#3289 - Conditions Precedent Crib Sheet - Finance and Capital Markets

Conditions Precedent

1. What?

   1. Specific conditions which a bank requires a borrower to fulfil before part or all of the of facility agreement takes effect

2. Why?

   1. Protects the bank before they lend

      1. A request for a drawdown of the loan may not be given until the conditions precedent have been fulfilled or waived

         1. Clause 4.1 of Credit agreement

   2. Borrower is locked in so the bank’s fees become payable

   3. Focuses and sets out issues that need to be addressed ahead of completion

3. Some CPs

   1. Corporate documentation

      1. Copy of constitutional documents of each borrower

      2. Copy of resolution of board of directors of each borrower approving the terms of the Finance Documents and Credit Agreements and Security Agreements

      3. Copy of resolution of board of directors approving SPA

      4. Copy of resolution of board of directors of borrower appointing director

      5. Forms AP01 signed by director

      6. Copy of register of members of the company showing the allotment of shares

      7. Specimen signature of each person authorised on behalf of borrower to enter into or witness entry into of any Finance Document

      8. Copy of resolution of shareholders of each guarantor approving agreement

      9. Share certificates

      10. Certificate of an authorised signatory of company confirming not exceeding borrowing limit in company’s constitution

   2. Security and other Finance Documents

      1. Security Agreement

      2. Completed MG01

      3. Inter-creditor Agreement

      4. Copy of SPA

      5. Copy of seller’s completion statement

      6. Land Charges Registry Search

      7. Land Registry application forms

      8. Certificate of title to borrower’s property

      9. Report on title

      10. Evidence of insurance cover in compliance with agreement

      11. Environmental report on properties

      12. Survey & initial valuation on each of the properties

      13. Evidence that security has been released or will be released at completion

   3. Legal Opinions

   4. Other documents & evidence

      1. Evidence that all fees and expenses then due and payable from the company have been or will be paid by the first utilisation date

      2. Original financial statements

      3. Copies of all necessary bank mandates

      4. Copies of each subordinated credit agreement and each subordinated security agreement

      5. Specific issues from workshop

         1. Counsel’s legal opinion advising on possibility of successful defence against a potential action

         2. Evidence that a higher fence has been erected

         3. Full environmental report

         4. Evidence that dangerous area fenced of

         5. Evidence of claims being settled

4. Can Completion occur without the CPs being fulfilled?

   1. The moment the borrower signs the Credit Agreement they will be locked into the agreement and the fees/expenses and repayments will initialise

   2. BUT there are some CPs that are wrapped into the completion

      1. Giving security over assets not yet bought as the loan monies are required for the acquisition

      2. Discharging prior securities as the loan monies are required to discharge the debt

   3. Undertakings will be required from borrower that the CPs will be satisfied on completion after the money is drawn-down

   4. Technically completion can therefore occur without CPs being fulfilled, but the money will be held to the order of the bank and the undertakings will need to be satisfied

5. Can CPs be waived?

   1. Clause 27.1 any terms can be amended or waived with the agreement of the company and the Majority Lenders

      1. Clause 1.1 Majority lenders definition

         1. Schedule 1, Part 1 for commitments of lenders

   2. Clause 27.2 Exceptions where consent of all lenders is required

6. Problems with CP documents:

   1. Certifications of Incorporation

      1. Are company names and numbers correct?

      2. All companies there?

   2. Memorandum of Association

      1. Are they provided?

      2. Authorised Share Capital?

   3. Articles of Association

      1. Company number correct?

      2. Numbering correct?

      3. Are there any restrictions on lending?

      4. Are there restrictions on issuing shares?

      5. Are there restrictions on appointing directors?

   4. Resolutions for finance documents

      1. Are guarantees being provided?

         1. Corporate benefit needs to be assessed

            1. Do the minutes include reference to the best interest of the company/referred to the shareholders for approval?

      2. Signatories appointed?

      3. Authorisations given?

      4. Power of Attorney given?

      5. Resolutions of Group Companies provided?

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