be necessary to
compensate for such additional cost or reduced receipt. The determination by the
Agent, any Lender or any such issuer of any amount due pursuant to this Section
2.13 as set forth in a certificate setting forth the calculation thereof in
reasonable detail shall, in the absence of demonstrable error, be final,
conclusive and binding on all of the parties hereto.
(i) If at any time when an Event of Default shall have occurred and be
continuing, any Letters of Credit shall remain outstanding, then the Agent may
require the Borrower to deliver to it Cash Equivalents in an amount equal to the
full amount of the L/C Exposure or to furnish other security acceptable to the
Agent. Any amounts so delivered pursuant to the preceding sentence shall be
applied to reimburse the Agent for the amount of any drawings honored under
Letters of Credit; provided, however, that if prior to the Maturity Date, (i) no
Default or Event of Default is then continuing, then the Agent shall return all
of such collateral relating to such deposit to the Borrower if requested by it
or (ii) Letters of Credit shall expire or be returned by the beneficiary so that
the amount of the Cash Equivalents delivered to the Agent hereunder shall exceed
the then current L/C Exposure, then such excess shall first be applied to pay
any Obligations then due under this Agreement and the remainder shall be
returned to the Borrower.
(j) Notwithstanding the termination of the Commitments and the repayment of
the Loans, the obligations of the Borrower under this Section 2.13 shall remain
in full force and effect until the issuers of all Letters of Credit shall have
been irrevocably released from their obligations with regard to any and all
Letters of Credit.
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.
18
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 Parties, 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, which security
interest replaces, continues and supercedes the security interest previously
granted to the Swap Provider pursuant to the Existing Credit Agreement.
(b) The Borrower will take all action which either Secured Party requests
and which is reasonably necessary to assure that each of the Secured Parties 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 either Secured Party, the Borrower
will promptly execute and deliver to such 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 such Secured Party and such other documents as may be required in
order to perfect the Security Interest, all in a form such Secured Party deems
to be acceptable. Upon the request of such 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 such
Secured Party and in a form such Secured Party deems to be acceptable. If the
Borrower fails to promptly deliver to such Secured Party financing statements or
continuation statements required by such Secured Party, such Secured Party may,
to the extent permitted by law and without limiting its other rights under this
Agreement and the Notes, 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 both Secured Parties in writing to that effect and will execute and
deliver to the Secured Parties any additional financing statements or similar
documentation the Secured Parties may reasonably request to assure the continued
effectiveness of the Security Interest. Once both the Secured Parties agree that
the Borrower has fully and indefeasibly performed the Obligations and the L/C
Exposure has been reduced to zero, the Security Interest in any Collateral will
be terminated, any such Collateral will be returned to the Borrower and the
Secured Parties will, at the Borrower's expense, execute and deliver to the
Borrower such documents as the Borrower may reasonably request to evidence such
termination.
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5. SPECIAL AGREEMENTS WITH RESPECT TO PLEDGED SECURITIES
On a continuing basis, the Borrower covenants with the Secured Parties
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, either of the
Secured Parties shall be entitled to take market action against any securities
held in the Securities Account in accordance with this Agreement, and where
appropriate, either of the Secured Parties 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, a Secured Party sells, assigns and delivers or otherwise transfers any
of the Pledged Securities under this Agreement (a "Liquidation"), the Borrower
will cooperate with such Secured Party in taking any and all action that such
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, a 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 such
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
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.
20
(d) Without limiting the foregoing, a 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 such 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 Parties 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 Agent 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 Agent, the Lenders and the Swap
Provider 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 Agent, each Lender and the Swap Provider that:
6.1 Collateral.
(a) Except for (i) the Secured Parties' rights established under this
Agreement, the Swap Agreement and the Account Control Agreement and (ii) the
Term Lender's rights established under the Term Loan 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 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.
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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 Notes 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 Agent) 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.
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
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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 Loans, 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 Agent, any 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.
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 or BRC has entered into any agreements which would otherwise prohibit,
restrict or limit the transactions contemplated by this Agreement or the Private
23
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 Parties, has been duly authorized, executed and delivered by all parties
thereto, has not been amended or otherwise modified (except as disclosed to the
Secured Parties), 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 the L/C Exposure has been reduced
to zero, and all Obligations have been indefeasibly paid in full, the Borrower
will and will cause its subsidiaries to:
7.1 Maintenance of Existence. Preserve and maintain its existence and
material rights and franchises.
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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 Agent, any Lender or the
Swap Provider 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 Agent, such Lender or the Swap Provider 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 Parties: (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 Parties 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.
7.9 Financial and Credit Information.
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(a) Notify the Secured Parties 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
Agent, the Lenders or the Swap Provider according to the terms of this
Agreement, the Notes or the Swap Agreement.
(b) Supply to the Secured Parties such current financial information or
other information as either Secured Party may reasonably request from time to
time.
(c) Permit the Secured Parties to share with any of their 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 each Secured Party to answer any questions about its credit
experience with the Borrower.
(e) Comply with any reasonable requests from either 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 such Secured
Party.
7.10 Financial Statements. Furnish the Secured Parties:
(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 Parties 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
26
(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 Parties, 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
Parties reserve the right to request such additional information in connection
with the Report and any Pledged Security as they deem 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 Parties 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 Loans to
refinance certain existing indebtedness, to finance the purchase of Qualifying
Assets, to pay loan facility expenses of the Borrower, for short-term liquidity
needs, and for other general working capital 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 Parties 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 Loans, plus
accrued and unpaid interest on the Loans, plus the then current L/C Exposure,
plus any liability of the Borrower for which the termination value on any swap
exceeds the collateral held for such swap, plus the outstanding principal
balance of the Loan (as defined in the Term Loan Agreement), plus accrued and
unpaid interest on the Loan (as defined in the Term Loan Agreement) under the
Term Loan Agreement;
(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;
27
(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
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 Parties 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 the L/C Exposure has been reduced
to zero 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 Notes, the Term Loan 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
28
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
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 Term Loan 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 Loans) without providing three Business Days
prior notice to the Agent.
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).
29
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 Parties, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, the Borrower and its subsidiaries may
make 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 Parties 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 Parties.
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 Initial Loan. It shall be a condition precedent
to the making of the initial Loan hereunder that:
(a) the Agent shall have received, with copies for each of the Lenders, the
following, in form and substance satisfactory to the Agent 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 Notes 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 Agent, (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 Notes 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
30
true, accurate and correct in all material respects and (z) to the
incumbency of the Manager, or any other Person executing this Agreement,
the Notes 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
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
Agent, the Swap Provider, the Term Lender, the Investment Manager, the
Borrower and 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 initial 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 Notes, 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 Agent.
(b) the Agent shall have received such other documents as the Agent or any
Lender may reasonably request.
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9.2 Conditions Precedent to All Loans. It shall be a condition precedent to
all Loans (including the initial Loan hereunder) and to the issuance of each
Letter of Credit that on the date of such Loan or issuance of a Letter of Credit
the following statements shall be true (and each request for a Loan or issuance
of a Letter of Credit shall constitute a representation and warranty by the
Borrower that on the date of such Loan or such issuance of Letter of Credit that
such statements are true):
(a) After giving effect to such Loan, the total of all Loans outstanding
will not exceed the Total Commitment;
(b) The representations and warranties contained in Article 6 are true and
correct in all material respects on and as of the date of such Loan or issuance
of such Letter of Credit, except to the extent such representations and
warranties specifically relate to an earlier date;
(c) No event has occurred or is continuing or would result from the making
of such Loan or issuance of such Letter of Credit, which would constitute a
Default or an Event of Default;
(d) The Borrower has delivered to the Agent the Borrowing Notice and
Compliance Certificate required pursuant to Section 2.3 hereof; and
(e) After giving effect to all Loans and the issuances of all Letters of
Credit, (a) the Value of the total assets of the Borrower (less the Value of its
assets pledged to any Person other than the Secured Parties 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 Loans, plus accrued and unpaid interest on the Loans,
plus the then current L/C Exposure, plus any liability of the Borrower for which
the termination value on any swap exceeds the collateral held for such swap,
plus the outstanding principal balance of the Loan (as defined in the Term Loan
Agreement), plus accrued and unpaid interest on the Loan (as defined in the Term
Loan Agreement) under the Term Loan Agreement.
10. DEFAULTS; REMEDIES
10.1 Events of Default. An event of default ("Event of Default") will occur
under this Agreement and the Notes 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;
32
(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 Agent, reduced the outstanding principal balance of the Loans plus the then
current L/C Exposure 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 Agent 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 Notes or the Loans;
(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) either 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;
(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
33
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
(n) the occurrence of an Event of Default (as defined in the Term Loan
Agreement) under the Term Loan Agreement.
10.2 Remedies.
(a) Upon the occurrence and during the continuation of an Event of Default,
the Agent may, without prejudice to any other right or remedy of the Agent or
any Lender, at law, by contract or otherwise, by notice to the Borrower declare
all Loans, 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, and/or declare the Commitments to be terminated,
whereupon they shall so terminate. If an Event of Default specified in clause
(h) or (i) above shall have occurred, the Commitment shall automatically
terminate and the Notes 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 Agent
may demand Cash Equivalents in an amount equal to the full amount of the L/C
Exposure or to furnish other securities therefor acceptable to the Lender, and
may, to the extent permitted by Applicable Law, also 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 Agent's possession.
(b) Upon the occurrence and continuation of an Event of Default, either
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
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subparagraph (a)(iii) of the definition of Indebtedness, transfer any or all of
the Pledged Securities to such 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 Parties 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 Agent 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 Parties may, to the extent permitted by Applicable Law,
also set-off, against any amount owing to it under this Agreement, the Notes or
the Swap Agreement, any securities, cash or other property of the Borrower in
the possession of any such Person.
(c) Either 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 such Secured Party's discretion on any
exchange or other market where such business is usually transacted, or at public
auction or private sale, and such Secured Party or its agent or any Affiliate of
either Secured Party or its agent may be the purchaser for such 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 such Secured Party or its agent will not be considered
a waiver of the Agent's right to sell or buy without any such demand, call or
notice except as provided in this Agreement.
(d) In addition to the Secured Parties' rights and remedies described in
this Agreement, the Secured Parties have 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 Agent under this Agreement are cumulative and are in addition
to any and all other rights and remedies which are otherwise available to the
Agent either at law, equity or otherwise. The Secured Parties may exercise any
one or more of such rights and remedies simultaneously or successively.
11. THE AGENT
11.1 Administration by Agent.
(a) The general administration of the Fundamental Documents and any other
documents contemplated by this Agreement shall be by the Agent or its designees.
Except as otherwise expressly provided herein each of the Lenders hereby
irrevocably authorizes the Agent, at its discretion, to take or refrain from
taking such actions as agent on its behalf and to exercise or refrain from
exercising such powers under the Fundamental Documents, the Notes and any other
35
documents contemplated by this Agreement as are expressly delegated by the terms
hereof or thereof, as appropriate, together with all powers reasonably
incidental thereto. The Agent shall have no duties or responsibilities except as
set forth in the Fundamental Documents.
(b) The Lenders hereby authorize the Agent (in its sole discretion):
(i) in connection with the sale or other disposition of any asset
included in the Collateral, to the extent undertaken in accordance with the
terms of this Agreement, to release a Lien granted to it (for the benefit
of the Lenders) on such asset;
(ii) to determine that the cost to the Borrower is disproportionate to
the benefit to be realized by the Lenders by perfecting a Lien in a given
asset or group of assets included in the Collateral and that the Borrower
should not be required to perfect such Lien in favor of the Agent;
(iii) to appoint subagents to be the holder of record of a Lien to be
granted to the Agent or to hold on behalf of the Agent such collateral or
instruments relating thereto;
11.2 Advances and Payments.
(a) On the date requested by the Borrower for the funding of each Loan, the
Agent shall be authorized (but not obligated) to advance, for the account of
each of the Lenders, the amount of the Loan to be made by it in accordance with
provisions of Article 2 hereof. Each of the Lenders hereby authorizes and
requests the Agent to advance for its account, pursuant to the terms hereof, the
amount of the Loan to be made by it, and each of the Lenders agrees forthwith to
reimburse the Agent in immediately available funds for the amount so advanced on
its behalf by the Agent. If any such reimbursement is not made in immediately
available funds on the same day on which the Agent shall have made any such
amount available on behalf of any Lender, such Lender shall pay interest to the
Agent at a rate per annum equal to the Agent's cost of obtaining overnight funds
in the New York Federal Funds Market for the first day following the time when
such Lender fails to make the required reimbursement, and thereafter at a rate
per annum equal to the Alternate Rate.
(b) Any amounts received by the Agent in connection with this Agreement or
the Notes the application of which is not otherwise provided for, shall be
applied, first, to pay accrued but unpaid Commitment Fees in accordance with the
Lenders' unused Commitments, second, to pay accrued but unpaid interest on the
Notes in proportion to the amounts owed to each Lender, third, to repay the
principal balance outstanding on the Notes (allocated in accordance with the
outstanding amounts thereof owing to each Lender as set forth on the Schedule of
Commitments attached as Schedule 1.1 hereto) and fourth, to pay other amounts
payable to the Agent. All amounts to be paid to any of the Lenders by the Agent
shall be credited to the Lenders, after collection by the Agent, in immediately
36
available funds either by wire transfer or deposit in such Lender's
correspondent account with the Agent, or as such Lender and the Agent shall from
time to time agree.
11.3 Sharing of Setoffs and Cash Collateral. Each of the Lenders agrees
that if it shall, through the exercise of a right of banker's lien, setoff or
counterclaim against the Borrower, including, but not limited to, a secured
claim under Section 506 of Title 11 of the United States Code or other security
or interest arising from, or in lieu of, such secured claim and received by such
Lender under any applicable bankruptcy, insolvency or other similar law, or
otherwise, obtain payment in respect of its Loans as a result of which the
unpaid portion of its Loans is proportionately less than the unpaid portion of
any of the other Lenders (a) it shall promptly purchase at par (and shall be
deemed to have thereupon purchased) from such other Lenders a participation in
the Loans of such other Lenders, so that the aggregate unpaid principal amount
of each of the Lenders' Loans and its participation in Loans of the other
Lenders shall be in the same proportion to the aggregate unpaid principal amount
of all Loans then outstanding as the principal amount of its Loans prior to the
obtaining of such payment was to the principal amount of all Loans outstanding
and prior to the obtaining of such payment and (b) such other adjustments shall
be made from time to time as shall be equitable to ensure that the Lenders share
such payment pro rata. If all or any portion of such excess payment is
thereafter recovered from a Lender which originally received such excess
payment, such purchase (or portion thereof) shall be canceled and the purchase
price restored to the extent of such recovery. The Borrower expressly consents
to the foregoing arrangements and agrees that any Lender or Lenders holding (or
deemed to be holding) a participation in a Note may exercise any and all rights
of banker's lien, setoff or counterclaim with respect to any and all moneys
owing by the Borrower to such Lender or Lenders as fully as if such Lender or
Lenders held a Note and was the original obligee thereon in the amount of such
participation.
11.4 Notice to the Lenders. Upon receipt by the Agent from the Borrower of
any communication calling for an action on the part of the Lenders, or upon
notice to the Agent of any Event of Default, the Agent will in turn immediately
inform the other Lenders in writing (which shall include facsimile
communications) of the nature of such communication or of the Event of Default,
as the case may be.
11.5 Liability of Agent.
(a) The Agent, when acting on behalf of the Lenders, may execute any of its
duties under this Loan Agreement or the other Fundamental Documents by or
through its officers, agents, or employees and neither the Agent, nor their
respective officers, agents or employees shall be liable to the Lenders or any
of them for any action taken or omitted to be taken in good faith, nor be
responsible to the Lenders or to any of them for the consequences of any
oversight or error of judgment, or for any loss, unless the same shall happen
through its gross negligence or willful misconduct. The Agent, and its
directors, officers, agents, and employees shall in no event be liable to the
Lenders or to any of them for any action taken or omitted to be taken by it
pursuant to instructions received by it from the Lenders or in reliance upon the
37
advice of counsel selected by it with reasonable care. Without limiting the
foregoing, neither the Agent, nor any of its directors, officers, employees, or
agents shall be responsible to any of the Lenders for the due execution,
validity, genuineness, effectiveness, sufficiency, or enforceability of, or for
any statement, warranty, or representation in, or for the perfection of any
security interest contemplated by, this Agreement or any related agreement,
document or order, or shall be required to ascertain or to make any inquiry
concerning the performance or observance by the Borrower of the terms,
conditions, covenants, or agreements of this Agreement or any related agreement
or document.
(b) Neither the Agent, as agent for the Lenders hereunder, nor any of its
directors, officers, employees, or agents shall have any responsibility to the
Borrower on account of the failure or delay in performance or breach by any of
the Lenders of any of their respective obligations under this Agreement or the
Notes or any related agreement or document or in connection herewith or
therewith.
(c) The Agent, as agent for the Lenders hereunder, shall be entitled to
rely on any communication, instrument, or document reasonably believed by it to
be genuine or correct and to have been signed or sent by a Person or Persons
believed by it to be the proper Person or Persons, and it shall be entitled to
reasonably rely on advice of legal counsel, independent public accountants, and
other professional advisers and experts selected by it.
11.6 Reimbursement and Indemnification. Each of the Lenders agrees (i) to
reimburse the Agent in accordance with such Lender's Percentage, for any
expenses and fees incurred for the benefit of the Lenders under the Fundamental
Documents, including, without limitation, counsel fees and compensation of
agents and employees paid for services rendered on behalf of the Lenders, and
any other expense incurred in connection with the operations or enforcement
thereof not reimbursed by the Borrower, and (ii) to indemnify and hold harmless
the Agent and any of its directors, officers, employees, or agents, on demand,
in accordance with each Lender's Percentage, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against it or any of them in any way
relating to or arising out of the Fundamental Documents or any action taken or
omitted by it or any of them under the Fundamental Documents to the extent not
reimbursed by the Borrower (except such as shall result from their gross
negligence or willful misconduct). To the extent indemnification payments made
by the Lenders pursuant to this Section 11.6 are subsequently recovered by the
Agent from the Borrower, the Agent will promptly refund such previously paid
indemnity payments to the Lenders.
11.7 Rights of Agent. It is understood and agreed that the Agent shall have
the same rights and powers as a Lender hereunder (including the right to give
any instructions hereunder) as the other Lenders and may exercise such rights
and powers, as well as its rights and powers under other agreements and
instruments to which it is or may be party, and engage in other transactions
with the Borrower, as though it were not the Agent of the Lenders under this
Agreement.
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11.8 Independent Investigation by Lenders. Each of the Lenders acknowledges
that it has decided to enter into this Agreement and to make the Loans hereunder
based on its own analysis of the transactions contemplated hereby and of the
creditworthiness of the Borrower and agrees that the Agent shall bear no
responsibility therefor.
11.9 Agreement of Required Lenders. Upon any occasion requiring or
permitting an approval, consent, waiver, election or other action on the part of
the Required Lenders, action shall be taken by the Agent for and on behalf or
for the benefit of all Lenders upon the direction of the Required Lenders and
any such action shall be binding on all Lenders. No amendment, modification,
consent or waiver shall be effective except in accordance with the provisions of
Section 12.13 hereof.
11.10 Notice of Transfer. The Agent may deem and treat any Lender which is
a party to this Agreement as the owner of such Lender's respective portions of
the Loans for all purposes, unless and until a written notice of the assignment
or transfer thereof executed by any such Lender shall have been received by the
Agent and become effective in accordance with Section 12.9 hereof.
11.11 Successor Agent. The Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower, but such resignation shall not
become effective until acceptance by a successor Agent of its appointment
pursuant hereto. Upon any such resignation, the retiring Agent shall promptly
appoint a successor Agent from among the Merrill Lynch Group or the Lenders,
provided that, if such replacement is not a member of the Merrill Lynch Group,
such replacement is reasonably acceptable (as evidenced in writing) to the
Borrower and the Required Lenders. If no successor Agent shall have been so
appointed by the retiring Agent and shall have accepted such appointment within
30 days after the retiring Agent's giving of notice of resignation, the Borrower
may appoint a successor Agent (which successor may be replaced by the Required
Lenders; provided that such replacement is reasonably acceptable to the Borrower
if such replacement is not a member of the Merrill Lynch Group), which shall be
either a Lender or a commercial bank organized under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of at least $250,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under this Agreement, the other Fundamental Documents and
any other credit documentation. After any retiring Agent's resignation hereunder
as Agent, the provisions of this Article 11 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.
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, the Agent and the Lenders in connection with, or growing out
of, the negotiation, preparation, execution and delivery of this Agreement and
39
any other documentation contemplated hereby, the Notes and the Collateral
(including the Pledged Securities), including, but not limited to, the
reasonable fees and disbursements of any counsel for the Borrower or the Agent
and the Lenders. The Borrower agrees to pay all reasonable expenses incurred by
the Agent and the Lenders 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 Notes and
the Collateral (including the Pledged Securities), including, but not limited
to, the reasonable fees and disbursements of any counsel for the Agent and the
Lenders.
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 Parties' 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
Agent or one of its Affiliates, the Agent's reasonable attorney fees.
12.3 Indemnities. The Borrower shall on demand indemnify the Agent, each of
the Lenders and the Swap Provider to the extent the Agent, any such Lender or
the Swap Provider has sustained or suffered:
(i) Any increased cost in maintaining its Commitment, all or any part
of any Loan or any other amount outstanding under this Agreement or any
reduction in the effective return to such 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 such
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 Agent,
any Lender or the Swap Provider (1) to render this Agreement (including the
Security Interest created by this Agreement) enforceable, (2) in connection
with protecting or enforcing the Agent's, the Lender's or the Swap
Provider'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 a Lender of all or any part of a 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 that Loan;
40
(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 Agent, any Lender, or
the Swap Provider 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 (excluding
litigation among the Lenders or between the Agent and the Lenders in
connection with the Fundamental Documents or in any way relating to the
transactions contemplated hereby) or other proceeding (whether or not
either the Agent, such Lender or the Swap Provider is a party thereto)
related to the entering into and/or the performance of this Agreement, or
the use of the proceeds of any Loan hereunder or the issuance of any Letter
of Credit, 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 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 Agent, any Lender or
the Swap Provider 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 either Secured Party in connection
with the Collateral or this Agreement.
12.4 Delay in Enforcement; No Waiver. The Secured Parties or either of them
can choose to delay or not to enforce any of their rights under this Agreement
without losing such rights or in any way affecting the ability of the other
Secured Party to exercise such rights. If either of the Secured Parties chooses
not to exercise or enforce (or is prevented from exercising or enforcing) any of
such rights, the Borrower agrees that such Secured Party is not waiving the
right to enforce such rights at a later time or any of its other rights, and
that the other Secured Party may, nonetheless, proceed to independently exercise
or enforce any or all of such rights as it may deem appropriate. Any waiver of
the Secured Parties' 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 Agent in writing of a change in address. The Borrower
agrees to provide the Agent with 30 Business Days' prior written notice of any
41
change of address or name. The Borrower agrees to send correspondence to the
Agent at the address for the Agent indicated on the signature page or as
otherwise provided by the Agent, or if to a Lender to it at its address set
forth on the signature page.
12.6 Waivers. To the extent permitted by Applicable Law, the Borrower
waives the Borrower's rights to require the Agent, (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. Each 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 Notes 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 Notes, 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 Loans 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
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
Parties' 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
either Secured Party, it shall execute and/or deliver any additional agreements,
documents and instruments as may be reasonably requested by such 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 Parties
in their sole discretion), which agreements, documents or instruments shall be
satisfactory to the Secured Parties in their sole discretion.
12.9 Successors and Assigns; Loan Sales; Participations.
(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. Each
Lender and the Swap Provider 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 any Lender or the Swap Provider 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
42
subject to the written consent of the Borrower and the Agent (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 Agent, any Lender or the Swap Provider may
disclose to a potential assignee (or any other Person who has entered or
proposes to enter into contractual arrangements with any 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
any 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.
(b) Each Lender may grant participations in all or any part of its Loans
and its Commitment to one or more financial institutions, provided that (i) such
Lender's obligations under this Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the Borrower for the performance of
such obligations, (iii) the Borrower shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
this Agreement, (iv) no sub-participations shall be permitted and (v) the voting
rights of any holder of any participation shall be limited to decisions that
only do any of the following: (A) subject the participant to any additional
obligation, (B) reduce the principal of, or interest on the Loans or any fees or
other amounts payable hereunder, (C) postpone the Commitment Termination Date or
Maturity Date, or the date fixed for payment of interest on the loans or the
Commitment Fee payable hereunder.
(c) If any participation made pursuant to subsection (b) shall be made to
any Person that is not a United States Person as defined in Section 7701(a)(30)
of the Internal Revenue Code of 1986, such Person shall furnish to the Agent
such forms as may be specified by the Internal Revenue Service to evidence such
Person's complete exemption from (or entitlement to a reduced rate for) U.S.
withholding taxes with respect to all payments with respect to such
participation.
12.10 GOVERNING LAW AND JURISDICTION.
(a) THIS AGREEMENT AND THE NOTES 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. EACH LETTER OF CREDIT SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OR RULES
DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED,
THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS, INTERNATIONAL CHAMBER
43
OF COMMERCE PUBLICATION NO. 500 AS ADOPTED OR AMENDED FROM TIME TO TIME (THE
"UNIFORM CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE
LAWS OF THE STATE OF NEW YORK.
(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
THIS AGREEMENT OR THE SUBJECT MATTER HEREOF BROUGHT BY THE AGENT 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 PARTIES. 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 EACH 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 each Lender only at such time
as such Lender has accepted this Agreement and such Lender shall not have any
44
liability or obligation hereunder until such time, (ii) the Agent, Lenders and
the Swap Provider 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 NOTES OR THE SUBJECT MATTER HEREOF OR THEREOF, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR
TORT OR OTHERWISE. THE BORROWER ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE
SECURED PARTIES THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL
INDUCEMENT UPON WHICH THE SECURED PARTIES HAVE RELIED, ARE RELYING AND WILL RELY
IN ENTERING INTO THIS AGREEMENT, THE NOTES, THE SWAP AGREEMENT AND ANY OTHER
DOCUMENT RELATED THERETO. EACH 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 Required
Lenders and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given; provided, however, that no such
modification, amendment or waiver shall, without the written consent of all of
the Lenders, (i) change the Commitment of any Lender, (ii) amend or modify any
provision of this Agreement which provides for the unanimous consent or approval
of the Lenders, (iii) release any Collateral or any of the Pledged Securities
(except as contemplated herein), (iv) alter the fixed scheduled maturity or
principal amount of any Loan, or the rate of interest payable thereon, or the
rate at which the Commitment Fees accrue or the fixed scheduled maturity or
amount of any other payment required to be made under this Agreement, (v)
subordinate the Obligations hereunder to other Indebtedness or subordinate the
security interests of the Collateral Agent in the Collateral except as permitted
by Section 11.1, (vi) amend the definition of "Required Lenders," (vii) amend
the definition of "Collateral," or (viii) amend or modify this Section 12.13. No
such amendment or modification may adversely affect the rights and obligations
of the Agent hereunder without its prior written consent. No notice to or demand
on any of the Borrower shall entitle the Borrower to any other or further notice
or demand in the same, similar or other circumstances. Each holder of a Note
shall be bound by any amendment, modification, waiver or consent authorized as
provided herein, whether or not a Note shall have been marked to indicate such
amendment, modification, waiver or consent and any consent by any holder of a
Note shall bind any Person subsequently acquiring a Note, whether or not a Note
is so marked.
45
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 Agent and each Lender agree 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
Agent based on a review of the books and records of the Borrower; provided that
nothing herein shall prevent the Agent or any 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 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 Survival. The Borrower hereby acknowledges that the Security Interest
created hereby is for the benefit of the Secured Parties. To the extent that the
Loans have been indefeasibly paid, the Commitment terminated, the L/C Exposure
has been reduced to zero, and all other Obligations of the Borrower to the Agent
and the Lenders have been satisfied (as determined by the Agent in its sole
discretion) while the Swap Agreement remains effective, then the Swap Provider
or its designee shall have or continue to have all rights hereunder as a Secured
Party and all provisions of this Agreement relating in any manner to such rights
shall survive the satisfaction of the Borrower's Obligations to the Agent and
the Lenders. At such time, the Swap Provider shall be entitled to exercise or
refrain from exercising any such rights, without regard to the satisfaction of
the Borrower's Obligations to the Agent and the Lenders. To the extent that all
Obligations of the Borrower to the Swap Provider have been satisfied (as
determined by the Swap Provider in its sole discretion) while the Borrower's
Obligations to the Agent and the Lenders remain outstanding, the Agent, for the
46
benefit of the Lenders, shall have or continue to have all rights hereunder as a
Secured Party and all provisions of this Agreement relating in any manner to
such rights shall survive the satisfaction of the Borrower's Obligations to the
Swap Provider. At such time, the Agent shall be entitled to exercise or refrain
from exercising any such rights, without regard to the satisfaction of the
Borrower's Obligation to the Swap Provider.
[Signature page to follow]
47
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
48
Lenders:
MERRILL LYNCH MORTGAGE CAPITAL, INC.,
individually and as Agent
By: /s/ Joshua A. Green
-------------------------------------
Name: Joshua A. Green
Title: Vice President
Address: 4 World Financial Center
10th Floor
New York, New York 10080
Telephone No.: (212) 449-7330
Telecopier No.: (212) 449-6673
49
Swap Provider:
MERRILL LYNCH CAPITAL SERVICES, INC.,
as Swap Provider
By: /s/ Thomas Finley
-------------------------------------
Name: Thomas Finley
Title: Managing Director
Address: 4 World Financial Center
12th Floor
New York, New York 10080
Telephone No.: (212) 449-8169
Telecopier No.: (212) 449-6993
50
SCHEDULE 1.1
SCHEDULE OF COMMITMENTS
LENDER LOAN COMMITMENT
Merrill Lynch Mortgage Capital, Inc. $100,000,000