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


Item 1.01. Entry into a Material Definitive Agreement.

On June 27, 2022, Rand Capital Corporation (the “Company”) 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 in a principal amount not to exceed $25.0 million (the “Credit Facility”). The amount available to be borrowed, at any given 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 publicly traded equity securities held by the Company (other than shares of ACV Auctions Inc.) plus (ii) the least 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 borrowing base availability for the Credit Facility at any date of determination plus (iii) 50% of the aggregate sum of the fair market values ​​of eligible private loans held by the Company meeting specified criteria plus (iv) ) the lesser of (a) 50% of the aggregate sum of the fair market values ​​of unsecured private loans held by the Company meeting specified criteria and (b) $1.25 million minus (v) such reserves as the 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 a rate per annum equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) 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, computed as 0.30% multiplied by the average daily Unused Commitment Fee Base (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 preceding quarter.

The Credit Agreement contains representations and warranties and affirmative, negative and financial covenants usual and customary for agreements of this type, including among others covenants that prohibit, subject to certain specified exceptions, the Company’s ability to merge or consolidate with other companies, sell any material Part of its assets, incur other indebtedness, incur liens on its assets, make investments or loans to third other than permitted investments and permitted loans, and declare any distribution or dividend other than certain permitted distributions. The Credit Agreement includes the following financial covenants: (i) a tangible net worth covenant that requires the Company to maintain a Tangible Net Worth (defined in the Credit Agreement as the aggregate assets of the Company, excluding intangible assets, less all liabilities of the Company) of not less than $50.0 millionwhich is measured quarterly at the end of each fiscal quarter, (ii) an asset coverage ratio covenant that requires the Company to maintain an Asset Coverage Ratio (defined in the Credit Agreement as the ratio of the fair market value of all assets of the Company to the sum of all of the Company’s obligations for borrowed money plus all capital lease obligations) of not less than 3:00:1:00, which is measured quarterly at the end of each fiscal quarter and (iii) an interest coverage ratio covenant that requires the Company to maintain an Interest Coverage Ratio (defined in the Credit Agreement as the ratio of Cash Flow (as defined in the Credit Agreement) to Interest Expense (as defined in the Credit Agreement)) of not less than 2:50 :1:00, which is measured quarterly on a trailing twelve-months basis.

Events of default under the Credit Agreement which permit the Lender to exercise its remedies, including acceleration of the principal and interest on the Credit Facility, include, among others: (i) default in the payment of principal or interest on the Credit Facility, ( ii) default by the Company on any other obligation, condition, covenant or other provision under the Credit Agreement and related documents, (iii) failure by the Company to pay any material indebtedness or obligation owing to any third party or affiliate, or the failure by the Company to perform any agreement with any third party or 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 Company’s assets to a third party, (v) various bankruptcy and insolvency events, and (vi) any adverse material change in the Company and its subsidiaries, taken as a whole, or their business, assets, operations, management, ownership, aff airs, condition (financial or otherwise) or the Lender’s collateral that the Lender reasonably determines will have an adverse material effect on the Lender’s collateral, the Company and its subsidiaries, taken as a whole, or their business, assets, operation or condition (financial or otherwise) or on the Company’s ability to repay its debts.

In connection with entry into the Credit Facility, the Company and each of its subsidiaries that guaranty the Credit Facility entered into a general security agreement, dated June 27, 2022, with the Lender (the “Security Agreement”). The Security Agreement secures all obligations of the Company to the Lender, including, without limitation, principal and interest on the Credit Facility and any fees and charges. The security interest granted under the Security Agreement covers all personal property of the Company including, among other things, all accounts, chattel paper, investment property, deposit accounts, general intangibles, inventory, and all fixtures of the Company. The Security Agreement contains various representations, warranties, covenants and customary agreements in security agreements and various events of default with remedies under the New York Uniform Commercial Code and the Security Agreement. Events of default under the Security Agreement, which permit the Lender to exercise her various remedies, are similar to those contained in the Credit Agreement.

The foregoing description of the Credit Agreement, Security Agreement and Credit Facility does not purport to be complete and is qualified in its entirety by reference to the Credit Agreement, the Revolving Line Notedated June 27, 2022by the Company as borrower, the Addendum to 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 hereto, respectively, and are each expressly incorporated by reference herein.

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

           Off-Balance Sheet Arrangement of a Registrant.



The information set forth under 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 Exhibits.





(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 Glimpses

.

Leave a Comment