LOAN AND SECURITY AGREEMENT
DATED AS OF FEBRUARY 5, 1998
BY AND BETWEEN
MERRILL LYNCH INTERNATIONAL BANK LIMITED
AND
BELAIR CAPITAL FUND LLC
TABLE OF CONTENTS
1. DEFINITIONS...............................................................1
2. THE LOAN..................................................................5
2.1 Loans.......................................................5
2.2 Borrowing Notice............................................6
2.3 Method of Funding Loans.....................................6
2.4 Interest....................................................6
2.5 Default Interest............................................6
2.6 Repayment and Termination...................................6
2.7 Optional Prepayments........................................6
2.8 Manner of Payments..........................................7
2.9 Commitment Fee..............................................7
2.10 Reduction or Termination of Commitment......................7
2.11 Change in Circumstances.....................................7
3. ESTABLISHMENT OF SECURITIES ACCOUNT; PLEDGE OF COLLATERAL.................8
3.1 Establishment of the Securities Account.....................8
3.2 Other Account Provisions....................................8
4. PLEDGE AND SECURITY AGREEMENT.............................................9
4.1 Grant of Security Interest..................................9
5. SPECIAL AGREEMENTS WITH RESPECT TO PLEDGED SECURITIES.....................9
5.1 Liquidation of Pledged Securities...........................9
6. REPRESENTATIONS AND WARRANTIES...........................................10
6.1 Collateral.................................................10
6.2 Due Organization...........................................10
6.3 Power and Authority; Binding Agreements....................10
6.4 No Violation...............................................11
6.5 No Consents................................................11
6.6 No Litigation..............................................11
6.7 Compliance with Laws.......................................11
6.8 No Material Adverse Change.................................11
6.9 Solvency...................................................11
6.10 Place of Business..........................................12
6.11 Full Disclosure............................................12
6.12 Sole Business..............................................12
6.13 Investment Company Act.....................................12
6.14 Private Placement Memorandum...............................12
6.15 Pledged Securities.........................................12
(i)
7. AFFIRMATIVE COVENANTS....................................................12
7.1 Maintenance of Existence...................................12
7.2 Compliance with Laws.......................................12
7.3 Payment of Taxes...........................................13
7.4 Books and Records..........................................13
7.5 Audit Rights...............................................13
7.6 Maintenance of Collateral..................................13
7.7 Notices....................................................13
7.8 Bankruptcy.................................................13
7.9 Financial and Credit Information...........................13
7.10 Financial Statements.......................................14
7.11 Monthly Report.............................................14
7.12 Liens......................................................14
7.13 Government Approval........................................14
7.14 Use of Proceeds............................................14
7.15 Valuation Covenants........................................14
8. NEGATIVE COVENANTS OF THE BORROWER.......................................15
8.1 No Indebtedness............................................15
8.2 No Liens...................................................15
8.3 No Mergers, Etc............................................16
8.4 No New Business............................................16
8.5 Trading....................................................16
8.6 Distributions..............................................16
8.7 Amendments.................................................16
8.8 Custodian..................................................16
9. CONDITIONS PRECEDENT TO CLOSING..........................................16
9.1 Conditions Precedent to Initial Loan.......................16
9.2 Conditions Precedent to All Loans..........................17
10. DEFAULTS; REMEDIES.......................................................18
10.1 Events of Default..........................................18
10.2 Remedies...................................................19
11. MISCELLANEOUS............................................................20
11.1 Expenses...................................................20
11.2 Cost of Collection.........................................20
11.3 Indemnities................................................20
11.4 Delay in Enforcement; No Waiver............................22
11.5 Statements and Notices.....................................22
11.6 Waivers....................................................22
11.7 Non-Recourse...............................................22
11.8 Further Assurances.........................................22
11.9 Successors and Assigns.....................................23
11.10 Governing Law and Jurisdiction.............................23
11.11 Effectiveness..............................................24
11.12 Waiver of Jury Trial.......................................24
11.13 Amendments.................................................24
(ii)
11.14 Headings...................................................24
11.15 Severability...............................................25
11.16 Entire Agreement...........................................25
11.17 Execution in Counterparts..................................25
11.18 Confidentiality............................................25
11.19 Survival...................................................25
Testimonium...................................................................26
Signatures....................................................................26
Exhibit A - Form of Note
Exhibit B - Form of Report
Exhibit C - Matters to be covered in Opinion of Counsel
Exhibit D - Form of of Borrowing
Exhibit E - Form of Compliance Certificate
(iii)
LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT dated as of February 5, 1998 (as the same may
be amended, supplemented or otherwise modified from time to time, the
"Agreement"), by and among Merrill Lynch International Bank Limited, a bank
organized under the laws of England (the "Lender"), Belair Capital Fund LLC, a
Massachusetts limited liability company (the "Borrower") and Merrill Lynch
Capital Services, Inc. ("MLCS"). This Agreement establishes the terms and
conditions that will govern the Loans from the Lender to the Borrower. The Loans
are secured by, among other items, a pledge of the shares of Belvedere Capital
Fund Company LLC owned by the Borrower and held in a special securities account
established and maintained with Investors Bank & Trust Company.
RECITALS
All terms not otherwise defined above or in this Introductory Statement are
as defined in Article 1 hereof, or as defined elsewhere herein.
The Borrower has requested the Lender to make Loans to the Borrower in the
aggregate amount of $300,000,000 or such lesser amount as indicated herein. The
Borrower wishes to pledge the Collateral to the Lender as security for the Loans
and to MLCS as security for Borrower's obligations under the MLCS Swap
Agreement.
Subject to the terms and conditions set forth herein, the Lender is willing
to make the Loans to the Borrower.
Accordingly, the parties hereto hereby agree as follows:
1. DEFINITIONS
For the purposes hereof unless the context otherwise requires, the
following terms shall have the meanings indicated. Unless the context otherwise
requires, any of the following terms may be used in the singular or the plural,
depending on the reference:
"ACT" shall have the meaning given to such term in Section 6.13.
"AFFILIATE" means 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.
"BASE RATE" shall mean the floating annual rate of interest determined by
the Lender and equal to a weighted average of rates on the second Business Day
before the first Business Day of each week the Lender offers deposits in Dollars
to leading banks in the London Inter Bank Market, for terms of one night, one
week and one month, or if any such deposits are not offered by the Lender at the
relevant time, the rate equal to its cost of such a deposit at the relevant time
(such floating annual rate to change when and as such base rate changes).
"BORROWING DATE" shall have the meaning given to such term in Section 2.2.
"BORROWING NOTICE" shall have the meaning given to such term in Section
2.2.
"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 Inter Bank Market and banks are open in London and New York City.
"CAPITAL" shall have the meaning given to such term in Section 7.10.
"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 any proceeds thereof
or income therefrom, specifically including, but not limited to:
(a) all stocks, bonds, or other securities or property now or hereafter in
the Securities Account;
(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) 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;
(d) all dividends, interest and proceeds of any of the property described
in clauses (a), (b) or (c) above, including without limitation, proceeds of
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 either of the
Secured Parties; and
(f) all its right, title and interest in and to bullion, precious metals or
other trades made on behalf of the Borrower (directly or indirectly) by Merrill
Lynch Pierce Fenner & Smith (Brokers & Dealers) Limited;
PROVIDED, HOWEVER, that assets encumbered by a lien to a person other than the
Secured Parties 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.
"COMMITMENT" shall mean three hundred million dollars ($300,000,000), or
such lesser amount if reduced pursuant to Section 2.10.
"COMMITMENT TERMINATION DATE" shall mean February 6, 2005 or such earlier
date on which (i) the Loans shall become due in accordance with Section 10.2 or
(ii) the Borrower terminates the Commitment pursuant to Section 2.10.
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"COMPLIANCE CERTIFICATE" shall have the meaning given to that term in
Section 2.2.
"CUSTODIAN" shall mean Investors Bank & Trust Company.
"DEFAULT" shall mean any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"DOLLARS" or "$" means the lawful currency of the United States of America.
"EVENT OF DEFAULT" shall have the meaning given to that term in Section
10.1.
"GAAP" shall mean generally accepted accounting principles consistently
applied (except for accounting changes in response to FASB releases or other
authoritative pronouncements).
"INDEBTEDNESS" of any Person means (a) 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 given in connection with the
acquisition of any business, property, service or asset of any kind (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 obligations with respect to a capital lease; (b) any
liability of others either for any lease, dividend or letter of credit or for
any obligation described in the preceding clause (a) that (i) the Person has
guaranteed or that is otherwise its legal liability (whether contingent or
otherwise or direct or indirect, but excluding endorsements of negotiable
instruments for deposit or collection in the ordinary course of business) or
(ii) is secured by any Lien, charge, easement, mortgage, pledge, security
interest or other encumbrance or any restriction or limitation of any kind on
any property or asset owned or held by that Person, regardless of whether the
obligation secured thereby shall have been assumed by or is a personal liability
of that Person and (c) any amendment, supplement, modification, deferral,
renewal, extension or refunding of any liability of the types referred to in
clauses (a) and (b) above.
"INTEREST PERIOD" shall mean a period of one month to five years as
selected by the Borrower in a written notice received by the Lender no later
than 12:00 noon (London time) on the third Business Day before the first day of
the Interest Period. In the case of each Loan, the first Interest Period shall
begin on the proposed date of such Loan and each subsequent Interest Period
shall begin on the last date of the previous Interest Period. If any Interest
Period would end on a day which is not a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day,
PROVIDED, HOWEVER, if such extension would cause such interest period to occur
in the next following calendar month, the last day of such Interest Period shall
occur on the next preceding Business Day. If the Borrower fails to timely
specify an Interest Period, then the Interest Period for such Loan shall be the
same as the Interest Period in effect as of the date notice should have been
received.
"INTEREST RATE" shall mean a rate per annum during each Interest Period,
LIBOR plus 0.45%. In the event that for any reason the Lender is unable to
define LIBOR, the Interest Rate shall mean the Base Rate plus 0.45%.
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"LIBOR" means in relation to a particular Interest Period, the rate per
annum equal to the rate (as determined by the Lender) (rounded to the next
higher 1/16 of 1%) at which, at or about 11:00 a.m. (London time), the Lender
offers deposits to leading banks in the London Inter Bank Market in an amount
comparable to the relevant Loan for the applicable Interest Period, it being
understood and agreed that a written statement by the Lender of the LIBOR rate
hereunder shall be conclusive evidence of such rate.
"LIEN" means 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 and any
right of first refusal or a right to purchase a Partnership Preference Unit (as
defined in the Private Placement Memorandum)), 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).
"LOAN" means a loan made by the Lender to the Borrower under this
Agreement.
"MLCS" shall mean Merrill Lynch Capital Services, Inc.
"MLCS SWAP AGREEMENT" shall mean the Swap Agreement entitled "ISDA Master
Agreement", and all exhibits thereto, dated as of February 5, 1998, between MLCS
and the Borrower, and all "Transactions" and "Confirmations" thereunder.
"MANAGER" shall mean Eaton Vance Management.
"MATURITY DATE" shall mean February 7, 2005 or such earlier date on which
the Loans shall become due in accordance with Section 10.2.
"NET ASSET VALUE" shall be as defined in the Private Placement Memorandum.
"NOTE" shall have the meaning given to such term in Section 2.1.
"OBLIGATIONS" shall mean the due and punctual payment of (i) principal of
and interest on the Loans, all fees and other monetary obligations of the
Borrower to the Lender under this Agreement or the Note and (ii) all payments,
fees and other monetary obligations of the Borrower to MLCS under this Agreement
or the MLCS Swap Agreement.
"OPERATING AGREEMENT" shall mean the Amended and Restated Operating
Agreement of the Borrower dated February 5, 1998.
"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 the Qualifying Assets and the other
securities held in the Securities Account, including, but not limited to, shares
of Belvedere Capital Fund Company LLC.
"PORTFOLIO" shall have the meaning given to such term in Section 7.15(c).
4
"PRIVATE PLACEMENT MEMORANDUM" shall mean the Confidential Private
Placement Memorandum of the Borrower dated October 28, 1997.
"QUALIFYING ASSET" shall have the meaning given such term in the Private
Placement Memorandum.
"REPORT" shall have the meaning given to such term in Section 7.11.
"REQUIRED AMOUNT" means the amount of the "Net Market Quotation" (as
hereinafter defined), if such amount is positive; PROVIDED, HOWEVER, that for so
long as the principal amount of the Loan outstanding shall be less than
$50,000,000 or if the Commitment shall be terminated, the Required Amount shall
mean an amount equal to the sum of (i) 3.7% of the notional amount of the
Transactions under the MLCS Swap Agreement and (ii) if positive, the amount of
the Net Market Quotation. The "Net Market Quotation" is the sum of all Market
Quotations (both positive and negative); PROVIDED, that MLCS need not obtain
quotations from Reference Market-makers, but shall determine the Market
Quotation on the basis of its customary method 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 MLCS is exposed to
the Borrower, a negative Market Quotation shall mean the Borrower is exposed to
MLCS. Terms used in this definition and not otherwise defined in this Agreement
shall have the meaning ascribed to them in the MLCS Swap Agreement.
"SECURED PARTIES" shall mean the Lender and MLCS.
"SECURITIES ACCOUNT" means the securities account of the Borrower
established with Custodian subject to the terms and provisions of the Securities
Agreement.
"SECURITIES AGREEMENT" means the Security Account Agreement among the
Borrower, the Lender, MLCS and the Custodian, in form and substance satisfactory
to the Lender and MLCS.
"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.
2. THE LOAN
2.1. LOANS. The Lender 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 the Commitment less the principal amount of any outstanding Loans;
provided, however, that the minimum amount of any Loan shall be $500,000 (or
such lesser amount as shall equal the available but unused portion of the
Commitment) or such greater amount which is a multiple of $100,000. Subject to
the terms of this Agreement, the Borrower may borrow, repay and reborrow Loans
at any time prior to the Commitment Termination Date. The Loans shall be
evidenced by a promissory note substantially in the form of Exhibit A hereto
(the "Note").
5
2.2. BORROWING NOTICE. The Borrower shall give the Lender irrevocable
notice (substantially in the form of Exhibit D hereto (a "Notice of Borrowing"))
not later than 10:00 a.m. (New York City time) at least two Business Days before
the proposed borrowing date (the "Borrowing Date") of any Loan specifying (i)
the Borrowing Date of such Loan which shall be a Business Day, (ii) the
principal amount of such Loan and (iii) the initial Interest Period applicable
to such Loan and certifying the matters contained in Section 9.2 hereof. In
addition to such notice, the Borrower shall deliver a Compliance Certificate
substantially in the form of Exhibit E hereto (a "Compliance Certificate") to
the Lender.
2.3. METHOD OF FUNDING LOANS. The Borrower has provided the Lender with an
instruction letter as to the proceeds of the Loan made on the date hereof. As to
all future Loans, the Lender shall make available to the Borrower on each
Borrowing Date, the Loans specified in the applicable Notice of Borrowing to the
Borrower's account (Account No. __________, Control Wire, Re: Belair Capital
Fund LLC) at Custodian (or to such other account as to which the Borrower shall
instruct the Lender) via Federal Funds wire transfer.
2.4. INTEREST. 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 (i) the last day of
the Interest Period applicable thereto, (ii) in the case of Loans with Interest
Periods in excess of six months, on the date during such Interest Period that
would be the last day of an Interest Period commencing on the same day as the
first day of such Interest Period but having a duration of six months 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 shall in no event be in excess of the maximum interest rate permitted
by applicable law. All interest shall accrue from day to day and shall be
calculated on the basis of a 360 (three hundred and sixty) day year and the
number of days elapsed.
2.5. 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 Base
Rate plus 2% per annum.
2.6. REPAYMENT AND TERMINATION. The Borrower shall repay the outstanding
principal amount of all Loans on the Maturity Date.
2.7. OPTIONAL PREPAYMENTS. The Borrower may from time to time on the last
day of any Interest Period, upon five Business Days prior written notice to the
Lender, which notice shall be irrevocable once given, 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 is in a minimum
aggregate amount of $1,000,000 or any integral multiple of $100,000 in excess
thereof.
6
2.8. MANNER OF PAYMENTS. All payments by the Borrower hereunder and under
the Note shall be made by the Borrower on the date when due without offset or
counterclaim in Dollars in federal or other immediately available funds to
Northern Trust International, New York, New York, A.B.A. No. 026001122, For the
account of the Lender, Account No. 10022220230, or in accordance with the wire
transfer instructions provided by the Lender to the Borrower from time to time.
Any such payment received after 11:00 a.m. New York City time on the date when
due shall be deemed received on the following Business Day.
2.9. COMMITMENT FEE. The Borrower agrees to pay in arrears to the Lender on
the last Business Day of each March, June, September and December in each year
(commencing on the last Business Day of March 1998) 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 the
Commitment exceeds the sum of the principal balance of Loans outstanding during
the preceding period or quarter. Such Commitment Fee shall commence to accrue on
the date on which this Agreement is fully executed and shall cease to accrue on
the Commitment Termination Date.
2.10. REDUCTION OR TERMINATION OF COMMITMENT. The Borrower shall have the
right, upon at least five (5) Business Days' prior written notice to the Lender,
to reduce permanently the Commitment 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 2.7), without premium or penalty, provided that each
partial reduction of the Commitment shall be in an amount equal to $1,000,000 or
such greater amount which is an integral multiple thereof.
2.11. CHANGE IN CIRCUMSTANCES. (a) In the event that after the date hereof
any change in applicable law or in the official interpretation or administration
thereof (including, without limitation, any request, guideline or policy not
having the force of law) by any authority charged with the administration or
interpretation thereof or, with respect to clause (ii), (iii) or (iv) below any
change in conditions, shall occur which shall:
(i) subject the Lender to, or increase the net amount of, any tax,
levy, impost, duty, charge, fee, deduction or withholding with respect to
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 the Lender, and that is imposed by the
United States of America, or by the jurisdiction in which the Lender is
incorporated, or in which the Lender has its principal office (or any
political subdivision or taxing authority thereof or therein), or (y) that
is imposed solely by reason of the Lender failing to make a declaration of,
or otherwise to establish, non-residence, or to make any other claim for
exemption, or otherwise to comply with any certification, identification,
information, documentation or reporting requirements prescribed under the
laws of the relevant jurisdiction, in those cases where 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 the 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
7
(iii) impose, modify or deem applicable any reserve, deposit or
similar requirement against any assets held by, deposits with or for the
account of or loans or commitments by an office of the Lender with respect
to any Loan for which the interest rate is based upon LIBOR; or
(iv) impose upon the Lender or the London Interbank Market any other
condition with respect to 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
the 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 the Lender in connection with any Loan hereunder, or to require
the Lender to make any payment in connection with any Loan hereunder, in each
case by or in an amount which the Lender in its sole judgment shall deem
material, then and in each case the Borrower shall pay to the Lender, as
provided in paragraph (b) below, such amounts as shall be necessary to
compensate the Lender for such cost, reduction or payment.
(b) The Lender shall deliver to the Borrower from time to time, one or more
certificates setting forth the amounts due to the Lender under paragraph (a)
above, the changes as a result of which such amounts are due, the manner of
computing such amounts and the manner of computing the amounts allocable to
Loans hereunder pursuant to paragraph (a) above. Each such certificate shall be
conclusive in the absence of manifest error. The Borrower shall pay to the
Lender the amounts shown as due on any such certificate within ten Business Days
after its receipt of the same. No failure on the part of the Lender to demand
compensation under paragraph (a) above on any one occasion shall constitute a
waiver of its rights to demand compensation on any other occasion. The
protection of this Section shall be available to the Lender regardless of any
possible contention of the invalidity or inapplicability of any law, regulation
or other condition which shall give rise to any demand by the Lender for
compensation thereunder.
3. ESTABLISHMENT OF SECURITIES ACCOUNT; PLEDGE OF COLLATERAL
3.1. ESTABLISHMENT OF THE SECURITIES ACCOUNT. The Borrower shall establish
with Custodian the Securities Account, which shall be known as the "Belair
Capital Fund LLC Collateral Account for Merrill Lynch International Bank Limited
and Merrill Lynch Capital Services, Inc." or such other title acceptable to the
Secured Parties to reflect their interest therein. The Borrower agrees, as a
condition to the Lender's obligation to extend the Loan and MLCS' obligations
under the MLCS Swap Agreement, to place the Pledged Securities in 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. The Borrower acknowledges that in establishing and maintaining the
Securities Account, Custodian is acting as the Secured Parties' agent for
purposes of perfecting the Secured Parties' Security Interest.
3.2. OTHER ACCOUNT PROVISIONS. The Borrower further acknowledges that the
Securities Account shall be subject to the terms and conditions of the
Securities Agreement.
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4. PLEDGE AND SECURITY AGREEMENT
4.1. GRANT OF SECURITY INTEREST. 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.
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. 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 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
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 either 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 Note, execute and file in the Borrower's name, as the Borrower's
attorney-in-fact, such documents.
If the location of the Borrower's principal executive office changes, the
Borrower will immediately 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
Secured Parties agrees that the Borrower has fully and indefeasibly performed
the Obligations, the Security Interest in any Collateral will be terminated 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.
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) 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, the Secured Parties may
execute and file the requisite number of S.E.C. Forms 144 on behalf of the
Borrower.
(b) 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 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
9
conducted. The Borrower acknowledges that the purchaser at such sale may be an
Affiliate of a Secured Party. Without limiting the foregoing, a Secured Party
may (i) approach and negotiate with only one or 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, (b) the
Borrower will not be entitled to credit against its Obligations in an amount in
excess of the purchase price, and (c) 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.
(c) The Borrower understands and acknowledges that it may incur monetary
liability to the issuer 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 the Pledged Securities, whether initiated by it or by a Secured Party
under this Agreement. The Borrower acknowledges that any such liability is
strictly personal to it, and agrees to indemnify and hold the Secured Parties
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 a continuing basis, the Borrower represents and warrants to the Lender
(and to MLCS with respect to Section 6.1, 6.8-6.11, 6.14 and 6.15) that:
6.1. COLLATERAL. (a) Except for the Secured Parties' rights established
under this Agreement, the MCLS Swap Agreement and the Securities Agreement, the
Borrower owns the Collateral free of any interest or Lien in favor of any third
party or any restriction on transfer other than pursuant to the Operating
Agreement or, as to restricted securities and Qualifying Assets, restrictions on
transfer arising under Federal or state securities laws or by reason of
contract. It is understood that the transfer of Partnership Preference Units (as
defined in the Private Placement Memorandum) will be subject to various
restrictions and limitations set forth in the applicable partnership agreements,
and that such partnership agreements may subject the Units to a right of first
refusal or a right to purchase such Units which may be exercised by the general
partners (or their affiliates) of such partnerships.
(b) The Security Interest is and shall remain a perfected and valid first
priority Lien and security interest upon the Collateral.
6.2......DUE ORGANIZATION. The Borrower is a limited liability company 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. The Borrower 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
or has made all filings necessary to so qualify.
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
10
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
transaction contemplated by this Agreement, nor compliance by the Borrower with
the provisions of this Agreement will (i) violate any law, regulation, order,
judgment or decree binding on the Borrower, (ii) violate or conflict with, as
applicable, the Borrower's certificate of organization, Operating Agreement or
other organizational or governing documents, (iii) conflict with, cause a breach
of, constitute a default under, be cause for the acceleration of the maturity
of, or create or result in the creation or imposition of any Lien, charge or
encumbrance (other than in favor of the Lender) on any of the Borrowers 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 the filing of UCC-1
financing statements, the registration of the shares of Capital in the name of
the Custodian or the Custodian's nominee, the consent of the Manager of Capital
to the Borrower's pledge of the shares of Capital, and any consents to the
pledge of Partnership Preference Units which may be required under the
applicable partnership agreements.
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),
obligations, operations, performance, properties or prospects of the Borrower or
(ii) affect the Borrower's ability to enter into and perform its obligations
under this Agreement or any of the transactions contemplated by this Agreement.
6.7. COMPLIANCE WITH LAWS. The operations of the Borrower are and have been
in compliance in all material respects with all federal, state, local and
foreign laws and regulations applicable to it, including, without limitation,
tax, environmental and health and safety laws and regulations.
6.8. NO MATERIAL ADVERSE CHANGE. Since the date of the Private Placement
Memorandum, there has been no material adverse change in the business, condition
(financial or otherwise), obligations, operations, performance, properties or
prospects of the Borrower.
6.9. SOLVENCY. After giving effect to the Loans and the MLCS Swap
Agreement, (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 business, (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
11
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. PLACE OF BUSINESS. 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
either Secured Party 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. The Borrower is not 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 (the "Act"),
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 the Borrower has not
entered into any agreements which would otherwise prohibit, restrict or limit
the transactions contemplated by this Agreement or the Private Placement
Memorandum other than agreements as a holder of shares of Capital to be bound by
the operating agreement of Capital, agreements entered into or made in
connection with the acquisition of Qualifying Assets which restrict the transfer
of such Qualifying Assets, and agreements entered into or made in connection
with Partnership Preference Units as referred to in Section 6.1.
6.15. PLEDGED SECURITIES. Any outstanding certificates representing the
Pledged Securities will be physically held in the United States by Custodian or
an authorized subcustodian or agent of the Custodian.
7. AFFIRMATIVE COVENANTS
Until this Agreement has terminated and all Obligations have been
indefeasibly paid in full, the Borrower will:
7.1. MAINTENANCE OF EXISTENCE. Preserve and maintain its existence and
material rights and franchises.
7.2. COMPLIANCE WITH LAWS. Comply in all material respects, with all
applicable laws, statutes, codes, ordinances, regulations, rules, orders,
awards, judgments, decrees, injunctions, approvals and permits applicable to it.
12
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
the Borrower has maintained adequate reserves with respect thereto.
7.4. BOOKS AND RECORDS. Maintain or cause to be maintained at all times in
accordance with GAAP (other than as to the valuation of the Pledged Securities
which shall be in accordance with the valuation procedures described in the
Private Placement Memorandum) true and complete books and records of its
financial and business operations.
7.5. AUDIT RIGHTS. Permit any representative of the Secured Parties to
examine the Borrower's books and records and to make copies and take extracts
therefrom, and to discuss the Borrower's affairs, finances and accounts with the
Manager of the Borrower and with the Borrower's independent accountants, all at
such reasonable times and as often as either Secured Party 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 Securities 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 the Borrower will not 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.
7.9. FINANCIAL AND CREDIT INFORMATION. (a) Notify the Secured Parties
immediately, in writing, of any material change in the Borrower's financial
condition which would adversely affect the Borrower's ability to repay any
obligation(s) to either Secured Party according to the terms of this Agreement,
the Note or the MLCS 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.
13
(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 (i) within 60 days
after the end of the first six-month fiscal period of the Borrower, semi-annual
unaudited financial statements of the Borrower consisting of a balance sheet of
the Borrower and statements of operations and cash flows of the Borrower for
such quarter, all in reasonable detail and certified by the Manager of the
Borrower, that such statements are correct and fairly present the financial
condition of the Borrower as at the end of such fiscal period (subject to normal
year-end audit adjustments); (ii) within 90 days after the end of each fiscal
year of the Borrower, annual audited financial statements of the Borrower
consisting of a balance sheet as of the close of such fiscal year and related
statements of operations and cash flows for such year, attached to which shall
be a report of Deloitte & Touche, L.L.P. 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; (iii) upon
receipt by the Borrower, copies of all financial reports distributed by or on
behalf of Belvedere Capital Fund Company LLC ("Capital") and (iv) concurrently
with such distribution, copies of all financial reports distributed by or on
behalf of the Borrower to all Shareholders.
7.11. MONTHLY REPORT. 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"). 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 to 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
finance the purchase of Qualifying Assets, to pay placement fees, selling
commissions and offering, organizational and 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 market value of its total assets (less the market value of its
assets pledged to another party) 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;
14
(b) the market value of its Qualifying Assets at an amount not in excess of
40% of the market value of the Collateral. (In the event that the market value
of its Qualifying Assets represents more than 40% of the market value of the
Collateral, value for that portion exceeding 40% shall not be given in
determining the market value of the Borrower's total assets for purposes of
clause (a) above); and
(c) by reason of its indirect interest in the securities which are directly
held by the Tax-Managed Growth Portfolio (the "Portfolio"), not more than (i) 5%
of its total assets (taken at current value) as investments (directly or
indirectly) in the securities of any one issuer (except obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and except
securities of other investment companies) or (ii) 25% of its total assets (taken
at current value) as investments (directly or indirectly) in any one industry
(or, with respect to real estate, in any one sector of the real estate market),
but the restrictions contained in this clause (c) shall not apply to the
Borrower's direct investments in (x) Qualifying Assets or (y) shares of Capital
or to the Borrower's indirect investment in the Portfolio held through its
direct investment in shares of Capital. (In the event that either of the
foregoing restrictions contained in this clause (c) are exceeded, value for that
portion of the excess shall not be given in determining the market value of the
Borrower's total assets for purposes of clause (a) above.)
8. NEGATIVE COVENANTS OF THE BORROWER
Until this Agreement has terminated and all Obligations have been
indefeasibly paid in full, the Borrower will not:
8.16. NO INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness, except for (i) Indebtedness of the Borrower under this Agreement
and the Note or the MLCS 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
and (iv) overdrafts extended by the Custodian under the Securities Agreement.
Nothing contained in this Section 8.1 shall prohibit the incurrence of the
Required Amount.
8.17. NO LIENS. Create, incur, assume or suffer to exist any Lien on any of
its properties or assets except (i) Liens in respect of Indebtedness permitted
under Section 8.1, (ii) 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 enforcement of such Liens is stayed pending such contest, (iii)
statutory Liens arising by operation of law such as mechanics, materials,
carriers', warehouse liens, (A) which occur in the ordinary course of business
(B) which secure normal trade debt which is not yet due and payable, (C) which
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, (iv) Liens
arising out of judgments or decrees which are being contested in good faith and
15
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, (v) Liens of the Custodian under the Securities
Agreement and (vi) Liens created pursuant to this Agreement, the MLCS Swap
Agreement and the Securities Agreement.
8.18. NO MERGERS, ETC.. Enter into any transaction of merger or
consolidation or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution).
8.19. NO NEW BUSINESS. Engage in any business other than as described in
the Private Placement Memorandum.
8.20. TRADING. Conduct any sale of any Qualifying Assets (other than (i) in
connection with a distribution or redemption not otherwise prohibited under this
Agreement or (ii) when the proceeds of such sale will be utilized to purchase
other Qualifying Assets which are comparable to investment grade Qualifying
Assets) without providing three Business Days' prior notice to the Lender.
8.21. 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(i) or 10.1(j).
8.22. AMENDMENTS. Amend or modify, or permit to be amended or modified the
Private Placement Memorandum or Operating Agreement of the Borrower, without the
prior written consent of the Secured Parties, which consent shall not be
unreasonably withheld, except that the Borrower 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.
8.23. CUSTODIAN. Terminate the services, or accept the resignation of the
Manager of the Borrower or the Custodian without the prior written consent of
the Secured Parties.
9. CONDITIONS PRECEDENT TO CLOSING
9.24. CONDITIONS PRECEDENT TO INITIAL LOAN. It shall be a condition
precedent to the effectiveness of this Agreement and the making of the initial
Loan hereunder that the Lender shall have received the following, in form and
substance satisfactory to the Lender in its sole discretion:
(a) Evidence satisfactory to the Lender 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;
(b) A certificate of the Manager of the Borrower attesting, among other
things, (i) that true, correct and complete copies of the Borrower's certificate
of organization and Operating Agreement, together with all amendments thereto,
have been delivered to the Lender, (ii) 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
16
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, (iii) that all representations and warranties made in
connection with this Agreement are true, accurate and correct in all respects
and (iv) to the incumbency of the Manager, or any other Person executing this
Agreement, the Notes and any related documents on behalf of the Borrower;
(c) (i) A copy of certificate of organization filed in the Borrower's
jurisdiction of organization and (ii) a certificate of good standing from the
Borrower's jurisdiction of organization;
(d) The Securities Agreement duly executed on behalf of the Borrower and
Custodian;
(e) Evidence that the Securities Account has been established and that the
Manager of Capital has consented to the pledge of the shares of Capital;
(f) Evidence that the aggregate market value of the Collateral (as of the
date of the initial Loan and as calculated in accordance with the determination
of Net Asset Value) is equal to or exceeds 250% of the sum of the Required
Amount plus the principal amount of the initial Loan;
(g) the UCC-1 Financing Statements duly signed on behalf of the Borrower;
(h) Instructions from the Borrower in connection with the payment from the
proceeds of the initial Loan of all placement fees, selling commissions and cost
and fees (including legal fees incurred by the Lender as to which a statement
has been delivered to the Borrower) which are due and payable as of the date
hereof;
(i) The favorable opinion of Counsel to the Borrower covering matters of
Massachusetts and United States law, in the form of Exhibit C hereto;
(j) the Note, dated as of the date hereof, duly executed on behalf of the
Borrower;
(k) the Closing (as defined in the Private Placement Memorandum) shall
occur contemporaneously with the making of the initial Loan hereunder;
(l) (i) the MLCS Swap Agreement and all Exhibits thereto, duly executed on
behalf of the Borrower and (ii) evidence that the Borrower has executed the
"Confirmations" relating to the MLCS Swap Agreement; and
(m) the Lender shall have received such other documents as the Lender may
reasonably require.
9.25. CONDITIONS PRECEDENT TO ALL LOANS. It shall be a condition precedent
to all Loans (including the initial Loan hereunder) that on the date of such
Loan the following statements shall be true (and each request for a Loan shall
constitute a representation and warranty by the Borrower that on the date of
such Loan that such statements are true):
(a) After giving effect to such Loan, the total of all Loans
outstanding will not exceed the Commitment;
17
(b) The representations and warranties contained in Article 6 are
true and correct on and as of the date of such Loan, 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 which would constitute a Default or an Event
of Default; and
(d) The Borrower has delivered to the Lender the Notice of Borrowing
and Compliance Certificate required pursuant to Section 2.2
hereof.
In addition, it shall be a condition precedent to all Loans (including the
initial Loan) that after giving effect to such Loan, the aggregate market value
of the Collateral shall be equal to or exceed 250% of the sum of the Required
Amount plus the principal amount of the Loans outstanding together with accrued
and unpaid interest thereon plus any other amounts due and owing under this
Agreement (in each case, as determined on the most recent date for which the
Borrower calculates its aggregate Net Asset Value (but in no event earlier than
ten (10) Business Days prior to the making of such Loan) and as calculated in
accordance with the determination of such Net Asset Value).
10. DEFAULTS; REMEDIES
10.1. EVENTS OF DEFAULT. An event of default ("Event of Default") will
occur under this Agreement and the Note if:
(a) the Borrower fails (i) to make any payment when it is due as required
by this Agreement and such default continues unremedied, in the case of payments
of any amounts other than principal, for five days after such amount becomes due
or (ii) to observe or perform any covenant or agreement contained in Article 8
of this Agreement or Article 4 of the Securities Agreement or (iii) to observe
or perform any other covenant or agreement contained in this Agreement and such
default continues unremedied for 30 days;
(b) the aggregate market value of the Collateral (as calculated in
accordance with the determination of aggregate Net Asset Value) shall be less
than 250% of the sum of the Required Amount plus the principal amount of the
Loans outstanding together with accrued and unpaid interest thereon plus any
other amounts due and owing under this Agreement;
(c) the Borrower makes, or the Lender discovers that the Borrower has made,
a material misrepresentation 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 MLCS Swap Agreement;
(e) (i) an attachment is levied against all or any portion of the
Securities Account or (ii) Custodian shall have breached any provision of the
Securities Agreement;
(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;
18
(g) either Secured Party reasonably determines that it is or will become
unlawful or contrary to any directive, regulation or the like (whether or not
having the force of law) of any governmental or other regulatory body or
authority for the Borrower or the Lender to carry out all or any of its
obligations hereunder;
(h) final judgment for the payment of money in excess of $1,000,000 shall
be rendered against the Borrower 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;
(i) any step is taken or legal proceeding started by any Person in the
bankruptcy of the Borrower or for the appointment of a receiver, administrator,
trustee or similar officer of the Borrower or of any or all of the revenues and
assets of the Borrower or the winding-up, administration, dissolution or
reorganization of the Borrower;
(j) the Borrower is insolvent, is unable to pay its debts as they fall due,
stops, suspends or threatens to stop or suspend payment of all or a material
part of its debts, begins negotiations or takes any proceeding or other step
with a view to readjustment, rescheduling or deferral of all of its indebtedness
or any part of its indebtedness which it would or might otherwise be unable to
pay when due or proposes or makes a general assignment or an arrangement or
composition with or for the benefit of the creditors;
(k) 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; or
(l) the ratio of 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.
10.2. REMEDIES. (a) Upon the occurrence and during the continuation of an
Event of Default, the Lender may, without prejudice to any other right or remedy
of the Lender, at law, by contract or otherwise, by notice to the Borrower
declare all Loans, accrued interest thereon and any other sum then payable
hereunder to be immediately due and payable by the Borrower to the Lender
whereupon they shall become so due and payable, and/or declare the Commitment to
be terminated, whereupon it shall so terminate. If an Event of Default specified
in clause (i) above shall have occurred, the Commitment shall automatically
terminate and the Note shall automatically become due and payable, both as to
interest and principal, without presentment, demand, protest or other notice of
any kind. Upon the occurrence and continuation of an Event of Default, the
Lender may to the extent permitted by applicable law, 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 Lender's possession.
(b) Upon the occurrence and continuation of an Event of Default, either
Secured Party may, at its option, instruct Custodian to cancel any open orders
and close any and all outstanding financial contracts referred to in
subparagraph (a)(iii) of the definition of Indebtedness, transfer any or all of
the Pledged Securities to 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
19
notify the obligors on any Collateral to make payment to the Secured Parties or
their nominee of any amounts due thereon and to take control or grant its
nominee the right to take control of any proceeds of the Collateral, liquidate
the Pledged Securities or other Collateral, withdraw and/or sell any such
Pledged Securities or other Collateral and apply any such Collateral as well as
the proceeds of any such Pledged Securities or other Collateral to all unpaid
Obligations in such order as the Lender defines in its sole discretion. The
Borrower will be responsible for any decrease in the value of the Collateral
occurring prior to liquidation. Upon the occurrence and continuation of an Event
of Default, the Secured Party may also set-off, against any amount owing to it
under this Agreement, the Note or the MLCS Swap Agreement, any securities, cash
or other property of the Borrower in such Secured Party's possession, directly
or through Custodian as agent for such Secured Party.
(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 such Secured Party's right to sell or buy without any such demand,
call or notice 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 Secured Parties under this Agreement are cumulative and are in
addition to any and all other rights and remedies which are otherwise available
to the Secured Parties either at law, equity or otherwise. The Secured Parties
may exercise any one or more of such rights and remedies simultaneously or
successively.
11. MISCELLANEOUS
11.1. EXPENSES. Whether or not the transactions hereby contemplated shall
be consummated, the Borrower agrees to pay all reasonable expenses incurred by
the Lender in connection with, or growing out of, the negotiation, preparation,
execution, delivery, 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 Lender.
11.2. 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, 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
Lender or one of its affiliates, the Lender's reasonable attorney fees.
11.3. INDEMNITIES. The Borrower shall on demand indemnify such of the
Secured Parties to the extent such Secured Party has sustained or suffered:
20
(i) Any increased cost in maintaining the Commitment, all or any part
of any Loan or any other amount outstanding under this Agreement or any
reduction in the effective return to the Lender under this Agreement or in
the rate of overall return on its capital below that which it would have
been able to achieve but for its entering into or giving effect to the
Agreement, in each case, which is sustained or incurred directly or
indirectly as a consequence of, or of compliance with, any change after the
date hereof in any law, regulation, guideline, order or any directive or
the like (whether or not having the force of law) of any governmental or
other regulatory body or authority including any law, regulation, directive
or the like affecting the manner in which the Lender allocates capital
resources to its obligations under this Agreement or any interpretation by
any such governmental or regulatory body or authority;
(ii) Any funding and any other cost, expense or liability (including
loss of profit, legal fees and taxes) sustained or incurred by either
Secured Party (1) to render this Agreement (including the Security Interest
created by this Agreement) enforceable, (2) in connection with protecting
or enforcing the Secured Parties' rights under this Agreement and/or any
amendment thereto, (3) as a result of the occurrence or continuance of any
Default, or (4) as a result of the receipt or recovery by the Lender of all
or any part of a Loan (other than a Loan interest on which is calculated by
reference to Base Rate) or an overdue sum otherwise than on the last day of
an Interest Period applicable to that Loan;
(iii) Any stamp, documentary, registration or similar tax payable in
connection with the entry into, registration, performance, enforcement or
admissibility in evidence of the Agreement and/or any such amendment,
supplement or waiver, promptly and in any event before any interest or
penalty becomes payable, together with any liability with respect to or
resulting from any delay in paying or omission to pay any such tax;
(iv) Any claims, demands, losses, judgments, damages and liabilities
(including liabilities for penalties) incurred by such Secured Party and/or
its directors, officers, employees and agents (each an "Indemnified Party")
as a result of, or arising out of, or in any way related to, or by reason
of, any investigation, litigation or other proceeding (whether or not such
Secured Party 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 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 an Indemnified Party 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.
21
11.4. 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, nevertheless, 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.
11.5. STATEMENTS AND NOTICES. Statements and notices will be sent to the
address for the Borrower indicated on the signature page hereto, unless the
Borrower notifies the Lender in writing of a change in address. The Borrower
agrees to provide the Lender with 30 Business Days' prior written notice of any
change of address or name. The Borrower agrees to send correspondence to (i) the
Lender at the address for the Lender indicated on the signature page or as
otherwise provided by the Lender from time to time with a copy to the Lender's
Representative Office located at 450 Lexington Avenue, New York, New York 10017,
Attention: G. Frederick Reinhardt, telephone no.: 212- 907-7761, telecopier no.:
212-907-7781 and (ii) as set forth in the MLCS Swap Agreement.
11.6. WAIVERS. To the extent permitted by applicable law, the Borrower
waives the Borrower's rights to require the Lender, (a) to demand payments of
amounts due (known as "presentment"); (b) to give notice that amounts due have
not been paid (known as "notice of dishonor"); and (c) to obtain an official
certification of non-payment (known as "protest").
11.7. 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, and any
successor, assignee, heir, estate, administrator or personal representative of
any such person (a "Non-Recourse Person") that: (a) no Non-Recourse Person shall
have any personal liability for any obligation of the Borrower under this
Agreement or the Note or the Securities Agreement, the MLCS 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 or the Note or the Securities 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 Securities Agreement or the MLCS 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 Securities
Agreement.
11.8. 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.
22
11.9. SUCCESSORS AND ASSIGNS. (a) This Agreement shall be binding upon and
inure to the benefit of the successors and permitted assigns of all the parties
to this Agreement. Either Secured Party may assign at its sole option all or
part of its rights, obligations and remedies under this Agreement. 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. Either Secured Party
may disclose to a potential assignee (or any other Person who has entered or
proposes to enter into contractual arrangements with the Lender in relation to
or concerning this Agreement) such information about the Borrower, and this
Agreement as it may deem appropriate. The Borrower may not assign its rights or
obligations under this Agreement.
(b) The Lender may grant participations in all or any part of its Loans and
its Commitment to one or more commercial banks, provided that (i) the Lender's
obligations under this Agreement shall remain unchanged, (ii) the 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
the Lender in connection with the 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 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 Lender
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.
11.10. GOVERNING LAW AND JURISDICTION. (A) THIS AGREEMENT AND THE NOTES
HAVE BEEN EXECUTED AND DELIVERED BY THE BORROWER IN THE STATE OF NEW YORK AND IN
ALL RESPECTS SHALL BE GOVERNED BY AND INTERPRETED UNDER THE LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH
STATE.
(b) THE BORROWER HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF
THE STATE COURTS OF THE STATE OF NEW YORK 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 LENDER OR ITS SUCCESSORS OR ASSIGNS.
THE BORROWER, TO THE EXTENT PERMITTED BY APPLICABLE LAW, (A) HEREBY WAIVES AND
AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN ANY SUCH
SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE
JURISDICTION OF THE ABOVE-NAMED COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE
FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN
AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS
IMPROPER OR THAT THIS AGREEMENT OR THE SUBJECT MATTER HEREOF MAY NOT BE ENFORCED
IN OR BY SUCH COURT, AND (B) HEREBY WAIVES THE RIGHT TO ASSERT IN ANY SUCH SUIT,
23
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 11.5. 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.
11.11. EFFECTIVENESS. The Borrower hereby acknowledges that (i) this
Agreement shall become effective with respect to Lender only at such time as the
Lender has accepted this Agreement in London and the Lender shall have no
liability or obligation hereunder until such time, (ii) the Lender may execute
this Agreement by telecopy and provide executed originals to the Borrower, and
(iii) the Loans will be made in England.
11.12. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, 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 IS
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 MLCS 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.
11.13. AMENDMENTS. Any amendment or other modification of this Agreement
shall not be effective unless and until signed by each of the parties hereto so
long as the Obligations of the Borrower to the Lender remain outstanding.
11.14. 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.
24
11.15. 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.
11.16. ENTIRE AGREEMENT. This Agreement and the Securities Agreement
constitute the entire agreement between Borrower and the Lender and supersede
any and all prior agreements (whether written or oral).
11.17. 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.
11.18. CONFIDENTIALITY. The Lender agrees to keep confidential any written
or oral information (a) provided to it by or on behalf of the Borrower pursuant
to or in connection with this Agreement or (b) obtained by the Lender based on a
review of the books and records of the Borrower; PROVIDED that nothing herein
shall prevent the Lender from disclosing any such information (i) to any
assignee, transferee, prospective assignee or prospective transferee which
agrees to comply with the provisions of this Section, (ii) to its affiliates,
employees, directors, agents, attorneys, accountants and other professional
advisors, (iii) upon the request or demand of any governmental or other
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.
11.19. 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, and all
other Obligations of the Borrower to the Lender have been satisfied (as
determined by the Lender in its sole discretion) while the MLCS Swap Agreement
remains effective, then MLCS 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 Lender. At such time, MLCS shall be entitled to
exercise or refrain from exercising any such rights, without regard to the
satisfaction of the Borrower's Obligations to the Lender. To the extent that all
Obligations of the Borrower to MLCS have been satisfied (as determined by MLCS
in its sole discretion) while the Borrower's Obligations to the Lender remain
outstanding, the Lender 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
MLCS. At such time, the Lender shall be entitled to exercise or refrain from
exercising any such rights, without regard to the satisfaction of the Borrower's
Obligation to MLCS.
25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by its authorized officer as of the day and year first written
above.
BELAIR CAPITAL FUND LLC
BY: EATON VANCE MANAGEMENT,
as Manager
BY: /s/ Alan R. Dynner
--------------------------------------------
Name: Alan R. Dynner
Title: Vice President
Address: 24 Federal Street
Boston, MA 02110
Telephone No.:
Telecopier No.:
The Lender is a member of The Securities and Futures Authority Limited and
operates a Client Complaints Procedure. If for any reason the Borrower should
have cause for concern or complaint, the Borrower should contact the Manager,
PBG Operations, at the Lender's address indicated below.
MERRILL LYNCH INTERNATIONAL
BANK LIMITED
BY: /s/ Jennifer A. Bereska
--------------------------------------------
Name: Jennifer A. Bereska
Title: Vice President
Address: 33 Chester Street
London SW1 7XD
England
Telephone No.:
Telecopier No.:
Executed in London, England on ____________________, 1998
26
MERRILL LYNCH CAPITAL SERVICES, INC.
BY: /s/ John Mulholland
--------------------------------------------
Name: John Mulholland
Title: Vice President
Address: Merrill Lynch World Headquarters,
World Financial Center
North Tower
22nd Floor
250 Vessey Street
New York, New York 10281-1322
Telephone No.:
Telecopier No.:
27
AMENDMENT NO. 1 dated as of April 20, 1998 to the Loan
and Security Agreement dated as of February 5, 1998 (as
heretofore amended, the "Loan Agreement"), by and among
MERRILL LYNCH INTERNATIONAL BANK LIMITED (the "Lender"),
MERRILL LYNCH CAPITAL SERVICES INC. ("MLCS") and BELAIR
CAPITAL FUND LLC (the "Borrower").
INTRODUCTORY STATEMENT
All capitalized terms not otherwise defined in this Amendment are as
defined in the Loan Agreement.
The Borrower has requested (and the Lender has agreed to) an increase in
the Commitment to $425,000,000.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby
amended as of the Effective Date (subject to the terms and conditions set forth
in Section 2 hereof) as follows:
(A) The definition of Commitment appearing in Article 1 of the Loan
Agreement is hereby amended in its entirety to read as follows:
""COMMITMENT" shall mean four hundred twenty-five million dollars
($425,000,000) or such lesser amount if reduced pursuant to Section 2.10."
(B) The definition of Required Amount appearing in Article 1 of the Loan
Agreement is hereby amended in its entirety to read as follows:
""REQUIRED AMOUNT" means the amount of the "Net Market Quotation" (as
hereinafter defined), if such amount is positive; PROVIDED, HOWEVER, that
(A) for so long as the principal amount of the Loan outstanding shall be
less than the greater of (i) $50,000,000 and (ii) 15% of the notional
amount of the Transactions under the MLCS Swap Agreement or (B) if the
Commitment shall be terminated, the Required Amount shall mean an amount
equal to the sum of (x) 3.7% of the notional amount of the Transactions
under the MLCS 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); PROVIDED, that MLCS need not
obtain quotations from Reference Market-makers, but shall determine the
Market Quotation on the basis of its customary method 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 MLCS is exposed to the Borrower, a negative Market Quotation shall
mean the Borrower is exposed to MLCS. Terms used in this definition and not
otherwise defined in this Agreement shall have the meaning ascribed to them
in the MLCS Swap Agreement."
SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment is subject to the
satisfaction in full of the following conditions (the first date on which all
such conditions have been satisfied being herein called the "Effective Date"):
(A) the Lender shall have received counterparts of this Amendment which,
when taken together, bear the signatures of all parties hereto;
(B) the Lender shall have received an Acknowledgment (in form and substance
satisfactory to the Lender) executed by the Borrower and the Custodian
confirming that the Securities Agreement remains in full force and effect;
(C) the Lender shall have received a promissory note in the form of Exhibit
A to the Loan Agreement in the amount of $425,000,000 (a "New Note") which New
Note shall replace the Note currently held by the Lender and shall be deemed the
Note for purposes of the Loan Agreement and the Lender shall return the existing
Note to the Borrower;
(D) the Lender shall have received a favorable written opinion of Counsel
to the Borrower, dated the Effective Date, addressed to the Lender, to the
effect that this Amendment and the New Note have been duly executed and
delivered by the Borrower and, together with the Loan Agreement as hereby
amended, constitute the legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms and no consent or approval
of any governmental authority or regulatory body to the execution, delivery and
performance of this Amendment or the New Note or to the borrowings thereunder is
required by law, or if any such consent or approval is necessary it has been
obtained, which opinion shall be satisfactory to Morgan, Lewis & Bockius LLP,
counsel for the Lender;
(E) the Lender shall have received (i) a certificate of the Manager of the
Borrower, dated the Effective Date and certifying that (1) the provisions of the
Operating Agreement authorize the Manager to authorize the execution, delivery
and performance in accordance with their terms of this Amendment, the New Note
and the other documents and transactions contemplated by this Amendment and the
borrowings under the Note and that the Manager has so authorized and such
authorization is in full force and effect and (2) neither the certificate of
organization nor the Operating Agreement of the Borrower have been amended since
February 5, 1998 and (ii) such other documents as the Lender or Morgan, Lewis &
Bockius LLP, counsel for the Lender, may reasonably request; and
(F) all legal matters in connection with this Amendment shall be
satisfactory to Morgan, Lewis & Bockius LLP, counsel for the Lender.
SECTION 3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants that:
(A) the representations and warranties contained in the Loan Agreement are
true and correct in all material respects on and as of the date hereof as if
such representations and warranties had been made on and as of the date hereof;
and
(B) the Borrower is in compliance with all the terms and provisions set
forth in the Loan Agreement and, after giving effect hereto, no Default or Event
of Default has occurred and is continuing.
2
SECTION 4. FULL FORCE AND EFFECT. Except as expressly amended hereby, the
Loan Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof. As used in the Loan Agreement, the terms
"Agreement", "this Agreement" "herein", "hereafter", "hereto", "hereof", and
words of similar import, shall, unless the context otherwise requires, mean the
Loan Agreement as amended by this Amendment.
SECTION 5. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. COUNTERPARTS. This Amendment may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute but one instrument.
SECTION 7. EXPENSES. The Borrower agrees to pay all reasonable
out-of-pocket expenses incurred by the Lender in connection with the
preparation, execution and delivery of this Amendment, including, but not
limited to, the reasonable fees and disbursements of Morgan, Lewis & Bockius
LLP, counsel for the Lender.
SECTION 8. HEADINGS. The headings of this Amendment are for the purposes of
reference only and shall not affect the construction of or be taken into
consideration in interpreting this Amendment.
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly
executed as of the date first written above.
BELAIR CAPITAL FUND, L.L.C.
BY: EATON VANCE MANAGEMENT,
as Manager
BY: /s/ Thomas Faust
---------------------------------------
Name: Thomas Faust
Title: Vice President
Address: 24 Federal Street
Boston, MA 02110
Telephone No.: 617-482-8260
Telecopier No.:617-482-3836
3
MERRILL LYNCH CAPITAL SERVICES, INC.
BY: /s/ John Mulholland
---------------------------------------
Name: John Mulholland
Title: Vice President
Address: Merrill Lynch World Headquarters,
World Financial Center
North Tower, 22nd Floor
250 Vessey Street
New York, New York 10281-1322
Telephone No.: 212-449-0291
Telecopier No.:212-449-1788
The Lender is a member of The Securities and Futures Authority Limited and
operates a Client Complaints Procedure. If for any reason the Borrower should
have cause for concern or complaint, the Borrower should contact the Manager,
PBG Operations, at the Lender's address indicated below.
MERRILL LYNCH INTERNATIONAL
BANK LIMITED
BY: /s/ Jennifer A. Bereska
------------------------------------------
Executed in London, Name: Jennifer A. Bereska
England on April __, 1998 Title: Vice President
Address: 33 Chester Street
London SW1 7XD
England
AGREED TO:
MERRILL LYNCH INTERNATIONAL
PRIVATE FINANCE LIMITED
By: /s/ G.F. Reinhardt
----------------------------------
Name: G.F. Reinhardt
Title: Vice President
4
AMENDMENT NO. 2 dated as of June 25, 1998 to the Loan
and Security Agreement dated as of February 5, 1998 (as
heretofore amended, the "Loan Agreement"), by and among
MERRILL LYNCH INTERNATIONAL BANK LIMITED (the "Lender"),
MERRILL LYNCH CAPITAL SERVICES INC. ("MLCS") and BELAIR
CAPITAL FUND LLC (the "Borrower").
INTRODUCTORY STATEMENT
All capitalized terms not otherwise defined in this Amendment are as
defined in the Loan Agreement.
The Borrower has requested (and the Lender has agreed to) an increase in
the Commitment to $600,000,000.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby
amended as of the Effective Date (subject to the terms and conditions set forth
in Section 2 hereof) as follows:
The definition of Commitment appearing in Article 1 of the Loan Agreement
is hereby amended in its entirety to read as follows:
""COMMITMENT" shall mean six hundred million dollars ($600,000,000) or
such lesser amount if reduced pursuant to Section 2.10."
SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment is subject to the
satisfaction in full of the following conditions (the first date on which all
such conditions have been satisfied being herein called the "Effective Date"):
(A) the Lender shall have received counterparts of this Amendment which,
when taken together, bear the signatures of all parties hereto;
(B) the Lender shall have received an Acknowledgment (in form and substance
satisfactory to the Lender) executed by the Borrower and the Custodian
confirming that the Securities Agreement remains in full force and effect;
(C) the Lender shall have received a promissory note in the form of Exhibit
A to the Loan Agreement in the amount of $600,000,000 (a "New Note") which New
Note shall replace the Note currently held by the Lender and shall be deemed the
Note for purposes of the Loan Agreement and the Lender shall return the existing
Note to the Borrower;
(D) the Lender shall have received a favorable written opinion of Counsel
to the Borrower, dated the Effective Date, addressed to the Lender, to the
effect that this Amendment and the New Note have been duly executed and
delivered by the Borrower and, together with the Loan Agreement as hereby
amended, constitute the legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms and no consent or approval
of any governmental authority or regulatory body to the execution, delivery and
performance of this Amendment or the New Note or to the borrowings thereunder is
required by law, or if any such consent or approval is necessary it has been
obtained, which opinion shall be satisfactory to Morgan, Lewis & Bockius LLP,
counsel for the Lender;
(E) the Lender shall have received (i) a certificate of the Manager of the
Borrower, dated the Effective Date and certifying that (1) the provisions of the
Operating Agreement authorize the Manager to authorize the execution, delivery
and performance in accordance with their terms of this Amendment, the New Note
and the other documents and transactions contemplated by this Amendment and the
borrowings under the Note and that the Manager has so authorized and such
authorization is in full force and effect and (2) neither the certificate of
organization nor the Operating Agreement of the Borrower have been amended since
February 5, 1998 and (ii) such other documents as the Lender or Morgan, Lewis &
Bockius LLP, counsel for the Lender, may reasonably request; and
(F) all legal matters in connection with this Amendment shall be
satisfactory to Morgan, Lewis & Bockius LLP, counsel for the Lender.
SECTION 3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants that:
(A) the representations and warranties contained in the Loan Agreement are
true and correct in all material respects on and as of the date hereof as if
such representations and warranties had been made on and as of the date hereof;
and
(B) the Borrower is in compliance with all the terms and provisions set
forth in the Loan Agreement and, after giving effect hereto, no Default or Event
of Default has occurred and is continuing.
SECTION 4. FULL FORCE AND EFFECT. Except as expressly amended hereby, the
Loan Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof. As used in the Loan Agreement, the terms
"Agreement, "this Agreement" "herein", "hereafter", "hereto", "hereof", and
words of similar import, shall, unless the context otherwise requires, mean the
Loan Agreement as amended by this Amendment.
SECTION 5. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. COUNTERPARTS. This Amendment may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute but one instrument.
2
SECTION 7. EXPENSES. The Borrower agrees to pay all reasonable
out-of-pocket expenses incurred by the Lender in connection with the
preparation, execution and delivery of this Amendment, including, but not
limited to, the reasonable fees and disbursements of Morgan, Lewis & Bockius
LLP, counsel for the Lender.
SECTION 8. HEADINGS. The headings of this Amendment are for the purposes of
reference only and shall not affect the construction of or be taken into
consideration in interpreting this Amendment.
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly
executed as of the date first written above.
BELAIR CAPITAL FUND, L.L.C.
BY: EATON VANCE MANAGEMENT,
as Manager
BY: /s/ Thomas E. Faust, Jr.
----------------------------------------------
Name: Thomas E. Faust, Jr.
Title: Vice President
Address: 24 Federal Street
Boston, MA 02110
Telephone No.: 617-482-8260
Telecopier No.:617-482-3836
MERRILL LYNCH CAPITAL SERVICES, INC.
BY: /s/ John Mulholland
-------------------------------------------
Name: John MulHolland
Title: Vice President
Address: Merrill Lynch World Headquarters,
World Financial Center
North Tower, 22nd Floor
250 Vessey Street
New York, New York 10281-1322
Telephone No.: 212-449-0291
Telecopier No.:212-449-1788
3
The Lender is a member of The Securities and Futures Authority Limited and
operates a Client Complaints Procedure. If for any reason the Borrower should
have cause for concern or complaint, the Borrower should contact the Manager,
PBG Operations, at the Lender's address indicated below.
MERRILL LYNCH INTERNATIONAL
BANK LIMITED
BY: /s/ Jennifer A. Bereska
------------------------------------------
Executed in London, Name: Jennifer A. Bereska
England on June 25, 1998 Title: Vice President
Address: 33 Chester Street
London SW1 7XD
England
AGREED TO:
MERRILL LYNCH INTERNATIONAL
PRIVATE FINANCE LIMITED
By: /s/ G.F. Reinhardt
---------------------------------------
Name: G.F. Reinhardt
Title: Vice President
4
AMENDMENT NO. 3 dated as of December 18, 1998 to the
Loan and Security Agreement dated as February 5, 1998 (as
heretofore amended, the "Loan Agreement"), by and among
MERRILL LYNCH INTERNATIONAL BANK LIMITED (the "Lender"),
MERRILL LYNCH CAPITAL SERVICES INC. ("MLCS") and BELAIR
CAPITAL FUND LLC (the "Borrower").
INTRODUCTORY STATEMENT
All capitalized terms not otherwise defined in this Amendment are as
defined in the Loan Agreement.
As set forth in that certain letter agreement dated as of November 24, 1998
(the "Letter Agreement"), the Borrower requested and the Lender has (i)
consented to and acknowledged (x) the organization of Belair Real Estate
Corporation ("BREC") and (y) the purchases and sales of Partnership Preference
Units and (ii) waived compliance with the provisions of the Loan Agreement and
the Securities Agreement to the extent necessary to permit the above detailed
transaction.
The Lender confirms that as contemplated by the Letter Agreement, Investors
Bank & Trust as Custodian (the "Custodian") released from the Collateral (i)
certain Qualifying Assets and transferred them to Belcrest Realty Corporation
upon payment therefor and (ii) the Qualifying Assets that were transferred by
the Borrower to BREC in exchange for the shares of common stock of BREC, which
common stock is now part of the Collateral. The Letter Agreement also required
the parties to amend the Loan Agreement to make certain conforming changes.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby
amended as of the Effective Date (subject to the terms and conditions set forth
in Section 2 hereof) as follows:
(A) Article 1 of the Loan Agreement is hereby amended to insert the
following definition in its proper alphabetical location:
"BELVEDERE" shall mean Belvedere Capital Fund Company LLC.
(B) Article 1 of the Loan Agreement is hereby amended to insert the
following definition in its proper alphabetical location:
"BREC" shall mean Belair Real Estate Corporation, a Delaware corporation.
(C) The definition of "Capital" appearing in Article 1 is hereby removed.
(D) The definition of "Collateral" appearing in Article 1 of the Loan
Agreement is hereby amended to add the following proviso at the end of the
existing text:
PROVIDED FURTHER that the term Collateral as used herein shall not include
any preferred stock of BREC issued from time to time which are temporarily
held by the Borrower pending donation to one or more charitable
organizations as contemplated under Supplement No. 1 dated November 12,
1998 to the Private Placement Memorandum.
(E) The definition of "Pledged Securities" appearing in Article 1 of the
Loan Agreement is hereby amended in its entirety to read as follows:
"PLEDGED SECURITIES" shall mean the Qualifying Assets and the other
securities held in the Securities Account, including, but not limited to,
shares of Belvedere Capital Fund Company LLC and shares of common stock of
BREC.
(F) The representation and warranty appearing in Section 6.2 is hereby
amended in its entirety to read as follows:
6.2 DUE ORGANIZATION. The Borrower is a limited liability company and BREC
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 BREC 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 or has made (or will make promptly following
the date hereof) all filings necessary to so qualify.
(G) The Representation and Warranty appearing in Section 6.5 is hereby
amended in its entirety to read as follows:
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 the filing of UCC-1 financing statements, the registration of
the shares of Belvedere and the shares of common stock of BREC in the name
of the Custodian or the Custodian's nominee and the written consent of the
Manager of Belvedere to the Borrower's pledge of the shares of Belvedere.
(H) The Representation and Warranty appearing in Section 6.12 is hereby
amended in its entirety to read as follows:
6.12 SOLE BUSINESS. Neither the Borrower nor BREC is engaged in any
business other than as described in the Private Placement Memorandum as
supplemented by the Supplement No. 1 thereto dated November 12, 1998.
(I) The following Representation and Warranty is hereby added to the Loan
Agreement:
2
6.16 BELAIR REAL ESTATE CORPORATION- The authorized capitalization of BREC
consists of (i) 7000 shares of common stock $0.01 par value of which
5,209.6618429 shares are outstanding and owned by the Borrower on the date
hereof and (ii) 3000 shares of preferred stock $0.01 par value, of which
2100 shares have been designated as class A preferred stock with a
liquidation preference of $100 per share all of which are now or promptly
after the date hereof to be issued to the Borrower and donated by the
Borrower to charitable organizations [as contemplated by Supplement No. 1
dated November 12, 1998 to the Private Placement Memorandum]. All
outstanding shares of common stock of BREC are owned by the Borrower. BREC
intends to qualify as a real estate investment trust under the Internal
Revenue Code of 1986, as amended.
(J) The Affirmative Covenants appearing in Article 7 shall apply to both
the Borrower and BREC and the lead in will read as follows:
Until this Agreement has terminated and all Obligations have been
indefeasibly paid in full, the Borrower will and will cause its subsidiary
BREC to:
(K) The Affirmative Covenant appearing in Section 7.5 is hereby amended in
its entirety to read as follows:
7.5 AUDIT RIGHTS. Permit any representative of the Secured Parties to
examine the Borrower's, and its consolidated subsidiary's, books and
records and to make copies and take extracts therefrom, and to discuss the
Borrower's affairs, finances and accounts with the Manager of the Borrower
and with the Borrower's independent accountants, all at such reasonable
times and as often as either Secured Party may reasonably request.
(L) The Affirmative Covenant appearing in Section 7.8 is hereby amended in
its entirety to read as follows:
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 BREC 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
it or Belvedere.
(M) The Affirmative Covenant appearing in Section 7.9(a) is hereby amended
in its entirety to read as follows:
7.9 FINANCIAL AND CREDIT INFORMATION. (a) Notify the Secured Parties
immediately, in writing, of any material change in the Borrower's or BREC's
financial condition which would adversely affect the Borrower's ability to
repay any obligation(s) to either Secured Party according to the terms of
this Agreement, the Note or the MLCS Swap Agreement.
3
(N) The Affirmative Covenant appearing in Section 7.14 is hereby amended in
its entirety to read as follows:
7.14 USE OF PROCEEDS. The Borrower shall use the proceeds of the Loans to
acquire common stock and preferred stock of BREC, to finance the purchase
of Qualifying Assets by BREC and by the Borrower, to finance the cost of
qualifying BREC as a Real Estate Investment Trust, to pay placement fees,
selling commissions and offering, organizational and 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.
(O) The Affirmative Covenant appearing in Section 7.15 is hereby amended in
its entirety to read as follows:
7.15 VALUATION COVENANTS. Maintain:
(a) the market value of the total assets of the Borrower, and its
consolidated subsidiary (less the market value of its assets pledged to
another party), 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;
(b) the market value of the Borrower's, and its consolidated subsidiary's,
Qualifying Assets at an amount not in excess of 40% of the market value of
the Collateral. (In the event that the market value of the Qualifying
Assets represents more than 40% of the market value of the Collateral,
value for that portion exceeding 40% shall not be given in determining the
market value of the Borrower's total assets for purposes of clause (a)
above); and
(c) by reason of its indirect interest in the securities which are directly
held by the Tax-Managed Growth Portfolio (the "Portfolio"), not more than
(i) 5% of the Borrower's, and its consolidated subsidiary's, total assets
(taken at current value) as investments (directly or indirectly) in the
securities of any one issuer (except obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and except
securities of other investment companies) or (ii) 25% of the Borrower's,
and its consolidated subsidiary's, total assets (taken at current value) as
investments (directly or indirectly) in any one industry (or, with respect
to real estate, in any one sector of the real estate market), but the
restrictions contained in this clause (c) shall not apply to the Borrower's
direct investments in (1) Qualifying Assets or (2) shares of Belvedere or
(3) securities issued by BREC or to 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 or to BREC's investments in Qualifying Assets. (In the event that
either of the foregoing restrictions contained in this clause (c) are
exceeded, value for that portion of the excess shall not be given in
determining the market value of the Borrower's, and its consolidated
subsidiary's, total assets for purposes of clause (a) above.)
(P) The Negative Covenants as they appear in Article 8 will apply to both
the Borrower and BREC and the lead in is amended to read as follows:
Until this agreement has terminated and all Obligations have been
indefeasibly paid in full, the Borrower will not, and it will not allow its
subsidiary BREC to:
4
(Q) The Negative Covenant appearing in Section 8.1 is hereby amended to
insert the phrase "of the Borrower" immediately after the word "Indebtedness" in
clause (ii) thereof.
(R) The Negative Covenant appearing in Section 8.2 is hereby amended to
insert the phrase "on assets of the Borrower (but not BREC)" immediately after
the word "Liens" in clause (i) thereof.
(S) The Negative Covenant appearing in Section 8.7 is hereby amended in its
entirety to read as follows:
8.7 AMENDMENTS. Amend or modify, or permit to be amended or modified the
Private Placement Memorandum or Operating Agreement of the Borrower, or the
Certificate of Incorporation or By-Laws of BREC, without the prior written
consent of the Secured Parties, which consent shall not be unreasonably
withheld, except that the Borrower or BREC 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 or BREC shall promptly
notify the Secured Parties of such changes.
(T) The following Negative Covenant is hereby added to the Loan Agreement
as Section 8.9:
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 BREC
to (a) pay dividends or make any other distributions on its capital stock
or any other interest or participation in its profits owned by the Borrower
other than such restrictions as are set forth in BREC's Certificate of
Incorporation and 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.
(U) Subparagraphs (h), (i) and (j) of Article 10 are hereby amended to
insert the words "or BREC" immediately after the "Borrower" each place it
appears.
(V) The last sentence of Section 11.5 is hereby amended to read as follows:
The Borrower agrees to send correspondence to (i) the Lender at the address
for the Lender indicated on the signature page or as otherwise provided by
the Lender from time to time with a copy to the Lender's Representative
Office located at 65 East 55th Street, 29th Floor, New York, New York
10022, Attention: G. Frederick Reinhardt, telephone no.: 212- 610-2041,
telecopier no.: 212-610-2080 and (ii) as set forth in the MLCS Swap
Agreement.
SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment is subject to the
satisfaction in full of the following conditions (the first date on which all
such conditions have been satisfied being herein called the "Effective Date"):
(A) the Lender shall have received counterparts of this Amendment which,
when taken together, bear the signatures of all parties hereto;
5
(B) the Lender shall have received (i) a certificate of the Manager of the
Borrower, dated the Effective Date and certifying that attached thereto is a
true, correct and complete copy of the certificate of incorporation, certificate
of designation of class A preferred stock, and by-laws of BREC and (ii) such
other documents as the Lender or Morgan, Lewis & Bockius LLP, counsel for the
Lender, may reasonably request; and
(C) all legal matters in connection with this Amendment shall be
satisfactory to Morgan, Lewis & Bockius LLP, counsel for the Lender.
SECTION 3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants that:
(A) the representations and warranties contained in the Loan Agreement are
true and correct in all material respects on and as of the date hereof as if
such representations and warranties had been made on and as of the date hereof;
and
(B) the Borrower is in compliance with all the terms and provisions set
forth in the Loan Agreement and, after giving effect hereto, no Default or Event
of Default has occurred and is continuing.
SECTION 4. FULL FORCE AND EFFECT. Except as expressly amended hereby, the
Loan Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof. As used in the Loan Agreement, the terms
"Agreement", "this Agreement" "herein", "hereafter", "hereto", "hereof", and
words of similar import, shall, unless the context otherwise requires, mean the
Loan Agreement as amended by this Amendment.
SECTION 5. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. COUNTERPARTS. This Amendment may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute but one instrument.
SECTION 7. EXPENSES. The Borrower agrees to pay all reasonable
out-of-pocket expenses incurred by the Lender in connection with the
preparation, execution and delivery of this Amendment, including, but not
limited to, the reasonable fees and disbursements of Morgan, Lewis & Bockius
LLP, counsel for the Lender.
SECTION 8. HEADINGS. The headings of this Amendment are for the purposes of
reference only and shall not affect the construction of or be taken into
consideration in interpreting this Amendment.
6
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly
executed as of the date first written above.
BELAIR CAPITAL FUND, L.L.C.
BY: EATON VANCE MANAGEMENT,
as Manager
BY: /s/ William M. Steul
--------------------------------------
Name: William M. Steul
Title: Vice President, Treasurer
Address: 24 Federal Street
Boston, MA 02110
Telephone No.: 617-482-8260
Telecopier No.:617-482-3836
MERRILL LYNCH CAPITAL SERVICES, INC.
BY: /s/ John Mulholland
--------------------------------------
Name: John Mulholland
Title: Vice President
Address: Merrill Lynch World Headquarters,
World Financial Center
North Tower, 22nd Floor
250 Vessey Street
New York, New York 10281-1322
Telephone No.: 212-449-0291
Telecopier No.:212-449-1788
7
The Lender is a member of The Securities and Futures Authority Limited and
operates a Client Complaints Procedure. If for any reason the Borrower should
have cause for concern or complaint, the Borrower should contact the Manager,
PBG Operations, at the Lender's address indicated below.
MERRILL LYNCH INTERNATIONAL
BANK LIMITED
BY: /s/ Alan Stern
----------------------------------
Executed in London, Name: Alan Stern
England on December , 1998 Title: Chief Credit Officer
Address: 123 Buckingham Palace Road
London SW1 W9TD
England
AGREED TO:
MERRILL LYNCH INTERNATIONAL
PRIVATE FINANCE LIMITED
By: /s/ G.F. Reinhardt
-------------------------------------
Name: G.F. Reinhardt
Title: Vice President
8
AMENDMENT NO. 4 dated as of February 23, 1999 to the
Loan and Security Agreement dated as of February 5, 1998 (as
heretofore amended, the "Loan Agreement"), by and among
MERRILL LYNCH INTERNATIONAL BANK LIMITED (the "Lender"),
MERRILL LYNCH CAPITAL SERVICES INC. ("MLCS") and BELAIR
CAPITAL FUND LLC (the "Borrower").
INTRODUCTORY STATEMENT
All capitalized terms not otherwise defined in this Amendment are as
defined in the Loan Agreement.
The Borrower has requested (and the Lender has agreed to) an increase in
the Commitment to $625,000,000.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby
amended as of the Effective Date (subject to the terms and conditions set forth
in Section 2 hereof) as follows:
(A) The definition of Commitment appearing in Article 1 of the Loan
Agreement is hereby amended in its entirety to read as follows:
""COMMITMENT" shall mean six hundred twenty-five million dollars
($625,000,000) or such lesser amount if reduced pursuant to Section 2.10."
SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment is subject to the
satisfaction in full of the following conditions (the first date on which all
such conditions have been satisfied being herein called the "Effective Date"):
(A) the Lender shall have received counterparts of this Amendment which,
when taken together, bear the signatures of all parties hereto;
(B) the Lender shall have received an Acknowledgment (in form and substance
satisfactory to the Lender) executed by the Borrower and the Custodian
confirming that the Securities Account Agreement remains in full force and
effect;
(C) the Lender shall have received a promissory note in the form of Exhibit
A to the Loan Agreement in the amount of $625,000,000 (a "New Note") which New
Note shall replace the Note currently held by the Lender and shall be deemed the
Note for purposes of the Loan Agreement and the Lender shall return the existing
Note to the Borrower;
(D) the Lender shall have received a favorable written opinion of Counsel
to the Borrower, dated the Effective Date, addressed to the Lender, to the
effect that this Amendment and the New Note have been duly executed and
delivered by the Borrower and, together with the Loan Agreement as hereby
amended, constitute the legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms and no consent or approval
of any governmental authority or regulatory body to the execution, delivery and
performance of this Amendment or the New Note or to the borrowings thereunder is
required by law, or if any such consent or approval is necessary it has been
obtained, which opinion shall be satisfactory to Morgan, Lewis & Bockius LLP,
counsel for the Lender;
(E) the Lender shall have received (i) a certificate of the Manager of the
Borrower, dated the Effective Date and certifying that (1) the provisions of the
Operating Agreement authorize the Manager to authorize the execution, delivery
and performance in accordance with their terms of this Amendment, the New Note
and the other documents and transactions contemplated by this Amendment and the
borrowings under the Note and that the Manager has so authorized and such
authorization is in full force and effect and (2) neither the certificate of
organization nor the Operating Agreement of the Borrower have been amended since
February 5, 1998 (other than the Amended and Restated Operating Agreement as
amended by the First Amendment thereto dated November 24, 1998) and (ii) such
other documents as the Lender or Morgan, Lewis & Bockius LLP, counsel for the
Lender, may reasonably request; and
(F) all legal matters in connection with this Amendment shall be
satisfactory to Morgan, Lewis & Bockius LLP, counsel for the Lender.
SECTION 3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants that:
(A) the representations and warranties contained in the Loan Agreement are
true and correct in all material respects on and as of the date hereof as if
such representations and warranties had been made on and as of the date hereof;
and
(B) the Borrower is in compliance with all the terms and provisions set
forth in the Loan Agreement and, after giving effect hereto, no Default or Event
of Default has occurred and is continuing.
SECTION 4. FULL FORCE AND EFFECT. Except as expressly amended hereby, the
Loan Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof. As used in the Loan Agreement, the terms
"Agreement", "this Agreement" "herein", "hereafter", "hereto", "hereof", and
words of similar import, shall, unless the context otherwise requires, mean the
Loan Agreement as amended by this Amendment.
SECTION 5. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. COUNTERPARTS. This Amendment may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute but one instrument.
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SECTION 7. EXPENSES. The Borrower agrees to pay all reasonable
out-of-pocket expenses incurred by the Lender in connection with the
preparation, execution and delivery of this Amendment, including, but not
limited to, the reasonable fees and disbursements of Morgan, Lewis & Bockius
LLP, counsel for the Lender.
SECTION 8. HEADINGS. The headings of this Amendment are for the purposes of
reference only and shall not affect the construction of or be taken into
consideration in interpreting this Amendment.
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly
executed as of the date first written above.
BELAIR CAPITAL FUND, L.L.C.
BY: EATON VANCE MANAGEMENT,
as Manager
BY: /s/ Thomas E. Faust, Jr.
---------------------------------------------
Name: Thomas E. Faust, Jr.
Title: Vice President
Address: 24 Federal Street
Boston, MA 02110
Telephone No.: 617-482-8260
Telecopier No.:617-482-3836
MERRILL LYNCH CAPITAL SERVICES, INC.
BY: /s/ John Mulholland
--------------------------------------------
Name: John Mulholland
Title: Vice President
Address: Merrill Lynch World Headquarters,
World Financial Center
North Tower, 22nd Floor
250 Vessey Street
New York, New York 10281-1322
Telephone No.: 212-449-0291
Telecopier No.:212-449-1788
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The Lender is a member of The Securities and Futures Authority Limited and
operates a Client Complaints Procedure. If for any reason the Borrower should
have cause for concern or complaint, the Borrower should contact the Manager,
PBG Operations, at the Lender's address indicated below.
MERRILL LYNCH INTERNATIONAL
BANK LIMITED
BY: /s/ Alan Stern
--------------------------------------------
Executed in London, Name: Alan Stern
England on ________, 1999 Title: Chief Credit Officer
Address: 123 Buckingham Palace Road
5th Floor
London SW1 W9TD
England
Telephone No.:
Telecopier No.:
AGREED TO:
MERRILL LYNCH INTERNATIONAL
PRIVATE FINANCE LIMITED
By: /s/ G.F. Reinhardt
-----------------------------------
Name: G.F. Reinhardt
Title: Vice President
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