The LSTA's Complete Credit Agreement Guide by Gray, Richard -- Read -- Imperial Library of Trantor

Index

Preface 1 T HE C REDIT A GREEMENT 2 C OMMITMENTS , L OANS, AND L ETTERS OF C REDIT 2.1 Credit Variants

2.1.1 Loans 2.1.1.1 Revolving Credit versus Term Loans 2.1.1.2 A and B Loan Tranches 2.1.1.3 Competitive Bid Loans 2.1.1.4 Swingline Loans 2.1.2 Letters of Credit 2.1.2.1 Application for Issuance 2.1.2.2 Form of Letter of Credit 2.1.2.3 Expiration Date 2.1.2.4 Limitations on Amount 2.1.2.5 Examination of Documents 2.1.2.6 Borrower’s Reimbursement Obligation 2.1.2.7 Participations by Lenders 2.1.2.8 Strict versus Substantial Compliance 2.1.2.9 Indemnification 2.1.2.10 Cash Collateral 2.1.3 Synthetic Letters of Credit 2.1.4 Bankers’ Acceptances

2.2 Commitments

2.2.1 Several Liability 2.2.2 Reducing Revolving Credit Commitments 2.2.3 Terminating Commitments 2.2.4 Increasing Commitments: Accordion Features and Incremental Facilities 2.2.4.1 Accordion Feature 2.2.4.2 Incremental Facilities 2.2.5 “Termout” of Revolving Credit Commitments

2.3 Multicurrency Facilities

2.3.1 Ratable Committed Dollar/FX Loans 2.3.2 Nonratable Committed Loans 2.3.3 Local Currency Tranches 2.3.4 Uncommitted FX Loans 2.3.5 Multicurrency Competitive Bid Loans

2.4 Second Lien Facilities

2.4.1 General Observations 2.4.2 Bankruptcy Issues 2.4.2.1 Post-Petition Interest 2.4.2.2 Debtor-in-Possession Financing and Use of Cash Collateral 2.4.2.3 Automatic Stay 2.4.2.4 Contest Rights 2.4.2.5 Plan Confirmation 2.4.2.6 Aggregate Effect

2.5 Minimums, Multiples, and Frequency 2.6 Notices and Mechanics of Funding 3 I NTEREST AND F EES 3.1 Interest

3.1.1 Base Rate Interest 3.1.2 LIBOR Interest 3.1.2.1 General Principles 3.1.2.2 Interest Periods 3.1.2.3 Reserve Requirements 3.1.2.4 Why LIBOR? 3.1.3 Competitive Bid Loans 3.1.4 Other Pricing Options 3.1.5 Applicable Margins 3.1.5.1 General Principles 3.1.5.2 Margins Based upon Credit Ratings 3.1.5.3 Margins Based upon Financial Tests 3.1.6 Interest Payment Dates 3.1.7 PIK Interest and “Toggle” Loans 3.1.8 Default Interest

3.2 Fees

3.2.1 Commitment Fees 3.2.2 Facility Fees 3.2.3 Utilization Fees 3.2.4 Letter of Credit Fees 3.2.5 Swingline Fronting Fees

3.3 Computation of Interest and Fees 3.4 Accrual Conventions 3.5 Business Day Conventions 3.6 Lending Offices 3.7 Yield Protection

3.7.1 Increased Costs 3.7.2 Capital Costs 3.7.3 LIBOR Market Disruption 3.7.3.1 Background 3.7.3.2 Components of the Market Disruption Clause 3.7.3.3 Historical Issues with the Market Disruption Clause 3.7.3.4 The Future of the Market Disruption Clause 3.7.4 Illegality 3.7.5 Breakfunding 3.7.5.1 General Principles 3.7.5.2 Breakfunding Upon Initial Drawdowns 3.7.5.3 Sell-down Costs 3.7.5.4 Compared to Prepayment Premiums 3.7.6 Taxes 3.7.6.1 Evidence of Payments 3.7.6.2 Actions by Lenders to Minimize Taxes 3.7.6.3 Refunds and Credits 3.7.6.4 Exclusions

3.8 Interest Savings Clauses 4 A MORTIZATION AND M ATURITY 4.1 Payments Generally

4.1.1 Immediately Available Funds 4.1.2 Time of Payment 4.1.3 Extensions for Nonbusiness Days 4.1.4 Obligation to Repay Absolute

4.2 Scheduled Repayment 4.3 Advancing the Maturity Date 4.4 364-Day Facilities 4.5 Stripped Loan Facilities 4.6 Voluntary Prepayments 4.7 Mandatory Prepayments

4.7.1 Revolving Clean Downs 4.7.2 Borrowing Base 4.7.3 Asset Sales 4.7.4 Casualty Events 4.7.5 Debt and Equity Issuances 4.7.6 Excess Cash Flow/Cash Sweep 4.7.7 Change of Control 4.7.8 Currency Adjustments in Multicurrency Deals

4.8 Allocation of Prepayments 4.9 Cover for Letters of Credit 4.10 Prepayment Opt Outs 4.11 Prepayment Premiums 4.12 Multiple Borrowers 5 C ONDITIONS P RECEDENT 5.1 Effectiveness Conditions

5.1.1 Signing versus Closing 5.1.2 Execution; Lender Addenda 5.1.3 Matters Relating to Organization and Authorization 5.1.4 Opinions 5.1.5 Government Approvals 5.1.6 The MAC Condition 5.1.7 Conditions that Relate to Perfection of Collateral 5.1.8 Promissory Notes 5.1.9 Special Conditions Applicable to Non-U.S. Borrowers 5.1.10 Repayment of Other Debt 5.1.11 Other Conditions 5.1.11.1 Appraisals 5.1.11.2 Solvency 5.1.11.3 Environmental Due Diligence 5.1.11.4 Insurance 5.1.11.5 Patriot Act 5.1.11.6 The Catchall 5.1.12 Effectiveness

5.2 Ongoing Conditions

5.2.1 Representations 5.2.2 Defaults

6 R EPRESENTATIONS 6.1 Legal Matters Representations

6.1.1 Organization, Existence, Power, and Qualification to do Business 6.1.2 Due Authorization 6.1.3 Due Execution 6.1.4 Enforceability 6.1.5 No Conflict 6.1.6 Government Approvals 6.1.7 Compliance with Law; Licenses 6.1.8 Investment Company Act 6.1.9 Public Utility Holding Company 6.1.10 Foreign Assets Control Regulations 6.1.11 USA Patriot Act 6.1.12 Margin Regulations

6.2 Financial Condition Representations

6.2.1 Financial Statements 6.2.2 Material Adverse Change 6.2.3 Litigation 6.2.4 Projections 6.2.5 Taxes 6.2.6 Pension and Welfare Plans 6.2.7 Solvency 6.2.8 Material Agreements

6.3 Representations and Disclosures Regarding the Business

6.3.1 Capitalization 6.3.2 Subsidiaries and Investments 6.3.3 Real Property 6.3.4 Existing Debt and Liens 6.3.5 Title to Property 6.3.6 Labor Matters 6.3.7 Intellectual Property 6.3.8 Environmental Matters 6.3.9 No Burdensome Restrictions

6.4 Representations by Foreign Borrowers

6.4.1 Commercial Activity 6.4.2 Pari Passu Ranking 6.4.3 Legal Form 6.4.4 Foreign Taxes 6.4.5 Sovereign Borrowers

6.5 Other Representations

6.5.1 Completeness of Disclosures 6.5.2 Status as Senior Debt 6.5.3 Perfection and Priority of Security

6.6 The Special Circumstances of Acquisition Financings 7 C OVENANTS 7.1 Some General Principles 7.2 Categorizing Subsidiaries

7.2.1 Subsidiaries Generally 7.2.2 Restricted and Unrestricted Subsidiaries 7.2.3 Significant Subsidiaries

7.3 Covenant Definitions

7.3.1 Definitions Generally; GAAP 7.3.2 Key Financial Definitions 7.3.2.1 Debt 7.3.2.2 EBITDA

7.4 Financial Covenants

7.4.1 Date-Specific versus Performance versus Hybrid Covenants; Annualized and Rolling Periods 7.4.2 Phase-In and Pro Forma Treatment 7.4.3 Date-Specific Financial Covenants 7.4.3.1 Net Worth 7.4.3.2 Leverage Ratio 7.4.3.3 Current Ratio/Working Capital 7.4.4 Performance-Based Financial Covenants 7.4.4.1 Interest Coverage Ratio 7.4.4.2 Debt Service Coverage Ratio 7.4.4.3 Fixed Charges Coverage Ratio 7.4.4.4 Lease Payments 7.4.4.5 Capital Expenditures 7.4.5 Hybrid Financial Covenants 7.4.5.1 Debt Ratio

7.5 Affirmative Covenants

7.5.1 Disclosure Covenants 7.5.1.1 Financial Statements 7.5.1.2 Compliance Certificates 7.5.1.3 Notices of Material Events 7.5.1.4 Catchall Provisions 7.5.1.5 Delivery 7.5.2 Inspection Rights 7.5.3 Insurance 7.5.4 Miscellaneous “Who-Can-Object” Covenants 7.5.4.1 Books and Records 7.5.4.2 Properties 7.5.4.3 Existence and Franchises 7.5.4.4 Compliance with Law 7.5.4.5 Payment of Taxes and Other Obligations 7.5.4.6 Government Approvals 7.5.4.7 Substantive Consolidation 7.5.5 Use of Proceeds 7.5.6 Interest Rate Protection 7.5.7 Pari Passu Ranking 7.5.8 Further Assurances

7.6 Negative Covenants

7.6.1 Negative Pledge 7.6.1.1 Lender Liens 7.6.1.2 Grandfathered Liens 7.6.1.3 Permitted Encumbrances 7.6.1.4 Purchase Money Liens 7.6.1.5 Acquisition Liens 7.6.1.6 Lien Basket 7.6.2 Equal and Ratable Sharing Clause 7.6.2.1 Documentation Issues 7.6.2.2 Sharing Rights 7.6.2.3 Voting Rights 7.6.2.4 Collateral Agent 7.6.3 Negative Negative Pledge 7.6.3.1 Grandfathered Restrictions 7.6.3.2 Boilerplate Restrictions 7.6.3.3 Secured Debt Restrictions 7.6.3.4 Sale Restrictions 7.6.4 Debt 7.6.4.1 Lender Debt 7.6.4.2 Grandfathered Debt 7.6.4.3 Intercompany Debt 7.6.4.4 Purchase Money Debt 7.6.4.5 Acquisition Debt 7.6.4.6 Subsidiary Debt 7.6.4.7 Debt Basket 7.6.5 Disqualified Stock 7.6.6 Fundamental Changes 7.6.6.1 Mergers 7.6.6.2 Dispositions 7.6.6.3 Acquisitions 7.6.7 Sale–Leasebacks 7.6.8 Investments 7.6.8.1 Grandfathered Investments 7.6.8.2 Cash and Cash Equivalents 7.6.8.3 Subsidiaries 7.6.8.4 Guarantees 7.6.8.5 Acquisition Investments 7.6.8.6 Investment Basket 7.6.9 Lines of Business 7.6.10 Derivatives 7.6.11 Guarantees or Contingent Liabilities 7.6.12 Dividends and Equity Repurchases 7.6.12.1 Stock Dividends 7.6.12.2 Subsidiary Dividends 7.6.12.3 Employee Stock Plans 7.6.12.4 Preferred Dividends 7.6.12.5 Dividend Basket 7.6.13 Tax-Sharing Payments 7.6.14 Dividend Blockers 7.6.14.1 Grandfathered Restrictions 7.6.14.2 Legal Restrictions 7.6.14.3 Sale Restrictions 7.6.15 Modification and Prepayment of Other Debt 7.6.16 Affiliate Transactions 7.6.17 Amendments to Organic Documents and Other Agreements 7.6.18 Fiscal Periods and Accounting Changes

7.7 Incorporation by Reference 7.8 Covenant Lite 8 G UARANTEES AND S ECURITY 8.1 Guarantees and Security Generally 8.2 Guarantees

8.2.1 Guarantees Generally 8.2.2 Guarantee of Payment versus Guarantee of Collection 8.2.3 Waivers 8.2.4 Subrogation 8.2.5 Reinstatement 8.2.6 Insolvency of Borrower 8.2.7 Continuing Guarantee 8.2.8 Summary Procedure 8.2.9 Guarantee Limitations and Rights of Contribution 8.2.10 Subordination

8.3 Collateral Packages

8.3.1 Conditions 8.3.2 Representations 8.3.3 Further Assurances Covenant 8.3.4 Defaults 8.3.5 Voting 8.3.6 Expenses

8.4 Springing Liens 8.5 True-Up Mechanism 8.6 Deemed Dividends 9 D EFAULTS AND E NFORCEMENT 9.1 Events of Default

9.1.1 Default in Payment 9.1.2 Inaccuracy of Representations 9.1.3 Breach of Covenants 9.1.4 Cross-Default; Cross-Acceleration 9.1.4.1 Why a Cross-Default? 9.1.4.2 What Debt is Crossed? 9.1.4.3 Meaning of Cross-Default and Cross-Acceleration 9.1.4.4 Mandatory Prepayments 9.1.5 Insolvency 9.1.5.1 Voluntary 9.1.5.2 Involuntary 9.1.5.3 Admission 9.1.6 Judgment Default 9.1.7 ERISA Events 9.1.8 Environmental Events 9.1.9 Change of Control or Management 9.1.10 Invalidity of Guarantees or Liens 9.1.11 Foreign Borrowers 9.1.12 Material Adverse Change 9.1.13 Specialized Events of Default 9.1.14 Significant Subsidiaries

9.2 Remedies

9.2.1 Stop Lending 9.2.2 Terminate Commitments 9.2.3 Accelerate 9.2.4 Demand Cover for Letters of Credit 9.2.5 Institute Suit 9.2.6 Demand Payment from Guarantors 9.2.7 Foreclose on Collateral

9.3 Rescission 9.4 Waterfalls 9.5 Setoff 9.6 Action by Individual Lenders 9.7 Lender Liability Risks

9.7.1 Breach of Contract 9.7.2 Creditor Control 9.7.3 Tortious Interference 9.7.4 Environmental Liability 9.7.5 RICO 9.7.6 Securities Laws

10 I NTERLENDER , V OTING AND A GENCY I SSUES; D EFAULTING LENDERS 10.1 Agency Issues

10.1.1 Appointment 10.1.2 Rights of Administrative Agent Individually 10.1.3 No Fiduciary Duty 10.1.4 Exculpation 10.1.5 Reliance 10.1.6 Delegation 10.1.7 Filing Proofs of Claim 10.1.8 Successor Agents 10.1.9 Syndication and Other Agents

10.2 Lender Indemnification 10.3 Voting

10.3.1 Basic Rule 10.3.2 Multitranche Agreements 10.3.3 Consents Requiring More than a Majority 10.3.3.1 Money Terms 10.3.3.2 Pro Rata Provisions 10.3.3.3 Voting 10.3.3.4 Conditions 10.3.4 Unanimous vs Affected Lender Consent 10.3.5 Special Lender Consents 10.3.6 Collateral Security 10.3.7 Vote Splitting 10.3.8 Lenders that Default

10.4 Pro Rata Treatment 10.5 Sharing of Setoffs and Other Claims 10.6 The Clawback Clauses 10.7 Access to the Loan Register 10.8 Defaulting Lenders

10.8.1 Defining a Defaulting Lender 10.8.2 Disenfranchising Defaulting Lenders 10.8.3 Mitigating Fronting Bank Exposure 10.8.4 Forfeiture of Fees 10.8.5 Application of Payments 10.8.6 Removing Defaulting Lenders from the Syndicate 10.8.7 Removing a Defaulting Administrative Agent

11 A SSIGNMENTS AND P ARTICIPATIONS 11.1 Distinguishing Assignments and Participations 11.2 Assignments

11.2.1 The General Rule for Successors and Assigns 11.2.2 Consent Rights Over Lender Assignments 11.2.2.1 Defaults 11.2.2.2 Assignments to Lenders and Lender Affiliates 11.2.2.3 Assignments to Borrower Affiliates 11.2.2.4 Agent Consent Rights 11.2.2.5 Issuing and Swingline Lender Consent Rights 11.2.2.6 Unreasonably Withholding or Delaying Consent 11.2.2.7 Absolute Consent Rights 11.2.2.8 Other Considerations 11.2.3 Eligible Assignees 11.2.4 Minimums 11.2.5 Transfer Fees 11.2.6 Loan Register

11.3 Participations 11.4 Loan Pledges 11.5 Third Party Beneficiaries 11.6 Are Loans Covered by the Securities Laws? 12 T HE B OILERPLATE 12.1 Notice Provisions

12.1.1 Notices Generally 12.1.2 Electronic Notices

12.2 No Deemed Waivers 12.3 Cumulative Remedies 12.4 Colorado River Clause 12.5 Expenses 12.6 Borrower Indemnification; Consequential Damages 12.7 Governing Law 12.8 Enforcement Provisions

12.8.1 Submission to Jurisdiction; Process Agents 12.8.2 Venue and Forum Non Conveniens 12.8.3 Waiver of Sovereign Immunity 12.8.4 Waiver of Jury Trial 12.8.5 Judgment Currency

12.9 Severability; Counterparts; Integration; Captions

12.9.1 Severability 12.9.2 Counterparts; Effectiveness 12.9.3 Integration 12.9.4 Captions

12.10 Electronic Execution 12.11 Survival 12.12 USA Patriot Act 13 B ORROWER R IGHTS 13.1 The Right that Lenders Make Loans 13.2 The Right that Lenders Mitigate Costs 13.3 The “Yank-a-Bank” Provision 13.4 Documentation from Lenders 13.5 Implied Covenant of Good Faith and Fair Dealing; No Implied Fiduciary Duties 13.6 The Right to Designate Additional Borrowers 13.7 Equity Cure Rights 13.8 Specified Representations 13.9 Confidentiality

13.9.1 The Confidentiality Clause 13.9.1.1 Disclosure to Regulators 13.9.1.2 Disclosure Required by Law or Subpoena 13.9.1.3 Disclosure to Other Agreement Parties 13.9.1.4 Exercise of Remedies 13.9.1.5 Under Confidentiality Agreement 13.9.1.6 With Consent of Borrower 13.9.1.7 Information Already Public 13.9.1.8 Confidential Tax Treatment 13.9.2 Remedies 13.9.3 Use Restrictions 13.9.4 Destruction of Records

13.10 Loan Buybacks

13.10.1 Documentary Impediments 13.10.2 Overcoming Documentary Issues 13.10.3 Buyback Methodologies 13.10.4 Effect upon Amortization

Appendix I – Table of Authorities Appendix II – LSTA Model Credit Agreement Provisions Index

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