(a) A guarantee agreement made
under this Act with respect to an enterprise shall require that while
there is any principal or interest remaining unpaid on a guaranteed
loan to that enterprise the enterprise may not—
(1) declare a dividend on its common stock;
or
(2) make any payment
on its other indebtedness to a lender whose loan has been guaranteed
under this Act.
The Board may waive
either or both of the requirements set forth in this subsection, as
specified in the guarantee agreement covering a loan to any particular
enterprise, if it determines that such waiver is not inconsistent
with the reasonable protection of the interests of the United States
under the guarantee.
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(b) If the Board determines that the
inability of an enterprise to obtain credit without a guarantee under
this Act is the result of a failure on the part of management to exercise
reasonable business prudence in the conduct of the affairs of the
enterprise, the Board shall require before guaranteeing any loan to
the enterprise that the enterprise make such management changes as
the Board deems necessary to give the enterprise a sound managerial
base.
(c) A guarantee of a loan to any enterprise
shall not be made under this Act unless—
(1) the Board has received an audited financial
statement of the enterprise; and
(2) the enterprise permits the Board to
have the same access to its books and other documents as the Board
would have under section 7 in the event the loan is guaranteed.
(d) No payment shall be made or become
due under a guarantee entered into under this Act unless the lender
has exhausted any remedies which it may have under the guarantee agreement.
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(e) (1) Prior to making any guarantee
under this Act, the Board shall satisfy itself that the underlying
loan agreement on which the guarantee is sought contains all the affirmative
and negative covenants and other protective provisions which are usual
and customary in loan agreements of a similar kind, including previous
loan agreements between the lender and the borrower, and that it cannot
be amended, or any provisions waived, without the Board’s prior consent.
(2) On each occasion
when the borrower seeks an advance under the loan agreement, the guarantee
authorized by this Act shall be in force as to the funds advanced
only if—
(A) the lender gives the Board at least
ten days’ notice in writing of its intent to provide the borrower
with funds pursuant to the loan agreement;
(B) the lender certifies to the Board
before an advance is made that, as of the date of the notice provided
for in subparagraph (A), the borrower is not in default under the
loan agreement; Provided, That if a default has occurred the
lender shall report the facts and circumstances relating thereto to
the Board and the Board may expressly and in writing waive such default
in any case where it determines that such waiver is not inconsistent
with the reasonable protection of the interests of the United States
under the guarantee; and
(C) the borrower provides the Board
with a plan setting forth the expenditures for which the advance will
be used and the period during which the expenditures will be made,
and, upon the expiration of such periods, reports to the Board any
instances in which amounts advanced have not been expended in accordance
with the plan.
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(f) (1) A guarantee agreement made
under this Act shall contain a requirement that as between the Board
and the lender, the Board shall have a priority with respect to, and
to the extent of, the lender’s interest in any collateral securing
the loan and any earlier outstanding loans. The Board shall take all
steps necessary to assure such priority against any other persons.
(2) As used in paragraph
(1) of this subsection, the term “collateral” includes all assets
pledged under loan agreements and, if appropriate in the opinion of
the Board, all sums of the borrower on deposit with the lender and
subject to offset under section 68 of the Bankruptcy Act.
[15 USC 1845.]
