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agree that its swaps with FNBC would be terminated early if the
counterparty’s public debt rating was downgraded to below
investment grade, required the counterparty to secure its
performance mainly by establishing a debt service reserve
account, or did all of these things. In at least one other case,
FNBC required that the counterparty agree to maintain:
(1) Adequate books under GAAP and, in certain cases, to permit
FNBC to inspect and audit its books, inventory, and accounts;
(2) certain levels of tangible net worth; (3) certain cashflow
coverage ratios; and (4) certain interest coverage ratios. The
counterparty also had to agree: (1) To maintain a certain
capitalization ratio; (2) not to engage in any business
operations substantially different from and unrelated to its
present business activities; (3) not to create, assume, or suffer
any liens, except certain permitted liens; (4) not to liquidate,
dissolve, or enter into any merger, or sell, transfer, assign, or
otherwise dispose of assets in a single transaction or series of
transactions, except, generally, in the ordinary course of
business; (5) not to make any acquisitions except under the terms
set out in a revolving credit agreement; (6) not to enter into
certain operating leases; (7) not to prepay, defease, refinance,
or repurchase certain indebtedness; and (8) not to enter into
certain inventory repurchase agreements.
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