RAND CAPITAL CORP: Entering into a Material Definitive Agreement, Creation of a Direct Financial Obligation or Obligation Under an Off-Balance Sheet Arrangement of a Registrant, Other Events, Financial Statements and Exhibits (Form 8-K )

0

Item 1.01. Conclusion of a significant definitive agreement.

On June 27, 2022, Rand Capital Corporation (the “Company”) has entered into a credit agreement (the “Credit Agreement”) with M&T Bank, as lender (the “Lender”), which provides the Company with a senior secured revolving credit facility of an amount in principal not exceeding $25.0 million (the “Credit Facility”). The amount that may be borrowed, at any time, by the Company under the Credit Facility is tied to a borrowing base, which is measured as (i) 75% of the aggregate sum of the fair market values ​​of the equity securities shares held by the Company (other than the shares of ACV Auctions Inc.) plus (ii) the lesser of (a) 75% of the fair market value of the shares of ACV Auctions Inc. held by the Company, (b) $6.25 million and (c) 25% of the aggregate availability of the borrowing base for the Credit Facility on any Determination Date plus (iii) 50% of the aggregate sum of the fair market values ​​of the qualifying Private Loans held by the Company meeting the specified criteria plus (iv ) the lesser of (a) 50% of the aggregate sum of the fair market values ​​of the private unsecured loans held by the Company meeting the specified criteria and (b) $1.25 million less (v) such reserves as Lender may establish from time to time in its sole discretion. The credit facility has a maturity date of June 27, 2027.

The Company’s borrowings under the Credit Facility bear interest at a variable rate determined as an annual rate equal to 3.50 percentage points above the greater of (i) the secured simple overnight rate (SOFR) applicable daily and (ii) 0.25%. In addition, under the terms of the credit facility, the Company has also agreed to pay the lender an unused commitment fee on a quarterly basis, calculated as 0.30% multiplied by the daily average of the unused commitment. Basic fees (which is defined as the difference between (i) $25.0 million and (ii) the sum of the aggregate principal amount of the Company’s outstanding borrowings under the Credit Facility) for the prior quarter.

The Credit Agreement contains positive, negative and financial representations and warranties and covenants customary and customary for agreements of this type, including, among other things, covenants which prohibit, subject to certain specified exceptions, the ability of the company to merge or consolidate with other companies, sell any material part of its assets, incur other debts, incur liens on its assets, make investments or loans to third parties other than authorized investments and authorized loans, and declare any distributions or dividends other than certain authorized distributions. The credit agreement includes the following financial covenants: (i) a tangible net worth clause which obligates the company to maintain a tangible net worth Net value (defined in the Credit Agreement as the total assets of the Company, excluding intangible assets, less all liabilities of the Company) of at least $50.0 millionwhich is measured quarterly at the end of each fiscal quarter, (ii) an asset coverage ratio clause which requires the Company to maintain an asset coverage ratio (defined in the credit agreement as the fair value ratio of all Company assets to the sum of all Company obligations for borrowed money plus all capital lease obligations) of at least 3:00:1:00, which is measured quarterly at the end of each fiscal quarter and (iii) an interest coverage ratio commitment which obligates the Company to maintain an interest coverage ratio (defined in the credit agreement as the ratio between the cash flows (as defined in the credit agreement) and interest expense (as defined in the credit agreement) of at least 2:50:1:00, which is measured quarterly on a rolling twelve month basis.

Events of default under the Credit Agreement which entitle the Lender to exercise its remedies, including acceleration of payment of principal and interest on the Credit Facility, include, among others: (i) default of payment of principal or interest on the Credit Facility, (ii) default by the Company of any other obligation, condition, covenant or other provision under the Credit Agreement and related documents, (iii) failure by the Company to pay any material debt or obligation owed to a third party or an affiliate, or the failure by the Company to perform any agreement with a third party or an affiliate that would have a material adverse effect on the Company and its subsidiaries taken as a whole, (iv) the sale of all or substantially all of the assets of the Company to a third party, (v) various events of bankruptcy and insolvency, and (vi) any material adverse change of the Company and its subsidiaries , taken as a whole, or their business, assets, operations, management, ownership, business, conditions (financial or otherwise) or the Lender’s guarantee that the Lender reasonably believes to have a material adverse effect on the Lender’s guarantee, the Company and its subsidiaries, taken as a whole, or their business, assets, operations or condition (financial or otherwise) or the ability of the Company to repay its debts.

In connection with entering into the Credit Facility, the Company and each of its subsidiaries that guarantee the Credit Facility entered into a General Security Agreement, dated June 27, 2022, with the lender (the “collateral agreement”). The Guarantee Agreement secures all of the Company’s obligations to the Lender, including, without limitation, principal and interest on the Credit Facility and all fees and charges. Security granted under the security agreement covers all personal property of the company, including but not limited to all accounts, household effects, investment property, custodial accounts, general intangible property, inventory and all company fixtures. The Security Agreement contains various representations, warranties, covenants and covenants customary in security agreements and various events of default with remedies under the New York Uniform Commercial Code and the Security Agreement. The events of default under the guarantee agreement, which allow the lender to exercise its various remedies, are similar to those contained in the credit agreement.

The foregoing description of the Credit Agreement, Guarantee Agreement and Credit Facility does not purport to be complete and is qualified in its entirety by reference to the Credit Agreement, the Line notedate June 27, 2022by the Company as borrower, the addendum to the line of credit note, dated June 27, 2022by the Company as borrower, the Variable Rate Rider (Daily Simple SOFR), dated June 27, 2022by the Company as borrower and the Security Agreement, copies of which have been filed as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5, respectively, and are each expressly incorporated by reference herein.

Section 2.03. Creation of a Direct Financial Obligation or an Obligation under a

           Off-Balance Sheet Arrangement of a Registrant.



The information set out in item 1.01 above regarding the Credit Facility is incorporated herein by reference.

Item 8.01. Other Events.



The Company issued a press release announcing the Company’s entry into the Credit Facility. A copy of the press release is attached as Exhibit 99.1 hereto and is incorporated herein by reference.

Item 9.01. Financial statements and supporting documents.




(d) Exhibits



Exhibit
Number                             Description of Exhibit
10.1        Credit Agreement, dated June 27, 2022, by and between Rand Capital
          Corporation, as borrower, and M&T Bank, as lender.
10.2        Revolving Line Note, dated June 27, 2022, by Rand Capital Corporation,
          as borrower.
10.3        Addendum to Line of Credit Note, dated June 27, 2022, by Rand Capital
          Corporation, as borrower.
10.4        Variable Rate Rider (Daily Simple SOFR), dated June 27, 2022, by Rand
          Capital Corporation, as borrower.
10.5        General Security Agreement, dated June 27, 2022, by Rand Capital
          Corporation and each of the subsidiaries listed therein, as debtors, in
          favor of Manufacturers and Traders Trust Company, as the secured
          party.
99.1        Press Release, dated June 27, 2022.

© Edgar Online, source Previews

Share.

About Author

Comments are closed.