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U.S. Code as of:
01/19/04
Section 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.
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