New term loan. Business Guide. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. [ii] This is as compared to amortization terms commonly seen in senior term loans with commercial banks. top: 20px; color: #6ba2b9; If either party has applied for or entered into a Main Street Loan, a close examination should be conducted to confirm that party’s eligibility, including a thorough understanding of employee count. “We want to assure everybody, if you don’t get a loan this week, you’ll get a loan next week or the following week,” said Treasury Secretary Steven Mnuchin in an interview with CNBC. vertical-align: top; No officer/employee whose total compensation exceeds $3 million in 2019 may (1) receive total compensation during any 12-month period in excess of $3 million + 50% of the amount above $3 million received in 2019 or (2) receive severance pay or other termination benefits in excess of 2x the maximum total compensation received in 2019. [iii]  Key implications of the affiliation rules are: In the absence of further guidance from the Federal Reserve, borrowers should proactively attempt to clarify these issues with their lender in the Main Street Loan documentation. "The Fed's role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.". Concerns grew that Wells Fargo would stop issuing loans until the Fed stepped in and said it would ease restrictions on its overall assets. This webinar will provide you with additional background on the program such as who is eligible, what are the terms of the loans, and where can you submit a loan application. The necessary legal forms and agreements for eligible borrowers and eligible lenders to participate in the MSNLF, MSELF, MSPLF, NONLF, and NOELF can be found below. The Main Street Lending Program adopts the same affiliation rules used for the SBA’s Paycheck Protection Program (“PPP”), which generally consider entities that control each other or are under common control (including through ownership of 50% or more of the entity’s voting equity interests (on a fully diluted basis) or a minority investment coupled with certain governance rights) to be affiliates. Both parties are likely to have a vested interest in audits or investigations, especially those conducted by the US government entities. [xii] An acquiror taking a Main Street Loan will need to evaluate compensation offered by a target’s direct competitors and companies in other industries that may be attractive to this highly sought-after employee talent pool, including whether those other employers also are taking Main Street Loans. Fed Chair on stimulus: There's little risk of overdoing it, Another 751,000 Americans filed first-time jobless claims, US economy grew in Q3 but the crisis isn't over, See how Texans are fighting to keep their businesses alive, Asian Americans facing historic unemployment during pandemic, 'Have to laugh to keep from crying': Business owner struggling amid pandemic, This fourth-grader doesn't have WiFi at home. margin: 0; Banks, however, are struggling to keep up with the demand to assist thousands of small businesses vying for billions in government-funded loans. If they are not, the acquiror could find itself at a significant disadvantage in a competitive process to acquire the target. [x] See Section 4003(c)(3)(A)(ii) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). .breadcrumb-dark { The dividend and employee compensation restrictions, which the Main Street Lending Program expressly incorporates from the Title IV of the CARES Act, have caused many borrower companies to carefully consider whether they want to participate in the program at all. [xvii] The Main Street SPV or another government agency could bring an enforcement action, and may have varying motivations to do so (such as political pressure or popular sentiment). In the U.S., the firm’s clients include more than half of the Fortune 100. Lender Registration Certifications and Covenants, Loan Participation Agreement Standard Terms and Conditions, Co-Lender Agreement Standard Terms and Conditions, MSNLF Lender Transaction Specific Certifications and Covenants, MSELF Lender Transaction Specific Certifications and Covenants, MSPLF Lender Transaction Specific Certifications and Covenant, NONLF Lender Transaction Specific Certifications and Covenants, NOELF Lender Transaction Specific Certifications and Covenants, MSNLF Borrower Certifications and Covenants, MSELF Borrower Certifications and Covenants, MSPLF Borrower Certifications and Covenants, NONLF Borrower Certifications and Covenants, NOELF Borrower Certifications and Covenants, Exclusion of PPP Loan from Main Street “Outstanding Debt”, Main Street Lending Program Instructions for Lender Required Documentation, Comparison to September 18, 2020 Instructions, Comparison to May 27, 2020 Lender Registration Certifications and Covenants, Participation Agreement Transaction Specific Terms, Comparison to July 31, 2020 Participation Agreement Transaction Specific Terms, Participation Agreement Standard Terms and Conditions, Comparison to June 11, 2020 Participation Agreement Standard Terms and Conditions, Comparison to July 31, 2020 Servicing Agreement, Comparison to June 11, 2020 Assignment-in-Blank, Co-Lender Agreement Transaction Specific Terms, Comparison to June 11, 2020 Co-Lender Agreement Transaction Specific Terms, Comparison to June 11, 2020 Co-Lender Agreement Standard Terms and Conditions, Comparison to June 11, 2020 MSNLF Lender Transaction Specific Certifications and Covenants, Comparison to June 11, 2020 MSELF Lender Transaction Specific Certifications and Covenants, MSPLF Lender Transaction Specific Certification and Covenants, Comparison to June 11, 2020 MSPLF Lender Transaction Specific Certifications and Covenants, Comparison to July 31, 2020 NONLF Lender Transaction Specific Certifications and Covenants, Comparison to July 31, 2020 NOELF Lender Transaction Specific Certifications and Covenants, MSELF Borrower Certification and Covenants, MSPLF Borrower Certification and Covenants, Comparison to September 18, 2020 Nonprofit Organization FAQs, Participation Agreement Transaction Specific Terms, MSPLF Lender Transaction Specific Certifications and Covenants. Eligible lenders are U.S. federally-insured depository institutions (including banks, savings associations, and credit unions) as well as any U.S. branch or affiliate of a foreign bank. The compensation and dividend restrictions are set forth in Borrower Certifications and Covenants (which the Federal Reserve has advised is nonnegotiable). As of June 15, 2020, lenders can begin registering with the Federal Reserve to be included in the Main Street Lending Program. The penultimate sentence of FAQ E.4 (which is mirrored in Section 1.D of the Borrower Certifications and Covenants) says “If a potential borrower (or its affiliate) does not yet have audited financial statements or annual receipts for 2019, the borrower (or its affiliate) should use its most recent audited financial statements or annual receipts.” [emphasis added]. What Is The Main Street Lending Program? The most notable concerns in an M&A context are: As the parties to an M&A transaction explore alternative structures to accommodate the Main Street Lending Program’s dividend restrictions, careful tax planning is essential to ensure the most efficient, or at least predictable, tax outcomes. The consequential damages waiver contained in a standard purchase agreement should not exclude potential civil or criminal fines or penalties that may be imposed for violations. Borrowers should contact lenders for more information on whether the lender plans to participate in the program and for more information on the application process. The compensation restrictions also apply to (i) any officer/employee whose employment with the borrower started during 2019 or later, in which case the total compensation is measured for the 12-month period starting from the end of the month in which such officer/employee commenced employment (and if such total compensation exceeds the $425,000 and/or the $3 million threshold, the compensation restriction would apply to such officer/employee for the life of the Main Street Loan + 12 months) and (ii) any existing officer/employee whose compensation first exceeds $425,000 during a 12-month period ending after 2019, in which case the total compensation is measured for the 12-month period starting from the end of the month in which such officer/employee’s compensation first exceeded $425,000 (and the compensation restriction would apply to such officer/employee for the life of the Main Street Loan + 12 months).