<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the six months ended June 30, 1996 Commission File No. 0-8841
The Pioneer Group, Inc.
-----------------------
(exact name of registrant as specified in its charter)
Delaware 13-5657669
- --------------------------------------------------------------------------------
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
60 State Street, Boston, Massachusetts 02109
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 742-7825
--------------
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changes since last
report.
Indicate by checkmark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days.
X Yes No
----- -----
As of June 30, 1996, there were 24,961,333 shares of the Registrant's Common
Stock, $.10 par value per share, issued and outstanding.
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
THE PIONEER GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands Except Per Share Amounts)
<CAPTION>
6/30/96 12/31/95
------- --------
ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents, at cost which approximates value ................ $ 31,884 $ 27,809
Investment in marketable securities, at value .............................. 4,821 7,630
Receivables:
From securities brokers and dealers
for sales of mutual fund shares ..................................... 11,327 12,385
For gold shipments .................................................... 2,292 5,410
Other ................................................................. 35,710 14,085
Mining inventory ........................................................... 20,730 15,605
Other current assets ....................................................... 12,169 8,295
-------- --------
Total current assets ............................................... 118,933 91,219
-------- --------
NONCURRENT ASSETS:
Mining operations:
Mining equipment and facilities (net of accumulated
depreciation of $48,303 in 1996 and $42,631 in 1995) ........... 78,179 46,980
Deferred mining development costs (net of accumulated
amortization of $12,333 in 1996 and $11,420 in 1995) ........... 9,460 9,622
Cost of acquisition in excess of net assets (net of accumulated
amortization of $7,858 in 1996 and $6,501 in 1995) ................... 23,622 24,784
Long-term venture capital investments, at value
(cost $44,750 in 1996 and $38,802 in 1995) ............................ 48,845 44,520
Long-term investments ...................................................... 13,948 16,934
Timber project in development:
Timber equipment and facilities ....................................... 16,922 8,130
Deferred timber development costs ..................................... 14,014 19,653
Timber inventory ...................................................... 3,296 1,487
Building in progress ....................................................... 18,637 12,239
Furniture, equipment, and leasehold improvements (net of accumulated
depreciation and amortization of $11,927 in 1995 and $10,558 in 1995) . 13,681 13,766
Dealer advances ............................................................ 29,981 17,095
Other noncurrent assets .................................................... 19,284 12,640
-------- --------
Total noncurrent assets ............................................ 289,869 227,850
-------- --------
$408,802 $319,069
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Payable to funds for shares sold ........................................... $ 11,304 $ 12,369
Accrued expenses and accounts payable ...................................... 56,811 28,947
Accrued income taxes ....................................................... -- 1,169
Current portion of notes payable ........................................... 6,871 56,053
-------- --------
Total current liabilities .......................................... 74,986 98,538
-------- --------
NONCURRENT LIABILITIES:
Notes payable, net of current portion ...................................... 101,937 11,048
Deferred income taxes, net ................................................. 24,150 14,503
-------- --------
Total noncurrent liabilities ....................................... 126,087 25,551
-------- --------
Total liabilities .................................................. 201,073 124,089
-------- --------
Minority interest .......................................................... 51,848 44,637
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $10 par value; authorized 60,000,000 shares;
issued 24,961,333 shares in 1996 and 24,833,508 shares in 1995 ...... 2,496 2,483
Paid-in capital ....................................................... 10,659 7,660
Retained earnings ..................................................... 147,248 143,603
-------- --------
160,403 153,746
Less - Deferred cost of restricted common stock issued ................ (4,522) (3,403)
-------- --------
Total stockholders' equity ......................................... 155,881 150,343
-------- --------
$408,802 $319,069
======== ========
</TABLE>
The Company's Annual Report on Form 10-K should be read in conjunction with
these financial statements
<PAGE> 3
THE PIONEER GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues and sales:
Investment management fees ............................. $24,017 $15,341 $42,865 $30,413
Underwriting commissions and distribution fees ......... 4,330 1,893 8,186 3,675
Shareholder services fees .............................. 6,288 5,561 12,377 11,105
Trustee fees and other income .......................... 6,487 1,678 12,553 3,700
------- ------- ------- -------
Revenues from financial services businesses .......... 41,122 24,473 75,981 48,893
Gold sales ............................................. 16,522 22,080 37,759 43,339
------- ------- ------- -------
Total revenues and sales .............................. 57,644 46,553 113,740 92,232
------- ------- ------- -------
Costs and expenses:
Management, distribution, shareholder service
and administrative expenses ........................... 33,035 21,752 62,225 42,743
Gold mining operating costs and expenses ............... 17,508 16,242 34,153 30,655
------- ------- ------- -------
Total costs and expenses .............................. 50,543 37,994 96,378 73,398
------- ------- ------- -------
Other (income) expense:
Unrealized and realized gains on venture capital
and marketable securities investments, net ............. (145) (4,148) (362) (4,659)
Interest expense ....................................... 738 99 1,158 531
Other, net ............................................. 802 182 1,223 354
------- ------- ------- -------
Total other (income) expense .......................... 1,395 (3,867) 2,019 (3,774)
------- ------- ------- -------
Income before provision for federal, state and
foreign income taxes and minority interest .............. 5,706 12,426 15,343 22,608
------- ------- ------- -------
Provision for federal, state and foreign income taxes ...... 1,896 4,742 5,808 8,644
------- ------- ------- -------
Income before minority interest ............................ 3,810 7,684 9,535 13,964
------- ------- ------- -------
Minority interest .......................................... 290 355 901 838
------- ------- ------- -------
Net income ................................................. $ 3,520 $ 7,329 $ 8,634 $13,126
======= ======= ======= =======
Earnings per share ......................................... $ 0.14 $ 0.29 $ 0.34 $ 0.52
======= ======= ======= =======
Dividends per share ........................................ $ 0.10 $ 0.10 $ 0.20 $ 0.20
======= ======= ======= =======
Weighted average common and
common equivalent shares outstanding ....................... 25,458,000 25,310,000 25,458,000 25,260,000
========== ========== ========== ==========
</TABLE>
The Company's annual report on Form 10-K should be read in conjunction with
these financial statements
<PAGE> 4
THE PIONEER GROUP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
(DOLLARS IN THOUSANDS) SIX MONTHS ENDED
(UNAUDITED) JUNE 30,
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................................................... $ 8,634 $ 13,126
-------- --------
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ............................................................. 13,181 10,851
Unrealized and realized gains on venture capital and marketable securities, net ........... (362) (4,659)
Provision on (Equity in earnings of) other investments .................................... 55 (501)
Restricted stock plan expense ............................................................. 754 584
Deferred income taxes ..................................................................... 9,647 (4,481)
Minority interest ......................................................................... 901 838
Changes in operating assets and liabilities:
Receivable from securities brokers and dealers for sales of mutual fund shares ............ 1,058 (10)
Receivables for gold shipments ............................................................ 3,118 872
Other receivables ......................................................................... (21,625) 55
Mining inventory .......................................................................... (5,125) (4,894)
Other current assets ...................................................................... (3,874) 33
Other assets .............................................................................. (2,727) (745)
Payable to funds for shares sold .......................................................... (1,065) 319
Accrued expenses and accounts payable ..................................................... 27,864 5,303
Accrued income taxes ...................................................................... (668) 4,874
-------- --------
TOTAL ADJUSTMENTS ...................................................................... 21,132 8,439
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES .............................................. 29,766 21,565
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of mining equipment and facilities .................................................. (37,211) (7,132)
Deferred mining development costs, net ....................................................... (751) (122)
Additions to furniture, equipment and leasehold improvements ................................. (2,089) (3,691)
Building in progress ......................................................................... (6,398) --
Investments in marketable securities ......................................................... (3,382) (5,179)
Proceeds from sale of marketable securities .................................................. 6,292 2,782
Long-term venture capital investments ........................................................ (7,600) (1,662)
Proceeds from sale of venture capital investments ............................................ 3,863 3,981
Deferred timber development costs ............................................................ 5,586 (5,851)
Timber equipment and facilities .............................................................. (8,792) (3,966)
Timber inventory ............................................................................. (1,809) --
Other investments ............................................................................ (3,972) (3,696)
Cost of acquisition in excess of net assets .................................................. (194) (96)
Long-term investments ........................................................................ (1,880) --
Proceeds from sale of long-term investments .................................................. 4,539 --
Investment in Russian Voucher Fund ........................................................... -- (10,000)
Investment in Management Company of Russian Voucher Fund ..................................... -- (2,022)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES .................................................. (53,798) (36,654)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid ............................................................................... (4,989) (4,961)
Distributions to minority interest holder of gold mining subsidiary .......................... -- (350)
Distributions to limited partners of venture capital subsidiary .............................. (23) (12)
Exercise of stock options .................................................................... 254 151
Restricted stock plan award .................................................................. 7 12
Employee stock purchase plan ................................................................. 377 --
Dealer advances .............................................................................. (15,559) (5,950)
Amounts raised by venture capital investment partnerships .................................... 6,333 --
Borrowings ................................................................................... 119,733 29,751
Repayments of notes payable .................................................................. (78,026) (12,321)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES .............................................. 28,107 6,320
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............................................. 4,075 (8,769)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................................................. 27,809 23,118
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ....................................................... $ 31,884 $ 14,349
======== ========
</TABLE>
THE COMPANY'S ANNUAL REPORT ON FORM 10-K SHOULD BE READ IN CONJUNCTION WITH
THESE FINANCIAL STATEMENTS
<PAGE> 5
THE PIONEER GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
NOTE 1 - NATURE OF OPERATIONS AND ORGANIZATION
The Pioneer Group, Inc., and its subsidiaries (collectively, the "Company"), are
engaged in financial services businesses in the United States and several
foreign countries and in a number of natural resource development projects,
including a gold mining venture in the Republic of Ghana and three timber
ventures in the Russian Far East.
In the United States, the Company conducts four lines of financial services
businesses: (i) Pioneering Management Corporation ("PMC") serves as investment
manager to the 29 U.S. registered investment companies in the Pioneer Family of
Mutual Funds and several institutional accounts, (ii) Pioneer Funds Distributor,
Inc. ("PFD") serves as distributor of shares of the Pioneer Family of Mutual
Funds, (iii) Pioneer Capital Corporation ("PCC"), and its subsidiaries, engage
in venture capital investing and management activities, and (iv) Pioneering
Services Corporation serves as shareholder servicing agent for the Pioneer
Family of Mutual Funds.
The Company's international financial services businesses include investment
operations in: (i) Warsaw, Poland, where the Company manages and distributes
units of three mutual funds, owns 50% of a unitholder servicing agent and
manages an institutional venture capital fund, (ii) Dublin, Ireland, where the
Company distributes shares of, manages and services three offshore investment
funds, sold primarily in Western Europe, and (iii) Moscow, Russia, where the
Company provides financial services, including investment advisory, investment
banking and brokerage services, and where the Company owns 51% of the First
Voucher Fund, the largest Russian voucher investment fund. In addition, the
Company has investment operations in the Czech Republic and has invested in
investment management operations in India and Taiwan.
The Company's wholly owned subsidiary, Pioneer Goldfields Limited ("PGL"),
conducts mining and exploration activities in the Republic of Ghana and
exploration activities elsewhere in Africa. PGL's principal asset is its
ownership of 90% of the outstanding shares of Teberebie Goldfields Limited
("TGL"), which operates a gold mine in the western region of the Republic of
Ghana. The Republic of Ghana owns the remaining 10% of TGL. The Company also
participates in several natural resource development ventures in Russia,
including a project pursuing the development of timber production in the Russian
Far East, in which the Company has a 76% direct interest and a 1.5% indirect
interest.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of The Pioneer Group, Inc. and its
subsidiaries (the "Company") conform to generally accepted accounting
principles. The Company has not changed any of its principal accounting policies
from those stated in the Annual Report on Form 10-K for the year ended December
31, 1995. The footnotes to the financial statements reported in the 1995 Annual
Report on Form 10-K are incorporated herein by reference, except to the extent
that any such footnote is updated by the following:
<PAGE> 6
Certain reclassifications have been made to the accompanying 1995 consolidated
financial statements to conform with the 1996 presentation.
Income taxes paid were $522,000 and $7,948,000 for the six months ended June 30,
1996, and June 30, 1995, respectively. In addition, interest paid was $3,166,000
for the six months ended June 30, 1996, and $1,089,000 for the six months ended
June 30, 1995. Included in these interest paid amounts were $1,491,000 for the
six months ended June 30, 1996, that was capitalized related to the development
of the Company's building in progress and Russian timber operations.
NOTE 3 - MINING INVENTORY
<TABLE>
Mining inventories consist of the following:
<CAPTION>
June 30, December
1996 31, 1995
------- --------
(Dollars in Thousands)
<S> <C> <C>
Gold-in-process $ 2,100 $ 1,485
Materials and supplies 18,630 14,120
------- -------
$20,730 $15,605
======= =======
</TABLE>
NOTE 4 - MINING EQUIPMENT
<TABLE>
<CAPTION>
June 30, December
1996 31, 1995
------- --------
(Dollars in Thousands)
<S> <C> <C>
Mobile mine equipment $ 49,602 $ 31,482
Crusher 18,995 18,460
Processing plant and laboratory 4,964 4,911
Leach pads and ponds 17,087 15,726
Building and civil works 10,608 10,595
Office furniture and equipment 1,730 1,731
Motor vehicles 2,184 1,756
Construction in progress 19,484 3,161
Other assets 1,828 1,789
-------- --------
126,482 89,611
Less: accumulated depreciation (48,303) (42,631)
-------- --------
Total mining equipment $ 78,179 $ 46,980
======== ========
</TABLE>
NOTE 5 - INCOME TAXES
The Company adopted the accounting and disclosure rules specified by Statement
of Financial Accounting Standards ("SFAS No. 109") "Accounting for Income Taxes"
as of January 1, 1993. Under SFAS No. 109, deferred tax assets and liabilities
are recognized for the expected future tax consequences of events that have been
included in the financial statements or tax
<PAGE> 7
returns. The amounts of deferred tax assets or liabilities are based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the years in which the
differences are expected to reverse. Deferred tax assets consist principally of
deferred interest on debt paid to the Company by TGL and on loans to Forest
Starma (the Company's Russian timber venture), non-qualified pension expense,
deferred rent expense, and foreign tax credits' temporary differences. Deferred
tax liabilities include principally deferred foreign income taxes, dealer
advances and cumulative unrealized gains related to the Company's venture
capital investment portfolio.
NOTE 6 -- STOCK PLANS
The Company records stock compensation in accordance with APB 25. The Company
has a Restricted Stock Plan (the "1995 Plan") to provide incentives to certain
employees who have contributed and are expected to contribute materially to the
success of the Company and its subsidiaries. An aggregate total of 600,000
shares of the Company's stock may be awarded to participants under the 1995 Plan
at a price to be determined by the Board of Directors, generally $.10 per share.
The 1995 Plan expires in January 2000. The Company's 1990 Restricted Stock Plan
(the "1990 Plan") expired in January 1995. The 1995 Plan and the 1990 Plan are
collectively referred to as the "Plans."
The following tables summarize restricted stock plan activity for the Plans
during the first six months of 1996.
<TABLE>
Unvested Shares
---------------
<CAPTION>
1995 Plan 1990 Plan Total
--------- --------- -----
<S> <C> <C> <C>
Balance at 12/31/95 600 401,969 402,569
Awarded 74,690 -- 74,690
Vested (3,305) (131,588) (134,893)
Forfeited (870) (6,595) (7,465)
------ ------- -------
Balance at 6/30/96 71,115 263,786 334,901
====== ======= =======
</TABLE>
<TABLE>
Vested Shares
-------------
<CAPTION>
1995 Plan 1990 Plan Total
--------- --------- -----
<S> <C> <C> <C>
Balance at 12/31/95 3,337 353,450 356,787
Vested 3,305 131,588 134,893
----- ------- -------
Balance at 6/30/96 6,642 485,038 491,680
===== ======= =======
</TABLE>
The Company awarded 3,937 shares in 1995 under the 1995 Plan. In addition, the
Company awarded 123,400 shares in 1995 and 101,460 shares in 1994 under the 1990
Plan.
<PAGE> 8
The participant's right to resell the awarded stock under the Plans, is
generally restricted as to 100% of the shares awarded during the first two years
following the award, 60% during the third year and 20% less each year
thereafter. The Company may repurchase unvested restricted shares at $.10 per
share upon termination of employment.
Awards under the Plans are compensatory, and, accordingly, the difference
between the award price and the market value of the shares under the Plans at
the award date, less the applicable tax benefit, is being amortized on a
straight-line basis over a five-year period.
The Company also maintains the 1988 Stock Option Plan (the "Option Plan"),
pursuant to which options on the Company's stock may be granted to key employees
of the Company. The Company has reserved an aggregate of 2,400,000 shares for
issuance under the Option Plan. Both incentive stock options intended to qualify
under Section 422A of the Internal Revenue Code of 1986 and non-statutory
options not intended to qualify for incentive stock option treatment
("non-statutory options") may be granted under the Option Plan. The Option Plan
is administered by the Board of Directors or a committee of disinterested
directors designated by the Board (the "Committee") and unless the Option Plan
is earlier terminated, no option may be granted after August 1, 1998. The option
price per share is determined by the Board of Directors or the Committee, but
(i) in the case of incentive stock options, may not be less than 100% of the
fair market value of such shares on the date of option grant, and (ii) in the
case of non-statutory options, may not be less than 90% of the fair market value
on the date of option grant. Options issuable under the Option Plan become
exercisable as determined by the Board of Directors or the Committee not to
exceed ten years from the date of grant. Options granted to date vest over five
years at an annual rate of 20% on each anniversary date of the date of the
grant.
<TABLE>
The following table summarizes all stock option activity since December 31,
1993.
<CAPTION>
Number of Exercise
shares price per share
--------- ---------------------
<S> <C> <C>
Outstanding at December 31, 1993 1,635,000 $ 4.188 - $12.000
Granted 191,500 15.875 - 21.250
Exercised (32,000) 4.188
--------- -----------------
Outstanding at December 31, 1994 1,794,500 $ 4.188 - $21.250
Granted 207,500 26.500 - 27.500
Exercised (25,000) 6.000 - 6.125
--------- -----------------
Outstanding at December 31, 1995 1,977,000 $ 4.188 - $27.500
Granted 53,000 26.750 - 28.625
Exercised (44,000) 4.188 - 7.063
--------- -----------------
Outstanding at June 30, 1996 1,986,000 $ 4.188 - $28.625
========= =================
</TABLE>
At June 30, 1996, options to purchase 1,326,900 shares of common stock had
vested and were unexercised under the Option Plan.
On May 4, 1995, the Company adopted the 1995 Employee Stock Purchase Plan (the
"1995 Purchase Plan"), which qualifies as an "Employee Stock Purchase Plan"
within the meaning of
<PAGE> 9
Section 423 of the Internal Revenue Code of 1986. An aggregate total of 500,000
shares of common stock have been authorized for issuance under the 1995 Purchase
Plan, to be implemented through one or more offerings, each approximately six
months in length beginning on the first business day of each January and July.
The price at which shares may be purchased during each offering will be the
lower of (i) 85% of the closing price of the common stock as reported on the
NASDAQ National Market (the "closing price") on the date that the offering
commences or (ii) 85% of the closing price of the common stock on the date the
offering terminates. In 1995, the Company issued 18,228 shares under the 1995
Purchase Plan. Through June 30, 1996, the Company issued 16,600 shares under the
1995 Purchase Plan.
NOTE 7 - NET CAPITAL
As a broker-dealer, Pioneer Funds Distributor, Inc. ("PFD"), is subject to the
Securities and Exchange Commission's regulations and operating guidelines which,
among other things, require PFD to maintain a specified amount of net capital,
as defined, and a ratio of aggregate indebtedness to net capital, as defined,
not exceeding 15 to 1. Net capital and the related ratio of aggregate
indebtedness to net capital may fluctuate on a daily basis. PFD's net capital,
as computed under Rule 15c3-1, was $2,502,074 at June 30, 1996, which exceeded
required net capital of $1,062,112 by $1,439,962. The ratio of aggregate
indebtedness to net capital at June 30, 1996, was 6.37 to 1.
PFD is exempt from the reserve requirements of Rule 15c3-3, since its
broker-dealer transactions are limited to the purchase, sale and redemption of
redeemable securities of registered investment companies. All customer funds are
promptly transmitted and all securities received in connection with activities
as a broker-dealer are promptly delivered. PFD does not otherwise hold funds or
securities for, or owe money or securities to, customers.
NOTE 8 - BENEFIT PLANS
The Company and its subsidiaries have two defined contribution benefit plans for
eligible employees: a retirement benefit plan and a savings and investment plan
("the Benefit Plans") qualified under section 401 of the Internal Revenue Code
of 1986. The Company makes contributions to a trustee, on behalf of eligible
employees, to fund both the retirement benefit and the savings and investment
plans. The Company's expenses under the Benefit Plans were $1,255,000 for the
six months ended June 30, 1996, and $1,015,000 for the six months ended June 30,
1995.
Both of the Company's qualified Benefit Plans described above cover all
full-time employees who have met certain age and length of service requirements.
Regarding the retirement benefit plan, the Company contributes an amount which
would purchase a certain targeted monthly pension benefit at the participant's
normal retirement date. In connection with the savings and investment plan,
participants can voluntarily contribute up to 10% of their compensation to the
plan, and the Company will match this contribution up to 2%.
NOTE 9 - RELATED PARTY TRANSACTIONS
Certain officers and/or directors of the Company and its subsidiaries are
officers and/or trustees of the Pioneer mutual funds and the Company's
international mutual funds. Investment management fees earned from the mutual
funds were approximately $40,387,000 for the six months ended June 30, 1996, and
$28,836,000 for the six months ended June 30, 1995.
<PAGE> 10
Underwriting commissions and distribution fees earned from the sales of mutual
funds shares were approximately $8,186,000 for the six months ended June 30,
1996, and $3,675,000 for the six months ended June 30, 1995, respectively.
Shareholder services fees earned from the mutual funds were approximately
$12,377,000 for the six months ended June 30, 1996, and $11,105,000 for the six
months ended June 30, 1995.
Within the Pioneer mutual funds, revenues from Pioneer II were approximately
$18,708,000 for the six months ended June 30, 1996, and $15,628,000 for the six
months ended June 30, 1995. Revenues from Pioneer Fund were $9,714,000 for the
six months ended June 30, 1996, and $7,909,000 for the six months ended June 30,
1995.
Certain partners of Hale and Dorr, the Company's legal counsel, are officers
and/or directors of the Company and its subsidiaries. Amounts paid to Hale and
Dorr for legal services were $795,000 for the six months ended June 30, 1996,
and $959,000 for the six months ended June 30, 1995.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
U.S. rental expense was $1,620,000 for the six months ended June 30, 1996, and
$1,591,000 for the six months ended June 30, 1995. Future minimum payments under
the leases amount to approximately $1,290,000 for the last six months of 1996,
$3,423,000 in 1997, $3,514,000 in 1998, $3,439,000 in 1999, $3,293,000 in 2000,
$3,372,000 in 2001 and $3,365,000 thereafter. These future minimum payments
include estimated annual operating expenses of approximately $498,000 in the
last six months of 1996, and $1,529,000 thereafter.
The Company is contingently liable to the Investment Company Institute Mutual
Insurance Company for unanticipated expenses or losses in an amount not to
exceed $500,000. Two thirds of this amount is secured by an irrevocable standby
letter of credit with a bank.
In September 1995, the Overseas Private Investment Corporation ("OPIC") executed
a commitment letter with TGL and the Company pursuant to which OPIC agreed,
subject to the fulfillment of certain conditions, to finance up to $54 million
in connection with the Phase III expansion. Such commitment expires on October
31, 1996. As of August 13, 1996, TGL and the Company have not executed
definitive loan agreements with respect to such OPIC guaranteed financing and
there can be no assurance that such financing will become available, or that it
will be available on terms acceptable to TGL and the Company. As a result of
delays associated with the OPIC guaranteed financing, TGL has sought and
obtained alternative financing sources as described below. Accordingly, TGL has
reduced the proposed amount of the OPIC guaranteed financing to $19 million.
TGL has received credit approval from Caterpillar Financial Services
Corporation, a wholly owned subsidiary of Caterpillar Inc. (collectively,
"Caterpillar"), pursuant to which Caterpillar has agreed, subject to the
fulfillment of certain conditions, to provide a revolving credit facility of up
to $21 million to finance the purchase of Caterpillar and other mining
equipment. During the second quarter of 1996, Caterpillar issued disbursements,
at TGL's request, for $14.1 million of such facility. TGL is currently
negotiating with Caterpillar to obtain an additional $6.4 million disbursement
under the credit facility. There can be no assurance that TGL will be able to
obtain similar or satisfactory terms for subsequent tranches of the Caterpillar
credit facility. On March 6, 1996, TGL executed a loan agreement with Enskilda,
a division of Skandinaviska Enskilda Banken, pursuant to which Enskilda has
agreed to provide a direct loan of Swedish Krona 94.5 million (approximately
$14.0 million) to finance the gyratory crusher and related equipment procured
from Svedala Crushing and Screening AB. As of August 2, 1996, SEK 30.9 million
was drawn down (approximately $4.6 million). This loan is guaranteed by the
Swedish
<PAGE> 11
Export Credits Board.
The Company is committed to additional capital contributions of $1.8 million to
Pioneer Poland U.S. L.P. and $1.8 million to Pioneer Poland U.K. L.P. These
contributions are due upon call by Management as prior contributions become 80%
invested. At June 30, 1996, the Company was committed to additional capital
contributions of $2.2 million to Pioneer Ventures Limited Partnership II, a U.S.
venture capital fund.
NOTE 11- NOTES PAYABLE
<TABLE>
Notes payable of the Company consists of the following:
<CAPTION>
June 30, December 31,
1996 1995
---- ----
(Dollars in Thousands)
<S> <C> <C>
Revolving Credit Agreement ............................. $79,000 --
Lines of Credit ........................................ -- $52,000
Preferred shares financing related to the Russian
investment operations, principal payable in three
annual installments of $2,000,000 through 1998,
interest payable at 5% ................................. 4,000 6,000
Small Business Administration ("SBA")
financing, notes payable to a bank,
interest payable semi-annually at
rates ranging from 6.12% to 9.8%,
principal due in 1998 through 2003 ..................... 4,950 4,950
Note payable to a bank guaranteed by the
Swedish Exports Credits Guarantee Board,
principal payable in semi-annual installments
of $812,000 through March 31, 1997,
interest payable at 5.77%, secured by
equipment .............................................. 1,624 2,436
Notes payable to a bank, guaranteed by the
Company, principal payable in semi-annual
installments, of $214,000 through
November 30, 1999, no interest payable,
secured by equipment ................................... 1,501 1,715
</TABLE>
<PAGE> 12
<TABLE>
<S> <C> <C>
Note payable to a bank, guaranteed by the
Swedish Exports Credits Guarantee Board,
principal payable in ten semi-annual
installments of $364,000 beginning no
later than July 31, 1997, interest payable
at 6.42% secured by equipment ...................... 3,642 --
Note payable to a supplier, principal payable
in quarterly installments of $336,000 through
April 15, 2001, interest payable at 7.85%,
secured by equipment ............................... 6,713 --
Note payable to a supplier, principal and
interest payable in quarterly installments of
$102,000 through April 15, 2001, interest
payable at 7.85%, secured by equipment ............. 1,680 --
Note payable to a supplier, principal and
interest payable in quarterly installments
of $285,000 through May 30, 2001,
interest payable at 8.00%,
secured by equipment ............................... 5,698 --
-------- --------
108,808 67,101
Less: Current portion .............................. (6,871) (56,053)
-------- --------
$101,937 $ 11,048
======== ========
</TABLE>
In June 1996, the Company entered into an agreement with a syndicate of
commercial banks for a senior credit facility (the "Credit Facility") in the
amount of $115 million. Under the Credit Facility, the Company may borrow up to
$35 million (the "B-Share Revolver") to finance dealer advances relating to
sales of back-end load shares of the Company's domestic mutual funds. See Note
14 below for further discussion on dealer advances. The B-share Revolver is
subject to annual renewal by the Company and the commercial banks. In the event
the B-share Revolver is not renewed at maturity, it will automatically convert
into a five-year term loan. Advances under the B-share Revolver bear interest,
at the Company's option, at (a) the higher of the bank's base lending rate or
the federal funds rate plus 0.50% or (b) LIBOR plus 1.25%. The Credit Facility
also provides that the Company may borrow up to $80 million for general
corporate purposes (the "Corporate Revolver"). The Corporate Revolver is payable
in full on June 11, 2001. Advances under the Corporate Revolver bear interest,
at the Company's option, at (a) the higher of the bank's base lending rate or
the federal funds rate plus 0.50% or (b) LIBOR plus the applicable margin tied
to the Company's financial performance, of either 1.25%, 1.50% or 1.75% in the
first year of the agreement and 0.75%, 1.25%, 1.50% or 1.75% for the remaining
term as defined under the agreement. The Credit Facility provides that the
Company must pay additional interest at the rate of 0.375% per annum of the
unused portion of the facility and an annual arrangement fee of $35,000. The
commitment fees were approximately $0.7 million. At June 30, 1996, the Company
had borrowed $51 million under the Corporate Revolver and $28 million under the
B-share Revolver. The Company used the proceeds from borrowings under the new
credit facility to repay in full amounts previously borrowed under the lines of
credit with a commercial bank. For the six months ended June 30,
<PAGE> 13
1996, the weighted average interest rate on borrowings under the Credit
Facility and lines of credit outstanding was 6.9%.
The Credit Facility contains restrictions that limit, among other things,
encumbrances on the assets of the Company's domestic mutual fund subsidiaries
and certain mergers and sales of assets. Additionally, the Credit Facility
requires that the Company meet certain financial covenants including covenants
that require the Company to maintain certain minimum ratios with respect to debt
to cash flow and interest payments to cash flow and a minimum tangible net
worth, all as defined in the Credit Facility. As of June 30, 1996, the Company
was in compliance with all applicable covenants of the Credit Facility.
Under the Credit Facility, the Company is required to maintain interest rate
protection agreements covering at least 60% of the outstanding indebtedness
under the B-share Revolver. As of June 30, 1996, the Company entered into two
five-year interest rate swap agreements with a member of the Company's banking
group which has effectively fixed the interest rate on notional amounts of $40
million and $20 million. Under these agreements, the Company will pay the bank
fixed rates of 6.975% and 6.74%, respectively, plus the applicable margin, on
the notional principal. The bank will pay the Company interest on the notional
principal at the current variable rate stated under the B-share Revolver. The
Company had accrued approximately $29,000 of interest expense on the swap
agreements at June 30, 1996. The fair value of the these agreements was $786,000
at June 30, 1996, which amount represents the estimated amount the Company would
be obligated to pay to terminate the agreements.
<TABLE>
Maturities of notes payable at June 30, 1996 for each of the next five years and
thereafter are as follows (dollars in thousands):
<CAPTION>
<S> <C>
7/1/96-6/30/97 $ 6,871
7/1/97-6/30/98 7,101
7/1/98-6/30/99 3,972
7/1/99-6/30/00 3,785
7/1/00-6/30/01 84,100
Thereafter 2,979
--------
$108,808
========
</TABLE>
NOTE 12 - MAJOR CUSTOMERS AND EXPORT SALES
During the six months ended June 30, 1996, gold sales aggregated $37.8 million.
During this period, gold shipments from TGL in Ghana to two unaffiliated
European refiners accounted for $15.7 million and $22.1 million of total gold
sales, respectively, representing 100% of such total gold sales.
During the six months ended June 30, 1995, gold sales aggregated $43.3 million.
During this period, gold shipments from TGL in Ghana to two unaffiliated
European refiners accounted for $24.4 million and $18.9 million of total gold
sales, respectively, representing 100% of such total gold sales.
NOTE 13 - ACQUISITIONS
<TABLE>
Cost in excess of net assets acquired, net, as reflected in the accompanying
consolidated balance sheets, consists of the following:
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
(Dollars in Thousands)
<S> <C> <C>
Mutual of Omaha Fund $19,709 $20,768
Management Company
Russian investment 2,134 2,050
operations
Gold mining operations 1,779 1,966
------- -------
$23,622 $24,784
------- -------
</TABLE>
<PAGE> 14
NOTE 14 - DEALER ADVANCES
Certain of the Pioneer Family of Mutual Funds maintain a multi-class share
structure, whereby the participating funds offer both the traditional front-end
load shares (Class A shares) and back-end load shares (Class B and Class C
shares). Back-end load shares do not require the investor to pay any sales
charge unless there is a redemption before the expiration of the minimum holding
period which ranges from three to six years in the case of Class B shares and is
one year in the case of C shares. However, the Company pays upfront sales
commissions (dealer advances) to broker-dealers ranging from 2% to 4% of the
sales transaction amount on Class B shares and 1% on Class C shares. The
participating Funds pay the Company distribution fees of 0.75% and service fees
of 0.25%, per annum of their net assets invested in Class B and Class C shares,
subject to annual renewal by the participating Fund's Board of Trustees. In
addition, the Company is paid a contingent deferred sales charge (CDSC) on B
and C-shares redeemed within the minimum holding period. The CDSC is paid based
on declining rates ranging from 2% to 4% on the purchases of Class B shares and
1% for Class C shares. The Company capitalizes and amortizes B share dealer
advances for book purposes over periods which range from three to six years
depending on the participating Fund. The Company deducts the dealer advances in
full for tax purposes in the year such advances are paid. Distribution and
service fees received by the Company from participating Funds are recorded in
income as earned. CDSC received by the Company from redeeming shareholders
reduce unamortized dealer advances directly. For the six months ended June 30,
1996, and June 30, 1995, the Company paid dealer advances in the amount of $15.6
million and $6.0 million, respectively.
NOTE 15 - FINANCIAL INFORMATION BY BUSINESS SEGMENT
Total revenues and income (loss) by business segment, excluding intersegment
transactions, were as follows:
<PAGE> 15
<TABLE>
NOTE 15 - FINANCIAL INFORMATION
BY BUSINESS SEGMENT
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<CAPTION>
MUTUAL FUND
INVESTMENT UNDERWRITING VENTURE CAPITAL SHAREHOLDER
MANAGEMENT AND OTHER INVESTMENTS SERVICES
---------- --------- ----------- --------
SIX MONTHS
- ----------
ENDED 6/30/96 6/30/95 6/30/96 6/30/95 6/30/96 6/30/95 6/30/96 6/30/95
- ----- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES &
OTHER INCOME $44,808 $30,467 $ 16,780 $ 6,994 $ 1,767 $ 285 $12,626 $11,147
======= ======= ======== ======== ======= ======= ======= =======
INCOME (LOSS)
BEFORE INCOME
TAXES & MINORITY (1) (1) (2) (2)
INTEREST $25,194 $19,851 $(11,692) $(12,983) $(1,163) $ 2,651 $ 973 $ 1,272
======= ======= ======== ======== ======= ======= ======= =======
DEPRECIATION &
AMORTIZATION $ 931 $ 519 $ 4,647 $ 2,537 $ 62 $ 53 $ 1,130 $ 775
======= ======= ======== ======== ======= ======= ======= =======
CAPITAL
EXPENDITURES $ 6,814 $ 199 $ 863 $ 1,666 $ 28 $ 35 $ 782 $ 1,791
======= ======= ======== ======== ======= ======= ======= =======
IDENTIFIABLE
ASSETS AT
QUARTER END $79,288 $33,483 $104,953 $ 35,222 $63,358 $52,198 $ 8,792 $ 7,665
======= ======= ======== ======== ======= ======= ======= =======
GOLD MINING OTHER CONSOLIDATED
----------- ----- ------------
SIX MONTHS \
- ----------
ENDED 6/30/96 6/30/95 6/30/96 6/30/95 6/30/96 6/30/95
- ----- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
REVENUES &
OTHER INCOME $ 37,759 $43,339 $ 0 $ 0 $113,740 $ 92,232
======== ======= ======= ======= ======== ========
INCOME (LOSS)
BEFORE INCOME
TAXES & MINORITY (3) (3) (4) (4)
INTEREST $ 3,254 $12,171 $(1,223) $ (354) $ 15,343 $ 22,608
======== ======= ======= ======= ======== ========
DEPRECIATION &
AMORTIZATION $ 7,112 $ 7,551 $ 53 $ 0 $ 13,935 $ 11,435
======== ======= ======= ======= ======== ========
CAPITAL
EXPENDITURES $ 37,211 $ 7,132 $ 8,792 $ 3,966 $ 54,490 $ 14,789
======== ======= ======= ======= ======== ========
IDENTIFIABLE
ASSETS AT
QUARTER END $114,078 $79,168 $38,333 $31,407 $408,802 $239,143
======== ======= ======= ======= ======== ========
- ----------
<FN>
(1) Net of interest expense related to third parties of approximately $888 for the six months ended June 30, 1996
and $152 for the six months ended June 30, 1995.
(2) Net of interest expense related to third parties of approximately $201 for the six months ended June 30, 1996
and $200 for the six months ended June 30, 1995.
(3) Net of interest expense related to third parties of approximately $69 for the six months ended June 30, 1996
and $179 for the six months ended June 30, 1995.
(4) Net of expense related to the Company of $325 for the six months ended June 30, 1996 and $0 for the six months
ended June 30, 1995. These expenses were related to the Company's Russia natural resources ventures.
</TABLE>
<PAGE> 16
PART I - FINANCIAL INFORMATION
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SUMMARY OF OPERATIONS
The Pioneer Group, Inc. (the "Company") reported second quarter 1996 earnings of
14 cents per share, 15 cents per share lower than earnings in the second quarter
of 1995. Second quarter results included earnings of 20 cents per share from the
Company's worldwide investment management businesses, up 12 cents per share from
the second quarter of 1995. These results included increased earnings of 12
cents per share from the domestic mutual fund operations and 3 cents from the
Russian investment operations, partially offset by decreased earnings of 3 cents
from the Polish mutual fund operations. The Company's worldwide venture capital
operations lost 1 cent per share in the second quarter of 1996 compared to
earnings of 8 cents in the second quarter of 1995, as venture capital earnings
in the 1995 period included significant portfolio write-ups. The Company's gold
mining operations, consisting of its wholly owned subsidiary, Pioneer Goldfields
Limited ("PGL"), and PGL's 90% owned subsidiary, Teberebie Goldfields Limited
("TGL"), lost 3 cents per share in the second quarter of 1996 versus earnings of
14 cents per share in the second quarter of 1995. The Company's various other
Russian natural resources businesses lost 2 cents per share in the second
quarter of 1996 compared to a loss of 1 cent in the second quarter of 1995.
Gross revenues in the second quarter of 1996 were $57.6 million, $11.1 million
higher than the second quarter of 1995.
The Company reported earnings of 34 cents per share for the six months ended
June 30, 1996, 18 cents per share lower than earnings for the six months ended
June 30, 1995. These results included earnings of 33 cents per share from the
Company's worldwide investment management businesses, up 15 cents per share from
the first half of 1995. Increased earnings of 15 cents per share from the
domestic mutual fund operations and 6 cents from the Russian investment
operations more than offset the decreased earnings of 5 cents from the Polish
mutual fund operations and corporate costs of 1 cent per share associated with
the Company's new mutual fund in the Czech Republic. The Company's worldwide
venture capital operations lost 3 cents per share in the first half of 1996
compared to earnings of 6 cents in the first half of 1995. Gold mining
operations earned 7 cents per share in the first six months of 1996 compared to
earnings of 29 cents per share in the first six months of 1995. The Company's
various other Russian natural resources businesses lost 3 cents per share in the
first half of 1996 compared to a loss of 1 cent in the first half of 1995. Gross
revenues in the first six months of 1996 were $113.7 million, $21.5 million
higher than the first six months of 1995.
FINANCIAL SERVICES BUSINESSES
RESULTS OF OPERATIONS
Revenues. The Company's worldwide financial services businesses have three
principal sources of revenues: fees derived from managing the 29 U. S.
registered investment companies in the Pioneer Family of Mutual Funds and
institutional accounts, fees from
<PAGE> 17
underwriting and distribution of mutual fund shares, and fees derived from
acting as shareholder servicing agent. The Company earns similar revenues from
its international investment operations in Poland, Russia, Ireland, the Czech
Republic, and from its joint ventures in India and Taiwan.
Revenues from the worldwide financial services businesses of $41.1 million and
$76 million for the second quarter and six months ended June 30, 1996, were
$16.6 million and $27.1 million higher, respectively, than revenues in the
comparable 1995 periods as a result of increases in all revenue categories as
discussed below.
Management fees of $24 million in the second quarter of 1996 were $8.7 million,
or 57%, higher than management fees in the second quarter of 1995. Three-fourths
of the increase resulted from higher management fees earned from the Company's
U.S. registered mutual funds. The shareholders of the Company's two largest U.S.
registered mutual funds approved management fee increases effective May 1, 1996.
The Company earned an additional $1.6 million of management fees in the second
quarter from these funds. The balance of the increase in management fees
resulted from an increase in assets in the U.S. registered mutual funds.
For the six months ended June 30, 1996, management fees were $42.9 million,
$12.5 million, or 41%, higher than management fees for the first six months of
1995, most of which resulted from increased management fees earned from the
Company's U.S. registered mutual funds.
Assets under management of $15.4 billion at June 30, 1996, increased by $1.6
billion over the 1995 year-end level and by $2.9 billion over the June 30, 1995
level. The $1.6 billion increase in assets under management since year end was
principally attributable to strong U.S. registered mutual fund net sales and a
higher stock market. The $2.9 billion increase since the second quarter of 1995
was largely attributable to a higher stock market. Since June 30, 1996, (through
August 9, 1996), assets under management have declined by approximately $0.3
billion, principally as a result of recent stock market conditions.
Underwriting commissions and distribution fees of $4.3 million in the second
quarter of 1996 were $2.4 million higher, or more than double, underwriting
commissions and distribution fees in the second quarter of 1995. Underwriting
commissions earned from sales of U.S. registered mutual funds increased by $0.8
million as a result of the significant increase in the sales of such funds. The
Company's U.S. registered mutual fund sales (including reinvested dividends) of
$842 million in the second quarter of 1996 were $432 million, or 105%, higher
than sales during the prior year's comparable period, while redemptions of $364
million increased by $95 million, or 35%. In the second quarter of 1996, the
Company had net sales of $478 million compared to $141 million in the second
quarter of 1995. Sales of Polish mutual funds increased from $10 million in the
second quarter of 1995 to $55 million in the second quarter of 1996.
Underwriting commissions on sales of the Polish mutual funds increased by $0.2
million as a result of
<PAGE> 18
the increased sales. Distribution fees increased by $1.4 million as a result of
increased average assets under management of the Company's back-end load funds.
For the six months ended June 30, 1996, underwriting commissions and
distribution fees of $8.2 million were $4.5 million higher, or more than double,
underwriting commissions and distribution fees for the first six months of 1995.
Underwriting commissions earned from sales of U.S. registered mutual funds
increased by $1.3 million as a result of the significant increase in the sales
of such funds. U.S. registered mutual fund sales of $1.5 billion for the first
half of 1996 were $729 million, or 93%, higher than sales during the prior
year's comparable period, while redemptions of $726 million increased by $208
million, or 40%. In the first six months of 1996, the Company had net sales of
$786 million compared to $265 million in the first six months of 1995. Sales of
Polish mutual funds were $87 million in the first half of 1996 versus $14
million in the first half of 1995. As a result of the increase in sales,
underwriting commissions increased by $0.9 million. The Company earned
the full broker-dealer commission on approximately 20% such sales. Distribution
fees increased by $2.3 million as a result of increased average assets under
management of the Company's back-end load funds.
Shareholder services fees of $6.3 million and $12.4 million for the second
quarter and six months ended June 30, 1996, respectively, increased by $0.7
million, or 13%, and $1.3 million, or 11%, over the respective 1995 periods, as
a result of an increase in the number of shareholder accounts and a cost of
living fee increase effective January 1, 1996.
Trustee fees and all other income of $6.5 million and $12.6 million for the
second quarter and six months ended June 30, 1996, respectively, increased by
$4.8 million and $8.8 million over the respective 1995 periods, principally from
interest and dividend income from the Company's Russian investment management
operations.
Costs and Expenses. Costs and expenses of the worldwide financial services
businesses increased by $11.3 million, or 52%, over 1995's second quarter to $33
million in the second quarter of 1996. Approximately 60% of the increase in
expenses resulted from the following accounting conventions or unusual
circumstances (i) approximately $5.4 million represents expenses related to the
Company's Russian investment operations which were acquired in April 1995 and
which are accounted for on the consolidation method, and (ii) approximately $1.0
million related to expenses associated with the amortization of dealer advances
resulting from substantial increases in sales of back-end load mutual fund
shares. The amortization expenses were more than offset by the increase in
distribution fees ($1.4 million) resulting from the increased asset levels. The
remaining 40% of the increased expenses resulted from higher payroll costs,
higher costs related to additional office space and higher costs related to
mutual fund distribution (including printing and mailing of sales literature,
paying commissions earned by the sales force and mutual fund advertising and
public relations).
Costs and expenses of the worldwide financial services businesses increased by
<PAGE> 19
$19.5 million, or 48%, over 1995's first six months to $62.2 million in the
first six months of 1996. Almost one-half of the increase in expenses resulted
from: (i) $7.4 million in expenses related to the Company's Russian investment
operations, and (ii) $1.9 million related to expenses associated with the
amortization of dealer advances resulting from substantial increases in sales of
back-end load mutual fund shares. The amortization expenses were more than
offset by the $2.3 million increase in distribution fees. The other half of
the increased expenses resulted from higher payroll costs, higher costs related
to additional office space and higher costs related to mutual fund distribution.
Other Income and Expense. The Company reported net venture capital investment
portfolio gains (excluding operating expenses) of $0.5 million and $0.6 million
in the second quarter and six months ended June 30, 1996, respectively, compared
to $4.1 million and $4.2 million for the respective 1995 periods, from
investments in the Company's U.S. venture capital portfolio. The Company's
investments in its own mutual funds, principally during their startup phase, had
net gains of $0.1 million in both the second quarter and six months ended June
30, 1996. In the second quarter and six months ended June 30, 1995, these
investments had net gains of $0.1 million and $0.5 million, respectively. The
Company reported net losses of $0.4 million and $0.3 million for the second
quarter and six months ended June 30, 1996, from investments held by the First
Voucher Fund (the "Voucher Fund"), the Russian investment fund in which the
Company owns a 51% interest. The net losses resulted primarily from an
unrealized loss on one of the Voucher Fund's investments partially offset by
realized gains from several other investments.
Interest expense increased by $0.6 million for both the second quarter and six
months ended June 30, 1996, resulting from increased borrowings by the Company
under its credit facility which is further discussed below. Other expenses, net,
increased by $0.6 million and $0.9 million for the second quarter and six months
ended June 30, 1996, respectively, principally as the result of expenses
incurred by the Company with respect to its various Russian natural resources
businesses.
Taxes. The Company's effective tax rate for the worldwide financial services
businesses was 34% for the second quarter of 1996 and 39% for the six months
ended June 30, 1996, compared to 41% and 43% for the respective 1995 periods.
The effective rates decreased as the result of tax exempt interest income
associated with the Company's Russian investment operations.
LIQUIDITY AND CAPITAL RESOURCES
IRS regulations require that, in order to serve as trustee, the Company must
maintain a net worth of at least 2% of the assets of Individual Retirement
Accounts and other qualified retirement plan accounts at year end. At June 30,
1996, the Company served as trustee for $4.7 billion of qualified plan assets
and the ratio of net worth to qualified assets was 3.3%. The Company's
stockholders' equity of $157 million at June 30, 1996, would permit it to serve
as trustee for up $7.8 billion of qualified plan assets.
For certain of the Pioneer Family of Mutual Funds, the Company has introduced a
multi-class share structure. Under the multi-class share structure,
<PAGE> 20
the participating (or "multi-class") funds offer both traditional front-end
load shares (Class A shares) and back-end load shares (Class B and C shares).
On back-end load shares, the investor does not pay any sales charge unless
there is a redemption before the expiration of the minimum holding period which
ranges from three to six years in the case of Class B shares and is one year in
the case of Class C shares. The Company, however, pays "up-front"
commissions to broker-dealers related to sales and service of the back-end load
shares ranging from 2% to 4% of the sales transaction amount on Class B shares
and of 1% on Class C shares. The multi-class funds pay the Company distribution
fees of 0.75%, and service fees of 0.25%, per annum of their respective net
assets invested in Class B and Class C shares, subject to annual renewal by the
trustees of the funds. Class B shares were introduced in April 1994 and Class C
shares were introduced in January 1996. Sales of back-end load shares were $481
million in the first six months of 1996 versus $167 million in the first six
months of 1995 and dealer advances totaled $15.6 million in the first six
months of 1996 versus $6 million in the first six months of 1995. Dealer
advances, net of amortization, were $30 million at June 30, 1996. The Company
intends to continue to finance this program, in part, through the senior credit
facility described in the section entitled "General."
In April 1995, the Company acquired approximately 51% of the shares of the
Voucher Fund, the largest voucher investment fund established in Russia in
connection with that country's privatization program. The shares were issued by
the Voucher Fund to two newly-formed subsidiaries of Pioneer Omega, Inc.
("Pioneer Omega"), a Delaware corporation in which the Company owns 80% of the
outstanding securities. In addition to acquiring shares in the Voucher Fund,
Pioneer Omega, acting through its subsidiary, Pioneer First Russia, Inc.,
acquired a Russian company that holds the right to manage the Voucher Fund's
investments. Pioneer Omega paid $2.0 million in cash and issued preferred shares
(the "Omega shares") valued at $6 million as consideration for the acquisition
of the management company and related rights. The holder of the Omega shares has
the right to cause the Company to purchase such shares (the "put option") and
the Company has a corresponding right to purchase such shares from the holder
(the "call option"). The put and call options are each exercisable with respect
to one-third of the Omega shares on the first, second and third anniversaries of
the closing of the transaction. The put and call option exercise price is $2
million per tranche, plus a 5% per annum premium on the option exercise price.
The Company will pay a total of $6.6 million for the Omega shares over a
three-year period as the put and/or call options are exercised. In April 1996,
the Company exercised its option and purchased the first tranche of Omega shares
for $2.1 million.
NATURAL RESOURCE DEVELOPMENT BUSINESSES
GOLD MINING BUSINESS
The gold mining business lost $0.7 million, or 3 cents per share, in the second
quarter of 1996, 17 cents per share below earnings of 14 cents per share in the
comparable period last year. For the six months ended June 30, 1996, earnings
of $1.8 million, or 7 cents per share, were 22 cents per share below last
year's first half earnings.
<PAGE> 21
Revenues decreased by 25% to $16.5 million in the second quarter of 1996
compared with the second quarter of 1995 as gold sales decreased by 26% to
42,500 ounces while the average realized price of gold increased by 1% to $389
per ounce. Revenues decreased by 13% to $37.8 million during the first half of
1996 compared with the first half of 1995 as gold sales decreased by 16% to
95,800 ounces while the average realized price of gold increased by 3% to $394
per ounce. The decrease in production was largely attributable to equipment
availability problems and abnormally heavy rainfall in the second quarter of
1996 resulting in excessive dilution in the production process.
While management believes that third quarter production will meet or exceed
historical 1995 quarterly gold production levels (approximately 60,000 ounces),
this production target is primarily dependent upon the continuing successful
phase-in of the new and larger mining equipment and a return to normal rainfall
patterns, in addition to the normal uncertainties associated with gold mining.
TGL continues to believe that fourth quarter production will be approximately
70,000 ounces.
RESULTS OF OPERATIONS
<TABLE>
The following table compares TGL's production results, cash costs and total
costs per ounce for the three and six months ended June 30, 1996 with the same
periods in 1995:
<CAPTION>
Three Months ended June 30, Six Months ended June 30,
--------------------------- -------------------------
(Increase)/ (Increase)
1996 1995 Decrease 1996 1995 Decrease
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Production (ounces) 42,500 57,200 14,700 95,800 113,300 17,500
======= ======= ======= ======= ======== =======
Cash Costs:
Production Costs $ 273 $ 174 $ (99) $ 227 $ 158 $ (69)
Royalties 12 12 -- 12 11 (1)
General and administrative 46 28 (18) 38 27 (11)
------- ------- ------- ------- -------- -------
CASH COSTS PER OUNCE 331 214 (117) 277 196 (81)
------- ------- ------- ------- -------- -------
Non-Cash Costs:
Depreciation and Amortization 80 65 (15) 74 67 (7)
Other 2 -0- (2) 2 4 2
------- ------- ------- ------- -------- -------
COST OF PRODUCTION PER OUNCE 413 279 (134) 353 267 (86)
------- ------- ------- ------- -------- -------
Interest and other costs 11 9 (2) 11 10 (1)
------- ------- ------- ------- -------- -------
TOTAL COSTS PER OUNCE $ 424 $ 288 $ (136) $ 364 $ 277 $ (87)
======= ======= ======= ======= ======== =======
</TABLE>
Production Costs. Production costs represent costs attributable to mining ore
and waste and processing the ore through crushing and processing facilities.
TGL's costs of production are affected by ore grade, gold recovery rates, the
waste to ore, or "stripping", ratio, the age of equipment and associated
equipment availability, the weather, the availability of labor, haul distances,
foreign exchange fluctuations and the inherent lag in gold production from new
operations. Production costs during the three and six months ended June 30,
1996, increased by $99 per ounce and $69 per ounce, respectively, over the
three and six months ended June 30, 1995. The increase
<PAGE> 22
was attributable principally to lower gold production, higher than anticipated
mining equipment maintenance costs, an increase in the stripping ratio, and
higher labor costs associated with TGL's collective bargaining agreement with
the Ghana Mineworker's Union. Compared with the first half of 1995, the
stripping ratio increased from 2.58:1 to 3.20:1, essentially in-line with
expectations, resulting in an increase in variable costs such as fuel, wear
parts, and tires. TGL also experienced increases in processing costs associated
with the continued development of a second run-of-mine, or dump leach, pad which
was not operational in the first half of 1995.
Royalties. Under the Ghanaian Minerals and Mining Law, royalties are levied at
rates ranging from 3% to 12% of operating revenues as determined by reference to
an operating ratio. Such operating ratio represents the percentage that
operating profits, after giving effect to capital allowances and interest
expense (as permitted by TGL's Deed of Warranty), bears to gold sales. In the
first half of 1995 and 1996, the royalty rate payable by TGL remained at 3% of
operating revenue, the minimum permitted by law, principally because of a
sustained level of capital expenditures, and associated capital allowances,
since the inception of the project.
General and Administrative Costs. General and administrative costs consist
principally of administrative salaries and related benefits, travel expenses,
insurance, utilities, legal costs, employee meals, rents, vehicle expenditures,
and customs clearing costs. Since these costs are relatively fixed and unrelated
to production levels, the cost per ounce increased by $12 per ounce and $6 per
ounce, respectively, during the three and six months ended June 30, 1996
compared with the three and six months ended June 30, 1995, because of
production decreases of 26% and 16%, respectively. In addition, the underlying
costs during the current periods increased by $6 per ounce and $5 per ounce,
respectively, over the three and six months ended June 30, 1995, primarily
because of increases in salaries and benefits relating to the 1995 collective
bargaining agreement, and in commercial insurance premiums and employee meals.
Depreciation and Amortization. Depreciation and amortization is calculated using
units-of-production and straight-line methods designed to fully depreciate
property, plant and equipment over the lesser of their estimated useful lives
and ten years. These costs increased by $15 per ounce and $7 per ounce,
respectively, during the three and six months ended June 30, 1996 compared with
the three and six months ended June 30, 1995, principally because of increases
in the depreciable asset base and the continued use of fully depreciated leach
pads by the original East Plant in the second quarter of 1995. Regarding the
latter point, the East Plant continued to use pads which were fully depreciated
in the first quarter of that year resulting in a decrease in the cost per ounce
in the first half of 1995. Capital additions affecting depreciation expense in
the first half of 1996 included capitalized rebuilds of mining equipment, which
are depreciated rapidly over two years, and the West Plant run-of-mine pad. In
addition, the depreciation cost per ounce increased slightly because of the
effect of lower production on depreciation calculated on a straight-line basis.
<PAGE> 23
Other. Other costs represent a provision for future reclamation costs and costs
related to exploration activities conducted by TGL at the Teberebie concessions
and in other parts of Ghana. The $2 per ounce decrease in the first half of 1996
was attributable to a decrease in exploration core drilling.
Interest and Other Costs. Interest and other costs comprise interest expense,
foreign exchange gains and losses, political risk insurance premiums, gold price
floor program premiums, goodwill amortization, and interest income. These costs
are essentially fixed and, as a result, increased during the three and six
months ended June 30, 1996, by $2 per ounce and $1 per ounce, respectively,
compared with the three and six months ended June 30, 1995, primarily because
of production decreases.
Income Taxes. The statutory tax rate for mining companies in Ghana during 1995
and the first half of 1996 was 35%. The effective tax rates during the first
half of 1995 and 1996 were 36% and 38%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow. PGL's cash balances decreased by $0.7 million to $1.6 million during
the six months ended June 30, 1996. Cash generated from operating activities
aggregated $18.1 million while capital expenditures and loan principal payments
were $38.1 million and $4.0 million, respectively. Major capital expenditures by
TGL during 1996 included $17.8 million for mining equipment, $13.3 million
related to TGL's Phase III mine expansion (South Plant) (as further described
below), and $2.1 million for leach pad and pond development. During the first
half of 1996, PGL received approximately $5.6 million in financing from the
Company, including $5.0 million in bridge financing for the Phase III mine
expansion, of which $2.0 million was outstanding at June 30, 1996. TGL also
received approximately $17.7 million of vendor financing in the first half of
1996. Otherwise, TGL generated sufficient operating cash flow to fund all of its
scheduled third-party debt service payments and short-term cash commitments.
Third-Party Debt. At the end of the second quarter of 1996, third-party debt
aggregated $20.9 million, including $1.5 million which was guaranteed by the
Company. Excluding Phase III expansion financing, scheduled third-party debt
service for 1996 is expected to aggregate $1.2 million, all of which is expected
to be funded by mining operations revenues.
Risk Management. In the past, TGL purchased put options to secure a minimum
selling price for its gold. All outstanding options expired on March 31, 1996
and TGL currently does not intend to purchase new options unless the price of
gold declines to below $375 per ounce.
The Company maintains $66.9 million of "political risk" insurance principally
from the Overseas Private Investment Corporation ("OPIC") covering 90% of its
equity and loan guarantees. This insurance also covers 90% of the Company's
proportionate share of TGL's cumulative retained earnings. In addition to other
commercial insurance policies,
<PAGE> 24
TGL has secured business interruption coverage of up to $19.0 million for losses
associated with machinery breakdown and property damage and to defray continuing
infrastructure and interest costs.
Phase III Mine Expansion. In July 1995, the Board of Directors of TGL approved
the Phase III expansion of the Teberebie mine. Phase III will include a further
heap leach operation and the construction of a near-pit gyratory crushing
facility which will act as the primary crushing facility for both the existing
West Plant and the new South Plant. Phase III will also gradually introduce a
new and larger mining fleet, with the objective of mining at an annualized rate
of approximately 60 million tonnes of material per year (including 12 million
tonnes of crushed ore) and raising overall gold production to at least 400,000
ounces per year when Phase III is completed (expected in 1998). Realization of
this objective is subject to the uncertainties inherent in any mining and
processing operation. The initial work on the project has commenced. The major
crushing equipment has been ordered and the initial mining equipment, consisting
of six CAT 785 trucks and two CAT 5230 hydraulic shovels, has been delivered to
the site and good progress is being made in training operators on the new
equipment. Total capital investment planned for 1996 is approximately $68
million, including $46 million in expansion capital. Expansion capital
represents approximately $32 million for the purchase of crushing and processing
facilities and approximately $14 million for the purchase of mining equipment.
Financing Facilities. In September 1995, OPIC executed a commitment letter
(which expires October 31, 1996) with TGL and the Company pursuant to which
OPIC agreed, subject to the fulfillment of certain conditions, to finance up to
$54 million in connection with the Phase III expansion. As of August 13, 1996,
TGL and the Company have not executed definitive loan agreements with respect to
such OPIC guaranteed financing and there can be no assurance that such financing
will become available, or that it will be available on terms acceptable to TGL
and the Company. As a result of the delays associated with the OPIC guaranteed
financing, TGL has sought and obtained alternative financing sources as
described below. Accordingly, TGL has reduced the proposed amount of the OPIC
guaranteed financing to $19 million. TGL has received credit approval from
Caterpillar Financial Services Corporation, a wholly owned subsidiary of
Caterpillar Inc. (collectively, "Caterpillar"), pursuant to which Caterpillar
has agreed, subject to the fulfillment of certain conditions, to provide a
revolving credit facility of up to $21 million to finance the purchase of
Caterpillar and other mining equipment. During the second quarter of 1996,
Caterpillar issued disbursements, at TGL's request, for $14.1 million of such
facility. TGL is currently negotiating with Caterpillar to obtain an additional
$6.4 million disbursement under the credit facility. There can be no assurance
that TGL will be able to obtain similar or satisfactory terms for subsequent
tranches of the Caterpillar credit facility. On March 6, 1996, TGL executed a
loan agreement with Enskilda, a division of Skandinaviska Enskilda Banken,
pursuant to which Enskilda has agreed to provide a direct loan of SEK 94.5
million (approximately $14.0 million) to finance the gyratory crusher and
related equipment procured from Svedala Crushing and Screening AB. This loan is
guaranteed by the Swedish Export Credits Board. As of August 2, 1996, SEK 30.9
million (or approximately $4.6 million)
<PAGE> 25
was drawn down. The Company has also provided $5 million in bridge financing to
TGL during the first six months of 1996, of which TGL repaid $3 million. The
balance of such bridge financing was $7.6 million at August 9, 1996.
<TABLE>
Reserves. The following table sets forth the proven and probable in situ
reserves of TGL at December 31, 1995. The cut-off grades used to delineate the
reserves are 0.765 grams per tonne for crushed ore and 0.25 grams per tonne for
run-of-mine at a gold price of $385 per ounce.
<CAPTION>
CRUSHED ORE RUN-OF-MINE
----------- -----------
Grams Grams
per per
Tonnes Tonnes Ounces Tonnes Tonnes Ounces
------ ------ ------ ------ ------ ------
MINEABLE RESERVES
<S> <C> <C> <C> <C> <C> <C>
Total Proven 149,236,000 1.46 7,039,000 49,859,000 0.54 865,000
Total Probable 22,740,000 1.41 1,030,000 8,625,000 0.56 154,000
Total Reserves 171,976,000 1.46 8,069,000 58,484,000 0.54 1,019,000
TOTAL RESERVE OUNCES: 9,088,000
=========
</TABLE>
TIMBER BUSINESS
LIQUIDITY AND CAPITAL RESOURCES
The Company's Russian venture, Forest Starma, in which the Company has a 76%
direct interest and a 1.5% indirect interest, is pursuing the development of
timber production under two long-term leases comprising 88,800 hectares
(approximately 219,500 acres) in the aggregate with annual cutting rights of
210,000 cubic meters awarded to the venture in the Khabarovsk Territory of
Russia. In June 1996, Forest Starma secured additional cutting rights of 90,000
cubic meters per year. Forest Starma has developed a site, including a jetty,
from which it exports timber for markets in the Pacific Rim, primarily Japan.
Timber harvesting commenced in the first quarter of 1995 and the first shipments
of timber (acquired in the development phase) totaling approximately 30,000
cubic meters occurred in the third and fourth quarters of 1995. In 1996, Forest
Starma has shipped approximately 60,800 cubic meters of timber (also acquired
in the development phase). The related revenues were used to offset development
costs.
Capital required by this venture is now projected at approximately $36.2 million
through the end of 1996 including $26.9 million in subordinated debt and accrued
interest provided by the Company and $9.3 million in third party financing.
Forest-Starma completed a $9.3 million project financing, guaranteed by OPIC, in
early July 1996. The underlying note is payable in fifteen equal semiannual
installments from December 15, 1996 through December 15, 2003 and bears interest
at a fixed rate of 7.20%. In addition, a guarantee fee of 2.75% on outstanding
borrowings is payable to OPIC prior to project completion, increasing to 5.125%
after project completion when the Company ceases to
<PAGE> 26
be an obligor in the transaction. As a condition to OPIC's guarantee, the
Company was required to execute a Project Completion Agreement pursuant to which
the Company would advance funds to Forest-Starma, as necessary, to permit Forest
Starma to fulfill all of its financial obligations, including cost overruns
related to project development, until such time as Forest Starma satisfies a
production test and certain financial and project development benchmarks. During
the second half of 1996, Forest Starma will apply for up to $6.5 million in
additional OPIC guaranteed financing for an expansion planned in 1997.
Investments by the Company in Forest Starma aggregated $30.8 million at June 30,
1996, $8.3 million of which was repaid in July 1996 out of the third party loan
proceeds described above. Forest Starma is expected to reach an annualized
production level of approximately 180,000 cubic meters per year by the end of
1996.
The Company has secured OPIC political risk insurance in amount of up to $47
million which would protect 90% of the Company's equity investment and loans and
a proportionate share of cumulative retained earnings.
In November 1995, Amgun-Forest and Udinskoye, the Company's other Russian timber
ventures, each executed a long-term lease (50 years) relating to timber
harvesting. The Amgun-Forest lease covers 264,700 hectares (approximately
654,000 acres) with annual cutting rights of 350,000 cubic meters while the
Udinskoye lease covers 156,600 hectares (approximately 387,000 acres) with
annual cutting rights of 200,000 cubic meters. The feasibility study on
Amgun-Forest is being reviewed, and the Udinskoye feasibility study is in the
early stages of development. The studies will form the basis for estimating
capital requirements for these projects. Preliminary estimates for these two
projects are that, prior to securing third-party financing, the Company will
provide funding of approximately $1.3 million in 1996.
GENERAL
The Company's liquid assets consisting of cash and marketable securities
(exclusive of gold mining operations) increased by $2 million in the first half
of 1996 to $35 million as cash from operations combined with financing
activities slightly exceeded investing activities.
The Company entered into an agreement in June 1996 with a syndicate of
commercial banks for a senior credit facility (the "Credit Facility") in the
amount of $115 million. Under the Credit Facility, the Company may borrow up to
$35 million (the "B-share Revolver") to finance dealer advances relating to
sales of back-end load shares of the Company's domestic mutual funds. The
B-share Revolver is subject to annual renewal by the Company and the commercial
banks. In the event the B-share Revolver is not renewed at maturity, it will
automatically convert into a five-year term loan. Advances under the B-share
Revolver bear interest, at the Company's option, at (a) the higher of the bank's
base lending rate or the federal funds rate plus 0.50% or (b) LIBOR plus 1.25%.
The Credit Facility also provides that the Company may borrow up to $80 million
for general corporate purposes (the "Corporate Revolver"). The Corporate
Revolver is
<PAGE> 27
payable in full on June 11, 2001. Advances under the Corporate Revolver bear
interest, at the Company's option, at (a) the higher of the bank's base
lending rate or the federal funds rate plus 0.50% or (b) LIBOR plus the
applicable margin, tied to the Company's financial performance, of either
1.25%, 1.50%, or 1.75% in the first year of the agreement and 0.75%, 1.25%,
1.50% or 1.75% for the remaining term as defined under the agreement. At August
9, 1996, the Company had borrowed $28 million under the B-share Revolver and
$50 million under the Corporate Revolver. The Credit Facility provides that the
Company must pay additional interest at the rate of 0.375% per annum of the
unused portion of the facility and an annual arrangement fee of $35,000. The
commitment fees were approximately $0.7 million. The Company used the proceeds
from borrowings under the new credit facility to repay in full amounts
previously borrowed under the lines of credit with a commercial bank.
The Credit Facility contains restrictions that limit, among other things,
encumbrances on the assets of the Company's domestic mutual fund subsidiaries
and certain mergers and sales of assets. Additionally, the Credit Facility
requires that the Company meet certain financial covenants including covenants
that require the Company to maintain certain minimum ratios with respect to
debt to cash flow and interest payments to cash flow and a minimum tangible net
worth, all as defined in the Credit Facility. As of June 30, 1996, the Company
was in compliance with all applicable covenants of the Credit Facility.
Under the Credit Facility, the Company is required to maintain interest rate
protection agreements covering at least 60% of the outstanding indebtedness
under the B-share Revolver. As of June 30, 1996, the Company entered into two
five-year interest rate swap agreements with a member of the Company's banking
group which has effectively fixed the interest rate on notional amounts of $40
million and $20 million. Under these agreements, the Company will pay the bank
fixed rates of 6.975% and 6.74%, respectively, plus the applicable margin, on
the notional principal. The bank will pay the Company interest on the notional
principal at the current variable rate stated under the B-share Revolver. The
fair value of these swap agreements was $786,000 at June 30, 1996, which amount
represents the estimated amount the Company would be obligated to pay to
terminate the agreements.
FUTURE OPERATING RESULTS
Certain of the information contained in this Quarterly Report on Form 10-Q,
including information with respect to the Company's plans and strategies for its
worldwide financial services and natural resources businesses, consists of
forward-looking statements. For this purpose, any statements contained herein
that are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects" and similar expressions are intended to identify
forward-looking statements. Important factors that could cause actual results to
differ materially from those indicated by such forward-looking statements
include, but are not limited to, the following:
<PAGE> 28
The Company derives a significant portion of its revenues from investment
management fees, underwriting and distribution fees and shareholder services
fees. Success in the investment management and mutual fund share distribution
businesses is substantially dependent on investment performance. Good
performance stimulates sales of shares and tends to keep redemptions low. Sales
of shares generate higher management fees and distribution fees (which are both
based on assets of the funds). Good performance also attracts institutional
accounts. Conversely, relatively poor performance results in decreased sales
and increased redemptions and the loss of institutional accounts, with
corresponding decreases in revenues to the Company. Investment performance may
also be affected by economic or market conditions which are beyond the
control of the Company.
The mutual fund industry is intensely competitive. Many organizations in this
industry are attempting to sell and service the same clients and customers, not
only with mutual fund investments but with other financial services products.
Some of the Company's competitors have more products and product lines and
substantially greater assets under management and financial resources.
As described above, the Company offers a multi-class share structure on its
domestic mutual funds. Under such structure, the Company pays to dealers a
commission on the sale of back-end load shares but the investor does not pay any
sales charge unless it redeems before the expiration of the minimum holding
period, which ranges from three to six years in the case of Class B Shares and
which is one year in the case of Class C Shares. The Company's cash flow and
results of operations may be adversely affected by vigorous sales of back-end
load shares because its recovery of the cost of commissions paid up front to
dealers is spread over a period of years. During this period, the Company bears
the costs of financing and the risk of market decline.
The businesses of the Company and its financial services subsidiaries are
primarily dependent upon their associations with the Pioneer Family of Mutual
Funds with which they have contractual relationships. In the event any of the
management contracts, underwriting contracts or service agreements were canceled
or not renewed pursuant to the terms thereof, the Company may be substantially
adversely affected.
The Securities and Exchange Commission has jurisdiction over registered
investment companies, registered investment advisers, broker-dealers and
transfer agents and, in the event of a violation of applicable rules or
regulations by the Company or its subsidiaries, may take action which could have
a serious effect on the Company.
Because a significant portion of the Company's revenues and net income are
derived from the mining and sale of gold by TGL, the Company's earnings are
directly related to the price of gold. Gold prices have historically fluctuated
significantly and are affected by numerous factors, including expectations for
inflation, the strength of the U.S. dollar, global and regional demand and
political and economic conditions. If, as a result of a decline in gold prices,
TGL's revenues from gold sales were to fall below cash costs of production, and
to remain below cash costs of production for any substantial period, the Company
<PAGE> 29
could determine that it is not economically feasible for TGL to continue
commercial production.
While an internationally recognized engineering firm audited and verified TGL's
gold reserves in August 1995, and indicated that the reserves are estimated in
accordance with good engineering practices using current cost estimates, reserve
estimates are necessarily imprecise and depend to some extent on statistical
inferences drawn from limited drilling which may, on occasion, prove unreliable.
Reserve estimates are based upon a number of assumptions, including the price of
gold, cut-off grades and operating costs. Increases in operating costs, reduced
recovery rates or market price fluctuations of gold may render all or a portion
of such reserves uneconomic to mine.
TGL has recently discovered clay filled fault zones below and parallel to the
lowest ore zone at the Teberebie mine that create areas of slope instability
within the pit. This instability may result in failures of sections of the
footwall of the mine, especially during the rainy season. TGL has engaged a
geotechnical consultant to conduct a study to identify the extent of, and
address a solution to, this instability. It is possible that it may be necessary
to mine in a manner which results in more footwall waste being removed than
presently planned. This may result in an increase in the average stripping
ratio. It is not yet possible to determine the impact, if any, of slope
instability on operating costs. A significant increase in the average stripping
ratio, however, would increase production costs.
To attain projected levels of gold production, TGL must successfully complete
its Phase III expansion, and the new crushing facility to be constructed in
connection with Phase III, the South Plant, must become operational on time. The
Company believes that the construction schedule for Phase III is feasible. There
can, however, be no assurance that Phase III will in fact be completed or become
operational in accordance with TGL's current proposed construction schedule. As
a result, future gold production achieved by the Teberebie mine may fail to meet
current projections.
TGL is dependent upon a number of key supplies for its mining operations,
including electricity, explosives, diesel fuel, lubricants, tires and sodium
cyanide. There can be no assurance that a disruption in the supplies to TGL of
these key materials will not occur and adversely affect the Company's
operations.
The operations at TGL depend on its ability to recruit, train and retain
employees with the requisite skills to operate large-scale mining equipment.
Although TGL offers its employees an attractive compensation package,
competition for skilled labor is strong among the various mines in Ghana. There
can be no assurance that the Company's operations will not be adversely affected
by a shortage of skilled laborers or by an increase in the time required to
fully train new employees.
<PAGE> 30
The Company has incurred considerable expenses in connection with the Forest
Starma timber project located in the Russian Far East. Although Forest Starma
has commenced harvesting and has made shipments of timber, Forest Starma is
still in the development stage. The commercial feasibility of Forest Starma is
also dependent upon a number of factors which are not within the control of the
Company including the price of timber, the weather and the strength of the
Japanese economy, the primary market for Forest Starma's timber. While the
Company continues to believe that the project will achieve commercial
feasibility, there can be no assurance that it will do so.
The Company has a significant number of operations and investments located
outside of the U. S., including the gold mining operation at TGL and the timber
and investment operations in Russia. Foreign operations and investments may be
adversely affected by exchange controls, currency fluctuations, taxation,
political instability and laws or policies of the particular countries in which
the Company may have operations. There is no assurance that permits,
authorizations and agreements to implement plans at the Company's projects can
be obtained under conditions or within time frames that make such plans
economically feasible, that applicable laws or the governing political
authorities will not change or that such changes will not result in the
Company's having to incur material additional expenditures. While the Company is
currently applying for political risk insurance to cover its Russian investment
operations, there can be no assurance that it will be able to obtain such
coverage.
THE COMPANY BELIEVES THAT IT IS IN SOUND FINANCIAL CONDITION, THAT IT HAS
SUFFICIENT LIQUIDITY FROM OPERATIONS AND FINANCING FACILITIES TO COVER
SHORT-TERM COMMITMENTS AND CONTINGENCIES AND THAT IT HAS ADEQUATE CAPITAL
RESOURCES TO PROVIDE FOR LONG-TERM COMMITMENTS.
<PAGE> 31
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Securityholders
The 1996 Annual Meeting of Stockholders (the "Annual Meeting") was held
on May 15, 1996. At the Annual Meeting, the following persons were elected to
serve as directors until the next Annual Meeting of Stockholders and thereafter
until their successors are duly elected and qualified: Robert L. Butler, Philip
L. Carret, John F. Cogan, Jr., Maurice Engleman, Jaskaran Teja, David D.
Tripple and John H. Valentine.
At the Annual Meeting, the stockholders also voted to ratify the
selection of Arthur Andersen LLP as the Company's independent accountants for
the 1996 fiscal year.
The following is a summary of the voting at the Annual Meeting:
For Withheld
Election of Directors --- --------
Robert L. Butler 21,589,071 35,027
Philip L. Carret 21,609,514 14,584
John F. Cogan, Jr. 21,587,499 36,599
Maurice Engleman 21,574,611 49,487
Jaskaran S. Teja 21,586,611 37,487
David D. Tripple 21,605,446 18,652
John H. Valentine 21,586,611 37,487
For Against Abstain
--- ------- -------
Ratification of Arthur Andersen 21,591,769 9,196 23,133
LLP as independent accountants
for 1996 fiscal year
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits.
10.1 1995 Employee Stock Purchase Plan.
10.2 Loan Agreement dated as of April 23, 1996, by and between
Teberebie Goldfields Limited ("TGL") and Caterpillar
Financial Services Corporation ("Caterpillar").
10.3 Chattel Mortgage dated as of April 23, 1996, by and
between TGL and Caterpillar.
10.4 Credit Agreement dated as of June 6, 1996, by and among
The Pioneer Group, Inc., certain of its subsidiaries, the
Lenders and The First National Bank of Boston, as agent
for itself and the other Lenders.
10.5 Loan Agreement dated as of May 16, 1996, by and between
TGL and Caterpillar.
11 Computation of earnings per share.
27 Financial Data Schedule.
(b) Reports filed on form 8-K. None.
<PAGE> 32
SIGNATURES
----------
It is the opinion of management that the financial information contained in this
report reflects all adjustments necessary to a fair statement of results for the
period report, but such results are not necessarily indicative of results to be
expected for the year due to the effect that stock market fluctuations may have
on assets under management. All accounting policies have been applied
consistently with those of prior periods. Such financial information is subject
to year-end adjustments and annual audit by independent public accountants.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE PIONEER GROUP, INC.
Dated: August 14, 1996 /s/ William H. Keough
---------------
William H. Keough
Senior Vice President
Chief Financial Officer
and Treasurer
<PAGE> 33
EXHIBIT INDEX
-------------
10.1 1995 Employee Stock Purchase Plan
10.2 Loan Agreement dated as of April 23, 1996, by and between Teberebie
Goldfields Limited ("TGL") and Caterpillar Financial Services
Corporation ("Caterpillar").
10.3 Chattel Mortgage dated as of April 23, 1996, by and between TGL and
Caterpillar.
10.4 Credit Agreement dated as of June 6, 1996, by and among The Pioneer
Group, Inc., certain of its subsidiaries, the Lenders and The First
National Bank of Boston, as agent for itself and the other Lenders.
10.5 Loan Agreement dated as of May 16, 1996, by and between TGL and
Caterpillar.
11 Computation of earnings per share.
27 Financial Data Schedule.
<PAGE> 1
Exhibit 10.1
THE PIONEER GROUP, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
The purpose of this Plan is to provide eligible employees of The Pioneer
Group, Inc. (the "Company") and certain of its subsidiaries with opportunities
to purchase shares of the Company's common stock, $.10 par value (the "Common
Stock"), commencing on July 3, 1995. Five hundred thousand (500,000) shares of
Common Stock in the aggregate have been approved for this purpose.
1. ADMINISTRATION. The Plan will be administered by the Company's Board of
Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. ELIGIBILITY. Participation in the Plan will neither be permitted nor
denied contrary to the requirements of Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations promulgated thereunder. All
employees of the Company, including Directors who are employees, and all
employees of any subsidiary of the Company (as defined in Section 424(f) of the
Code) designated by the Board or the Committee from time to time (a "Designated
Subsidiary"), are eligible to participate in any one or more of the offerings of
Options (as defined in Section 9) to purchase Common Stock under the Plan
provided that:
(a) they are regularly employed by the Company or a Designated
Subsidiary for more than 20 hours a week and for more than five months in a
calendar year; and
(b) they have been employed by the Company or a Designated Subsidiary
for at least three (3) months prior to enrolling in the Plan; and
(c) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).
No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code shall apply in determining the stock ownership of an employee, and
<PAGE> 2
all stock which the employee has a contractual right to purchase shall be
treated as stock owned by the employee.
3. OFFERINGS. The Company will make one or more offerings ("Offerings") to
employees to purchase stock under this Plan. Offerings will begin on each
January 1 and July 1, or the first business day thereafter (the "Offering
Commencement Dates"), the first such Offering Commencement Date being July 3,
1995. Each Offering Commencement Date will begin a six month period (a "Plan
Period") during which payroll deductions will be made and held for the purchase
of Common Stock at the end of the Plan Period. The Board or the Committee may,
at its discretion, choose a different Plan Period of twelve (12) months or less
for subsequent Offerings.
4. PARTICIPATION. An employee eligible on the Offering Commencement Date of
any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the employee's appropriate payroll
office at least 30 days prior to the applicable Offering Commencement Date. The
form will authorize a regular payroll deduction from the Compensation received
by the employee during the Plan Period. Unless an employee files a new form or
withdraws from the Plan, his deductions and purchases will continue at the same
rate for future Offerings under the Plan as long as the Plan remains in effect.
The term "Compensation" means the amount of money reportable as base earnings on
the employee's Federal Income Tax Withholding Statement, excluding overtime,
shift premium, incentive or bonus awards, allowances and reimbursements for
expenses such as relocation allowances for travel expenses, income or gains on
the exercise of Company stock options or stock appreciation rights, and similar
items, whether or not shown on the employee's Federal Income Tax Withholding
Statement, but including, in the case of salespersons, sales commissions to the
extent determined by the Board or the Committee.
5. DEDUCTIONS. The Company will maintain payroll deduction accounts for all
participating employees. With respect to any Offering made under this Plan, an
employee may authorize a payroll deduction in any dollar amount up to a maximum
of 10% of the Compensation he or she receives during the Plan Period or such
shorter period during which deductions from payroll are made. Payroll deductions
may be at the rate of 2%, 4%, 6%, 8% or 10% of Compensation with any change in
compensation during the Plan Period to result in an automatic corresponding
change in the dollar amount withheld.
No employee may be granted an Option (as defined in Section 9) which
permits his rights to purchase Common Stock under this Plan and any other stock
purchase plan of the Company and its subsidiaries, to accrue at a rate which
exceeds $25,000 of the
-2-
<PAGE> 3
fair market value of such Common Stock (determined at the Offering Commencement
Date of the Plan Period) for each calendar year in which the Option is
outstanding at any time.
6. DEDUCTION CHANGES. An employee may decrease or discontinue his payroll
deduction once during any Plan Period, by filing a new payroll deduction
authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
7. INTEREST. Interest will not be paid on any employee accounts, except to
the extent that the Board or the Committee, in its sole discretion, elects to
credit employee accounts with interest at such per annum rate as it may from
time to time determine.
8. WITHDRAWAL OF FUNDS. An employee may at any time prior to the close of
business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Plan Period. The employee may participate in any subsequent Offering in
accordance with terms and conditions established by the Board or the Committee,
except that employees who are also directors or officers of the Company within
the meaning of Section 16 of the Securities Exchange Act of 1934 (the "Exchange
Act") and the rules promulgated there under may not participate again for a
period of at least six months as provided in Rule 16b-3(d)(2)(i) or any
successor provision.
9. PURCHASE OF SHARES. On the Offering Commencement Date of each Plan
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, such number of whole shares of Common Stock of the Company
reserved for the purposes of the Plan as does not exceed the number of shares
determined by dividing 10% of such employee's annualized Compensation for the
immediately prior six-month period by the price determined in accordance with
the formula set forth in the following paragraph but using the closing price on
the Offering Commencement Date of such Plan Period.
The purchase price for each share purchased will be 85% of the closing
price of the Common Stock on (i) the first business
-3-
<PAGE> 4
day of such Plan Period or (ii) the Exercise Date, whichever closing price shall
be less. Such closing price shall be (a) the closing price on any national
securities exchange on which the Common Stock is listed, (b) the closing price
of the Common Stock on the Nasdaq National Market or (c) the average of the
closing bid and asked prices in the over-the-counter-market, whichever is
applicable, as published in THE WALL STREET JOURNAL. If no sales of Common Stock
were made on such a day, the price of the Common Stock for purposes of clauses
(a) and (b) above shall be the reported price for the next preceding day on
which sales were made.
Each employee who continues to be a participant in the Plan on the Exercise
Date shall be deemed to have exercised his Option at the Option Price on such
date and shall be deemed to have purchased from the Company the number of full
shares of Common Stock reserved for the purpose of the Plan that his accumulated
payroll deductions on such date will pay for pursuant to the formula set forth
above (but not in excess of the maximum number determined in the manner set
forth above).
Any balance remaining in an employee's payroll deduction account at the end
of a Plan Period will be automatically refunded to the employee, except that any
balance which is less than the purchase price of one share of Common Stock will
be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. ISSUANCE OF CERTIFICATES. Certificates representing shares of Common
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the street
name of a brokerage firm, bank or other nominee holder designated by the
employee.
11. RIGHTS ON RETIREMENT, Death or Termination of Employment. In the event
of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law) or (b) in the absence of
such a designated beneficiary, to the executor or administrator of the
employee's estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company, to such other person(s)
-4-
<PAGE> 5
as the Company may, in its discretion, designate. If, prior to the last business
day of the Plan Period, the Designated Subsidiary by which an employee is
employed shall cease to be a subsidiary of the Company, or if the employee is
transferred to a subsidiary of the Company that is not a Designated Subsidiary,
the employee shall be deemed to have terminated employment for the purposes of
this Plan.
12. OPTIONEES NOT STOCKHOLDERS. Neither the granting of an Option to an
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
13. RIGHTS NOT TRANSFERABLE. Rights under this Plan are not transferable by
a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
14. APPLICATION OF FUNDS. All funds received or held by the Company under
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.
15. ADJUSTMENT IN CASE OF CHANGES AFFECTING COMMON STOCK. In the event of a
subdivision of outstanding shares of Common Stock, or the payment of a dividend
in Common Stock, the number of shares approved for this Plan, and the share
limitation set forth in Section 9, shall be increased proportionately, and such
other adjustment shall be made as may be deemed equitable by the Board or the
Committee. In the event of any other change affecting the Common Stock, such
adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
16. MERGER. If the Company shall at any time merge or consolidate with
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger, and the Committee shall take such steps in
connection with such merger as the Committee shall deem necessary to assure that
the provisions of Paragraph 15 shall thereafter be applicable, as nearly as
reasonably may be, in relation to the said securities or property as to which
such holder of such Option might thereafter be entitled to receive thereunder.
-5-
<PAGE> 6
In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, (a) subject to the provisions of
clauses (b) and (c), after the effective date of such transaction, each holder
of an outstanding Option shall be entitled, upon exercise of such Option, to
receive in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of such transaction; or (b) all outstanding Options may be cancelled by
the Board or the Committee as of a date prior to the effective date of any such
transaction and all payroll deductions shall be paid out to the participating
employees; or (c) all outstanding Options may be cancelled by the Board or the
Committee as of the effective date of any such transaction, provided that notice
of such cancellation shall be given to each holder of an Option, and each holder
of an Option shall have the right to exercise such Option in full based on
payroll deductions then credited to his account as of a date determined by the
Board or the Committee, which date shall not be less than ten (10) days
preceding the effective date of such transaction.
17. AMENDMENT OF THE PLAN. The Board may at any time, and from time to
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the shareholders of the Company is required by Section 423 of
the Code or by Rule 16b-3 under the Exchange Act, such amendment shall not be
effected without such approval, and (b) in no event may any amendment be made
which would cause the Plan to fail to comply with Section 16 of the Exchange Act
and the rules promulgated thereunder, as in effect from time to time, or Section
423 of the Code.
18. INSUFFICIENT SHARES. In the event that the total number of shares of
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.
19. TERMINATION OF THE PLAN. This Plan may be terminated at any time by the
Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
20. GOVERNMENTAL REGULATIONS. The Company's obligation to sell and deliver
Common Stock under this Plan is subject to listing on a national stock exchange
or quotation on the Nasdaq National Market and the approval of all governmental
authorities
-6-
<PAGE> 7
required in connection with the authorization, issuance or sale of such stock.
The Plan shall be governed by Massachusetts law except to the extent that
such law is preempted by federal law.
The Plan is intended to comply with the provisions of Rule 16b-3
promulgated under the Securities Exchange Act of 1934. Any provision
inconsistent with such Rule shall to that extent be inoperative and shall not
affect the validity of the Plan.
21. ISSUANCE OF SHARES. Shares may be issued upon exercise of an Option
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
22. NOTIFICATION UPON SALE OF SHARES. Each employee agrees, by entering the
Plan, to promptly give the Company notice of any disposition of shares purchased
under the Plan where such disposition occurs within two years after the date of
grant of the Option pursuant to which such shares were purchased.
23. EFFECTIVE DATE AND APPROVAL OF SHAREHOLDERS. The Plan shall take effect
on July 3, 1995 subject to approval by the shareholders of the Company as
required by Rule 16b-3 under the Exchange Act and by Section 423 of the Code,
which approval must occur within twelve months of the adoption of the Plan by
the Board.
Adopted by the Board of Directors
on January 26, 1995
-7-
<PAGE> 1
Exhibit 10.2
LOAN AGREEMENT
THIS LOAN AGREEMENT is made this 23rd day of April, 1996, by and
between TEBEREBIE GOLDFIELDS LIMITED ("Borrower"), a limited liability company
organized and existing under the laws of the Republic of Ghana with its
principal place of business located at P.O. Box 6, Tarkwa, Republic of Ghana,
West Africa; and CATERPILLAR FINANCIAL SERVICES CORPORATION ("Lender"), a
Delaware corporation with its principal place of business located at 3322 West
End Avenue, Nashville, Tennessee, U.S.A. 37203.
SECTION 1. GENERAL DEFINITIONS
1.1. Defined Terms. When used herein, the following terms shall have
the following meanings (terms defined in the singular shall have the same
meaning when used in the plural and vice versa):
"Affiliate" shall mean any Person: (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the Borrower; (ii) which beneficially owns or holds 5% or
more of any class of the Voting Stock of the Borrower; or (iii) 5% or more of
the voting stock (or in the case of a Person which is not a corporation or a
limited liability company, 5% or more of the equity interest) of which is
beneficially owned or held by the Borrower or a Subsidiary of the Borrower. For
purposes hereof, "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting stock, by contract or otherwise.
"Agreement" shall mean this Loan Agreement.
"Applicable Law(s)" shall mean all laws, rules and regulations
applicable to the Person, conduct, transaction, covenant or Loan Documents in
question, including, but not limited to, all applicable common law and equitable
principles, if applicable; all provisions of all applicable state and federal
constitutions, statutes, rules, regulations and orders of governmental bodies;
and orders, judgments, decrees and awards of all courts and arbitrators, in any
jurisdiction or any political subdivision thereof, and in each case, as amended,
modified or replaced.
"Bank" shall mean any financial institution with which the Borrower
may, from time to time, maintain credit lines for financing its or its
Subsidiaries acquisition of Property.
"Base Rate" shall mean a fixed rate of interest equal to seven and
85/100ths percent (7.85%) per annum.
"Business Day" shall mean a day other than (i) a Saturday or Sunday, or
(ii) a day on which banks are authorized by law to be closed in New York, New
York, U.S.A.
"Caterpillar" shall mean Caterpillar Inc., a Delaware corporation.
"Caterpillar Sellers" shall mean Caterpillar, COSA, and each of their
respective wholly owned subsidiaries (other than Lender).
"Closing Date" shall mean the date on which all of the conditions
precedent in Section 6 are satisfied.
"Collection Expenses" shall mean all costs and expenses at any time or
times incurred by the Lender after the occurrence of an Event of Default in
connection with efforts to collect or recover any of the Obligations from the
Borrower, including, without limitation, reasonable legal fees, court expenses
and costs, transfer fees or taxes, accountants' fees, all fees and expenses
payable or reimbursable by the Borrower under Section 9.3 hereof, and all
1
<PAGE> 2
other costs and expenses associated with seeking to enforce any of the Loan
Documents.
"Commitment" shall mean the amount of commitment set forth opposite
Lender's name on the signature page hereof, or Lender's commitment to lend such
amounts, as the context may determine.
"Commitment Letter" means that certain Commitment Letter dated March
14, 1996 between Borrower and Lender.
"COSA" shall mean Caterpillar Overseas S.A., a Swiss corporation.
"Deed of Warranty" shall mean that certain Deed of Warranty dated
December 3, 1987 by and among the Government of the Republic of Ghana,
Borrower, Pioneer Group Inc. and Glencar Exploration (UK) Limited.
"Default" shall mean an event or condition the occurrence of which
would, with proper notice or lapse of time or both, become an Event of Default.
"Dollars" and the sign "$" shall mean the currency of the United States
of America.
"Eligible Equipment" shall mean the equipment described in the
Commitment Letter.
"Event of Default" shall have the meaning ascribed thereto in Section
7.1.
"Export Product Value" means the actual cost in Dollars to the Borrower
of each item of Eligible Equipment purchased, FOB port of exit, (INCOTERMS
1990). If actual cost is not denominated in Dollars, it shall be converted at a
rate determined by Lender using the guidelines set out in Section 9.7 hereof.
"Fiscal Year" shall mean the taxable year of the Borrower.
"Forfeiture Law" shall mean any state or federal law, rule or
regulation under which any Property of a Person may be seized by a governmental
agency or title thereto forfeited by reason of such Person's commission of a
crime.
"GAAP" shall mean generally accepted accounting principles as in effect
in the Republic of Ghana from time to time.
"Indebtedness" as applied to a Person shall mean the aggregate of all
items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Person as
at the date as of which Indebtedness is to be determined, including without
limitation, all obligations of other Persons which such Person has guaranteed.
"Lender's Bank Account" shall mean Lender's account with Chase
Manhattan Bank, New York, New York, account number 910-2-469872, ABA code
021-000-021, or other such account as Lender may designate in writing to
Borrower.
"Lien" shall mean any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangements, encumbrance, lien
(statutory or other), or preference, priority, or other security agreement or
preferential arrangement, charge, or encumbrance of any kind or nature
whatsoever.
"Loan" shall have the meaning ascribed thereto in Section 2.1.
"Loan Documents" shall mean this Agreement and the Other Agreements.
2
<PAGE> 3
"Material Adverse Effect" shall mean any event or condition which,
alone or when taken together with other events or conditions occurring or
existing concurrently therewith: (i) has or may be reasonably expected to have a
material adverse effect upon the business, operations, Properties or financial
condition of the Borrower or any Subsidiary; (ii) has or may be reasonably
expected to have any material adverse effect whatsoever upon the validity or
enforceability of this Agreement or any of the other Loan Documents; or (iii)
materially impairs the ability of the Borrower to perform its obligations under
this Agreement or any of the other Loan Documents or of the Lender to enforce or
collect the Obligations in accordance with the Loan Documents and Applicable
Law.
"Maximum Rate" shall mean the maximum rate of interest permitted by
Applicable Law that at any time, or from time to time, may be contracted for,
taken, reserved, charged or received on the Indebtedness in question or, to the
extent permitted by Applicable Law, under such Applicable Laws that may
hereafter be in effect and which allow a higher maximum interest rate than
Applicable Laws now allow. Notwithstanding any other provision hereof, the
Maximum Rate shall be calculated on a daily basis computed on the actual number
of days elapsed over a year of 360 days.
"Net Worth" shall mean the aggregate of capital stock, earned surplus,
and additional paid in capital of the Borrower, less the Borrower's treasury
stock, all as determined in accordance with GAAP applied on a basis consistent
with the accounting principles applied in the preparation of the financial
statements referred to in Sections 4.4 and 5.1(A).
"Note" shall mean the promissory note(s) evidencing the Loan made by
Lender to Borrower hereunder pursuant to Section 2.1 substantially in the form
of Exhibit A.
"Obligations" shall mean all Indebtedness, liabilities and obligations
(including non-financial obligations and covenants) owing, arising, to be
performed, due or payable from the Borrower to, or on behalf of, the Lender of
every kind or nature, whether absolute or contingent, due or to become due,
joint or several, liquidated or unliquidated, matured or unmatured, primary or
secondary, now existing or hereafter incurred or arising under any of the Loan
Documents or otherwise, and regardless of the form or purpose of such
Indebtedness, liabilities or obligations, including, without limitation, the
Loan, any other loans, any Security Agreements, all liabilities of the Borrower
to the Lender under any indemnity, reimbursement, letter of credit, guaranty,
deposit or other agreement heretofore or hereafter executed by the Borrower with
or in favor of the Lender. The term includes, without limitation, all interest,
charges, expenses, Taxes, attorneys' fees and other sums chargeable to the
Borrower under any of the Loan Documents.
"Other Agreements" shall mean any and all agreements, instruments,
documents and certificates (other than this Agreement), heretofore, now or
hereafter executed by the Borrower and delivered to the Lender in respect to the
transactions contemplated by this Agreement, including, without limitation, the
Note and any Security Agreement or Lien agreement now existing, concurrently or
hereafter executed by the Borrower to secure the Obligations.
"Permitted Liens" shall mean any Lien but only to the extent such Lien
is contested or disputed in good faith or for which arrangements for deferred
payment have been made, provided appropriate reserves are maintained, to the
satisfaction of the Lender, for the eventual payment thereof, or such Liens as
Lender shall approve in writing.
"Person" shall mean an individual, partnership, corporation, joint
venture, association, joint stock company, trust, business trust or
unincorporated organization, limited liability company, or a government or
agency or political subdivision thereof.
3
<PAGE> 4
"Projections" shall mean Borrower's forecasted (a) balance sheets, (b)
profit and loss statements, and (c) cash flow statements, all prepared on a
consistent basis with Borrower's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Remittance Instructions" shall have the meaning given to it in Section
2.2.
"Security Agreement" shall mean any instruments and agreements of any
kind now or at any time hereafter securing the whole or any part of the
Obligations, including but not limited to that certain Chattel Mortgage relating
to the Eligible Equipment.
"Solvent" shall mean, as to any Person, that such Person: (i) owns
Property the fair value of which is greater than the amount required to pay all
of such Person's Indebtedness (including contingent liabilities); (ii) is able
to pay all of its Indebtedness as such Indebtedness matures; and (iii) has
capital sufficient to carry on its business and transactions and all business
and transactions in which it is about to engage.
"Subsidiary" shall mean any corporation or limited liability company of
which the Borrower owns more than 50% of its securities, provided the ownership
of such securities, in the absence of contingencies, entitles the Borrower to
elect a majority of the directors of such corporation or limited liability
company.
"Taxes" shall mean any present or future taxes, levies, imposts,
duties, fees, assessments, deductions, withholdings or other charges of
whatsoever nature (excluding taxes imposed on net income and all income and
franchise taxes of the United States and any political subdivisions thereof on
Lender), that may now or hereafter be imposed or asserted by any jurisdiction or
any political subdivision thereof or any taxing authority therein and all
interest, penalties or similar liabilities with respect thereto.
1.2. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with that applied
in preparation of the financial statements referred to in Section 4.4 and
5.1(A), and all financial data pursuant to this Agreement shall be prepared in
accordance with such principles consistently applied.
1.3. Certain Matters of Construction. The terms "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of this Agreement. All references to any instruments or
agreements, including, without limitation, references to this Agreement and any
of the other Loan Documents, shall include any and all modifications or
amendments thereto and any and all extensions or renewals thereof.
SECTION 2. CREDIT COMMITMENT.
2.1. Loan. The Lender agrees, subject to the terms and conditions of
this Agreement and the other Loan Documents, to make a Loan to the Borrower, on
a date not later than May 1, 1996, in the principal amount not to exceed Eight
Million Three Hundred Ninety-Three Thousand Four Hundred Twenty and 20/100ths
Dollars ($8,393,420.20). The Loan will not exceed eighty-five percent (85%) of
the Eligible Equipment Export Product Value associated with the Loan, and must
be secured by a first priority security interest in the Eligible Equipment
satisfactory to Lender in its sole discretion. Borrower
4
<PAGE> 5
must make a cash payment of not less than fifteen percent (15%) of the Eligible
Equipment Export Product value to the equipment seller.
The Loan made hereunder shall be solely and exclusively in Dollars.
2.2. Notice and Manner of Borrowing. The Closing shall be on or before
May 1, 1996. Not less than ten (10) Business Days (and no later than 10:00 a.m.
Central Standard Time on such Business Day) in advance of the date on which the
Borrower intends to borrow funds hereunder, the Borrower shall provide the
Lender with written notice confirming such intent and specifying the date the
Loan is to be made and the amount thereof. Not later than 4:00 p.m. Central
Standard Time on the date of such Loan, provided the Borrower is not then in
default under any provision of this Agreement (particularly, the conditions
precedent set forth in Section 6 of this Agreement), the Lender shall make the
amount of such Loan available to the Borrower in immediately available funds in
accordance with remittance instructions substantially in the form of Exhibit B
hereto (the "Remittance Instructions") signed by Borrower's authorized
representative and acceptable to Lender set forth in such notice against receipt
from the Borrower of a properly completed and executed Note (as described in
Section 2.3 below). Disbursement of the Loan proceeds by the Lender shall be by
bank wire transfer to an account or accounts designated in writing by an
authorized officer of the Borrower no later than five (5) days before the
Closing Date. Lender and Borrower agree that there will be only one borrowing
under this Agreement, but such borrowing may be evidenced by two Notes.
2.3. The Note. The Loan and the Borrower's obligation to repay the Loan
shall be evidenced by the Note and repayable with interest in accordance with
Section 3 of this Agreement and the terms of the Note of the Borrower, payable
to the order of the Lender, substantially in the form of Exhibit A hereto. In no
case shall the Note be considered to constitute a payment or novation of the
Loan.
2.4. Interest. The Borrower shall pay interest on the outstanding
amounts loaned to the Borrower hereunder, commencing with the date specified in
the Note and until such time as the entire principal balance thereof is fully
repaid, at the annual interest rate specified in Section 3.1(A) hereof.
2.5. Payment. Except as the Lender may otherwise direct in writing, the
Borrower agrees to make all payments directly to the Lender (or to the holder of
the Note from time to time) with funds from Borrower's "external account" (as
defined in the Deed of Warranty) by means of wire transfer, net of any wire
transfer expenses, into Lender's Bank Account and in accordance with the terms
of payment set forth in this Section 2 and the Note. All payments of principal
and interest due under the Note and of any other amounts due hereunder shall be
made not later than 12:00 Noon Central Standard Time on the due date thereof.
Whenever any payment to be made under this Agreement or under the Note shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of interest. Each payment made shall also
reference the Note by Borrower name and date of the Note or by the applicable
Note number, if any.
2.6. Application of Payments and Collections.
(A) Subject to the provisions of Section 2.6(B) below, Borrower
irrevocably waives the right to direct the application of any and all payments
and collections at any time or times hereafter received by Lender from or on
behalf of Borrower, and Borrower does hereby irrevocably agree that Lender shall
have the continuing exclusive right to apply and reapply any and all such
payments and collections received at any time or times hereafter by Lender
against the Obligations, in such manner as Lender may deem advisable,
notwithstanding any entry by Lender upon any of its books and records.
5
<PAGE> 6
(B) Upon or after the occurrence of an Event of Default and Lender's
acceleration of the maturity of the Loan as a consequence thereof, all payments
and collections received by Lender from or on behalf of Borrower for application
to the Loan shall be applied in the following order: (a) to the unpaid balance
of all Collection Expenses; (b) to the amount of any loss, costs, expenses or
damages suffered or incurred by Lender for which Borrower has agreed to
indemnify Lender pursuant to the terms of this Agreement or any of the other
Loan Documents; (c) to any past due interest on the Loan, (d) to accrued but not
past due interest on the Loan, (e) to the principal amount outstanding of the
Loan and (f) to the amount of any other Obligations then outstanding to Lender.
2.7. Notations. Borrower hereby irrevocably authorizes Lender to make
(or cause to be made) appropriate notations in its records to evidence, inter
alia, the date of, the outstanding principal amount of and the interest rate
applicable to, the Loan evidenced thereby. The notations in such records
indicating the outstanding principal amount of the Loan evidenced thereby shall,
in the absence of manifest error, be prima facie evidence of the principal
amount thereof owing and unpaid, but the failure to record any such amount in
such records or otherwise shall not limit or affect the obligations of Borrower
hereunder or under the Note to make payment of principal of or interest on the
Loan when due.
2.8. Voluntary Prepayment. The Borrower may prepay without penalty or
premium the balance due under any one or more of the Note or Notes evidencing
the Loan (on a Note-by-Note basis) in its entirety and not in part at any time
thirteen (13) months after the Note date, provided the Borrower (i) shall give
the Lender advance written notice of the intended date of prepayment, which date
shall be a scheduled payment date (the "Final Payment Date"), not less than
thirty (30) days in advance of that Final Payment Date, and (ii) Borrower pays
all other Obligations to Lender under the Loan Documents. A notice of prepayment
once given by Borrower may only be rescinded if Lender has not, in relying on
such notice, undertaken obligations which might cause Lender to incur
liabilities should Lender attempt to rescind such obligations.
2.9. Payment "Net Taxes". The Borrower agrees to pay all amounts owing
by it under this Agreement, the Notes or the other Loan Documents free and clear
of and without deduction for any present or future Taxes, and
(A) that if it is prevented by operation of law from paying any Taxes,
then the interest rate or fees required to be paid under this Agreement, the
Notes or the other Loan Documents shall be increased by the amount necessary to
yield to the Lender interest or fees at the rates specified in this Agreement,
the Notes, or the Other Loan Documents after provision for the payment of all
such Taxes and without taking into account any tax benefits accruing to the
Lender from such payment;
(B) that it shall at the request of the Lender execute and deliver to
the Lender such further instruments as may be necessary or desirable to effect
the increase in the interest or fees as provided for in clause (a) immediately
above, including new Notes to be issued in exchange for any Notes theretofore
issued;
(C) that it shall indemnify and hold the Lender harmless from and
against any liabilities with respect to any Taxes (whether or not properly or
legally asserted); and
(D) that it shall provide the Lender with the original or a certified
copy of evidence of the payment of any Taxes by it, as the Lender may reasonably
request, or, if no Taxes have been paid to provide to Lender, at the Lender's
request, with a certificate from the appropriate taxing authority or an opinion
of counsel acceptable to the Lender stating that no Taxes are payable.
6
<PAGE> 7
If Lender shall receive a refund of any Taxes paid by the Borrower pursuant to
this Section 2.9 by reason of the fact that such Taxes were not correctly or
legally asserted, Lender shall within 60 days after receipt of such refund pay
to the Borrower the amount of such refund, as determined solely by the Lender;
provided, however, that in no event shall the amount paid by Lender to the
Borrower pursuant to this sentence exceed the amount of Taxes originally paid by
the Borrower; and further provided that Lender shall not have any obligation
under this Agreement to claim or otherwise seek to obtain any such refund.
Notwithstanding the foregoing, Lender agrees to cooperate in good faith with any
written request of the Borrower to seek or obtain any such refund relating to
this Agreement that cannot be obtained by the Borrower without the assistance,
or direct involvement, of Lender, provided no default exits under this Agreement
and provided the Borrower has agreed in advance in writing to bear the expenses
relating thereto and has agreed in writing (in a form acceptable to Lender) to
indemnify Lender against and hold Lender harmless for any loss, cost or expense
relating thereto.
2.10. Dollar Payments. All payments required to be made hereunder, the
Notes, or any of the Loan Documents shall be payable solely and exclusively in
Dollars.
2.11. Obligations Unconditional. The obligations of the Borrower under
this Agreement and in respect of the Loan shall be absolute and unconditional
under all circumstances and irrespective of any setoff, counterclaim or defense
to payment (of any type or description, whether as a result of non-compliance
with any of the provisions of this Agreement, any of the agreements referred to
herein or otherwise) which the Borrower may have or have had against the Lender
or any other Person.
2.12. Termination of Commitment. This Commitment shall terminate on May
1, 1996 if Borrower has not met the conditions precedent to the Loan under
Section 6 of this Agreement, except to the extent Lender may in its sole
discretion elect to make the Loan prior to the fulfillment of any of the
conditions precedent set forth in Section 6.
No termination (regardless of cause or procedure) of the Commitment
shall in any way affect or impair the rights, powers or privileges of Lender or
the obligations, duties or liabilities of Borrower in any way relating to (i)
any transaction or event occurring prior to the effective date of such
termination or (ii) any of the undertakings, agreements, covenants,
indemnifications, warranties or representations of Borrower contained in this
Agreement or any of the other Loan Documents. All such undertakings, agreements,
covenants, indemnities, warranties and representations of Borrower shall survive
such termination and Lender shall retain all of its rights and remedies under
this Agreement and the other Loan Documents notwithstanding such termination
until all of the Obligations have been paid in full, in immediately available
funds.
Notwithstanding the foregoing, if no funding is made under this
Agreement, Borrower shall not be bound by any of the undertakings, agreements,
covenants, indemnifications, warranties or representations of Borrower contained
in this Agreement or any of the other Loan Documents except to the extent that
such are intended, by their nature, to survive the termination of this
Agreement.
SECTION 3. INTEREST, FEES AND CHARGES
3.1. Interest, Fees and Charges.
(A) Interest Rates. Borrower agrees to pay interest in respect of
the unpaid principal amount of the Loan from the respective date the principal
amount is advanced until paid (whether at stated maturity, on acceleration, or
otherwise) at a rate per annum equal to the Base Rate. Interest shall be
computed on the actual number of days elapsed over a year of 360 days, and shall
be payable in accordance with the terms of the Note.
7
<PAGE> 8
(B) Late Payment Rate. Should the Borrower fail to pay, when due,
any installment of principal or interest or any prepayment amount (as described
above), or any other obligation as such becomes due hereunder or under the Note,
the Borrower shall also pay interest on such amount equal to the Base Rate plus
nine percent (9%) per annum; or, if such rate exceeds the Maximum Rate legally
allowed, then at such Maximum Rate. In the event that any obligation hereunder
or under the Note shall remain unpaid beyond the maturity date of the Note, the
Base Rate will continue to adjust for purposes of calculating the above rate as
if the maturity date of the Note had been extended. Interest payable at the Late
Payment Rate shall be computed on the actual number of days elapsed over a year
of 360 days, and shall be payable in accordance with the terms of the Note.
(C) Maximum Interest. Regardless of any provision contained in this
Agreement or any of the other Loan Documents, in no contingency or event
whatsoever shall the aggregate of all amounts deemed interest hereunder or under
the Note and contracted for, charged or collected pursuant to the terms of this
Agreement or pursuant to the Note exceed the highest rate permissible under any
Applicable Law. No agreements, conditions, provisions or stipulations contained
in this Agreement or any of the other Loan Documents or the exercise by Lender
of the right to accelerate the payment or the maturity of all or any portion of
the Obligations, or the exercise of any option whatsoever contained in any of
the Loan Documents, or the prepayment by Borrower of any of the Obligations, or
the occurrence of any contingency whatsoever, shall entitle Lender to charge or
receive in any event, interest, or any charges, amounts or fees deemed interest
by Applicable Law (such interest, charges, amounts and fees referred to herein
collectively as "Interest"), exceeding the Maximum Rate and in no event shall
Borrower be obligated to pay Interest exceeding such Maximum Rate, and all
agreements, conditions or stipulations, if any, which may in any event or
contingency whatsoever operate to bind, obligate or compel Borrower to pay
Interest exceeding the Maximum Rate, shall be without binding force or effect,
at law or in equity, to the extent only of the excess of Interest over such
Maximum Rate. If any Interest is charged or received in excess of the Maximum
Rate ("Excess"), Borrower acknowledges and stipulates that any such charge or
receipt shall be the result of an accident and bona fide error, and such Excess,
to the extent received, shall be applied first to reduce the principal then
unpaid hereunder; then applied to reduce the other Obligations; and the balance,
if any, returned to Borrower, it being the intent of the parties hereto not to
enter at any time into a usurious or otherwise illegal relationship. The right
to accelerate maturity of any of the Obligations does not include the right to
accelerate any interest that has not otherwise accrued on the date of such
acceleration, and Lender does not intend to collect any unearned interest in the
event of any such acceleration. All monies paid to Lender hereunder or under any
of the Loan Documents, whether at maturity or by prepayment, shall be subject to
any rebate of unearned interest as and to the extent required by Applicable Law.
By the execution of this Agreement, Borrower covenants that (i) the credit or
return of any Excess shall constitute the acceptance by Borrower of such Excess,
and (ii) Borrower shall not seek or pursue any other remedy, legal or equitable,
against Lender, based in whole or in part upon contracting for, charging or
receiving any Interest in excess of the Maximum Rate. For the purpose of
determining whether or not any Excess has been contracted for, charged or
received by Lender, all interest at any time contracted for, charged or received
from Borrower in connection with this Agreement shall, to the extent permitted
by Applicable Law, be amortized, prorated, allocated and spread in equal parts
throughout the full term of the Obligations. Borrower and Lender shall, to the
maximum extent permitted under Applicable Law, (i) characterize any
non-principal payment as an expense, fee or premium rather than as Interest and
(ii) exclude voluntary prepayments and the effects thereof. The provisions of
this Section shall be deemed to be incorporated into every Loan Document
(whether or not any provision of this Section is referred to therein). All such
Loan Documents and communications relating to any Interest owed by Borrower and
all figures set forth therein shall, for the sole purpose of
8
<PAGE> 9
computing the extent of Obligations, be automatically recomputed by Borrower,
and by any court considering the same, to give effect to the adjustments or
credits required by this Section.
SECTION 4. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants the following to the Lender as of the
date hereof and for the entire term of this Agreement:
4.1. Corporate Existence. The Borrower is a limited liability company duly
organized, validly existing and in good standing under the laws of its
jurisdiction of formation, and is duly licensed or qualified to transact
business in all jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes such licensing or
qualification necessary.
4.2. Authorization of Borrowing; No Conflict as to Applicable Law or
Agreements. The Borrower has the right and power and is duly authorized and
empowered to enter into, execute, deliver and perform all of its obligations
under this Agreement and each of the other Loan Documents to which it is a
party, to conduct its business as presently conducted and to own, operate and
lease its Property. The execution, delivery and performance by the Borrower of
this Agreement and each of the other Loan Documents and the borrowing hereunder,
have been duly authorized by all necessary corporate action and do not and will
not (i) require any consent or approval of the stockholders of the Borrower, or
any authorization, consent or approval by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign
(except those set forth in Exhibit C, each of which has been given or obtained
and is in full force and effect on the date hereof), (ii) violate any provision
of any Applicable Law, rule or regulation or of any order, writ, injunction or
decree presently in effect having applicability to the Borrower or of the
charter or bylaws of the Borrower, (iii) result in a breach of or constitute a
default under any indenture or loan or credit agreement (including, without
limitation, any such agreements in effect as of the date hereof between the
Borrower and any Bank) or any other material agreement, lease or instrument to
which the Borrower is a party or by which it or its Property may be bound or
affected (except for those with Persons who have consented thereto), or (iv)
result in, or require, the creation or imposition of any Lien (other than the
Lien granted to Lender by the Security Agreement) upon or with respect to any of
the Properties now owned or hereafter acquired by the Borrower.
4.3. Legal Agreements. This Agreement is, and each of the other Loan
Documents when delivered under this Agreement will be, a legal, valid and
binding obligation of the Borrower enforceable against it in accordance with
their respective terms, except as enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally and by the effect of
general principles of equity.
4.4. Financial Condition. The Borrower has heretofore furnished the
following financial statements to Lender: The annual audited consolidated
financial statements of the Borrower as of the close of the Fiscal Years set
forth on Exhibit C, and unaudited interim financial statements (which may, but
need not, contain footnotes) for the interim periods set forth on Exhibit C
hereto. Such financial statements present fairly in all material respects the
financial condition of the Borrower on the dates thereof and the results of its
operations for the periods then ended, and were prepared in accordance with
GAAP, subject, in the case of interim statements (which may, but need not,
contain footnotes), only to changes from audit and year-end adjustments. There
are no liabilities of the Borrower or any Subsidiary of the Borrower, fixed or
contingent, which are material and are not reflected in the financial statements
or the notes thereto, other than liabilities arising in the
9
<PAGE> 10
ordinary course of business since the date of the last financial statement
referred to hereinabove.
4.5. Accuracy of Information. The financial statements referred to in
paragraph 4.4 do not, nor does any other written statement furnished by the
Borrower in connection with this Agreement, contain any untrue statement of a
material fact or omit a material fact necessary to make the statements contained
herein or therein not misleading. All information supplied to Lender by or on
behalf of the Borrower with respect to the assets or any other Property of the
Borrower or its Subsidiaries (whether prior to the date of this Agreement, as
part of this Agreement, or after the date of this Agreement) is and shall be
true and correct in all material respects.
4.6. Adverse Change. Except as otherwise disclosed to Lender in writing in
connection with this Agreement, there has been no change in the business,
assets, liabilities, business prospects, Property or condition (financial or
otherwise) of the Borrower which could reasonably be expected to have a Material
Adverse Effect on the business, Property or financial condition of the Borrower
since the date of the latest financial statement referred to in Section 4.4.
4.7. Adverse Fact. Other than general economic conditions, no fact is
known to the Borrower, as of the date hereof, which has had or can reasonably be
expected in the future to have a Material Adverse Effect which has not been
previously disclosed to Lender by the Borrower in writing.
4.8. Solvent Financial Condition. The Borrower is now, and after giving
effect to the Loan to be made under this Agreement, will be, Solvent.
4.9. Operation of Business. The Borrower and each Subsidiary and Affiliate
of the Borrower possesses all licenses, permits, franchises, patents,
copyrights, trademarks, and trade names, or rights thereto, free from unduly
burdensome restrictions and adequate for the conduct in all material respects of
their respective businesses substantially as now conducted and as presently
proposed to be conducted, and to the best knowledge of the Borrower, the
Borrower and each Subsidiary is not in violation of any valid rights of others
with respect to any of the foregoing. During the five (5) year period
immediately preceding the date of this Agreement, Borrower has had no principal
office or principal place of business located in any political or administration
region or district other than as set forth in Exhibit D.
4.10. Title to Property. The Borrower has good, valid and marketable title
to all its material Property and assets, both real and personal (except for such
material property as has been sold or otherwise disposed of in the ordinary
course of business since the date hereof), and has appropriate rights to lease
any Property leased by it.
4.11. Absence of Liens Other Than Permitted Liens. The Eligible
Equipment is not and will not be subject to any Lien or the terms of any
security agreement during the term hereof, other than Permitted Liens.
4.12. Subsidiaries, Affiliates, and Ownership of Stock. Set forth in
Exhibit E hereto is a complete and accurate list of the Subsidiaries and
Affiliates of the Borrower, showing (i) the correct name of each of the
Subsidiaries of the Borrower, the jurisdiction of incorporation or formation and
the percentage of its voting stock owned by the Borrower; (ii) the name of each
of the Borrower's corporate or joint venture Affiliates and the nature of the
affiliation; (iii) the number, nature and holder of all outstanding securities
of the Borrower and each Subsidiary of the Borrower; and (iv) the number of
authorized, issued and treasury shares of the Borrower and each Subsidiary of
the Borrower. All of the outstanding capital stock of each Subsidiary has been
validly issued, is fully paid and nonassessable. If the Borrower has any
Subsidiary or Subsidiaries, the Borrower represents and warrants that it has
good title to all of the shares it purports to own of the
10
<PAGE> 11
securities of each Subsidiary, free and clear in each case of any Lien other
than Liens that have been disclosed to Lender in writing.
4.13. Stamp, Duty, Documentary and Withholding Taxes. Borrower has paid or
shall pay when due all stamp, duty or documentary taxes or charges imposed by
the government of the Republic of Ghana or any taxing authority thereof or
therein that are payable on or in connection with this Agreement, the Notes, the
Loan Documents or any related documents. Borrower has paid or shall pay when due
all applicable deductions or withholdings for or on account of any Taxes,
levies, duties, fees, deductions or withholding, restrictions or conditions of
any nature imposed by or on behalf of the government of the Republic of Ghana or
any taxing authority whatsoever on the payments by the Borrower to the Lender of
the Loan hereunder.
4.14. Corporate Names. During the preceding five (5) years, Borrower has
not been known as or used any corporate, fictitious or trade names except as
disclosed on Exhibit F hereto. Except as set forth on Exhibit F, Borrower has
not, during the preceding five (5) years, been the surviving corporation or
limited liability company of a merger or consolidation or acquired all or
substantially all of the assets of any Person.
4.15. Business Locations. The principal place of business and main
executive office of the Borrower and other current business locations (including
leased locations) are set forth on Exhibit D hereto.
4.16. Leases. A complete listing of all leases of the Borrower as "lessee"
thereunder in excess of $250,000 is set forth in Exhibit G.
4.17. Debt. Set forth in Exhibit H hereto is a complete, accurate and
correct list of all credit agreements, indentures, purchase agreements,
guarantees, surety agreements, capitalized leases, and other investments,
agreements, and arrangements presently in effect providing for or relating to
extensions of credit (including agreements and arrangements for the issuance of
letters of credit or for acceptance financing) in respect of which the Borrower
or any Subsidiary is in any manner directly or contingently obligated for an
amount greater than $1,000,000; provided, however, that the Borrower shall have
no obligation to report on Exhibit H purchase agreements regarding the sale of
goods produced in the Borrower's operations entered into in the ordinary course
of business of the Borrower. The maximum principal or face amounts of the credit
in question which are outstanding and which can be outstanding are correctly
stated, and all mortgages, deeds of trust, pledges, Liens, security interests,
or other charges or encumbrances of any nature given or agreed to be given as
security therefor are correctly described or indicated in such exhibit. The
Borrower is not obligated as surety or indemnitor under any surety or similar
bond or other contract and has not issued or entered into any agreement to
assure payment, performance or completion of performance of any undertaking or
obligation of any other Person. Borrower has no debt or other lien or obligation
in favor of any Affiliated or stockholder of Borrower that has payment rights
superior to those of Lender hereunder or under the Note.
4.18. Compliance with Applicable Laws and Regulations; Governmental
Consents. The Borrower, in the conduct of all of its business affairs, has
complied in all material respects with the requirements of all Applicable Laws
and regulations as in effect at the relevant time noncompliance with which would
have a Material Adverse Effect. Except as set forth in Exhibit I, there have
been no citations, notices or orders of noncompliance (that have not been
complied with or withdrawn), issued to the Borrower under any Applicable Law
which would have a Material Adverse Effect.
Except as set forth in Exhibit I, the Borrower has, and is in good
standing with respect to, all governmental consents, approvals, authorizations,
permits, certificates, inspections, and franchises necessary to continue and to
conduct in all material respects its business as heretofore
11
<PAGE> 12
conducted (or proposed to be conducted) by it and to own or lease and operate in
all material respects its Properties as now owned or leased by it.
4.19. Taxes. The Borrower and its Subsidiaries each has filed all federal,
state and local (or the relevant equivalent) tax returns and other reports it is
required by law to file and has paid, or made provision for the payment of, all
taxes, assessments, fees and other governmental charges that are reflected on
such returns except and to the extent only that such taxes, assessments, fees
and charges are being actively contested in good faith and by appropriate
proceedings and the Borrower or Subsidiary has established adequate reserves on
its books therefor. The provision for taxes on the books of the Borrower and
each Subsidiary are, insofar as known to the Borrower, adequate for all years
not closed by applicable statutes and for its current fiscal year. Except as
disclosed in the financial statements furnished to Lender in accordance with
Section 4.4, the Borrower knows of no proposed material tax assessment against
it or any of its Subsidiaries and no extension of time for the assessment of
federal, state or local taxes of the Borrower or any of its Subsidiaries is in
effect or has been required.
4.20. Litigation. Except as set forth in Exhibit J, there are no actions,
suits or proceedings pending or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any Subsidiary or the Property of the
Borrower or any Subsidiary before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which, if determined adversely to the Borrower or any Subsidiary (as the case
may be), would have a Material Adverse Effect.
4.21. No Defaults on Outstanding Judgments or Orders. The Borrower has
satisfied all judgments, and is not in default with respect to any judgment,
writ, injunction, decree, rule, or regulation of any court, arbitrator, or
federal, state, municipal, or other governmental authority, commission, board,
bureau, agency, or instrumentality, domestic or foreign, unless the failure to
cure such default would not have a Material Adverse Effect.
4.22. Labor Disputes; Acts of God. Except as set forth in Exhibit K,
neither the Borrower nor any of its Subsidiaries is a party to any collective
bargaining agreement and there are no material grievances, disputes or
controversies with any union or any other organization of the Borrower's
employees, or threats of strikes, work stoppages or any asserted pending demands
for collective bargaining by any union or organization. Neither the business nor
the Property of the Borrower or any Subsidiary are affected by any fire,
explosion, accident, drought, storm, hail, earthquake, volcanic eruption,
embargo, act of God or of the public enemy, or other casualty (whether or not
covered by insurance) which would have a Material Adverse Effect.
4.23. Surety Obligations. Except as set forth in Exhibit H, the Borrower
is not obligated as surety or indemnitor under any surety or similar bond or
other contract and has not issued or entered into any agreement to assure
payment, performance or completion of performance of any undertaking or
obligation of any other Person.
4.24. Other Agreements. The Borrower and each Subsidiary of the Borrower
is not in default in any material respect under any indenture, loan, or credit
agreement, or under any lease or other agreement or instrument to which it is a
party, or any term of its charter or bylaws or in the performance, observance,
or fulfillment of any of the obligations, covenants, or conditions contained in
any agreement or instrument material to its business to which it is a party. No
event has occurred and no condition exists which, upon consummation of the
transactions contemplated by this Agreement, would constitute a default under
any note or other evidence of indebtedness of the Borrower or a Default or an
Event of Default.
12
<PAGE> 13
4.25. No Exchange Approvals. There are no exchange approvals required for
the execution of the Agreement, the Notes, or the Loan Documents and the
Borrower will be permitted to purchase sufficient freely transferable Dollars
for the payment of all amounts due under such agreements and documents, or to
the extent any such approvals are required Borrower has obtained them.
4.26. Civil Acts; No Immunity. The Borrower is subject to civil and
commercial law with respect to its obligations under this Agreement. The
execution, delivery and performance of this Agreement by the Borrower constitute
a commercial act as opposed to a governmental act. The Borrower (and its
Property) does not enjoy, in the courts or under the laws of the Republic of
Ghana any right of immunity from suit, setoff or attachment or execution on a
judgment in respect of the obligations of the Borrower under this Agreement.
4.27. Legal Form of Agreement. The Loan Documents are in proper legal form
under the laws of the Republic of Ghana for the enforcement thereof against the
Borrower under the laws of the Republic of Ghana; and to ensure the legality,
validity, enforceability or admissibility in evidence of the Loan Documents, it
is not necessary that any of the Loan Documents be filed or recorded with any
court or other authority in the Republic of Ghana, other than the requirement
that relevant Loan Documents (including the Security Agreement) be stamped by
the appropriate governmental authority and that the Security Agreement be
registered with the Registrar of Companies.
4.28. Deed of Warranty. The Deed of Warranty remains in full force and
effect and no amendment to or modification thereto has been made.
SECTION 5. COVENANTS AND CONTINUING AGREEMENTS
5.1. Affirmative Covenants. The Borrower covenants that from the date
hereof, and for so long as any amounts owed by the Borrower to the Lender
hereunder or under any of the other Loan Documents shall remain unpaid, and
unless otherwise consented to by Lender in writing:
(A) Financial Statements; Other Information. The Borrower will deliver
to Lender:
(i) Annual Statements. As soon as available, and in any event
within one hundred twenty (120) days after the end of each Fiscal Year of the
Borrower, a copy of the unqualified (except for a qualification for a change in
accounting principles with which the independent public accountant concurs)
audited financial statements of the Borrower as of the end of such year,
certified by a firm of independent certified public accountants of recognized
international standing or otherwise acceptable to Lender.
(ii) Semi-Annual Statements. As soon as available and in any event
within ninety (90) days after the end of each semi-annual period of each Fiscal
Year of the Borrower, unaudited interim financial statements of the Borrower as
of the end of such semi-annual period and of the portion of the Borrower's
Fiscal Year then elapsed, certified by the principal financial officer of the
Borrower as prepared consistently with the Borrower's prior practices and fairly
presenting, in all material respects, the financial position and results of
operations of the Borrower for such period subject only to changes from audit
and year-end adjustments and except that such statements need not contain notes.
(iii) Generally Accepted Accounting Principles. The annual audit
reports and the semi-annual financial statements referred to in (i) and (ii),
above, shall be prepared in reasonable detail and in accordance with GAAP
applied on a basis consistent with the accounting practices reflected in the
annual financial statements referred to in Section 4.4 (subject only, in the
case of the semi-annual statements, to changes from audit and year-end
adjustments and except that such semi-annual statements need not contain
13
<PAGE> 14
notes); and accompanied by a certificate of the chief financial officer of the
Borrower stating (i) that such audit report and financial statement have been
prepared in accordance with GAAP applied on a basis consistent with the
accounting practices reflected in the annual financial statements referred to in
Section 4.4, and (ii) all relevant facts in reasonable detail to evidence, and
the computations as to, whether or not the Borrower is in compliance with the
requirements set forth in Section 5.1(L) of this Agreement.
(iv) Accountants' Reports. Promptly upon receipt thereof, a copy of
the accountants' letter to Borrower's management that is prepared in connection
with such financial statements; and, if the shares of Borrower are publicly
traded at any time during the term of this Agreement, copies of all such
financial statements and reports as the Borrower shall send to its stockholders
(as stockholders) and of all registration statements and all regular or periodic
reports which the Borrower shall file, or may be required to file, with any
national or state securities commission.
(v) Projections. As soon as available, and in any event no later
than thirty (30) days after the last day of each fiscal year of the Borrower,
Projections of the Borrower for the forthcoming fiscal year, month by month.
(vi) Notice of Litigation. Promptly after the commencement thereof,
notice in writing of all litigation and of all administrative proceedings before
any state or federal court or any governmental or regulatory agency, bureau or
commission affecting the Borrower or any Subsidiary or any of its Properties or
the Property of any Subsidiary, whether or not the claim is considered by the
Borrower to be covered by insurance, which may have a Material Adverse Effect or
which seek a monetary recovery against the Borrower in excess of $1,000,000,
along with, if requested in writing by Lender, an opinion of the Borrower's
counsel regarding the circumstances underlying and merit of such litigation or
proceedings.
(vii) Notice of Change in Ownership. Promptly upon the occurrence
thereof, a written notice of a change in ten percent (10%), in one transaction
or a series of transactions, in the ownership of the Borrower or any Subsidiary.
(viii) Notice of Claimed Default Under Other Agreements. Promptly
after learning of any material default by Borrower under any note, indenture,
loan agreement, mortgage, lease, deed, guaranty or other similar agreement
relating to any Indebtedness of the Borrower with an outstanding principal
balance in excess of $1,000,000, a written notice specifying the notice given or
action taken by the holder of such Indebtedness, as the case may be, and the
nature of the claimed default and what action the Borrower is taking or proposes
to take with respect thereto.
(ix) Notice of Default by Debtor of the Borrower. Promptly after
the occurrence of any default by any obligor under any note or other evidence of
Indebtedness payable to the Borrower in an amount exceeding $2,000,000, a
written notice thereof to Lender.
(x) Notice of Change in Credit Rating. Promptly upon becoming aware
thereof, a written notice of any adverse change in, or downgrading of, any
credit rating given the Borrower in connection with any outstanding debt
obligations of the Borrower.
(xi) Notice of Regulatory Action. Promptly upon becoming aware of
any action or proceeding instituted by any national, district or other
regulatory agency which might materially and adversely affect the ability of the
Borrower to perform its obligations under this Agreement or otherwise with
respect to the Loan, a written notice describing such action or proceeding and
the status thereof.
14
<PAGE> 15
(xii) Notice of Labor Dispute. Promptly after Borrower's learning
of any labor dispute to which the Borrower may become a party, any strikes or
walkouts relating to any of its plants or their facilities, or the expiration of
any labor contract to which it is a party or by which it is bound, a written
notice describing any such strike, walkout or condition which may have a
Material Adverse Effect, and the status thereof.
(xiii) Quarterly Covenant Compliance Report. As promptly as
practicable (but in any event not later than fifteen (15) Business Days)
following the end of each calendar quarter, a Covenant Compliance Report,
substantially in the form of Exhibit L, stating: (i) whether the Borrower was in
compliance during and at the end of the calendar quarter with respect to each of
the covenants of the Borrower specified in this Agreement, (ii) which
covenant(s), if any, the Borrower failed to comply with and the period(s) during
which the Borrower was not in compliance, and (iii) for any covenant for which
the Borrower is not in compliance, the steps being taken to correct such
noncompliance (including periodic notice to Lender as to the Borrower's progress
in such regard). If the Borrower identifies any covenant for which it is not in
compliance, and as the Borrower reports to Lender on the correction of the
noncompliance, the Borrower shall also provide Lender with sufficient
documentation to permit Lender to understand the nature of the noncompliance and
the progress toward correcting same. The Covenant Compliance Report shall be
signed by the chief executive officer or chief financial officer of the
Borrower. Lender's receipt of any report or other information identifying
noncompliance by the Borrower or failure to respond thereto, shall not act as a
waiver of Lender's rights under this Agreement or Lender's rights hereunder with
respect to such noncompliance or any other event of noncompliance.
(xiv) Requested Information. From time to time and promptly upon
the request of Lender, such data, certificates, reports, statements, opinions of
counsel and other experts, documents or further information or assurances
bearing upon or related to this Agreement, or the business, assets, liabilities,
financial condition, results of operations, or business prospects of the
Borrower as Lender may reasonably request (including, without limitation,
federal income tax returns of the Borrower, accounts payable ledgers, and bank
statements), in each case in form and substance, and certified in a manner,
satisfactory to Lender.
(B) Compliance with Applicable Laws and Regulations; Payment of Taxes and
Claims. The Borrower shall comply and cause each Subsidiary to comply with all
Applicable Laws, rules, regulations and orders including, without limitation,
all laws, statutes, regulations and ordinances regarding the collection, payment
and deposit of employees' income, unemployment, social security, sales and
excise taxes, other Taxes, which failure to comply with might have a Material
Adverse Effect, and shall also comply in all material respects with, perform and
observe and cause each Subsidiary to comply in all material respects with,
perform and observe, all material covenants, provisions and conditions in
connection with all other loan or credit agreements to which it or any such
Subsidiary is a party. The Borrower shall timely file, and cause each Subsidiary
to file, all national, district and local tax returns or extensions and other
reports the Borrower or such Subsidiary is required by law to file, and
maintain, and cause each Subsidiary to maintain, adequate reserves for the
payment of all taxes, assessments, governmental charges, and levies imposed upon
it, its income, or its profits, or upon any Property belonging to it. The
Borrower shall pay and discharge, and cause each Subsidiary to pay and
discharge, all taxes, assessments and governmental charges upon it, its income
and Properties as and when such taxes, assessments and charges are due and
payable, except and to the extent only that such taxes, assessments and charges
are being actively contested in good faith and by appropriate proceedings, the
Borrower promptly notifies Lender in writing of such contest, the Borrower (or
such Subsidiary) maintains adequate reserves on its books therefor and the
nonpayment of such taxes, assessments and charges does not result in a Lien upon
any Properties of the
15
<PAGE> 16
Borrower (or such Subsidiary) other than a Permitted Lien. The Borrower shall
also pay and discharge any lawful claims which, if unpaid, might become a Lien
against any of the Eligible Equipment except for Permitted Liens.
(C) Responsibility for Loss or Damage and Insurance. The Borrower and each
Subsidiary of the Borrower shall obtain and maintain general corporate insurance
with insurers believed by the Borrower and each such Subsidiary to be
responsible and reputable and reasonably acceptable to Lender, in such amounts
and against such risks as is usually carried by companies engaged in similar
business and owning similar Property in the same general areas in which the
Borrower and each Subsidiary operates or as may be required by any Applicable
Laws, orders or regulations or as may reasonably be requested by Lender. Upon
the written request of Lender, the Borrower and each Subsidiary shall promptly,
and in all events within ten (10) days of the date on which the Borrower
receives such request, provide Lender with evidence of the insurance coverage
required under this Section. Additionally, the Borrower and each Subsidiary and
Affiliate of the Borrower shall provide not less than thirty (30) days advance
written notification to Lender in the event of cancellation or material change
in the terms of such coverage.
Borrower shall be responsible for and bear the risk of any loss or damage to the
Eligible Equipment financed howsoever caused. Borrower shall at its expense
insure the Eligible Equipment in any Security Agreement against all risks of
physical loss for its full insurable value. All such insurance shall be with
such insurance companies and under such policies and in such form as are
satisfactory to Lender. Such insurance shall be primary, without right of
contribution from any insurance carried by Lender, and shall provide that it may
not be canceled or altered so as to affect the interest of Lender without at
least thirty (30) days prior written notice to Lender. All such insurance
covering loss or damage to Eligible Equipment shall name Lender (or its
designee) as sole loss payee. Deductibles on such insurance shall not exceed
U.S. $50,000 per occurrence. Borrower shall furnish Lender with satisfactory
evidence of such insurance. Borrower shall promptly notify Lender of any loss or
damage to the Equipment and of any claim relating thereto. Borrower shall not
agree to any settlement relating to the Eligible Equipment with insurers without
Lender's prior written consent. Borrower hereby irrevocably appoints Lender as
Borrower's attorney-in-fact to endorse all drafts or checks payable to Borrower,
and to file claims and to take all other actions necessary to collect any
proceeds of such insurance.
(D) Preservation of Corporate Existence. The Borrower and each Subsidiary
shall preserve and maintain its corporate existence and obtain and keep in force
any and all rights, privileges, licenses, permits, patents, franchises, or other
governmental authorizations necessary to the ownership of its Properties or to
the conduct of its business; provided, however, that the Borrower or any
Subsidiary shall not be required to preserve any such rights, privileges,
licenses, permits, patents, and franchises or, in the case of any Subsidiary,
its corporate existence, if (i) its Board of Directors shall determine that the
preservation thereof is no longer desirable or necessary in the conduct of the
current business of the Borrower or such Subsidiary and (ii) the loss thereof is
not disadvantageous in any material respect to the Lender or any subsequent
holder of the Loan and would not have a Material Adverse Effect.
(E) Inspection. At any reasonable time and from time to time upon prior
notice to the Borrower, the Lender or any agents or representatives thereof (at
Borrower's expense) shall be allowed to examine and make and prepare copies of
and abstracts from the records and books of account of, and visit and inspect
the Property of, the Borrower and each Subsidiary and to discuss the affairs,
finances and accounts of the Borrower with the Managing Director, Chief
Financial Officer or Chairman of the Borrower, and any other officer of the
Borrower who shall be designated by Borrower.
16
<PAGE> 17
(F) Maintenance of Property, Etc. The Borrower and each Subsidiary shall
maintain and preserve all of its Property necessary in the proper conduct of its
current business in good working order and condition, ordinary wear and tear
excepted.
(G) Maintenance of Records and Books of Account. The Borrower shall keep
and cause each Subsidiary to keep accurate records and books of account;
financial information shall be recorded and maintained in accordance with GAAP
consistently applied.
(H) Discharge of Indebtedness. The Borrower and each Subsidiary of the
Borrower shall promptly pay and discharge any and all Indebtedness and lawful
claims which, if unpaid, might become a Lien or charge upon the Eligible
Equipment, except Permitted Liens.
(I) Application of Proceeds of the Loan. The Borrower shall use the
proceeds only as specified in the Remittance Instructions.
(J) Uninsured Loss. Borrower shall give Lender written notice of any
uninsured loss suffered by the Borrower or any Subsidiary through fire, theft,
judgment, liability or property damage in excess of $100,000.
(K) Further Assurances. At Lender's request, Borrower shall promptly
execute or cause to be executed and deliver to Lender any and all documents,
instruments and agreements prepared at Lender's expense and reasonably deemed
necessary by Lender to give effect to or carry out the terms or intent of this
Agreement or any of the other Loan Documents.
(L) Financial Covenants. Following any funding under the Note, and for so
long as any amounts owed by the Borrower to the Lender hereunder or under any of
the other Loan Documents shall remain unpaid:
(i) Borrower shall maintain a ratio of Indebtedness to Net Worth of
not more than 1.8 to 1.0;
(ii) Borrower shall maintain a current ratio of not less than 1.0;
and
(iii) Borrower shall maintain a minimum Net Worth of $45,000,000.
5.2. Negative Covenants. The Borrower covenants that from the date hereof,
and for so long as any amounts owed by the Borrower to the Lender hereunder or
under any of the other Loan Documents shall remain unpaid, and unless otherwise
consented to by Lender in writing, the Borrower shall not:
(A) Sale or Disposition of Assets. Sell, transfer, convey, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its assets (whether now owned or hereafter acquired)
to any Person.
(B) Mergers; Consolidations; Acquisitions. Merge or consolidate, or
permit any Subsidiary to merge or consolidate, with any Person, or acquire all
or any substantial part of the Properties of any Person.
(C) Restrictions on Nature of Business. Engage in any line of
business materially different from that presently engaged in by the Borrower.
(D) Liens and Encumbrances. Create, incur or suffer to exist, or
permit any Subsidiary to create, incur or suffer to exist, any Lien upon any of
the Eligible Equipment, except Permitted Liens.
(E) Loans. Make any loans or other advances of money (other than
for salary, travel advances, ordinary moving expenses, housing loans, advances
against commissions and other advances to employees in the ordinary course of
17
<PAGE> 18
business or as provided for in the Borrower's collective bargaining agreement
with, or conditions of service for, its employees or senior officers as such
collective bargaining agreement may be amended or modified, and, in the case of
senior officers under the conditions of service, consistent with past practice)
to any Person, including, without limitation, any of the Borrower's Affiliates,
officers or employees.
(F) Affiliate Transactions; Affiliate Indebtedness. Except as
provided in Section 5.2(E) or 5.2(I) hereof, enter into, or be a party to any
transaction with any Affiliate or stockholder, except in the ordinary course of
and pursuant to the reasonable requirements of the Borrower's business and upon
fair and reasonable terms which are no less favorable to the Borrower than the
Borrower could obtain in a comparable arm's length transaction with a Person not
an Affiliate or stockholder of the Borrower. Without limiting the generality of
the foregoing, Borrower shall not incur any debt or other obligation to any
Affiliated or stockholder that ranks in priority above that of Lender evidenced
by the Note.
(G) Partnerships or Joint Ventures. Become or agree to become a
general or limited partner in any general or limited partnership or a joint
venturer in any joint venture; provided, however, that the Borrower shall have
the right to become a partner or joint venturer (i) in connection with its
mining activities and (ii) in connection with the conducting of exploration,
development and/or exploitation activities carried on to locate, assess and/or
exploit mineral deposits within the Republic of Ghana, so long as, in each such
case, the Borrower obtains insurance coverage relating to such partnership or
venture of a type and in amounts as described in Section 5.1(C) of this
Agreement.
(H) Adverse Transactions. Permit or agree to any material
extension, compromise or settlement of any Account, loan or other agreement with
a principal amount outstanding of $1,000,000.00 or more.
(I) Guaranties. Guarantee, assume, endorse or otherwise, in any
way, become directly or contingently liable with respect to the Indebtedness of
any Person except (i) by endorsement of instruments or items of payment for
deposit or collection, (ii) agreements to repurchase accounts or chattel paper
that have been discounted, sold or otherwise assigned in the ordinary course of
the Borrower's business or (iii) as otherwise approved by Lender.
(J) Subsidiaries. Hereafter acquire or create any Subsidiary or
divest itself of any material assets by transferring them to any Subsidiary.
(K) Business Locations. Transfer its principal place of business or
chief executive office except upon at least sixty (60) days prior written notice
to Lender.
(L) Location of Eligible Equipment. Transfer or remove the Eligible
Equipment from the Republic of Ghana.
(M) Name of the Borrower. Use any corporate name (other than its
own) or any fictitious name or "d/b/a" except for the names disclosed in Exhibit
F.
(N) Fiscal Year. Change its fiscal year.
(O) Tax Consolidation. File or consent to the filing of any
consolidated income tax return with any Person other than one or more parent
entities of the Borrower.
SECTION 6. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Lender under
18
<PAGE> 19
the other Sections of this Agreement, it is understood and agreed that the
Commitment shall not be binding upon Lender and Lender shall not be obligated to
make a Loan under Section 2 of this Agreement unless and until each of the
following conditions has been and continues to be satisfied, all in form and
substance satisfactory to Lender and its counsel:
6.1. Documentation. Lender shall have received the following documents,
each to be in form and substance satisfactory to Lender and its counsel:
(A) Evidence of Borrower's insurance specified in Section 5.1.C;
(B) Copies of all filing receipts, registrations or acknowledgments
issued by any governmental authority to evidence satisfactorily to Lender any
filing or recordation necessary to perfect the Liens of Lender under the
Security Agreement and other Loan Documents, and evidence in a form acceptable
to Lender that such Liens constitute valid and perfected security interests and
Liens, having a first priority in favor of Lender, or the Lien priority
specified in such Security Agreement or other Loan Document;
(C) A certified copy of the resolutions of the Board of Directors
of the Borrower or other equivalent corporate proceedings evidencing approval of
this Agreement, the other Loan Documents and all other matters contemplated
hereby or related hereto;
(D) Copies of the charter and bylaws or similar corporate documents
of the Borrower, certified by an authorized officer of the Borrower as being
true and correct copies thereof;
(E) A certificate of an authorized officer of the Borrower, which
shall certify the names of the officers of the Borrower authorized to execute
and deliver this Agreement and the other Loan Documents to be delivered pursuant
to this Agreement by the Borrower or any of its officers, together with the true
signatures of such officers. The Lender may conclusively rely on such
certificate until the Lender shall receive a further certificate of an
authorized officer of the Borrower canceling or amending the prior certificate
and submitting the signatures of the officers named in such further certificate;
(F) A Tax Clearance Certificate with respect to the Borrower issued
as of a recent date issued by the appropriate taxing authority of the Republic
of Ghana;
(G) A closing certificate signed by the President and Chief
Financial Officer of Borrower dated as of the Closing Date, stating that (i) the
representations and warranties set forth in Section 4 hereof are true and
correct in all material respects on and as of such date, (ii) Borrower is on
such date in compliance in all material respects with all the terms and
provisions set forth in this Agreement and (iii) on such date no Default or
Event of Default has occurred or is continuing;
(H) The Other Agreements, including but not limited to any Security
Agreement, duly executed and delivered by Borrower;
(I) The favorable, written opinion of counsel to Borrower, as to
the transactions contemplated by this Agreement and any of the other Loan
Documents, to be in form and scope satisfactory to Lender and its counsel
substantially in the form of Exhibit M;
(J) Written instructions from Borrower directing the application of
proceeds of the Loan made pursuant to this Agreement;
(K) The Note, properly executed on behalf of the Borrower and
substantially in the form of Exhibit A hereto;
19
<PAGE> 20
(L) Lender shall have received from the Borrower satisfactory
evidence that it has received the appropriate governmental exchange control
authorization for the transactions contemplated hereby or an opinion of the
Borrower's counsel that no such authorization is required;
(M) Certified copies and certified English translations of all
necessary governmental authorizations and approvals with respect to the Loan
Documents;
(N) Any of the conditions specified in the Commitment Letter which
are not expressly listed herein (so long as such conditions are not specifically
inconsistent with the requirements of this Agreement, in which case this
Agreement shall prevail);
(O) Evidence satisfactory to Lender that this Agreement has been
registered in accordance with Ghana law;
(P) Evidence satisfactory to Lender that Borrower has paid all
stamp duty that is payable prior to the registration of this Agreement with the
government of the Republic of Ghana; and
(Q) Such other documents, instruments and agreements as Lender
shall reasonably request in connection with the foregoing matters.
6.2. Other Conditions. The following conditions have been and shall
continue to be satisfied up to and through the Closing and any funding
hereunder, to the satisfaction of Lender:
(A) No Default or Event of Default shall exist;
(B) Lender shall have received all fees set forth in the
Commitment Letter from Borrower;
(C) Each of the conditions precedent set forth in the other Loan
Documents shall have been satisfied;
(D) Since the date of the last financial statements referred to in
Section 4.4, there shall not have occurred any material adverse change in the
business, financial condition or results of operations of Borrower, or the
existence or value of any collateral, or any event, condition or state of facts
which would reasonably be expected to have a Material Adverse Effect;
(E) No action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages from any Person in respect of, the consummation of the
transactions contemplated hereby or which, in Lender's sole discretion, would
make it inadvisable to consummate the transactions contemplated by this
Agreement or any of the other Loan Documents;
(F) The representations and warranties of Borrower set forth herein
and other Loan Documents are and shall remain true, correct and complete in all
material respects.
SECTION 7. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
7.1. Events of Default. An "Event of Default" shall exist if any of the
following shall occur and be continuing, whatever the reason for such event or
condition and whether it shall be voluntary or involuntary, or within or without
the control of the Borrower or any Subsidiary, or be effected by operation of
law or pursuant to any order or judgment of a court or otherwise:
20
<PAGE> 21
(A) the Borrower shall fail to pay any portion of the principal or
interest with respect to the Note or of any amount under the Loan Documents or
the Obligations when due; or
(B) any representation, warranty or other statement made by or on
behalf of the Borrower in this Agreement, or by or on behalf of the Borrower in
any other Loan Document shall prove false or misleading in any material respect;
or
(C) the Borrower shall fail or neglect to perform, keep or observe
any covenant contained in this Agreement or other Loan Document (other than a
covenant a default the performance or observance of which is dealt with
specifically elsewhere in this Section 7.1); or
(D) there shall occur any default on the part of Borrower
(including specifically, but without limitation, due to nonpayment) under any
other Loan Document, agreement, document, or instrument to which Borrower and
Lender are parties; or
(E) the Borrower shall fail to make any payment due on any
Indebtedness or other security with a principal amount of $1,000,000 or more or
any event shall occur (other than the mere passage of time) or any condition
shall exist in respect of any such Indebtedness or other security of the
Borrower, or under any agreement securing or relating to such Indebtedness or
other security, the effect of which is (i) to cause (or permit any holder of
such Indebtedness or other Security or a trustee to cause) such Indebtedness or
other Security, or a portion thereof, to become due prior to its stated maturity
or prior to its regularly scheduled dates of payment, or (ii) to permit a
trustee or the holder of any security (other than common stock of the Borrower)
to elect a majority of the directors on the Board of Directors of the Borrower;
or
(F) a custodian, receiver, liquidator or trustee of the Borrower,
or of any of its Property, shall be appointed by court order and such order
shall remain in effect for more than ninety (90) days; or an order for relief in
respect of the Borrower shall be entered under any bankruptcy laws, as now or
hereafter constituted; or any of its Property shall be sequestered by court
order and such order shall remain in effect for more than ninety (90) days; or a
petition shall be filed against the Borrower under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, and
shall not be dismissed within ninety (90) days after such filing; or
(G) the Borrower shall file a petition in voluntary bankruptcy or
seeking relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction, whether now or hereafter in effect, or shall consent to the
filing of any petition against it under any such law; or
(H) the Borrower shall make a general assignment for the benefit of
its creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall consent to the appointment of a
custodian, receiver, trustee or liquidator of the Borrower or of all or a
substantial part of its Property; or
(I) an adverse change with respect to the financial condition of
the Borrower which results, in the good faith credit judgement of the Lender, in
a material impairment of the prospect of repayment of the Loan or in Borrower's
performance under the Loan Documents; or
(J) the Borrower or any Subsidiary of the Borrower suffers a final
judgment against it which, within sixty (60) days from the date such judgment is
entered, shall not have been discharged or execution thereof stayed pending
appeal unless (i) such judgment in the reasonable opinion of the Lender is
21
<PAGE> 22
adequately covered by insurance; or (ii) adequate accruals with respect to such
judgment have been established in accordance with GAAP and the aggregate amount
of all such judgments at any time during the term hereof, not adequately covered
by insurance is not at any time in excess of $200,000; or
(K) a sale, hypothecation or other disposition of twenty percent
(20%) or more of the beneficial interest in any class of voting stock of the
Borrower without the prior written consent of Lender; or
(L) there shall occur a cessation of a substantial part of the
business of the Borrower for a period which significantly affects the Borrower's
capacity to continue its business on a profitable basis; or the Borrower shall
suffer the loss or revocation of any license or permit now held or hereafter
acquired by the Borrower which is necessary to the continued lawful operation of
its business and such loss or revocation shall have a Material Adverse Effect;
or the Borrower shall be enjoined, restrained or in any way prevented by court,
governmental or administrative order from conducting all or any material part of
its business affairs; or any lease or agreement pursuant to which the Borrower
leases, uses or occupies any Property shall be canceled or terminated prior to
the expiration of its stated term and such termination shall have a Material
Adverse Effect; or any material part of the Collateral shall be taken through
condemnation or the value of such Property shall be impaired through
condemnation; or
(M) the Borrower, or any Affiliate of either, shall challenge or
contest in any action, suit or proceeding the validity or enforceability of this
Agreement or any of the other Loan Documents, the legality or enforceability of
any of the Obligations or the perfection or priority of any Lien granted for the
benefit of the Lender, if any; or
(N) the Borrower shall be criminally indicted or convicted under
any Forfeiture Law that results in or could lead to a forfeiture of any Property
of the Borrower that is material to its financial condition or business
operations; or
(O) the Borrower shall be nationalized or confiscated or any
government or any agency thereof exercises management control of the Borrower's
day-to-day business operations and affairs; or
(P) the current government of the Republic of Ghana shall be
changed by reason of war (whether or not declared), revolution, riots,
insurrections, acts of terrorism, acts of the public enemy, and/or any other
event which may adversely affect the Borrower's performance under this Agreement
as determined by the Lender in its absolute and sole discretion.
7.2. Acceleration of the Obligations. Without in any way limiting the
right of Lender to demand payment of any portion of the Obligations payable on
demand in accordance with this Agreement or any of the other Loan Documents,
upon or at any time after the occurrence of an Event of Default, and during the
continuance thereof, all or any portion of the Obligations due or to become due
from Borrower to Lender, whether under this Agreement or any of the other Loan
Documents or otherwise, shall, at the option of Lender and without notice to or
demand upon Borrower, become at once due and payable and Borrower shall
forthwith pay to Lender, in addition to any and all sums and charges due, the
entire principal of and accrued and unpaid interest on the Obligations.
7.3. Remedies. Upon or at any time after the occurrence of an Event of
Default and during the continuance thereof, Lender may exercise from time to
time all of the rights and remedies under Applicable Law, and all other legal
and equitable rights to which Lender may be entitled, all of which rights and
remedies shall be cumulative, and none of which shall be exclusive, and shall be
in addition to any other rights or remedies contained in this Agreement, the
Security Agreements, or any of the other Loan Documents.
22
<PAGE> 23
7.4. Remedies Cumulative; No Waiver. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule or contained in any other agreement between Lender and
Borrower, heretofore, concurrently, or hereafter entered into, shall be deemed
cumulative to and not in derogation or substitution of any of the terms,
covenants, conditions, or agreements of Borrower herein contained. The failure
or delay of Lender to exercise or enforce any rights, Liens, powers, or remedies
hereunder or under any of the other Loan Documents shall not operate as a waiver
of any of such Liens, rights, powers or remedies, but all such Liens, rights,
powers, and remedies shall continue in full force and effect until the Loan and
all other Obligations owing or to become owing from Borrower to Lender shall
have been indefeasibly paid in full, and all Liens, rights, powers, and remedies
provided herein and the other Loan Documents are cumulative and none are
exclusive.
SECTION 8. BENEFIT OF AGREEMENT
8.1. Successors and Assigns. The terms and provisions of this Agreement
shall be binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns, except that Borrower shall not have the right
to assign its rights or obligations under this Agreement or any of the other
Loan Documents. Lender shall give written notice to the Borrower within fifteen
(15) Business Days of such assignment, provided however, such notice shall be
given on a "best efforts" basis and Lender shall not be liable to Borrower for
the failure to give such notice, and any such failure shall not affect the
validity or effectiveness of such assignment.
SECTION 9. GENERAL
9.1. Amendments. The terms of this Agreement may not be amended, waived,
modified or terminated except by written instrument signed by the parties
hereto. No such amendment or waiver shall extend to or affect any obligation not
expressly amended or waived or impair any right consequent thereon. In the event
an amendment to any of the Loan Documents or documents for any other of the
Obligations is required, in Lender's sole discretion, due to any request,
action, or inaction of Borrower, including but not limited to any voluntary or
mandatory prepayment of the Obligations, Borrower shall reimburse Lender for all
costs and expenses associated with such amendment, including but not limited to
the reasonable fees and out-of-pocket expenses of outside counsel for the
Lender, the reasonable time of Lender's in house counsel departmental activity
billed at Lender's outside counsel rate, and the reasonable travel costs of
Lender's in-house counsel with respect thereto. In addition, for any amendment,
the Borrower shall pay an administrative fee in an amount the greater of (i) one
half percent (.5%) of the financial value of the increase or decrease in
principal value of the Obligations associated with the amendment, or (ii) Five
Thousand Dollars ($5,000.00).
9.2. Notices.
(A) All communications under this Agreement shall be in writing and
shall be mailed by first class mail, postage prepaid, or delivered by hand or
transmitted by a telecommunications device capable of transmitting or creating a
written record (but in all cases of telecommunication notices such notice must
be immediately followed by mailing):
(i) if to the Lender, at its address at 3322 West End Avenue,
Nashville, Tennessee, 37203-09990, Attention: Global Accounts Operations
Manager, Telephone No. (615) 386-5943 or Facsimile (615) 386-5950 or at such
other address as it may have furnished in writing to the Borrower; or
(ii) if to the Borrower, at its address at P. O. Box 6,
Tarkwa, Republic of Ghana, West Africa Attention: Mr. Lucien Girard, (233) 362
357 or
23
<PAGE> 24
Facsimile (233) 362 273 or at such other address as it may have furnished in
writing to the Lender, with copies to (which copies shall not be required to
effect notice):
The Pioneer Group, Inc.
60 State Street
Boston, Massachusetts 02109
Attention: Donald H. Hunter
Telephone: (617) 422-4970
Telecopy: (617) 422-4296
and
Hale and Dorr
1455 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Telephone: (202) 942-8454
Telecopy: (202) 942-8484
(B) Any notice so addressed and mailed by first class mail shall be
deemed to be given when received or if mailed by registered or certified mail,
fifteen Business days after being so mailed, and any notice delivered by hand or
transmitted by telecommunications device shall be deemed to be given when
received by the Borrower or the Lender, as the case may be.
9.3. Costs, Expenses and Indemnification. The Borrower agrees to pay all
costs and expenses in connection with the preparation, execution, delivery and
enforcement of this Agreement and any other documents to be delivered hereunder,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Lender and the travel costs of Lender's in-house counsel
(excluding any internal allocated charges of the Lender's in-house counsel) with
respect thereto and with respect to advising the Lender as to its respective
rights and responsibilities under this Agreement and the other Loan Documents.
The Borrower also agrees to pay on demand all losses, costs and expenses, if any
(including reasonable counsel fees and expenses except for any internal
allocated charge of Lender's in-house counsel), incurred in connection with the
preservation of, or the enforcement of, or legal advice in respect of, the
rights or responsibilities of the Lender under this Agreement or the Loan
Documents, including, without limitation, losses, costs and Collection Expenses
sustained by the Lender as a result of any failure by the Borrower to perform or
observe its obligations contained herein or in any other Loan Document. The
Borrower further agrees to indemnify and hold harmless the Lender from and
against any and all (i) Taxes or assessments, governmental charges or levies,
duties, fees, deductions or withholding, restrictions or conditions of any
nature or other amounts imposed by, or behalf of, any government or any taxing
authority thereof or therein, including the Republic of Ghana or any subdivision
thereof (excluding taxes imposed on net income and all income and franchise
taxes of the United States and any political subdivisions thereof on Lender),
(ii) stamp, duty or documentary taxes or charges imposed by any government or
any taxing authority thereof or therein, including the Republic of Ghana and its
subdivisions and (iii) damages, losses, liabilities, costs and expenses
resulting from, related to or connected with this Agreement, the Loan or the
other Loan Documents or the transactions contemplated hereby, except to the
extent resulting from the gross negligence or willful misconduct of the Lender.
9.4. Reproduction of Documents; Confidentiality. This Agreement and all
other Loan Documents, including, without limitation, (i) consents, waivers and
modifications which may hereafter be executed, (ii) documents delivered at the
closing of the Loan, and (iii) financial statements, certificates and other
information previously or hereafter furnished, may be reproduced by the Lender
by any photographic, photostatic, microfilm, micro-card, miniature photographic
or other similar process and the Lender may destroy any original document so
reproduced. The Borrower agrees and stipulates that any such reproduction shall
be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in
24
<PAGE> 25
existence and whether or not such reproduction was made in the regular course of
business) and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
The Lender shall treat the information contained in the records, documents
and other materials received from the Borrower that are both marked
"Confidential" and are not otherwise available from another source as
confidential information. The Lender shall not disclose such confidential
information to any other person except: (a) with the consent of the Borrower
(which consent shall not to be unreasonably withheld); (b) if required by law or
required by any stock exchange; (c) in connection with legal proceedings
(including any alternative dispute resolution proceedings) relating to this
Agreement; (d) to an Affiliate, accountant, agent or advisor of the Lender,
provided such person or entity undertakes to observe this Section 9.4; (e) to a
potential assignee, participant or sub-participant of the Lender's interests
under this Agreement and the other Loan Documents provided such person or entity
undertakes to observe this Section 9.4 except to the extent limited by Freedom
of Information Act as it pertains to U.S. Government and agencies thereof; or
(f) to an insurance carrier covering political risk or other risks of the Lender
associated with this Agreement.
9.5. Survival. All warranties, representations, agreements and covenants
made by the Borrower herein or in any other Loan Document shall be considered to
have been relied upon by the Lender and shall survive the making of the Loan
regardless of any investigation made by or on behalf of the Lender.
9.6. Submission to Jurisdiction and Service of Process. The Borrower
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement, the Notes or any Loan Document may be instituted in
the United Sates of America in any Federal or State court sitting in the State
of Tennessee, and the Borrower, in respect of itself and its Properties and
revenues, irrevocably submits to the jurisdiction of these courts in any such
action or proceeding. The Borrower irrevocably consents to such service upon it
by the mailing of copies thereof by U.S. air mail or courier to the Borrower at
its address set forth in Section 9.2(A) of this Agreement. The foregoing
provisions shall not limit the right of the Lender to bring any such action or
proceeding or to obtain execution on any judgment rendered in any such action or
proceeding in any other appropriate jurisdiction or in any other manner. The
Borrower agrees that final judgement against it in any legal action or
proceeding arising out of or relating to this Agreement or the Notes or other
Loan Documents shall be conclusive and may be enforced in any other jurisdiction
within or outside the United States by suit on the judgement, a certified or
exemplified copy of which judgment shall be conclusive evidence thereof and of
the amount of its indebtedness, or by such other means provided by law.
9.7. Judgment. If for the purposes of obtaining judgment in any court it
is necessary to convert a sum due hereunder or under the Note in Dollars into
another currency, the parties hereto agree, to the fullest extent that they
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures Lender could purchase Dollars with
such other currency at Nashville, Tennessee on the Business Day preceding that
on which final judgment is given. The obligation of the Borrower in respect of
any sum due from it to Lender hereunder or under the Note shall, notwithstanding
any judgment in a currency other than Dollars, be discharged only to the extent
that on the Business Day following receipt by Lender of any sum adjudged to be
so due in such other currency Lender may in accordance with normal banking
procedures purchase Dollars with such other currency; if the Dollars so
purchased are less than the sum originally due to Lender in Dollars, the
Borrower agrees, as a separate obligation and notwithstanding any such judgment,
to indemnify Lender against such loss, and if the Dollars so purchased exceed
the sum originally due Lender in Dollars, Lender agrees to remit to the Borrower
such excess.
25
<PAGE> 26
9.8. Waiver of Sovereign Immunity. The Borrower acknowledges and agrees
that the activities contemplated by the provisions of this Agreement, the Notes
and the other Loan Documents are commercial in nature rather than governmental
or public, and therefore acknowledges and agrees that it is not entitled to any
right of immunity on the grounds of sovereignty or otherwise with respect to
such activities or in any legal action or proceeding arising out of or relating
to this Agreement, the Notes or the other Loan Documents, in respect of itself
and its properties and revenues, expressly and irrevocably waives any such right
of immunity which may now or hereafter exist (including any immunity from any
legal process, from the jurisdiction of any court or from any execution or
attachment in aid of execution prior to judgment or otherwise) or claim thereto
which may now or hereafter exist, and agrees not to assert any such right or
claim in any such action or proceeding, whether in the United States, or
otherwise.
9.9. Governing Law. THE PARTIES HERETO HAVE EXPRESSLY AGREED THAT THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TENNESSEE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS
THEREOF, PROVIDED, HOWEVER, THAT FOR ANY LEGAL ACTION OR PROCEEDING BROUGHT WITH
RESPECT TO THE LOAN AGREEMENT, THE NOTE OR ANY LOAN DOCUMENT IN THE COURTS OF
THE REPUBLIC OF GHANA OR ANY POLITICAL SUBDIVISION THEREOF, THE LOAN AGREEMENT,
THE NOTE OR ANY LOAN DOCUMENT SHALL BE DEEMED TO BE MADE UNDER THE LAWS OF THE
REPUBLIC OF GHANA AND FOR SUCH PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE REPUBLIC OF GHANA.
9.10. Right of Setoff. As collateral security for the repayment of the
Borrower's obligations and liabilities under this Agreement, the Borrower hereby
grants the Lender and the Lender's successors and assigns (including any
affiliate or subsidiary of Lender (including Caterpillar or any other
Caterpillar Seller)) the right to apply, at any time and from time to time
should an Event of Default exist hereunder, any and all obligations owing from
the Lender (or its assignees) to the Borrower toward repayment of any sums owing
from the Borrower to the Lender hereunder.
9.11. Severability of Provisions. Any provision of this Agreement which
is prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
9.12. Duplicate Originals. Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument.
9.13. Consequential Damages. Notwithstanding any other provision of this
agreement, Borrower hereby fully waives any claim or right now or hereafter
existing against Lender for any incidental, special, or consequential damages
whether based on contract, warranty, tort (including negligence and strict
liability), or otherwise.
9.14. Use of English Language. All documents or notices to be delivered
pursuant to or in connection with this Agreement shall be in the English
language. English shall be the official language for construction and
interpretation of this Agreement, the Notes, and all Loan Documents and notices,
unless specifically designated otherwise in any such Loan Document. If the
original of any such document or notice is not in the English language, an
English translation thereof shall be delivered.
9.15. Jury Trial Waiver. THE BORROWER AND THE LENDER EACH WAIVE THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE NOTES, ANY OF THE LOAN
DOCUMENTS, OR THE OBLIGATIONS. THE BORROWER ACKNOWLEDGES THAT THE FOREGOING
WAIVER IS A MATERIAL INDUCEMENT TO LENDER ENTERING INTO THIS AGREEMENT AND THAT
LENDER IS RELYING UPON THE FOREGOING WAIVER IN ITS FUTURE DEALINGS WITH THE
BORROWER. THE BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE
FOREGOING WAIVER WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED
ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH SUCH LEGAL COUNSEL.
26
<PAGE> 27
IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO
A TRIAL BY THE COURT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
BORROWER:
TEBEREBIE GOLDFIELDS LIMITED
By: /s/ Lucien Girard
-------------------------------
Title: Managing Director
----------------------------
LENDER:
Total Commitment:
CATERPILLAR FINANCIAL
$8,393,420.20 SERVICES CORPORATION
By: /s/ Ronald R. Rossmann
-------------------------------
Title: Ronald R. Rossmann
----------------------------
Corporate Operations Manager
[Exhibits Omitted]
27
<PAGE> 1
EXHIBIT 10.3
CHATTEL MORTGAGE
TEBEREBIE GOLDFIELDS LIMITED
("MORTGAGOR")
AND
CATERPILLAR FINANCIAL SERVICES CORPORATION
("MORTGAGEE")
DATED APRIL 23, 1996
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Section Page
- ------- ----
<C> <C>
1. General Definitions...................................................................... 1
2. Consideration............................................................................ 3
3. Mortgage................................................................................. 3
4. Restrictions on Dealing with Secured Property............................................ 3
5. Insurance Covenants...................................................................... 4
6. Other Covenants by Mortgagor............................................................. 4
7. Mortgagee's Right to Rectify............................................................. 5
8. Mortgagee's Right to Enter............................................................... 5
9. Representations and Warranties........................................................... 5
10. Default.................................................................................. 6
11. Appointment of Receiver.................................................................. 7
12. Powers of Receiver....................................................................... 7
13. Powers of Mortgagee and Exclusion of Statutory Notices................................... 8
14. Costs, Charges, Expenses and Indemnities................................................. 8
15. Application of Money..................................................................... 9
16. Reassignment............................................................................. 10
17. Preservation of Mortgagee's Rights....................................................... 10
18. Power of Attorney........................................................................ 12
19. Notices.................................................................................. 12
20. Liens and Assignment..................................................................... 12
21. Miscellaneous............................................................................ 12
22. Governing Law, Jurisdiction and Services of Process...................................... 14
23. Counterparts............................................................................. 15
Schedule 1........................................................................................ 16
Schedule 2........................................................................................ 17
Execution Page.................................................................................... 18
</TABLE>
<PAGE> 3
CHATTEL MORTGAGE
This deed is made on April 23, 1996, between TEBEREBIE GOLDFIELDS
LIMITED having its principal office at P.O. Box 6, Tarkwa - Wassaw, Ghana (West
Africa), and CATERPILLAR FINANCIAL SERVICES CORPORATION, a corporation
subsisting pursuant to the laws of the State of Delaware, USA with offices
located at 3322 West End Avenue, Nashville, Tennessee 37203, USA ("Mortgagee").
1. GENERAL DEFINITIONS
1.1 DEFINED TERMS. When used herein, the following terms shall have the
following meanings (terms defined in the singular shall have the same meaning
when used in the plural and vice versa and statute references herein refer to
the statutes of the Republic of Ghana unless otherwise stated):
ACKNOWLEDGMENT means an acknowledgment in the form of Schedule 2.
AFFILIATE means any Person: (i) which directly or indirectly through
one or more intermediaries controls, or is controlled by, or is under common
control with, the relevant party; (ii) which beneficially owns or holds 5% or
more of any class of the Voting Stock of the relevant party; (iii) 5% or more of
the voting stock (or in the case of a Person which is not a corporation or a
limited liability company, 5% or more of the equity interest) of which is
beneficially owned or held by the relevant party or a Subsidiary of the relevant
party, or (iv) another entity which is related to the first within the meaning
of the Companies Code 1963 (Act 179). For purposes hereof, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting stock, by contract or otherwise.
COLLATERAL SECURITY means a present or future Lien (other than this
mortgage) or indemnity given by the Mortgagor or another person to secure or
otherwise provide for the payment of the Secured Money including, without
limitation, the documents identified in Item 1 of Schedule 1.
BUSINESS DAY means a day other than (i) a Saturday or Sunday, or (ii) a
day on which banks are authorized by law to be closed in New York, New York,
U.S.A.
DOLLARS and the sign $ shall mean the currency of the United States of
America.
EVENT OF DEFAULT has the meaning given to it in Clause 10.
FUTURE SECURITY means the chattels in respect of which the Mortgagor
deposits Acknowledgments with the Mortgagee after the date of this mortgage.
INSOLVENCY EVENT means the happening of any of these events: (a) an
application is made to a court for an order or an order is made that a body
corporate be wound up, and such application or order is not withdrawn, appealed
or dismissed within ninety (90) days of the issuance thereof; (b) an application
is made to a court for an order appointing a liquidator or provisional
liquidator in respect of a body corporate, or one of them is appointed, whether
or not under an order and such application or appointment is not withdrawn or
dismissed within ninety (90) days thereof; (c) except to reconstruct or
amalgamate while solvent on terms approved by the Mortgagee, a body corporate
enters into, or resolves to enter into, a scheme of arrangement, deed of company
arrangement or composition with, or assignment for the benefit of, all or any
class of its creditors, or it proposes a
<PAGE> 4
reorganization, moratorium or other administration involving any of them; (d) a
body corporate resolves to wind itself up, or otherwise dissolve itself, or
gives notice of intention to do so, except to reconstruct or amalgamate while
solvent on terms approved by the Mortgagee or is otherwise wound up or
dissolved; (e) a body corporate is or states that it is insolvent; (f) as a
result of the operation of The Bodies Corporate (Official Liquidation) Act 1963
(Act 180), a body corporate is taken to have failed to comply with a statutory
demand; (g) a body corporate is or makes a statement from which it may be
reasonably deduced by the Mortgagee that the body corporate is, the subject of
an event described in The Bodies Corporate (Official Liquidation) Act 1963 (Act
180); (h) a body corporate takes any step to obtain protection or is granted
protection from its creditors, under any applicable legislation or an
administrator is appointed to a body corporate; (i) a person becomes an
insolvent under administration as defined in The Bodies Corporate (Official
Liquidation) Act 1963 (Act 180) or action is taken which could result in that
event; or (j) anything analogous or having a substantially similar effect to any
of the events specified above (taking into consideration any cure period
described therein) happens under the law of any applicable jurisdiction.
LIEN means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangements, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever, or any,
lease, license, easement, assignment or right of any agreement to create any of
them or allow them, or any of them, to exist.
MORTGAGEE means Caterpillar Financial Services Corporation or such
other person who is nominated from time to time by Caterpillar Financial
Services Corporation by notice to the Mortgagor as "Mortgagee".
PERMITTED LIENS means any Lien that is specifically permitted under
this mortgage, or, with respect to specific Secured Property, a Lien
specifically permitted with regard to that Secured Property by an agreement
between Mortgagor and Mortgagee, including without limitation, the agreements or
other documents representing the obligations secured thereby.
PERSON means an individual, partnership, corporation, joint venture,
association, joint stock company, trust, business trust or unincorporated
organization, limited liability company, or a government or agency or political
subdivision thereof.
PRESENT SECURITY means the chattels specified in Item 2 of Schedule 1.
RECEIVER means a person or persons appointed under or by virtue of this
mortgage as receiver or receiver and manager.
SECURED MONEY means monies payable as consideration for the Secured
Property together with interest thereon and charges in relation thereto.
SECURED PROPERTY means the Present Security and the Future Security. A
reference to Secured Property includes any part of it.
SUBSIDIARY means any corporation or limited liability company of which
the Borrower owns more than 50% of its securities, provided the ownership of
such securities, in the absence of contingencies, entitles the Borrower to elect
a majority of the directors of such corporation or limited liability company, or
another entity which is a subsidiary of the first within the meaning of the
Companies Code 1963 (Act 179).
TAXES means any present or future taxes, levies, imposts, duties, fees,
2
<PAGE> 5
assessments, deductions, withholdings or other charges of whatsoever nature
(excluding taxes imposed on net income and all income and franchise taxes of the
United States and any political subdivisions thereof on Lender and except an
amount payable under a covenant or stipulation which is void under the Income
Tax Decree 1975 (SMCD5)), that may now or hereafter be imposed or asserted by
any jurisdiction or any political subdivision thereof or any taxing authority
therein and all interest, penalties or similar liabilities with respect thereto.
1.2 CERTAIN MATTERS OF CONSTRUCTION. The terms "herein," "hereof" and
"hereunder" and other words of similar import refer to this mortgage as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of this Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any instruments or agreements, including, without
limitation, references to this mortgage, shall include any and all modifications
or amendments thereto and any and all extensions or renewals thereof. A
reference to any thing (including, without limitation, the Secured Money, or any
other amount and the Secured Property) is a reference to the whole and each part
of it and a reference to a group of persons (including, without limitation, the
Mortgagor) is a reference to all of them collectively, to any two or more of
them collectively and to each of them individually.
2. CONSIDERATION
The Mortgagor acknowledges giving this mortgage and incurring
obligations and giving rights under this mortgage for valuable consideration
received from the Mortgagee.
3. MORTGAGE
3.1 As security for the due repayment of the Secured Money, the
Mortgagor as legal and beneficial owner: (a) assigns to the Mortgagee the
Present Security by way of legal mortgage; and (b) agrees to assign to the
Mortgagee, from the time of a deposit made under Clause 3.2, all of the Future
Security the subject of that deposit by way of legal mortgage.
3.2 The Mortgagor agrees that any deposit of an Acknowledgment referred
to in the definition of Future Security will, without the necessity for any
further act, operate as an assignment to the Mortgagee of the Future Security
referred to in the Acknowledgment by way of legal mortgage on the same terms as
this mortgage, and that the mortgage will operate as security for the due
repayment of the Secured Money.
4. RESTRICTIONS ON DEALING WITH SECURED PROPERTY
4.1 In addition to any provisions of any other agreement between the
Mortgagor and the Mortgagee relating to the Secured Property, the Mortgagor may
not, without the prior written consent of the Mortgagee: (a) dispose of, or part
with possession of, any interest in the Secured Property; (b) create or allow to
come into existence any Lien on the Secured Property other than a Permitted
Lien; or (c) remove the Secured Property from Ghana.
4.2 If the Mortgagee grants the Mortgagor consent under Clause 4.1, for
whatever reason, the Mortgagor acknowledges that such consent shall not operate
in any way to release or diminish the Mortgagor's obligations under this Chattel
Mortgage in relation to the Secured Property.
3
<PAGE> 6
5. INSURANCE COVENANTS
5.1 The Mortgagor agrees to keep the Secured Property insured to the
extent required under the note, loan agreement or other similar document or
agreement between the Mortgagor and the Mortgagee relating to such Secured
Property, and further agrees to not do or suffer to be done anything which could
reasonably be expected to prejudice any insurance and immediately rectify
anything which might prejudice any insurance and reinstate the insurance if it
lapses.
5.2 The Mortgagee may, but the Mortgagor may not without the consent of
the Mortgagee, enforce, conduct, settle or compromise claims under any policy of
insurance required by, or referenced in, Clause 5.1, to the extent that such
policy covers the Secured Property; provided that the Mortgagor may enforce,
conduct, settle or compromise claims under any such policy without Mortgagee's
consent to the extent that such actions do not affect the coverage on the
Secured Property, or any claims or potential claims relating thereto.
6. OTHER COVENANTS BY MORTGAGOR
6.1 AFFIRMATIVE COVENANTS. The Mortgagor agrees to: (a) keep the
Secured Property in good working order and condition; (b) protect the Secured
Property from theft, loss or damage; (c) comply on time with all its obligations
in connection with the Secured Property including, without limitation, laws and
requirements and orders of authorities; (d) comply on time with all its
obligations in connection with any agreement which imposes an obligation to pay
the Secured Money; (e) comply on time with all its obligations in connection
with any Lien over the Secured Property other than this mortgage; (f) at the
Mortgagee's request, deliver to the Mortgagee receipts for payments referred to
in this Clause 6.1; (g) comply on time with terms attaching to any approval or
consent given by the Mortgagee in connection with this mortgage; (h) give
promptly to the Mortgagee the information and documents which the Mortgagee
requests from time to time in connection with this mortgage or the Secured
Property; (i) notify the Mortgagee promptly after it occurs of full details of
an Event of Default or an event which with the giving of notice, lapse of time
or fulfillment of any condition would be likely to become an Event of Default,
and the steps taken to remedy it; (j) obtain and renew on time and comply with
the terms of each authorization necessary to enter into this mortgage, observe
obligations under it and allow it to be enforced; (k) notify the Mortgagee
promptly if any representation or warranty made or taken to be made by or on
behalf of the Mortgagor in connection with this mortgage is found to be
incorrect or misleading when made or taken to be made; (l) execute and deposit
with the Mortgagee an Acknowledgment in the form of Schedule 2 herewith upon the
Mortgagor taking or being entitled to take legal and beneficial title to any
Future Security; and (m) at the request of Mortgagee, deposit with the Mortgagee
immediately or as soon as the Mortgagor receives them anything evidencing a Lien
on the Secured Property and any document of title given to the Mortgagor to
secure the payment of a monetary obligation to the Mortgagor relating to the
Secured Property and any documents of title relating to the Secured Property.
6.2 NEGATIVE COVENANTS. The Mortgagor may not: (a) increase or allow to
be increased the amount secured by a Lien in the Secured Property other than
this mortgage; (b) do or omit to do anything or knowingly permit or cause
anything to be done or omitted which could mean in the reasonable opinion of the
Mortgagee that the Secured Property, this mortgage or a Collateral Security is
or is likely to become materially lessened in value or prejudicially affected,
other than the ordinary use of the Secured Property by the Mortgagor and other
than relating to such decrease in value or prejudicial
4
<PAGE> 7
effect that is reasonably likely to be covered by the insurance provided for
herein; or (c) without the Mortgagee's consent, affix the Secured Property to
any land.
6.3 FURTHER ASSURANCES. The Mortgagor agrees to: (a) execute in favor
of the Mortgagee, or as the Mortgagee directs, and in form stipulated by the
Mortgagee, further documents; and (b) take any action and do any thing the
Mortgagee requests to enable the Mortgagee to exercise its rights in connection
with the Secured Property. The Mortgagee or an authorized officer of the
Mortgagee may fill in any blanks in this mortgage and complete in favor of the
Mortgagee or anyone purchasing under the powers given by this mortgage any
instrument executed by or on behalf of the Mortgagor in blank and deposited with
the Mortgagee in connection with this mortgage.
6.4 REGISTRATION. The Mortgagee may register this mortgage at the
Mortgagor's expense as a mortgage on any appropriate register. The Mortgagor
agrees to procure execution of all documents required by the Mortgagee which are
necessary to register this mortgage.
7. MORTGAGEE'S RIGHT TO RECTIFY
The Mortgagee may do anything which should have been done by the
Mortgagor under this mortgage but which has not been done or which the Mortgagee
considers has not been done properly.
8. MORTGAGEE'S RIGHT TO ENTER
8.1 A person authorized by the Mortgagee may enter at all times on land
or buildings owned or occupied by the Mortgagor to: (a) inspect the condition of
the Secured Property; (b) determine whether the terms of this mortgage are being
complied with; (c) inspect and take copies of records relating to the Secured
Property; (d) investigate the affairs and financial position of the Mortgagor;
(e) exercise the rights of the Mortgagee under Clause 7.
8.2 The Mortgagee agrees to give the Mortgagor reasonable notice of
entry. The Mortgagor agrees to give the person authorized to enter reasonable
assistance including, without limitation, obtaining any necessary consent.
9. REPRESENTATIONS AND WARRANTIES
9.1 The Mortgagor represents and warrants that: (a) it is the
beneficial owner of and has good title to the Secured Property free from any
Lien other than Permitted Liens; (b) it has power to enter into and observe its
obligations under this mortgage; (c) it has in full force and effect the
authorizations necessary to enter into this mortgage, observe obligations under
it, and allow it to be enforced; (d) its obligations under this mortgage are
valid and binding and are enforceable against it in accordance with its terms;
(e) this mortgage and the transactions under it do not contravene its
constituent documents (when the Mortgagor is a company) or any law, regulation
or official directive or any of its obligations or undertakings by which it or
any of its assets are bound or cause a limitation on its powers or, when the
Mortgagor is a company, the powers of its directors, to be exceeded; (f) it has
fully disclosed in writing to the Mortgagee all facts relating to the Mortgagor,
this mortgage, the Secured Property and anything in connection with them which
are material to the assessment of the nature and amount of the risk undertaken
by the Mortgagee in entering into this mortgage and doing anything in connection
with it; (g) no Event of Default or event which with the giving of notice, lapse
of time or fulfillment of any condition would be likely to become an Event of
Default continues unremedied; (h) it does not hold any interest in the Secured
Property as a trustee; and (i) the Secured Property is
5
<PAGE> 8
not affixed to any land.
9.2 These representations and warranties are taken to be also made: (a)
on each date on which the Mortgagor acquires Secured Property; and (b) on each
date on which the Mortgagee provides funds to Mortgagor under a loan agreement
or other financial accommodation involving Secured Property.
10. DEFAULT
An Event of Default occurs if:
(a) the Mortgagor does not pay any of the Secured Money on time and in
the manner required under any agreement which imposes the obligation to pay it,
or there is any other default constituting an event of default, or which with
the passing of time or the giving of notice would become a default or an event
of default, or any term or provision is not complied with by Mortgagor, under
any such agreement; or
(b) the Secured Money becomes prematurely payable or can be rendered
prematurely payable by the giving of notice, lapse of time or fulfillment of any
condition; or
(c) distress is levied or a judgment, order or Lien is enforced, or
becomes enforceable against any property of the Mortgagor, or can be rendered
enforceable by the giving of notice, lapse of time or fulfillment of any
condition; or
(d) a representation or warranty made or taken to be made by or on
behalf of the Mortgagor in connection with this mortgage is found or is notified
by the Mortgagor to be incorrect or misleading in any material respect when made
or taken to be made; or
(e) the Mortgagor or any of its Subsidiaries takes action to reduce its
capital or buy back any of its ordinary shares or passes a resolution referred
to in section 75(1) of the Companies Code 1963 (Act 179), in each case without
the consent of the Mortgagee; or
(f) a person is appointed under legislation to investigate or manage
any part of the affairs of the Mortgagor or any of its Subsidiaries; or
(g) this mortgage: (i) is or becomes wholly or partly void, voidable or
unenforceable, or is claimed to be so; or (ii) loses the priority which it has
at or after the date of this mortgage (other than by an act or omission of the
Mortgagee) or a claim to that effect is made in either case, by the Mortgagor,
any of its Related Entities, anyone on behalf of any of them or anyone who
claims to have an interest in the Secured Property; or
(h) an undertaking given to the Mortgagee or its solicitors by the
Mortgagor or another person in connection with this mortgage or an agreement in
connection with the Secured Money is breached or not wholly performed within the
period specified in the undertaking or, if no period is specified, within seven
days from the date of the undertaking; or
(i) in the reasonable opinion of the Mortgagee: (i) the value to the
Mortgagee of this mortgage is materially and adversely affected; or (ii) any of
the Secured Property is in jeopardy, other than as a result of any act or
omission of the Mortgagee, and in each such case, the adverse effect or jeopardy
is not reasonably likely to be covered by insurance carried by the
Mortgagor as provided for herein; or
6
<PAGE> 9
(j) the Mortgagor attempts to create or allows to exist a Lien over the
Secured Property (other than a Permitted Lien) or a Lien (other than a Permitted
Lien) comes into existence over the Secured Property; or
(k) the Mortgagor does not observe any other obligation under this
mortgage and, if the non-observance can be remedied, does not remedy the non-
observance within seven days.
11. APPOINTMENT OF RECEIVER
At any time after and during an Event of Default, the Mortgagee may
appoint a person or persons as receiver or receiver and manager of all or part
of the Secured Property. The Mortgagee may remove a Receiver so appointed, and,
if a Receiver is removed, retires or dies, then the Mortgagee may appoint a new
Receiver. A Receiver is the agent of the Mortgagor unless the Mortgagee notifies
the Mortgagor that the Receiver is to act as the agent of the Mortgagee. The
Mortgagor is solely responsible for anything done or not done by the Receiver,
and for the Receiver's remuneration. The Mortgagee may fix the remuneration of a
Receiver at an amount or rate of commission agreed between the Mortgagee and the
Receiver or, in the absence of agreement, at an amount or rate determined by the
Mortgagee. If two or more persons are appointed as Receiver of the same part of
the Secured Property, the Mortgagee may provide that their rights, powers and
remedies vest in them jointly and severally, or jointly. The power to appoint a
Receiver or manager over all of the Secured Property may be exercised whether or
not a Receiver has already been appointed over part of it.
12. POWERS OF RECEIVER
In addition to powers conferred by other provisions of this mortgage,
by statute or by the terms of appointment, the Receiver may do one or more of
the following unless they are specifically excluded by the terms and provisions
of appointment or statute in the manner and on terms (in addition to any terms
expressly specified below) which the Receiver considers necessary (and the
Mortgagee may vary these powers at any time by notice given to the Mortgagor and
the Receiver): (a) take possession of, have access to and make use of the
Secured Property as often as the Receiver deems expedient; (b) receive rents and
profits derived from the Secured Property; (c) exercise the rights, powers and
remedies of the Mortgagor over, in connection with or comprising part of the
Secured Property; (d) subject to obligations imposed by law, sell or agree to
sell the Secured Property on any terms, including without limitation, at public
or private sale, in lots, otherwise in accordance with Mortgagee's instructions,
or any other method permitted by applicable law; (e) obtain the benefit of any
agreement, entered into by the Mortgagor and relating to the Secured Property
(including without limitation, by specific performance), whether or not the
agreement is entered into in the exercise of the rights, powers and remedies
conferred by this mortgage; (f) institute, conduct, defend, submit to
arbitration, settle, compromise or defer in the name of the Mortgagor or
otherwise on any terms, any proceeding, claim, question or dispute in connection
with the Secured Property or this mortgage and execute releases or other
discharges in connection with them; (g) delegate the Receiver's powers including
this power of delegation to any person for any period; (h) alter, improve,
provide services to, insure, and maintain the Secured Property; (i) lease or
license, end, renew, surrender, or accept the surrender of a lease or license
of, the Secured Property, and compromise with or make concessions to lessees or
licensees, or agree to do any of these things, for any period and on any terms;
(j) give a person an option to purchase, lease or license the Secured Property
on any terms; (k) surrender or transfer the Secured Property to any person; (l)
do anything which should have been done by the Mortgagor under this mortgage but
which has not been done or
7
<PAGE> 10
which the Receiver considers has not been done properly; (m) secure money
advanced by Mortgagee and relating to the powers hereunder by a Lien over the
Secured Property so that the Lien ranks in priority to, equally with, or after
this mortgage; (n) employ or engage persons (including, without limitation,
employees of the Receiver and consultants and professional advisers) in
connection with the powers conferred on the Receiver by this Clause 12; (o) do
or cause to be done anything to protect the priority of this mortgage, to
protect the Mortgagor's or the Mortgagee's estate or interest in the Secured
Property, to enforce this mortgage, to recover the Secured Money or to protect
or enhance the Secured Property; (p) expend money or incur liabilities in
exercising the powers conferred on the Receiver by this Clause 12.
13. POWERS OF MORTGAGEE AND EXCLUSION OF STATUTORY NOTICES
13.1 At any time after an Event of Default the Mortgagee, in addition
to powers conferred by other provisions of this mortgage or by law, may exercise
any of the powers set out or referred to in Clause 12 each of which is to be
construed as if the reference to the Receiver were a reference to the Mortgagee
and whether or not a Receiver has been or could be appointed under this
mortgage.
13.2 If either the Mortgagee or a Receiver exercises its rights under
this mortgage, exercises its rights conferred by law or takes possession of the
Secured Property, then neither of them is liable to account as mortgagee in
possession.
13.3 The Mortgagee may give up possession of the Secured Property at
any time.
13.4 The Mortgagee or a Receiver need not give notice or a demand to
the Mortgagor or allow time to elapse before exercising a right, power or remedy
under this mortgage or conferred by law, unless notice or demand or a lapse of
time is required by a law which cannot be excluded. If the law requires that a
period of notice must be given or a lapse of time must occur or be permitted
before a right, power or remedy under this mortgage or conferred by law may be
exercised, then: (a) when a period of notice or lapse of time is mandatory, that
period of notice must be given or that lapse of time must be permitted by the
Mortgagee; or (b) when the law provides that a period of notice or lapse of time
may be stipulated or fixed by this mortgage, one day is stipulated and fixed as
that period of notice or lapse of time and, without limitation, where
applicable, one day is stipulated and fixed as the period of notice or lapse of
time during which:
(i) default must continue before a notice is given or
requirement otherwise made for payment of the Secured Money or the observance
of obligations under this mortgage; and
(ii) a notice or requirement for payment of the
Secured Money or the observance of obligations under this mortgage must remain
not complied with before the Mortgagee's rights, powers or remedies may be
exercised.
14. COSTS, CHARGES, EXPENSES AND INDEMNITIES
14.1 The Mortgagor agrees to pay or reimburse the Mortgagee on demand
for: (a) the costs, charges and expenses of the Mortgagee in connection with any
consent, exercise or non-exercise of rights (including, without limitation, in
connection with the contemplated or actual enforcement or preservation of any
rights under this mortgage), waiver, variation, release, discharge or production
of documents in connection with this mortgage or the
8
<PAGE> 11
Secured Property; (b) taxes and fees (including, without limitation,
registration fees) and fines and penalties in respect of fees, which may be
payable or determined to be payable in connection with this mortgage or a
payment or receipt or any other transaction contemplated by this mortgage; (c)
costs, charges and expenses of the Mortgagee in connection with any inquiry by
any authority involving the Mortgagor or any of its Related Entities, including
in each case, without limitation, any costs or other charges of any agent of the
Mortgagee, any Receiver or any attorney appointed under this mortgage.
14.2 The Mortgagor agrees to pay the Mortgagee an amount equal to any
liability, loss, costs, charges or expenses of the kind referred to in this
Clause 14 suffered or incurred by any Receiver or other controller (as defined
in the Corporate Laws of either the United States of America or the Republic of
Ghana) appointed under or by virtue of this mortgage or any attorney appointed
under this mortgage, or any employee, officer, agent or contractor of the
Mortgagee.
14.3 If a judgment, order or proof of debt in connection with the
Secured Money is expressed in a currency other than the currency in which the
Secured Money is due, then the Mortgagor indemnifies the Mortgagee against: (a)
any difference arising from converting the other currency if the spot rate of
exchange for converting the other currency into the due currency available to
the Mortgagee when the Mortgagee receives a payment in the other currency is
less favorable to the Mortgagee than the rate of exchange used for the purpose
of the judgment, order or acceptance of proof of debt; and (b) the costs of
conversion. The Mortgagor acknowledges that it may be necessary to convert the
other currency through more than one currency to ascertain the spot rate of
exchange available to the Mortgagee.
14.4 Anything which the Mortgagor is required to do under this mortgage
must be done at the Mortgagor's cost.
15. APPLICATION OF MONEY
15.1 To the extent permitted by law, money received in connection with
this mortgage is to be applied (after satisfaction of claims taking priority
over this mortgage) as follows: (a) first, towards satisfaction of amounts which
become owing or payable under Clause 14 (except the Receiver's remuneration, if
any); (b) second, towards satisfaction of the Receiver's remuneration; (c)
third, towards satisfaction of the balance of the Secured Money in the manner
and order which the Mortgagee determines in its absolute discretion; and (d)
fourth, to the extent not otherwise applied, to the Mortgagor or any other
person entitled to it. In particular, the Mortgagee may pay the balance of the
money to a person with a subsequent Lien in the Secured Property whether
registered or not, or may pay it into court by way of interpleader without
incurring liability to the Mortgagor.
15.2 Money available for application under Clause 15.1(d) will not bear
interest. The Mortgagee may discharge its liability to account for it by
crediting it to an account in its books in the name of the person to whom it is
payable, or by paying it into court.
15.3 In an application of money under Clause 15.1 the Mortgagor is to
be credited only with so much of that money as is actually received by the
Mortgagee. The credit dates from the time of receipt. This provision applies
even if in exercising a power of sale the Mortgagee or a Receiver transfers the
Secured Property and takes a Lien to secure the unpaid balance of purchase
money.
9
<PAGE> 12
15.4 If during the currency of a notice under Clause 13.4: (a) an
installment of principal or interest forming part of the Secured Money falls due
for payment by the Mortgagor; and (b) the Mortgagee receives money or allows a
credit under this mortgage, then the Mortgagee may apply that money or credit
first in satisfaction of the installment, and second toward satisfaction of
money specified in the notice.
16. REASSIGNMENT
The Mortgagee agrees to execute a reassignment of the Secured Property
to the Mortgagor at the request of the Mortgagor on payment of all of the
Secured Money.
17. PRESERVATION OF MORTGAGEE'S RIGHTS
17.1 The liabilities under this mortgage of the Mortgagor and the
rights under this mortgage of the Mortgagee, a Receiver or an attorney appointed
under this mortgage are not affected by anything which might otherwise have that
effect at law or in equity including, without limitation, one or more of the
following (whether occurring with or without the consent of a person): (a) the
Mortgagee or another person granting time or other indulgence (with or without
the imposition of an additional burden) to, compounding or compromising with, or
wholly or partially releasing the Mortgagor or another person in any way; (b)
laches, acquiescence, delay, acts, omissions or mistakes on the part of the
Mortgagee or another person or both the Mortgagee and another person; (c) any
variation or novation of a right of the Mortgagee or another person, or material
alteration of a document, in respect of the Mortgagor or another person
including, without limitation, an increase in the limit of or other variation in
connection with the Secured Money; (d) the transaction of business, expressly or
impliedly, with for or at the request of the Mortgagor or another person; (e)
changes which from time to time may take place in the membership, name or
business of a firm, partnership, committee or association whether by death,
retirement, admission or otherwise whether or not the Mortgagor or another
person was a member; (f)the loss or impairment of a Collateral Security or a
negotiable instrument; (g) a Lien being void, voidable or unenforceable; (h) a
person dealing in any way with a Lien, guarantee, judgment or negotiable
instrument (including, without limitation, taking, abandoning or releasing
(wholly or partially), realizing, exchanging, varying, abstaining from
perfecting or taking advantage of it); (i) the death of any person or an
Insolvency Event occurring in respect of any person; (j) a change in the legal
capacity, rights or obligations or a person; (k) the fact that a person is a
trustee, nominee, joint owner, joint venturer or a member of a partnership, firm
or association; (l) a judgment against the Mortgagor or another person; (m) the
receipt of a dividend after an Insolvency Event or the payment of a sum or sums
into the account of the Mortgagor or another person at any time (whether
received or paid jointly, jointly and severally or otherwise); (n) any part of
the Secured Money being irrecoverable; (o) an assignment of rights in connection
with the Secured Money; (p) the acceptance of repudiation or other termination
in connection with the Secured Money; (q) the invalidity or unenforceability of
an obligation or liability of a person other than the Mortgagor; (r) invalidity
or irregularity in the execution of this mortgage by the Mortgagor or any
deficiency in the powers of the Mortgagor to enter into or observe its
obligations under this mortgage; (s) the opening of a new account by the
Mortgagor with the Mortgagee or another person or the operation of a new
account; (t) any obligation of the Mortgagor or any other person being
discharged by operation of law or otherwise; or (u) property secured under a
Lien being forfeited, extinguished, surrendered, resumed or determined.
10
<PAGE> 13
17.2 The Mortgagee's right to payment of the Secured Money arising in
any way (including, without limitation, under a negotiable instrument or another
contract with the Mortgagor) does not merge with the Mortgagor's undertaking to
pay the Secured Money under this mortgage.
17.3 This mortgage does not merge with, postpone, lessen or otherwise
prejudicially affect any other Lien to which the Mortgagee is entitled.
17.4 The Mortgagee will hold a judgment or order which the Mortgagee
obtains against the Mortgagor in respect of the Secured Money collaterally with
this mortgage. This mortgage will not merge in the judgment or order.
17.5 The Mortgagee may demand payment of the Secured Money and exercise
its rights, powers and remedies under this mortgage even if a negotiable
instrument, security, contract or other obligation relating to the Secured Money
is still current or has not fallen due.
17.6 This mortgage is a continuing security despite any intervening
payment, settlement of account or other thing until a release has been executed
and given to the Mortgagor.
17.7 This mortgage does not affect a Collateral Security or any other
right, power or remedy of the Mortgagee at law or in equity.
17.8 Until this mortgage is released in respect of the relevant Secured
Property the Mortgagee is entitled to retain all instruments and documents of
title deposited under Clause 6.1.
17.9 The Mortgagee need not resort to any other Lien it holds for
payment of the Secured Money before it resorts to this mortgage.
17.10 A purchaser from, or other person dealing with, the Mortgagee, or
any Receiver, or any attorney appointed under this mortgage or a person to whom
is tendered for registration an instrument duly executed by any of them need not
inquire: (a) whether the Secured Money is in fact owing or payable; (b) whether
default has occurred; (c) whether a right, power or remedy which they have
exercised or purported to exercise has been properly exercised; (d) whether a
Receiver has been properly appointed; or (e) about any other thing in connection
with the exercise or purported exercise of a right, power or remedy. The title
of any person relying on this Clause 17.10 is not affected by express or
constructive notice of anything in connection with the matters referred to in
Clauses 17.10(a) to (e)(inclusive).
17.11 The liability of the Mortgagor under this mortgage is not
affected because: (a) any other person who was intended to become a co-surety or
co-indemnifier for payment of the Secured Money has not done so or has not done
so effectively; or (b) a person who is a co-surety or co-indemnifier for payment
of the Secured Money is discharged under an agreement or under statute or a
principle of law or equity.
17.12 If a claim is made that all or part of a payment, obligation,
settlement, transaction, conveyance or transfer in connection with the Secured
Money is void or voidable under law relating to Insolvency Events or the
protection of creditors or for any other reason and the claim is upheld,
conceded or compromised then: (a) the Mortgagee is entitled immediately as
against the Mortgagor to the rights in respect of the Secured Money to which it
would have been entitled if all or that part of that payment, obligation,
settlement, transaction, conveyance or transfer had not taken place; and (b)
promptly on request from the Mortgagee, the Mortgagor agrees to immediately do
any act and sign any document to restore to the Mortgagee any Lien or
11
<PAGE> 14
guarantee held by it from the Mortgagor immediately before that payment,
obligation, settlement, transaction, conveyance or transfer.
18. POWER OF ATTORNEY
18.1 The Mortgagor irrevocably appoints the Mortgagee, each authorized
officer of the Mortgagee, and each Receiver severally its attorneys.
18.2 Each attorney may: (a) in the name of the Mortgagor or the
attorney do anything which the Mortgagor may lawfully authorize an attorney to
do in connection with this mortgage or the Secured Property or which in the
attorney's opinion is necessary or expedient to give effect to any right, power
or remedy conferred on the Mortgagee or a Receiver by this mortgage, by law or
otherwise, (including, without limitation, executing deeds and instituting,
conducting and defending legal proceedings); (b) delegate its powers (including,
without limitation, this power of delegation) to any person for any period and
may revoke a delegation; and (c) exercise or concur in exercising its powers
even if the attorney has a conflict of duty in exercising its powers or has a
direct or person interest in the means or result of that exercise of powers.
18.3 The Mortgagor agrees to ratify anything done by an attorney or its
delegate in accordance with Clause 18.2.
19. NOTICES
All communications under this mortgage shall be in writing and shall be
mailed by first class mail, postage prepaid, or delivered by hand or transmitted
by a telecommunications device capable of transmitting or creating a written
record (but in all cases of telecommunication notices such notice must be
immediately followed by mailing):
(a) if to the Mortgagee, at its address at 3322 West End
Avenue, Nashville, Tennessee, 37203-0990, Attention: Global Accounts Operations
Manager, Telephone No. (615) 386-5943 or Facsimile (615) 386-5950 or at such
other address as it may have furnished in writing to the Mortgagor; or
(b) if to the Mortgagor, at its address at P.O. Box 6, Tarkwa,
Republic of Ghana, West Africa Attention: Mr. Lucien Girard, (233) 362-357 or
Facsimile (233) 362-273 or at such other address as it may have furnished in
writing to the Mortgagee.
Any notice so addressed and mailed by first class mail shall be deemed
to be given when received or if mailed by registered or certified mail, five
Business Days after being so mailed, and any notice delivered by hand or
transmitted by telecommunications device shall be deemed to be given when
received by the Mortgagee or the Mortgagor, as the case may be.
20. LIENS AND ASSIGNMENT
The Mortgagor may not, without the consent of the Mortgagee, create or
allow to exist a Lien over, or an interest in, this mortgage or assign or
otherwise dispose of or deal with its rights under this mortgage. The Mortgagee
at any time may do any of those things as the Mortgagee sees fit.
21. MISCELLANEOUS
21.1 CERTIFICATE. A certificate signed by the Mortgagee or its
solicitors about a matter or about a sum payable to the Mortgagee in connection
with this mortgage is sufficient evidence of the matter or sum
12
<PAGE> 15
stated in this certificate unless the matter or sum is proved to be false.
21.2 EXERCISE OF RIGHTS. The Mortgagee, a Receiver or an attorney
appointed under this mortgage may exercise a right, power or remedy at its
discretion, and separately or concurrently with another right, power or remedy.
A single or partial exercise of a right, power or remedy by the person does not
prevent a further exercise of that or an exercise of any other right, power or
remedy. Failure by the person to exercise or delay in exercising a right, power
or remedy does not prevent its exercise. The person with the right, power or
remedy is not liable for any loss caused by the exercise or attempted exercise
of, failure to exercise or delay in exercising the right, power or remedy,
whether or not caused by that person's negligence.
21.3 WAIVER AND VARIATION. A provision of or a right created under this
mortgage may not be waived or varied except in writing signed by the party or
parties to be bound.
21.4 SUPERVENING LEGISLATION. Any present or future legislation which
operates to vary the obligations of the Mortgagor in connection with this
mortgage, the Secured Money or the Secured Property with the result that the
Mortgagee's rights, powers or remedies are adversely affected (including,
without limitation, by way of delay or postponement) is excluded except to the
extent that its exclusion is prohibited or rendered ineffective by law.
21.5 APPROVALS AND CONSENT. The Mortgagee, a Receiver or an attorney
appointed under this mortgage may give conditionally or unconditionally or
withhold its approval or consent in its absolute discretion, unless this
mortgage expressly provides otherwise.
21.6 REMEDIES CUMULATIVE. The rights, powers and remedies provided in
this mortgage are cumulative with and not exclusive of the rights, powers or
remedies provided by law independently of this mortgage.
21.7 SET-OFF. At its sole discretion the Mortgagee may apply (without
notice) any credit balance in any currency in any account of the Mortgagor with
the Mortgagee towards satisfaction of any amount then payable by the Mortgagor
to the Mortgagee under this mortgage. The Mortgagor authorizes the Mortgagee in
the name of the Mortgagor or the Mortgagee to do anything (including, without
limitation, to execute any document) that is required for that purpose.
21.8 INDEMNITIES. Each indemnity in this mortgage is a continuing
obligation, separate and independent from the other obligations of the Mortgagor
and survives termination of this mortgage. It is not necessary for the Mortgagee
to incur expense or make payment before enforcing a right of indemnity conferred
by this mortgage.
21.9 TIME OF THE ESSENCE. Time is of the essence of this mortgage in
respect of an obligation of the Mortgagor to pay money or perform any act or
thing under this mortgage.
21.10 CONFIDENTIALITY. The Mortgagee shall treat the information
contained in the records, documents and other materials received from the
Mortgagor that are both marked "Confidential" and are not otherwise available
from another source as confidential information. The Mortgagee shall not
disclose such confidential information to any other person except: (a) with the
consent of the Mortgagor (which consent shall not to be unreasonably withheld);
(b) if required by law or required by any stock exchange; (c) in connection with
legal proceedings (including any alternative dispute resolution proceedings)
relating to this mortgage; (d) to an Affiliate,
13
<PAGE> 16
accountant, agent or advisor of the Mortgagee, provided such person or entity
undertakes to observe this Clause 21.10; (e) to a potential assignee,
participant or sub-participant of the Mortgagee's interests under this mortgage,
provided such person or entity undertakes to observe this Section 21.10 except
to the extent limited by Freedom of Information Act as it pertains to the U.S.
Government and agencies thereof; or (f) to an insurance carrier covering
political risk or other risks of the Lender associated with this mortgage.
21.11 RECEIPTS. The receipt of a Receiver or an authorized officer of
the Mortgagee releases the person paying money to the Receiver or the Mortgagee
in connection with this mortgage from: (a) liability to inquire whether the
Secured Money has become payable; (b) liability for the money paid or expressed
to be received; and (c) being concerned to see to its application or being
answerable or accountable for its loss or misapplication.
22. GOVERNING LAW, JURISDICTION AND SERVICES OF PROCESS
22.1. GOVERNING LAW. THE PARTIES HERETO HAVE EXPRESSLY AGREED THAT THIS
MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TENNESSEE, UNITED STATES OF AMERICA, WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICT OF LAWS THEREOF, PROVIDED, HOWEVER, THAT FOR ANY LEGAL
ACTION OR PROCEEDING BROUGHT WITH RESPECT TO THIS MORTGAGE IN THE COURTS OF THE
REPUBLIC OF GHANA OR ANY POLITICAL SUBDIVISION THEREOF, THIS MORTGAGE SHALL BE
DEEMED TO BE MADE UNDER THE LAWS OF THE REPUBLIC OF GHANA AND FOR SUCH PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE REPUBLIC OF GHANA.
22.2. SUBMISSION TO JURISDICTION AND SERVICE OF PROCESS. The Mortgagor
irrevocably agrees that any legal action or proceeding arising out of or
relating to this mortgage may be instituted in the United Sates of America in
any Federal or State court sitting in the State of Tennessee, and the Mortgagor
irrevocably submits to the jurisdiction of these courts in any such action or
proceeding. The Mortgagor irrevocably consents to such service upon it by the
mailing of copies thereof by U.S. air mail or courier to the Mortgagor at its
address set forth in Clause 19 of this mortgage. The foregoing provisions shall
not limit the right of the Mortgagee to bring any such action or proceeding or
to obtain execution on any judgment rendered in any such action or proceeding in
any other appropriate jurisdiction or in any other manner. The Mortgagor agrees
that final judgement against it in any legal action or proceeding arising out of
or relating to this mortgage shall be conclusive and may be enforced in any
other jurisdiction within or outside the United States by suit on the judgement,
a certified or exemplified copy of which judgment shall be conclusive evidence
thereof and of the amount of its indebtedness, or by such other means provided
by law.
22.3. JURY TRIAL WAIVER. THE MORTGAGOR AND MORTGAGEE EACH WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY
KIND ARISING OUT OF OR RELATED TO THIS MORTGAGE OR THE OBLIGATIONS OF MORTGAGOR
RELATING HERETO. MORTGAGOR ACKNOWLEDGES THAT THE FOREGOING WAIVER IS A MATERIAL
INDUCEMENT TO MORTGAGEE ENTERING INTO THIS MORTGAGE AND THAT MORTGAGEE IS
RELYING UPON THE FOREGOING WAIVER IN ITS FUTURE DEALINGS WITH MORTGAGOR.
MORTGAGOR WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVER WITH
ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH SUCH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14
<PAGE> 17
23. COUNTERPARTS
This mortgage may consist of a number of counterparts and the
counterparts taken together constitute one and the same instrument.
EXECUTED as a deed.
15
<PAGE> 18
SCHEDULE 1 DETAILS
ITEM 1
(Clause 1.1 - definition of Collateral Security)
SPECIFICALLY IDENTIFIED COLLATERAL SECURITY:
No collateral security is specifically identified
ITEM 2
(Clause 1.1 - definition of Present Security)
<TABLE>
<CAPTION>
Machine Serial Engine Serial
Description of Chattel No. of Chattel No. of Chattel
- ---------------------- -------------- --------------
<S> <C> <C>
One New Caterpillar 785B Off-Highway Truck 6HK00507 4WJ00670
One New Caterpillar 785B Off-Highway Truck 6HK00508 4WJ00669
One New Caterpillar 785B Off-Highway Truck 6HK00509 4WJ00671
One New Caterpillar 785B Off-Highway Truck 6HK00510 4WJ00672
One New Caterpillar 5230 Hydraulic Excavator 7LL00044 2PK00885
One New Driltech D245S Drill 732098 67U17377
One New Caterpillar 966F II Wheel Loader 9YJ02581 13Z34964
One New Caterpillar 375 Hydraulic Excavator 6NK00131 11N12998
One New Caterpillar D6H II Track-Type Tractor 4LG05680 13Z34680
One New Caterpillar TH63 Telescopic Handler 3NN00442 5HK34629
One Used Caterpillar D400D Articulated Truck 8TF00731 11N06985
One Used Caterpillar D400D Articulated Truck 8TF00741 11N06988
One Used Caterpillar D400D Articulated Truck 8TF00742 11N07063
One Used Caterpillar D400D Articulated Truck 8TF00758 11N01737
</TABLE>
16
<PAGE> 19
SCHEDULE 2 (Clause 2.1 - definition of Acknowledgment)
To: [ ]
("Mortgagee")
Date:
ACKNOWLEDGMENT
Under the mortgage ("Mortgage") dated [ ] between
Teberebie Goldfields Limited ("Mortgagor") and Caterpillar Financial Services
Corporation ("Mortgagee") the Mortgagor notifies the Mortgagee and represents
and warrants that:
1. The following chattels constitute Future Security:
DESCRIPTION SERIAL NO. OF CHATTEL LOCATION OF
OF CHATTEL (OR OTHER IDENTIFYING CHATTEL
NUMBER)
2. The Future Security referred to in this Acknowledgment is fully paid for.
3. The Mortgagor is the legal and beneficial owner of and has good title to the
Future Security referred to in this Acknowledgment free from Liens (other than
Permitted Liens) other than the security granted in favor of the Mortgagee under
the Mortgage.
Under Clause 3.2 of the Mortgage, the Mortgagor assigns to the Mortgagee the
Future Security referred to in this Acknowledgment by way of legal mortgage.
We enclose:
(a) the contract documents relating to our purchase of the Future Security
referred to in this Acknowledgment;
(b) the title documents in respect of the Future Security referred to in
this Acknowledgment;
(c) a copy of all service and maintenance contracts entered into by the
Mortgagor (or the Mortgagor's predecessor in title to the Future
Security) in respect of the Future Security referred to in this
Acknowledgment.
If any of the above are not enclosed we undertake to forward them to you as soon
as we obtain possession of them. A term which has a defined meaning in the
Mortgage has the same meaning as in the Mortgage when used in this
Acknowledgment.
- ---------------------------------
For:
17
<PAGE> 20
Execution Page
TEBEREBIE GOLDFIELDS LIMITED
BY: /s/ William Allen
-------------------------------------
TITLE: Chief Financial Officer
-------------------------------------
WITNESS: /s/
-------------------------------------
CATERPILLAR FINANCIAL SERVICES CORPORATION
BY: /s/ Ronald R. Rossmann
-------------------------------------
TITLE: Corporate Operations Manager
-------------------------------------
WITNESS: /s/
-------------------------------------
18
<PAGE> 1
Exhibit 10.4
============================================================
THE PIONEER GROUP, INC.
CREDIT AGREEMENT
Dated as of June 6, 1996
THE FIRST NATIONAL BANK OF BOSTON, Agent
============================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Definitions; Certain Rules of Construction....................................................................1
2. The Credits..................................................................................................23
2.1. B Share Revolving Credit..........................................................................24
2.1.1. B Share Revolving Loan.................................................................24
2.1.2. Borrowing Requests.....................................................................24
2.1.3. B Share Revolving Notes................................................................24
2.2. B Share Term Credit...............................................................................25
2.2.1. Term Loan..............................................................................25
2.2.2. Term Notes.............................................................................25
2.2.3. Option to Extend Maturities............................................................25
2.3. Revolving Credit Facility.........................................................................25
2.3.1. Revolving Loan.........................................................................25
2.3.2. Borrowing Requests.....................................................................26
2.3.3. Revolving Note.........................................................................26
2.4. Application of Proceeds...........................................................................26
2.4.1. B Share Revolving Loan.................................................................26
2.4.2. B Share Term Loan......................................................................26
2.4.3. Revolving Loan.........................................................................26
2.4.4. Specifically Prohibited Applications...................................................27
2.5. Nature of Obligations of Lenders to Extend Credit.................................................27
3. Interest; Pricing Options; Fees..............................................................................27
3.1. Interest..........................................................................................27
3.2. Pricing Options...................................................................................27
3.2.1. Election of Pricing Options............................................................27
3.2.2. Notice to Lenders and Borrowers........................................................28
3.2.3. Selection of Interest Periods..........................................................28
3.2.4. Additional Interest....................................................................29
3.2.5. Change in Applicable Laws, Regulations, etc............................................29
3.2.6. Taxes..................................................................................29
3.2.7. Funding Procedure......................................................................30
3.3. Commitment Fees...................................................................................30
3.4. Capital Adequacy..................................................................................30
3.5. Computations of Interest and Fees.................................................................31
4. Payment......................................................................................................31
4.1. Payment at Maturity...............................................................................31
4.2. Contingent Required Prepayments...................................................................31
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
4.2.1. Excess Credit Exposure.................................................................31
4.2.2. Prepayment of B Share Revolving Loan...................................................32
4.3. Mandatory Prepayment of B Share Term Loan.........................................................32
4.4. Voluntary Prepayments.............................................................................32
4.5. Reborrowing; Application of Payments..............................................................32
4.6. Payment with Accrued Interest, etc................................................................33
5. Conditions to Extending Credit...............................................................................33
5.1. Conditions on Initial Closing Date................................................................33
5.1.1. Revolving Notes........................................................................33
5.1.2. Payment of Fees........................................................................33
5.1.3. Guarantors Contribution Agreement......................................................33
5.1.4. Legal Opinions.........................................................................33
5.1.5. Investment Assets Under Management.....................................................34
5.1.6. OPIC Insurance Policies................................................................34
5.2. Conditions on the B Share Conversion Date.........................................................34
5.2.1. B Share Term Notes.....................................................................34
5.3. Conditions to Each Extension of Credit............................................................34
5.3.1. Officer's Certificate..................................................................34
5.3.2. Proper Proceedings.....................................................................34
5.3.3. Legality, etc..........................................................................34
6. Guarantees...................................................................................................35
6.1. Guarantees of Credit Obligations..................................................................35
6.2. Continuing Obligation.............................................................................35
6.3. Waivers with Respect to Credit Obligations........................................................36
6.4. Lenders' Power to Waive, etc......................................................................37
6.5. Information Regarding Obligors, etc...............................................................38
6.6. Certain Guarantor Representations.................................................................38
6.7. No Subrogation....................................................................................39
6.8. Subordination.....................................................................................39
6.9. Future Subsidiaries; Further Assurances...........................................................39
7. General Covenants............................................................................................39
7.1. Taxes and Other Charges; Accounts Payable.........................................................40
7.1.1. Taxes and Other Charges................................................................40
7.1.2. Accounts Payable.......................................................................40
7.2. Conduct of Business, etc..........................................................................40
7.2.1. Types of Business......................................................................40
7.2.2. Maintenance of Properties..............................................................40
7.2.3. Compliance with Material Agreements....................................................41
7.2.4. Statutory Compliance...................................................................41
7.3. Insurance.........................................................................................41
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
7.3.1. Business Interruption Insurance........................................................41
7.3.2. Errors and Omissions Insurance.........................................................42
7.3.3. Directors and Officers Insurance.......................................................42
7.3.4. Property Insurance.....................................................................42
7.3.5. Liability Insurance....................................................................42
7.4. Financial Statements and Reports..................................................................42
7.4.1. Annual Reports.........................................................................42
7.4.2. Quarterly Reports......................................................................44
7.4.3. Other Reports..........................................................................45
7.4.4. Notice of Litigation; Notice of Defaults...............................................46
7.4.5. ERISA Reports..........................................................................46
7.4.6. Other Information......................................................................47
7.5. Certain Financial Tests...........................................................................47
7.5.1. Aggregated Total Debt to Combined Mutual Fund Cash Flow................................47
7.5.2. Combined Adjusted Cash Flow to Consolidated Fixed Charges..............................47
7.5.3. Consolidated Tangible Net Worth........................................................48
7.6. Indebtedness......................................................................................48
7.7. Guarantees; Letters of Credit.....................................................................49
7.8. Liens.............................................................................................49
7.9. Investments and Acquisitions......................................................................51
7.10. Distributions....................................................................................51
7.11. Merger, Consolidation and Dispositions of Assets.................................................52
7.12. Issuance of Stock by Subsidiaries; Subsidiary Distributions; Subsidiary
Guarantors.....................................................................................53
7.12.1. Issuance of Stock by Subsidiaries.....................................................53
7.12.2. Issuance of Stock by Core Mutual Fund Subsidiaries or Pioneer
Goldfields Entity.....................................................................53
7.12.3. No Restrictions on Subsidiary Distributions...........................................53
7.13. ERISA, etc.......................................................................................53
7.14. Transactions with Affiliates.....................................................................53
7.15. Interest Rate Protection.........................................................................54
7.16. Maintenance of Fee Structure.....................................................................54
7.17. Maintenance of Mutual Fund Contracts.............................................................54
8. Representations and Warranties...............................................................................54
8.1. Organization and Business.........................................................................54
8.1.1. Company................................................................................54
8.1.2. Subsidiaries...........................................................................55
8.1.3. Qualification..........................................................................55
8.2. Financial Statements and Other Information; Material Agreements...................................55
8.2.1. Financial Statements and Other Information.............................................55
8.2.2. Material Agreements....................................................................56
8.2.3. Investment Assets Under Management.....................................................57
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
8.3. Changes in Condition..............................................................................57
8.4. Agreements Relating to Financing Debt.............................................................57
8.5. Title to Assets...................................................................................57
8.6. Licenses, etc.....................................................................................57
8.7. Litigation........................................................................................58
8.8. Tax Returns.......................................................................................58
8.9. Authorization and Enforceability.................................................................59
8.10. No Legal Obstacle to Agreements..................................................................59
8.11. Defaults.........................................................................................59
8.12. Certain Business Representations.................................................................59
8.12.1. Labor Relations.......................................................................60
8.12.2. Antitrust.............................................................................60
8.12.3. Environmental Compliance..............................................................60
8.12.4. Certain Other Agreements..............................................................60
8.12.5. Certain Laws..........................................................................60
8.12.6. Burdensome Obligations................................................................60
8.13. Pension Plans....................................................................................61
8.14. Foreign Trade Regulations; Government Regulation.................................................61
8.14.1. Foreign Trade Regulations.............................................................61
8.14.2. Government Regulation.................................................................61
8.15. Pioneer Fund Management Omaha....................................................................61
8.16. Disclosure.......................................................................................61
9. Defaults.....................................................................................................61
9.1. Events of Default.................................................................................61
9.2. Certain Actions Following an Event of Default.....................................................65
9.2.1. No Obligation to Extend Credit.........................................................65
9.2.2. Specific Performance; Exercise of Rights...............................................65
9.2.3. Acceleration...........................................................................65
9.2.4. Enforcement of Payment; Credit Security; Setoff........................................66
9.2.5. Cumulative Remedies....................................................................66
9.3. Annulment of Defaults.............................................................................66
9.4. Waivers...........................................................................................66
10. Expenses; Indemnity.........................................................................................67
10.1. Expenses.........................................................................................67
10.2. General Indemnity................................................................................67
11. Operations..............................................................................................68
11.1. Interests in Credits.............................................................................68
11.2. Agent's Authority to Act, etc....................................................................68
11.3. Company to Pay Agent, etc........................................................................68
11.4. Lender Operations for Advances, etc..............................................................68
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<S> <C>
11.4.1. Advances..............................................................................68
11.4.2. Agent to Allocate Payments, etc.......................................................69
11.4.3. Delinquent Lenders; Nonperforming Lenders.............................................69
11.5. Sharing of Payments, etc.........................................................................70
11.6. Amendments, Consents, Waivers, etc...............................................................70
11.7. Agent's Resignation..............................................................................71
11.8. Concerning the Agent.............................................................................72
11.8.1. Action in Good Faith, etc.............................................................72
11.8.2. No Implied Duties, etc................................................................72
11.8.3. Validity, etc.........................................................................72
11.8.4. Compliance............................................................................72
11.8.5. Employment of Agents and Counsel......................................................73
11.8.6. Reliance on Documents and Counsel.....................................................73
11.8.7. Agent's Reimbursement.................................................................73
11.8.8. Agent's Fees..........................................................................73
11.9. Rights as a Lender...............................................................................73
11.10. Independent Credit Decision.....................................................................74
11.11. Indemnification.................................................................................74
12. Successors and Assigns; Lender Assignments and Participations...............................................74
12.1. Assignments by Lenders...........................................................................75
12.1.1. Assignees and Assignment Procedures...................................................75
12.1.2. Terms of Assignment and Acceptance....................................................76
12.1.3. Register..............................................................................76
12.1.4. Acceptance of Assignment and Assumption...............................................77
12.1.5. Federal Reserve Bank..................................................................77
12.1.6. Further Assurances....................................................................77
12.2. Credit Participants..............................................................................77
13. Confidentiality.............................................................................................78
14. Foreign Persons.............................................................................................79
15. Notices.....................................................................................................79
16. Course of Dealing; Amendments and Waivers...................................................................80
17. Defeasance..................................................................................................80
18. Venue; Service of Process...................................................................................80
19. WAIVER OF JURY TRIAL........................................................................................81
</TABLE>
-v-
<PAGE> 7
<TABLE>
<S> <C>
20. General.....................................................................................................81
</TABLE>
-vi-
<PAGE> 8
THE PIONEER GROUP, INC.
CREDIT AGREEMENT
This Credit Agreement, dated as of June 6, 1996, as amended, is among
The Pioneer Group, Inc., a Delaware corporation, certain of its subsidiaries
listed on the signature pages hereto and other Borrower Subsidiaries (as defined
below) who from time to time become party hereto, the Lenders (as defined below)
and The First National Bank of Boston, as agent for itself and the other
Lenders. The parties agree as follows:
1. Definitions; Certain Rules of Construction. Except as otherwise explicitly
specified to the contrary, (a) the capitalized term "Section" refers to sections
of this Agreement, (b) the capitalized term "Exhibit" refers to exhibits to this
Agreement, (c) references to a particular Section include all subsections
thereof, (d) the word "including" shall be construed as "including without
limitation," (e) accounting terms not otherwise defined herein shall have the
meaning provided under GAAP and (f) terms defined in the UCC and not otherwise
defined herein shall have the meaning provided under the UCC. Certain
capitalized terms are used in this Agreement as specifically defined as follows:
1.1. "Accumulated Benefit Obligations" means the actuarial present
value of the accumulated benefit obligations under any Plan, calculated in a
manner consistent with Statement No. 87 of the Financial Accounting Standards
Board.
1.2. "Affiliate" means, with respect to the Company (or other specified
Person), any other Person directly or indirectly controlling, controlled by or
under direct or indirect common control with the Company, and shall include (a)
any officer or director of the Company or general partner of such Person and (b)
any Person of which the Company or any Affiliate (as defined in clause (a)
above) of the Company shall, directly or indirectly, beneficially own either (i)
at least 10% of the outstanding equity securities having the general power to
vote or (ii) at least 10% of all equity interests.
1.3. "Agent" means Bank of Boston in its capacity as agent for the
Lenders hereunder, as well as its successors and assigns in such capacity
pursuant to Section 11.7.
1.4. "Applicable Margin" means,
(1) with respect to any portion of the Revolving Loan subject to a
Pricing Option,
(a) on or after the Initial Closing Date but prior to the first
anniversary of the Initial Closing Date:
(i) on any date that Company Total Debt is less than or equal
to 250% of Combined Mutual Fund Cash Flow, 1.25%;
<PAGE> 9
(ii) on any date that Company Total Debt is greater than 250%
but less than 300% of Combined Mutual Fund Cash Flow, 1.50%; and
(iii) on any date that Company Total Debt is equal to or
greater than 300% of Combined Mutual Fund Cash Flow, 1.75%.
(b) on and after the first anniversary of the Initial Closing Date:
(i) on any date that Company Total Debt is less than or equal
to 200% of Combined Mutual Fund Cash Flow, 0.75%;
(ii) on any date that Company Total Debt is greater than 200%
but less than or equal to 250% of Combined Mutual Fund Cash Flow,
1.25%;
(iii) on any date that Company Total Debt is greater than 250%
but less than 300% of Combined Mutual Fund Cash Flow, 1.50%; and
(iv) on any date that Company Total Debt is equal to or
greater than 300% of Combined Mutual Fund Cash Flow, 1.75%; and
(2) with respect to each other portion of the Revolving Loan,
(a) on any date that Company Total Debt is less than 300% of
Combined Mutual Fund Cash Flow, 0%; and
(b) on any date that Company Total Debt is equal to or greater
than 300% of Combined Mutual Fund Cash Flow, 0.25%.
For purposes of calculating the Applicable Margin, (1) Company
Total Debt shall be determined as of the last day of the most recently
ended fiscal quarter for which financial statements have been furnished
(or are required to have been furnished) by the Company to the Agent
pursuant to Sections 7.4.1 or 7.4.2 and (2) Combined Mutual Fund Cash
Flow shall be determined for the period of four consecutive fiscal
quarters of the Company then ended. Any adjustment in the Applicable
Margin shall take effect upon the earlier of (i) the date upon which
the financial statements referred to in the foregoing sentence are
furnished or (ii) the date such financial statements are required to be
furnished by the Company to the Agent. If for any reason the Company
shall not have furnished the financial statements required by Sections
7.4.1 or 7.4.2 upon the expiration of the period specified in Section
9.1.2, then the Applicable Margin shall be deemed to be the highest
margin specified by this Section 1.4
1.5. "Applicable Rate" means, at any date,
-2-
<PAGE> 10
(1) (a) with respect to the B Share Loan,
(i) for each portion of the B Share Loan subject to a
Pricing Option, the sum of the Eurodollar Rate with
respect to such Pricing Option plus 1.25%; and
(ii) for each other portion of the B Share Loan, the Base
Rate;
(b) with respect to the Revolving Loan,
(i) for each portion of the Revolving Loan subject to a
Pricing Option, the sum of the Eurodollar Rate with
respect to such Pricing Option plus the Applicable Margin;
and
(ii) for each other portion of the Revolving Loan, the
Base Rate plus the Applicable Margin;
plus (2) in each case, an additional 2% effective on the day
the Agent notifies (which notice the Agent shall be required
to give upon the written request of the Required Lenders) the
Company that the interest rates hereunder are increasing as a
result of the occurrence of an Event of Default until the
earlier of such time as (i) such Event of Default is no longer
continuing or (ii) such Event of Default is deemed no longer
to exist, in each case pursuant to Section 9.3.
1.6. "Assignee" is defined in Section 12.1.1.
1.7. "Assignment and Acceptance" is defined in Section 12.1.1.
1.8. "B Share Collection Amount" means, for any period, the sum of
Distribution Fees plus Redemption Fees received by the Company or any Subsidiary
of the Company during such period.
1.9. "B Share Conversion Date" means the earlier of June 10, 1997, or
the date 364 days after the Initial Closing Date, or such later date as
determined in accordance with Section 2.2.3.
1.10. "B Share Final Maturity Date" means the fifth anniversary of the
B Share Conversion Date.
1.11. "B Share Funds" means the Funds set forth on Exhibit 7.16, with
dealer commissions with respect to the sale of B Shares no more favorable to the
Brokers and Redemption Fees and Distribution Fees with respect to B Shares no
more favorable to the shareholders of such Funds than as specified in Exhibit
7.16.
-3-
<PAGE> 11
1.12. "B Share Loan" means the B Share Revolving Loan or the B Share
Term Loan, as applicable.
1.13. "B Share Notes" means the B Share Revolving Notes or the B Share
Term Notes, as applicable.
1.14. "B Share Revolving Loan" is defined in Section 2.1.1.
1.15. "B Share Revolving Note" is defined in Section 2.1.3.
1.16. "B Share Term Loan" is defined in Section 2.2.1.
1.17. "B Share Term Notes" is defined in Section 2.2.2.
1.18. "B Shares" means any shares (or class of shares) of beneficial
interest or capital stock of any B Share Fund, upon the redemption of which a
Redemption Fee may be payable at any time, and that are set forth on Exhibit
7.16.
1.19. "Bank of Boston" means The First National Bank of Boston and its
successors.
1.20. "Banking Day" means any day other than Saturday, Sunday or a day
on which banks in Boston, Massachusetts or New York, New York are authorized or
required by law or other governmental action to close and, if such term is used
with reference to a Pricing Option, any day on which dealings are effected in
the Eurodollars in question by first-class banks in the inter-bank Eurodollar
markets in New York, New York and at the location of the applicable Eurodollar
office.
1.21. "Bankruptcy Code" means Title 11 of the United States Code (or
any successor statute) and the rules and regulations thereunder, all as from
time to time in effect.
1.22. "Bankruptcy Default" means an Event of Default referred to in
Section 9.1.11.
1.23. "Base Rate" means, on any day, the greater of (a) the rate of
interest announced by Bank of Boston at the Boston Office as its Base Rate or
(b) the sum of 1/2% plus the Federal Funds Rate.
1.24. "Basic Eurodollar Rate" means, as applied to any Interest Period,
the rate of interest at which Eurodollar deposits in an amount comparable to the
Percentage Interest of Bank of Boston in the portion of the Loan as to which a
Pricing Option has been elected and which have a term corresponding to the
Interest Period in question are offered to Bank of Boston by first class banks
in the inter-bank Eurodollar market for delivery in immediately available funds
at a Eurodollar Office on the first day of such Interest Period as determined by
-4-
<PAGE> 12
the Agent at approximately 10:00 a.m. (Boston time) two Banking Days prior to
the date upon which the Interest Period in question is to commence, which
determination by the Agent shall, in the absence of manifest error, be
conclusive.
1.25. "Borrower" means each of the Company and the Borrower
Subsidiaries.
1.26. "Borrower Subsidiary" means initially Pioneering Management
Corporation and Pioneer Management (Ireland) Ltd., each of their Wholly Owned
Subsidiaries and any other Wholly Owned Subsidiary from time to time designated
by the Company and approved by the Required Lenders.
1.27. "Boston Office" means the principal banking office of Bank of
Boston in Boston, Massachusetts.
1.28. "Broker" means any broker, dealer, bank or other person or entity
(other than any Subsidiary or any director, officer or employee of the Company
or any Subsidiary) that sells or arranges for the sale of B Shares and is
entitled to receive from the Company or any Subsidiary any commission or other
compensation in respect of such sales.
1.29. "By-laws" means all written by-laws of any Person other than an
individual or similar governance documents of such Person, all as from time to
time in effect.
1.30. "Capitalized Lease" means any lease which is required to be
capitalized on the balance sheet of the lessee in accordance with GAAP,
including Statement Nos. 13 and 98 of the Financial Accounting Standards Board.
1.31. "Capitalized Lease Obligations" means the amount of the liability
reflecting the aggregate discounted amount of future payments under all
Capitalized Leases calculated in accordance with GAAP, including Statement Nos.
13 and 98 of the Financial Accounting Standards Board.
1.32. "Cash Equivalents" means:
(a) negotiable certificates of deposit, time deposits
(including sweep accounts), demand deposits and bankers' acceptances
issued by any United States financial institution having capital and
surplus and undivided profits aggregating at least $100,000,000 and
rated Prime-1 by Moody's Investors Service, Inc. or A-1 by Standard &
Poor's Ratings Group (or equivalently rated by any other nationally
recognized rating organization) or issued by any Lender;
(b) short-term corporate obligations rated Prime-1 by Moody's
Investors Service, Inc. or A-1 by Standard & Poor's Ratings Group (or
equivalently rated by any other nationally recognized rating
organization) or issued by any Lender;
-5-
<PAGE> 13
(c) any direct obligation of the United States of America or
any agency or instrumentality thereof, or of any state or municipality
thereof, (i) which has a remaining maturity at the time of purchase of
not more than one year or (ii) which is subject to a repurchase
agreement with any Lender (or any other financial institution referred
to in clause (a) above) exercisable within one year from the time of
purchase and (iii) which, in the case of obligations of any state or
municipality, is rated AA or better by Moody's Investors Service, Inc.
or equivalently rated by any other nationally recognized rating
organization; and
(d) any mutual fund or other pooled investment vehicle which
invests principally in obligations described above and which is rated
AA or better by Moody's Investors Service, Inc. or equivalently rated
by any other nationally recognized rating organization.
1.33. "Charter" means the articles of organization, certificate of
incorporation, joint venture agreement, partnership agreement, trust indenture
or other charter document of any Person other than an individual, each as from
time to time in effect.
1.34. "Closing Date" means the Initial Closing Date and each subsequent
date on which any extension of credit is made pursuant to Section 2.
1.35. "Code" means, collectively, the federal Internal Revenue Code of
1986 (or any successor statute) and the rules and regulations thereunder, all as
from time to time in effect.
1.36. "Combined" and "Combining", when used with reference to any term,
mean that term as applied to the accounts of the Company (or other specified
Person) and such of its Subsidiaries as may be specified (or other specified
Persons), combined or combining, as the case may be, in accordance with GAAP and
with appropriate deductions for minority interests in Subsidiaries.
1.37. "Combined Adjusted Cash Flow" means, for any period, the total of
(a) Combined Mutual Fund Cash Flow plus (b) the B Share Collection Amount during
such period.
1.38. "Combined Mutual Fund Cash Flow" means, for any period, the total
of:
(a) Combined Mutual Fund Net Income;
plus (b) all amounts deducted in computing such Combined Mutual
Fund Net Income in respect of:
(i) interest on Financing Debt;
-6-
<PAGE> 14
(ii) taxes based upon or measured by income;
(iii) depreciation and amortization (including
amortization resulting from Contingent Deferred
Sales Charges);
minus (c) the B Share Collection Amount.
1.39. "Combined Mutual Fund Net Income" means, for any period, the net
income (or loss) of the Core Mutual Fund Subsidiaries, determined in accordance
with GAAP on a Combined basis; provided, however, that such Combined Mutual Fund
Net Income shall not include:
(a) the income (or loss) of any Person accrued prior to the date such
Person becomes a Core Mutual Fund Subsidiary or is merged into or consolidated
with any Core Mutual Fund Subsidiary;
(b) the income (or loss) of any Person (other than a Core Mutual Fund
Subsidiary) in which the Core Mutual Fund Subsidiary has an ownership interest;
provided, however, that (i) Combined Mutual Fund Net Income shall include
amounts in respect of the income of such Person when actually received in cash
by the Core Mutual Fund Subsidiary in the form of dividends or similar
Distributions and (ii) Combined Mutual Fund Net Income shall be reduced by the
aggregate amount of all Investments, regardless of the form thereof, made by the
Core Mutual Fund Subsidiary in such Person for the purpose of funding any
deficit or loss of such Person;
(c) all amounts included in computing such net income (or loss) in
respect of the write-up of any asset (and any depreciation and amortization
charges resulting from any such write-up of assets).
(d) the income of any Core Mutual Fund Subsidiary to the extent the
payment of such income in the form of a Distribution or repayment of
Indebtedness to a Core Mutual Fund Subsidiary is not permitted, whether on
account of any Charter or By-law restriction, any agreement, instrument, deed or
lease or any law, statute, judgment, decree or governmental order, rule or
regulation applicable to such Core Mutual Fund Subsidiary;
(e) extraordinary and nonrecurring gains; and
(f) any after-tax gains or losses attributable to returned surplus
assets of any Plan.
1.40. "Combined Unreimbursed Sales Commissions" means, for any period,
(a) for the first such period after the Initial Closing Date, the
total of:
-7-
<PAGE> 15
(i) Prepaid Brokerage Commissions paid by the Company
and its Subsidiaries as of the first day of such
period (excluding Distribution Fees collected on
prior B Share sales, calculated based on the
original purchase price amount of such B Shares);
minus
(ii) the B Share Collection Amount as of the first day
of such period; and
(b) for each subsequent period, the total of:
(i) Combined Unreimbursed Sales Commissions as of the
last day of the previous period; plus
(ii) Prepaid Brokerage Commissions paid by the Company
and its Subsidiaries during such period; plus
(iii) accrued but unpaid interest in respect of the B
Share Loan; minus
(iv) the B Share Collection Amount for such period.
1.41. "Commitment" means, with respect to any Lender, such Lender's
Percentage Interest in the obligations to extend the credits contemplated by the
Credit Documents.
1.42. "Commodities Act" means, collectively, the federal Commodities
Exchange Act (or any successor statute), the rules and regulations thereunder
and the rules and regulations of the Commodity Futures Trading Commission (or
any successor), all as from time to time in effect.
1.43. "Company" means The Pioneer Group, Inc., a Delaware corporation.
1.44. "Company Total Debt" means, at any date, the total of:
(a) Indebtedness in respect of borrowed money;
(b) Indebtedness evidenced by notes, debentures or similar
instruments;
(c) Indebtedness in respect of Capitalized Leases;
(d) Indebtedness in respect of the deferred purchase price of assets
(other than normal trade accounts payable in the ordinary course
of business);
(e) Indebtedness in respect of mandatory redemption or dividend
rights on capital stock (or other equity);
-8-
<PAGE> 16
(f) Indebtedness in respect of unfunded pension liabilities;
(g) Indebtedness in respect of financial Guarantees and letters of
credit; and
(h) Indebtedness calculated in accordance with GAAP in respect of
tax deficiencies asserted in a notice of deficiency from the IRS
issued pursuant to Section 6212 (or similar or successor
provisions) of the Code; minus
(i) the B-Share Loan.
For purposes of this Section 1.44 only, the term "Indebtedness" shall
exclude any Consolidated balance sheet obligations of the Company for which the
Company is not directly liable or otherwise obligated, including but not limited
to Indebtedness of Teberebie Goldfields Ltd. in respect of certain equipment
financings.
1.45. "Computation Covenants" means Sections 7.5, 7.8.10, 7.11.1, 7.13
and 7.15.
1.46. "Consolidated" and "Consolidating," when used with reference to
any term, mean that term as applied to the accounts of the Company (or other
specified Person) and all of its Subsidiaries (or other specified group of
Persons), or such of its Subsidiaries as may be specified, consolidated (or
combined) or consolidating (or combining), as the case may be, in accordance
with GAAP and with appropriate deductions for minority interests in
Subsidiaries, as required by GAAP.
1.47. "Consolidated Fixed Charges" means, for any period, the sum of:
(a) the aggregate amount of interest, including payments in
the nature of interest under Capitalized Leases, accrued by the Company
(whether such interest is reflected as an item of expense or
capitalized) in accordance with GAAP on a Consolidated basis, plus
(b) the aggregate amount of all required or mandatory
scheduled payments, prepayments and sinking fund payments with respect
to principal paid or accrued by the Company in respect of Financing
Debt other than the Loan, plus
(c) only for periods after the B Share Conversion Date, the
extent to which the prepayments on the B Share Term Loan required by
Section 4.3 exceed the B Share Collection Amount.
1.48. "Consolidated Net Income" means, for any period, the net income
(or loss) of the Company and its Subsidiaries, determined in accordance with
GAAP on a Consolidated basis; provided however, that such Consolidated Net
Income shall not include:
-9-
<PAGE> 17
(a) the income (or loss) of any Person accrued prior to the date such
Person becomes a Subsidiary of the Company or is merged into or consolidated
with any Subsidiary of the Company;
(b) the income (or loss) of any Person (other than a Subsidiary of the
Company) in which a Subsidiary of the Company has an ownership interest;
provided, however, that (i) Consolidated Net Income shall include amounts in
respect of the income of such Person when actually received in cash by such
Subsidiary in the form of dividends or similar Distributions and (ii)
Consolidated Net Income shall be reduced by the aggregate amount of all
Investments, regardless of the form thereof, made by such Subsidiary in such
Person for the purpose of funding any deficit or loss of such Person;
(c) all amounts included in computing net income (or loss) in respect
of the write-up of any asset (and any depreciation and amortization charges
resulting from any such write-up of assets);
(d) the income of any Subsidiary of the Company to the extent the
payment of such income in the form of a Distribution or repayment of
Indebtedness to the Company or any Subsidiary of the Company is not permitted,
whether on account of any Charter or By-law restriction, any agreement,
instrument, deed or lease or any law, statute, judgment, decree or governmental
order, rule or regulation applicable to such Subsidiary;
(e) extraordinary and non-recurring gains; and
(f) any after-tax gains or losses attributable to returned surplus
assets of any Plan.
1.49. "Consolidated Tangible Net Worth" means, at any date, the total
of:
(a) stockholders' equity of the Company and its Subsidiaries
(excluding the effect of any foreign currency translation adjustments)
determined in accordance with GAAP on a Consolidated basis, minus
(b) the amount by which such stockholders' equity has been
increased by the write-up of any asset of the Company and its
Subsidiaries (excluding any write-ups net of write-downs associated
with any venture capital investments of the Company and its
Subsidiaries, minus
(c) assets of the Company and its Subsidiaries that are
considered intangible assets under GAAP (including but not limited to
customer lists, goodwill, computer software and capitalized research
and development costs other than the capitalized development costs
relating to the natural resource business operations of the Company or
any of its Subsidiaries).
-10-
<PAGE> 18
1.50. "Contingent Deferred Sales Charge" means any amount that is or
may be payable to the Company or any of its Subsidiaries by any Fund or any
shareholder thereof in such capacity upon redemption of all or a portion of
shares of beneficial interest or capital stock in the Funds upon redemption of B
Shares at rates and on terms no more favorable to such Funds or the shareholders
thereof than as specified in the pricing structure set forth in Exhibit 7.16.
1.51. "Core Mutual Fund Subsidiaries" means each of Pioneering
Management Corporation, Pioneer Funds Distributor, Inc., Pioneering Services
Corporation, Pioneer Management (Ireland) Ltd., and any other Borrower
Subsidiary and any other Person which becomes a Subsidiary of the Company after
the date of this Agreement if such Person engages in activities similar or
related to the business conducted by any Core Mutual Fund Subsidiary and is
approved by the Required Lenders.
1.52. "Credit Documents" means:
(a) this Agreement and the Notes, each as from time to time in effect;
(b) all financial statements, reports, notices and certificates
delivered to any of the Lenders by the Company or any Subsidiary in connection
herewith or therewith; and
(c) any other present or future agreement or instrument from time to
time entered into among the Company or any Subsidiary on the one hand, and the
Agent or all the Lenders, on the other hand, relating to, amending or modifying
this Agreement or any other Credit Document referred to above or which is stated
to be a Credit Document (including the separate letter agreement between the
Company and the Agent relating to certain fees of the Agent), each as from time
to time in effect.
1.53. "Credit Obligations" means all present and future liabilities,
obligations and Indebtedness of the Company, any Subsidiary or any of their
Affiliates party to a Credit Document owing to any Lender under or in connection
with this Agreement or any other Credit Document, including obligations in
respect of principal, interest, commitment fees, amounts provided for in
Sections 3.2.4, 3.2.6, 3.4 and 10 and other fees, charges, indemnities and
expenses from time to time owing hereunder or under any other Credit Document
(whether accruing before or after a Bankruptcy Default).
1.54. "Credit Participant" is defined in Section 12.2.
1.55. "Default" means any Event of Default and any event or condition
which with the passage of time or giving of notice, or both, would become an
Event of Default.
1.56. "Delinquency Period" is defined in Section 11.4.3.
-11-
<PAGE> 19
1.57. "Delinquent Lender" is defined in Section 11.4.3.
1.58. "Delinquent Payment" is defined in Section 11.4.3.
1.59. "Distribution" means, with respect to the Company (or other
specified Person):
(a) the declaration or payment of any dividend, including
dividends payable in shares of capital stock of the Company, on or in
respect of any shares of any class of capital stock of the Company;
(b) the purchase, redemption or other retirement of any shares
of any class of capital stock of the Company (or of options, warrants
or other rights for the purchase of such shares), directly, indirectly
through a Subsidiary or otherwise;
(c) any other distribution on or in respect of any shares of
any class of equity of or beneficial interest in the Company;
(d) any payment of principal or interest with respect to, or
any purchase, redemption or defeasance of, any Indebtedness of the
Company which by its terms or the terms of any agreement is
subordinated to the payment of the Credit Obligations; and
(e) any payment, loan or advance by the Company to, or any
other Investment by the Company in, the holder of any shares of any
class of capital stock of or equity or interest in the Company or any
Affiliate of such holder;
provided, however, that the term "Distribution" shall not include payments in
the ordinary course of business in respect of (i) reasonable compensation paid
to employees, officers and directors, (ii) advances to employees for travel
expenses, drawing accounts and similar expenditures, (iii) rent paid to or
accounts payable for services rendered or goods sold by non-Affiliates or (iv)
intercompany accounts payable and real property leases to non-Affiliates.
1.60. "Distribution Agreement" means any distribution agreement of
which a Distribution Plan is a part.
1.61. "Distribution Fees" means fees paid by the B Share Funds to the
Company or any other Subsidiary of the Company (minus any portion of such fees
remitted by the Company or any other Subsidiary to a Broker as concessions,
trailing compensation or service fees) pursuant to a Distribution Plan.
1.62. "Distribution Plan" means any plan duly adopted by any B Share
Fund and validly in effect pursuant to Rule 12b-1 under the Investment Company
Act (or similar or
-12-
<PAGE> 20
successor provisions) pursuant to which such B Share Fund may make payments to
the Company or any Subsidiary in connection with the distribution of B Shares.
1.63. "ERISA" means, collectively, the Employee Retirement Income
Security Act of 1974 (or any successor statute) and the rules and regulations
thereunder, all as from time to time in effect.
1.64. "ERISA Group Person" means the Company, any Subsidiary and any
Person which is a member of the controlled group or under common control with
the Company or any Subsidiary within the meaning of section 414 of the Code or
section 4001(a)(14) of ERISA.
1.65. "Eurodollar Office" means such non-United States office or
international banking facility of any Lender as such Lender may from time to
time select.
1.66. "Eurodollar Rate" for any Interest Period means the rate, rounded
to the nearest 1/100%, obtained by dividing (a) the Basic Eurodollar Rate for
such Interest Period by (b) an amount equal to 1 minus the Eurodollar Reserve
Rate; provided, however, that if at any time during such Interest Period the
Eurodollar Reserve Rate applicable to any outstanding Pricing Option changes,
the Eurodollar Rate for such Interest Period shall automatically be adjusted to
reflect such change, effective as of the date of such change.
1.67. "Eurodollar Reserve Rate" means the stated maximum rate
(expressed as a decimal) of all reserves (including any basic, supplemental,
marginal or emergency reserve or any reserve asset), if any, as from time to
time in effect, required by any Legal Requirement to be maintained by any Lender
against (a) "Eurocurrency liabilities" as specified in Regulation D of the Board
of Governors of the Federal Reserve System (or any successor regulation)
applicable to a Pricing Option, (b) any other category of liabilities that
includes Eurodollar deposits by reference to which the interest rate on portions
of the Loan subject to a Pricing Option is determined, (c) the principal amount
of or interest on any portion of the Loan subject to a Pricing Option or (d) any
other category of extensions of credit, or other assets, that includes portions
of the Loan subject to a Pricing Option by a non-United States office of any of
the Lenders to United States residents.
1.68. "Eurodollars" means, with respect to any Lender, deposits of
United States Funds in a non-United States office or an international banking
facility of such Lender.
1.69. "Event of Default" is defined in Section 9.1.
1.70. "Exchange Act" means, collectively, the federal Securities
Exchange Act of 1934 (or any successor statute) and the rules and regulations
thereunder, all as from time to time in effect.
-13-
<PAGE> 21
1.71. "Excluded Subsidiary" means any Subsidiary of the Company which
(i) is, as of the date hereof, a registered broker/dealer under, and subject to
the net capital requirements of, the Exchange Act or (ii) becomes, after the
date hereof, a registered broker/dealer under, and subject to the net
requirements of, the Exchange Act and is consented to in writing by the Agent,
which consent shall not be unreasonably withheld.
1.72. "Executive Officer" means the chief executive officer, chief
operating officer or president of the Company (or other specified Person) or any
vice president of the Company who is not a Financial Officer.
1.73. "Federal Funds Rate" means, for any day, (a) the rate equal to
the weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as such
weighted average is published for such day (or, if such day is not a Banking
Day, for the immediately preceding Banking Day) by the Federal Reserve Bank of
New York or (b) if such rate is not so published for such Banking Day, as
determined by the Agent using any reasonable means of determination. Each
determination by the Agent of the Federal Funds Rate shall, in the absence of
manifest error, be conclusive.
1.74. "Financial Officer" means the chief financial officer, treasurer
or assistant treasurer of the Company (or other specified Person) or a vice
president whose primary responsibility is for the financial affairs of the
Company (or other specified Person).
1.75. "Financing Debt" means:
(a) Indebtedness in respect of borrowed money;
(b) Indebtedness evidenced by notes, debentures or similar instruments;
(c) Indebtedness in respect of Capitalized Leases;
(d) Indebtedness in respect of the deferred purchase price of assets
(other than normal trade accounts payable in the ordinary course of
business);
(e) Indebtedness in respect of mandatory redemption or dividend rights
on capital stock (or other equity);
(f) Indebtedness in respect of unfunded pension liabilities;
(g) Indebtedness in respect of financial Guarantees and letters of
credit; and
-14-
<PAGE> 22
(h) Indebtedness calculated in accordance with GAAP in respect of tax
deficiencies asserted in a notice of deficiency from the IRS issued
pursuant to Section 6212 (or similar or successor provisions) of the
Code.
1.76. "Foreign Trade Regulations" means, collectively and as from time
to time in effect (including any successor statutes or regulations), (a) any act
that prohibits or restricts, or empowers the President or executive agencies of
the United States of America to prohibit or restrict, exports to or financial
transactions with any foreign country or foreign national, (b) the regulations
with respect to certain prohibited foreign trade transactions set forth at 15
C.F.R. Parts 730 et seq., 22 C.F.R. Parts 120-130 and 31 C.F.R. Parts 500 et
seq. and (c) any order, regulation, ruling, interpretation, direction,
instruction or notice relating to any of the foregoing.
1.77. "Fund" means (a) with respect to any Trust that has more than one
portfolio, the individual portfolios, interests in which are represented by
series of shares of beneficial interest or capital stock of each Trust having
series, for which portfolio the Company or any of its Subsidiaries provides
investment advisory services pursuant to Investment Advisory Contracts and (b)
with respect to any Trust that does not have more than one portfolio, such
Trust.
1.78. "GAAP" means generally accepted accounting principles, as defined
by the United States Financial Accounting Standards Board, as from time to time
in effect; provided, however, that for purposes of compliance with Section 7
(other than Section 7.4) and the related definitions, "GAAP" means such
principles as in effect on December 31, 1995 as applied by the Company and its
Subsidiaries in the preparation of the December 31, 1995 financial statements
referred to in Section 8.2.1.1, and consistently followed, without giving effect
to any subsequent changes therein other than changes consented to in writing by
the Required Lenders.
1.79. "Guarantee" means, with respect to the Company (or other
specified Person):
(a) any guarantee by the Company of the payment or performance
of, or any contingent obligation of the Company in respect of, any
Indebtedness or other obligation of any other Person;
(b) any other arrangement whereby credit is extended to a
Person on the basis of any promise or undertaking of the Company
(including any "comfort letter" or "keep well agreement" written by the
Company to a creditor or prospective creditor of such Person) to (i)
pay the Indebtedness of such Person, (ii) purchase an obligation owed
by such Person, (iii) pay for the purchase or lease of assets or
services regardless of the actual delivery thereof or (iv) maintain the
capital, working capital, solvency or general financial condition of
such Person, in each case whether or not such arrangement is disclosed
in the balance sheet of the Company or referred to in a footnote
thereto;
-15-
<PAGE> 23
(c) any liability of the Company as a general partner of a
partnership in respect of Indebtedness or other obligations of such
partnership;
(d) any liability of the Company as a joint venturer of a
joint venture in respect of Indebtedness or other obligations of such
joint venture; and
(e) reimbursement obligations with respect to letters of
credit, surety bonds and other financial guarantees;
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Guarantee and the amount of Indebtedness resulting from such Guarantee shall be
the amount which should be carried on the balance sheet of the obligor whose
obligations were guaranteed in respect of such obligations (but without giving
effect to any limitations on recourse against such obligor), determined in
accordance with GAAP.
1.80. "Guarantor" means the Company and each of the Core Mutual Fund
Subsidiaries (initially other than the Excluded Subsidiaries) and other
Subsidiaries, including the Excluded Subsidiaries, from time to time becoming
party to this Agreement as a Guarantor.
1.81. "Guarantors Contribution Agreement" means the Guarantors
Contribution Agreement dated the date hereof among the Company and the
Guarantors, as from time to time in effect, pursuant to which the Guarantors
shall make contributions among themselves with respect to payments made in
accordance with their respective guarantees of the Credit Obligations.
1.82. "Inactive Subsidiary" means any Subsidiary that conducts no
business and which has total assets with a fair market value (or book value, if
greater) of less than $25,000.
1.83. "Indebtedness" means all obligations, contingent or otherwise,
which in accordance with GAAP are required to be classified upon the balance
sheet of the Company (or other specified Person) as liabilities, but in any
event including:
(a) liabilities secured by any Lien existing on property owned
or acquired by the Company or any Subsidiary, whether or not the
liability secured thereby shall have been assumed;
(b) Capitalized Lease Obligations;
(c) mandatory redemption, repurchase or dividend obligations
with respect to capital stock (or other evidence of beneficial
interest); and
(d) all endorsements in respect of Indebtedness of others.
-16-
<PAGE> 24
1.84. "Indemnified Party" is defined in Section 10.2.
1.85. "Initial Closing Date" means June 11, 1996 or such other date
prior to June 13, 1996 as agreed to by the Company and the Agent as the first
Closing Date hereunder.
1.86. "Interest Period" means any period, selected as provided in
Sections 3.2.1 and 3.2.3, of one, two, three or six months, commencing on any
Banking Day and ending on the corresponding date in the subsequent calendar
month so indicated (or, if such subsequent calendar month has no corresponding
date, on the last day of such subsequent calendar month); provided, however,
that subject to Section 3.2.4, if any Interest Period so selected would
otherwise begin or end on a date which is not a Banking Day, such Interest
Period shall instead begin or end, as the case may be, on the immediately
preceding or succeeding Banking Day as determined by the Agent in accordance
with the then current banking practice in the inter-bank Eurodollar market with
respect to Eurodollar deposits at the applicable Eurodollar Office, which
determination by the Agent shall, in the absence of manifest error, be
conclusive.
1.87. "Interest Rate Protection Agreement" means any interest rate
swap, interest rate cap or other contractual arrangement protecting a Person
against increases in variable interest rates on Financing Debt.
1.88. "Investment" means, with respect to the Company (or other
specified Person):
(a) any share of capital stock, evidence of Indebtedness or
other security issued by any other Person;
(b) any loan, advance or extension of credit to, or
contribution to the capital of, any other Person;
(c) any acquisition of all or any part of the business of any
other Person or the assets comprising such business or part thereof;
(d) any commitment or option to make any Investment; and
(e) any other similar investment.
The investments described in the foregoing clauses (a) through (e)
shall be included in the term "Investment" whether they are made or acquired by
purchase, exchange, issuance of stock or other securities, merger,
reorganization or any other method; provided, however, that the term
"Investment" shall not include (i) current trade and customer accounts
receivable for property leased, goods furnished or services rendered in the
ordinary course of business and payable in accordance with customary trade
terms, (ii) advances and prepayments to suppliers for property leased, goods
furnished and services rendered in the ordinary course of business,
-17-
<PAGE> 25
(iii) advances to employees for travel expenses, drawing accounts and similar
expenditures, (iv) stock or other securities acquired in connection with the
satisfaction or enforcement of Indebtedness or claims due to the Company or any
Subsidiary or as security for any such Indebtedness or claim or (v) demand
deposits in banks or trust companies.
In determining the amount of outstanding Investments for purposes of
Section 7.9:
(1) the amount of any Investment (other than Investments
referred to in the following clause (2) or (3)) shall be the cost
thereof minus any returns of capital on such Investment (determined in
accordance with GAAP without regard to amounts realized as income on
such Investment);
(2) the amount of any Investment in respect of a commitment or
option to make a purchase shall be the amount of any nonrefundable down
payment or acquisition price plus the amount of any additional fixed
payment obligation;
(3) the amount of any Investment in respect of a Guarantee
shall be the maximum amount that the guarantor may become obligated to
pay in respect of the obligations guaranteed (whether or not such
obligations are outstanding at the time of computation);
(4) the amount of any Investment in respect of a purchase
described in clause (c) above shall be increased by the amount of any
Indebtedness assumed in connection with such purchase or secured by any
asset acquired in such purchase (whether or not any Indebtedness is
assumed) or for which any Person that becomes a Subsidiary is liable on
the date on which the securities of such Person are acquired; and
(5) no Investment shall be increased as the result of an
increase in the undistributed retained earnings of the Person in which
the Investment was made or decreased as a result of an equity interest
in the losses of such Person.
1.89. "Investment Advisers Act" means, collectively, the federal
Investment Advisers Act of 1940 (or any successor statute) and the rules and
regulations thereunder, all as from time to time in effect.
1.90. "Investment Advisory Contracts" means binding written contractual
agreements under which the Company or any of its Subsidiaries provides
investment advisory services to a Fund or Trust under the Investment Company Act
or the Investment Advisers Act.
1.91. "Investment Company Act" means, collectively, the federal
Investment Company Act of 1940 (or any successor statute) and the rules and
regulations thereunder, all as from time to time in effect.
-18-
<PAGE> 26
1.92. "Legal Requirement" means any requirement imposed upon any of the
Lenders by any law of the United States of America or any jurisdiction in which
any Eurodollar Office is located or by any regulation, order, interpretation,
ruling or official directive of the Board of Governors of the Federal Reserve
System or any other board or governmental or administrative agency of the United
States of America, of any jurisdiction in which any Eurodollar Office is
located, or of any political subdivision of any of the foregoing. Any
requirement imposed by any such regulation, order, ruling or official directive
not having the force of law shall be deemed to be a Legal Requirement if any of
the Lenders reasonably believes that compliance therewith is in the best
interest of such Lender.
1.93. "Lenders" means the Persons owning a Percentage Interest in the
Credit Obligations or having a Commitment and their respective Assignees
permitted by Section 12.1.
1.94. "Lending Officer" means such officers or employees of the Agent
as from time to time designated by it in writing to the Company.
1.95. "Lien" means, with respect to the Company (or any other specified
Person):
(a) Any encumbrance, mortgage, pledge, lien, charge or
security interest of any kind upon any property or assets of such
Person, whether now owned or hereafter acquired, or upon the income or
profits therefrom.
(b) Any arrangement or agreement which prohibits such Person
from creating encumbrances, mortgages, pledges, liens, charges or
security interests.
(c) The acquisition of, or the agreement to acquire, any
property or asset upon conditional sale or subject to any other title
retention agreement, device or arrangement (including a Capitalized
Lease).
(d) The sale, assignment, pledge or transfer for security of
any accounts, general intangibles or chattel paper of such Person, with
or without recourse.
(e) The transfer of any tangible property or assets for the
purpose of subjecting such items to the payment of Indebtedness in
priority to payment of the general creditors of the Company.
(f) The existence for a period of more than 90 consecutive
days of any Indebtedness against the Company which if unpaid would by
law or upon a Bankruptcy Default be given any priority over general
creditors.
1.96. "Loan" means either the B Share Revolving Loan, the B Share Term
Loan or the Revolving Loan, as applicable.
-19-
<PAGE> 27
1.97. "Margin Stock" means "margin stock" within the meaning of
Regulation G, T, U or X (or any successor provisions) of the Board of Governors
of the Federal Reserve System, or any regulations, interpretations or rulings
thereunder, all as from time to time in effect.
1.98. "Material Adverse Change" means a material adverse change in the
business, assets, financial condition, results of operations or prospects of the
Company (on an individual basis) or the Company and its Subsidiaries (on a
Consolidated basis) (or any other specified Persons), including:
(a) general economic conditions affecting the mutual fund
industry,
(b) fire, flood or other natural calamities,
(c) regulatory changes, judicial decisions, war or other
governmental action,
(d) termination of the Company's or any Subsidiary's status as
a registered investment adviser under the Investment Advisers Act or,
on an involuntary basis, under the laws of states material to the
Company or such Subsidiary's business,
(e) involuntary termination of the status of the Company or
any Subsidiary as a registered broker/dealer in good standing under the
Exchange Act or laws of states material to the Company's or such
Subsidiary's business, or as a member of the NASD in good standing,
(f) termination of the qualification of any Trust or Fund as a
regulated investment company taxed under the rules of subchapter M of
the Code (other than as a result of merger or other voluntary
termination of any Trust or Fund),
(g) the issuance by the Securities and Exchange Commissions of
a stop order suspending the effectiveness of a Trust's or Fund's
registration statement under the Securities Act, or
(h) suspension or termination of the registration or approval
of the Company or any Subsidiary under the Commodities Act.
1.99. "Material Agreements" is defined in Section 8.2.2.
1.100. "Maximum Amount of B Share Revolving Credit" means the lesser
of:
(a) the Stated Maximum Amount of B Share Revolving Credit;
-20-
<PAGE> 28
(b) Combined Unreimbursed Sales Commissions as reported for
the most recent date on which a report is required to be furnished to
the Lenders in accordance with Section 7.4.2; and
(c) the Total Estimated Collectible Amount as reported for the
most recent date on which a report is required to be furnished to the
Lenders in accordance with Section 7.4.2.
1.101. "Maximum Amount of Revolving Credit" means the lesser of (i)
$80,000,000 or such lesser amount to which the lending commitment of the Lenders
may be reduced pursuant to Section 4, and (ii) such amount (in a minimum amount
of $10,000,000 and an integral multiple of $5,000,000) less than the Maximum
Amount of Revolving Credit then in effect as specified by irrevocable notice
from the Company to the Agent.
1.102. "Multiemployer Plan" means any Plan that is a "multiemployer
plan" as defined in section 4001(a)(3) of ERISA.
1.103. "NASD" means The National Association of Securities Dealers,
Inc. (or any successor self-regulatory organization).
1.104. "Nonperforming Lender" is defined in Section 10.4.3.
1.105. "Notes" means the B Share Notes and the Revolving Notes.
1.106. "Obligors" means the Borrowers and the Guarantors.
1.107. "Payment Date" means the last Banking Day of each February, May,
August and November beginning with August 30, 1996.
1.108. "PBGC" means the Pension Benefit Guaranty Corporation or any
successor entity.
1.109. "Percentage Interest" is defined in Section 11.1.
1.110. "Performing Lender" is defined in Section 11.4.3.
1.111. "Person" means any present or future natural person or any
corporation, association, partnership, joint venture, company, business trust,
trust, organization, business or government or any governmental agency or
political subdivision thereof.
1.112. "Pioneer Goldfields Entities" means Pioneer Goldfields Holdings,
Inc., Pioneer Goldfields Limited and Teberebie Goldfields Ltd.
-21-
<PAGE> 29
1.113. "Plan" means, at any time, any pension benefit plan subject to
Title IV of ERISA maintained, or to which contributions have been made or are
required to be made, by any ERISA Group Person within six years prior to such
time.
1.114. "Prepaid Brokerage Commissions" means commissions or other
selling compensation paid or payable by the Company or any Subsidiary of the
Company to Brokers in respect of sales of B Shares at the respective commission
rates for each B Share Fund set forth in Exhibit 7.16 without giving effect to
any increases permitted as temporary sales promotions under Section 7.16 or
otherwise.
1.115. "Pricing Options" means the options granted pursuant to Section
3.2.1 to have the interest on any portion of the Loan computed on the basis of a
Eurodollar Rate.
1.116. "Qualified Institutional Buyer" means:
(a) a duly authorized domestic bank, savings and loan
association, registered investment company, registered investment
adviser or registered dealer, acting for its own account or the
accounts of other Qualified Institutional Buyers, which in the
aggregate owns and invests on a discretionary basis at least $100
million in securities and (if a bank or savings and loan association)
which has a net worth of at least $25 million; or
(b) a foreign bank or savings and loan association or
equivalent institution, acting for its own account or the account of
other Qualified Institutional Buyers, which in the aggregate owns and
invests on a discretionary basis at least $100 million in securities
and has a net worth of at least $25 million; or
(c) any other entity which also constitutes a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act.
1.117. "Redemption Fee" means any amount that is or may be payable to
the Company or any Subsidiary of the Company or to any Fund by any holder of B
Shares in such capacity upon redemption of all or a portion of the B Shares.
1.118. "Register" is defined in Section 12.1.3.
1.119. "Required Lenders" means, with respect to any consent or other
action to be taken by the Agent or the Lenders under the Credit Documents, such
Lenders as own at least the portion of the Percentage Interests required by
Section 11.6 with respect to such consent or other action.
1.120. "Revolving Final Maturity Date" means the fifth anniversary of
the Initial Closing Date.
-22-
<PAGE> 30
1.121. "Revolving Loan" is defined in Section 2.3.1.
1.122. "Revolving Notes" is defined in Section 2.3.3.
1.123. "Securities Act" means, collectively, the federal Securities Act
of 1933 (or any successor statute) and the rules and regulations thereunder, all
as from time to time in effect.
1.124. "Stated Maximum Amount of B Share Revolving Credit" means the
lesser of (i) $35,000,000 or such lesser amount to which the lending commitment
of the Lenders may be reduced pursuant to Section 4, and (ii) such amount (in a
minimum amount of $10,000,000 and an integral multiple of $1,000,000) less than
the Maximum Amount of B Share Revolving Credit then in effect as specified by
irrevocable notice from the Company to the Agent.
1.125. "Subsidiary" means any Person of which the Company (or other
specified Person) shall at the time, directly or indirectly through one or more
of its Subsidiaries, (a) own at least 50% of the outstanding capital stock (or
other shares of beneficial interest) entitled to vote generally, (b) hold at
least 50% of the partnership, joint venture or similar interests or (c) be a
general partner or joint venturer.
1.126. "Tax" means any tax, levy, duty, deduction, withholding, or any
penalties or interest on such charges, or other charges of whatever nature at
any time required by any Legal Requirement (a) to be paid by any Lender or (b)
to be withheld or deducted from any payment otherwise required hereby to be made
to any Lender, in each case on or with respect to (i) any Eurodollar deposit
which was used (or deemed by Section 3.2.6 to have been used) to fund any
portion of the Loan subject to a Pricing Option, (ii) any portion of the Loan
subject to a Pricing Option funded (or deemed by Section 3.2.6 to have been
funded) with the proceeds of any such Eurodollar deposit, (iii) the principal
amount of or interest on any portion of the Loan subject to a Pricing Option or
(iv) funds transferred from a non-United States office or an international
banking facility of such Lender to a United States office of such Lender in
order to fund (or deemed by Section 3.2.6 to have funded) a portion of the Loan
subject to a Pricing Option; provided, however, that the term "Tax" shall not
include (1) taxes imposed upon or measured by the net income of such Lender, (2)
taxes which would have been imposed even if no provision for Pricing Options
appeared in this Agreement or (3) amounts required to be withheld by such Lender
from payments of interest to Persons from whom Eurodollar deposits were
purchased by such Lender.
1.127. "Total Estimated Collectible Amount" means the potential future
collections of Distribution Fees and Redemption Fees over the remaining life of
all outstanding Class B Shares, calculated as of the last day of each fiscal
quarter of the Company and utilizing averages of net asset value, number of
shares per Fund, redemptions (including dividend reinvest shares) and
withdrawals under systematic withdrawal plans experienced by the Company and the
Borrower Subsidiaries during the six month period ending on such date,
-23-
<PAGE> 31
which calculation shall be performed in accordance with the methodology shown on
Exhibit 1.126.
1.128. "Trust" means each registered investment company under the
Investment Company Act for which the Company or any of its Subsidiaries provides
investment advisory services pursuant to Investment Advisory Contracts and for
which the Company or any Subsidiary is the principal underwriter.
1.129. "UCC" means the Uniform Commercial Code, as in effect from time
to time in The Commonwealth of Massachusetts.
1.130. "Wholly Owned Subsidiary" means any Subsidiary of which all of
the outstanding capital stock (or other shares of beneficial interest) entitled
to vote generally (other than directors' qualifying shares) is owned by the
Company (or other specified Person) directly or indirectly through one or more
Wholly Owned Subsidiaries.
2. The Credits.
2.1. B Share Revolving Credit.
2.1.1. B Share Revolving Loan. Subject to all of the terms and
conditions of this Agreement and so long as no Default exists, the
Lenders, severally in accordance with their respective Percentage
Interests, on or after the Initial Closing Date and prior to the B
Share Conversion Date as requested by the Borrower Subsidiaries, will
make loans to the Borrower Subsidiaries, who shall be jointly and
severally liable therefor, in an aggregate principal amount requested
in accordance with Section 2.1.2, but not to exceed at any time
outstanding the Maximum Amount of B Share Revolving Credit. The
aggregate principal amount of the loans made pursuant to this Section
2.1 from time to time outstanding is referred to as the "B Share
Revolving Loan."
2.1.2. Borrowing Requests. Loans will be made to the Borrower
Subsidiaries by the Lenders under this Section 2.1 on or after the
Initial Closing Date and prior to the B Share Conversion Date as
requested by the Borrower Subsidiaries. Not later than 12:00 p.m.
(Boston time) on the same Banking Day (third Banking Day prior to the
requested Closing Date if any portion of such loan will be subject to a
Pricing Option on the requested Closing Date) of each requested Closing
Date for any such loan, the Borrower Subsidiaries will give the Agent
notice of its request for a loan (which may be given by a telephone
call received by a Lending Officer and promptly confirmed in writing),
specifying (a) the amount of the requested loan (not less than
$1,000,000 and an integral multiple of $500,000 for each portion of the
B Share Revolving Loan subject to a Pricing Option, and not less than
$100,000 and an integral multiple of $100,000 for each other portion of
the B Share Revolving Loan) and (b) the requested Closing Date
therefor. Each such loan will be made at the Boston Office by
depositing
-24-
<PAGE> 32
the amount thereof to the general account of the Borrower Subsidiaries
with the Agent, or as the Borrower Subsidiaries may otherwise direct.
In connection with each such loan, the Borrower Subsidiaries shall
furnish to the Agent a certificate dated the applicable Closing Date in
substantially the form of Exhibit 5.3.1, together with any other
documents required by Section 5.
2.1.3. B Share Revolving Notes. The B Share Revolving Loan
shall be evidenced by notes in substantially the form of Exhibit 2.1.3
(the "B Share Revolving Notes") payable to each of the Lenders in an
amount equal to such Lender's Percentage Interest in the B Share
Revolving Loan. Each Lender shall keep a record of the date and amount
of (a) each loan made by such Lender pursuant to this Section 2.1 and
(b) each payment of principal made to such Lender on the B Share
Revolving Loan pursuant to Section 4. Prior to any transfer of any B
Share Revolving Note, the Lender holding such B Share Revolving Note
shall record on a schedule thereto appropriate notations evidencing
such dates and amounts; provided, however, that the failure of any
Lender to make any such recordation shall not affect the obligations of
the Borrower Subsidiaries under this Agreement, the B Share Revolving
Notes or any other Credit Document.
2.2. B Share Term Credit.
2.2.1. Term Loan. Subject to all the terms and conditions
hereof and so long as no Default exists, on the B Share Conversion Date
the Lenders will lend to the Borrower Subsidiaries as a term loan, in
accordance with their respective Percentage Interests, an aggregate
amount equal to the principal amount of the B Share Revolving Loan
outstanding on such date, which shall not in any event exceed the
Maximum Amount of B Share Revolving Credit. The aggregate principal
amount of the loans made pursuant to this Section 2.2.1 at any time
outstanding is referred to as the "B Share Term Loan."
2.2.2. Term Notes. The B Share Term Loan shall be made at the
Boston Office by crediting the amount of such loan to the B Share
Revolving Loan against delivery to the Agent of the B Share Term Notes
in substantially the form of Exhibit 2.2.2 (the "B Share Term Notes")
payable to the respective Lenders. Each B Share Term Note shall be in a
principal amount equal to each Lender's respective Percentage Interest
in the B Share Term Loan. In connection with the B Share Term Loan, the
Borrower Subsidiaries shall furnish to the Agent a certificate in
substantially the form of Exhibit 5.3.1, together with any other
documents required by Section 5. Upon issuance of the B Share Term
Notes in accordance with this Section 2.2, the B Share Revolving Notes
shall be deemed to be cancelled.
2.2.3. Option to Extend Maturities. So long as no Default
exists, the Borrower Subsidiaries may request by notice to each Lender
delivered no later than 120 days
-25-
<PAGE> 33
prior to the B Share Conversion Date that the B Share Conversion Date
be extended for a 364-day period, commencing on the date the Lenders
grant such request, and that the B Share Final Maturity Date be
extended to the fifth anniversary of the new B Share Conversion Date.
The Lenders shall inform the Borrower Subsidiaries by written notice
delivered no later than 30 days prior to the B Share Conversion Date
whether the Lenders will grant such request. In no event shall the B
Share Conversion Date and the B Share Final Maturity Date be extended
without the written consent of each Lender in its sole discretion.
2.3. Revolving Credit Facility.
2.3.1. Revolving Loan. Subject to all the terms and conditions
of this Agreement and so long as no Default exists, the Lenders, in
accordance with their respective Percentage Interests, will make loans
to the Company in an aggregate principal amount requested in accordance
with Section 2.3.2 from time to time prior to the Revolving Final
Maturity Date, but not to exceed at any time outstanding the Maximum
Amount of Revolving Credit. The aggregate principal amount of the loans
made pursuant to this Section 2.3 from time to time outstanding is
referred to as the "Revolving Loan".
2.3.2. Borrowing Requests. Loans will be made to the Company
by the Lenders under this Section 2.3 on or after the Initial Closing
Date and prior to the Revolving Final Maturity Date. Not later than
12:00 p.m. (Boston time) on the same Banking Day (third Banking Day
prior to the requested Closing Date if any portion of such loan will be
subject to a Pricing Option on the requested Closing Date) of each
requested Closing Date for any such loan, the Company will give the
Agent notice of its request for a loan (which may be given by a
telephone call received by a Lending Officer and promptly confirmed in
writing), specifying (a) the amount of the requested loan (not less
than $1,000,000 and an integral multiple of $500,000 for each portion
of the Revolving Loan subject to a Pricing Option, and not less than
$100,000 and an integral multiple of $100,000 for each other portion of
the Loan) and (b) the requested Closing Date therefor. Each such loan
will be made at the Boston office by depositing the amount thereof to
the general account of the Company with the Agent, or as the Company
may otherwise direct. In connection with such loan, the Company will
furnish to the Agent a certificate dated the applicable Closing Date in
substantially the form of Exhibit 5.3.1, together with any other
documents required by Section 5.
2.3.3. Revolving Note. The Revolving Loan shall be evidenced
by notes in substantially the form of Exhibit 2.3.3 (the "Revolving
Notes") payable to each of the Lenders in an amount equal to such
Lender's Percentage Interest in the Revolving Loan. Each Lender shall
keep a record of the date and amount of (a) each loan made by such
Lender pursuant to Section 2.3 and (b) each payment of principal made
to such Lender on the Revolving Loan pursuant to Section 4. Prior to
any transfer of any
-26-
<PAGE> 34
Revolving Note, the Lender holding such Revolving Note shall record on
a schedule thereto appropriate notations evidencing such dates and
amounts; provided, however, that the failure of any Lender to make, or
any error in making, any such recordation shall not affect the
obligations of the Company under this Agreement, the Revolving Notes or
any other Credit Document.
2.4. Application of Proceeds.
2.4.1. B Share Revolving Loan. Subject to Section 2.4.4, the
Borrower Subsidiaries will apply the proceeds of the B Share Revolving
Loan only to pay Prepaid Brokerage Commissions.
2.4.2. B Share Term Loan. The Borrower Subsidiaries will apply
the proceeds of the B Share Term Loan solely as provided in Section
2.2.2.
2.4.3. Revolving Loan. Subject to Section 2.4.4 and to the
extent permitted by this Agreement, the Company will apply the proceeds
of the Revolving Loan for the repayment of its existing Financing Debt,
for its working capital and for general corporate purposes.
2.4.4. Specifically Prohibited Applications. The Company and
the Borrower Subsidiaries will not, directly or indirectly, apply any
part of the proceeds of any extension of credit made pursuant to this
Agreement to any transaction prohibited by the Foreign Trade
Regulations.
2.5. Nature of Obligations of Lenders to Extend Credit. The Lenders'
obligations under this Agreement to make the Loan are several and are not joint
or joint and several. If any Lender shall fail to perform its obligations to
extend any such credit, the amount of the commitment of the Lender so failing to
perform may be assumed by the other Lenders, in their sole discretion, in such
proportions as such Lenders may agree among themselves and the Percentage
Interests of each other Lender shall be appropriately adjusted, but such
assumption and adjustment shall not relieve the Lenders from any of their
obligations to make any such extension of credit or to repay any Delinquent
Payment required by Section 11.4.3.
3. Interest; Pricing Options; Fees.
3.1. Interest. The Loan shall accrue and bear daily interest at a rate
per annum which shall at all times equal the Applicable Rate. Prior to any
stated or accelerated maturity of the Loan, the Borrower will, on each Payment
Date, pay the accrued and unpaid interest on the portion of the Loan which was
not subject to a Pricing Option. On the last day of each Interest Period or on
any earlier termination of any Pricing Option, the Borrower will pay the accrued
and unpaid interest on the portion of the Loan which was subject to the Pricing
Option which expired or terminated on such date; provided, however, that in the
case of any Interest
-27-
<PAGE> 35
Period longer than three months, the Borrower will also pay at three-month
intervals the accrued and unpaid interest on the portion of the Loan subject to
the Pricing Option having such Interest Period, the first such payment to be
made on the last Banking Day of the three-month period beginning on the first
day of such Interest Period. On any stated or accelerated maturity of the Loan,
the Borrower will pay all accrued and unpaid interest on the Loan, including any
accrued and unpaid interest on such portion of the Loan which is subject to a
Pricing Option. In addition, the Borrower will on demand pay daily interest on
any overdue payments of principal and, to the extent not prohibited by
applicable law, on any overdue payments of interest and fees owed under any
Credit Document at a rate per annum which equals the sum of 2% plus the highest
Applicable Rate then in effect. All payments of interest hereunder shall be made
to the Agent for the account of each Lender in accordance with the Lenders'
respective Percentage Interests.
3.2. Pricing Options.
3.2.1. Election of Pricing Options. Subject to all of the
terms and conditions hereof and so long as no Default exists, the
Borrower may from time to time, by irrevocable notice to the Agent
received not less than three Banking Days prior to the commencement of
the Interest Period selected in such notice, elect to have such portion
of the Loan as the Borrower may specify in such notice accrue and bear
daily interest during the Interest Period so selected at the Applicable
Rate computed on the basis of the Eurodollar Rate. No such election
shall become effective if, prior to the commencement of any such
Interest Period, the Agent determines that (a) the electing or granting
of the Pricing Option in question would violate a Legal Requirement or
(b) Eurodollar deposits in an amount comparable to the principal amount
of the Loan as to which such Pricing Option has been elected and which
have a term corresponding to the proposed Interest Period are not
readily available in the inter-bank Eurodollar market for delivery at
any Eurodollar Office or, by reason of circumstances affecting such
market, adequate and reasonable methods do not exist for ascertaining
the interest rate applicable to such deposits for the proposed Interest
Period. For purposes of determining ready availability of Eurodollar
deposits with respect to a proposed Interest Period, such Eurodollar
deposits shall not be deemed readily available if any Lender shall have
advised the Agent by telephone, confirmed in writing, at or prior to
noon (Boston time) on the second Banking Day prior to the commencement
of such proposed Interest Period that, based upon the knowledge of such
Lender of the Eurodollar market and after reasonable efforts to
determine the availability of such Eurodollar deposits, such Lender
reasonably anticipates that Eurodollar deposits in an amount equal to
the respective Percentage Interest of such Lender in the portion of the
Loan as to which such Pricing Option has been elected and which have a
term corresponding to the Interest Period in question will not be
offered in the Eurodollar market to such Lender at a rate of interest
that does not exceed the Basic Eurodollar Rate.
-28-
<PAGE> 36
3.2.2. Notice to Lenders and Borrowers. The Agent will
promptly inform each Lender (by telephone or otherwise) of each notice
received by it from the Borrower pursuant to Section 3.2.1 and of the
Interest Period specified in such notice. Upon determination by the
Agent of the Eurodollar Rate for such Interest Period or in the event
that no such election shall become effective, the Agent will promptly
notify the Borrower and each Lender (by telephone or otherwise) of the
Eurodollar Rate so determined or why such election did not become
effective.
3.2.3. Selection of Interest Periods. Interest Periods shall
be selected so that:
(a) the minimum portion of the Loan subject to any Pricing
Option shall be $1,000,000 and an integral multiple of $500,000;
(b) no more than six Pricing Options shall be outstanding at
any one time; and
(c) no Interest Period with respect to any part of the B Share
Loan subject to a Pricing Option shall expire later than the B Share
Final Maturity Date, and no Interest Period with respect to any part of
the Revolving Loan subject to a Pricing Option shall expire later than
the Revolving Final Maturity Date.
If on the B Share Conversion Date all or any portion of the B Share
Revolving Loan is subject to one or more effective Pricing Options,
then each such Pricing Option shall apply to an equal amount of the B
Share Term Loan until the expiration of the Interest Period for such
Pricing Option.
3.2.4. Funding Costs. If any portion of the Loan which is
subject to a Pricing Option is repaid, or any Pricing Option is
terminated for any reason, on a date which is prior to the last Banking
Day of the Interest Period applicable to such Pricing Option, the
Borrower will pay to the Agent for the account of each Lender in
accordance with the Lenders' respective Percentage Interests, in
addition to any amounts of interest otherwise payable hereunder, an
amount equal to daily interest for the unexpired portion of such
Interest Period on the portion of the Loan so repaid, or as to which a
Pricing Option was so terminated, at a per annum rate equal to the
excess, if any, of (a) the Applicable Rate calculated on the basis of
the rate applicable to such Pricing Option minus (b) the rate of
interest obtainable by the Agent upon the purchase of debt securities
customarily issued by the Treasury of the United States of America
which have a maturity date approximating the last Banking Day of such
Interest Period. For purposes of this Section 3.2.4, if any portion of
the Loan which was to have been subject to a Pricing Option is not
outstanding on the first day of the Interest Period applicable to such
Pricing Option other than for reasons described in Section 3.2.1 or the
failure to advance funds by a Delinquent Lender, the Borrower shall be
deemed to have terminated such Pricing Option. The determination by the
Agent of such amount of interest shall, in the absence of manifest
error, be conclusive.
-29-
<PAGE> 37
3.2.5. Change in Applicable Laws, Regulations, etc. If any
Legal Requirement shall prevent any Lender from funding through the
purchase of deposits any portion of the Loan subject to a Pricing
Option or otherwise from giving effect to such Lender's obligations as
contemplated hereby, (a) the Agent may by notice to the Borrower
terminate all of the affected Pricing Option, (b) the portion of the
Loan subject to such terminated Pricing Option shall immediately bear
interest thereafter at the Applicable Rate computed on the basis of the
Base Rate and (c) the Borrower shall make any payment required by
Section 3.2.4.
3.2.6. Taxes. If (a) any Lender shall be subject to any Tax or
(b) the Company shall be required to withhold or deduct any Tax, the
Borrower will on demand by the Agent or such Lender, accompanied by the
certificate referred to below, pay to the Agent for such Lender's
account such additional amount as is necessary to enable such Lender to
receive net of any Tax the full amount of all payments of principal of,
interest on and fees payable pursuant to a Credit Document. Each Lender
agrees that if, after the payment by the Borrower of any such
additional amount, any amount identifiable as a part of any Tax related
thereto is subsequently recovered or used as a credit by such Lender,
such Lender shall reimburse the Borrower to the extent of the amount so
recovered or used. A certificate of an officer of such Lender setting
forth the amount of such Tax or recovery or use and the basis therefor
shall, in the absence of manifest error, be conclusive.
3.2.7. Funding Procedure. The Lenders may fund any portion of
the Loan subject to a Pricing Option out of any funds available to the
Lenders. Regardless of the source of the funds actually used by any of
the Lenders to fund any portion of the Loan subject to a Pricing
Option, however, all amounts payable hereunder, including the interest
rate applicable to any such portion of the Loan and the amounts payable
under Sections 3.2.4 and 3.2.6, shall be computed as if each Lender had
actually funded such Lender's Percentage Interest in such portion of
the Loan through the purchase of deposits in such amount with a
maturity the same as the applicable Interest Period relating thereto
and through the transfer of such deposits from an office of such Lender
having the same location as the applicable Eurodollar Office to one of
such Lender's offices in the United States of America.
3.3. Commitment Fees. In consideration of the Lenders' commitments to
make extensions of credit provided for in Section 2, the Borrower will pay in
arrears to the Agent for the account of the Lenders in accordance with their
Percentage Interests the following commitment fees:
(a) with respect to the B Share Revolving Loan, on each
Payment Date prior to the B Share Conversion Date, and on the B Share
Conversion Date, commencing with the first such date after the Initial
Closing Date, an amount calculated on a daily
-30-
<PAGE> 38
basis at a rate of 0.375% per annum on the amount by which (i) the
Stated Maximum Amount of B Share Revolving Credit exceeded (ii) the
average daily B Share Revolving Loan during such period;
(b) with respect to the Revolving Loan, on each Payment Date,
and on the Revolving Final Maturity Date, commencing with the first
such date after the Initial Closing Date, an amount calculated on a
daily basis at a rate of 0.375% per annum on the amount by which (i)
the Maximum Amount of Revolving Credit exceeded (ii) the average daily
Revolving Loan during such period.
3.4. Capital Adequacy. If any Lender shall have determined that (a)
compliance by such Lender with any applicable law, governmental rule, regulation
or order regarding capital adequacy of banks or bank holding companies, or any
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Lender's (or any Person controlling such Lender) capital as a
consequence of such Lender's obligations hereunder to a level below that which
such Lender (or any Person controlling such Lender) could have achieved but for
such compliance (taking into consideration such Lender's policies with respect
to capital adequacy immediately before such compliance and assuming that such
Lender's capital was fully utilized prior to such compliance) by an amount
deemed by such Lender to be material, or (b) any change in any Legal Requirement
after the date hereof shall directly or indirectly (i) reduce the amount of any
sum received or receivable by such Lender with respect to the Loan, (ii) impose
a cost on such Lender that is attributable to the making or maintaining of, or
such Lender's commitment to make, its portion of the Loan, or (iii) require such
Lender to make any payment on or calculated by reference to the gross amount of
any amount received by such Lender under any Credit Document, then, in the case
of clause (a) or (b), the Borrower will on demand by the Agent, accompanied by
the certificate referred to below, pay to the Agent from time to time as
specified by such Lenders as are so affected such additional amounts as shall be
sufficient to compensate such Lenders (or any Person controlling such Lenders)
for such reduced return, reduction, increased cost or payment together with
interest on each such amount from five Banking Days after the date demanded
until payment in full thereof at the rate of interest on overdue installments of
principal provided in Section 3.1. A certificate of an officer of any such
Lender setting forth the amount to be paid to it and the basis for computation
thereof hereunder shall, in the absence of manifest error, be conclusive. In
determining such amount, such Lender may use any reasonable averaging and
attribution methods to allocate any increased costs in good faith on a
reasonably equitable basis.
-31-
<PAGE> 39
3.5. Computations of Interest and Fees. For purposes of this Agreement,
interest and commitment fees (and any amount expressed as interest or such fees)
shall be computed on a daily basis and on the basis of a 360-day year.
4. Payment.
4.1. Payment at Maturity. On the stated or any accelerated maturity of
the B Share Loan or the Revolving Loan, as the case may be, the Borrower will
pay to the Agent for the account of each Lender for credit to the applicable
Notes an amount equal to the Indebtedness evidenced by the applicable Notes then
due, together with all accrued and unpaid interest thereon and all other Credit
Obligations in respect thereof then outstanding.
4.2. Contingent Required Prepayments.
4.2.1. Excess Credit Exposure. If at any time the B Share
Revolving Loan exceeds the Maximum Amount of B Share Revolving Credit,
or the Revolving Loan exceeds the Maximum Amount of Revolving Credit,
the Borrower will promptly pay the amount of such excess to the Agent
for the account of the Lenders without premium (except as provided in
Section 3.2.4), for credit to the B Share Revolving Loan or the
Revolving Loan, as applicable.
4.2.2. Prepayment of B Share Revolving Loan. At the time of
the furnishing of each of the financial statements required by Section
7.4.2, and in any event within 45 days after the end of each fiscal
quarter, the Borrower Subsidiaries will, as a mandatory prepayment on
account of the B Share Revolving Loan, pay to the Agent for the account
of each Lender, without premium (except as provided in Section 3.2.4),
an amount equal to the excess, if any, of the B Share Collection Amount
over the Prepaid Brokerage Commission during such fiscal quarter, minus
any voluntary prepayments made since the beginning of such period but
prior to the B Share Conversion Date in accordance with Section 4.4.
4.2.3. Prepayment of Revolving Loan. Within five Banking Days
after the consummation of any underwritten public offering or other
sale of any equity interest in any of the Pioneer Goldfields Entities
pursuant to Section 7.11.5, the Company shall apply fifty percent (50%)
of the net cash proceeds received by the Company or any of its
Subsidiaries in such offering or sale to the prepayment of the
Revolving Loan, and the Maximum Amount of Revolving Credit shall be
permanently reduced by such amount. For purposes of this Section 4.2.3,
"net cash proceeds" shall reflect the deduction of any federal, state
or local tax obligations which the Company or any Subsidiary may have
as a result of such public offering or sale.
4.3. Mandatory Prepayment of B Share Term Loan. In addition to any
amounts paid in accordance with Section 4.2, the Borrower Subsidiaries will, as
a mandatory prepayment of
-32-
<PAGE> 40
the B Share Term Loan, pay to the Agent for the Lenders' accounts on each
Payment Date, commencing on the last Banking Day of the first full calendar
quarter after the B Share Conversion Date, an amount equal to the greater of (i)
5% of the B Share Term Loan outstanding on the B Share Conversion Date or (ii)
the B Share Collection Amount for the quarter ending on such Payment Date;
provided that the amount of any such prepayment shall not exceed the amount of
the B Share Term Loan outstanding at the time of such prepayment.
4.4. Voluntary Prepayments. In addition to the prepayments required by
Sections 4.2 and 4.3, the Borrower may from time to time prepay all or any
portion of the Loan (in integral multiples of $1,000,000), without premium
(except as provided in Section 3.2.4 with respect to Pricing Options). After the
B Share Conversion Date, such prepayments with respect to the B Share Term Loan
shall be applied in the inverse order of maturity thereof. The Borrower shall
give the Agent at least five Banking Days' prior notice of its intention to
prepay, specifying the date of payment, the total principal amount of the Loan
to be paid on such date, the allocation of such prepayment between the B Share
Loan and the Revolving Loan and the amount of interest to be paid with such
prepayment.
4.5. Reborrowing; Application of Payments. The amounts of the B Share
Revolving Loan or the Revolving Loan prepaid pursuant to Sections 4.2.1, 4.2.2
or 4.4 may be reborrowed from time to time (in the case of the B Share Revolving
Loan, prior to the B Share Conversion Date) in accordance with Sections 2.1 and
2.3. The amount of the B Share Term Loan prepaid pursuant to either Section 4.3
or 4.4 may not be reborrowed. Any prepayment of the Loan shall be applied first
to the portion of the Loan not then subject to Pricing Options, then the balance
of any such prepayment shall be applied to the portion of the Loan then subject
to Pricing Options, in the chronological order of the respective maturities
thereof, together with any payments required by Section 3.2.4. All payments of
principal hereunder shall be made to the Agent for the account of each Lender in
accordance with the Lenders' respective Percentage Interests.
4.6. Payment with Accrued Interest, etc. Upon all prepayments of the
Loan, the Borrower shall pay to the Agent for each Lender's account the
principal amount to be prepaid together with unpaid interest in respect thereof
accrued to the date of prepayment. Notice of prepayment having been given in
accordance with Section 4.4, and whether or not notice is given of prepayments
pursuant to Sections 4.2 and 4.3, the amount specified to be prepaid shall
become due and payable on the date specified for prepayment.
5. Conditions to Extending Credit.
5.1. Conditions on Initial Closing Date. The obligations of the Lenders
to make any extension of credit pursuant to Section 2 shall be subject to the
satisfaction, on or before the Initial Closing Date, of the following conditions
(in addition to the further conditions in Section 5.3):
-33-
<PAGE> 41
5.1.1. Revolving Notes. The Borrower shall have executed this
Agreement, the B Share Revolving Notes and the Revolving Notes and
delivered them to the Agent for each Lender.
5.1.2. Payment of Fees. The Borrower shall have paid to the
Agent for the Agent's account the fees as separately agreed between the
Borrower and the Agent.
5.1.3. Guarantors Contribution Agreement. Each of the
Guarantors shall have entered into a Guarantors Contribution Agreement
substantially in the form of Exhibit 5.1.3, pursuant to which the
Guarantors will make contributions among themselves with respect to
payments made in accordance with their respective guarantees of the
Credit Obligations, and shall have delivered it to the Agent.
5.1.4. Legal Opinions. On the Initial Closing Date, the
Lenders shall have received from the following counsel their respective
opinions with respect to the transactions contemplated by the Credit
Documents, which opinions shall be in form and substance satisfactory
to the Lenders:
(a) Hale and Dorr, special counsel to the Company.
(b) Ropes & Gray, special counsel for the Agent.
5.1.5. Investment Assets Under Management. On the Initial
Closing Date, the aggregate investment assets under management by the
Company and its Subsidiaries shall equal or exceed $11,000,000,000, and
the Company shall have furnished to the Agent on such date a
certificate to such effect signed by an Executive Officer or a
Financial Officer.
5.1.6. OPIC Insurance Policies. The Agent, on behalf of the
Lenders, shall be named as the "Loss Payee" on an insurance policy
obtained from the Overseas Private Investment Corporation ("OPIC")
and/or such other political risk insurance policies as may reasonably
be requested by the Agent, which shall be satisfactory to the Agent in
its sole discretion.
5.2. Conditions on the B Share Conversion Date. In addition to the
conditions specified in Section 5.3, on the B Share Conversion Date:
5.2.1. B Share Term Notes. The Borrower Subsidiaries shall
have executed the B Share Term Notes pursuant to Section 2.2 and
delivered them to the Agent.
5.3. Conditions to Each Extension of Credit. The obligations of the
Lenders to make any extension of credit pursuant to Section 2 shall be subject
to the satisfaction, on or before the Closing Date for such extension of credit,
of the following conditions:
-34-
<PAGE> 42
5.3.1. Officer's Certificate. The representations and
warranties contained in Sections 6.6 and 8 shall be true and correct on
and as of the Closing Date with the same force and effect as though
originally made on and as of such date; no Default shall exist on such
Closing Date prior to or immediately after giving effect to the
requested extension of credit; as of such Closing Date, no Material
Adverse Change shall have occurred; and the Company shall have
furnished to the Agent on such Closing Date a certificate to these
effects (together with a schedule of calculations demonstrating, as of
such Closing Date, compliance with the financial tests set forth in
Section 7.5), in substantially the form of Exhibit 5.3.1, signed by an
Executive Officer or a Financial Officer.
5.3.2. Proper Proceedings. This Agreement, each other Credit
Document and the transactions contemplated hereby and thereby shall
have been authorized by all necessary proceedings of the Company and
any of its Affiliates party thereto. All necessary consents, approvals
and authorizations of any governmental or administrative agency or any
other Person of any of the transactions contemplated hereby or by any
other Credit Document shall have been obtained and shall be in full
force and effect in such form as shall be satisfactory to the Required
Lenders.
5.3.3. Legality, etc. The making of the requested extension of
credit shall not (a) subject any Lender to any penalty or special tax
(other than a Tax for which the Borrower has reimbursed the Lenders
under Section 3.2.6), (b) be prohibited by any law or governmental
order or regulation applicable to any Lender or the Borrower or (c)
violate any voluntary credit restraint program of the executive branch
of the government of the United States of America, the Board of
Governors of the Federal Reserve System or any other governmental or
administrative agency so long as any Lender reasonably believes that
compliance therewith is in the best interests of such Lender.
6. Guarantees.
6.1. Guarantees of Credit Obligations. Each Guarantor hereby
unconditionally guarantees that the Credit Obligations incurred by any other
Obligor will be performed and will be paid in full in immediately available
funds when due and payable, whether at the stated or accelerated maturity
thereof or otherwise, this guarantee being a guarantee of payment and not of
collectibility and being absolute and in no way conditional or contingent. In
the event any part of the Credit Obligations shall not have been so paid in full
when due and payable, such Guarantor will, not later than five days after
written notice by the Agent or, without notice, immediately upon the occurrence
of a Bankruptcy Default, pay or cause to be paid to the Agent for the Lenders'
account the amount of such Credit Obligations which are then due and payable and
unpaid. The obligations of each Guarantor hereunder shall not be affected by the
invalidity, unenforceability or irrecoverability of any of the Credit
Obligations as against
-35-
<PAGE> 43
any Obligor, any other guarantor thereof or any other Person. For purposes
hereof, the Credit Obligations shall be due and payable when and as the same
shall be due and payable under the terms of this Agreement or any other Credit
Document notwithstanding the fact that the collection or enforcement thereof may
be stayed or enjoined under the Bankruptcy Code or other applicable law.
6.2. Continuing Obligation. Each Guarantor acknowledges that the
Lenders have entered into this Agreement (and, to the extent that the Lenders
may enter into any future Credit Document, will have entered into such
agreement) in reliance on this Section 6 being a continuing irrevocable
agreement, and such Guarantor agrees that its guarantee may not be revoked in
whole or in part. The obligations of the Guarantors hereunder shall terminate
when the commitment of the Lenders to extend credit under this Agreement shall
have terminated and all of the Credit Obligations have been indefeasibly paid in
full in immediately available funds and discharged; provided, however, that
(i) if a claim is made upon the Lenders at any time for
repayment or recovery of any amounts or any property received by the
Lenders from any source on account of any of the Credit Obligations and
the Lenders repay or return any amounts or property so received
(including interest thereon to the extent required to be paid by the
Lenders) or
(ii) if the Lenders become liable for any part of such claim
by reason of (a) any judgment or order of any court or administrative
authority having competent jurisdiction or (b) any settlement or
compromise of any such claim,
then the Guarantors shall remain liable under this Agreement for the amounts so
repaid or returned or the amounts for which the Lenders become liable (such
amounts being deemed part of the Credit Obligations) to the same extent as if
such amounts had never been received by the Lenders, notwithstanding any
termination hereof or the cancellation of any instrument or agreement evidencing
any of the Credit Obligations. The Guarantors shall, not later than five days
after receipt of notice from the Agent, pay to the Agent an amount equal to the
amount of such repayment or return for which the Lenders have so become liable.
Payments hereunder by a Guarantor may be required by the Agent or the Required
Lenders on any number of occasions.
6.3. Waivers with Respect to Credit Obligations. Except to the extent
expressly required by this Agreement or any other Credit Document, each
Guarantor hereby waives, to the extent permitted by the provisions of applicable
law that may not be waived, all of the following (including all defenses,
counterclaims and other rights of any nature based upon any of the following):
(i) presentment, demand for payment and protest of nonpayment
of any of the Credit Obligations, and notice of protest, dishonor or
nonperformance;
-36-
<PAGE> 44
(ii) notice of acceptance of this guarantee and notice that
credit has been extended in reliance on such Guarantor's guarantee of
the Credit Obligations;
(iii) notice of any Default or of any inability to enforce
performance of the obligations of any Obligor or any other Person with
respect to any Credit Document, or notice of any acceleration of
maturity of any Credit Obligations;
(iv) demand for performance or observance of, and any
enforcement of any provision of, the Credit Obligations, this Agreement
or any other Credit Document or against any Obligor or any other Person
in respect of the Credit Obligations or any requirement of diligence or
promptness on the part of the Lenders in connection with any of the
foregoing;
(v) any act or omission on the part of the Lenders which may
impair or prejudice the rights of such Guarantor, including subrogation
rights or rights to obtain exoneration, contribution, indemnification
or any other reimbursement from any Obligor or any other Person;
(vi) any act or omission which might vary the risk of such
Guarantor or otherwise operate as a deemed release or discharge, and
the benefits of any statute that limits the liability of one joint
guarantor upon the release of any other joint guarantor;
(vii) any statute or rule of law which provides that the
obligation of a surety must be neither larger in amount nor in other
respects more burdensome than the obligation of the principal;
(viii) the provisions of any "one action" or "anti-deficiency"
law which would otherwise prevent the Lenders from bringing any action,
including any claim for a deficiency, against such Guarantor before or
after the Lenders' commencement or completion of any foreclosure
action, whether judicially, by exercise of power of sale or otherwise,
or any other law which would otherwise require any election of remedies
by the Lenders;
(ix) all demands and notices of every kind with respect to the
foregoing; and
(x) to the extent not referred to above, all defenses which
any Obligor may now or hereafter have to the payment of the Credit
Obligations, together with all suretyship defenses, which could
otherwise be asserted by such Guarantor.
No delay or omission on the part of the Lenders in exercising any right
under this Agreement or any other Credit Document or under any guarantee of the
Credit Obligations shall operate as a waiver or relinquishment of such right. No
action which the Lenders or any Obligor may take or refrain from taking with
respect to the Credit Obligations, including any
-37-
<PAGE> 45
amendments thereto or modifications thereof or waivers with respect thereto,
shall affect the provisions of this Agreement or the obligations of any
Guarantor hereunder. None of the Lenders' rights shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Lenders
or any Obligor, or by any noncompliance by any Obligor with the terms,
provisions and covenants of this Agreement, regardless of any knowledge thereof
which the Lenders may have or otherwise be charged with. To the extent not
prohibited by the provisions of applicable law that may not be waived, each
Guarantor hereby absolutely and irrevocably waives and relinquishes the benefit
and advantage of, and covenants not to assert, any appraisement, valuation,
stay, extension, redemption or similar law, now or at any time hereafter in
force, which might delay, prevent or otherwise impede the performance or
enforcement of this Agreement, any other Credit Document or the Credit
Obligations.
6.4. Lenders' Power to Waive, etc. Each Guarantor hereby grants to the
Lenders full power in their discretion, without notice to or consent of such
Guarantor, such notice and consent being hereby expressly waived to the fullest
extent permitted by applicable law, and without in any way affecting the
liability of such Guarantor under its guarantee hereunder:
(i) to waive compliance with, and any Default under, and to
consent to any amendment to or modification or termination of any terms
or provisions of, or to give any waiver in respect of, this Agreement,
any other Credit Document, the Lender Security, the Credit Obligations
or any guarantee thereof (each as from time to time in effect);
(ii) to grant any extensions of the Credit Obligations (for
any duration), and any other indulgence with respect thereto, and to
effect any total or partial release (by operation of law or otherwise),
discharge, compromise or settlement with respect to the obligations of
the Obligors or any other Person in respect of the Credit Obligations,
whether or not rights against such Guarantor under this Agreement are
reserved in connection therewith;
(iii) to collect or liquidate or realize upon any of the
Credit Obligations in any manner or to refrain from collecting or
liquidating or realizing upon any of the Credit Obligations; and
(iv) to extend credit under this Agreement, any other Credit
Document or otherwise in such amount as the Lenders may determine, even
though the condition of the Obligors (financial or otherwise on an
individual or consolidated basis) may have deteriorated since the date
hereof.
6.5. Information Regarding Obligors, etc. Each Guarantor acknowledges
and agrees that it has made such investigation as it deems desirable of the
risks undertaken by it in entering into this Agreement and is fully satisfied
that it understands all such risks. Each Guarantor hereby waives any obligation
which may now or hereafter exist on the part of the
-38-
<PAGE> 46
Lenders to inform it of the risks being undertaken by entering into this
Agreement or of any changes in such risks and, from and after the date hereof,
each Guarantor undertakes to keep itself informed of such risks and any changes
therein. Each Guarantor hereby expressly waives any duty which may now or
hereafter exist on the part of the Lenders to disclose to such Guarantor any
matter related to the business, operations, character, collateral, credit,
condition (financial or otherwise), income or prospects of the Obligors or their
Affiliates or their properties or management, whether now or hereafter known by
the Lenders. Each Guarantor represents, warrants and agrees that it assumes sole
responsibility for obtaining from the Obligors all information concerning this
Agreement and all other Credit Documents and all other information as to the
Obligors and their Affiliates or their properties or management as such
Guarantor deems necessary or desirable.
6.6. Certain Guarantor Representations. Each Guarantor hereby
represents that it has determined (i) that it is in its best interest and in
pursuit of its corporate purposes as an integral part of the business conducted
and proposed to be conducted by the Company and its Subsidiaries (including such
Guarantor), and reasonably necessary and convenient in connection with the
conduct of the business conducted and proposed to be conducted by such
Guarantor, to induce the Lenders to enter into this Agreement and to extend
credit to the Company by making the guarantees contemplated by this Section 6,
(ii) that the credit available hereunder will directly or indirectly inure to
the benefit of such Guarantor and (iii) that by virtue of the foregoing such
Guarantor is receiving at least reasonably equivalent consideration from the
Lenders for its guarantee. Each Guarantor acknowledges that it has been advised
by the Agent that the Lenders are unwilling to enter into this Agreement unless
the guarantees contemplated by this Section 6 are given by it. Each Guarantor
represents that (a) it will not be rendered insolvent as a result of entering
into this Agreement, (b) after giving effect to the transactions contemplated by
this Agreement, it will have assets having a fair saleable value in excess of
the amount required to pay its probable liability on its existing debts as they
have become absolute and matured, (c) it has, and will have, access to adequate
capital for the conduct of its business and (d) it has the ability to pay its
debts from time to time incurred in connection therewith as such debts mature.
6.7. No Subrogation. Until the Credit Obligations have been
indefeasibly paid in full and all commitments to extend further credit under the
Credit Documents have been irrevocably terminated, each Guarantor hereby agrees
with the Lenders and the Obligors that it waives all rights of reimbursement,
subrogation, contribution, offset and other claims against the Obligors arising
by contract or operation of law in connection with any payment made or required
to be made by such Guarantor under this Agreement, except for contribution
rights provided in the Guarantors Contribution Agreement.
6.8. Subordination. Each Guarantor and Excluded Subsidiary hereby
covenants and agrees that all Indebtedness, claims and liabilities now or
hereafter owing by the Company to such Guarantor or Excluded Subsidiary are
hereby subordinated to the prior payment in full of the Credit Obligations and
are so subordinated as a claim against the Company or any of its
-39-
<PAGE> 47
assets, whether such claim be in the ordinary course of business or in the event
of voluntary or involuntary liquidation, dissolution, insolvency or bankruptcy,
so that no payment with respect to any such Indebtedness, claim or liability
will be made or received while any of the Credit Obligations are outstanding;
provided, however, that the Company may make payments permitted by Section 7.10.
6.9. Future Subsidiaries; Further Assurances. The Company and each
other Guarantor shall from time to time cause each of its present and future
Core Mutual Fund Subsidiaries, within 30 days after any such Person becomes a
Core Mutual Fund Subsidiary, that is not a Guarantor to join this Agreement as a
Guarantor, pursuant to a joinder agreement in form and substance satisfactory to
the Agent. Each Excluded Subsidiary shall, upon written request by the Agent,
after the occurrence of an Event of Default, join this Agreement as a Guarantor
and an Obligor to the maximum extent permitted by the net capital requirements
of the Exchange Act, such guarantee to be in effect during the continuance of an
Event of Default. Each Guarantor will, promptly upon the request of the Agent
from time to time, execute, acknowledge and deliver, and file and record, all
such instruments, and take all such action, as the Agent may deem necessary or
advisable to carry out the intent and purposes of this Section 6.
7. General Covenants. The Company and the other Obligors covenant that, until
all of the Credit Obligations shall have been paid in full and until the
Lenders' commitments to extend credit under this Agreement and any other Credit
Document shall have been irrevocably terminated, the Company and its
Subsidiaries will comply with such of the following provisions as are applicable
to the Person in question:
7.1. Taxes and Other Charges; Accounts Payable.
7.1.1. Taxes and Other Charges. Each of the Company and its
Subsidiaries will duly pay and discharge, or cause to be paid and
discharged, before the same shall become in arrears, all taxes,
assessments and other governmental charges imposed upon such Person and
its properties, sales or activities, or upon the income or profits
therefrom, as well as all claims for labor, materials or supplies which
if unpaid might by law become a Lien upon any of its property;
provided, however, that any such tax, assessment, charge or claim need
not be paid if the validity or amount thereof shall at the time be
contested in good faith by appropriate proceedings and if such Person
shall, in accordance with GAAP, have set aside on its books adequate
reserves with respect thereto; and provided, further, that each of the
Company and its Subsidiaries will pay or bond, or cause to be paid or
bonded, all such taxes, assessments, charges or other governmental
claims immediately upon the commencement of proceedings to foreclose
any Lien which may have attached as security therefor (except to the
extent such proceedings have been dismissed or stayed).
-40-
<PAGE> 48
7.1.2. Accounts Payable. Each of the Company and its
Subsidiaries will promptly pay when due, or in conformity with
customary trade terms, all other Indebtedness incident to the
operations of such Person; provided, however, that any such
Indebtedness need not be paid if the validity or amount thereof shall
at the time be contested in good faith and if such Person shall, in
accordance with GAAP, have set aside on its books adequate reserves
with respect thereto.
7.2. Conduct of Business, etc.
7.2.1. Types of Business. The Core Mutual Fund Subsidiaries
will engage only in the business of providing investment advisory,
distribution, portfolio execution, administration and transfer agency
services, pricing and bookkeeping services and other services
incidental or closely related to the investment advisory and investment
company complex business.
7.2.2. Maintenance of Properties. Each of the Company and
its Subsidiaries:
(a) will keep its properties in such repair, working order and
condition, and will from time to time make such repairs, replacements,
additions and improvements thereto for the efficient operation of its
businesses and will comply at all times in all material respects with
all franchises, licenses and leases to which it is party so as to
prevent any loss or forfeiture thereof or thereunder, unless compliance
is at the time being contested in good faith by appropriate
proceedings; and
(b) except to the extent permitted under Section 7.11, will do
all things necessary to preserve, renew and keep in full force and
effect and in good standing its legal existence and authority necessary
to continue its business.
7.2.3. Compliance with Material Agreements. Each of the
Company and its Subsidiaries will comply in all material respects with
the provisions of the Material Agreements (to the extent not
inconsistent with this Agreement or any other Credit Document). Without
the prior written consent of the Required Lenders, no Material
Agreement shall be amended, modified, waived or terminated in any
manner that would have in any material respect an adverse effect on the
interests of the Lenders.
7.2.4. Statutory Compliance. Each of the Company and its
Subsidiaries will comply, and will use reasonable efforts to cause the
Trusts and Funds to comply to the extent applicable (subject to the
discretion of their trustees and directors and other than a reasonable
business decision to merge or terminate any Trust or Fund), in all
material respects with the Investment Company Act (including (a)
receipt of financial statements accompanied by an auditor's report of
Arthur Andersen LLP (or other independent public accountants of
nationally recognized standing), (b) maintenance of a fidelity bond to
secure the Funds from larceny and embezzlement and (c) continued
registration
-41-
<PAGE> 49
in full force and effect of each Trust as a registered investment
company), the Investment Advisers Act, the Exchange Act, the Securities
Act (including the continued registration of the shares representing
beneficial interests of, or common stock in, each Fund or Trust), the
rules and regulations of the NASD, subchapter M of the Code (to the
extent of each Fund's or Trust's continued qualification as a regulated
investment company thereunder), the Commodities Act, any other law,
statute, rule or regulation governing investment advisers, investment
companies, broker-dealers, underwriters, custodians or transfer agents,
including capital requirements, and all other valid and applicable
statutes, ordinances, zoning and building codes and other rules and
regulations of the United States of America, of the states and
territories thereof and their counties, municipalities and other
subdivisions and of any foreign country or other jurisdictions
applicable to such Person, except where compliance therewith shall at
the time be contested in good faith by appropriate proceedings or where
failure so to comply has not resulted, or does not pose a material risk
of resulting, in the aggregate in any Material Adverse Change.
7.3. Insurance.
7.3.1. Business Interruption Insurance. Each of the Company
and its Subsidiaries will maintain with financially sound and reputable
insurers insurance related to interruption of business, either for loss
of revenues or for extra expense, in the manner customary for similar
businesses similarly situated, including but not limited to OPIC
insurance or other political risk insurance policies as may reasonably
be requested by the Agent or the Required Lenders.
7.3.2. Errors and Omissions Insurance. Each of the Company and
the Core Mutual Fund Subsidiaries (other than Pioneer Management
(Ireland) Ltd.) will maintain a joint errors and omissions policy
insuring the Company and each Core Mutual Fund Subsidiary for losses
arising from any breach of duty, error or omission arising from the
performance of transfer agency services in such amounts as are
customarily carried by Persons of established reputation engaged in the
same or a similar business and similarly situated.
7.3.3. Directors and Officers Insurance. Each of the Company
and its Subsidiaries will maintain directors and officers liability
insurance insuring the Company and each Subsidiary in such amounts as
are customarily carried by Persons of established reputation employed
in the same or a similar business and similarly situated, if available
on a commercially reasonable basis.
7.3.4. Property Insurance. Each of the Company and its
Subsidiaries will keep its assets which are of an insurable character
insured by financially sound and reputable insurers against theft and
fraud and against loss or damage by fire, explosion or hazards to the
extent, in amounts and with deductibles at least as favorable as those
-42-
<PAGE> 50
generally maintained by businesses of similar size engaged in similar
activities. Such insurance shall provide extended coverage in amounts
sufficient to prevent such Person from becoming a co-insurer.
7.3.5. Liability Insurance. Each of the Company and its
Subsidiaries will maintain with financially sound and reputable
insurers insurance against liability for hazards, risks and liability
to persons and property, including product liability insurance, to the
extent, in amounts and with deductibles at least as favorable as those
generally maintained by businesses of similar size engaged in similar
activities; provided, however, that it may effect workers' compensation
insurance or similar coverage with respect to operations in any
particular state or other jurisdiction through an insurance fund
operated by such state or jurisdiction or by meeting the self-insurance
requirements of such state or jurisdiction.
7.4. Financial Statements and Reports. Each of the Company and its
Subsidiaries will maintain a system of accounting in which correct entries will
be made of all transactions in relation to their business and affairs in
accordance with GAAP. The fiscal year of the Company and its Subsidiaries will
end on December 31 in each year.
7.4.1. Annual Reports. The Company will furnish to the Lenders
as soon as available, and in any event within 95 days after the end of
each fiscal year, (1) the Consolidated balance sheet of the Company and
its Subsidiaries as at the end of such fiscal year, (2) the
Consolidated statements of income and Consolidated statements of cash
flows of the Company and its Subsidiaries for such fiscal year and (3)
the Combined and Combining statements of income and Combined and
Combining statements of changes in shareholders' equity and of cash
flows for each of (A) the Core Mutual Fund Subsidiaries, (B) the
Pioneer Goldfields Entities and (C) the other Subsidiaries of the
Company for such fiscal year, all in reasonable detail and together, in
the case of Consolidated financial statements in paragraphs (1) and (2)
of this Section 7.4.1, with comparative figures for the preceding
fiscal year or fiscal year end, all accompanied by:
(a) Unqualified reports of Arthur Andersen LLP (or, if
they cease to be auditors of the Company and its Subsidiaries,
other independent certified public accountants of recognized
national standing reasonably satisfactory to the Agent)
containing no material uncertainty, to the effect that they
have audited the Consolidated financial statements in
accordance with generally accepted auditing standards in the
United States and that the Consolidated financial statements
present fairly, in all material respects, the financial
position of the Persons covered thereby at the dates thereof
and the results of their operations for the periods covered
thereby in conformity with GAAP.
-43-
<PAGE> 51
(b) A report by such accountants that in the course of
their annual audit of the Company and its Subsidiaries,
nothing came to their attention that caused them to believe
that the Company failed to comply with the terms, covenants,
provisions and conditions of Section 7.5, as calculated on an
annual basis that coincides with the Company's fiscal year
end, of this Agreement insofar as they relate to accounting
matters. The report is furnished by such accountants with the
understanding that their audit was not directed primarily
toward obtaining knowledge of such noncompliance. Further, it
is understood that the report is intended solely for the
information and use of (i) the management of the Company and
(ii) the Lenders hereunder, and cannot be used for any other
purposes without the prior written consent of such
accountants.
(c) A certificate of the Company signed by a Financial
Officer to the effect that such officer has caused this
Agreement to be reviewed and has no knowledge of any Default,
or if such officer has such knowledge, specifying such Default
and the nature thereof, and what action the Company has taken,
is taking or proposes to take with respect thereto.
(d) In the event of a change in GAAP after the date
hereof, computations by the Company, certified by a Financial
Officer, reconciling the financial statements referred to
above with financial statements prepared in accordance with
GAAP as applied to the other covenants in Section 7 and the
related definitions.
(e) Computations by the Company demonstrating, as of
the end of such fiscal year, (i) compliance with the
Computation Covenants, (ii) Combined Unreimbursed Sales
Commissions for the previous fiscal quarter then ended and
(iii) the Total Estimated Collectible Amount as of the end of
such fiscal year.
(f) Computations by the Company comparing the financial
statements referred to above with the most recent budgets for
such fiscal year furnished to the Lenders in accordance with
Section 7.4.3(a).
(g) Calculations, as at the end of the fiscal year
covered by such financial statements, of (i) the Accumulated
Benefit Obligations for each Plan covered by Title IV of ERISA
(other than Multiemployer Plans) and (ii) the fair market
value of the assets of such Plan allocable to such benefits.
(h) Supplements to Exhibits 8.1 and 8.4 showing any
changes in the information set forth in such Exhibits during
the last quarter of such fiscal year, as well as any changes
in the Charter, Bylaws or incumbency of officers of the
Company and the Subsidiaries from those previously certified
to the Agent.
-44-
<PAGE> 52
(i) Reconciliation of beginning and ending balances of
the Funds on an aggregate basis showing sales, redemptions,
exchanges and changes in net asset value on a group basis for
the following groups: money market, equity, fixed income and
other.
7.4.2. Quarterly Reports. The Company will furnish to the
Lenders as soon as available and, in any event, within 50 days after
the end of each of the first three fiscal quarters of the Company, (1)
the internally prepared Consolidated balance sheet of the Company and
its Subsidiaries as of the end of such fiscal quarter, (2) the
Consolidated statements of income, changes in shareholders' equity and
cash flows of the Company and its Subsidiaries for such fiscal quarter
and for the portion of the fiscal year then ending and (3) the Combined
and Combining statements of income and Combined and Combining
statements of cash flows for each of (A) the Core Mutual Fund
Subsidiaries, (B) the Pioneer Goldfields Entities and (C) the other
Subsidiaries of the Company for such fiscal quarter and for the portion
of the fiscal year then ending, all in reasonable detail and together,
in the case of the Consolidated financial statements, with comparative
figures for the same date or period in the preceding fiscal year, all
accompanied by:
(a) A certificate of the Company signed by a Financial
Officer to the effect that such financial statements have been
prepared in accordance with GAAP and present fairly, in all
material respects, the financial position of the Company and
its Subsidiaries covered thereby at the dates thereof and the
results of their operations for the periods covered thereby,
subject only to normal year-end audit adjustments and the
addition of footnotes.
(b) In the event of a change in GAAP after the date
hereof, computations by the Company, certified by a Financial
Officer, reconciling the financial statements referred to
above with financial statements prepared in accordance with
GAAP as applied to the other covenants in Section 7 and
related definitions.
(c) Computations by the Company demonstrating, as of
the end of such quarter, (i) compliance with the Computation
Covenants, (ii) Combined Unreimbursed Sales Commissions for
such period, and (iii) the Total Estimated Collectible Amount
as of the end of such fiscal quarter.
(d) Computations by the Company comparing the financial
statements referred to above with the most recent budgets for
such fiscal year furnished to the Lenders in accordance with
Section 7.4.3(a).
(e) Supplements to Exhibits 8.1 and 8.4 showing any
changes in the information set forth in such Exhibits during
such fiscal quarter, as well as any
-45-
<PAGE> 53
changes in the Charter, Bylaws or incumbency of officers of
the Company and its Subsidiaries from those previously
certified to the Agent.
(f) A certificate of the Company signed by a Financial
Officer to the effect that such officer has caused this
Agreement to be reviewed and has no knowledge of any Default,
or if such officer has such knowledge, specifying such Default
and the nature thereof and what action the Company has taken,
is taking or proposes to take with respect thereto.
(g) Reconciliation of beginning and ending balances of
the Funds on an aggregate basis showing sales, redemptions,
exchanges and changes in net asset value on a group basis for
the following groups: money market, equity, fixed income and
other.
7.4.3. Other Reports. The Company will promptly furnish to
the Lenders:
(a) As soon as prepared and in any event before
February 15 in each year, an annual budget and operating
projections for such fiscal year of the Company and its
Subsidiaries, prepared in a manner consistent with the manner
in which the financial projections described in Section 8.2.1
were prepared.
(b) Any material updates of such budget and
projections.
(c) Any management letters furnished to the Company or
any Subsidiary by the Company's auditors.
(d) All budgets, projections, Consolidated statements
of operations and other reports furnished by the Company or
any Subsidiary generally to the shareholders of the Company in
such capacity.
(e) Such registration statements, proxy statements and
reports, including Forms 10-K, 10-Q, 8-K, ADV and BD, as may
be filed by the Company or any Subsidiary (but in no event
including the Trusts and Funds) with the Securities and
Exchange Commission.
(f) Any 90-day letter or 30-day letter from the federal
Internal Revenue Service asserting tax deficiencies against
the Company and its Subsidiaries.
(g) Upon the request of the Agent or the Required
Lenders, the Trust financial statements and auditor opinions
required by Section 7.2.4.
7.4.4. Notice of Litigation; Notice of Defaults. The Company
will promptly furnish to the Lenders notice of any litigation or any
administrative or arbitration
-46-
<PAGE> 54
proceeding to which the Company or any Subsidiary may hereafter become
a party which poses a material risk of resulting, after giving effect
to any applicable insurance, in the payment by the Company and its
Subsidiaries of at least $1,000,000 or which seeks to enjoin or
questions the validity or enforceability of any Credit Document.
Promptly upon acquiring knowledge thereof, the Company will notify the
Lenders of the existence of any Default, specifying the nature thereof
and what action the Company or any Subsidiary has taken, is taking or
proposes to take with respect thereto.
7.4.5. ERISA Reports. The Company will furnish to the Lenders
as soon as available the following items with respect to any Plan:
(a) any request for a waiver of the funding standards
or an extension of the amortization period,
(b) any reportable event (as defined in section 4043 of
ERISA), unless the notice requirement with respect thereto has
been waived by regulation,
(c) any notice received by any ERISA Group Person that
the PBGC has instituted or intends to institute proceedings to
terminate any Plan, or that any Multiemployer Plan is
insolvent or in reorganization,
(d) notice of the possibility of the termination of
any Plan by its administrator pursuant to section 4041 of
ERISA, and
(e) notice of the intention of any ERISA Group Person
to withdraw, in whole or in part, from any Multiemployer Plan.
7.4.6. Other Information. From time to time upon request of
any authorized officer of any Lender, each of the Company and its
Subsidiaries will furnish to the Lenders such other information
regarding the business, assets, financial condition, income or
prospects of the Company and its Subsidiaries as such officer may
reasonably request, including copies of all tax returns, licenses,
agreements, contracts, leases and instruments to which any of the
Company or its Subsidiaries is party, including copies of the
Investment Advisory Contracts, Distribution Plans or Distribution
Agreements, principal underwriting agreements and custodian, registrar,
transfer agent and shareholder services contracts of the Company, the
Subsidiaries and the Funds. The Lenders' authorized officers and
representatives shall have the right during normal business hours upon
reasonable notice and at reasonable intervals to examine the books and
records of the Company and its Subsidiaries, to make copies, notes and
abstracts therefrom and to make an independent examination of their
books and records, for the purpose of verifying the accuracy of the
reports delivered by any of the Company and its Subsidiaries pursuant
to this Section 7.4 or otherwise and
-47-
<PAGE> 55
ascertaining compliance with or obtaining enforcement of this Agreement
or any other Credit Document.
7.5. Certain Financial Tests.
7.5.1. Company Total Debt to Combined Mutual Fund Cash Flow.
On the last day of each of the first four fiscal quarters of the
Company after the Initial Closing Date, Company Total Debt shall not
exceed 325% of Combined Mutual Fund Cash Flow for the four consecutive
fiscal quarters of the Company ending on such date, and on the last day
of each fiscal quarter of the Company thereafter, Company Total Debt
shall not exceed 300% of Combined Mutual Fund Cash Flow for the four
consecutive fiscal quarters of the Company then ending.
7.5.2. Combined Adjusted Cash Flow to Consolidated Fixed
Charges. On the last day of each fiscal quarter of the Company,
Combined Adjusted Cash Flow for the four consecutive fiscal quarters of
the Company then ending shall equal or exceed 400% of Consolidated
Fixed Charges for such period.
7.5.3. Consolidated Tangible Net Worth. Consolidated Tangible
Net Worth shall at all times equal or exceed $114,000,000; provided,
however, that on the first day of each fiscal quarter of the Company
beginning after the Initial Closing Date, such dollar amount shall be
increased by an amount equal to 50% of Consolidated Net Income (only if
in excess of zero) for the fiscal quarter then most recently ended.
7.6. Indebtedness. Neither the Company nor any Subsidiary of the
Company will create, incur, assume or otherwise become or remain liable with
respect to any Indebtedness except the following:
7.6.1. Indebtedness in respect of the Credit Obligations.
7.6.2. Indebtedness of the Company and each Subsidiary of the
Company which is not a Core Mutual Fund Subsidiary, provided that
immediately before and after giving effect to the incurrence of such
Indebtedness, no Default exists.
7.6.3. Current liabilities existing from time to time, other
than for borrowed money, incurred in the ordinary course of business.
7.6.4. To the extent that payment thereof shall not at the
time be required by Section 7.1, Indebtedness in respect of taxes,
assessments, governmental charges and claims for labor, materials and
supplies.
7.6.5. Indebtedness secured by Liens of carriers,
warehousemen, mechanics and landlords permitted by Sections 7.8.5 and
7.8.6.
-48-
<PAGE> 56
7.6.6. Indebtedness in respect of judgments or awards (a)
which have been in force for less than the applicable appeal period, so
long as execution is not levied, or (b) in respect of which the Company
or any Subsidiary shall at the time in good faith be prosecuting an
appeal or proceedings for review, so long as execution thereof shall
have been stayed pending such appeal or review and the Company or such
Subsidiary shall have taken appropriate reserves therefor consistent
with GAAP.
7.6.7. Indebtedness in respect of deferred taxes arising in
the ordinary course of business.
7.6.8. Indebtedness in respect of inter-company loans and
advances among the Company and its Subsidiaries which are not
prohibited by Section 7.9.
7.6.9. Guarantees permitted by Section 7.7.
7.6.10. Financing Debt outstanding on the date hereof and
described on Exhibit 8.4.
7.6.11. Obligations under Interest Rate Protection Agreements
permitted by Section 7.15.
7.7. Guarantees; Letters of Credit. Neither the Company nor any
Subsidiary of the Company will become or remain liable with respect to any
Guarantee, including reimbursement obligations under letters of credit and other
financial guarantees by third parties, except the following:
7.7.1. Guarantees of the Credit Obligations.
7.7.2. Guarantees of Indebtedness by the Company and each
Subsidiary of the Company which is not a Core Mutual Fund Subsidiary,
provided that immediately before and after giving effect to such
Guarantee, no Default exists.
7.8. Liens. Neither the Company nor any Subsidiary of the Company,
shall create, incur or enter into, or suffer to be created or incurred or to
exist, any Lien (including any arrangement or agreement which prohibits it from
creating any Lien), except the following:
7.8.1. Restrictions on transfer and Liens contained in the
Credit Documents.
7.8.2. Liens to secure taxes, assessments and other
governmental charges, to the extent that payment thereof shall not at
the time be required by Section 7.1.
-49-
<PAGE> 57
7.8.3. Deposits or pledges made (a) in connection with, or to
secure payment of, workers' compensation, unemployment insurance, old
age pensions or other social security, (b) in connection with casualty
insurance maintained in accordance with Section 7.3, (c) to secure the
performance of bids, tenders, contracts (other than contracts relating
to Financing Debt) or leases, (d) to secure statutory obligations or
surety or appeal bonds, (e) to secure indemnity, performance or other
similar bonds in the ordinary course of business or (f) in connection
with contested payments to the extent that payment thereof shall not at
that time be required by Section 7.1.
7.8.4. Liens in respect of judgments or awards, to the extent
that such judgments or awards are permitted by Section 7.6.6.
7.8.5. Liens of carriers, warehousemen, mechanics and similar
Liens, in each case (a) in existence less than 90 days from the date of
creation thereof or (b) being contested in good faith by the Company or
any Subsidiary in appropriate proceedings (so long as the Company or
such Subsidiary shall, in accordance with GAAP, have set aside on its
books adequate reserves with respect thereto).
7.8.6. Encumbrances in the nature of (a) zoning restrictions,
(b) easements, (c) restrictions of record on the use of real property,
(d) landlords' and lessors' Liens on rented premises and (e)
restrictions on transfers or assignments of leases, which in each case
do not materially detract from the value of the encumbered property or
impair the use thereof in the business of the Company or any
Subsidiary.
7.8.7. Restrictions under federal and state securities laws on
the transfer of securities.
7.8.8. Restrictions under Foreign Trade Regulations on the
transfer or licensing of certain assets of the Company and its
Subsidiaries.
7.8.9. Set-off rights of depository institutions with which
the Company or any Subsidiary maintains deposit accounts.
7.8.10. Liens of the Core Mutual Fund Subsidiaries
constituting (a) purchase money security interests (including
mortgages, conditional sales, Capitalized Leases and any other title
retention or deferred purchase devices) in real property, interests in
leases or tangible personal property existing or created on the date on
which such property is acquired, and (b) the renewal, extension or
refunding of any security interest referred to in the foregoing clause
(a) in an amount not to exceed the amount thereof remaining unpaid
immediately prior to such renewal, extension or refunding; provided,
however, that each such security interest shall attach solely to the
particular item of property so acquired, and the principal amount of
Indebtedness (including Indebtedness in respect of Capitalized Lease
Obligations) secured thereby shall not
-50-
<PAGE> 58
exceed the cost (including all such Indebtedness secured thereby,
whether or not assumed) of such item of property; and provided,
further, that the aggregate principal amount of all Indebtedness
secured by Liens permitted by this Section 7.8.10 shall not exceed
$5,000,000 at any one time.
7.8.11. Any prohibition imposed by applicable law, including
Section 15(a) of the Investment Company Act and Section 205 of the
Investment Advisers Act, or any regulatory agency, on the creation of
Liens and the assignment of contracts.
7.8.12. Liens incurred by the Company and each Subsidiary of
the Company which is not a Core Mutual Fund Subsidiary, provided that
immediately before and after giving effect to the incurrence of such
Lien, no Default exists, and provided further that in no event shall
any pledge of stock be permitted with respect to the stock of any of
the Core Mutual Fund Subsidiaries or, subject to Section 7.8.13, the
stock of any of the Pioneer Goldfields Entities.
7.8.13. Liens with respect to the stock of the Pioneer
Goldfields Entities shall be permitted if (i) the Revolving Loan shall
have been satisfied and discharged in full and (ii) Combined Mutual
Fund Cash Flow exceeds $30,000,000 for the twelve month period ending
on the date of the most recently ended fiscal quarter for which
financial statements have been furnished (or were required to be
furnished) by the Company to the Agent pursuant to Section 7.4.2.
7.9. Investments and Acquisitions. Neither the Company nor any
Subsidiary of the Company will have outstanding, acquire, commit itself to
acquire or hold any Investment (including any Investment consisting of the
acquisition of any business) except for the following:
7.9.1. Investments of the Company and each Subsidiary of the
Company which is not a Core Mutual Fund Subsidiary; provided that
immediately before and after giving effect to such Investment, no
Default exists.
7.9.2. Investments of the Core Mutual Fund Subsidiaries in
Wholly Owned Subsidiaries of the Core Mutual Fund Subsidiaries;
provided, however, that so long as immediately before and after giving
effect thereto no Default exists, Investments in Wholly Owned
Subsidiaries may be made only to the extent reasonably necessary for
the conduct of the business permitted by Section 7.2.1.
7.9.3. Investments in Cash Equivalents.
7.9.4. Intercompany loans and advances from any Core Mutual
Fund Subsidiary to any other Core Mutual Fund Subsidiary or the
Company, but only to the
-51-
<PAGE> 59
extent reasonably necessary for Consolidated tax planning and working
capital management.
7.9.5. Prepaid royalties and fees paid in the ordinary course
of business.
7.9.6. Investments in investment companies sponsored by the
Company for which the Company or any Core Mutual Fund Subsidiary is or
will become the investment adviser.
7.9.7. Guarantees permitted by Section 7.7.
7.10. Distributions. Neither the Company nor any Subsidiary of the
Company shall make any Distribution except for the following:
7.10.1. The Core Mutual Fund Subsidiaries may make
Distributions to the Company or to any other Core Mutual Fund
Subsidiary to the extent reasonably necessary for the conduct of the
business permitted by Section 7.2.1.
7.10.2. The Company and each Subsidiary of the Company which
is not a Core Mutual Fund Subsidiary may make Distributions to its
stockholders during any fiscal quarter of the Company; provided that
immediately before and after giving effect thereto, no Default exists.
7.10.3. The Company and each Subsidiary of the Company which
is not a Core Mutual Fund Subsidiary may make Investments permitted by
Section 7.9; provided that immediately before and after giving effect
thereto, no Default exists.
7.11. Merger, Consolidation and Dispositions of Assets. Neither the
Company nor any Subsidiary of the Company will become party to any merger or
consolidation or will sell, lease, sell and lease back, sublease or otherwise
dispose of any of its assets, or agree to do any of the foregoing, except the
following:
7.11.1. The Core Mutual Fund Subsidiaries and the Pioneer
Goldfields Entities may sell or otherwise dispose of (a) inventory in
the ordinary course of business, (b) tangible assets to be replaced in
the ordinary course of business by other tangible assets of equal or
greater value and (c) tangible assets or stock or assets of Inactive
Subsidiaries that are no longer used or useful in the business of the
Core Mutual Fund Subsidiaries and the Pioneer Goldfields Entities;
provided, however, that the aggregate fair market value (or book value
if greater) of such assets, rights or stock no longer being used or
useful shall not exceed $1,000,000 in any fiscal year.
-52-
<PAGE> 60
7.11.2. Subject to Section 9.1.13, any Core Mutual Fund
Subsidiary may merge or be liquidated into the Company or any other
Core Mutual Fund Subsidiary (other than an Excluded Subsidiary).
7.11.3. Subject to Section 9.1.13, any of the Pioneer
Goldfields Entities may merge or be liquidated into the Company or any
of the other Pioneer Goldfields Entities.
7.11.4. The Company and each Subsidiary of the Company which
is not a Core Mutual Fund Subsidiary or a Pioneer Goldfields Entity may
enter into a merger, consolidation, sale, lease, sale and leaseback,
sublease or other disposition of its assets, provided that immediately
before and after giving effect to such transaction, no Default exists;
and provided further that any sale of equity interests in any of the
Pioneer Goldfields Entities shall be in accordance with Section 7.11.5.
7.11.5. Subject to Section 4.2.3, the Company or Pioneer
Goldfields Holdings, Inc. may sell a non-controlling equity interest in
Pioneer Goldfields Limited or Teberebie Goldfields Limited.
7.12. Issuance of Stock by Subsidiaries; Subsidiary Distributions;
Subsidiary Guarantors.
7.12.1. Issuance of Stock by Subsidiaries. No Subsidiary of
the Company which is not a Core Mutual Fund Subsidiary or a Pioneer
Goldfields Entity shall issue or sell any shares of its capital stock
or other evidence of beneficial ownership to any Person other than the
Company or any Wholly Owned Subsidiary of the Company unless,
immediately before and after giving effect thereto, no Default exists.
7.12.2. Issuance of Stock by Core Mutual Fund Subsidiaries or
Pioneer Goldfields Entity. No Core Mutual Fund Subsidiary or Pioneer
Goldfields Entity shall issue or sell any shares of its capital stock
or other evidence of beneficial ownership to any Person other than the
Company or any Wholly Owned Subsidiary of the Company; provided that,
subject to Sections 4.2.3 and 7.11.5, a public offering or other sale
with respect to equity interests in the Pioneer Goldfields Entities
shall be permitted.
7.12.3. No Restrictions on Subsidiary Distributions. Except
for restrictions contained in the Credit Documents, neither the Company
nor any Subsidiary will enter into or be bound by any agreement
(including covenants requiring the maintenance of specified amounts of
net worth or working capital) restricting the right of any Subsidiary
to make Distributions or extensions of credit to the Company (directly
or indirectly through another Subsidiary).
-53-
<PAGE> 61
7.13. ERISA, etc. Each of the Company and its Subsidiaries will comply,
and will cause all ERISA Group Persons to comply, in all material respects, with
the provisions of ERISA and the Code applicable to each Plan. Each of the
Company and its Subsidiaries will meet, and will cause all ERISA Group Persons
to meet, all minimum funding requirements applicable to them with respect to any
Plan pursuant to section 302 of ERISA or section 412 of the Code, without giving
effect to any waivers of such requirements or extensions of the related
amortization periods which may be granted. At no time shall the Accumulated
Benefit Obligations under any Plan that is not a Multiemployer Plan exceed the
fair market value of the assets of such Plan allocable to such benefits by more
than $1,000,000. The Company and its Subsidiaries will not withdraw, and will
cause all other ERISA Group Persons not to withdraw, in whole or in part, from
any Multiemployer Plan so as to give rise to withdrawal liability exceeding
$1,000,000 in the aggregate. At no time shall the actuarial present value of
unfunded liabilities for post-employment health care benefits, whether or not
provided under a Plan, calculated in a manner consistent with Statement No. 106
of the Financial Accounting Standards Board, exceed $1,000,000.
7.14. Transactions with Affiliates. Other than the Material Agreements,
neither the Company nor any of its Subsidiaries shall effect any transaction
with any of their respective Affiliates (except for the Company and its
Subsidiaries, except for Investments permitted by Section 7.9.6, and except for
certain expense subsidies, consistent with past practice, for Funds for which
the Company or any Subsidiary acts as an investment adviser) on a basis less
favorable to the Company and its Subsidiaries than would be the case if such
transaction had been effected with a non-Affiliate.
7.15. Interest Rate Protection. The Company will obtain, within 60 days
after the Initial Closing Date, and thereafter keep in effect one or more
Interest Rate Protection Agreements, each in form and substance reasonably
satisfactory to the Agent, covering a notional amount of at least 60% of the B
Share Loan (calculated as of the later of the Initial Closing Date and the date
such Interest Rate Protection Agreements are entered into, and as of the last
day of each calendar year thereafter, and giving effect to the required
prepayments under Section 4.3). Each Interest Rate Protection Agreement shall
have an original maturity of not less than five years.
7.16. Maintenance of Fee Structure. With respect to the B Shares,
neither the Company nor any Subsidiary shall cause or permit dealer commissions
to be amended to be more favorable to the Brokers or Redemption Fees to be
amended to be more favorable to the shareholders of the B Share Funds. The
Company and each Subsidiary of the Company, as the case may be, shall continue
to receive Distribution Fees at rates no less favorable than the minimum amounts
set forth on Exhibit 7.16 and shall continue to act as sole distributor of each
Fund and to be the only Person to whom the Funds are permitted to make any
payments under the respective Distribution Plan or Distribution Agreement.
Exhibit 7.16 may be amended from time to time by the Company upon 60 days prior
notice to the Agent, and the Agent shall give prompt notice thereof to the other
Lenders, only to add to such Exhibit a Fund with
-54-
<PAGE> 62
dealer reallowances no more favorable to the Brokers and Redemption Fees and
Distribution Fees no more favorable to the shareholders of such Fund than those
applicable to the Funds set forth on Exhibit 7.16 on the date hereof.
7.17. Maintenance of Mutual Fund Contracts. The Company and the Core
Mutual Fund Subsidiaries shall cause each Investment Advisory Contract,
Distribution Plan or Distribution Agreement to which it is a party to be renewed
on an annual basis on terms at least as favorable to the Company or the Core
Mutual Fund Subsidiary, as the case may be.
8. Representations and Warranties. In order to induce the Lenders to extend
credit to the Company hereunder, the Company represents and warrants that:
8.1. Organization and Business.
8.1.1. Company. The Company is a duly organized and validly
existing corporation, in good standing under the laws of Delaware, with
all power and authority, corporate or otherwise, necessary to (a) enter
into and perform this Agreement and each other Credit Document to which
it is party and make the borrowings hereunder and (b) own its
properties and carry on the business now conducted or proposed to be
conducted by it. Certified copies of the Charter and By-laws of the
Company have been previously delivered to the Agent and are correct and
complete. Exhibit 8.1, as from time to time hereafter supplemented in
accordance with Sections 7.4.1 and 7.4.2, sets forth, as of the end of
the most recent fiscal year or quarter for which such financial
statements are required to be furnished, (i) the jurisdiction of
incorporation of the Company, (ii) the address of the Company's
principal executive office and chief place of business and (iii) the
name under which the Company conducts its business and the
jurisdictions in which the name is used.
8.1.2. Subsidiaries. Each Subsidiary is duly organized,
validly existing and in good standing under the laws of the
jurisdiction in which it is organized, with all power and authority,
corporate or otherwise, necessary to (a) enter into and perform this
Agreement and each other Credit Document to which it is party and (b)
own its properties and carry on the business now conducted or proposed
to be conducted by it. Certified copies of the Charter and By-laws of
each Subsidiary that is a party to this Agreement have been previously
delivered to the Agent and are correct and complete. Exhibit 8.1, as
from time to time hereafter supplemented in accordance with Sections
7.4.1 and 7.4.2, sets forth, as of the end of the most recent fiscal
year or quarter for which such financial statements are required to be
furnished, (i) the name and jurisdiction of organization of each
Subsidiary, (ii) the address of the chief executive office and
principal place of business of each Subsidiary, (iii) each name under
which each Subsidiary conducts its business and the jurisdictions in
which each such name is used and (iv) with respect to the Core Mutual
Fund Subsidiaries and the Pioneer
-55-
<PAGE> 63
Goldfields Entities, the number of authorized and issued shares and
ownership of each such Subsidiary.
8.1.3. Qualification. Except as set forth on Exhibit 8.1, as
from time to time supplemented in accordance with Sections 7.4.1 and
7.4.2, each of the Company and each Subsidiary is duly and legally
qualified to do business as a foreign corporation or other entity and
is in good standing in each state or jurisdiction in which such
qualification is required and is duly authorized, qualified and
licensed under all laws, regulations, ordinances or orders of public
authorities, or otherwise, to carry on its business in the places and
in the manner in which it is conducted, except for failures to be so
qualified, authorized or licensed which would not in the aggregate
result, or pose a material risk of resulting, in any Material Adverse
Change.
8.2. Financial Statements and Other Information; Material Agreements.
8.2.1. Financial Statements and Other Information. The Company
has previously furnished to the Lenders copies of the following:
8.2.1.1. The Company's Annual Reports on Form 10-K and
its annual reports to stockholders for its fiscal years ended
December 31 in each of 1994 and 1995, including the audited
Consolidated balance sheet of the Company and its Subsidiaries
as at December 31 in each of 1994 and 1995 and audited
Consolidated statements of income, changes in shareholders'
equity and cash flows of the Company and its Subsidiaries for
the fiscal years of the Company then ended.
8.2.1.2. The financial and operational projections for
the Company and its Subsidiaries included in the Information
Memorandum to the Lenders dated April 8, 1996.
8.2.1.3. Calculations demonstrating pro forma
compliance with the Computation Covenants as of March 31,
1996.
The financial statements referred to in Section 8.2.1.1 (or
delivered pursuant to Section 7.4.1 or 7.4.2) were prepared in
accordance with GAAP and fairly present the financial position of each
of the Company and its Subsidiaries, respectively, covered thereby at
the respective dates thereof and the results of their operations for
the periods covered thereby. Neither the Company nor any of its
Subsidiaries has any known contingent liability material to the Company
and its Subsidiaries on a Consolidated basis which is not reflected in
the most recent balance sheet referred to in clause (c) above (or
delivered pursuant to Section 7.4.1 or 7.4.2) or the notes thereto.
-56-
<PAGE> 64
The financial statements referred to in Section 8.2.1.2 were
prepared in a manner consistent with GAAP and fairly present the
financial position of the Persons covered thereby at the respective
dates thereof and the results of their operations for the periods
covered thereby, subject only to normal year-end audit adjustments and
the addition of footnotes.
In the Company's judgment, the financial and operational
projections referred to in Section 8.2.1.3 constitute a reasonable
basis as of the date hereof for the assessment of the future
performance of the Company and its Subsidiaries during the periods
indicated therein, it being understood that any projected financial
information represents an estimate, based on various assumptions, of
future results of operations and factors outside of its control which
may or may not in fact occur.
8.2.2. Material Agreements. The Company has previously
furnished to the Lenders correct and complete copies, including all
exhibits, schedules and amendments thereto, of the following agreements
(the "Material Agreements"):
8.2.2.1. the form of Distribution Plan or Distribution
Agreement.
8.2.2.2. the form of Investment Advisory Contract.
8.2.2.3. the OPIC insurance policy naming the Agent, on
behalf of the Lenders, as the "Loss Payee."
8.2.3. Investment Assets Under Management. The aggregate
investment assets under management by the Company and its Subsidiaries
were at least $11,000,000,000 on March 31, 1996.
8.3. Changes in Condition. No Material Adverse Change has occurred, and
since December 31, 1995, neither the Company nor any Subsidiary has entered into
any material transaction outside the ordinary course of business except for the
transactions contemplated by this Agreement and the Material Agreements or as
specifically described to the Lenders in writing.
8.4. Agreements Relating to Financing Debt. Exhibit 8.4, as from time
to time hereafter supplemented in accordance with Sections 7.4.1 and 7.4.2, sets
forth the amounts (as of the dates indicated in Exhibit 8.4, as so supplemented)
of all Financing Debt of the Company and its Subsidiaries with amounts
outstanding or commitments to lend of [$2,500,000] or more and all agreements
which relate to such Financing Debt, and all Liens with respect to such
Financing Debt. The Company has furnished the Agent with correct and complete
copies of any agreements related to Exhibit 8.4 requested by the Required
Lenders.
-57-
<PAGE> 65
8.5. Title to Assets. The Company and its Subsidiaries have good and
marketable title to or valid leases of all material assets necessary for or used
in the operations of their business as now conducted by them and reflected in
the most recent balance sheet referred to in Section 8.2.1(i) (or the balance
sheet most recently furnished to the Lenders pursuant to Section 7.4.1 or
7.4.2), and to all material assets acquired subsequent to the date of such
balance sheet, subject to no Liens except for those permitted by Section 7.8 and
except for assets disposed of as permitted by Section 7.11.
8.6. Licenses, etc.
(a) Pioneering Management Corporation is a registered investment
adviser under the Investment Advisers Act, with similar registrations with state
authorities required to conduct its business as currently conducted and proposed
to be conducted except to the extent immaterial to the Company's business,
assets, financial condition or prospects. Pioneer Funds Distributor, Inc. is a
registered broker/dealer in good standing under the Exchange Act and a member in
good standing of the NASD, with similar registrations with state authorities
required to conduct its business as currently conducted and proposed to be
conducted except to the extent immaterial to the Company's business, assets,
financial condition or prospects. Each Trust is a registered investment company,
which registration is in full force and effect, under the Investment Company Act
and each Fund or Trust is qualified to be taxed and has been (except to the
extent no material liability applies to the Company or any Subsidiary) and is
taxed as a regulated investment company under subchapter M of the Code. Pioneer
Funds Distributor, Inc. acts as the principal underwriter for the Funds and is
the sole recipient of Distribution Fees under the respective Distribution Plan
or Distribution Agreement. Each Fund or Trust which is a commodity pool is
registered under, or has obtained an exemption from, the Commodities Act. The
shares representing beneficial interests in, or common stock of, each Fund or
Trust are registered, which registration is in full force and effect, under the
Securities Act and except to the extent immaterial to the Company's business,
assets, financial condition or prospects, similar state securities laws. Each
Subsidiary required to be a commodity trading advisor under the Commodities Act
is so qualified.
(b) The Company and its Subsidiaries have all material patents, patent
applications, patent rights, service marks, service mark rights, trademarks,
trademark rights, trade names, trade name rights, copyrights, licenses,
franchises, permits, authorizations, including authorizations under state
securities laws, and other material rights as are necessary for the conduct of
the business of the Company and its Subsidiaries. All of the foregoing are in
full force and effect, and each of the Company and its Subsidiaries is in
substantial compliance with the foregoing without any known conflict with the
valid rights of others which has resulted, or poses a material risk of
resulting, in any Material Adverse Change. No event has occurred which permits,
or after notice or lapse of time or both would permit, the revocation or
termination of any such license, franchise or other right or affects the rights
of any of the Company and its Subsidiaries thereunder so as to result in any
Material Adverse Change. No litigation or other proceeding or dispute with
respect to the validity or, where applicable, the
-58-
<PAGE> 66
extension or renewal, of any of the foregoing has resulted, or poses a material
risk of resulting, in any Material Adverse Change.
8.7. Litigation. There is no litigation, at law or in equity, including
the litigation set forth on Exhibit 8.7, or any proceeding before any court,
board or other governmental or administrative agency or any arbitrator which is
pending or, to the knowledge of the Company, threatened which involves any
material risk of any final judgment, order or liability which, after giving
effect to any applicable insurance, has resulted, or poses a material risk of
resulting, in any Material Adverse Change or which seeks to enjoin the
consummation, or which questions the validity or enforceability, of any of the
transactions contemplated by this Agreement or any other Credit Document. No
judgment, decree or order of any court, board or other governmental or
administrative agency or any arbitrator has been issued against or binds the
Company or any Subsidiary which has resulted, or poses a material risk of
resulting, in any Material Adverse Change.
8.8. Tax Returns. Each of the Company and its Subsidiaries has filed
all material tax and information returns which are required to be filed by it
and has paid, or made adequate provision for the payment of, all taxes which
have or may become due pursuant to such returns or to any assessment received by
it. Neither the Company nor any Subsidiary knows of any material additional
assessments or any basis therefor. The Company reasonably believes that the
charges, accruals and reserves on the books of the Company and its Subsidiaries
in respect of taxes or other governmental charges are adequate.
8.9. Authorization and Enforceability. Each of the Company and any
Subsidiary party to the Subsidiary Guarantee has taken all corporate action
required to execute, deliver and perform this Agreement and each other Credit
Document, including the borrowings, to which it is party. Each of this Agreement
and each other Credit Document constitutes the legal, valid and binding
obligation of the Company or such Subsidiary party thereto and is enforceable
against such Person in accordance with its terms.
8.10. No Legal Obstacle to Agreements. Neither the execution and
delivery of this Agreement or any other Credit Document, nor the making of any
borrowings hereunder, nor the consummation of any transaction referred to in or
contemplated by this Agreement or any other Credit Document, nor the fulfillment
of the terms hereof or thereof or of any other agreement, instrument, deed or
lease contemplated by this Agreement or any other Credit Document, has
constituted or resulted in or will constitute or result in:
(a) any breach or termination of the provisions of any agreement,
instrument, deed or lease to which the Company or any Subsidiary is a party or
by which it is bound, or of the Charter or By-laws of the Company or any
Subsidiary;
(b) the violation of any law, statute, judgment, decree or governmental
order, rule or regulation applicable to the Company or any Subsidiary;
-59-
<PAGE> 67
(c) the creation under any agreement, instrument, deed or lease of any
Lien upon any of the assets of the Company or any Subsidiary; or
(d) any redemption, retirement or other repurchase obligation of the
Company or any Subsidiary under any Charter, By-law, agreement, instrument, deed
or lease.
No approval, authorization or other action by, or declaration to or filing with,
any governmental or administrative authority or any other Person is required to
be obtained or made by the Company or any Subsidiary in connection with the
execution, delivery and performance of this Agreement, the Notes or any other
Credit Document, the transactions contemplated hereby or thereby or the making
of any borrowing hereunder.
8.11. Defaults. Neither the Company nor any Subsidiary is in default
under any provision of its Charter or By-laws or of this Agreement or any other
Credit Document. Neither the Company nor any Subsidiary is in default under any
provision of any agreement, instrument, deed or lease to which it is party or by
which it or its property is bound, or has violated any law, judgment, decree or
governmental order, rule or regulation, in each case so as to result, or pose a
material risk of resulting, in any Material Adverse Change.
8.12. Certain Business Representations.
8.12.1. Labor Relations. No dispute or controversy between the
Company or any Subsidiary and any of their respective employees has
resulted, or is reasonably likely to result, in any Material Adverse
Change, and neither the Company nor any Subsidiary anticipates that its
relationships with its unions or employees will result, or are
reasonably likely to result, in any Material Adverse Change. The
Company and each of the Subsidiaries is in compliance in all material
respects with all federal and state laws with respect to (a)
non-discrimination in employment with which the failure to comply, in
the aggregate, has resulted in, or poses a material risk of resulting
in, a Material Adverse Change and (b) the payment of wages.
8.12.2. Antitrust. Each of the Company and its Subsidiaries is
in compliance in all material respects with all federal and state
antitrust laws relating to its business and the geographic
concentration of its business except as has not resulted in, and could
not reasonably be expected to result in, a Material Adverse Change.
8.12.3. Environmental Compliance. Each of the Company and its
Subsidiaries is in compliance in all material respects with the Clean
Air Act, the Federal Water Pollution Control Act, the Marine Protection
Research and Sanctuaries Act and all other federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, concessions, grants, licenses, agreements or
governmental restrictions relating to the disposal or use of acids,
chemicals, oils,
-60-
<PAGE> 68
solvents and other hazardous materials, substances or waste products
used or produced by the Company and its respective Subsidiaries in the
course of their businesses.
8.12.4. Certain Other Agreements. Each of the Funds has
entered into Investment Advisory Contracts and shareholder services
agreements, and in the case of B Share Funds, a Distribution Plan or
Distribution Agreement with the Company or another Subsidiary of the
Company, which agreements are in full force and effect. The Company has
furnished to the trustees or directors, as the case may be, of each
Fund and Trust such information as may be reasonably necessary to
evaluate the terms of each Investment Advisory Contract and
Distribution Plan or Distribution Agreement in accordance with sections
15(c) and 12(b) of the Investment Company Act.
8.12.5. Certain Laws. Each of the Company and its Subsidiaries
is in compliance with the Investment Company Act, the Investment
Advisers Act, the Exchange Act, the Commodities Act and the rules and
regulations of the NASD and similar state laws, except to the extent
that noncompliance would not result, or pose a material risk of
resulting, in any Material Adverse Change. Each Trust and Fund is in
compliance with the Investment Company Act and the Securities Act and
similar state laws, except to the extent that noncompliance would not
result, or pose a material risk of resulting, in any Material Adverse
Change.
8.12.6. Burdensome Obligations. Neither the Company nor any
Subsidiary is party to or bound by any agreement, instrument, deed or
lease or is subject to any Charter, By-law or other restriction or
commitment or requirement for future expenditures which, in the opinion
of the management of such Person, is so burdensome as in the
foreseeable future to result in, or pose a material risk of resulting
in, a Material Adverse Change.
8.13. Pension Plans. Neither the Company nor any Subsidiary has any
Plan as of the date hereof except for Plans of which the Agent has been notified
in writing and are in compliance with Section 7.13.
8.14. Foreign Trade Regulations; Government Regulation.
8.14.1. Foreign Trade Regulations. Neither the execution and
delivery of this Agreement or any other Credit Document, nor the making
by the Company of any borrowings hereunder has constituted or resulted
in or will constitute or result in the violation of any Foreign Trade
Regulation.
8.14.2. Government Regulation. Neither the Company nor any
Subsidiary, nor any Person controlling the Company or any Subsidiary or
under common control with the Company or any Subsidiary is subject to
regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act
-61-
<PAGE> 69
or any statute or regulation which regulates the incurring by the
Company or any Subsidiary of Financing Debt as contemplated by this
Agreement and the other Credit Documents.
8.15. Pioneer Fund Management Omaha Inc. Pioneer Fund Management Omaha
Inc. conducts no business and, as of the date of this Agreement, has total
assets with a fair market value (or book value, if greater) of less than $5,000,
and the Company will cause Pioneer Fund Management Omaha Inc. to be dissolved
prior to December 31, 1996.
8.16. Disclosure. Neither this Agreement nor any other Credit Document
to be furnished to the Lenders by or on behalf of the Company or any Subsidiary
in connection with the transactions contemplated hereby or by such other Credit
Document contains any untrue statement of material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.
No fact is actually known to the Company or any Subsidiary which has resulted,
or in the future (so far as the Company or any Subsidiary can reasonably
foresee) will result, or poses a material risk of resulting, in any Material
Adverse Change, except to the extent that present or future general economic
conditions may result in a Material Adverse Change.
9. Defaults.
9.1. Events of Default. The following events are referred to as "Events
of Default":
9.1.1. The Company or any other Obligor shall fail to make any
payment in respect of: (a) interest or any fee on or in respect of any
of the Credit Obligations as the same shall become due and payable, and
such failure shall continue for a period of three Banking Days or (b)
principal of any of the Credit Obligations as the same shall become
due, whether at maturity or by acceleration or otherwise.
9.1.2. The Company or any of its Subsidiaries shall fail to
perform or observe any of the provisions (a) of Section 7.4 and such
failure shall continue for a period of five Banking Days or (b) of
Sections 7.5 through 7.17.
9.1.3. The Company or any Subsidiary or any of their
respective Affiliates party to any Credit Document shall fail to
perform or observe any other covenant, agreement or provision to be
performed or observed by it under this Agreement or any other Credit
Document, and such failure shall not be rectified or cured to the
written satisfaction of the Required Lenders within 30 days after
notice thereof by the Agent to the Company.
9.1.4. Any representation or warranty of or with respect to
the Company, any Subsidiary or any of their respective Affiliates party
to any Credit Document made to
-62-
<PAGE> 70
the Lenders in, pursuant to or in connection with this Agreement or any
other Credit Document shall be materially false on the date as of which
it was made.
9.1.5. (a) The Company or any Subsidiary shall fail to make
any payment when due (after giving effect to any applicable grace
periods) in respect of any Financing Debt (other than the Credit
Obligations) outstanding in an aggregate amount of principal and
accrued interest exceeding $5,000,000;
(b) The Company or any Subsidiary shall fail to perform
or observe the terms of any agreement relating to such
Financing Debt, and such failure shall continue, without
having been duly cured, waived or consented to, beyond the
period of grace, if any, specified in such agreement, and such
failure shall permit the acceleration of such Financing Debt;
(c) Any such Financing Debt of the Company or any
Subsidiary shall be accelerated or become due or payable prior
to its stated maturity for any reason whatsoever (other than
voluntary prepayments thereof); or
(d) Any Lien on any property of the Company or any
Subsidiary securing any such Financing Debt shall be enforced
by foreclosure or similar action.
9.1.6. Except as permitted by Section 7.11, the Company, any
Core Mutual Fund Subsidiary any Pioneer Goldfields Entity or any other
Subsidiary of the Company with aggregate liabilities in excess of
$2,500,000 shall initiate any action to dissolve, liquidate or
otherwise terminate its existence.
9.1.7. Any Credit Document or Material Agreement shall cease,
for any reason (other than the scheduled termination thereof in
accordance with its terms), to be in full force and effect; or the
Company, any Subsidiary or any of their respective Affiliates party
thereto shall so assert in a judicial or similar proceeding.
9.1.8. A final judgment (a) which, with other outstanding
final judgments against the Company, the Subsidiaries and any of their
Affiliates party to any Credit Document, exceeds an aggregate of
$1,000,000 shall be rendered against the Company or any of the
Subsidiaries or Affiliates party to any Credit Document, or (b) which
grants injunctive relief that results in, or poses a material risk of
resulting in, a Material Adverse Change, and if, within 30 days after
entry thereof, such judgment shall not have been discharged or
execution thereof stayed pending appeal, or if, within 30 days after
the expiration of any such stay, such judgment shall not have been
discharged.
9.1.9. (a) In any four consecutive fiscal quarters of the
Company, Investment Advisory Contracts that account for more than 15%
of investment assets under
-63-
<PAGE> 71
management arising from all Investment Advisory Contracts for the four
fiscal quarters of the Company completed immediately prior to the
commencement of the four consecutive fiscal quarters in question shall
have been terminated during the four fiscal quarters in question and
shall not have been extended or replaced (by merger of a Fund or Trust
into another Fund or Trust or otherwise) with other Investment Advisory
Contracts with terms not materially less favorable to the Company and
its Subsidiaries and applicable fee rates not less than the previous
terms and applicable fee rates, in each case in the sole discretion of
the Required Lenders.
(b) Any Distribution Plan or Distribution Agreement shall have
been terminated and shall not have been extended or replaced with
another Distribution Plan or Distribution Agreement with terms not
materially less favorable to the Company and its Subsidiaries and
applicable fee rates not less than the terms and fee rates applicable
to Distribution Fees of the previous Distribution Plan or Distribution
Agreement so terminated, in each case in the sole discretion of the
Required Lenders.
9.1.10. ERISA Group Persons shall fail to pay when due amounts
(other than amounts being contested in good faith through appropriate
proceedings) aggregating in excess of $1,000,000 for all ERISA Group
Persons for which they shall have become liable under Title IV of ERISA
to pay to the PBGC or to a Plan; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a trustee
to be appointed to administer any Plan or a proceeding shall be
instituted by a fiduciary of any Plan against any ERISA Group Person to
enforce section 515 or 4219(c)(5) of ERISA and such proceeding shall
not have been dismissed within 30 days thereafter; or a condition shall
exist which would require the PBGC to obtain a decree adjudicating that
any Plan must be terminated.
9.1.11. The Company, any Subsidiary or any of their respective
Affiliates obligated with respect to any Credit Obligation shall:
(a) commence a voluntary case under the Bankruptcy Code
or authorize, by appropriate proceedings of its board of
directors or other governing body, the commencement of such a
voluntary case;
(b) have filed against it a petition commencing an
involuntary case under the Bankruptcy Code which shall not
have been dismissed within 60 days after the date on which
such petition is filed; or file an answer or other pleading
within such 60-day period admitting or failing to deny the
material allegations of such a petition or seeking, consenting
to or acquiescing in the relief therein provided;
(c) have entered against it an order for relief in any
involuntary case commenced under the Bankruptcy Code;
-64-
<PAGE> 72
(d) seek relief as a debtor under any applicable law,
other than the Bankruptcy Code, of any jurisdiction relating
to the liquidation or reorganization of debtors or to the
modification or alteration of the rights of creditors, or
consent to or acquiesce in such relief;
(e) have entered against it an order by a court of
competent jurisdiction (i) finding it to be bankrupt or
insolvent, (ii) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights
of its creditors or (iii) assuming custody of, or appointing a
receiver or other custodian for, all or a substantial portion
of its property; or
(f) make an assignment for the benefit of, or enter
into a composition with, its creditors, or appoint, or consent
to the appointment of, or suffer to exist a receiver or other
custodian for, all or a substantial portion of its property.
9.1.12. Any person or group of persons (within the meaning of
Section 13 or 14 of the Exchange Act, but excluding any persons who are
directors or officers of the Company on the date of this Agreement who
continue to be directors and officers) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said Act) of 20% or more of
the outstanding shares of common stock of the Company or the percentage
of the voting power required to elect a majority of the board of
directors of the Company; or during any period of twelve consecutive
calendar months, individuals who were directors of the Company on the
first day of such period shall cease to constitute a majority of the
board of the directors of the Company; or any three officers of the
Company listed on Exhibit 9.1.12 shall cease to be employed by the
Company for any reason.
9.1.13. The Company shall at any time cease to beneficially
own either (i) a controlling interest in the Pioneer Goldfields
Entities or (ii) a beneficial ownership interest in all of the Core
Mutual Fund Subsidiaries at least equal to that existing on the date
hereof (or at the time such Core Mutual Fund Subsidiary becomes a
Subsidiary of the Company).
9.1.14. Any Fund or Trust shall cease to be qualified to be
taxed as a regulated investment company under subchapter M of the Code.
9.1.15. Any Material Adverse Change shall have occurred, or
any event or events shall have occurred which could reasonably be
expected, individually or in the aggregate, to cause a Material Adverse
Change.
9.2. Certain Actions Following an Event of Default. If any one or more
Events of Default shall occur, then in each and every such case:
-65-
<PAGE> 73
9.2.1. No Obligation to Extend Credit. The Agent may (and upon
written request of the Required Lenders shall) terminate the
obligations of the Lenders to make any further extensions of credit
under the Credit Documents by furnishing notice thereof to the Company;
provided, however, that if a Bankruptcy Default shall have occurred,
such obligations shall automatically terminate.
9.2.2. Specific Performance; Exercise of Rights. The Agent may
(and upon written request of the Required Lenders shall) proceed to
protect and enforce the Lenders' rights by suit in equity, action at
law and/or other appropriate proceeding, either for specific
performance of any covenant or condition contained in this Agreement or
any other Credit Document or in any instrument or assignment delivered
to the Lenders pursuant to this Agreement or any other Credit Document,
or in aid of the exercise of any power granted in this Agreement or any
other Credit Document or any such instrument or assignment.
9.2.3. Acceleration. The Agent on behalf of the Lenders may
(and upon written request of the Required Lenders shall) by notice in
writing to the Company declare all or any part of the unpaid balance of
the Credit Obligations then outstanding to be immediately due and
payable, and thereupon such unpaid balance or part thereof shall become
so due and payable without presentment, protest or further demand or
notice of any kind, all of which are expressly waived; provided,
however, that if a Bankruptcy Default shall have occurred, the unpaid
balance of the Credit Obligations shall automatically become
immediately due and payable without presentment, protest or further
demand or notice of any kind, all of which are expressly waived.
9.2.4. Enforcement of Payment; Credit Security; Setoff. The
Agent may (and upon written request of the Required Lenders shall)
proceed to enforce payment of the Credit Obligations in such manner as
it may elect. The Lenders may offset and apply toward the payment of
the Credit Obligations (and/or toward the curing of any Event of
Default) any Indebtedness from the Lenders to the Company and its
Subsidiaries, including any Indebtedness represented by deposits in any
account maintained with the Lenders (except with respect to Pioneer
Capital Corporation, Pioneer Ventures Limited Partnership and Pioneer
Ventures Limited Partnership II to the extent not permitted by any
applicable law or regulation, including without limitation any
regulation imposed by the Small Business Administration), regardless of
the adequacy of any security for the Credit Obligations. The Lenders
shall have no duty to determine the adequacy of any such security in
connection with any such offset.
9.2.5. Cumulative Remedies. To the extent not prohibited by
applicable law which cannot be waived, all of the Lenders' rights
hereunder and under each other Credit Document shall be cumulative.
-66-
<PAGE> 74
9.3. Annulment of Defaults. Any Default or Event of Default shall be
deemed to exist and to be continuing for any purpose of this Agreement until the
Required Lenders or the Agent (with any consent of the Required Lenders) shall
have waived such Default or Event of Default in writing, stated in writing that
the same has been cured to such Lenders' reasonable satisfaction or entered into
an amendment to this Agreement which by its express terms cures such Default or
Event of Default. No such action by the Lenders or the Agent shall extend to or
affect any subsequent Default or Event of Default or impair any rights of the
Lenders upon the occurrence thereof. The making of any extension of credit
during the existence of any Default or Event of Default shall not constitute a
waiver thereof.
9.4. Waivers. The Company waives to the extent not prohibited by the
provisions of applicable law that cannot be waived:
(a) all presentments, demands for performance, notices of
nonperformance (except to the extent required by the provisions of this
Agreement or any other Credit Document), protests, notices of protest
and notices of dishonor;
(b) any requirement of diligence or promptness on the part of
any Lender in the enforcement of its rights under this Agreement, the
Notes or any other Credit Document;
(c) any and all notices of every kind and description which
may be required to be given by any statute or rule of law; and
(d) any defense (other than indefeasible payment in full)
which it may now or hereafter have with respect to the Credit
Obligations.
10. Expenses; Indemnity.
10.1. Expenses. Whether or not the transactions contemplated hereby
shall be consummated, the Company will pay:
(a) all reasonable expenses of the Agent (including the
out-of-pocket expenses related to forming the group of Lenders and
reasonable fees and disbursements of the special counsel to the Agent)
in connection with the preparation and duplication of this Agreement
and each other Credit Document, examinations by, and reports of, the
Agent's commercial financial examiners (limited to not more than one
per year prior to the existence of a Default), the transactions
contemplated hereby and thereby and operations hereunder and thereunder
(other than for assignments pursuant to Section 12.1.1);
-67-
<PAGE> 75
(b) all recording and filing fees and transfer and documentary
stamp and similar taxes at any time payable in respect of this
Agreement, any other Credit Document or the incurrence of the Credit
Obligations; and
(c) to the extent not prohibited by applicable law that cannot
be waived, all other reasonable expenses incurred by any Lender or the
holder of any Credit Obligation in connection with the enforcement or
protection of any rights hereunder or under any other Credit Document,
including costs of collection and reasonable attorneys' fees (including
a reasonable allowance for the hourly cost of attorneys employed by any
Lender on a salaried basis) and expenses.
10.2. General Indemnity. The Company will indemnify each Lender and
hold them harmless from any liability, loss or damage resulting from the
violation by the Company of Section 2.4. The Company will also indemnify each
Lender, each of the Lenders' directors, officers, employees, affiliates, agents
and each Person, if any, who controls any Lender (each Lender and each of such
directors, officers, employees, affiliates, agents and control Persons is
referred to as an "Indemnified Party") and hold each of them harmless from and
against any and all losses, claims, damages, liabilities and expenses (including
reasonable fees and disbursements of counsel with whom any Indemnified Party may
consult in connection therewith and all reasonable expenses of litigation or
preparation therefor) which any Indemnified Party may become subject to arising
out of or in connection with (a) such Indemnified Party's compliance with or
contest of any subpoena or other process issued against it in any proceeding
involving the Company or any Subsidiary or their Affiliates arising from this
Agreement or any other Credit Document, the transactions contemplated hereby and
thereby or the operations hereunder or thereunder or (b) any litigation or
investigation involving the Company, any Subsidiaries or their Affiliates, or
any officer, director or employee thereof, other than litigation commenced by
the Company against any Lender which seeks enforcement of any of the rights of
the Company hereunder or under any other Credit Document and is determined
adversely to any Lender in a final nonappealable judgment and except to the
extent such claims, damages, liabilities and expenses result from the Agent's or
a Lender's, as the case may be, gross negligence or willful misconduct.
11. Operations.
11.1. Interests in Credits. The percentage interest of each Lender in
the Loan shall be computed based on the maximum principal amount for each Lender
as set forth in Exhibit
-68-
<PAGE> 76
11.1. The foregoing percentage interests, as otherwise adjusted as the Lenders
may from time to time agree among themselves, or pursuant to Section 12, are
referred to as the "Percentage Interests" with respect to all or any portion of
the Loan. References in any Credit Document to the Lenders' respective
Percentage Interests are to such interests as from time to time in effect.
11.2. Agent's Authority to Act, etc. Each of the Lenders appoints and
authorizes the Agent to act for the Lenders as the Lenders' Agent in connection
with the transactions contemplated by this Agreement and the other Credit
Documents on the terms set forth herein. In acting hereunder, the Agent is
acting for its own account to the extent of its Percentage Interest and for the
accounts of each other Lender to the extent of the Lenders' respective
Percentage Interests, and all action in connection with the enforcement of, or
the exercise of any remedies (other than the Lenders' rights of set-off as
provided in Section 9.2.4 or in any Credit Document) in respect of the Credit
Obligations and Credit Documents shall be taken by the Agent.
11.3. Company to Pay Agent, etc. The Company shall be fully protected
in making all payments in respect of the Credit Obligations to the Agent, in
relying upon consents, modifications and amendments executed by the Agent
purportedly on the Lenders' behalf, and in dealing with the Agent as herein
provided. The Agent shall charge the accounts of the Company, on the dates when
the amounts thereof become due and payable, with the amounts of the principal of
and interest on the Loan, commitment fees, agent's fees and upon notice to the
Company, any other fees and amounts owing under any Credit Document.
11.4. Lender Operations for Advances, etc.
11.4.1. Advances. On each Closing Date, each Lender, upon
notice by the Agent, given promptly after its receipt of the borrowing
request, shall advance to the Agent in immediately available funds such
Lender's Percentage Interest in the portion of the Loan advanced on
such Closing Date prior to 1:00 p.m. (Boston time). If such funds are
not received at such time, but all the conditions set forth in Section
5 have been satisfied, each Lender hereby authorizes and requests the
Agent to advance for such Lender's account, pursuant to the terms
hereof, such Lender's respective Percentage Interest in such portion of
the Loan and agrees to reimburse the Agent in immediately available
funds for the amount thereof prior to 3:00 p.m. (Boston time) on the
day such portion of the Loan is advanced hereunder; provided, however,
that the Agent is not authorized to make any such advance for the
account of any Lender who has previously notified the Agent in writing
that such Lender will not be performing its obligations to make further
advances hereunder.
11.4.2. Agent to Allocate Payments, etc. All payments of
principal and interest in respect of the extensions of credit made
pursuant to this Agreement, commitment fees and other fees under this
Agreement shall, as a matter of
-69-
<PAGE> 77
convenience, be made by the Company to the Agent in immediately
available funds. The share of each Lender shall be credited to such
Lender by the Agent in immediately available funds in such manner that
the principal amount of the Credit Obligations to be paid shall be paid
proportionately in accordance with the Lenders' respective Percentage
Interests in such Credit Obligations. Under no circumstances shall any
Lender be required to produce or present its Notes as evidence of its
interests in the Credit Obligations in any action or proceeding
relating to the Credit Obligations.
11.4.3. Delinquent Lenders; Nonperforming Lenders. In the
event that any Lender fails to reimburse the Agent pursuant to Section
11.4.1 for the Percentage Interest of such Lender (a "Delinquent
Lender") in any credit advanced by the Agent pursuant hereto, overdue
amounts (the "Delinquent Payment") due from the Delinquent Lender to
the Agent shall bear interest, payable by the Delinquent Lender on
demand, at a per annum rate equal to (a) the Federal Funds Rate for the
first three days overdue and (b) the sum of 2% plus the Federal Funds
Rate for any longer period. Such interest shall be payable to the Agent
for its own account for the period commencing on the date of the
Delinquent Payment and ending on the date the Delinquent Lender
reimburses the Agent on account of the Delinquent Payment (to the
extent not paid by the Company as provided below) and the accrued
interest thereon (the "Delinquency Period"), whether pursuant to the
assignments referred to below or otherwise. Upon notice by the Agent,
the Company will pay to the Agent the principal (but not the interest)
portion of the Delinquent Payment. During the Delinquency Period, in
order to make reimbursements for the Delinquent Payment and accrued
interest thereon, the Delinquent Lender shall be deemed to have
assigned to the Agent all payments made by the Company under Section 4
which would have thereafter otherwise been payable under the Credit
Documents to the Delinquent Lender. During any other period in which
any Lender is not performing its obligations to extend credit under
Section 2 (a "Nonperforming Lender"), the Nonperforming Lender shall be
deemed to have assigned to each Lender that is not a Nonperforming
Lender (a "Performing Lender") all payments made by the Company under
Section 4 which would have thereafter otherwise been payable under the
Credit Documents to the Nonperforming Lender, and the Agent shall
credit a portion of such payments to each Performing Lender in an
amount equal to the Percentage Interest of such Performing Lender
divided by one minus the Percentage Interest of the Nonperforming
Lender until the respective portions of the Loan owed to all the
Lenders are the same as the Percentage Interests of the Lenders
immediately prior to the failure of the Nonperforming Lender to perform
its obligations under Section 2. The foregoing provisions shall be in
addition to any other remedies the Agent, the Performing Lenders or the
Company may have under law or equity against the Delinquent Lender as a
result of the Delinquent
-70-
<PAGE> 78
Payment or against the Nonperforming Lender as a result of its failure
to perform its obligations under Section 2.
11.5. Sharing of Payments, etc. Each Lender agrees that (a) if by
exercising any right of set-off or counterclaim or otherwise, it shall receive
payment of a proportion of the aggregate amount of principal, interest and fees
due with respect to its Percentage Interest in the Loan which is greater than
the proportion received by any other Lender in respect of the aggregate amount
of principal, interest and fees due with respect to the Percentage Interest of
such other Lender and (b) if such inequality shall continue for more than 10
days, the Lender receiving such proportionately greater payment shall purchase
participations in the Percentage Interests in the Loan held by the other
Lenders, and such other adjustments shall be made from time to time (including
rescission of such purchases of participations in the event the unequal
payment originally received is recovered from such Lender through bankruptcy
proceedings or otherwise), as may be required so that all such payments of
principal, interest and fees with respect to the Loan held by the Lenders shall
be shared by the Lenders pro rata in accordance with their respective Percentage
Interests; provided, however, that this Section 11.5 shall not impair the right
of any Lender to exercise any right of set-off or counterclaim it may have and
to apply the amount subject to such exercise to the payment of Indebtedness of
the Company other than the Company's Indebtedness with respect to the Loan. The
Company agrees, to the fullest extent permitted by applicable law, that any
Credit Participant and any Lender purchasing a participation from another Lender
pursuant to this Section 11.5 may exercise all rights of payment (including the
right of set-off), and shall be obligated to share payments under this Section
11.5, with respect to its participation as fully as if such Credit Participant
or such Lender were the direct creditor of the Company and a Lender hereunder in
the amount of such participation.
11.6. Amendments, Consents, Waivers, etc. Except as otherwise set forth
herein and subject to Section 11.4.2(c), the Agent may (and upon the written
request of the Required Lenders described in paragraph (a) or (b) below, the
Agent shall) take or refrain from taking any action under this Agreement or any
other Credit Document, including giving its written consent to any modification
of or amendment to and waiving in writing compliance with any covenant or
condition in this Agreement or any other Credit Document or any Default or Event
of Default, all of which actions shall be binding upon all of the Lenders;
provided, however, that:
(a) Except as provided below, without the written consent of
Lenders owning at least a majority of the Percentage Interests, no
modification of or amendment to, or consent with respect to or waiver
of compliance with, any of the Credit Documents or waiver of a Default
or Event of Default shall be made.
(b) Without the written consent of such Lenders as own 100% of
the Percentage Interests (other than Delinquent Lenders during the
existence of a
-71-
<PAGE> 79
Delinquency Period so long as such Delinquent Lender is treated the
same as the other Lenders with respect to any actions enumerated
below):
(i) No reduction in the interest rate on any portion
of the Loan or in commitment fees shall be made.
(ii) No extension or postponement of the stated time
of payment of all or any portion of the Loan or interest
thereon or any commitment fees shall be made.
(iii) No increase in the amount, or extension of the
term, of the Commitments beyond that provided for under
Section 2 shall be made.
(iv) No amendment to or modification of Section 7.16
(including the pricing structure set forth in Exhibit 7.16 to
the extent not amended in accordance with Section 7.16) or
this Section 11.6(c) shall be made.
(v) No assignment by the Company of its rights or
delegation of its duties under any Credit Document shall be
made.
(vi) No amendment to or modification of this Section
11.6 shall be made.
(vii) No modification or release of the obligations
of the Guarantors pursuant to Section 6 shall be made.
11.7. Agent's Resignation. The Agent may resign at any time by giving
at least 60 days' prior written notice of its intention to do so to each other
of the Lenders and upon the appointment by the Required Lenders of a successor
Agent satisfactory to the Company. If no successor Agent shall have been so
appointed and shall have accepted such appointment within 45 days after the
retiring Agent's giving of such notice of resignation, then the retiring Agent
may with the consent of the Company, which shall not be unreasonably withheld,
appoint a successor Agent which shall be a bank or a trust company having a
combined capital, surplus and undivided profit of at least $500,000,000;
provided, however, that any successor Agent appointed under this sentence may be
removed upon the written request of the Required Lenders, which request shall
also appoint a successor Agent satisfactory to the Company. Upon the appointment
of a new Agent hereunder, the term "Agent" shall for all purposes of this
Agreement thereafter mean such successor. After any retiring Agent's resignation
hereunder as Agent, or the removal hereunder of any successor Agent, the
provisions of this Agreement shall continue to inure to the benefit of such
Agent as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement.
11.8. Concerning the Agent.
-72-
<PAGE> 80
11.8.1. Action in Good Faith, etc. The Agent and its officers,
directors, employees and agents shall be under no liability to any of
the Lenders or to any future holder of any interest in the Credit
Obligations for any action or failure to act taken or suffered in good
faith, and any action or failure to act in accordance with an opinion
of its counsel shall conclusively be deemed to be in good faith. The
Agent shall in all cases be entitled to rely, and shall be fully
protected in relying, on instructions given to the Agent by the
required holders of Credit Obligations as provided in this Agreement.
11.8.2. No Implied Duties, etc. The Agent shall have and may
exercise such powers as are specifically delegated to the Agent under
this Agreement or any other Credit Document together with all other
powers incidental thereto. The Agent shall have no implied duties to
any Person or any obligation to take any action under this Agreement or
any other Credit Document except for action specifically provided for
in this Agreement or any other Credit Document to be taken by the
Agent. Before taking any action under this Agreement or any other
Credit Document, the Agent may request an appropriate specific
indemnity satisfactory to it from each Lender in addition to the
general indemnity provided for in Section 11.11; provided, however,
that no such indemnity shall extend to actions or omissions which are
taken by the Agent with gross negligence or willful misconduct. Until
the Agent has received such specific indemnity, the Agent shall not be
obligated to take (although it may in its sole discretion take) any
such action under this Agreement or any other Credit Document. Each
Lender confirms that the Agent does not have a fiduciary relationship
to it under the Credit Documents. The Company confirms that neither the
Agent nor any other Lender has a fiduciary relationship to it under the
Credit Documents.
11.8.3. Validity, etc. Subject to Section 11.8.1, the Agent
shall not be responsible to any Lender or any future holder of any
interest in the Credit Obligations (a) for the legality, validity,
enforceability or effectiveness of this Agreement or any other Credit
Document, (b) for any recitals, reports, representations, warranties or
statements contained in or made in connection with this Agreement or
any other Credit Document, (c) for the existence or value of any assets
included in any security for the Credit Obligations, (d) for the
perfection or effectiveness of any Lien purported to be included in
such security or (e) for the specification or failure to specify any
particular assets to be included in such security.
11.8.4. Compliance. The Agent shall not be obligated to
ascertain or inquire as to the performance or observance of any of the
terms of this Agreement or any other Credit Document; and in connection
with any extension of credit under this Agreement or any other Credit
Document, the Agent shall be fully protected in relying on a
certificate of the Company as to the fulfillment by the Company of any
conditions to such extension of credit.
-73-
<PAGE> 81
11.8.5. Employment of Agents and Counsel. The Agent may
execute any of its duties as Agent under this Agreement or any other
Credit Document by or through employees, agents and attorneys-in-fact
and shall not be responsible to any of the Lenders, the Company or any
Subsidiary (except as to money or securities received by the Agent or
the Agent's authorized agents) for the default or misconduct of any
such agents or attorneys-in-fact selected by the Agent with reasonable
care. The Agent shall be entitled to advice of counsel concerning all
matters pertaining to the agency hereby created and its duties
hereunder or under any other Credit Document.
11.8.6. Reliance on Documents and Counsel. The Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
affidavit, certificate, cablegram, consent, instrument, letter, notice,
order, document, statement, telecopy, telegram, telex or teletype
message or writing reasonably believed in good faith by the Agent to be
genuine and correct and to have been signed, sent or made by the Person
in question, including any telephonic or oral statement made by such
Person, and, with respect to legal matters, upon the opinion of counsel
selected by the Agent.
11.8.7. Agent's Reimbursement. Each of the Lenders severally
agrees to reimburse the Agent, in the amount of such Lender's
Percentage Interest, for any reasonable expenses not reimbursed by the
Company (without limiting the obligation of the Company to make such
reimbursement): (a) for which the Agent is entitled to reimbursement by
the Company under this Agreement or any other Credit Document, and (b)
after the occurrence of a Default, for any other reasonable expenses
incurred by the Agent on the Lenders' behalf in connection with the
enforcement of the Lenders' rights under this Agreement or any other
Credit Document.
11.8.8. Agent's Fees. The Company shall pay to the Agent for
its own account the amounts on the Initial Closing Date and thereafter
as separately agreed between the Company and the Agent.
11.9. Rights as a Lender. With respect to any credit extended by it
hereunder, Bank of Boston shall have the same rights, obligations and powers
hereunder as any other Lender and may exercise such rights and powers as though
it were not the Agent, and unless the context otherwise specifies, Bank of
Boston shall be treated in its individual capacity as though it were not the
Agent hereunder. Without limiting the generality of the foregoing, the
Percentage Interest of Bank of Boston shall be included in any computations of
Percentage Interests. Bank of Boston and its Affiliates may accept deposits
from, lend money to, act as trustee for and generally engage in any kind of
banking or trust business with the Company, any Subsidiary or any Affiliate of
any of them and any Person who may do business with or own an equity interest in
the Company, any of the Subsidiaries or any Affiliate of any of them, all as if
Bank of Boston were not the Agent and without any duty to account therefor to
the other Lenders.
-74-
<PAGE> 82
11.10. Independent Credit Decision. Each of the Lenders acknowledges
that it has independently and without reliance upon the Agent, based on the
financial statements and other documents referred to in Section 8.2, on the
other representations and warranties contained herein and on such other
information with respect to the Company and its Subsidiaries as such Lender
deemed appropriate, made such Lender's own credit analysis and decision to enter
into this Agreement and to make the extensions of credit provided for hereunder.
Each Lender represents to the Agent that such Lender will continue to make its
own independent credit and other decisions in taking or not taking action under
this Agreement or any other Credit Document. Each Lender expressly acknowledges
that neither the Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates has made any representations or warranties to
such Lender, and no act by the Agent taken under this Agreement or any other
Credit Document, including any review of the affairs of the Company and its
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agent. Except for notices, reports and other documents expressly required to
be furnished to each Lender by the Agent under this Agreement or any other
Credit Document, the Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
operations, property, condition, financial or otherwise, or credit worthiness of
the Company or any Subsidiary which may come into the possession of the Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
11.11. Indemnification. The holders of the Credit Obligations hereby
agree to indemnify the Agent (to the extent not reimbursed by the Company and
without limiting the obligation of the Company to do so), pro rata according to
their respective Percentage Interests, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time be
imposed on, incurred by or asserted against the Agent relating to or arising out
of this Agreement, any other Credit Document, the transactions contemplated
hereby or thereby, or any action taken or omitted by the Agent in connection
with any of the foregoing; provided, however, that the foregoing shall not
extend to actions or omissions which are taken by the Agent with gross
negligence or willful misconduct.
12. Successors and Assigns; Lender Assignments and Participations. Any reference
in this Agreement to any of the parties hereto shall be deemed to include the
successors and assigns of such party, and all covenants and agreements by or on
behalf of the Company, the Agent or the Lenders that are contained in this
Agreement shall bind and inure to the benefit of their respective successors and
assigns; provided, however, that (a) the Company may not assign its rights or
obligations under this Agreement, and (b) the Lenders shall be not entitled to
assign their respective Percentage Interests in the Loan hereunder except as set
forth below in this Section 12.
12.1. Assignments by Lenders.
-75-
<PAGE> 83
12.1.1. Assignees and Assignment Procedures. Each Lender may
with the consent of the Agent and, if no Default exists, the Company
(which consent of the Company will not be unreasonably withheld), in
compliance with applicable laws in connection with such assignment,
assign to one or more commercial banks or other financial institutions
(other than mutual funds) (each, an "Assignee") all or a portion of its
interests, rights and obligations under this Agreement and the other
Credit Documents, including its Percentage Interest in the Loan;
provided, however, that:
(i) the aggregate amount of the Commitment of the assigning
Lender subject to each such assignment to any Assignee other than
another Lender (determined as of the date the Assignment and Acceptance
with respect to such assignment is delivered to the Agent) shall be not
less than $5,000,000 and in increments of $1,000,000;
(ii) the parties to each such assignment shall execute and
deliver to the Agent an Assignment and Acceptance (the "Assignment and
Acceptance") substantially in the form of Exhibit 12.1.1 together with
the Note or Notes subject to such assignment and a processing and
recordation fee of $3,000 from the Lenders; provided, however, that no
such processing and recording fee shall be payable upon an assignment
effected pursuant to Section 3.4; and
(iii) any assignment of a Percentage Interest in the Loan
shall be pro rata between such Lender's Percentage Interest in the B
Share Loan and the Revolving Loan.
Upon acceptance and recording pursuant to Section 12.1.4, from and
after the effective date specified in each Assignment and Acceptance
(which effective date shall be at least five Banking Days after the
execution thereof unless waived by the Agent):
(1) the Assignee shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender under this Agreement and
(2) the assigning Lender shall, to the extent
provided in such assignment, be released from its obligations
under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto but
shall continue to be entitled to the benefits of Sections
3.2.4, 3.2.6, 3.4 and 10, as well as to any fees accrued for
its account hereunder and not yet paid).
12.1.2. Terms of Assignment and Acceptance. By executing and
delivering an Assignment and Acceptance, the assigning Lender and
Assignee shall be deemed to confirm to and agree with each other and
the other parties hereto as follows:
-76-
<PAGE> 84
(a) other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in
connection with this Agreement, any other Credit Document or any other
instrument or document furnished pursuant hereto or thereto or the
execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement, any other Credit Document or any other
instrument or document furnished pursuant hereto or thereto;
(b) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition
of the Company and its Subsidiaries or the performance or observance by
the Company or any Subsidiary of any of their obligations under this
Agreement, any other Credit Document or any other instrument or
document furnished pursuant hereto or thereto;
(c) such Assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 7.4 and such other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance;
(d) such Assignee will independently and without reliance upon
the Agent, such assigning Lender or any other Lender, and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking
action under this Agreement;
(e) such Assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under
this Agreement as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and
(f) such Assignee agrees that it will perform in accordance
with the terms of this Agreement all the obligations which are required
to be performed by it as a Lender, including any requirements under
Section 14.
12.1.3. Register. The Agent shall maintain at the Boston
Office a register (the "Register") for the recordation of (a) the names
and addresses of the Lenders and the Assignees which assume rights and
obligations pursuant to an assignment under Section 12.1.1, (b) the
Percentage Interest of each such Lender as set forth in Section 11.1
and (c) the amount of the Loan owing to each Lender from time to time.
The entries in the Register shall be conclusive, in the absence of
manifest error, and the Company, the Agent and the Lenders may treat
each Person whose name is registered therein for all
-77-
<PAGE> 85
purposes as a party to this Agreement. The Register shall be available
for inspection by the Company or any Lender at any reasonable time and
from time to time upon reasonable prior notice.
12.1.4. Acceptance of Assignment and Assumption. Upon its
receipt of a completed Assignment and Acceptance executed by an
assigning Lender and an Assignee together with the Note or Notes
subject to such assignment, and the processing and recordation fee
referred to in Section 12.1.1, the Agent shall (a) accept such
Assignment and Acceptance, (b) record the information contained therein
in the Register and (c) give prompt notice thereof to the Company.
Within five Banking Days after receipt of notice, the Company shall
execute and deliver to the Agent, in exchange for the surrendered Note
or Notes, a new Note or Notes to the order of such Assignee in a
principal amount equal to the applicable Commitment and Loan assumed by
it pursuant to such Assignment and Acceptance and, if the assigning
Lender has retained a Commitment and Loan, a new Note to the order of
such assigning Lender in a principal amount equal to the applicable
Commitment and Loan retained by it. Such new Note or Notes shall be in
an aggregate principal amount equal to the aggregate principal amount
of such surrendered Note or Notes, and shall be dated the date of the
surrendered Notes which they replace.
12.1.5. Federal Reserve Bank. Notwithstanding the foregoing
provisions of this Section 12, any Lender may at any time pledge or
assign all or any portion of such Lender's rights under this Agreement
and the other Credit Documents to a Federal Reserve Bank; provided,
however, that no such pledge or assignment shall release such Lender
from such Lender's obligations hereunder or under any other Credit
Document.
12.1.6. Further Assurances. The Company and its Subsidiaries
shall sign such documents and take such other actions from time to time
reasonably requested by an Assignee to enable it to share in the
benefits of the rights created by the Credit Documents.
12.2. Credit Participants. Each Lender may, without the consent of the
Company or the Agent, in compliance with applicable laws in connection with such
participation, sell to one or more Qualified Institutional Buyers (each a
"Credit Participant") participations in all or a portion of its interests,
rights and obligations under this Agreement and the other Credit Documents
(including all or a portion of its Commitment and the Loan owing to it and the
Notes held by it); provided, however, that:
(a) such Lender's obligations under this Agreement shall
remain unchanged;
(b) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations;
-78-
<PAGE> 86
(c) the Credit Participant shall be entitled to the benefit of
the cost protection provisions contained in Sections 3.2.4, 3.2.6, 3.4
and 10, but shall not be entitled to receive any greater payment
thereunder than the selling Lender would have been entitled to receive
with respect to the interest so sold if such interest had not been
sold; and
(d) the Company, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement, and
such Lender shall retain the sole right to enforce the obligations of
the Company relating to the Loan and to approve any amendment,
modification or waiver of any provision of this Agreement (except that
the consent of the Credit Participant shall be required for any consent
pursuant to Section 11.6(b)).
Such Lender shall promptly give notice of such participation to the Company and
the Agent.
13. Confidentiality. Each Lender agrees that it will make no disclosure of
confidential information furnished to it by the Company or any Subsidiary which
is identified as confidential unless such information is or shall have become
public other than by the actions of such Lender, or was otherwise known to such
Lender prior to its disclosure, except:
(a) in connection with operations under or the enforcement of this
Agreement or any other Credit Document;
(b) to the applicable bank regulatory or other governmental agencies
relating to such Lender or pursuant to any statutory or regulatory requirement;
(c) pursuant to any mandatory court order, subpoena or other legal
process of which the Lender will give, if practicable and permissible under
applicable law, prompt notice to the Company;
(c) to any parent or corporate Affiliate of such Lender or to any
Credit Participant, proposed Credit Participant or proposed Assignee; provided,
however, that any such Person shall agree to comply with the restrictions set
forth in this Section 13 with respect to such information;
(d) to its independent counsel, auditors and other professional
advisors with an instruction to such Person to keep such information
confidential;
(e) in connection with any litigation or arbitration proceedings to
which any Lender, the Company or any of its Subsidiaries is a party arising out
of this Agreement or any other Credit Document; and
(f) with the prior written consent of the Company, to any other
Person.
-79-
<PAGE> 87
14. Foreign Persons. If any assignment is made under Section 12.1 to any Person
that is not incorporated or organized under the laws of the United States of
America or a state thereof, the Lender making such assignment shall cause such
Person to agree that, on or prior to the date of such assignment, it will
deliver to the Company and the Agent the following:
(a) Two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224 or successor form, as the case may
be, certifying in each case that such Person is entitled to receive
payments under this Agreement and the Notes payable to it, without
deduction or withholding of any United States federal income taxes.
(b) A duly completed Internal Revenue Service Form W-8 or W-9
or successor form, as the case may be, to establish an exemption from
United States backup withholding tax.
Each such Person that delivers to the Company and the Agent a Form 1001
or 4224 and Form W-8 or W-9 pursuant to this Section 13 further undertakes to
deliver to the Company and the Agent two further copies of Form 1001 or 4224 and
Form W-8 or W-9, or successor applicable forms, or other manner of
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Company and the
Agent. Such Form 1001 or 4224 shall certify that such Person is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes. The foregoing documents need not be
delivered in the event any change in treaty, law or regulation or official
interpretation thereof has occurred which renders all such forms inapplicable or
which would prevent such transferee from delivering any such form with respect
to it, or such transferee advises the Company that it is not capable of
receiving payments without any deduction or withholding of United States federal
income tax, and in the case of a Form W-8 or W-9, establishing an exemption from
United States backup withholding tax. Until such time as the Company and the
Agent have received such forms indicating that payments hereunder are not
subject to United States withholding tax or are subject to such tax at a rate
reduced by an applicable tax treaty, the Company shall withhold taxes from such
payments at the applicable statutory rate.
15. Notices. Except as otherwise specified in this Agreement, any notice
required to be given pursuant to this Agreement shall be given in writing. Any
notice, demand or other communication in connection with this Agreement shall be
deemed to be given if given in writing (including telex, telecopy or similar
teletransmission) addressed as provided below (or to the addressee at such other
address as the addressee shall have specified by notice actually received by the
addressor), and if either (a) actually delivered in fully legible form to such
address (evidenced in the case of a telex by receipt of the correct answerback)
or (b) in the case of a letter, five days shall have elapsed after the same
shall have been deposited in the United States mails, with first-class postage
prepaid and registered or certified.
-80-
<PAGE> 88
If to the Company or any Subsidiary, to it at its address set forth in
Exhibit 8.1 (as supplemented pursuant to Sections 7.4.1 and 7.4.2), to the
attention of the chief financial officer, with a copy to the attention of the
chief legal officer.
If to the Agent or any Lender, to it at its address set forth on the
signature page of this Agreement, to the attention of the account officer
specified on the signature page, with a copy to the Agent.
16. Course of Dealing; Amendments and Waivers. No course of dealing between any
Lender, on the one hand, and the Company or any Subsidiary or Affiliate of the
Company, on the other hand, shall operate as a waiver of any of the Lenders'
rights under this Agreement or any other Credit Document or with respect to the
Credit Obligations. The Company acknowledges that if the Lenders, without being
required to do so by this Agreement or any other Credit Document, give any
notice or information to, or obtain any consent from, any of the Company and its
Subsidiaries or any of their respective Affiliates, the Lenders shall not by
implication have amended, waived or modified any provision of this Agreement or
any other Credit Document, or created any duty to give any such notice or
information or to obtain any such consent on any future occasion. No delay or
omission in exercising any right, or any partial exercise of any right, on the
part of any Lender under this Agreement or any other Credit Document or with
respect to the Credit Obligations shall operate as a waiver of such right or any
other right hereunder or thereunder. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right or remedy on any future occasion.
No waiver, consent or amendment with respect to this Agreement or any other
Credit Document shall be binding unless it is in writing and signed by the Agent
or the holders of the required Credit Obligations.
17. Defeasance. When all Credit Obligations have been paid, performed and
reasonably determined by the Lenders to have been indefeasibly discharged in
full, and if at the time no Lender continues to be committed to extend any
credit to the Company hereunder or under any other Credit Document, this
Agreement shall terminate; provided, however, that Sections 3.2.4, 3.2.6, 3.4,
10, 11.8.7, 11.11, 13, 18 and 19 shall survive the termination of this
Agreement.
18. Venue; Service of Process. Each of the Company and the Lenders:
(a) Irrevocably submits to the nonexclusive jurisdiction of
the state courts of The Commonwealth of Massachusetts and to the
nonexclusive jurisdiction of the United States District Court for the
District of Massachusetts for the purpose of any suit, action or other
proceeding arising out of or based upon this Agreement or any other
Credit Document or the subject matter hereof or thereof.
(b) Waives to the extent not prohibited by applicable law, and
agrees not to assert, by way of motion, as a defense or otherwise, in
any such proceeding brought in
-81-
<PAGE> 89
any of the above-named courts, any claim that it is not subject
personally to the jurisdiction of such court, that its property is
exempt or immune from attachment or execution, that such proceeding is
brought in an inconvenient forum, that the venue of such proceeding is
improper, or that this Agreement or any other Credit Document, or the
subject matter hereof or thereof, may not be enforced in or by such
court.
Each of the Company and the Lenders consents to service of process in any such
proceeding in any manner permitted by Chapter 223A of the General Laws of The
Commonwealth of Massachusetts and agrees that service of process by registered
or certified mail, return receipt requested, at its address specified in or
pursuant to Section 14 is reasonably calculated to give actual notice.
19. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT
CANNOT BE WAIVED, EACH OF THE COMPANY AND THE LENDERS WAIVES, AND COVENANTS THAT
IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO
TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM OR PROCEEDING ARISING
OUT OF THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR THE SUBJECT MATTER HEREOF
OR THEREOF OR ANY CREDIT OBLIGATION OR IN ANY WAY CONNECTED WITH THE DEALINGS OF
THE LENDERS OR THE COMPANY IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT, TORT OR
OTHERWISE. The Company acknowledges that it has been informed by the Lenders
that the provisions of this Section 19 constitute a material inducement upon
which each of the Lenders has relied and will rely in entering into this
Agreement and any other Credit Document, and that it has reviewed the provisions
of this Section 18 with its counsel. Any Lender or the Company may file an
original counterpart or a copy of this Section 18 with any court as written
evidence of the consent of the Company and the Lenders to the waiver of their
rights to trial by jury.
20. General. All covenants, agreements, representations and warranties made in
this Agreement or any other Credit Document or in certificates delivered
pursuant hereto or thereto shall be deemed to have been relied on by each
Lender, notwithstanding any investigation made by any Lender on its behalf, and
shall survive the execution and delivery to the Lenders hereof and thereof. The
invalidity or unenforceability of any provision hereof shall not affect the
validity or enforceability of any other provision hereof. The headings in this
Agreement are for convenience of reference only and shall not limit or otherwise
affect the meaning hereof. This Agreement and the other Credit Documents
constitute the entire understanding of the parties with respect to the subject
matter hereof and thereof and supersede all prior and current understandings and
agreements, whether written or oral, with respect to such subject matter. This
Agreement may be executed in any number of counterparts which together shall
constitute one instrument. This Agreement shall be governed by and construed in
accordance with the laws (other than the conflict of laws rules) of The
Commonwealth of Massachusetts.
-82-
<PAGE> 90
Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as an agreement under seal as of the
date first above written.
<TABLE>
<S> <C>
THE PIONEER GROUP, INC. PIONEERING SERVICES CORP.
By /s/ William H. Keough By /s/ William H. Keough
-------------------------------------- -------------------------------
Title: Senior Vice President, Chief Title: Treasurer
Financial Officer and Treasurer
60 State Street 60 State Street
Boston, Massachusetts 02109-1820 Boston, Massachusetts 02109-1820
PIONEERING MANAGEMENT ACKNOWLEDGED WITH RESPECT TO SECTIONS
CORPORATION 7.8.12 AND 7.8.13:
By /s/ William H. Keough PIONEER GOLDFIELDS HOLDINGS, INC.
--------------------------------------
Title: Treasurer By /s/ William H. Keough
-------------------------------
60 State Street Title: Assistant Treasurer
Boston, Massachusetts 02109-1820
60 State Street
PIONEER MANAGEMENT (IRELAND) Boston, Massachusetts 02109-1820
LTD.
PIONEER GOLDFIELDS LTD.
By /s/ John F. Cogan, Jr.
-------------------------------------- By /s/ John F. Cogon, Jr.
Title: Chairman -------------------------------
Title: Chairman
60 State Street
Boston, Massachusetts 02109-1820 By /s/ John F. Lawlor
-------------------------------
PIONEER FUNDS DISTRIBUTOR, INC. Title: Director
By /s/ William H. Keough 60 State Street
-------------------------------------- Boston, Massachusetts 02109-1820
Title: Treasurer
TEBEREBIE GOLDFIELDS LTD.
60 State Street
Boston, Massachusetts 02109-1820 By /s/ John F. Cogon, Jr.
-------------------------------
Title: Chairman
By /s/ John F. Lawlor
-------------------------------
Title: Director
60 State Street
Boston, Massachusetts 02109-1820
</TABLE>
-83-
<PAGE> 91
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Stewart P. Neff
--------------------------------------
Title: Managing Director
Financial Institutions Division
100 Federal Street - 15th Floor
Boston, Massachusetts 02110
Telecopy: (617) 434-1537
Telex: 940581
THE BANK OF NEW YORK
By /s/ Alexander Dunka
--------------------------------------
Title: AVP
One Wall Street, OWS-1
Securities Industry Division
New York, NY 10286
Telecopy: (212) 809-9566
Telex:
SOCIETE GENERALE
By /s/ D.E. Littlefield
--------------------------------------
Title: D.E. Littlefield
Vice President
1221 Avenue of the Americas
New York, New York 10020
Telecopy: (212) 278-7153
-84-
<PAGE> 92
STATE STREET BANK & TRUST COMPANY
By: /s/
----------------------------------------
Title: V.P.
225 Franklin Street, 8th Floor
Asset-Based Finance
Boston, MA 02110
Telecopy: (617) 338-4041
BANQUE NATIONALE DE PARIS
By: /s/ William Shaheen
----------------------------------------
Title: Vice President
By: /s/ Laurent Vanderzyppe
----------------------------------------
Title: Assistant Vice President
499 Park Avenue, 3rd Floor
New York, 10022
Telecopy: (212) 415-9707
MELLON BANK, N.A.
By: /s/
----------------------------------------
Title: Vice President
One Mellon Bank Center
Mail Code: 1510370
Pittsburgh, PA 15258
Telecopy: (412) 234-8087
-85-
<PAGE> 93
Exhibits
Exhibit 1.126 Calculation Formula for Total Estimated Collectible Amount
Exhibit 2.1.3 Form of B Share Revolving Note
Exhibit 2.2.2 Form of B Share Term Note
Exhibit 2.3.3 Form of Revolving Note
Exhibit 5.1.3 Guarantors Contribution Agreement
Exhibit 5.3.1 Officers's Certificate
Exhibit 7.16 Pricing Structure of B Share Funds
Exhibit 8.1 The Pioneer Group and its Subsidiaries
Exhibit 8.4 Financing Debt
Exhibit 8.7 Litigation
Exhibit 9.1.12 Officers of the Company
Exhibit 11.1 Percentage Interests
Exhibit 12.1.1 Assignment and Acceptance
<PAGE> 94
EXHIBIT 1.126
QUARTERLY "B" SHARE BORROWING BASE CALCULATION
TOTAL ESTIMATED COLLECTIBLE AMOUNT
1. Calculate the Average Asset Under Management (AAUM) by averaging the prior
six months daily net asset values by Fund
2. Eight Year Projection of Assets Under Management by Quarterly Bucket
a) Calculate the six month average redemption rate by dividing the total
dollars redeemed over the prior six months by the AAUM calculated in
(1) above
b) Reduce the Assets Under Management calculated in (1) by the calculated
redemption rate (2.a.) to determine the projected AUM each year
3. Projected Annual Collection of CDSC (back-end sales charge)
a) Calculate the historical six month redemptions charged a CDSC and use
this to determine the percentage of assets redeemed in (2.b) which
are subject to a back-end charge vs those which are not
b) Apply the percentage (calculated in 3.a.) to each of the quarterly
buckets to determine the total assets redeemed each year
c) Apply the applicable CDSC rate (from Pioneer's sales fee schedule) to
the redemptions calculated in (3.b.) to determine the total
collectible CDSC amount
4. Projected Collection of Asset Based Sales Charges (ABSC)
a) Multiply 75 bpts each year to the projected AUM calculated in 2 above
5. Sum Projected CDSC and ABSC collections in 3 & 4 above for the eight year
period to determine the total collectible amount
6. Determine the Net Dealer Advances adjusted for ABSCs collected at original
cost for sales prior to the loan agreement
7. Compare the total collectible in (5) to the net dealer advances in (6) to
determine the coverage ratio
<PAGE> 95
Exhibit 2.1.3
FORM OF B SHARE REVOLVING NOTE
BRN-__
June __, 1996
FOR VALUE RECEIVED, each of the undersigned, Pioneering Management
Corporation and Pioneer Management (Ireland) Ltd., (collectively, the
"Borrowers"), jointly and severally, hereby promise to pay to _____________ (the
"Payee") or order, on the B Share Conversion Date, the aggregate unpaid
principal amount of the B Share Revolving Loan made by the Payee to the
Borrowers pursuant to the Credit Agreement referred to below. The Borrowers
jointly and severally promise to pay daily interest from the date hereof,
computed as provided in such Credit Agreement, on the aggregate principal amount
of such B Share Revolving Loan from time to time unpaid at the per annum rate
applicable to such unpaid principal amount as provided in such Credit Agreement
and to pay interest on overdue principal and, to the extent not prohibited by
applicable law, on overdue installments of interest at the rate specified in
such Credit Agreement, all such interest being payable at the times specified in
such Credit Agreement, except that all accrued interest shall be paid at the
stated or accelerated maturity hereof or upon the prepayment in full hereof.
Payments hereunder shall be made to The First National Bank of Boston, as
agent for the Payee, at 100 Federal Street, Boston, Massachusetts 02110.
All advances with respect to the B Share Revolving Loan made by the Payee
pursuant to the Credit Agreement referred to below and all repayments of the
principal thereof shall be recorded by the Payee and, prior to any transfer
hereof, appropriate notations to evidence the foregoing information with respect
to each such B Share Revolving Loan then outstanding shall be endorsed by the
Payee on the schedule attached hereto or on a continuation of such schedule
attached to and made a part hereof, provided, however, that the failure of the
Payee to make any such recordation or endorsement shall not affect the
obligations of the Borrowers under this Note, such Credit Agreement or any other
Credit Document.
This Note evidences borrowings under, and is entitled to the benefits and
security of, and is subject to the provisions of, the Credit Agreement dated as
of June __, 1996, and from time to time in effect (the "Credit Agreement"),
among The Pioneer Group, Inc., a Delaware corporation, certain of its
subsidiaries, including the Borrowers, the Payee and certain other parties. The
principal of this Note is prepayable in the amounts and under the circumstances
set forth in the Credit Agreement, and may be prepaid in whole or from time to
time in part, all as set forth in the Credit Agreement. Terms defined in the
Credit Agreement and not otherwise defined herein are used herein with the
meanings so defined.
<PAGE> 96
In case an Event of Default shall occur, the entire principal of this Note
may become or be declared due and payable in the manner and with the effect
provided in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE COMMONWEALTH OF MASSACHUSETTS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
RULES OF ANY JURISDICTION.
The parties hereto, including the Borrowers and all guarantors and
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Note, except as specifically otherwise provided in the
Credit Agreement, and assent to extensions of time of payment, or forbearance or
other indulgence without notice.
PIONEERING MANAGEMENT CORPORATION
PIONEER MANAGEMENT (IRELAND) LTD.
By
-------------------------------
Title:
-2-
<PAGE> 97
LOAN AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount Amount of Unpaid
of Principal Principal Notation
Date Loan Repaid Balance Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-3-
<PAGE> 98
Exhibit 2.2.2
FORM OF B SHARE TERM NOTE
TN-__
June __, 1996
FOR VALUE RECEIVED, each of the undersigned Pioneering Management
Corporation and Pioneer Management (Ireland) Ltd., (collectively, the
"Borrowers"), jointly and severally, hereby promise to pay to _____________ (the
"Payee") or order, on the B Share Final Maturity Date (as defined in the Credit
Agreement referred to below), the aggregate unpaid principal amount of the B
Share Term Loan made by the Payee to the Borrowers pursuant to the Credit
Agreement. The Borrowers jointly and severally promise to pay daily interest
from the date hereof, computed as provided in such Credit Agreement, on the
aggregate principal amount of such B Share Term Loan from time to time unpaid at
the per annum rate applicable to such unpaid principal amount as provided in
such Credit Agreement and to pay interest on overdue principal and, to the
extent not prohibited by applicable law, on overdue installments of interest at
the rate specified in such Credit Agreement, all such interest being payable at
the times specified in such Credit Agreement, except that all accrued interest
shall be paid at the stated or accelerated maturity hereof or upon the
prepayment in full hereof.
Payments hereunder shall be made to The First National Bank of Boston, as
agent for the Payee, at 100 Federal Street, Boston, Massachusetts 02110.
All B Share Term Loans made by the Payee pursuant to the Credit Agreement
referred to below and all repayments of the principal thereof shall be recorded
by the Payee and, prior to any transfer hereof, appropriate notations to
evidence the foregoing information with respect to each such B Share Term Loan
then outstanding shall be endorsed by the Payee on the schedule attached hereto
or on a continuation of such schedule attached to and made a part hereof;
provided, however, that the failure of the Payee to make any such recordation or
endorsement shall not affect the obligations of the Borrowers under this Note,
such Credit Agreement or any other Credit Document.
This Note evidences borrowings under, and is entitled to the benefits and
security of, and is subject to the provisions of, the Credit Agreement dated as
of June _, 1996, as from time to time in effect, (the "Credit Agreement"), among
The Pioneer Group, Inc., a Delaware corporation, certain of its subsidiaries,
including the Borrowers, the Payee and certain other parties. The principal of
this Note is prepayable in the amounts and under the circumstances set forth in
the Credit Agreement, and may be prepaid in whole or from time to time in part,
all as set forth in the Credit Agreement. Terms defined in the Credit Agreement
and not otherwise defined herein are used herein with the meanings so defined.
<PAGE> 99
In case an Event of Default shall occur, the entire principal of this
Note may become or be declared due and payable in the manner and with the effect
provided in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAWS RULES OF ANY JURISDICTION.
The parties hereto, including the undersigned makers and all guarantors
and endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Note, except as specifically otherwise provided in the
Credit Agreement, and assent to extensions of time of payment, or forbearance or
other indulgence, without notice.
PIONEERING MANAGEMENT CORPORATION
PIONEER MANAGEMENT (IRELAND) LTD.
By
-------------------------------
Title:
-2-
<PAGE> 100
LOAN AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount Amount of Unpaid
of Principal Principal Notation
Date Loan Repaid Balance Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-3-
<PAGE> 101
Exhibit 2.3.3
FORM OF REVOLVING NOTE
RN-__
June __, 1996
FOR VALUE RECEIVED, The Pioneer Group, Inc., a Delaware corporation (the
"Company"), hereby promises to pay _____________________ (the "Lender") or
order, on the Revolving Final Maturity Date (as defined in the Credit Agreement
referred to below), the aggregate unpaid principal amount of the Revolving Loans
made by the Lender to the Company pursuant to the Credit Agreement. The Company
promises to pay daily interest from the date hereof, computed as provided in
such Credit Agreement, on the aggregate principal amount of such Revolving Loans
from time to time unpaid at the per annum rate applicable to such unpaid
principal amount as provided in such Credit Agreement and to pay interest on
overdue principal and, to the extent not prohibited by applicable law, on
overdue installments of interest and fees at the rate specified in such Credit
Agreement, all such interest being payable at the times specified in such Credit
Agreement, except that all accrued interest shall be paid at the stated or
accelerated maturity hereof or upon the final prepayment in full hereof.
Payments hereunder shall be made to The First National Bank of Boston, as
agent for the payee hereof, at 100 Federal Street, Boston, MA 02110.
All Revolving Loans made by the Lender pursuant to the Credit Agreement
referred to below and all repayments of the principal thereof shall be recorded
by the Lender and, prior to any transfer hereof, appropriate notations to
evidence the foregoing information with respect to each such Revolving Loan then
outstanding shall be endorsed by the Lender on the schedule attached hereto or
on a continuation of such schedule attached to and made a part hereof; provided,
however, that the failure of the Lender to make any such recordation or
endorsement shall not affect the obligations of the Company under this Note,
such Credit Agreement or under any other Credit Document.
This Note evidences borrowings under, and is entitled to the benefits of,
and is subject to the provisions of, the Credit Agreement dated as of June __,
1996, as from time to time in effect (the "Credit Agreement"), among the
Company, the payee hereof and certain other lenders. The principal of this Note
is prepayable in the amounts and under the circumstances set forth in the Credit
Agreement, and may be prepaid in whole or from time to time in part, all as set
forth in the Credit Agreement. Terms defined in the Credit Agreement and not
otherwise defined herein are used herein with the meanings so defined.
<PAGE> 102
In case an Event of Default shall occur and be continuing, the entire
principal of this Note may become or be declared due and payable in the manner
and with the effect provided in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
(OTHER THAN THE CONFLICT OF LAWS RULES) OF THE COMMONWEALTH OF MASSACHUSETTS.
The parties hereto, including the Company and all guarantors and
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Note, except as specifically otherwise provided in the
Credit Agreement, and assent to extensions of time of payment, or forbearance or
other indulgence without notice.
THE PIONEER GROUP, INC.
By
____________________________
Title:
-2-
<PAGE> 103
LOAN AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount Amount of Unpaid
of Principal Principal Notation
Date Loan Repaid Balance Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-3-
<PAGE> 104
EXHIBIT 5.1.3
GUARANTORS CONTRIBUTION AGREEMENT
This Agreement, dated as of June __, 1996, is among each of The Pioneer
Group, Inc., a Delaware corporation, Pioneering Management Corporation and
Pioneer Management (Ireland) Ltd., (collectively, the "Borrowers"), and the
other guarantors listed on Schedule A hereto (together with the Borrowers, the
"Guarantors"), in connection with the Credit Agreement dated as of June __,
1996, as from time to time in effect (the "Credit Agreement"), among the
Borrowers, the other Guarantors, and the Lenders, including The First National
Bank of Boston as agent for itself and the other Lenders. Terms defined in the
Credit Agreement and not otherwise defined herein are used herein with the
meanings so defined.
The Guarantors agree as follows:
1. Inducement. In order to induce the Lenders to extend credit to the
Borrowers pursuant to the Credit Agreement, the Guarantors have guaranteed, to
the extent provided in the Credit Documents, the payment and performance of all
Credit Obligations. The extensions of credit by the Lenders to the Borrowers
under the Credit Agreement will directly or indirectly inure to the benefit of
each Guarantor, and the guarantees referred to in the foregoing sentence are in
pursuit of the business purposes of the Guarantor that has given such guarantee
as an integral part of the business conducted and proposed to be conducted by it
and are reasonably necessary and convenient in connection with the conduct of
the business conducted and proposed to be conducted by it. By virtue of the
foregoing and after giving effect to the probable liability of each Guarantor on
its guarantee, each Guarantor is receiving at least fair consideration and
reasonably equivalent value from the Lenders for such guarantee.
2. Contribution. The Guarantors agree that, as among themselves in their
capacity as guarantors and also with respect to the joint and several nature of
borrowings under the Credit Agreement, the ultimate responsibility for repayment
of the Credit Obligations, in the event that the Borrowers fail to pay when due
their respective Credit Obligations, shall be equitably apportioned, to the
extent consistent with the Credit Documents, among the respective Guarantors in
the proportion that each, in its capacity as a guarantor or as a joint and
several Borrower, has benefited from the extensions of credit to the respective
Borrowers by the Lenders under the Credit Agreement, or if such equitable
apportionment cannot reasonably be determined or agreed upon among the affected
Guarantors, in proportion to their respective net worths determined on or about
the date hereof (or such later date as such Guarantor becomes party hereto). In
the event that any Guarantor, in its capacity as a guarantor or as a joint and
several Borrower, pays an amount with respect to the Credit Obligations in
excess of its proportionate share as set forth in this Section 2, each other
Guarantor shall, to the extent
<PAGE> 105
consistent with the Credit Documents, make a contribution payment to such
Guarantor in an amount such that the aggregate amount paid by each Guarantor
reflects its proportionate share of the Credit Obligations. In the event of any
default by any Guarantor under this Section 2, each other Guarantor will bear,
to the extent consistent with the Credit Documents, its proportionate share of
the defaulting Guarantor's obligation under this Section 2.
3. Enforcement: Parties. This Agreement is intended to set forth only the
rights and obligations of the Guarantors among themselves and shall not in any
way affect the obligations of any Guarantor to the Lenders under the Credit
Documents (which obligations shall at all times constitute the joint and several
obligations of all the Guarantors) and, in furtherance of the foregoing, the
provisions of this Agreement shall be carried out in a manner consistent with
the requirements contained in Section 6 of the Credit Agreement. The parties
agree that, from time to time, additional Affiliates which are included as
Guarantors under the Credit Documents may be added as parties hereto (and will
also then be added to Schedule A hereto) by executing a counterpart of this
Agreement or an agreement by which such Affiliate agrees to be bound hereby, and
without further action by any party hereto or thereto.
4. Counterparts. This Agreement may be executed in any number of
counterparts, which together shall constitute one instrument.
Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as of the date first above written.
THE PIONEER GROUP, INC.
By
---------------------
Title:
PIONEERING MANAGEMENT CORPORATION
By
---------------------
Title:
PIONEER MANAGEMENT (IRELAND) LTD.
By
---------------------
Title:
PIONEERING SERVICES CORP.
By
---------------------
Title:
-2-
<PAGE> 106
SCHEDULE A
OTHER GUARANTORS
Pioneering Services Corporation
-3-
<PAGE> 107
Exhibit 5.3.1
OFFICER'S CERTIFICATE
Pursuant to Section 5.3.1 of the Credit Agreement dated as of June __,
1996, and as now in effect (the "Credit Agreement"), among The Pioneer Group,
Inc. (the "Company"), the Borrower Subsidiaries (as defined therein and,
collectively with the Company, the "Borrowers"), certain other subsidiaries of
the Company signatories thereto, The First National Bank of Boston and certain
other Lenders for which it is acting as agent, the Borrowers hereby request that
a loan be made on the date specified below (the "Closing Date") in the following
amount(s):
Closing Date:
Total amount of B Share Revolving Loan requested: $
----------
Total amount of B Share Term Loan Requested: $
----------
Total amount of Revolving Loan requested: $
----------
In connection with the foregoing request, each of the Borrowers
represents and warrants that the representations and warranties contained in
Sections 6.6 and 8 of the Credit Agreement are true and correct on and as of the
date hereof with the same force and effect as though made on and as of the date
hereof; no Default exists on the date hereof or will exist after giving effect
to the extension of credit requested hereby; as of the date hereof, no Material
Adverse Change has occurred; and, as of the date hereof, the aggregate
investment assets under management by the Company and its Subsidiaries equals or
exceeds $11,000,000,000.
Attached hereto as Schedule A are calculations demonstrating, as of the
last day of the most recently ended fiscal quarter of the Company prior to the
Closing Date, the Combined Unreimbursed Sales Commissions.
Attached hereto as Schedule B are calculations demonstrating, as of the
requested Closing Date, compliance with the financial tests set forth in Section
7.5 of the Credit Agreement.
The foregoing representations and warranties shall be deemed made by the
Borrowers on the requested Closing Date unless the Borrowers shall have notified
the Agent in writing to the contrary no later than one Banking Day prior to such
Closing Date.
Terms defined in the Credit Agreement and not otherwise defined herein
are used herein with the meanings so defined.
<PAGE> 108
This certificate has been executed by a duly authorized Executive Officer
or Financial Officer this ____ day of ____________, 19__.
THE PIONEER GROUP, INC.
By_______________________________
Title:
PIONEERING MANAGEMENT CORPORATION
By_______________________________
Title:
PIONEER MANAGEMENT (IRELAND) LTD.
By_______________________________
Title:
-2-
<PAGE> 109
SCHEDULE A
COMBINED UNREIMBURSED SALES COMMISSIONS
-3-
<PAGE> 110
SCHEDULE B
SECTION 7.5 COMPLIANCE
-4-
<PAGE> 111
EXHIBIT 7.16
B-SHARE PRICING STRUCTURE
<TABLE>
<CAPTION>
DEALER CONCESSION EIGHT YEARS SIX YEARS FIVE YEARS
- ----------------- ----------- --------- ----------
<S> <C> <C> <C>
Dealer Advances 4.0% 3.0% 2.0%
</TABLE>
ANNUAL FEES PAID BY THE FUND TO THE FUND DISTRIBUTOR AND QUALIFIED DEALERS
ANNUAL TRAIL FEES
The 400 basis point dealer concession represent two components: 1) a 25 bpt
prepaid trail and 2) a 375 basis point dealer advance. After the thirteenth
month annual trail fees are paid quarterly to qualifying dealers at a
maximum rate of 0.25% on the net assets of your clients' accounts for all
funds with the exception of Pioneer Cash Reserves A Shares, which pays
0.15%.
ASSET BASED SALES CHARGE
100 basis points are charged on an annual basis with 25 bpts paid as a trail
to qualified dealers and 75 bpts paid to the distributor except in the first
year 100 basis points are paid to the distributor (25 bpts to re-pay the
prepaid trail fee)
B-SHARES - CONTINGENT DEFERRED SALES CHARGE (CDSC)
<TABLE>
<CAPTION>
YEARS SINCE
PURCHASED EIGHT YEARS SIX YEARS FIVE YEARS
--------- ----------- --------- ----------
<S> <C> <C> <C>
First 4.0 3.0 2.0
Second 4.0 3.0 2.0
Third 3.0 2.0 1.0
Fourth 3.0 1.0 0.0
Fifth 2.0 0.0 0.0
Sixth 1.0 0.0 Converts to A
Seventh 0.0 Converts to A
Eighth 0.0
Ninth Converts to A
</TABLE>
PIONEER B-SHARE FUNDS
EIGHT YEAR PRICING STRUCTURE
---------------------------------
Pioneer II Pioneer Gold Shares
Pioneer America Income Trust Pioneer Growth Shares
Pioneer Bond Fund Pioneer Income Fund
Pioneer Capital Growth Fund Pioneer India Fund
Pioneer Cash Reserves Fund Pioneer International Growth Fund
Pioneer Emerging Markets Fund Pioneer Mid-Cap Fund
Pioneer Equity-Income Fund Pioneer Real Estate Shares
Pioneer Europe Fund Pioneer Small Company Fund
Pioneer Fund Pioneer Tax Free-Income Fund
SIX YEAR PRICING STRUCTURE
Pioneer Intermediate Tax-Free Fund
FIVE YEAR PRICING STRUCTURE
Pioneer Short-Term Income Trust
<PAGE> 112
EXHIBIT 8.1
<TABLE>
<CAPTION>
Jurisdiction
of
Name(1) Incorporation Address Jurisdiction(s)
------- ------------- ------- ---------------
<S> <C> <C> <C>
Pioneer Group, Inc. Delaware 60 State Street Massachusetts
Boston, Massachusetts 02019
Pioneering Management Delaware 60 State Street Massachusetts
Corporation(2) Boston, Massachusetts 02109
Pioneer Funds Distributor, Inc.(3) Massachusetts 60 State Sweet Massachusetts
Boston, Massachusetts 02109
Pioneering Services Corporation(4) Massachusetts 60 State Sweet Massachusetts
Boston, Massachusetts 02109
Pioneer Capital Corporation Massachusetts 60 State Street Massachusetts
Boston, Massachusetts 02109
Pioneer SBIC Corporation Massachusetts 60 State Street Massachusetts
Boston, Massachusetts 02109
Pioneer Associates, Inc. Massachusetts 60 State Street Massachusetts
Boston, Massachusetts 02109
Pioneer Plans Corporation Delaware 60 State Street Massachusetts
Boston, Massachusetts 02109
PIOGlobal Corporation Delaware 60 State Street Massachusetts
Boston, Massachusetts 02109
Pioneer Metals and Delaware 60 State Street Massachusetts
Technology, Inc Boston, Massachusetts 02109
Pioneer Investments Corporation Massachusetts 60 State Street Massachusetts
Boston, Massachusetts 02109
Pioneer International Corporation Delaware 60 State Street Massachusetts
Boston, Massachusetts 02109 Switzerland
Moscow, Russia
Pioneer Fund Management Nebraska 60 State Street Massachusetts
Company Boston, Massachusetts 02109
Pioneer Ventures Limited Massachusetts 60 State Sweet Massachusetts
Partnership Boston, Massachusetts 02109
</TABLE>
1
<PAGE> 113
<TABLE>
<CAPTION>
Jurisdiction
of
Name(1) Incorporation Address Jurisdiction(s)
------- ------------- ------- ---------------
<S> <C> <C> <C>
Pioneer Real Estate Advisors, Inc. Delaware 60 State Street Massachusetts
Boston, Massachusetts 02109 Moscow, Russia
Pioneer Exploration Limited Delaware 60 State Street Massachusetts
Boston, Massachusetts 02109
Pioneer Omega, Inc. Delaware 60 State Street Massachusetts
Boston, Massachusetts 02109
Pioneer First Russia, Inc. Delaware 60 State Street Massachusetts
Boston, Massachusetts 02109
Luscinia, Inc. Delaware 60 State Street Massachusetts
Boston, Massachusetts 02109
Theta Enterprises, Inc. Delaware 60 State Street Massachusetts
Boston, Massachusetts 02109
Pioneer Forest, Inc. Delaware 60 State Street Massachusetts
Boston, Massachusetts 02109
Pioneer Goldfields Holdings, Inc.(5) Delaware c/o Belfint, Lyons & Shuman Delaware
200 West Ninth Street Plaza
Box 2105
Wilmington, Delaware 19899
Pioneer Goldfields Limited(6) Guernsey, 7 New Street Guernsey,
Channel Islands St. Peter Port Channel Islands
Guernsey GY1 4BZ
Channel Islands
Pioneer Goldfields Trustees Guernsey, 7 New Street Guernsey,
Limited Channel Islands St. Peter Port Channel Islands
Guernsey GYI 4BZ
Channel Islands
Teberebie Goldfields Limited(7) Republic of P.O. Box 6 Republic of
Ghana Tarkwa - Wassaw Ghana
Ghana, West Africa
Lobenguela Exploration and Zimbabwe Chancellor House Zimbabwe
Mining Company (Private) Limited 4th Floor
Samora Machel Avenue
Harare
Zimbabwe
</TABLE>
2
<PAGE> 114
<TABLE>
<CAPTION>
Jurisdiction
of
Name(1) Incorporation Address Jurisdiction(s)
------- ------------- ------- ---------------
<S> <C> <C> <C>
PIOGlobal Insurance Bermuda c/o Skandia International Bermuda
Company, Ltd. Front Street
Hamilton
Bermuda
Pioneer Funds Marketing GmbH Germany Germany
Pioneer Management (Ireland) Ireland 2/4 Ely Place Ireland
Limited(8) Dublin 2
Ireland
Pioneer First Polish Trust Fund Poland Intraco - 26th Floor Poland
Joint-Stock Company, s-a Stawki 2
00-193 Warsaw
Poland
Pioneer Real Estate Poland Intraco - 26th Floor Poland
Advisors Sp z. o. o. Stawki 2
00-193 Warsaw
Poland
Financial Services Limited Poland Intraco - 26th Floor Poland
Stawki 2
00-193 Warsaw
Poland
Pioneer Investment Poland Intraco - 26th Floor Poland
Poland Sp z. o. o. Stawki 2
00-193 Warsaw
Poland
Pioneer Czech Investment Czech Republic Betlem Palais Czech Republic
Company, a.s. Husova ulice 5
110-00 Prague I
Czech Republic
Pioneer Metals International Russian Vasilevsky Island Russian
Federation 21st Line, 8a Federation
St. Petersburg 199026
Russian Federation
Joint-Stock Company Foresr- Russian Koprovaya Street, 4 Russian
Starma Federation Komsomolsk-on-Amur Federation
Khabarovsk Territory
Russian Federation
</TABLE>
3
<PAGE> 115
<TABLE>
<CAPTION>
JURISDICTION
OF
NAME(1) INCORPORATION ADDRESS JURISDICTION(S)
------- ------------- ------- ---------------
<S> <C> <C> <C>
Joint-Stock Company Amgun- Russian Briakan Village Russian
Forest Federation Polina Osipenko Region Federation
Khabarovsk Territory
680000
Russian Federation
Joint-Stock Company Udinskoye Russian Udinsk Village Russian
Federation Polina 0sipenko Region Federation
Khabarovsk Territory
692391
Russian Federation
Tas-Yurjah Mining Company Russian Lev Tolstoy Street Russian
Federation Khabarovsk Territory Federation
680000
Russian Federation
Joint-Stock Company Pioneer Russian Repina Street, 6 Russian
Starma Equipment Federation Khabarovsk Territory Federation
680003
Russian Federation
Joint-Stock Company Pioneer Russian Gazetny per., 5 Russian
Investments Federation Building 3 Federation
Moscow, 103918
Russian Federation
Pioneer Securities Russian Prospect Mira, 150 Russian
Federation Suite 04252 Federation
Moscow, 129366
Russian Federation
Management Company (KUIF) Russian Prospect Mira, 150 Russian
Federation Suite 04252 Federation
Moscow, 129366
Russian Federation
First Voucher Fund Russian Trubnikovsky per., 21/2 Russian
Federation Moscow, 121069 Federation
Russian Federation
First Voucher Bank Russian 2 - Krasnoprudny per., 7 Russian
Federation Moscow, 107140 Federation
Russian Federation
</TABLE>
4
<PAGE> 116
<TABLE>
<CAPTION>
JURISDICTION
OF
NAME(1) INCORPORATION ADDRESS JURISDICTION(S)
------- ------------- ------- ---------------
<S> <C> <C> <C>
Pioneer Services Russian ul. Smolnaya, 24 Russian
Federation Moscow, 125445 Federation
Russian Federation
Pioneering Management (Jersey) Jersey, c/o Abacus Asset Jersey,
Limited Channel Islands Management Ltd. Channel Islands
La Motte Chambers
St. Helier
Jersey JE1 1BJ
Channel Islands
Pioneer Poland U.S. (Jersey) Jersey, c/o Abacus Asset Jersey,
Limited Channel Islands Management Ltd. Channel Islands
La Motte Chambers
St. Helier
Jersey JE1 1BJ
Channel Islands
Pioneer Poland U.K. Limited United Kingdom Plumtree Court United Kingdom
London EC4A 4HT
England
</TABLE>
- ------------------------------
(1) Unless otherwise noted, each corporation conducts business under its own
name.
(2) 2,000 shares of Common Stock authorized, 1,999 shares issued and
outstanding. All shares issued to The Pioneer Group, Inc.
(3) 100,000 shares of Common Stock authorized, 100 shares issued and
outstanding. All shares issued to Pioneering Management Corporation.
(4) 15,000 shares of Common Stock authorized, 1,000 shares issued and
outstanding. All shares issued to The Pioneer Group, Inc.
(5) 1,000 shares of Common Stock authorized, issued and outstanding. All shares
issued to The Pioneer Group, Inc.
(6) 25,000 Ordinary Shares authorized issued and outstanding. 24,993 shares
issued to Pioneer Goldfields Holdings, Inc. and 7 shares issued to 7 individual
nominees as nominee for Pioneer Goldfields Holdings, Inc.
(7) 10,000,000 Ordinary Shares authorized, consisting of 9,000,000 authorized
Class 'A' Shares and 1,000,000 authorized Class 'B' Shares. 1,860,000 Class 'A'
Shares issued to Pioneer Goldfields Limited and 206,667 Class 'B' Shares issued
to the Government of Ghana.
(8) 1,000,000 Ordinary Shares authorized, 250,000 shares issued and outstanding.
249,999 shares issued to The Pioneer Group. Inc. and 1 share issued to Frymount
Limited as nominee for The Pioneer Group, Inc.
5
<PAGE> 117
EXHIBIT 8.4
NOTES PAYABLE
Notes payable of the Company consists of the following:
<TABLE>
<CAPTION>
June 7, December 31,
1996 1995
------- ------------
(Dollars in Thousands)
<S> <C> <C>
Lines of Credit ............................................................... $ 0 $52,000
Senior Credit Facility: $80,000,000 revolving credit
facility, monthly principal payments, interest payable
LIBOR plus 1.25% .............................................................. 45,000 0
Senior Credit Facility: $35,000,000 revolver/term loan
facility, monthly principal payments, interest payable
LIBOR plus 1.25% .............................................................. 30,000 0
Preferred shares financing related to the Russian investment operations,
principal payable in two annual installments of $2,000,000 through 1998,
interest payable at 5% ........................................................ 4,000 6,000
Small Business Administration ("SBA") financing, notes payable to a bank,
interest payable semi-annually at rates ranging from 6.12% to 9.8%,
principal due in 1998 through 2003 ............................................ 4,950 4,950
Note payable to a supplier, principal and interest payable in quarterly
installments of $336,000 through April 15, 2001
interest payable at 7.85%, secured by equipment ............................... 6,713 0
Note payable to a supplier, principal and interest payable in quarterly
installments of $102,000 through May 31, 2001
interest payable at 8.00%, secured by equipment ............................... 5,698 0
Note payable to a supplier, principal and interest payable in quarterly
installments of $285,000 through April 15, 2001
interest payable at 7.85%, secured by equipment ............................... 1,680 0
Note payable to a bank guaranteed by the Swedish Exports Credits Guarantee
Board, principal payable in ten semi-annual installments of $266,000 beginning
no later than July 31, 1997, interest payable at 6.42%, secured by equipment .. 2,663 0
</TABLE>
<PAGE> 118
Exhibit 8.4: NOTES PAYABLE (con't)
<TABLE>
<S> <C> <C>
Note payable to a bank guaranteed by the Swedish Exports Credits Guarantee
Board, principal payable in semi-annual installments of $812,000 through March
31, 1997, interest payable at 5.77%, secured by equipment ..................... 1,624 2,436
Notes payable to a bank, guaranteed by the Company, principal payable in
semi-annual installments, of $214,000 through November 30, 1999,
no interest payable, secured by equipment ..................................... 1,501 1,715
--------- ---------
103,829 67,101
Less: Current portion ......................................................... (6,825) (56,053)
--------- ---------
$ 97,004 $ 11,048
========= =========
</TABLE>
Maturates of notes payable at June 7, 1996 for each of the next six years and
thereafter are as follows (dollars in thousands):
<TABLE>
<S> <C>
1996 $ 6,825
1997 6,951
1998 3,777
1999 3,589
2000 79,904
Thereafter 2,783
--------
$103,829
========
</TABLE>
<PAGE> 119
EXHIBIT 8.7
The School Board of St. Lucie County, Florida v.
Pioneering Management Corporation
During the period from February 1994, to October 1994, Pioneering
Management Corporation ("PMC") served as investment adviser to the School Board
of St. Lucie County, Florida ("St. Lucie"). Under the terms of the management
contract between St. Lucie and PMC, PMC was authorized to invest in short-term
government securities. In May 1995, St. Lucie commenced a civil action against
PMC in the Nineteenth Judicial Circuit in and for St. Lucie County, Florida. In
the Civil action, which was subsequently removed by PMC to the United States
District Court, Southern District of Florida, St. Lucie alleged that PMC had
breached the terms of the management contract and that PMC had acted
fraudulently. Although no specific damage claim is alleged in the complaint, St.
Lucie did note that it had lost $800,000 as a result of PMC's breach and
fraudulent conduct. The case is currently in the discovery stage with trial set
for fall 1996.
PMC believes that St. Lucie's claims are without merit. PMC's investments
on behalf of St. Lucie were in accordance with the investment objective and
strategies set forth in the management contract (which was prepared by the
Florida School Board Association on St. Lucie's behalf and the Florida statute
which lists acceptable investments for entities such as St. Lucie. In addition,
PMC personnel, in written correspondence, specifically informed St. Lucie
regarding the types of investments that PMC would make on St. Lucie's behalf.
Finally, the management contract disclosed in detail the risks relating to
investments in government securities, including interest rate risk and the
resulting loss of principal. Notwithstanding the merits of St. Lucie's claim.
St. Lucie suffered no damages. St. Lucie apparently calculates its damages by
adding the losses on individual portfolio securities while failing to account
for offsetting gains. During the time in which PMC managed the St. Lucie
account, PMC achieved a positive total return. PMC achieved this positive total
return on St. Lucie's behalf during a period when, due to action by the Federal
Reserve Board, short-term interest rates moved higher at a historic pace. PMC
believes that none of the alternative investments available to St. Lucie (under
the program administered by the Florida School Board Association) performed
materially better than the St. Lucia account managed by PMC; in fact, at least
one alternative performed significantly worse.
PMC is represented in this matter by Hale and Dorr with Holland & Knight
serving as local Florida counsel. PMC has filed a claim with its insurance
carrier, ICI Mutual Insurance Company ("ICI Mutual"). While PMC believes that
the claim will be covered under its policy, ICI has, in standard fashion,
reserved its rights. Kirkpatrick & Lockhart is representing ICI Mutual. The ICI
Mutual policy carries a $100,000 deductible.
<PAGE> 120
Exhibit 9.1.12
OFFICERS OF THE COMPANY
1. John F. Cogan, Jr. Chairman of the Board, Chief Executive Officer and
President of the Company
2. William H. Keough Senior Vice President, Chief Financial Officer and
Treasurer of the Company and Subsidiaries
3. David D. Tripple President and Chief Investment Officer of Pioneering
Management Corporation
4. William H. Smith, Jr. President and Director of Pioneering Services
Corporation
S. Lucien Girard, III Managing Director and Chief Executive of Pioneer
Goldfields Limited and Managing Director of
Teberebie Goldfields Limited
6. Robert L. Butler President of Pioneer Funds Distributor, Inc.
<PAGE> 121
Exhibit 11.1
PERCENTAGE INTERESTS
<TABLE>
<CAPTION>
Lender Total Commitment B Share Loan Revolving Loan Percentage Interest
- ------ ---------------- -------------- -------------- -------------------
<S> <C> <C> <C> <C>
The First National $ 30,000,000.00 $ 9,130,434.78 $20,869,565.22 26.086956522%
Bank of Boston
Mellon Bank, N.A $ 25,000,000.00 $ 7,608,695.65 $17,391,304.35 21.739130435%
State Street Bank & $ 20,000,000.00 $ 6,086,956.52 $13,913,043.48 17.391304348%
Trust Company
The Bank of New $ 15,000,000.00 $ 4,565,217.39 $10,434,782.61 13.043478261%
York
Societe Generale $ 15,000,000.00 $ 4,565,217.39 $10,434,782.61 13.043478261%
Banque Nationale $ 10,000,000.00 $ 3,043,478.26 $ 6,956,521.74 8.695652174%
de Paris
TOTAL $115,000,000.00 $35,000,000.00 $80,000,000.00 100.000000000%
</TABLE>
<PAGE> 122
Exhibit 12.1.1
ASSIGNMENT AND ACCEPTANCE
This Agreement, dated as of ________, 19__, is between ________, a
Lender under the Credit Agreement referred to below (the "Assignor"), and
________ (the "Assignee").
For valuable consideration, the receipt of which is hereby acknowledged,
the Assignor agrees with the Assignee as follows:
8. Reference to Credit Agreement and Definitions. Reference is made to
the Credit Agreement dated as of June __, 1996, as from time to time in effect
(the, "Credit Agreement"), among The Pioneer Group, Inc., a Delaware corporation
(the "Company"), certain of its subsidiaries, the Lenders, and The First
National Bank of Boston, as agent (the "Agent") for itself and the other
Lenders. Terms defined in the Credit Agreement and not otherwise defined herein
are used herein with the meanings so defined.
2. Assignment and Assumption. The Assignor hereby sells and assigns to
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
the interest set forth on Schedule A hereto in and to all the Assignor's rights
and obligations under the Credit Agreement and the other Credit Documents (other
than Interest Rate Protection Agreements) as of the Assignment Date (as defined
below), together with such percentage interest in all unpaid interest with
respect to the Loan and commitment fees accrued to the Assignment Date.
3. Representations, Warranties, etc.
3.1. Assignor's Representations and Warranties. The Assignor:
(a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or
the other Credit Documents or any other instrument or document furnished
pursuant thereto or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or the other
Credit Documents or any other instrument or document furnished pursuant
thereto, other than that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free
and clear of any adverse claim;
(b) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Company or
any Subsidiary or the performance by the Company or any Subsidiary of
its obligations under the Credit Agreement, any
<PAGE> 123
of the other Credit Documents or any other instrument or document
furnished pursuant thereto; and
(c) represents and warrants that after giving effect to the
assignment hereunder on the Assignment Date, the Assignor has the
interests in the Credit Obligations set forth on Schedule A hereto.
3.2. Assignee's Representation, Warranties and Agreements. The Assignee:
(a) represents and warrants that it is legally authorized to
enter into this Agreement;
(b) confirms that it has received a copy of the Credit Agreement
and certain other Credit Documents it has requested, together with
copies of the most recent financial statements delivered pursuant to
Section 7.4 of the Credit Agreement and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into this Agreement;
(c) agrees that it will, independently and without reliance upon
the Assignor or any other Person which has become a Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under the Credit Agreement and the other Credit Documents;
(d) appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under the Credit
Agreement and other Credit Documents as are delegated to the Agent by
the terms thereof, together with such powers as are reasonably
incidental thereto;
(e) agrees that it will be bound by the provisions of the Credit
Agreement and will perform in accordance with their terms all the
obligations which by the terms of the Credit Agreement and the other
Credit Documents are required to be performed by it as a Lender; and
(f) represents and warrants that after giving effect to the
assignment hereunder on the Assignment Date, the Assignee has the
interests in the Credit Obligations and under the Credit Agreement as
set forth on Schedule A hereto.
3.3. Qualified Institutional Buyer. The Assignee represents and warrants
that it is a Qualified Institutional Buyer.
-2-
<PAGE> 124
3.4. US Withholding Tax. The Assignee represents and warrants that (a)
it is incorporated or organized under the laws of the United States of America
or a state thereof or (b) it will perform all of its obligations relating to
United States income tax withholding under Section 14 of the Credit Agreement.
4. Assignment Date. The effective date of this Agreement shall be
______________, 19__ (the "Assignment Date").
5. Assignee Party to Credit Agreement; Assignor Release of Obligations.
From and after the Assignment Date, (a) the Assignee shall be a party to the
Credit Agreement and, to the extent provided in this Agreement, have the rights
and obligations of a Lender thereunder and under the other Credit Documents and
(b) the Assignor shall, to the extent provided in this Agreement, relinquish its
rights and be released from its obligations under the Credit Agreement and the
other Credit Documents.
6. Notices. All notices and other communications required to be given or
made to the Assignee under this Agreement, the Credit Agreement or any other
Credit Documents shall be given or made at the address of the Assignee set forth
on the signature page hereof or at such other address as the Assignee shall have
specified to the Assignor, the Agent and the Company in writing.
7. Further Assurances. The parties hereto agree to execute and deliver
such other instruments and documents and to take such other actions as any party
hereto may reasonably request in connection with the transactions contemplated
by this Agreement.
8. General. This Agreement, the Credit Agreement and the other Credit
Documents constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and thereof and supersede all current and prior
agreements and understandings, whether written or oral, with respect to such
subject matter. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof. The invalidity
or unenforceability of any term or provision hereof shall not affect the
validity or enforceability of any other term or provision hereof. This Agreement
may be executed in any number of counterparts, which together shall constitute
one instrument, and shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, including as such successors and
assigns all holders of any Credit Obligation. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS (OTHER THAN THE CONFLICT OF LAWS
RULES) OF THE COMMONWEALTH OF MASSACHUSETTS.
-3-
<PAGE> 125
Each of the Assignor and the Assignee has caused this Agreement to be
executed and delivered by its duly authorized officer under seal as of the date
first written above.
[ASSIGNOR]
By
-------------------------------
Title:
[ASSIGNEE]
By
-------------------------------
Title:
[Street Address
City, State, Zip Code]
Telecopy:
Telex:
The foregoing is hereby approved:
THE FIRST NATIONAL BANK OF BOSTON,
as Agent
By
-------------------------------
Title:
THE PIONEER GROUP, INC.
By
-------------------------------
Title:
-4-
<PAGE> 126
SCHEDULE A
Portion Assigned Hereunder
Assignee's Percentage Interest and outstanding principal balance in the B
Share Loan and Revolving Loan under the Credit Agreement on and after the
Assignment Date pursuant to the assignment being made hereunder on the
Assignment Date:
Percentage Interest: ______________%
B Share Loan: $_____________
Revolving Loan: $_____________
Assignor's Interest
Assignor's new Percentage Interest and outstanding principal balance in
the B Share Loan and Revolving Loan on and after the Assignment Date after
giving effect to the other assignments being made on the Assignment Date:
Percentage Interest: ______________%
B Share Loan: $_____________
Revolving Loan: $_____________
Assignee's Interest
Assignee's new Percentage Interest and outstanding principal balance in
the B Share Loan and Revolving Loan on and after the Assignment Date after
giving effect to the other assignments being made on the Assignment Date:
Percentage Interest: ______________%
B Share Loan: $_____________
Revolving Loan: $_____________
-5-
<PAGE> 1
Exhibit 10.5
LOAN AGREEMENT
THIS LOAN AGREEMENT is made this 16th day of May, 1996, by and
between TEBEREBIE GOLDFIELDS LIMITED ("Borrower"), a limited liability company
organized and existing under the laws of the Republic of Ghana with its
principal place of business located at P.O. Box 6, Tarkwa, Republic of Ghana,
West Africa; and CATERPILLAR FINANCIAL SERVICES CORPORATION ("Lender"), a
Delaware corporation with its principal place of business located at 3322 West
End Avenue, Nashville, Tennessee, U.S.A. 37203.
SECTION 1. GENERAL DEFINITIONS
1.1. Defined Terms. When used herein, the following terms shall have
the following meanings (terms defined in the singular shall have the same
meaning when used in the plural and vice versa):
"Affiliate" shall mean any Person: (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the Borrower; (ii) which beneficially owns or holds 5% or
more of any class of the Voting Stock of the Borrower; or (iii) 5% or more of
the voting stock (or in the case of a Person which is not a corporation or a
limited liability company, 5% or more of the equity interest) of which is
beneficially owned or held by the Borrower or a Subsidiary of the Borrower. For
purposes hereof, "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting stock, by contract or otherwise.
"Agreement" shall mean this Loan Agreement.
"Applicable Law(s)" shall mean all laws, rules and regulations
applicable to the Person, conduct, transaction, covenant or Loan Documents in
question, including, but not limited to, all applicable common law and equitable
principles, if applicable; all provisions of all applicable state and federal
constitutions, statutes, rules, regulations and orders of governmental bodies;
and orders, judgments, decrees and awards of all courts and arbitrators, in any
jurisdiction or any political subdivision thereof, and in each case, as amended,
modified or replaced.
"Bank" shall mean any financial institution with which the Borrower
may, from time to time, maintain credit lines for financing its or its
Subsidiaries acquisition of Property.
"Base Rate" shall mean a fixed rate of interest equal to eight and
No/100ths percent (8.00%) per annum.
"Business Day" shall mean a day other than (i) a Saturday or Sunday, or
(ii) a day on which banks are authorized by law to be closed in New York, New
York, U.S.A.
"Caterpillar" shall mean Caterpillar Inc., a Delaware corporation.
"Caterpillar Sellers" shall mean Caterpillar, COSA, and each of their
respective wholly owned subsidiaries (other than Lender).
"Closing Date" shall mean the date on which all of the conditions
precedent in Section 6 are satisfied.
"Collection Expenses" shall mean all costs and expenses at any time or
times incurred by the Lender after the occurrence of an Event of Default in
connection with efforts to collect or recover any of the Obligations from the
Borrower, including, without limitation, reasonable legal fees, court expenses
and costs, transfer fees or taxes, accountants' fees, all fees and expenses
payable or reimbursable by the Borrower under Section 9.3 hereof, and all
1
<PAGE> 2
other costs and expenses associated with seeking to enforce any of the Loan
Documents.
"Commitment" shall mean the amount of commitment set forth opposite
Lender's name on the signature page hereof, or Lender's commitment to lend such
amounts, as the context may determine.
"Commitment Letter" means that certain Commitment Letter dated May 6,
1996 between Borrower and Lender.
"COSA" shall mean Caterpillar Overseas S.A., a Swiss corporation.
"Deed of Warranty" shall mean that certain Deed of Warranty dated
December 3, 1987 by and among the Government of the Republic of Ghana,
Borrower, Pioneer Group Inc. and Glencar Exploration (UK) Limited.
"Default" shall mean an event or condition the occurrence of which
would, with proper notice or lapse of time or both, become an Event of Default.
"Dollars" and the sign "$" shall mean the currency of the United States
of America.
"Eligible Equipment" shall mean the equipment described in the
Commitment Letter.
"Event of Default" shall have the meaning ascribed thereto in Section
7.1.
"Export Product Value" means the actual cost in Dollars to the Borrower
of each item of Eligible Equipment purchased, FOB port of exit, (INCOTERMS
1990). If actual cost is not denominated in Dollars, it shall be converted at a
rate determined by Lender using the guidelines set out in Section 9.7 hereof.
"Fiscal Year" shall mean the taxable year of the Borrower.
"Forfeiture Law" shall mean any state or federal law, rule or
regulation under which any Property of a Person may be seized by a governmental
agency or title thereto forfeited by reason of such Person's commission of a
crime.
"GAAP" shall mean generally accepted accounting principles as in effect
in the Republic of Ghana from time to time.
"Indebtedness" as applied to a Person shall mean the aggregate of all
items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Person as
at the date as of which Indebtedness is to be determined, including without
limitation, all obligations of other Persons which such Person has guaranteed.
"Lender's Bank Account" shall mean Lender's account with Chase
Manhattan Bank, New York, New York, account number 910-2-469872, ABA code
021-000-021, or other such account as Lender may designate in writing to
Borrower.
"Lien" shall mean any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangements, encumbrance, lien
(statutory or other), or preference, priority, or other security agreement or
preferential arrangement, charge, or encumbrance of any kind or nature
whatsoever.
"Loan" shall have the meaning ascribed thereto in Section 2.1.
"Loan Documents" shall mean this Agreement and the Other Agreements.
2
<PAGE> 3
"Material Adverse Effect" shall mean any event or condition which,
alone or when taken together with other events or conditions occurring or
existing concurrently therewith: (i) has or may be reasonably expected to have a
material adverse effect upon the business, operations, Properties or financial
condition of the Borrower or any Subsidiary; (ii) has or may be reasonably
expected to have any material adverse effect whatsoever upon the validity or
enforceability of this Agreement or any of the other Loan Documents; or (iii)
materially impairs the ability of the Borrower to perform its obligations under
this Agreement or any of the other Loan Documents or of the Lender to enforce or
collect the Obligations in accordance with the Loan Documents and Applicable
Law.
"Maximum Rate" shall mean the maximum rate of interest permitted by
Applicable Law that at any time, or from time to time, may be contracted for,
taken, reserved, charged or received on the Indebtedness in question or, to the
extent permitted by Applicable Law, under such Applicable Laws that may
hereafter be in effect and which allow a higher maximum interest rate than
Applicable Laws now allow. Notwithstanding any other provision hereof, the
Maximum Rate shall be calculated on a daily basis computed on the actual number
of days elapsed over a year of 360 days.
"Net Worth" shall mean the aggregate of capital stock, earned surplus,
and additional paid in capital of the Borrower, less the Borrower's treasury
stock, all as determined in accordance with GAAP applied on a basis consistent
with the accounting principles applied in the preparation of the financial
statements referred to in Sections 4.4 and 5.1(A).
"Note" shall mean the promissory note(s) evidencing the Loan made by
Lender to Borrower hereunder pursuant to Section 2.1 substantially in the form
of Exhibit A.
"Obligations" shall mean all Indebtedness, liabilities and obligations
(including non-financial obligations and covenants) owing, arising, to be
performed, due or payable from the Borrower to, or on behalf of, the Lender of
every kind or nature, whether absolute or contingent, due or to become due,
joint or several, liquidated or unliquidated, matured or unmatured, primary or
secondary, now existing or hereafter incurred or arising under any of the Loan
Documents or otherwise, and regardless of the form or purpose of such
Indebtedness, liabilities or obligations, including, without limitation, the
Loan, any other loans, any Security Agreements, all liabilities of the Borrower
to the Lender under any indemnity, reimbursement, letter of credit, guaranty,
deposit or other agreement heretofore or hereafter executed by the Borrower with
or in favor of the Lender. The term includes, without limitation, all interest,
charges, expenses, Taxes, attorneys' fees and other sums chargeable to the
Borrower under any of the Loan Documents.
"Other Agreements" shall mean any and all agreements, instruments,
documents and certificates (other than this Agreement), heretofore, now or
hereafter executed by the Borrower and delivered to the Lender in respect to the
transactions contemplated by this Agreement, including, without limitation, the
Note and any Security Agreement or Lien agreement now existing, concurrently or
hereafter executed by the Borrower to secure the Obligations.
"Permitted Liens" shall mean any Lien but only to the extent such Lien
is contested or disputed in good faith or for which arrangements for deferred
payment have been made, provided appropriate reserves are maintained, to the
satisfaction of the Lender, for the eventual payment thereof, or such Liens as
Lender shall approve in writing.
"Person" shall mean an individual, partnership, corporation, joint
venture, association, joint stock company, trust, business trust or
unincorporated organization, limited liability company, or a government or
agency or political subdivision thereof.
3
<PAGE> 4
"Projections" shall mean Borrower's forecasted (a) balance sheets, (b)
profit and loss statements, and (c) cash flow statements, all prepared on a
consistent basis with Borrower's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Remittance Instructions" shall have the meaning given to it in Section
2.2.
"Security Agreement" shall mean any instruments and agreements of any
kind now or at any time hereafter securing the whole or any part of the
Obligations, including but not limited to that certain Chattel Mortgage relating
to the Eligible Equipment.
"Solvent" shall mean, as to any Person, that such Person: (i) owns
Property the fair value of which is greater than the amount required to pay all
of such Person's Indebtedness (including contingent liabilities); (ii) is able
to pay all of its Indebtedness as such Indebtedness matures; and (iii) has
capital sufficient to carry on its business and transactions and all business
and transactions in which it is about to engage.
"Subsidiary" shall mean any corporation or limited liability company of
which the Borrower owns more than 50% of its securities, provided the ownership
of such securities, in the absence of contingencies, entitles the Borrower to
elect a majority of the directors of such corporation or limited liability
company.
"Taxes" shall mean any present or future taxes, levies, imposts,
duties, fees, assessments, deductions, withholdings or other charges of
whatsoever nature (excluding taxes imposed on net income and all income and
franchise taxes of the United States and any political subdivisions thereof on
Lender), that may now or hereafter be imposed or asserted by any jurisdiction or
any political subdivision thereof or any taxing authority therein and all
interest, penalties or similar liabilities with respect thereto.
1.2. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with that applied
in preparation of the financial statements referred to in Section 4.4 and
5.1(A), and all financial data pursuant to this Agreement shall be prepared in
accordance with such principles consistently applied.
1.3. Certain Matters of Construction. The terms "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of this Agreement. All references to any instruments or
agreements, including, without limitation, references to this Agreement and any
of the other Loan Documents, shall include any and all modifications or
amendments thereto and any and all extensions or renewals thereof.
SECTION 2. CREDIT COMMITMENT.
2.1. Loan. The Lender agrees, subject to the terms and conditions of
this Agreement and the other Loan Documents, to make a Loan to the Borrower, on
a date not later than August 31, 1996, in the principal amount not to exceed
Five Million Six Hundred Ninety-Seven Thousand Seven Hundred Thirteen and
20/100ths Dollars ($5,697,713.20). The Loan will not exceed eighty-five percent
(85%) of the Eligible Equipment Export Product Value associated with the Loan,
and must be secured by a first priority security interest in the Eligible
Equipment satisfactory to Lender in its sole discretion. Borrower
4
<PAGE> 5
must make a cash payment of not less than fifteen percent (15%) of the Eligible
Equipment Export Product value to the equipment seller.
The Loan made hereunder shall be solely and exclusively in Dollars.
2.2. Notice and Manner of Borrowing. The Closing shall be on or before
August 31, 1996. Not less than ten (10) Business Days (and no later than 10:00
a.m. Central Standard Time on such Business Day) in advance of the date on which
the Borrower intends to borrow funds hereunder, the Borrower shall provide the
Lender with written notice confirming such intent and specifying the date the
Loan is to be made and the amount thereof. Not later than 4:00 p.m. Central
Standard Time on the date of such Loan, provided the Borrower is not then in
default under any provision of this Agreement (particularly, the conditions
precedent set forth in Section 6 of this Agreement), the Lender shall make the
amount of such Loan available to the Borrower in immediately available funds in
accordance with remittance instructions substantially in the form of Exhibit B
hereto (the "Remittance Instructions") signed by Borrower's authorized
representative and acceptable to Lender set forth in such notice against receipt
from the Borrower of a properly completed and executed Note (as described in
Section 2.3 below). Disbursement of the Loan proceeds by the Lender shall be by
bank wire transfer to an account or accounts designated in writing by an
authorized officer of the Borrower no later than five (5) days before the
Closing Date. Lender and Borrower agree that there will be only one borrowing
under this Agreement, but such borrowing may be evidenced by two Notes.
2.3. The Note. The Loan and the Borrower's obligation to repay the Loan
shall be evidenced by the Note and repayable with interest in accordance with
Section 3 of this Agreement and the terms of the Note of the Borrower, payable
to the order of the Lender, substantially in the form of Exhibit A hereto. In no
case shall the Note be considered to constitute a payment or novation of the
Loan.
2.4. Interest. The Borrower shall pay interest on the outstanding
amounts loaned to the Borrower hereunder, commencing with the date specified in
the Note and until such time as the entire principal balance thereof is fully
repaid, at the annual interest rate specified in Section 3.1(A) hereof.
2.5. Payment. Except as the Lender may otherwise direct in writing, the
Borrower agrees to make all payments directly to the Lender (or to the holder of
the Note from time to time) with funds from Borrower's "external account" (as
defined in the Deed of Warranty) by means of wire transfer, net of any wire
transfer expenses, into Lender's Bank Account and in accordance with the terms
of payment set forth in this Section 2 and the Note. All payments of principal
and interest due under the Note and of any other amounts due hereunder shall be
made not later than 12:00 Noon Central Standard Time on the due date thereof.
Whenever any payment to be made under this Agreement or under the Note shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of interest. Each payment made shall also
reference the Note by Borrower name and date of the Note or by the applicable
Note number, if any.
2.6. Application of Payments and Collections.
(A) Subject to the provisions of Section 2.6(B) below, Borrower
irrevocably waives the right to direct the application of any and all payments
and collections at any time or times hereafter received by Lender from or on
behalf of Borrower, and Borrower does hereby irrevocably agree that Lender shall
have the continuing exclusive right to apply and reapply any and all such
payments and collections received at any time or times hereafter by Lender
against the Obligations, in such manner as Lender may deem advisable,
notwithstanding any entry by Lender upon any of its books and records.
5
<PAGE> 6
(B) Upon or after the occurrence of an Event of Default and Lender's
acceleration of the maturity of the Loan as a consequence thereof, all payments
and collections received by Lender from or on behalf of Borrower for application
to the Loan shall be applied in the following order: (a) to the unpaid balance
of all Collection Expenses; (b) to the amount of any loss, costs, expenses or
damages suffered or incurred by Lender for which Borrower has agreed to
indemnify Lender pursuant to the terms of this Agreement or any of the other
Loan Documents; (c) to any past due interest on the Loan, (d) to accrued but not
past due interest on the Loan, (e) to the principal amount outstanding of the
Loan and (f) to the amount of any other Obligations then outstanding to Lender.
2.7. Notations. Borrower hereby irrevocably authorizes Lender to make
(or cause to be made) appropriate notations in its records to evidence, inter
alia, the date of, the outstanding principal amount of and the interest rate
applicable to, the Loan evidenced thereby. The notations in such records
indicating the outstanding principal amount of the Loan evidenced thereby shall,
in the absence of manifest error, be prima facie evidence of the principal
amount thereof owing and unpaid, but the failure to record any such amount in
such records or otherwise shall not limit or affect the obligations of Borrower
hereunder or under the Note to make payment of principal of or interest on the
Loan when due.
2.8. Voluntary Prepayment. The Borrower may prepay without penalty or
premium the balance due under any one or more of the Note or Notes evidencing
the Loan (on a Note-by-Note basis) in its entirety and not in part at any time
thirteen (13) months after the Note date, provided the Borrower (i) shall give
the Lender advance written notice of the intended date of prepayment, which date
shall be a scheduled payment date (the "Final Payment Date"), not less than
thirty (30) days in advance of that Final Payment Date, and (ii) Borrower pays
all other Obligations to Lender under the Loan Documents. A notice of prepayment
once given by Borrower may only be rescinded if Lender has not, in relying on
such notice, undertaken obligations which might cause Lender to incur
liabilities should Lender attempt to rescind such obligations.
2.9. Payment "Net Taxes". The Borrower agrees to pay all amounts owing
by it under this Agreement, the Notes or the other Loan Documents free and clear
of and without deduction for any present or future Taxes, and
(A) that if it is prevented by operation of law from paying any Taxes,
then the interest rate or fees required to be paid under this Agreement, the
Notes or the other Loan Documents shall be increased by the amount necessary to
yield to the Lender interest or fees at the rates specified in this Agreement,
the Notes, or the Other Loan Documents after provision for the payment of all
such Taxes and without taking into account any tax benefits accruing to the
Lender from such payment;
(B) that it shall at the request of the Lender execute and deliver to
the Lender such further instruments as may be necessary or desirable to effect
the increase in the interest or fees as provided for in clause (a) immediately
above, including new Notes to be issued in exchange for any Notes theretofore
issued;
(C) that it shall indemnify and hold the Lender harmless from and
against any liabilities with respect to any Taxes (whether or not properly or
legally asserted); and
(D) that it shall provide the Lender with the original or a certified
copy of evidence of the payment of any Taxes by it, as the Lender may reasonably
request, or, if no Taxes have been paid to provide to Lender, at the Lender's
request, with a certificate from the appropriate taxing authority or an opinion
of counsel acceptable to the Lender stating that no Taxes are payable.
6
<PAGE> 7
If Lender shall receive a refund of any Taxes paid by the Borrower pursuant to
this Section 2.9 by reason of the fact that such Taxes were not correctly or
legally asserted, Lender shall within 60 days after receipt of such refund pay
to the Borrower the amount of such refund, as determined solely by the Lender;
provided, however, that in no event shall the amount paid by Lender to the
Borrower pursuant to this sentence exceed the amount of Taxes originally paid by
the Borrower; and further provided that Lender shall not have any obligation
under this Agreement to claim or otherwise seek to obtain any such refund.
Notwithstanding the foregoing, Lender agrees to cooperate in good faith with any
written request of the Borrower to seek or obtain any such refund relating to
this Agreement that cannot be obtained by the Borrower without the assistance,
or direct involvement, of Lender, provided no default exits under this Agreement
and provided the Borrower has agreed in advance in writing to bear the expenses
relating thereto and has agreed in writing (in a form acceptable to Lender) to
indemnify Lender against and hold Lender harmless for any loss, cost or expense
relating thereto.
2.10. Dollar Payments. All payments required to be made hereunder, the
Notes, or any of the Loan Documents shall be payable solely and exclusively in
Dollars.
2.11. Obligations Unconditional. The obligations of the Borrower under
this Agreement and in respect of the Loan shall be absolute and unconditional
under all circumstances and irrespective of any setoff, counterclaim or defense
to payment (of any type or description, whether as a result of non-compliance
with any of the provisions of this Agreement, any of the agreements referred to
herein or otherwise) which the Borrower may have or have had against the Lender
or any other Person.
2.12. Termination of Commitment. This Commitment shall terminate on May
1, 1996 if Borrower has not met the conditions precedent to the Loan under
Section 6 of this Agreement, except to the extent Lender may in its sole
discretion elect to make the Loan prior to the fulfillment of any of the
conditions precedent set forth in Section 6.
No termination (regardless of cause or procedure) of the Commitment
shall in any way affect or impair the rights, powers or privileges of Lender or
the obligations, duties or liabilities of Borrower in any way relating to (i)
any transaction or event occurring prior to the effective date of such
termination or (ii) any of the undertakings, agreements, covenants,
indemnifications, warranties or representations of Borrower contained in this
Agreement or any of the other Loan Documents. All such undertakings, agreements,
covenants, indemnities, warranties and representations of Borrower shall survive
such termination and Lender shall retain all of its rights and remedies under
this Agreement and the other Loan Documents notwithstanding such termination
until all of the Obligations have been paid in full, in immediately available
funds.
Notwithstanding the foregoing, if no funding is made under this
Agreement, Borrower shall not be bound by any of the undertakings, agreements,
covenants, indemnifications, warranties or representations of Borrower contained
in this Agreement or any of the other Loan Documents except to the extent that
such are intended, by their nature, to survive the termination of this
Agreement.
SECTION 3. INTEREST, FEES AND CHARGES
3.1. Interest, Fees and Charges.
(A) Interest Rates. Borrower agrees to pay interest in respect of
the unpaid principal amount of the Loan from the respective date the principal
amount is advanced until paid (whether at stated maturity, on acceleration, or
otherwise) at a rate per annum equal to the Base Rate. Interest shall be
computed on the actual number of days elapsed over a year of 360 days, and shall
be payable in accordance with the terms of the Note.
7
<PAGE> 8
(B) Late Payment Rate. Should the Borrower fail to pay, when due,
any installment of principal or interest or any prepayment amount (as described
above), or any other obligation as such becomes due hereunder or under the Note,
the Borrower shall also pay interest on such amount equal to the Base Rate plus
nine percent (9%) per annum; or, if such rate exceeds the Maximum Rate legally
allowed, then at such Maximum Rate. In the event that any obligation hereunder
or under the Note shall remain unpaid beyond the maturity date of the Note, the
Base Rate will continue to adjust for purposes of calculating the above rate as
if the maturity date of the Note had been extended. Interest payable at the Late
Payment Rate shall be computed on the actual number of days elapsed over a year
of 360 days, and shall be payable in accordance with the terms of the Note.
(C) Maximum Interest. Regardless of any provision contained in this
Agreement or any of the other Loan Documents, in no contingency or event
whatsoever shall the aggregate of all amounts deemed interest hereunder or under
the Note and contracted for, charged or collected pursuant to the terms of this
Agreement or pursuant to the Note exceed the highest rate permissible under any
Applicable Law. No agreements, conditions, provisions or stipulations contained
in this Agreement or any of the other Loan Documents or the exercise by Lender
of the right to accelerate the payment or the maturity of all or any portion of
the Obligations, or the exercise of any option whatsoever contained in any of
the Loan Documents, or the prepayment by Borrower of any of the Obligations, or
the occurrence of any contingency whatsoever, shall entitle Lender to charge or
receive in any event, interest, or any charges, amounts or fees deemed interest
by Applicable Law (such interest, charges, amounts and fees referred to herein
collectively as "Interest"), exceeding the Maximum Rate and in no event shall
Borrower be obligated to pay Interest exceeding such Maximum Rate, and all
agreements, conditions or stipulations, if any, which may in any event or
contingency whatsoever operate to bind, obligate or compel Borrower to pay
Interest exceeding the Maximum Rate, shall be without binding force or effect,
at law or in equity, to the extent only of the excess of Interest over such
Maximum Rate. If any Interest is charged or received in excess of the Maximum
Rate ("Excess"), Borrower acknowledges and stipulates that any such charge or
receipt shall be the result of an accident and bona fide error, and such Excess,
to the extent received, shall be applied first to reduce the principal then
unpaid hereunder; then applied to reduce the other Obligations; and the balance,
if any, returned to Borrower, it being the intent of the parties hereto not to
enter at any time into a usurious or otherwise illegal relationship. The right
to accelerate maturity of any of the Obligations does not include the right to
accelerate any interest that has not otherwise accrued on the date of such
acceleration, and Lender does not intend to collect any unearned interest in the
event of any such acceleration. All monies paid to Lender hereunder or under any
of the Loan Documents, whether at maturity or by prepayment, shall be subject to
any rebate of unearned interest as and to the extent required by Applicable Law.
By the execution of this Agreement, Borrower covenants that (i) the credit or
return of any Excess shall constitute the acceptance by Borrower of such Excess,
and (ii) Borrower shall not seek or pursue any other remedy, legal or equitable,
against Lender, based in whole or in part upon contracting for, charging or
receiving any Interest in excess of the Maximum Rate. For the purpose of
determining whether or not any Excess has been contracted for, charged or
received by Lender, all interest at any time contracted for, charged or received
from Borrower in connection with this Agreement shall, to the extent permitted
by Applicable Law, be amortized, prorated, allocated and spread in equal parts
throughout the full term of the Obligations. Borrower and Lender shall, to the
maximum extent permitted under Applicable Law, (i) characterize any
non-principal payment as an expense, fee or premium rather than as Interest and
(ii) exclude voluntary prepayments and the effects thereof. The provisions of
this Section shall be deemed to be incorporated into every Loan Document
(whether or not any provision of this Section is referred to therein). All such
Loan Documents and communications relating to any Interest owed by Borrower and
all figures set forth therein shall, for the sole purpose of
8
<PAGE> 9
computing the extent of Obligations, be automatically recomputed by Borrower,
and by any court considering the same, to give effect to the adjustments or
credits required by this Section.
SECTION 4. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants the following to the Lender as of the
date hereof and for the entire term of this Agreement:
4.1. Corporate Existence. The Borrower is a limited liability company duly
organized, validly existing and in good standing under the laws of its
jurisdiction of formation, and is duly licensed or qualified to transact
business in all jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes such licensing or
qualification necessary.
4.2. Authorization of Borrowing; No Conflict as to Applicable Law or
Agreements. The Borrower has the right and power and is duly authorized and
empowered to enter into, execute, deliver and perform all of its obligations
under this Agreement and each of the other Loan Documents to which it is a
party, to conduct its business as presently conducted and to own, operate and
lease its Property. The execution, delivery and performance by the Borrower of
this Agreement and each of the other Loan Documents and the borrowing hereunder,
have been duly authorized by all necessary corporate action and do not and will
not (i) require any consent or approval of the stockholders of the Borrower, or
any authorization, consent or approval by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign
(except those set forth in Exhibit C, each of which has been given or obtained
and is in full force and effect on the date hereof), (ii) violate any provision
of any Applicable Law, rule or regulation or of any order, writ, injunction or
decree presently in effect having applicability to the Borrower or of the
charter or bylaws of the Borrower, (iii) result in a breach of or constitute a
default under any indenture or loan or credit agreement (including, without
limitation, any such agreements in effect as of the date hereof between the
Borrower and any Bank) or any other material agreement, lease or instrument to
which the Borrower is a party or by which it or its Property may be bound or
affected (except for those with Persons who have consented thereto), or (iv)
result in, or require, the creation or imposition of any Lien (other than the
Lien granted to Lender by the Security Agreement) upon or with respect to any of
the Properties now owned or hereafter acquired by the Borrower.
4.3. Legal Agreements. This Agreement is, and each of the other Loan
Documents when delivered under this Agreement will be, a legal, valid and
binding obligation of the Borrower enforceable against it in accordance with
their respective terms, except as enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally and by the effect of
general principles of equity.
4.4. Financial Condition. The Borrower has heretofore furnished the
following financial statements to Lender: The annual audited consolidated
financial statements of the Borrower as of the close of the Fiscal Years set
forth on Exhibit C, and unaudited interim financial statements (which may, but
need not, contain footnotes) for the interim periods set forth on Exhibit C
hereto. Such financial statements present fairly in all material respects the
financial condition of the Borrower on the dates thereof and the results of its
operations for the periods then ended, and were prepared in accordance with
GAAP, subject, in the case of interim statements (which may, but need not,
contain footnotes), only to changes from audit and year-end adjustments. There
are no liabilities of the Borrower or any Subsidiary of the Borrower, fixed or
contingent, which are material and are not reflected in the financial statements
or the notes thereto, other than liabilities arising in the
9
<PAGE> 10
ordinary course of business since the date of the last financial statement
referred to hereinabove.
4.5. Accuracy of Information. The financial statements referred to in
paragraph 4.4 do not, nor does any other written statement furnished by the
Borrower in connection with this Agreement, contain any untrue statement of a
material fact or omit a material fact necessary to make the statements contained
herein or therein not misleading. All information supplied to Lender by or on
behalf of the Borrower with respect to the assets or any other Property of the
Borrower or its Subsidiaries (whether prior to the date of this Agreement, as
part of this Agreement, or after the date of this Agreement) is and shall be
true and correct in all material respects.
4.6. Adverse Change. Except as otherwise disclosed to Lender in writing in
connection with this Agreement, there has been no change in the business,
assets, liabilities, business prospects, Property or condition (financial or
otherwise) of the Borrower which could reasonably be expected to have a Material
Adverse Effect on the business, Property or financial condition of the Borrower
since the date of the latest financial statement referred to in Section 4.4.
4.7. Adverse Fact. Other than general economic conditions, no fact is
known to the Borrower, as of the date hereof, which has had or can reasonably be
expected in the future to have a Material Adverse Effect which has not been
previously disclosed to Lender by the Borrower in writing.
4.8. Solvent Financial Condition. The Borrower is now, and after giving
effect to the Loan to be made under this Agreement, will be, Solvent.
4.9. Operation of Business. The Borrower and each Subsidiary and Affiliate
of the Borrower possesses all licenses, permits, franchises, patents,
copyrights, trademarks, and trade names, or rights thereto, free from unduly
burdensome restrictions and adequate for the conduct in all material respects of
their respective businesses substantially as now conducted and as presently
proposed to be conducted, and to the best knowledge of the Borrower, the
Borrower and each Subsidiary is not in violation of any valid rights of others
with respect to any of the foregoing. During the five (5) year period
immediately preceding the date of this Agreement, Borrower has had no principal
office or principal place of business located in any political or administration
region or district other than as set forth in Exhibit D.
4.10. Title to Property. The Borrower has good, valid and marketable title
to all its material Property and assets, both real and personal (except for such
material property as has been sold or otherwise disposed of in the ordinary
course of business since the date hereof), and has appropriate rights to lease
any Property leased by it.
4.11. Absence of Liens Other Than Permitted Liens. The Eligible
Equipment is not and will not be subject to any Lien or the terms of any
security agreement during the term hereof, other than Permitted Liens.
4.12. Subsidiaries, Affiliates, and Ownership of Stock. Set forth in
Exhibit E hereto is a complete and accurate list of the Subsidiaries and
Affiliates of the Borrower, showing (i) the correct name of each of the
Subsidiaries of the Borrower, the jurisdiction of incorporation or formation and
the percentage of its voting stock owned by the Borrower; (ii) the name of each
of the Borrower's corporate or joint venture Affiliates and the nature of the
affiliation; (iii) the number, nature and holder of all outstanding securities
of the Borrower and each Subsidiary of the Borrower; and (iv) the number of
authorized, issued and treasury shares of the Borrower and each Subsidiary of
the Borrower. All of the outstanding capital stock of each Subsidiary has been
validly issued, is fully paid and nonassessable. If the Borrower has any
Subsidiary or Subsidiaries, the Borrower represents and warrants that it has
good title to all of the shares it purports to own of the
10
<PAGE> 11
securities of each Subsidiary, free and clear in each case of any Lien other
than Liens that have been disclosed to Lender in writing.
4.13. Stamp, Duty, Documentary and Withholding Taxes. Borrower has paid or
shall pay when due all stamp, duty or documentary taxes or charges imposed by
the government of the Republic of Ghana or any taxing authority thereof or
therein that are payable on or in connection with this Agreement, the Notes, the
Loan Documents or any related documents. Borrower has paid or shall pay when due
all applicable deductions or withholdings for or on account of any Taxes,
levies, duties, fees, deductions or withholding, restrictions or conditions of
any nature imposed by or on behalf of the government of the Republic of Ghana or
any taxing authority whatsoever on the payments by the Borrower to the Lender of
the Loan hereunder.
4.14. Corporate Names. During the preceding five (5) years, Borrower has
not been known as or used any corporate, fictitious or trade names except as
disclosed on Exhibit F hereto. Except as set forth on Exhibit F, Borrower has
not, during the preceding five (5) years, been the surviving corporation or
limited liability company of a merger or consolidation or acquired all or
substantially all of the assets of any Person.
4.15. Business Locations. The principal place of business and main
executive office of the Borrower and other current business locations (including
leased locations) are set forth on Exhibit D hereto.
4.16. Leases. A complete listing of all leases of the Borrower as "lessee"
thereunder in excess of $250,000 is set forth in Exhibit G.
4.17. Debt. Set forth in Exhibit H hereto is a complete, accurate and
correct list of all credit agreements, indentures, purchase agreements,
guarantees, surety agreements, capitalized leases, and other investments,
agreements, and arrangements presently in effect providing for or relating to
extensions of credit (including agreements and arrangements for the issuance of
letters of credit or for acceptance financing) in respect of which the Borrower
or any Subsidiary is in any manner directly or contingently obligated for an
amount greater than $1,000,000; provided, however, that the Borrower shall have
no obligation to report on Exhibit H purchase agreements regarding the sale of
goods produced in the Borrower's operations entered into in the ordinary course
of business of the Borrower. The maximum principal or face amounts of the credit
in question which are outstanding and which can be outstanding are correctly
stated, and all mortgages, deeds of trust, pledges, Liens, security interests,
or other charges or encumbrances of any nature given or agreed to be given as
security therefor are correctly described or indicated in such exhibit. The
Borrower is not obligated as surety or indemnitor under any surety or similar
bond or other contract and has not issued or entered into any agreement to
assure payment, performance or completion of performance of any undertaking or
obligation of any other Person. Borrower has no debt or other lien or obligation
in favor of any Affiliated or stockholder of Borrower that has payment rights
superior to those of Lender hereunder or under the Note.
4.18. Compliance with Applicable Laws and Regulations; Governmental
Consents. The Borrower, in the conduct of all of its business affairs, has
complied in all material respects with the requirements of all Applicable Laws
and regulations as in effect at the relevant time noncompliance with which would
have a Material Adverse Effect. Except as set forth in Exhibit I, there have
been no citations, notices or orders of noncompliance (that have not been
complied with or withdrawn), issued to the Borrower under any Applicable Law
which would have a Material Adverse Effect.
Except as set forth in Exhibit I, the Borrower has, and is in good
standing with respect to, all governmental consents, approvals, authorizations,
permits, certificates, inspections, and franchises necessary to continue and to
conduct in all material respects its business as heretofore
11
<PAGE> 12
conducted (or proposed to be conducted) by it and to own or lease and operate in
all material respects its Properties as now owned or leased by it.
4.19. Taxes. The Borrower and its Subsidiaries each has filed all federal,
state and local (or the relevant equivalent) tax returns and other reports it is
required by law to file and has paid, or made provision for the payment of, all
taxes, assessments, fees and other governmental charges that are reflected on
such returns except and to the extent only that such taxes, assessments, fees
and charges are being actively contested in good faith and by appropriate
proceedings and the Borrower or Subsidiary has established adequate reserves on
its books therefor. The provision for taxes on the books of the Borrower and
each Subsidiary are, insofar as known to the Borrower, adequate for all years
not closed by applicable statutes and for its current fiscal year. Except as
disclosed in the financial statements furnished to Lender in accordance with
Section 4.4, the Borrower knows of no proposed material tax assessment against
it or any of its Subsidiaries and no extension of time for the assessment of
federal, state or local taxes of the Borrower or any of its Subsidiaries is in
effect or has been required.
4.20. Litigation. Except as set forth in Exhibit J, there are no actions,
suits or proceedings pending or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any Subsidiary or the Property of the
Borrower or any Subsidiary before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which, if determined adversely to the Borrower or any Subsidiary (as the case
may be), would have a Material Adverse Effect.
4.21. No Defaults on Outstanding Judgments or Orders. The Borrower has
satisfied all judgments, and is not in default with respect to any judgment,
writ, injunction, decree, rule, or regulation of any court, arbitrator, or
federal, state, municipal, or other governmental authority, commission, board,
bureau, agency, or instrumentality, domestic or foreign, unless the failure to
cure such default would not have a Material Adverse Effect.
4.22. Labor Disputes; Acts of God. Except as set forth in Exhibit K,
neither the Borrower nor any of its Subsidiaries is a party to any collective
bargaining agreement and there are no material grievances, disputes or
controversies with any union or any other organization of the Borrower's
employees, or threats of strikes, work stoppages or any asserted pending demands
for collective bargaining by any union or organization. Neither the business nor
the Property of the Borrower or any Subsidiary are affected by any fire,
explosion, accident, drought, storm, hail, earthquake, volcanic eruption,
embargo, act of God or of the public enemy, or other casualty (whether or not
covered by insurance) which would have a Material Adverse Effect.
4.23. Surety Obligations. Except as set forth in Exhibit H, the Borrower
is not obligated as surety or indemnitor under any surety or similar bond or
other contract and has not issued or entered into any agreement to assure
payment, performance or completion of performance of any undertaking or
obligation of any other Person.
4.24. Other Agreements. The Borrower and each Subsidiary of the Borrower
is not in default in any material respect under any indenture, loan, or credit
agreement, or under any lease or other agreement or instrument to which it is a
party, or any term of its charter or bylaws or in the performance, observance,
or fulfillment of any of the obligations, covenants, or conditions contained in
any agreement or instrument material to its business to which it is a party. No
event has occurred and no condition exists which, upon consummation of the
transactions contemplated by this Agreement, would constitute a default under
any note or other evidence of indebtedness of the Borrower or a Default or an
Event of Default.
12
<PAGE> 13
4.25. No Exchange Approvals. There are no exchange approvals required for
the execution of the Agreement, the Notes, or the Loan Documents and the
Borrower will be permitted to purchase sufficient freely transferable Dollars
for the payment of all amounts due under such agreements and documents, or to
the extent any such approvals are required Borrower has obtained them.
4.26. Civil Acts; No Immunity. The Borrower is subject to civil and
commercial law with respect to its obligations under this Agreement. The
execution, delivery and performance of this Agreement by the Borrower constitute
a commercial act as opposed to a governmental act. The Borrower (and its
Property) does not enjoy, in the courts or under the laws of the Republic of
Ghana any right of immunity from suit, setoff or attachment or execution on a
judgment in respect of the obligations of the Borrower under this Agreement.
4.27. Legal Form of Agreement. The Loan Documents are in proper legal form
under the laws of the Republic of Ghana for the enforcement thereof against the
Borrower under the laws of the Republic of Ghana; and to ensure the legality,
validity, enforceability or admissibility in evidence of the Loan Documents, it
is not necessary that any of the Loan Documents be filed or recorded with any
court or other authority in the Republic of Ghana, other than the requirement
that relevant Loan Documents (including the Security Agreement) be stamped by
the appropriate governmental authority and that the Security Agreement be
registered with the Registrar of Companies.
4.28. Deed of Warranty. The Deed of Warranty remains in full force and
effect and no amendment to or modification thereto has been made.
SECTION 5. COVENANTS AND CONTINUING AGREEMENTS
5.1. Affirmative Covenants. The Borrower covenants that from the date
hereof, and for so long as any amounts owed by the Borrower to the Lender
hereunder or under any of the other Loan Documents shall remain unpaid, and
unless otherwise consented to by Lender in writing:
(A) Financial Statements; Other Information. The Borrower will deliver
to Lender:
(i) Annual Statements. As soon as available, and in any event
within one hundred twenty (120) days after the end of each Fiscal Year of the
Borrower, a copy of the unqualified (except for a qualification for a change in
accounting principles with which the independent public accountant concurs)
audited financial statements of the Borrower as of the end of such year,
certified by a firm of independent certified public accountants of recognized
international standing or otherwise acceptable to Lender.
(ii) Semi-Annual Statements. As soon as available and in any event
within ninety (90) days after the end of each semi-annual period of each Fiscal
Year of the Borrower, unaudited interim financial statements of the Borrower as
of the end of such semi-annual period and of the portion of the Borrower's
Fiscal Year then elapsed, certified by the principal financial officer of the
Borrower as prepared consistently with the Borrower's prior practices and fairly
presenting, in all material respects, the financial position and results of
operations of the Borrower for such period subject only to changes from audit
and year-end adjustments and except that such statements need not contain notes.
(iii) Generally Accepted Accounting Principles. The annual audit
reports and the semi-annual financial statements referred to in (i) and (ii),
above, shall be prepared in reasonable detail and in accordance with GAAP
applied on a basis consistent with the accounting practices reflected in the
annual financial statements referred to in Section 4.4 (subject only, in the
case of the semi-annual statements, to changes from audit and year-end
adjustments and except that such semi-annual statements need not contain
13
<PAGE> 14
notes); and accompanied by a certificate of the chief financial officer of the
Borrower stating (i) that such audit report and financial statement have been
prepared in accordance with GAAP applied on a basis consistent with the
accounting practices reflected in the annual financial statements referred to in
Section 4.4, and (ii) all relevant facts in reasonable detail to evidence, and
the computations as to, whether or not the Borrower is in compliance with the
requirements set forth in Section 5.1(L) of this Agreement.
(iv) Accountants' Reports. Promptly upon receipt thereof, a copy of
the accountants' letter to Borrower's management that is prepared in connection
with such financial statements; and, if the shares of Borrower are publicly
traded at any time during the term of this Agreement, copies of all such
financial statements and reports as the Borrower shall send to its stockholders
(as stockholders) and of all registration statements and all regular or periodic
reports which the Borrower shall file, or may be required to file, with any
national or state securities commission.
(v) Projections. As soon as available, and in any event no later
than thirty (30) days after the last day of each fiscal year of the Borrower,
Projections of the Borrower for the forthcoming fiscal year, month by month.
(vi) Notice of Litigation. Promptly after the commencement thereof,
notice in writing of all litigation and of all administrative proceedings before
any state or federal court or any governmental or regulatory agency, bureau or
commission affecting the Borrower or any Subsidiary or any of its Properties or
the Property of any Subsidiary, whether or not the claim is considered by the
Borrower to be covered by insurance, which may have a Material Adverse Effect or
which seek a monetary recovery against the Borrower in excess of $1,000,000,
along with, if requested in writing by Lender, an opinion of the Borrower's
counsel regarding the circumstances underlying and merit of such litigation or
proceedings.
(vii) Notice of Change in Ownership. Promptly upon the occurrence
thereof, a written notice of a change in ten percent (10%), in one transaction
or a series of transactions, in the ownership of the Borrower or any Subsidiary.
(viii) Notice of Claimed Default Under Other Agreements. Promptly
after learning of any material default by Borrower under any note, indenture,
loan agreement, mortgage, lease, deed, guaranty or other similar agreement
relating to any Indebtedness of the Borrower with an outstanding principal
balance in excess of $1,000,000, a written notice specifying the notice given or
action taken by the holder of such Indebtedness, as the case may be, and the
nature of the claimed default and what action the Borrower is taking or proposes
to take with respect thereto.
(ix) Notice of Default by Debtor of the Borrower. Promptly after
the occurrence of any default by any obligor under any note or other evidence of
Indebtedness payable to the Borrower in an amount exceeding $2,000,000, a
written notice thereof to Lender.
(x) Notice of Change in Credit Rating. Promptly upon becoming aware
thereof, a written notice of any adverse change in, or downgrading of, any
credit rating given the Borrower in connection with any outstanding debt
obligations of the Borrower.
(xi) Notice of Regulatory Action. Promptly upon becoming aware of
any action or proceeding instituted by any national, district or other
regulatory agency which might materially and adversely affect the ability of the
Borrower to perform its obligations under this Agreement or otherwise with
respect to the Loan, a written notice describing such action or proceeding and
the status thereof.
14
<PAGE> 15
(xii) Notice of Labor Dispute. Promptly after Borrower's learning
of any labor dispute to which the Borrower may become a party, any strikes or
walkouts relating to any of its plants or their facilities, or the expiration of
any labor contract to which it is a party or by which it is bound, a written
notice describing any such strike, walkout or condition which may have a
Material Adverse Effect, and the status thereof.
(xiii) Quarterly Covenant Compliance Report. As promptly as
practicable (but in any event not later than fifteen (15) Business Days)
following the end of each calendar quarter, a Covenant Compliance Report,
substantially in the form of Exhibit L, stating: (i) whether the Borrower was in
compliance during and at the end of the calendar quarter with respect to each of
the covenants of the Borrower specified in this Agreement, (ii) which
covenant(s), if any, the Borrower failed to comply with and the period(s) during
which the Borrower was not in compliance, and (iii) for any covenant for which
the Borrower is not in compliance, the steps being taken to correct such
noncompliance (including periodic notice to Lender as to the Borrower's progress
in such regard). If the Borrower identifies any covenant for which it is not in
compliance, and as the Borrower reports to Lender on the correction of the
noncompliance, the Borrower shall also provide Lender with sufficient
documentation to permit Lender to understand the nature of the noncompliance and
the progress toward correcting same. The Covenant Compliance Report shall be
signed by the chief executive officer or chief financial officer of the
Borrower. Lender's receipt of any report or other information identifying
noncompliance by the Borrower or failure to respond thereto, shall not act as a
waiver of Lender's rights under this Agreement or Lender's rights hereunder with
respect to such noncompliance or any other event of noncompliance.
(xiv) Requested Information. From time to time and promptly upon
the request of Lender, such data, certificates, reports, statements, opinions of
counsel and other experts, documents or further information or assurances
bearing upon or related to this Agreement, or the business, assets, liabilities,
financial condition, results of operations, or business prospects of the
Borrower as Lender may reasonably request (including, without limitation,
federal income tax returns of the Borrower, accounts payable ledgers, and bank
statements), in each case in form and substance, and certified in a manner,
satisfactory to Lender.
(B) Compliance with Applicable Laws and Regulations; Payment of Taxes and
Claims. The Borrower shall comply and cause each Subsidiary to comply with all
Applicable Laws, rules, regulations and orders including, without limitation,
all laws, statutes, regulations and ordinances regarding the collection, payment
and deposit of employees' income, unemployment, social security, sales and
excise taxes, other Taxes, which failure to comply with might have a Material
Adverse Effect, and shall also comply in all material respects with, perform and
observe and cause each Subsidiary to comply in all material respects with,
perform and observe, all material covenants, provisions and conditions in
connection with all other loan or credit agreements to which it or any such
Subsidiary is a party. The Borrower shall timely file, and cause each Subsidiary
to file, all national, district and local tax returns or extensions and other
reports the Borrower or such Subsidiary is required by law to file, and
maintain, and cause each Subsidiary to maintain, adequate reserves for the
payment of all taxes, assessments, governmental charges, and levies imposed upon
it, its income, or its profits, or upon any Property belonging to it. The
Borrower shall pay and discharge, and cause each Subsidiary to pay and
discharge, all taxes, assessments and governmental charges upon it, its income
and Properties as and when such taxes, assessments and charges are due and
payable, except and to the extent only that such taxes, assessments and charges
are being actively contested in good faith and by appropriate proceedings, the
Borrower promptly notifies Lender in writing of such contest, the Borrower (or
such Subsidiary) maintains adequate reserves on its books therefor and the
nonpayment of such taxes, assessments and charges does not result in a Lien upon
any Properties of the
15
<PAGE> 16
Borrower (or such Subsidiary) other than a Permitted Lien. The Borrower shall
also pay and discharge any lawful claims which, if unpaid, might become a Lien
against any of the Eligible Equipment except for Permitted Liens.
(C) Responsibility for Loss or Damage and Insurance. The Borrower and each
Subsidiary of the Borrower shall obtain and maintain general corporate insurance
with insurers believed by the Borrower and each such Subsidiary to be
responsible and reputable and reasonably acceptable to Lender, in such amounts
and against such risks as is usually carried by companies engaged in similar
business and owning similar Property in the same general areas in which the
Borrower and each Subsidiary operates or as may be required by any Applicable
Laws, orders or regulations or as may reasonably be requested by Lender. Upon
the written request of Lender, the Borrower and each Subsidiary shall promptly,
and in all events within ten (10) days of the date on which the Borrower
receives such request, provide Lender with evidence of the insurance coverage
required under this Section. Additionally, the Borrower and each Subsidiary and
Affiliate of the Borrower shall provide not less than thirty (30) days advance
written notification to Lender in the event of cancellation or material change
in the terms of such coverage.
Borrower shall be responsible for and bear the risk of any loss or damage to the
Eligible Equipment financed howsoever caused. Borrower shall at its expense
insure the Eligible Equipment in any Security Agreement against all risks of
physical loss for its full insurable value. All such insurance shall be with
such insurance companies and under such policies and in such form as are
satisfactory to Lender. Such insurance shall be primary, without right of
contribution from any insurance carried by Lender, and shall provide that it may
not be canceled or altered so as to affect the interest of Lender without at
least thirty (30) days prior written notice to Lender. All such insurance
covering loss or damage to Eligible Equipment shall name Lender (or its
designee) as sole loss payee. Deductibles on such insurance shall not exceed
U.S. $50,000 per occurrence. Borrower shall furnish Lender with satisfactory
evidence of such insurance. Borrower shall promptly notify Lender of any loss or
damage to the Equipment and of any claim relating thereto. Borrower shall not
agree to any settlement relating to the Eligible Equipment with insurers without
Lender's prior written consent. Borrower hereby irrevocably appoints Lender as
Borrower's attorney-in-fact to endorse all drafts or checks payable to Borrower,
and to file claims and to take all other actions necessary to collect any
proceeds of such insurance.
(D) Preservation of Corporate Existence. The Borrower and each Subsidiary
shall preserve and maintain its corporate existence and obtain and keep in force
any and all rights, privileges, licenses, permits, patents, franchises, or other
governmental authorizations necessary to the ownership of its Properties or to
the conduct of its business; provided, however, that the Borrower or any
Subsidiary shall not be required to preserve any such rights, privileges,
licenses, permits, patents, and franchises or, in the case of any Subsidiary,
its corporate existence, if (i) its Board of Directors shall determine that the
preservation thereof is no longer desirable or necessary in the conduct of the
current business of the Borrower or such Subsidiary and (ii) the loss thereof is
not disadvantageous in any material respect to the Lender or any subsequent
holder of the Loan and would not have a Material Adverse Effect.
(E) Inspection. At any reasonable time and from time to time upon prior
notice to the Borrower, the Lender or any agents or representatives thereof (at
Borrower's expense) shall be allowed to examine and make and prepare copies of
and abstracts from the records and books of account of, and visit and inspect
the Property of, the Borrower and each Subsidiary and to discuss the affairs,
finances and accounts of the Borrower with the Managing Director, Chief
Financial Officer or Chairman of the Borrower, and any other officer of the
Borrower who shall be designated by Borrower.
16
<PAGE> 17
(F) Maintenance of Property, Etc. The Borrower and each Subsidiary shall
maintain and preserve all of its Property necessary in the proper conduct of its
current business in good working order and condition, ordinary wear and tear
excepted.
(G) Maintenance of Records and Books of Account. The Borrower shall keep
and cause each Subsidiary to keep accurate records and books of account;
financial information shall be recorded and maintained in accordance with GAAP
consistently applied.
(H) Discharge of Indebtedness. The Borrower and each Subsidiary of the
Borrower shall promptly pay and discharge any and all Indebtedness and lawful
claims which, if unpaid, might become a Lien or charge upon the Eligible
Equipment, except Permitted Liens.
(I) Application of Proceeds of the Loan. The Borrower shall use the
proceeds only as specified in the Remittance Instructions.
(J) Uninsured Loss. Borrower shall give Lender written notice of any
uninsured loss suffered by the Borrower or any Subsidiary through fire, theft,
judgment, liability or property damage in excess of $100,000.
(K) Further Assurances. At Lender's request, Borrower shall promptly
execute or cause to be executed and deliver to Lender any and all documents,
instruments and agreements prepared at Lender's expense and reasonably deemed
necessary by Lender to give effect to or carry out the terms or intent of this
Agreement or any of the other Loan Documents.
(L) Financial Covenants. Following any funding under the Note, and for so
long as any amounts owed by the Borrower to the Lender hereunder or under any of
the other Loan Documents shall remain unpaid:
(i) Borrower shall maintain a ratio of Indebtedness to Net Worth of
not more than 1.8 to 1.0;
(ii) Borrower shall maintain a current ratio of not less than 1.0;
and
(iii) Borrower shall maintain a minimum Net Worth of $45,000,000.
5.2. Negative Covenants. The Borrower covenants that from the date hereof,
and for so long as any amounts owed by the Borrower to the Lender hereunder or
under any of the other Loan Documents shall remain unpaid, and unless otherwise
consented to by Lender in writing, the Borrower shall not:
(A) Sale or Disposition of Assets. Sell, transfer, convey, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its assets (whether now owned or hereafter acquired)
to any Person.
(B) Mergers; Consolidations; Acquisitions. Merge or consolidate, or
permit any Subsidiary to merge or consolidate, with any Person, or acquire all
or any substantial part of the Properties of any Person.
(C) Restrictions on Nature of Business. Engage in any line of
business materially different from that presently engaged in by the Borrower.
(D) Liens and Encumbrances. Create, incur or suffer to exist, or
permit any Subsidiary to create, incur or suffer to exist, any Lien upon any of
the Eligible Equipment, except Permitted Liens.
(E) Loans. Make any loans or other advances of money (other than
for salary, travel advances, ordinary moving expenses, housing loans, advances
against commissions and other advances to employees in the ordinary course of
17
<PAGE> 18
business or as provided for in the Borrower's collective bargaining agreement
with, or conditions of service for, its employees or senior officers as such
collective bargaining agreement may be amended or modified, and, in the case of
senior officers under the conditions of service, consistent with past practice)
to any Person, including, without limitation, any of the Borrower's Affiliates,
officers or employees.
(F) Affiliate Transactions; Affiliate Indebtedness. Except as
provided in Section 5.2(E) or 5.2(I) hereof, enter into, or be a party to any
transaction with any Affiliate or stockholder, except in the ordinary course of
and pursuant to the reasonable requirements of the Borrower's business and upon
fair and reasonable terms which are no less favorable to the Borrower than the
Borrower could obtain in a comparable arm's length transaction with a Person not
an Affiliate or stockholder of the Borrower. Without limiting the generality of
the foregoing, Borrower shall not incur any debt or other obligation to any
Affiliated or stockholder that ranks in priority above that of Lender evidenced
by the Note.
(G) Partnerships or Joint Ventures. Become or agree to become a
general or limited partner in any general or limited partnership or a joint
venturer in any joint venture; provided, however, that the Borrower shall have
the right to become a partner or joint venturer (i) in connection with its
mining activities and (ii) in connection with the conducting of exploration,
development and/or exploitation activities carried on to locate, assess and/or
exploit mineral deposits within the Republic of Ghana, so long as, in each such
case, the Borrower obtains insurance coverage relating to such partnership or
venture of a type and in amounts as described in Section 5.1(C) of this
Agreement.
(H) Adverse Transactions. Permit or agree to any material
extension, compromise or settlement of any Account, loan or other agreement with
a principal amount outstanding of $1,000,000.00 or more.
(I) Guaranties. Guarantee, assume, endorse or otherwise, in any
way, become directly or contingently liable with respect to the Indebtedness of
any Person except (i) by endorsement of instruments or items of payment for
deposit or collection, (ii) agreements to repurchase accounts or chattel paper
that have been discounted, sold or otherwise assigned in the ordinary course of
the Borrower's business or (iii) as otherwise approved by Lender.
(J) Subsidiaries. Hereafter acquire or create any Subsidiary or
divest itself of any material assets by transferring them to any Subsidiary.
(K) Business Locations. Transfer its principal place of business or
chief executive office except upon at least sixty (60) days prior written notice
to Lender.
(L) Location of Eligible Equipment. Transfer or remove the Eligible
Equipment from the Republic of Ghana.
(M) Name of the Borrower. Use any corporate name (other than its
own) or any fictitious name or "d/b/a" except for the names disclosed in Exhibit
F.
(N) Fiscal Year. Change its fiscal year.
(O) Tax Consolidation. File or consent to the filing of any
consolidated income tax return with any Person other than one or more parent
entities of the Borrower.
SECTION 6. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Lender under
18
<PAGE> 19
the other Sections of this Agreement, it is understood and agreed that the
Commitment shall not be binding upon Lender and Lender shall not be obligated to
make a Loan under Section 2 of this Agreement unless and until each of the
following conditions has been and continues to be satisfied, all in form and
substance satisfactory to Lender and its counsel:
6.1. Documentation. Lender shall have received the following documents,
each to be in form and substance satisfactory to Lender and its counsel:
(A) Evidence of Borrower's insurance specified in Section 5.1.C;
(B) Copies of all filing receipts, registrations or acknowledgments
issued by any governmental authority to evidence satisfactorily to Lender any
filing or recordation necessary to perfect the Liens of Lender under the
Security Agreement and other Loan Documents, and evidence in a form acceptable
to Lender that such Liens constitute valid and perfected security interests and
Liens, having a first priority in favor of Lender, or the Lien priority
specified in such Security Agreement or other Loan Document;
(C) A certified copy of the resolutions of the Board of Directors
of the Borrower or other equivalent corporate proceedings evidencing approval of
this Agreement, the other Loan Documents and all other matters contemplated
hereby or related hereto;
(D) Copies of the charter and bylaws or similar corporate documents
of the Borrower, certified by an authorized officer of the Borrower as being
true and correct copies thereof;
(E) A certificate of an authorized officer of the Borrower, which
shall certify the names of the officers of the Borrower authorized to execute
and deliver this Agreement and the other Loan Documents to be delivered pursuant
to this Agreement by the Borrower or any of its officers, together with the true
signatures of such officers. The Lender may conclusively rely on such
certificate until the Lender shall receive a further certificate of an
authorized officer of the Borrower canceling or amending the prior certificate
and submitting the signatures of the officers named in such further certificate;
(F) A Tax Clearance Certificate with respect to the Borrower issued
as of a recent date issued by the appropriate taxing authority of the Republic
of Ghana;
(G) A closing certificate signed by the President and Chief
Financial Officer of Borrower dated as of the Closing Date, stating that (i) the
representations and warranties set forth in Section 4 hereof are true and
correct in all material respects on and as of such date, (ii) Borrower is on
such date in compliance in all material respects with all the terms and
provisions set forth in this Agreement and (iii) on such date no Default or
Event of Default has occurred or is continuing;
(H) The Other Agreements, including but not limited to any Security
Agreement, duly executed and delivered by Borrower;
(I) The favorable, written opinion of counsel to Borrower, as to
the transactions contemplated by this Agreement and any of the other Loan
Documents, to be in form and scope satisfactory to Lender and its counsel
substantially in the form of Exhibit M;
(J) Written instructions from Borrower directing the application of
proceeds of the Loan made pursuant to this Agreement;
(K) The Note, properly executed on behalf of the Borrower and
substantially in the form of Exhibit A hereto;
19
<PAGE> 20
(L) Lender shall have received from the Borrower satisfactory
evidence that it has received the appropriate governmental exchange control
authorization for the transactions contemplated hereby or an opinion of the
Borrower's counsel that no such authorization is required;
(M) Certified copies and certified English translations of all
necessary governmental authorizations and approvals with respect to the Loan
Documents;
(N) Any of the conditions specified in the Commitment Letter which
are not expressly listed herein (so long as such conditions are not specifically
inconsistent with the requirements of this Agreement, in which case this
Agreement shall prevail);
(O) Evidence satisfactory to Lender that this Agreement has been
registered in accordance with Ghana law;
(P) Evidence satisfactory to Lender that Borrower has paid all
stamp duty that is payable prior to the registration of this Agreement with the
government of the Republic of Ghana; and
(Q) Such other documents, instruments and agreements as Lender
shall reasonably request in connection with the foregoing matters.
6.2. Other Conditions. The following conditions have been and shall
continue to be satisfied up to and through the Closing and any funding
hereunder, to the satisfaction of Lender:
(A) No Default or Event of Default shall exist;
(B) Lender shall have received all fees set forth in the
Commitment Letter from Borrower;
(C) Each of the conditions precedent set forth in the other Loan
Documents shall have been satisfied;
(D) Since the date of the last financial statements referred to in
Section 4.4, there shall not have occurred any material adverse change in the
business, financial condition or results of operations of Borrower, or the
existence or value of any collateral, or any event, condition or state of facts
which would reasonably be expected to have a Material Adverse Effect;
(E) No action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages from any Person in respect of, the consummation of the
transactions contemplated hereby or which, in Lender's sole discretion, would
make it inadvisable to consummate the transactions contemplated by this
Agreement or any of the other Loan Documents;
(F) The representations and warranties of Borrower set forth herein
and other Loan Documents are and shall remain true, correct and complete in all
material respects.
SECTION 7. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
7.1. Events of Default. An "Event of Default" shall exist if any of the
following shall occur and be continuing, whatever the reason for such event or
condition and whether it shall be voluntary or involuntary, or within or without
the control of the Borrower or any Subsidiary, or be effected by operation of
law or pursuant to any order or judgment of a court or otherwise:
20
<PAGE> 21
(A) the Borrower shall fail to pay any portion of the principal or
interest with respect to the Note or of any amount under the Loan Documents or
the Obligations when due; or
(B) any representation, warranty or other statement made by or on
behalf of the Borrower in this Agreement, or by or on behalf of the Borrower in
any other Loan Document shall prove false or misleading in any material respect;
or
(C) the Borrower shall fail or neglect to perform, keep or observe
any covenant contained in this Agreement or other Loan Document (other than a
covenant a default the performance or observance of which is dealt with
specifically elsewhere in this Section 7.1); or
(D) there shall occur any default on the part of Borrower
(including specifically, but without limitation, due to nonpayment) under any
other Loan Document, agreement, document, or instrument to which Borrower and
Lender are parties; or
(E) the Borrower shall fail to make any payment due on any
Indebtedness or other security with a principal amount of $1,000,000 or more or
any event shall occur (other than the mere passage of time) or any condition
shall exist in respect of any such Indebtedness or other security of the
Borrower, or under any agreement securing or relating to such Indebtedness or
other security, the effect of which is (i) to cause (or permit any holder of
such Indebtedness or other Security or a trustee to cause) such Indebtedness or
other Security, or a portion thereof, to become due prior to its stated maturity
or prior to its regularly scheduled dates of payment, or (ii) to permit a
trustee or the holder of any security (other than common stock of the Borrower)
to elect a majority of the directors on the Board of Directors of the Borrower;
or
(F) a custodian, receiver, liquidator or trustee of the Borrower,
or of any of its Property, shall be appointed by court order and such order
shall remain in effect for more than ninety (90) days; or an order for relief in
respect of the Borrower shall be entered under any bankruptcy laws, as now or
hereafter constituted; or any of its Property shall be sequestered by court
order and such order shall remain in effect for more than ninety (90) days; or a
petition shall be filed against the Borrower under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, and
shall not be dismissed within ninety (90) days after such filing; or
(G) the Borrower shall file a petition in voluntary bankruptcy or
seeking relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction, whether now or hereafter in effect, or shall consent to the
filing of any petition against it under any such law; or
(H) the Borrower shall make a general assignment for the benefit of
its creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall consent to the appointment of a
custodian, receiver, trustee or liquidator of the Borrower or of all or a
substantial part of its Property; or
(I) an adverse change with respect to the financial condition of
the Borrower which results, in the good faith credit judgement of the Lender, in
a material impairment of the prospect of repayment of the Loan or in Borrower's
performance under the Loan Documents; or
(J) the Borrower or any Subsidiary of the Borrower suffers a final
judgment against it which, within sixty (60) days from the date such judgment is
entered, shall not have been discharged or execution thereof stayed pending
appeal unless (i) such judgment in the reasonable opinion of the Lender is
21
<PAGE> 22
adequately covered by insurance; or (ii) adequate accruals with respect to such
judgment have been established in accordance with GAAP and the aggregate amount
of all such judgments at any time during the term hereof, not adequately covered
by insurance is not at any time in excess of $200,000; or
(K) a sale, hypothecation or other disposition of twenty percent
(20%) or more of the beneficial interest in any class of voting stock of the
Borrower without the prior written consent of Lender; or
(L) there shall occur a cessation of a substantial part of the
business of the Borrower for a period which significantly affects the Borrower's
capacity to continue its business on a profitable basis; or the Borrower shall
suffer the loss or revocation of any license or permit now held or hereafter
acquired by the Borrower which is necessary to the continued lawful operation of
its business and such loss or revocation shall have a Material Adverse Effect;
or the Borrower shall be enjoined, restrained or in any way prevented by court,
governmental or administrative order from conducting all or any material part of
its business affairs; or any lease or agreement pursuant to which the Borrower
leases, uses or occupies any Property shall be canceled or terminated prior to
the expiration of its stated term and such termination shall have a Material
Adverse Effect; or any material part of the Collateral shall be taken through
condemnation or the value of such Property shall be impaired through
condemnation; or
(M) the Borrower, or any Affiliate of either, shall challenge or
contest in any action, suit or proceeding the validity or enforceability of this
Agreement or any of the other Loan Documents, the legality or enforceability of
any of the Obligations or the perfection or priority of any Lien granted for the
benefit of the Lender, if any; or
(N) the Borrower shall be criminally indicted or convicted under
any Forfeiture Law that results in or could lead to a forfeiture of any Property
of the Borrower that is material to its financial condition or business
operations; or
(O) the Borrower shall be nationalized or confiscated or any
government or any agency thereof exercises management control of the Borrower's
day-to-day business operations and affairs; or
(P) the current government of the Republic of Ghana shall be
changed by reason of war (whether or not declared), revolution, riots,
insurrections, acts of terrorism, acts of the public enemy, and/or any other
event which may adversely affect the Borrower's performance under this Agreement
as determined by the Lender in its absolute and sole discretion.
7.2. Acceleration of the Obligations. Without in any way limiting the
right of Lender to demand payment of any portion of the Obligations payable on
demand in accordance with this Agreement or any of the other Loan Documents,
upon or at any time after the occurrence of an Event of Default, and during the
continuance thereof, all or any portion of the Obligations due or to become due
from Borrower to Lender, whether under this Agreement or any of the other Loan
Documents or otherwise, shall, at the option of Lender and without notice to or
demand upon Borrower, become at once due and payable and Borrower shall
forthwith pay to Lender, in addition to any and all sums and charges due, the
entire principal of and accrued and unpaid interest on the Obligations.
7.3. Remedies. Upon or at any time after the occurrence of an Event of
Default and during the continuance thereof, Lender may exercise from time to
time all of the rights and remedies under Applicable Law, and all other legal
and equitable rights to which Lender may be entitled, all of which rights and
remedies shall be cumulative, and none of which shall be exclusive, and shall be
in addition to any other rights or remedies contained in this Agreement, the
Security Agreements, or any of the other Loan Documents.
22
<PAGE> 23
7.4. Remedies Cumulative; No Waiver. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule or contained in any other agreement between Lender and
Borrower, heretofore, concurrently, or hereafter entered into, shall be deemed
cumulative to and not in derogation or substitution of any of the terms,
covenants, conditions, or agreements of Borrower herein contained. The failure
or delay of Lender to exercise or enforce any rights, Liens, powers, or remedies
hereunder or under any of the other Loan Documents shall not operate as a waiver
of any of such Liens, rights, powers or remedies, but all such Liens, rights,
powers, and remedies shall continue in full force and effect until the Loan and
all other Obligations owing or to become owing from Borrower to Lender shall
have been indefeasibly paid in full, and all Liens, rights, powers, and remedies
provided herein and the other Loan Documents are cumulative and none are
exclusive.
SECTION 8. BENEFIT OF AGREEMENT
8.1. Successors and Assigns. The terms and provisions of this Agreement
shall be binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns, except that Borrower shall not have the right
to assign its rights or obligations under this Agreement or any of the other
Loan Documents. Lender shall give written notice to the Borrower within fifteen
(15) Business Days of such assignment, provided however, such notice shall be
given on a "best efforts" basis and Lender shall not be liable to Borrower for
the failure to give such notice, and any such failure shall not affect the
validity or effectiveness of such assignment.
SECTION 9. GENERAL
9.1. Amendments. The terms of this Agreement may not be amended, waived,
modified or terminated except by written instrument signed by the parties
hereto. No such amendment or waiver shall extend to or affect any obligation not
expressly amended or waived or impair any right consequent thereon. In the event
an amendment to any of the Loan Documents or documents for any other of the
Obligations is required, in Lender's sole discretion, due to any request,
action, or inaction of Borrower, including but not limited to any voluntary or
mandatory prepayment of the Obligations, Borrower shall reimburse Lender for all
costs and expenses associated with such amendment, including but not limited to
the reasonable fees and out-of-pocket expenses of outside counsel for the
Lender, the reasonable time of Lender's in house counsel departmental activity
billed at Lender's outside counsel rate, and the reasonable travel costs of
Lender's in-house counsel with respect thereto. In addition, for any amendment,
the Borrower shall pay an administrative fee in an amount the greater of (i) one
half percent (.5%) of the financial value of the increase or decrease in
principal value of the Obligations associated with the amendment, or (ii) Five
Thousand Dollars ($5,000.00).
9.2. Notices.
(A) All communications under this Agreement shall be in writing and
shall be mailed by first class mail, postage prepaid, or delivered by hand or
transmitted by a telecommunications device capable of transmitting or creating a
written record (but in all cases of telecommunication notices such notice must
be immediately followed by mailing):
(i) if to the Lender, at its address at 3322 West End Avenue,
Nashville, Tennessee, 37203-09990, Attention: Global Accounts Operations
Manager, Telephone No. (615) 386-5943 or Facsimile (615) 386-5950 or at such
other address as it may have furnished in writing to the Borrower; or
(ii) if to the Borrower, at its address at P. O. Box 6,
Tarkwa, Republic of Ghana, West Africa Attention: Mr. Lucien Girard, (233) 362
357 or
23
<PAGE> 24
Facsimile (233) 362 273 or at such other address as it may have furnished in
writing to the Lender, with copies to (which copies shall not be required to
effect notice):
The Pioneer Group, Inc.
60 State Street
Boston, Massachusetts 02109
Attention: Donald H. Hunter
Telephone: (617) 422-4970
Telecopy: (617) 422-4296
and
Hale and Dorr
1455 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Telephone: (202) 942-8454
Telecopy: (202) 942-8484
(B) Any notice so addressed and mailed by first class mail shall be
deemed to be given when received or if mailed by registered or certified mail,
fifteen Business days after being so mailed, and any notice delivered by hand or
transmitted by telecommunications device shall be deemed to be given when
received by the Borrower or the Lender, as the case may be.
9.3. Costs, Expenses and Indemnification. The Borrower agrees to pay all
costs and expenses in connection with the preparation, execution, delivery and
enforcement of this Agreement and any other documents to be delivered hereunder,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Lender and the travel costs of Lender's in-house counsel
(excluding any internal allocated charges of the Lender's in-house counsel) with
respect thereto and with respect to advising the Lender as to its respective
rights and responsibilities under this Agreement and the other Loan Documents.
The Borrower also agrees to pay on demand all losses, costs and expenses, if any
(including reasonable counsel fees and expenses except for any internal
allocated charge of Lender's in-house counsel), incurred in connection with the
preservation of, or the enforcement of, or legal advice in respect of, the
rights or responsibilities of the Lender under this Agreement or the Loan
Documents, including, without limitation, losses, costs and Collection Expenses
sustained by the Lender as a result of any failure by the Borrower to perform or
observe its obligations contained herein or in any other Loan Document. The
Borrower further agrees to indemnify and hold harmless the Lender from and
against any and all (i) Taxes or assessments, governmental charges or levies,
duties, fees, deductions or withholding, restrictions or conditions of any
nature or other amounts imposed by, or behalf of, any government or any taxing
authority thereof or therein, including the Republic of Ghana or any subdivision
thereof (excluding taxes imposed on net income and all income and franchise
taxes of the United States and any political subdivisions thereof on Lender),
(ii) stamp, duty or documentary taxes or charges imposed by any government or
any taxing authority thereof or therein, including the Republic of Ghana and its
subdivisions and (iii) damages, losses, liabilities, costs and expenses
resulting from, related to or connected with this Agreement, the Loan or the
other Loan Documents or the transactions contemplated hereby, except to the
extent resulting from the gross negligence or willful misconduct of the Lender.
9.4. Reproduction of Documents; Confidentiality. This Agreement and all
other Loan Documents, including, without limitation, (i) consents, waivers and
modifications which may hereafter be executed, (ii) documents delivered at the
closing of the Loan, and (iii) financial statements, certificates and other
information previously or hereafter furnished, may be reproduced by the Lender
by any photographic, photostatic, microfilm, micro-card, miniature photographic
or other similar process and the Lender may destroy any original document so
reproduced. The Borrower agrees and stipulates that any such reproduction shall
be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in
24
<PAGE> 25
existence and whether or not such reproduction was made in the regular course of
business) and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
The Lender shall treat the information contained in the records, documents
and other materials received from the Borrower that are both marked
"Confidential" and are not otherwise available from another source as
confidential information. The Lender shall not disclose such confidential
information to any other person except: (a) with the consent of the Borrower
(which consent shall not to be unreasonably withheld); (b) if required by law or
required by any stock exchange; (c) in connection with legal proceedings
(including any alternative dispute resolution proceedings) relating to this
Agreement; (d) to an Affiliate, accountant, agent or advisor of the Lender,
provided such person or entity undertakes to observe this Section 9.4; (e) to a
potential assignee, participant or sub-participant of the Lender's interests
under this Agreement and the other Loan Documents provided such person or entity
undertakes to observe this Section 9.4 except to the extent limited by Freedom
of Information Act as it pertains to U.S. Government and agencies thereof; or
(f) to an insurance carrier covering political risk or other risks of the Lender
associated with this Agreement.
9.5. Survival. All warranties, representations, agreements and covenants
made by the Borrower herein or in any other Loan Document shall be considered to
have been relied upon by the Lender and shall survive the making of the Loan
regardless of any investigation made by or on behalf of the Lender.
9.6. Submission to Jurisdiction and Service of Process. The Borrower
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement, the Notes or any Loan Document may be instituted in
the United Sates of America in any Federal or State court sitting in the State
of Tennessee, and the Borrower, in respect of itself and its Properties and
revenues, irrevocably submits to the jurisdiction of these courts in any such
action or proceeding. The Borrower irrevocably consents to such service upon it
by the mailing of copies thereof by U.S. air mail or courier to the Borrower at
its address set forth in Section 9.2(A) of this Agreement. The foregoing
provisions shall not limit the right of the Lender to bring any such action or
proceeding or to obtain execution on any judgment rendered in any such action or
proceeding in any other appropriate jurisdiction or in any other manner. The
Borrower agrees that final judgement against it in any legal action or
proceeding arising out of or relating to this Agreement or the Notes or other
Loan Documents shall be conclusive and may be enforced in any other jurisdiction
within or outside the United States by suit on the judgement, a certified or
exemplified copy of which judgment shall be conclusive evidence thereof and of
the amount of its indebtedness, or by such other means provided by law.
9.7. Judgment. If for the purposes of obtaining judgment in any court it
is necessary to convert a sum due hereunder or under the Note in Dollars into
another currency, the parties hereto agree, to the fullest extent that they
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures Lender could purchase Dollars with
such other currency at Nashville, Tennessee on the Business Day preceding that
on which final judgment is given. The obligation of the Borrower in respect of
any sum due from it to Lender hereunder or under the Note shall, notwithstanding
any judgment in a currency other than Dollars, be discharged only to the extent
that on the Business Day following receipt by Lender of any sum adjudged to be
so due in such other currency Lender may in accordance with normal banking
procedures purchase Dollars with such other currency; if the Dollars so
purchased are less than the sum originally due to Lender in Dollars, the
Borrower agrees, as a separate obligation and notwithstanding any such judgment,
to indemnify Lender against such loss, and if the Dollars so purchased exceed
the sum originally due Lender in Dollars, Lender agrees to remit to the Borrower
such excess.
25
<PAGE> 26
9.8. Waiver of Sovereign Immunity. The Borrower acknowledges and agrees
that the activities contemplated by the provisions of this Agreement, the Notes
and the other Loan Documents are commercial in nature rather than governmental
or public, and therefore acknowledges and agrees that it is not entitled to any
right of immunity on the grounds of sovereignty or otherwise with respect to
such activities or in any legal action or proceeding arising out of or relating
to this Agreement, the Notes or the other Loan Documents, in respect of itself
and its properties and revenues, expressly and irrevocably waives any such right
of immunity which may now or hereafter exist (including any immunity from any
legal process, from the jurisdiction of any court or from any execution or
attachment in aid of execution prior to judgment or otherwise) or claim thereto
which may now or hereafter exist, and agrees not to assert any such right or
claim in any such action or proceeding, whether in the United States, or
otherwise.
9.9. Governing Law. THE PARTIES HERETO HAVE EXPRESSLY AGREED THAT THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TENNESSEE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS
THEREOF, PROVIDED, HOWEVER, THAT FOR ANY LEGAL ACTION OR PROCEEDING BROUGHT WITH
RESPECT TO THE LOAN AGREEMENT, THE NOTE OR ANY LOAN DOCUMENT IN THE COURTS OF
THE REPUBLIC OF GHANA OR ANY POLITICAL SUBDIVISION THEREOF, THE LOAN AGREEMENT,
THE NOTE OR ANY LOAN DOCUMENT SHALL BE DEEMED TO BE MADE UNDER THE LAWS OF THE
REPUBLIC OF GHANA AND FOR SUCH PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE REPUBLIC OF GHANA.
9.10. Right of Setoff. As collateral security for the repayment of the
Borrower's obligations and liabilities under this Agreement, the Borrower hereby
grants the Lender and the Lender's successors and assigns (including any
affiliate or subsidiary of Lender (including Caterpillar or any other
Caterpillar Seller)) the right to apply, at any time and from time to time
should an Event of Default exist hereunder, any and all obligations owing from
the Lender (or its assignees) to the Borrower toward repayment of any sums owing
from the Borrower to the Lender hereunder.
9.11. Severability of Provisions. Any provision of this Agreement which
is prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
9.12. Duplicate Originals. Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument.
9.13. Consequential Damages. Notwithstanding any other provision of this
agreement, Borrower hereby fully waives any claim or right now or hereafter
existing against Lender for any incidental, special, or consequential damages
whether based on contract, warranty, tort (including negligence and strict
liability), or otherwise.
9.14. Use of English Language. All documents or notices to be delivered
pursuant to or in connection with this Agreement shall be in the English
language. English shall be the official language for construction and
interpretation of this Agreement, the Notes, and all Loan Documents and notices,
unless specifically designated otherwise in any such Loan Document. If the
original of any such document or notice is not in the English language, an
English translation thereof shall be delivered.
9.15. Jury Trial Waiver. THE BORROWER AND THE LENDER EACH WAIVE THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE NOTES, ANY OF THE LOAN
DOCUMENTS, OR THE OBLIGATIONS. THE BORROWER ACKNOWLEDGES THAT THE FOREGOING
WAIVER IS A MATERIAL INDUCEMENT TO LENDER ENTERING INTO THIS AGREEMENT AND THAT
LENDER IS RELYING UPON THE FOREGOING WAIVER IN ITS FUTURE DEALINGS WITH THE
BORROWER. THE BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE
FOREGOING WAIVER WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED
ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH SUCH LEGAL COUNSEL.
26
<PAGE> 27
IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO
A TRIAL BY THE COURT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
BORROWER:
TEBEREBIE GOLDFIELDS LIMITED
By: /s/ Lucien Girard
-------------------------------
Title: Managing Director
----------------------------
LENDER:
Total Commitment:
CATERPILLAR FINANCIAL
$5,697,713.20 SERVICES CORPORATION
By: /s/
-------------------------------
Title:
----------------------------
Corporate Operations Manager
[Exhibits Omitted]
27
<PAGE> 1
Exhibit 11
THE PIONEER GROUP, INC.
<TABLE>
COMPUTATION OF EARNINGS PER SHARE (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<CAPTION>
COMPUTATION FOR CONSOLIDATED
STATEMENT OF INCOME THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------- --------------------------- -------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET INCOME (1) $ 3,520 $ 7,329 $ 8,634 $ 13,126
========== ========== ========== ==========
SHARES
Weighted average number of
common shares outstanding (2) 24,944,000 24,805,000 24,934,000 24,798,000
Dilutive effect of stock options and
restricted stock proceeds as common
stock equivalents computed under the
treasury stock method using the
average price during the period (2) 514,000 505,000 524,000 462,000
---------- ---------- ---------- ----------
WEIGHTED AVERAGE NUMBER OF SHARES
outstanding as adjusted (1) (2) 25,458,000 25,310,000 25,458,000 25,260,000
========== ========== ========== ==========
EARNINGS PER SHARE (1) (2) $ 0.14 $ 0.29 $ 0.34 $ 0.52
========== ========== ========== ==========
- ----------
<FN>
(1) These amounts agree with the related amounts in the Consolidated Statement
of Income.
(2) Adjusted for December 1, 1994, 2-for-1 stock split effected in the form of
a 100% stock dividend.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1.00000
<CASH> 31,884
<SECURITIES> 4,821
<RECEIVABLES> 49,329
<ALLOWANCES> 0
<INVENTORY> 20,730
<CURRENT-ASSETS> 118,933
<PP&E> 187,649
<DEPRECIATION> (60,230)
<TOTAL-ASSETS> 408,802
<CURRENT-LIABILITIES> 74,986
<BONDS> 101,937
<COMMON> 2,496
0
0
<OTHER-SE> 153,385
<TOTAL-LIABILITY-AND-EQUITY> 408,802
<SALES> 0
<TOTAL-REVENUES> 113,740
<CGS> 0
<TOTAL-COSTS> 96,378
<OTHER-EXPENSES> 1,762
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,158
<INCOME-PRETAX> 14,442
<INCOME-TAX> 5,808
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,634
<EPS-PRIMARY> 0.340
<EPS-DILUTED> 0.340
</TABLE>
