§ 1845. — Requirements applicable to loan guarantees.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC1845]
TITLE 15--COMMERCE AND TRADE
CHAPTER 45--EMERGENCY LOAN GUARANTEES TO BUSINESS ENTERPRISES
Sec. 1845. Requirements applicable to loan guarantees
(a) Stock dividends or other payments, prohibition; waiver
A guarantee agreement made under this chapter 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 chapter.
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.
(b) Managerial changes
If the Board determines that the inability of an enterprise to
obtain credit without a guarantee under this chapter 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) Financial statement; access to documents
A guarantee of a loan to any enterprise shall not be made under this
chapter 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
1846 of this title in the event the loan is guaranteed.
(d) Exhaustion of remedies
No payment shall be made or become due under a guarantee entered
into under this chapter unless the lender has exhausted any remedies
which it may have under the guarantee agreement.
(e) Protective provisions; advances
(1) Prior to making any guarantee under this chapter, 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 chapter 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.
(f) Loan security, priority; collateral
(1) A guarantee agreement made under this chapter 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.
(Pub. L. 92-70, Sec. 6, Aug. 9, 1971, 85 Stat. 179.)
References in Text
Section 68 of the Bankruptcy Act, referred to in subsec. (f)(2), was
classified to section 108 of former Title 11, Bankruptcy. The Bankruptcy
Act was repealed effective Oct. 1, 1979, by Pub. L. 95-598,
Secs. 401(a), 402(a), Nov. 6, 1978, 92 Stat. 2682, section 101 of which
enacted revised Title 11. See sections 502(b)(3) and 553 of Title 11.
