<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ----------------------
Commission File Number: 1-9468
NEW ENGLAND INVESTMENT COMPANIES, L.P.
--------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3405992
----------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
399 Boylston Street, Boston, Massachusetts 02116
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(617) 578-3500
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark 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 12 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 the past 90 days.
[X] Yes [_] No
The issuer is a limited partnership. There were 42,979,168 units of limited
partner interest and 110,000 units of general partner interest outstanding at
April 30, 1997.
1 of 12
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NEW ENGLAND INVESTMENT COMPANIES, L.P.
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
- ------------------------------
PAGE
----
ITEM 1. FINANCIAL STATEMENTS.
--------------------
Consolidated Balance Sheet as of December 31, 1996
and March 31, 1997 3
Consolidated Statement of Income for the three months
ended March 31, 1996 and 1997 4
Consolidated Statement of Cash Flows for the three months
ended March 31, 1996 and 1997 5
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS. 8
-----------------------------------
PART II - OTHER INFORMATION
- ---------------------------
ITEM 5. OTHER INFORMATION. 11
-----------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 11
---------------------------------
SIGNATURES 12
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PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS.
- ------------------------------
NEW ENGLAND INVESTMENT COMPANIES, L.P.
CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ---------------
(unaudited)
ASSETS
- ------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 49,914 $ 29,779
Accounts receivable 66,430 73,404
Other 6,692 9,589
---------- ----------
Total current assets 123,036 112,772
Intangible assets 527,765 612,994
Fixed assets 19,236 21,601
Other assets 51,621 50,120
---------- ----------
Total assets $721,658 $797,487
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 38,651 $ 51,955
Accrued compensation and benefits 43,612 32,337
Distribution payable 20,084 23,466
---------- ----------
Total current liabilities 102,347 107,758
Deferred compensation, benefits and other 28,686 22,397
Notes payable 118,334 143,283
Deferred purchase consideration 144,027 144,124
---------- ----------
Total liabilities 393,394 417,562
Contingent liabilities (note 3)
Partners' capital 328,264 379,925
---------- ----------
Total liabilities and partners' capital $721,658 $797,487
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3 of 12
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NEW ENGLAND INVESTMENT COMPANIES, L.P.
--------------------------------------
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per unit data, unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1996 1997
------- --------
REVENUES
- --------
<S> <C> <C>
Management and advisory fees $79,913 $116,109
Other revenues and interest income 9,412 10,688
Gain on partial sale of affiliate 4,988 -
--------- ----------
94,313 126,797
--------- ----------
EXPENSES
- --------
Compensation and benefits 43,436 64,999
Restricted unit plan compensation 1,352 133
Amortization of intangibles 5,401 9,268
Depreciation and amortization 1,204 1,556
Occupancy and equipment 2,584 3,724
Interest expense 2,093 3,878
Other 17,308 21,671
--------- ----------
73,378 105,229
--------- ----------
Income before income taxes 20,935 21,568
Income tax expense 621 1,215
--------- ----------
Net income $20,314 $ 20,353
========= ==========
Net income per unit $ 0.53 $ 0.48
========= ==========
Distributions declared per unit $ 0.48 $ 0.58
========= ==========
Weighted average units outstanding 40,385 43,087
========= ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4 of 12
<PAGE>
NEW ENGLAND INVESTMENT COMPANIES, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1996 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 20,314 $ 20,353
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of intangibles 5,401 9,268
Restricted unit plan compensation 1,352 133
Gain on partial sale of affiliate (4,988) -
---------- ----------
Sub-total 22,079 29,754
Depreciation and amortization 1,204 1,556
Increase in accounts receivable and other assets (2,473) (8,370)
Decrease in accounts payable and other liabilities (4,348) (4,260)
---------- ----------
Net cash provided by operating activities 16,462 18,680
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,956) (2,822)
Acquisition payments, net of cash acquired - (41,238)
---------- ----------
Net cash used in investing activities (2,956) (44,060)
---------- ----------
-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 110,000 24,949
Repayment of promissory notes (80,919) -
Distributions paid to unitholders (17,950) (20,084)
Other - 380
---------- ----------
Net cash provided by financing activities 11,131 5,245
---------- ----------
Net increase (decrease) in cash and
cash equivalents 24,637 (20,135)
Cash and cash equivalents, beginning of period 34,385 49,914
---------- ----------
Cash and cash equivalents, end of period $ 59,022 $ 29,779
========== ==========
Cash paid during the period for interest $ 1,297 $ 2,623
========== ==========
Cash paid during the period for income taxes $ 356 $ 1,381
========== ==========
Supplemental disclosure of non-cash
increase in partners' capital $ - $ 54,261
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5 of 12
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NEW ENGLAND INVESTMENT COMPANIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The unaudited consolidated financial statements of New England Investment
Companies, L.P. (the "Partnership") have been prepared in accordance with the
rules and regulations of the Securities and Exchange Commission. These
financial statements should be read in conjunction with the annual report of the
Partnership filed on Form 10-K for the year ended December 31, 1996. In the
opinion of management, all adjustments, consisting only of normal recurring
accruals, have been made to present fairly the financial statements of the
Partnership at March 31, 1997 and for the three month periods ended March 31,
1996 and 1997.
Certain amounts in prior period financial statements have been reclassified to
conform with the 1997 presentation.
NOTE 2 - NET INCOME PER UNIT
- ----------------------------
The calculation of net income per publicly held unit ("net income per unit")
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------
1996 1997
------- -------
(in thousands,
except per
unit data)
<S> <C> <C>
Net income $20,314 $20,353
Restricted unit plan compensation and other 1,127 133
------- -------
Income available for allocation $21,441 $20,486
======= =======
Net income per unit $0.53 $0.48
======= =======
Net income per unit is calculated using the following weighted average units
outstanding:
Weighted average actual units outstanding 37,396 40,456
Units assumed outstanding to settle
deferred purchase consideration 2,989 2,631
------- -------
Weighted average units outstanding 40,385 43,087
======= =======
</TABLE>
For the three month period ended March 31, 1997, weighted average units
outstanding include the dilutive effect of 2,631,537 units assumed outstanding
on January 1, 1997 from the settlement on April 2, 1997 of the $144,124,000
deferred purchase consideration for the Harris acquisition, which was paid by
the issuance of 2,631,537 units valued at $64,489,000 and $79,635,000 in
cash.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share." The standard
specifies the computation, presentation and disclosure requirements for net
income per unit and is effective for the Partnership's financial statements for
the year ending December 31, 1997. The adoption of the standard is not expected
to have a material effect on the financial statements of the Partnership.
NOTE 3 - COMMITMENTS AND CONTINGENT LIABILITIES
- -----------------------------------------------
The Partnership is subject to legal proceedings and claims which have arisen in
the ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to these actions, if any, will not materially
adversely affect the results of operations or financial condition of the
Partnership.
6 of 12
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NEW ENGLAND INVESTMENT COMPANIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 4 - TAX CONSIDERATIONS FOR PUBLIC UNITHOLDERS
- --------------------------------------------------
Under existing tax law, the Partnership would, effective January 1, 1998 (and in
some circumstances earlier), no longer be treated as a partnership for federal
income tax purposes. As a result, the Partnership and the ownership thereof is
expected to be restructured prior to that date in accordance with the terms of
the Partnership Agreement, which confers broad authority and absolute discretion
on the General Partner to effect (or not to effect) a restructuring. See
"Possible Future Restructuring of the Partnership" included in Item 1, and Note
6 of the Notes to the Consolidated Financial Statements of the Partnership
included in Item 8, of the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1996.
Note 5 - NOTES PAYABLE (SUBSEQUENT EVENT)
- -----------------------------------------
On April 1, 1997, the Partnership completed the private placement of
$160,000,000 of 7.15% Senior Notes due April 1, 2007. The Notes have an
effective interest rate of 7.29%, including deferred debt issuance costs which
are amortized to interest expense over the term of the Notes.
7 of 12
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS.
- --------------
Any statements in this report that are not historical facts are intended to fall
within the safe harbor for forward-looking statements provided by the Private
Securities Litigation Reform Act of 1995. Any forward-looking statements should
be considered in light of the risks and uncertainties attendant to the
Partnership and its business, which may cause actual results to vary materially
from what had been anticipated. Certain factors that affect the Partnership
have been described in the Partnership's filings with the Securities and
Exchange Commission, particularly the Partnership's Annual Report on Form 10-K
for the year ended December 31, 1996 (under Item 1, "Business--Forward-Looking
Statements") and include factors such as conditions affecting fee revenues,
reliance on key personnel, competition, regulatory and legal factors, tax
considerations and possible future restructurings. Readers are encouraged to
review these factors carefully.
GENERAL
- -------
The following summary of the consolidated financial information of the
Partnership for the three months ended March 31 shows revenues and net income
before the non-recurring item recognized in the first quarter of 1996 relating
to the sale of a portion of the Partnership's interest in its affiliate, CGM.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------
1996 1997
------- --------
(in thousands,
except per unit data)
<S> <C> <C>
TOTAL REVENUES BEFORE NON-RECURRING ITEM $89,325 $126,797
TOTAL EXPENSES 73,999 106,444
------- --------
NET INCOME BEFORE NON-RECURRING ITEM 15,326 20,353
NON-RECURRING ITEM - GAIN ON PARTIAL SALE OF AFFILIATE 4,988 -
------- --------
NET INCOME $20,314 $ 20,353
======= ========
NET INCOME PER UNIT $ 0.53 $ 0.48
======= ========
DISTRIBUTIONS DECLARED PER UNIT $ 0.48 $ 0.58
======= ========
OPERATING CASH FLOW/1/ $22,079 $ 29,754
======= ========
OPERATING CASH FLOW PER UNIT/1/ $ 0.55 $ 0.69
======= ========
WEIGHTED AVERAGE UNITS OUTSTANDING 40,385 43,087
======= ========
</TABLE>
1. Operating cash flow represents net income adjusted for restricted unit plan
compensation, amortization of intangibles and non-recurring items. Operating
cash flow per public unit ("operating cash flow per unit") should not be
construed as an alternative to net income per unit or cash flow from
operating activities.
8 of 12
<PAGE>
STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE
- -----------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 1996
- ---------------------------------
Net income of $20.4 million or $0.48 per unit for the three months ended March
31, 1997 represents an increase of $5.1 million from the $15.3 million of net
income before non-recurring item or $0.41 per unit for the three months ended
March 31, 1996. The increase primarily reflects higher revenues due to increases
in assets under management from both internal growth and acquisitions. Net
income for the three months ended March 31, 1997 was $20.4 million or $0.48 per
unit compared to net income of $20.3 million or $0.53 per unit for the same
quarter last year.
Total revenues of $126.8 million for the three months ended March 31, 1997
represents an increase of $37.5 million (or 42%) from the $89.3 million of total
revenues before non-recurring item for the same quarter last year. Included in
1997 total revenues are revenues from acquisitions made after March 31, 1996 of
$18.0 million. Excluding acquisitions, revenues increased $19.5 million (or 22%)
primarily reflecting growth in assets under management. Total revenues in 1997
also include a $6 million gain on a transaction in the Partnership's real estate
management subsidiary, which was substantially offset by a charge for
contractual employment obligations and additional costs associated with a
business combination in the same subsidiary.
A $5.0 million non-recurring gain on the partial sale of the Partnership's
interest in its affiliate, Capital Growth Management Limited Partnership
("CGM"), was realized during the first quarter of 1996, completing the agreement
to reduce the Partnership's ownership interest to 50%.
Compensation and benefits of $65.0 million for the three months ended March 31,
1997 increased $21.6 million compared to the same quarter last year and
consisted of 53% base compensation and 47% variable compensation. The increase
in base compensation and benefits resulted primarily from acquisitions. The
increase in variable compensation of $12.8 million resulted from acquisitions
and higher incentive payments based on subsidiary profitability, portfolio
performance and sales growth.
Restricted unit plan expense of $0.1 million for the three months ended March
31, 1997 represented a decrease of $1.2 million from the same quarter last year,
reflecting the immediate vesting of substantially all restricted units in August
1996 effective with the merger of New England Mutual Life Insurance Company with
Metropolitan Life Insurance Company.
Amortization of intangibles of $9.3 million for the three months ended March 31,
1997 increased $3.9 million from the same quarter last year due to acquisitions.
Interest expense of $3.9 million for 1997 increased $1.8 million from the same
quarter last year, reflecting interest related to the financing of acquisitions.
Other expense of $21.7 million for the three months ended March 31, 1997
increased $4.4 million from the same period last year. The increase results from
higher general and administrative expenses, primarily associated with
acquisitions.
9 of 12
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
Operating cash flow not required for normal business operations and working
capital needs or growth strategies is generally distributed to unitholders each
quarter. Distributions to unitholders are typically declared during the last
month of calendar quarters. On March 18, 1997, the Partnership declared a
regular distribution of $0.53 per unit and a special distribution of $0.05 per
unit as compared to the $0.48 regular distribution declared for the first
quarter of 1996. The Partnership has the ability to make distributions
in excess of net income due to non-cash amortization expense. For the three
months ended March 31, 1997, distributions paid to unitholders were $20.1
million as compared to $18.0 million for the same quarter last year.
Cash and cash equivalents at March 31, 1997 of $29.8 million decreased $20.1
million from December 31, 1996. The reduction resulted from the $43.0 million
payment for the acquisition of Jurika & Voyles and the payment of variable
compensation which is accrued throughout the year of $11.3 million. Cash
reductions were offset in part by $25.0 million of borrowings made by the
Partnership during the first quarter of 1997 under available lines of credit.
On April 2, 1997, an additional payment of $144.1 million was made relating to
the Harris acquisition. The payment was made by issuing 2,631,537 units and
paying $79.6 million in cash (see Note 2 of Notes to Consolidated Financial
Statements). The cash portion of this payment was funded from the proceeds of
the issuance of $160.0 million, 7.15% Senior Notes due April 1, 2007.
The Partnership has various contingent purchase payment obligations, depending
upon the attainment of certain revenue targets through 1999, resulting from the
acquisitions of Aldrich, Eastman & Waltch, L.P. and Jurika & Voyles, Inc. Such
obligations are not expected to have a material impact on the capital resources
of the Partnership.
The Partnership's had $185 million in lines of credit of which $148 million was
available at March 31, 1997.
ASSETS UNDER MANAGEMENT
- -----------------------
A summary of assets under management follows (in billions):
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1996 1996 1997
--------- ------------ ---------
<S> <C> <C> <C>
Institutional $ 57 $ 66 $ 67
Mutual funds 22 25 27
Private accounts and other 5 9 9
------ ------ ------
$ 84 $ 100 $ 103
====== ====== ======
</TABLE>
At March 31, 1997, assets under management were $103 billion, an
increase of $3 billion (or 3%) as compared to $100 billion at December 31, 1996.
This increase resulted primarily from growth in equity mutual funds.
10 of 12
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
- -------------------------
CERTAIN OPERATING POLICIES
The Partnership currently distributes to unitholders operating cash flow not
required for normal business operations and working capital needs, including
support of the Partnership's growth strategy. Management defines operating cash
flow as net income adjusted for restricted unit plan compensation, amortization
of intangible assets and non-recurring items. Management does not consider
capital gains as part of operating cash flow.
The following calculation of operating cash flow per unit should be read in
conjunction with the consolidated financial statements of the Partnership and
the notes thereto, filed on Form 10-K for the year ended December 31, 1996.
Operating cash flow for the three months ended March 31 follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------------
1996 1997
----------------------------------------
Per Unit Amount Per Unit Amount
--------- -------- -------- -------
(in thousands, except per unit data)
<S> <C> <C> <C> <C>
Income available for allocation $ 0.53 $21,441 $0.48 $20,486
Less non-recurring items (0.12) (4,988) - -
-------- ------- ----- -------
Sub-total 0.41 16,453 0.48 20,486
Add amortization of intangibles/1/ 0.14 5,626 0.21 9,268
-------- ------- ----- -------
Operating cash flow $ 0.55 $22,079 $0.69 $29,754
======== ======= ===== =======
Distributions declared $ 0.48 $0.58
======== ======
Weighted average units outstanding 40,385 43,087
======= =======
</TABLE>
1. Amortization of intangibles is a non-cash expense and does not reduce
amounts available for cash distributions to unitholders.
Operating cash flow per unit should not be construed as an alternative to net
income per unit or cash flow from operating activities.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) Exhibits
- ------------
4. Form of Note Purchase Agreement dated as of March 25, 1997, between the
Partnership and the purchasers of the Partnership's 7.15% Senior Notes due April
1, 2007, including the form of Senior Note issued pursuant thereto.
(b) Reports on Form 8-K
- -----------------------
On January 3, 1997, the Partnership filed a Current Report on Form 8-K to
report the consummation of the acquisition of assets of Jurika & Voyles, Inc.,
effective January 1, 1997.
11 of 12
<PAGE>
SIGNATURES
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.
New England Investment Companies, L.P.
- --------------------------------------
Registrant
/s/ G. Neal Ryland May 14, 1997
- ------------------ ------------
G. Neal Ryland Date
Executive Vice President and
Chief Financial Officer
/s/ Stephen D. Martino May 14, 1997
- ---------------------- ------------
Stephen D. Martino Date
Senior Vice President and Controller
12 of 12
<PAGE>
CONFORMED COPY
BII\68161_6
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NEW ENGLAND INVESTMENT COMPANIES, L.P.
$160,000,000
7.15% Senior Notes due April 1, 2007
-------
NOTE PURCHASE AGREEMENT
-------
Dated as of March 25, 1997
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Section Page
- ------- ----
<S> <C>
1. AUTHORIZATION OF NOTES................................................... 1
2. SALE AND PURCHASE OF NOTES............................................... 1
3. CLOSING.................................................................. 2
4. CONDITIONS TO CLOSING.................................................... 2
4.1. Representations and Warranties.................................... 2
4.2. Performance; No Default........................................... 2
4.3. Compliance Certificates........................................... 2
4.4. Opinions of Counsel............................................... 3
4.5. Purchase Permitted By Applicable Law, etc......................... 3
4.6. Sale of Other Notes............................................... 3
4.7. Payment of Special Counsel Fees................................... 3
4.8. Private Placement Number.......................................... 4
4.9. Changes in Structure.............................................. 4
4.10. Proceedings and Documents......................................... 4
4.11. Rating............................................................ 4
4.12. Latest Financial Statements....................................... 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................... 4
5.1. Organization; Power and Authority................................. 4
5.2. Authorization, etc................................................ 5
5.3. Disclosure........................................................ 5
5.4. Organization and Ownership of Shares of Subsidiaries.............. 5
5.5. Financial Statements.............................................. 6
5.6. Compliance with Laws, Other Instruments, etc...................... 6
5.7. Governmental Authorizations, etc.................................. 6
5.8. Litigation; Observance of Statutes and Orders..................... 7
5.9. Taxes............................................................. 7
5.10. Title to Property; Leases......................................... 7
5.11. Licenses, Permits, etc............................................ 7
5.12. Compliance with ERISA............................................. 8
5.13. Private Offering by the Company................................... 8
5.14. Use of Proceeds; Margin Regulations............................... 9
5.15. Existing Indebtedness............................................. 9
5.16. Foreign Assets Control Regulations, etc........................... 9
</TABLE>
<PAGE>
NEW ENGLAND INVESTMENT COMPANIES, L.P.
399 Boylston Street
Boston, Massachusetts 02116
7.15% Senior Notes due April 1, 2007
As of March 25, 1997
TO THE PURCHASER WHOSE NAME
APPEARS IN THE ACCEPTANCE
FORM AT THE END HEREOF:
Ladies and Gentlemen:
NEW ENGLAND INVESTMENT COMPANIES, L.P., a Delaware limited partnership
(the "Company"), agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $160,000,000 aggregate
principal amount of its 7.15% Senior Notes due April 1, 2007 (the "Notes", such
term to include any such notes issued in substitution therefor pursuant to
Section 13 of this Agreement or the Other Agreements (as hereinafter defined)).
The Notes shall be substantially in the form set out in Exhibit 1, with such
changes therefrom, if any, as may be approved by you and the Company. Certain
capitalized terms used in this Agreement are defined in Schedule B; references
to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule
or an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes in the principal amount specified opposite your
name in Schedule A at the purchase price of 100% of the principal amount
thereof. Contemporaneously with entering into this Agreement, the Company is
entering into separate Note Purchase Agreements (the "Other Agreements")
identical with this Agreement with each of the other purchasers named in
Schedule A (the "Other Purchasers"), providing for the sale at such Closing to
each of the Other Purchasers of Notes in the principal amount specified opposite
its name in Schedule A. Your obligation hereunder and the obligations of the
Other Purchasers under the Other Agreements are several and not joint
obligations and you shall have no obligation under any Other Agreement and no
liability to any Person for the performance or non-performance by any Other
Purchaser thereunder.
1
<PAGE>
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Milbank, Tweed, Hadley & McCloy, One
Chase Manhattan Plaza, New York, New York 10005, at 11:00 a.m., New York time,
at a closing (the "Closing") on April 1, 1997, or on such other Business Day
thereafter on or prior to April 2, 1997 as may be agreed upon by the Company and
you and the Other Purchasers. At the Closing the Company will deliver to you
the Notes to be purchased by you in the form of a single Note (or such greater
number of Notes in denominations of at least $1,000,000 (or such lower amount as
the Company may agree) (multiples of $200,000) (or in such lower amounts and
different denominations as the Company may agree) (as you may request) dated the
date of the Closing and registered in your name (or in the name of your
nominee), against delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor by wire transfer of
immediately available funds for the account of the Company to account number
4071-3283 at Citibank, N.A., 399 Park Avenue, New York, NY 10043, ABA 021 000
089. If at the Closing the Company shall fail to tender such Notes to you as
provided above in this Section 3, or any of the conditions specified in Section
4 shall not have been fulfilled to your satisfaction, you shall, at your
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights you may have by reason of such failure or such
nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:
1. Representations and Warranties.
The representations and warranties of the Company in this Agreement shall
be correct when made and at the time of the Closing.
2. Performance; No Default.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by
Section 5.14) no Default or Event of Default shall have occurred and be
continuing.
3. Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered to you an
---------------------
Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.
2
<PAGE>
(b) Secretary's Certificate. The General Partner shall have delivered to
-----------------------
you a certificate certifying as to the resolutions attached thereto and other
partnership proceedings relating to the authorization, execution and delivery of
the Notes and the Agreements.
4. Opinions of Counsel.
You shall have received opinions in form and substance satisfactory to
you, dated the date of the Closing (a) from Ropes & Gray, special counsel for
-
the Company, and from Edward N. Wadsworth, Esq., General Counsel for the General
Partner, covering the matters set forth in Exhibits 4.4(a)(i) and 4.4(a)(ii),
respectively, and each covering such other matters incident to the transactions
contemplated hereby as you or your counsel may reasonably request (and the
Company hereby instructs such counsel to deliver such opinions to you) and (b)
-
from Milbank, Tweed, Hadley & McCloy, your special New York counsel in
connection with such transactions, substantially in the form set forth in
Exhibit 4.4(b) and covering such other matters incident to such transactions as
you may reasonably request.
5. Purchase Permitted By Applicable Law, etc.
On the date of the Closing your purchase of Notes shall (i) be permitted
-
by the laws and regulations of each jurisdiction to which you are subject,
without recourse to provisions (such as Section 1405(a)(8) of the New York
Insurance Law) permitting limited investments by insurance companies without
restriction as to the character of the particular investment, (ii) not violate
--
any applicable law or regulation (including, without limitation, Regulation G, T
or X of the Board of Governors of the Federal Reserve System) or any order,
judgment, decree or ruling of any court, arbitrator or Governmental Authority
and (iii) not subject you to any tax, penalty or liability under or pursuant to
---
any applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
6. Sale of Other Notes.
Contemporaneously with the Closing the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes to be purchased by
them at the Closing as specified in Schedule A.
7. Payment of Special Counsel Fees.
Without limiting the provisions of Section 15.1, the Company shall have
paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
3
<PAGE>
8. Private Placement Number.
A Private Placement number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Notes.
9. Changes in Structure.
Except as specified in Schedule 4.9, the Company shall not have changed
its jurisdiction of organization or been a party to any merger or consolidation
and shall not have succeeded to all or any substantial part of the liabilities
of any other entity, at any time following the date of the most recent financial
statements referred to in Schedule 5.5.
10. Proceedings and Documents.
All corporate, partnership and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.
11. Rating.
You shall have received evidence satisfactory to you that Duff & Phelps
Credit Rating Co. has assigned a credit rating of at least A- to the Notes.
12. Latest Financial Statements.
You shall have received final forms of the audited annual financial
statements for the fiscal year ending December 31, 1996, which shall not vary
materially from the drafts of such financial statements delivered to you on or
prior to the date hereof.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
4
<PAGE>
1. Organization; Power and Authority.
The Company is a limited partnership duly organized, validly existing and
in good standing under the laws of Delaware, and is duly qualified as a foreign
partnership and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has all requisite partnership power and authority to own or hold under lease the
properties it purports to own or hold under lease, to transact the business it
transacts and proposes to transact, to execute and deliver this Agreement and
the Other Agreements and the Notes and to perform the provisions hereof and
thereof.
2. Authorization, etc.
This Agreement and the Other Agreements and the Notes have been duly
authorized by all necessary corporate or partnership (as the case may be) action
on the part of the Company and the General Partner, and this Agreement
constitutes, and upon execution and delivery thereof each Note will constitute,
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or
-
other similar laws affecting the enforcement of creditors' rights generally and
(ii) general principles of equity (regardless of whether such enforceability is
--
considered in a proceeding in equity or at law).
3. Disclosure.
The Company, through its agents, Citicorp Securities, Inc. and Prudential
Securities Incorporated has delivered to you and each Other Purchaser a copy of
a Confidential Private Placement Memorandum, dated February 5, 1997 (the
"Memorandum"), relating to the transactions contemplated hereby. This
Agreement, the Memorandum, the documents, certificates or other writings
identified in Schedule 5.3 and the financial statements listed in Schedule 5.5,
taken as a whole, do not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made. Except as
disclosed in the Memorandum or as expressly described in Schedule 5.3 or in one
of the documents, certificates or other writings identified therein or in the
financial statements listed in Schedule 5.5, since December 31, 1996, there has
been no change in the financial condition, operations, business or properties of
the Company or any of its Subsidiaries except changes that individually or in
the aggregate would not reasonably be expected to have a Material Adverse
Effect.
4. Organization and Ownership of Shares of Subsidiaries.
(a) Schedule 5.4 is (except as noted therein) a complete and correct list
of the Company's Material Subsidiaries, showing, as to each Material Subsidiary,
the correct name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its capital
5
<PAGE>
stock or similar equity interests outstanding owned by the Company and each
other Material Subsidiary.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Material Subsidiary shown in Schedule 5.4 as being owned by
the Company and its Material Subsidiaries have been validly issued, are fully
paid and nonassessable and are owned by the Company or another Subsidiary free
and clear of any Lien.
(c) Each Material Subsidiary identified in Schedule 5.4 is a corporation
or other legal entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and is duly qualified as a
foreign corporation or partnership or other legal entity and is in good standing
in each jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Each such Subsidiary has the corporate,
partnership or other power and authority to own or hold under lease the
properties it purports to own or hold under lease and to transact the business
it transacts and proposes to transact.
(d) Each Subsidiary of the Company required to register with the
Securities and Exchange Commission as an "investment adviser" (as defined in the
Investment Advisers Act) has so registered and is in compliance in all material
respects with the Investment Advisers Act.
5. Financial Statements.
The Company has delivered to each Purchaser copies of the consolidated
financial statements of the Company and its Subsidiaries listed on Schedule 5.5.
All of said financial statements (including in each case the related schedules
and notes) fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
specified in such Schedule and the consolidated results of their operations and
cash flows for the respective periods so specified and have been prepared in
accordance with GAAP consistently applied throughout the periods involved except
as set forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments).
6. Compliance with Laws, Other Instruments, etc.
The execution, delivery and performance by the Company of this Agreement
and the Notes will not (i) contravene, result in any breach of, or constitute a
-
default under, or result in the creation of any Lien in respect of any property
of the Company or any Subsidiary under, the Partnership Agreement or any
indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate or partnership charter or by-laws, or any other Material agreement or
instrument to which the Company or any Subsidiary is bound or by which the
Company or any Subsidiary or any of their respective properties may be bound or
affected, (ii) conflict with or result in a breach of any of the terms,
--
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or any Subsidiary
or
6
<PAGE>
(iii) violate any provision of any statute or other rule or regulation of any
---
Governmental Authority applicable to the Company or any Subsidiary.
7. Governmental Authorizations, etc.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company of this Agreement or the
Notes.
8. Litigation; Observance of Statutes and Orders.
(a) Except as disclosed in Schedule 5.8, there are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Subsidiary or any property of the Company or any
Subsidiary in any court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any
order, judgment, decree or ruling of any court, arbitrator or Governmental
Authority or is in violation of any applicable law, ordinance, rule or
regulation (including without limitation Environmental Laws) of any Governmental
Authority, which default or violation, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
9. Taxes.
The Company and its Subsidiaries have filed all income tax returns that
are required to have been filed in any jurisdiction, and have paid all taxes
shown to be due and payable on such returns and all other taxes and assessments
payable by them, to the extent such taxes and assessments have become due and
payable and before they have become delinquent, except for any taxes and
assessments (i) the amount of which is not individually or in the aggregate
-
Material or (ii) the amount, applicability or validity of which is currently
--
being contested in good faith by appropriate proceedings and with respect to
which the Company or a Subsidiary, as the case may be, has established adequate
reserves in accordance with GAAP. The Federal income tax liabilities of the
Company and its Subsidiaries have been paid for all fiscal years up to and
including the fiscal year ended December 31, 1995.
10. Title to Property; Leases.
The Company and its Subsidiaries have good and sufficient title to their
respective Material properties, including all such properties reflected in the
most recent audited balance sheet referred to in Section 5.5 or purported to
have been acquired by the Company or any Subsidiary after said date (except as
sold or otherwise disposed of in the ordinary course of business), in each case
free and clear of Liens prohibited by this Agreement, except for those defects
in title and Liens that, individually or in the aggregate, would not have a
Material Adverse Effect. All Material leases are valid and subsisting and are
in full force and effect in all material respects.
7
<PAGE>
11. Licenses, Permits, etc.
Except as disclosed in Schedule 5.11, the Company and its Subsidiaries
own or possess all licenses, permits, franchises, authorizations, patents,
copyrights, service marks, trademarks and trade names, or rights thereto, that
are Material, without known conflict with the rights of others, except for those
conflicts that, individually or in the aggregate, would not have a Material
Adverse Effect.
12. Compliance with ERISA.
(a) The Company and each ERISA Affiliate have operated and administered
each Plan in compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and would not reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans (as defined
in Section 3 of ERISA), and no event, transaction or condition has occurred or
exists that would reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to section 401(a)(29) or 412 of the Code, other than
such liabilities or Liens as would not be individually or in the aggregate
Material.
(b) The present value of the aggregate benefit liabilities under each of
the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "benefit liabilities" has the
meaning specified in section 4001 of ERISA and the terms "current value" and
"present value" have the meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation (determined as of the
last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of section 406 of ERISA or in connection with which a tax could
be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation
by the Company in the first sentence of this Section 5.12(e)
8
<PAGE>
made in reliance upon and subject to the accuracy of your representation in
Section 6.2 as to the sources of the funds to be used to pay the purchase price
of the Notes to be purchased by you.
13. Private Offering by the Company.
Neither the Company nor anyone acting on its behalf has offered the Notes
or any similar securities for sale to, or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect thereof with, any
person other than you, the Other Purchasers and not more than 45 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of Section 5 of the Securities Act.
14. Use of Proceeds; Margin Regulations.
The Company will apply the proceeds of the sale of the Notes to finance a
portion of the deferred purchase price in the Harris Acquisition, to pay related
costs and expenses and for general business purposes. The Company is not
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock and no part of the proceeds from the sale of the Notes
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220). Margin stock does not constitute more than 25% of the value of the
consolidated assets of the Company and its Subsidiaries and the Company does not
have any present intention that margin stock will constitute more than 25% of
the value of such assets. As used in this Section, the terms "margin stock" and
"purpose of buying or carrying" shall have the meanings assigned to them in said
Regulation G.
15. Existing Indebtedness.
Except as described therein, Schedule 5.15 sets forth a complete and
correct list of all outstanding Indebtedness of the Company and its Subsidiaries
as of December 31, 1996, since which date there has been no Material change in
the amounts, interest rates, sinking funds, instalment payments or maturities of
the Indebtedness of the Company or its Subsidiaries. Neither the Company nor
any Subsidiary is in default and no waiver of default is currently in effect, in
the payment of any principal or interest on any Indebtedness of the Company or
such Subsidiary and no event or condition exists with respect to any
Indebtedness of the Company or any Subsidiary the outstanding principal amount
of which exceeds $5,000,000 that would permit (or that with notice or the lapse
of time, or both, would permit) one or more Persons to cause such Indebtedness
to become due and payable before its stated maturity or before its regularly
scheduled dates of payment.
16. Foreign Assets Control Regulations, etc.
9
<PAGE>
Neither the sale of the Notes by the Company hereunder nor its use of the
proceeds thereof will violate the Trading with the Enemy Act, as amended, or any
of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
17. Status under Certain Statutes.
The Company is not subject to regulation as an "investment company" under
the Investment Company Act. Neither the Company nor any Subsidiary is subject to
regulation under the Public Utility Holding Company Act of 1935, as amended, the
Interstate Commerce Act, as amended, or the Federal Power Act, as amended. The
Company is registered as an "investment adviser" (as defined in the Investment
Advisers Act).
18. Status of Obligations under this Agreement and the Notes.
All obligations and liabilities of the Company under this Agreement and
the Notes constitute direct, unconditional and general obligations of the
Company and rank in right of payment either pari passu or senior to all other
---- -----
Indebtedness of the Company, except for such Indebtedness which is preferred as
a result of being secured (but then only to the extent of such security).
19. Restrictions on Subsidiaries.
No Material Subsidiary is subject to any restriction of any kind on its
ability to pay dividends or make other distributions to the Company or any
Subsidiary of the Company or to pay any Indebtedness owed to the Company or any
Subsidiary of the Company.
6. REPRESENTATIONS OF THE PURCHASER.
1. Purchase for Investment.
You represent that you are purchasing the Notes for your own account or
for one or more separate accounts maintained by you or for the account of one or
more pension or trust funds and not with a view to the distribution thereof,
provided that the disposition of your or their property shall at all times be
within your or their control. You understand that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.
2. Source of Funds.
10
<PAGE>
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) the Source is an insurance company general account as such term is
used in Prohibited Transaction Exemption ("PTE") 95-60 issued by the United
States Department of Labor and your purchase of the Notes hereunder is entitled
to the exemption granted by PTE 95-60; or
(b) the Source is a separate account that is maintained solely in
connection with your fixed contractual obligations under which the amounts
payable, or credited, to any employee benefit plan (or its related trust) that
has any interest in such separate account (or to any participant or beneficiary
of such plan (including any annuitant)) are not affected in any manner by the
investment performance of the separate account; or
(c) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a
bank collective investment fund, within the meaning of the PTE 91-38 (issued
July 12, 1991) and, except as you have disclosed to the Company in writing
pursuant to this paragraph (c), no employee benefit plan or group of plans
maintained by the same employer or employee organization beneficially owns more
than 10% of all assets allocated to such pooled separate account or collective
investment fund; or
(d) the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified professional
asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption),
no employee benefit plan's assets that are included in such investment fund,
when combined with the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client assets
managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption
are satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity of
-
such QPAM and (ii) the names of all employee benefit plans whose assets are
--
included in such investment fund have been disclosed to the Company in writing
pursuant to this paragraph (d); or
(e) the Source is a governmental plan; or
(f) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each of
which has been identified to the Company in writing pursuant to this paragraph
(f); or
(g) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
11
<PAGE>
As used in this Section 6.2, the terms "employee benefit plan", "governmental
plan" and "separate account" shall have the respective meanings assigned to such
terms in Section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
1. Financial and Business Information.
The Company shall deliver to you, so long as you shall be obligated to
purchase Notes hereunder, and to each holder of Notes that is an Institutional
Investor and in the case of Sections 7.1(a) and (b), to the National Association
of Insurance Commissioners, provided that the failure of the Company to deliver
such information to such Association shall not constitute an Event of Default
hereunder:
(a) Quarterly Statements -- within 45 days after the end of each
--------------------
quarterly fiscal period in each fiscal year of the Company (other than the
last quarterly fiscal period of each such fiscal year), duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in partners'
capital and cash flows of the Company and its Subsidiaries, for such
quarter and (in the case of the second and third quarters) for the
portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable detail,
prepared in accordance with GAAP applicable to quarterly financial
statements generally, and certified by a Senior Financial Officer as fairly
presenting, in all material respects, the financial position of the
companies being reported on and their results of operations and cash flows,
subject to changes resulting from year-end adjustments, provided that
delivery within the time period specified above of copies of the Company's
Quarterly Report on Form 10-Q (without exhibits except as expressly
requested by such holder) prepared in compliance with the requirements
therefor and filed with the Securities and Exchange Commission shall be
deemed to satisfy the requirements of this Section 7.1(a);
(b) Annual Statements -- within 90 days after the end of each fiscal
-----------------
year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
12
<PAGE>
(ii) consolidated statements of income, changes in partners'
capital and cash flows of the Company and its Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied by an unqualified opinion thereon of Price Waterhouse, L.L.P. or
other independent certified public accountants of recognized national standing,
which opinion shall state that such financial statements present fairly, in all
material respects, the financial position of the companies being reported upon
and their results of operations and cash flows and have been prepared in
conformity with GAAP, and that the examination of such accountants in connection
with such financial statements has been made in accordance with generally
accepted auditing standards, and that such audit provides a reasonable basis for
such opinion in the circumstances, provided that the delivery within the time
period specified above of the Company's Annual Report on Form 10-K for such
fiscal year (together with the Company's annual report to partners, if any,
prepared in accordance with the requirements therefor and filed with the
Securities and Exchange Commission but without exhibits except as expressly
requested by such holder) shall be deemed to satisfy the requirements of this
Section 71(b);
(c) SEC and Other Reports -- promptly upon their becoming available,
---------------------
one copy of (i) each financial statement, report, notice or proxy statement sent
-
by the Company or any Subsidiary to public securities holders generally, and
(ii) each regular or periodic report, each registration statement that shall
--
have become effective (without exhibits except as expressly requested by such
holder), and each final prospectus and all amendments thereto filed by the
Company or any Subsidiary with the Securities and Exchange Commission;
(d) Notice of Default or Event of Default -- promptly, and in any
-------------------------------------
event within five Business Days after a Responsible Officer becoming aware of
the existence of any Default or Event of Default, a written notice specifying
the nature and period of existence thereof and what action the Company is taking
or proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five Business
-------------
Days after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if any, that the
Company or an ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable event, as defined
in section 4043(b) of ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such regulations as in
effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or any ERISA
Affiliate of a notice from a Multiemployer Plan that
13
<PAGE>
such action has been taken by the PBGC with respect to such Multiemployer
Plan; or
(iii) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such
penalty or excise tax provisions, if such liability or Lien, taken
together with any other such liabilities or Liens then existing, would
reasonably be expected to have a Material Adverse Effect; and
(f) Requested Information -- with reasonable promptness, such other
---------------------
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to the ability of the Company to perform its
obligations hereunder and under the Notes as from time to time may be
reasonably requested by any such holder of Notes.
2. Officer's Certificate.
Each set of financial statements delivered to a holder of Notes pursuant
to Section 7.1(a) or Section 71(b) hereof shall be accompanied by a certificate
of a Senior Financial Officer setting forth:
(b) Covenant Compliance -- the information (including detailed
-------------------
calculations) required in order to establish whether the Company was in
compliance with the requirements of Sections 10.5, 10.6, 10.8 and 10.14
hereof, inclusive, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the terms
of such Sections, and the calculation of the amount, ratio or percentage
then in existence); and
(a) Event of Default -- a statement that such officer has reviewed the
----------------
relevant terms hereof and has made, or caused to be made, under his or her
supervision, a review of the transactions and conditions of the Company and
its Subsidiaries from the beginning of the quarterly or annual period
covered by the statements then being furnished to the date of the
certificate and that such review shall not have disclosed the existence
during such period of any condition or event that constitutes a Default or
an Event of Default or, if any such condition or event existed or exists
(including, without limitation, any such event or condition resulting from
the failure of the Company or any Subsidiary to comply with any
Environmental Law), specifying the nature and period of existence thereof
and what action the Company shall have taken or proposes to take with
respect thereto.
3. Inspection.
14
<PAGE>
The Company shall permit the representatives of each holder of Notes that
is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists, at
----------
the expense of such holder and upon reasonable prior notice to the Company,
to visit the principal executive office of the Company, to discuss the
affairs, finances and accounts of the Company and its Subsidiaries with the
Company's officers, and, with the consent of the Company (which consent will
not be unreasonably withheld) to visit the other offices and properties of
the Company, all at such reasonable times and as often as may be reasonably
requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at the
-------
expense of the Company to visit and inspect any of the offices or properties
of the Company or any Subsidiary, to examine all their respective books of
account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts
with their respective officers and independent public accountants (and by
this provision the Company authorizes said accountants to discuss the
affairs, finances and accounts of the Company and its Subsidiaries), all at
such times and as often as may be reasonably requested.
8. PREPAYMENT OF THE NOTES.
1. Optional Prepayments with Make-Whole Amount.
The Company may, at its option, upon notice as provided below, prepay at
any time all, or from time to time any part of, the Notes, in an amount not less
than 5% of the aggregate principal amount of the Notes then outstanding in the
case of a partial prepayment, at 100% of the principal amount so prepaid
(together with interest accrued thereon to the date fixed for such payment),
plus the Make-Whole Amount determined for the prepayment date with respect to
such principal amount. The Company will give each holder of Notes written
notice of each optional prepayment under this Section 8.1 not less than 30 days
and not more than 60 days prior to the date fixed for such prepayment. Each
such notice shall specify such date, the aggregate principal amount of the Notes
to be prepaid on such date, the principal amount of each Note held by such
holder to be prepaid (determined in accordance with Section 8.4), and the
interest to be paid on the prepayment date with respect to such principal amount
being prepaid, and shall be accompanied by a certificate of a Senior Financial
Officer as to the estimated Make-Whole Amount due in connection with such
prepayment (calculated as if the date of such notice were the date of the
prepayment), setting forth the details of such computation. Two Business Days
prior to such prepayment, the Company shall deliver to each holder of Notes a
certificate of a Senior Financial Officer specifying the calculation of such
Make-Whole Amount as of the specified prepayment date.
2. Special Prepayment for Change of Control.
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Promptly and in any event within five Business Days after the occurrence
of a Change of Control, the Company will give written notice thereof to the
holders of all outstanding Notes, which notice shall (a) refer specifically to
this Section 8.2 and describe such Change of Control in reasonable detail, (b)
specify the Change of Control Prepayment Date and the Response Date (as
respectively defined below) in respect thereof and (c) offer to prepay all Notes
(at the unpaid principal amount of such Notes, together with interest accrued
thereon to the date fixed for such prepayment plus the Make-Whole Amount) on the
date therein specified (the "Change of Control Prepayment Date"), which shall be
not less than 45 nor more than 60 days after the date of the giving of such
notice. Each holder of a Note shall notify the Company of such holder's
acceptance or rejection of such offer by giving written notice of such
acceptance or rejection to the Company on a date (the "Response Date") at least
ten Business Days prior to the Change of Control Prepayment Date, and the
Company shall prepay on the Change of Control Prepayment Date all of the Notes
held by the holders who have accepted such offer in accordance with this Section
8.2 at a price in respect of each Note held by such holder equal to the unpaid
principal amount of such Note, together with interest accrued thereon to the
Change of Control Prepayment Date plus the Make-Whole Amount; provided, however,
that the failure by a holder of any Note to respond to such offer in writing on
or before the Response Date shall be deemed to be an acceptance of such offer in
respect of such Change of Control. In connection with any offer to prepay Notes
under this Section 8.2, (x) the notice provided pursuant to the first sentence
of this Section 8.2 shall be accompanied by a certificate of a Senior Financial
Officer as to the estimated Make-Whole Amount due in connection with such
prepayment (calculated as if the date of such notice were the date of the
prepayment), setting forth the details of such computation and (y) two Business
Days prior to such prepayment, the Company shall deliver to each holder of Notes
a certificate of a Senior Financial Officer specifying the calculation of such
Make-Whole Amount as of the specified prepayment date.
3. Prepayments in Connection with Transfers.
If at any time the Company intends to apply any proceeds from a Transfer
pursuant to Section 10.3 or 10.4 (such proceeds referred to herein as the
"Disposition Proceeds") to the prepayment of Indebtedness as contemplated by
Section 10.3 or 10.4, the Company will give written notice thereof to the
holders of all outstanding Notes, which notice shall (a) refer specifically to
this Section 8.3, (b) specify the Disposition Prepayment Date and the
Disposition Response Date (as respectively defined below) in respect thereof,
(c) set forth (i) the aggregate amount of Disposition Proceeds to be applied to
the prepayment of the Notes and (ii) the amount of such Proceeds allocable to
each Note and (d) offer to prepay a principal amount of each Note equal to the
amount of such Proceeds so allocable to such Note, together with interest
accrued thereon to the date fixed for such prepayment plus the applicable Make-
Whole Amount, on the date therein specified (the "Disposition Prepayment Date"),
which shall be not less than 45 nor more than 60 days after the date of the
giving of such notice. Each holder of a Note shall notify the Company of such
holder's acceptance or rejection of such offer by giving written notice of such
acceptance or rejection to the Company on a date (the "Disposition Response
Date") at least ten Business Days prior to the Disposition Prepayment Date, and
the Company shall prepay on the Disposition Prepayment Date the applicable
portion of each Note held by each holder by whom such offer has been accepted in
accordance with this Section 8.3 at a price in respect of each Note held by such
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<PAGE>
holder equal to the principal amount of such Note so to be prepaid as specified
above, together with interest accrued thereon to the Disposition Prepayment Date
plus the Make-Whole Amount; provided, however, that the failure by the holder of
any Note to respond to such offer in writing on or before the Disposition
Response Date shall be deemed to be an acceptance of such offer in respect of
such Disposition. In connection with any offer to prepay Notes under this
Section 8.3, (x) the notice provided pursuant to the first sentence of this
Section 8.3 shall be accompanied by a certificate of a Senior Financial Officer
as to the estimated Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the prepayment),
setting forth the details of such computation and (y) two Business Days prior to
such prepayment, the Company shall deliver to each holder of Notes a certificate
of a Senior Financial Officer specifying the calculation of such Make-Whole
Amount as of the specified prepayment date.
4. Allocation of Partial Prepayments.
In the case of each partial prepayment of the Notes, the principal amount
of the Notes to be prepaid shall be allocated among all of the Notes at the time
outstanding (or, in the case of a prepayment under Section 8.2 or 8.3, the Notes
being so prepaid) in proportion, as nearly as practicable, to the respective
unpaid principal amounts thereof not theretofore called for prepayment.
5. Maturity; Surrender, etc.
In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and Make-
Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
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<PAGE>
6. Purchase of Notes.
The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except (a) upon the payment or prepayment of the Notes in
-
accordance with the terms of this Agreement and the Notes or (b) pursuant to an
-
offer to purchase made by the Company or an Affiliate pro rata to the holders of
all Notes at the time outstanding upon the same terms and conditions. Any such
offer shall provide each holder with sufficient information to enable it to make
an informed decision with respect to such offer, and shall remain open for at
least 15 Business Days. If the holders of more than a majority of the principal
amount of the Notes then outstanding accept such offer, the Company shall
promptly notify the remaining holders of such fact and the expiration date for
the acceptance by holders of Notes of such offer shall be extended by the number
of days necessary to give each such remaining holder at least five Business Days
from its receipt of such notice to accept such offer. The Company will promptly
cancel all Notes acquired by it or any Affiliate pursuant to any payment,
prepayment or purchase of Notes pursuant to any provision of this Agreement and
no Notes may be issued in substitution or exchange for any such Notes.
7. Make-Whole Amount.
The term "Make-Whole Amount" means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, provided that the Make-Whole Amount may in no event be
less than zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:
"Called Principal" means, with respect to any Note, the principal of such
Note that is to be prepaid pursuant to Section 8.1, 8.2 or 8.3 or has become
or is declared to be immediately due and payable pursuant to Section 12.1,
as the context requires.
"Discounted Value" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor
(applied on the same periodic basis as that on which interest on the Notes
is payable) equal to the Reinvestment Yield with respect to such Called
Principal.
"Reinvestment Yield" means, with respect to the Called Principal of any
Note, 0.50% over the yield to maturity implied by (i) the yields reported,
-
as of 10:00 A.M. (New York City time) on the second Business Day preceding
the Settlement Date with respect to such Called Principal on the display
designated as "Page 678" on the Telerate Access Service (or such other
display as may replace Page 678 on Telerate Access Service), for actively
traded "On the Run" U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date,
or (ii) if such yields are not reported as of such time or the yields
--
reported as of such time are not ascertainable, the Treasury Constant
Maturity Series Yields reported, for the latest day for
18
<PAGE>
which such yields have been so reported as of the second Business Day
preceding the Settlement Date with respect to such Called Principal, in
Federal Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded "On the Run" U.S. Treasury securities
having a constant maturity equal to the Remaining Average Life of such
Called Principal as of such Settlement Date. Such implied yield will be
determined, if necessary, by (a) converting U.S. Treasury bill quotations to
-
bond-equivalent yields in accordance with accepted financial practice and
(b) interpolating linearly between (1) the actively traded "On the Run" U.S.
- -
Treasury security with the duration closest to and greater than the
Remaining Average Life and (2) the actively traded "On the Run" U.S.
-
Treasury security with the duration closest to and less than the Remaining
Average Life.
"Remaining Average Life" means, with respect to any Called Principal, the
number of years (calculated to the nearest one-twelfth year) obtained by
dividing (i) such Called Principal into (ii) the sum of the products
- --
obtained by multiplying (a) the principal component of each Remaining
-
Scheduled Payment with respect to such Called Principal by (b) the number of
-
years (calculated to the nearest one-twelfth year) that will elapse between
the Settlement Date with respect to such Called Principal and the scheduled
due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a date
on which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Section 8.1, 8.2,
8.3 or 12.1.
"Settlement Date" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.1, 8.2 or 8.3 or has become or is declared to be immediately due
and payable pursuant to Section 12.1, as the context requires.
Any holder of a Note may object to the Company's computation of the Make-
Whole Amount by delivering a certificate to the Company stating its objection
and showing the details of such holder's alternative computation of the Make-
Whole Amount for the date on which such Make-Whole Amount is due. The Company
shall notify the holders of the Notes of such objection, and the Required
Holders shall forthwith recalculate such Make-Whole Amount, which calculation
shall be binding in the absence of manifest error.
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<PAGE>
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as you shall be obligated to purchase
Notes hereunder or any of the Notes are outstanding:
1. Compliance with Law.
The Company will and will cause each of its Subsidiaries to comply with
all laws, ordinances or governmental rules or regulations to which each of them
is subject, including, without limitation, Environmental Laws, ERISA and the
Investment Advisers Act, and will obtain and maintain in effect all licenses,
certificates, permits, registrations, franchises and other governmental
authorizations necessary to the ownership of their respective properties or to
the conduct of their respective businesses, in each case to the extent necessary
to ensure that non-compliance with such laws, ordinances or governmental rules
or regulations or failures to obtain or maintain in effect such licenses,
certificates, permits, registrations, franchises and other governmental
authorizations would not reasonably be expected, individually or in the
aggregate, to have a materially adverse effect on the business, operations,
affairs, financial condition, properties or assets of the Company and its
Subsidiaries taken as a whole.
2. Insurance.
The Company will and will cause each of its Subsidiaries to maintain,
with financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles, co-
insurance and self-insurance, if adequate reserves are maintained with respect
thereto) as is customary in the case of entities of established reputations
engaged in the same or a similar business and similarly situated.
3. Maintenance of Properties.
The Company will and will cause each of its Subsidiaries to maintain and
keep, or cause to be maintained and kept, their respective properties in good
repair, working order and condition (other than ordinary wear and tear), so that
the business carried on in connection therewith may be properly conducted at all
times, provided that this Section shall not prevent the Company or any
Subsidiary from discontinuing the operation and the maintenance of any of its
properties if such discontinuance is desirable in the conduct of its business
and the Company has concluded that such discontinuance would not, individually
or in the aggregate, have a materially adverse effect on the business,
operations, affairs, financial condition, properties or assets of the Company
and its Subsidiaries taken as a whole.
4. Payment of Taxes.
The Company will and will cause each of its Subsidiaries to file all
income tax or similar tax returns required to be filed in any jurisdiction and
to pay and discharge all taxes shown to be due and payable on such returns and
all other taxes, assessments, governmental charges, or
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<PAGE>
levies payable by any of them, to the extent such taxes and assessments have
become due and payable and before they have become delinquent, provided that
neither the Company nor any Subsidiary need pay any such tax or assessment if
(i) the amount, applicability or validity thereof is contested by the Company or
-
such Subsidiary on a timely basis in good faith and in appropriate proceedings,
and the Company or a Subsidiary has established adequate reserves therefor in
accordance with GAAP on the books of the Company or such Subsidiary or (ii) the
--
nonpayment of all such taxes and assessments in the aggregate would not
reasonably be expected to have a materially adverse effect on the business,
operations, affairs, financial condition, properties or assets of the Company
and its Subsidiaries taken as a whole.
5. Existence, etc.
The Company will at all times preserve and keep in full force and effect
its legal existence. Subject to Sections 10.2 and 10.3, the Company will at all
times preserve and keep in full force and effect the legal existence of each of
its Subsidiaries and all rights and franchises of the Company and its
Subsidiaries unless, in the good faith judgment of the Company, the termination
of or failure to preserve and keep in full force and effect such legal
existence, right or franchise would not, individually or in the aggregate, have
a materially adverse effect on the business, operations, affairs, financial
condition, properties or assets of the Company and its Subsidiaries taken as a
whole.
6. Keeping of Books.
The Company will keep, and will cause each of its Subsidiaries to keep,
proper records and books of account as are necessary to prepare consolidated
financial statements in accordance with GAAP, in which full and correct entries
shall be made of all financial transactions and the assets and business of the
Company and each such Subsidiary in accordance with GAAP.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
1. Transactions with Affiliates.
The Company will not and will not permit any Subsidiary to enter into
directly or indirectly any Material transaction or Material group of related
transactions (including without limitation the purchase, lease, sale or exchange
of properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Subsidiary), except pursuant to the
reasonable requirements of the Company's or such Subsidiary's business and upon
fair and reasonable terms no less favorable to the Company or such Subsidiary
than would be obtainable in a comparable arm's-length transaction with a Person
not an Affiliate. Any transaction or arrangement that has been approved by a
majority of the Disinterested Directors of the Board of Directors of the General
Partner as being fair to the Company shall be deemed to have satisfied the
requirements of the preceding sentence. For purposes of this Section 10.1, the
term "Disinterested Director" means with respect to any transaction, series of
transactions or arrangements, a member
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<PAGE>
of the Board of Directors of the General Partner that does not have any
material financial interest, direct or indirect, in such transaction, series of
transactions or arrangements.
2. Limitations on Mergers, Consolidations and Sales of Substantially All
Assets.
The Company will not, and will not permit any of its Subsidiaries to,
merge or consolidate with or into, or convey, transfer, 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, except that
(a) any Subsidiary of the Company may merge or consolidate with or
into, or convey, transfer, lease or otherwise dispose of all or
substantially all of its assets, (i) to the Company or any Significant
Subsidiary of the Company, provided that in the case of any such merger
or consolidation, the Company or (in the case of a transaction between a
Subsidiary and a Significant Subsidiary) such Significant Subsidiary is
the surviving Person or (ii) as part of a Transfer permitted under
Section 10.3 or 10.4; and
(b) the Company may merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of all or substantially all of its
assets to, any other Person, if (i) the surviving entity of such
consolidation or merger or the transferee or lessee of such assets (the
"Successor Entity") is a solvent corporation or limited partnership
organized under the laws of the United States of America or any state
thereof and, if not the Company, expressly assumes in writing the due
performance of all obligations of the Company under this Agreement and
the Notes and (ii) immediately prior to and after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing.
No such conveyance, transfer or lease of substantially all of the assets
of the Company shall have the effect of releasing the Company (or any Successor
Entity permitted under this Section 10.2) from its liability under this
Agreement or the Notes.
3. Transfer of Assets.
The Company will not, and will not permit any of its Subsidiaries to,
make any Transfer, provided that the foregoing restriction does not apply to a
Transfer if:
(a) such Transfer takes place in the ordinary course of business
of the Company or the relevant Subsidiary, including, without limitation,
any Transfer of (i) inventory held for sale or (ii) equipment, fixtures,
supplies or materials that are obsolete or no longer required in the
operation of the business of the Company or such Subsidiary (in each
case, an "Ordinary Course Transfer");
(b) such Transfer is (i) a Transfer from a Subsidiary of the
Company to the Company or a Significant Subsidiary of the Company, (ii) a
Transfer from the
22
<PAGE>
Company to a Significant Subsidiary of the Company or (iii) a Transfer
from a Subsidiary of the Company to another Subsidiary of the Company
(including by way of a merger or consolidation of such Subsidiary with or
into such other Subsidiary) and in either case is for Fair Market Value,
as determined in good faith by the Company or the Subsidiary making such
Transfer, as the case may be; provided that in the case of any Transfer
under clause (i), (ii) or (iii) above, immediately before and after
giving effect to such Transfer, and after giving Pro Forma Effect thereto
as if such transfer has occurred, no Default or Event of Default shall
have occurred and be continuing (each such Transfer, an "Intergroup
Transfer"); or
(c) all of the following conditions shall have been satisfied with
respect thereto: (i) such Transfer does not involve a Substantial Part of
the property of the Company or any of its Subsidiaries, (ii) in the good
faith opinion of the Company, the Transfer is in exchange for
consideration with a Fair Market Value at least equal to that of the
property exchanged and (iii) immediately before and after giving effect
to such Transfer, and after giving Pro Forma Effect thereto, no Default
or Event of Default shall have occurred and be continuing.
Notwithstanding the foregoing, but subject to Sections 10.2 and 10.4, the
Company and its Subsidiaries shall be permitted to make a Transfer of a
Substantial Part of their respective property, if in the good faith opinion of
the Company or the Subsidiary making such Transfer, the Transfer is in exchange
for consideration with a Fair Market Value at least equal to the property
exchanged and if contemporaneously with such Transfer, the Company or such
Subsidiary delivers to the holders of the outstanding Notes a certificate of a
Senior Financial Officer certifying that the Net Cash Payments (if any) in
respect of such Transfer will be used in accordance with either of the following
clauses (a) or (b) and, in accordance with such certificate, within six-months
of the receipt of any Net Cash Payments from any such Transfer, the Company
shall, or shall cause such Subsidiary to, either (a) apply such Net Cash
Payments to the purchase of assets useful and intended to be used in the
business of the Company and its Subsidiaries or (b) offer to prepay the Notes in
accordance with Section 8.3 in an amount equal to such Net Cash Payments;
provided that the aggregate principal amount of Notes required to be prepaid in
- --------
connection with any such Transfer shall not exceed the product of (A) the
percentage that the revenues of, or attributable to, such assets represents to
the consolidated revenues of the Company and its Subsidiaries and (B) the
aggregate outstanding principal amount of the Notes at the time of such
Transfer.
No Transfer of a Substantial Part of the assets of the Company shall have
the effect of releasing the Company (or any Successor Entity permitted under
Section 10.2) from its liability under this Agreement or the Notes.
4. Disposal of Ownership of a Subsidiary.
The Company will not, and will not permit any of its Subsidiaries to,
Transfer any of its Subsidiary Stock nor will the Company permit any such
Subsidiary to Transfer any shares of its own capital stock or equity interests,
provided that the foregoing restriction does not apply to:
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(a) the issuance by any such Subsidiary of directors' qualifying
shares;
(b) any Transfer of Subsidiary Stock that constitutes an Intergroup
Transfer; and
(c) any Transfer of Subsidiary Stock of the Company if all of the
following conditions shall have been satisfied with respect thereto: (i)
such Transfer does not involve a Substantial Part of the property of the
Company, (ii) in the good faith opinion of the Company, the Transfer is
in exchange for consideration with a Fair Market Value at least equal to
that of the property exchanged and (iii) immediately before and after
giving effect to such transaction, and after giving Pro Forma Effect
thereto, no Default or Event of Default shall have occurred and be
continuing.
Notwithstanding the foregoing, but subject to Sections 10.2 and 10.3, the
Company shall be permitted to Transfer any of its Subsidiary Stock, if in the
good faith opinion of the Company the Company receives in exchange therefore
consideration with a Fair Market Value at least equal to that of the property
exchanged and if, contemporaneously with any such Transfer, the Company delivers
to the holders of the outstanding Notes a certificate of a Senior Financial
Officer of the Company certifying that the Net Cash Payments (if any) in respect
of such Transfer will be used in accordance with either of the following clauses
(a) or (b), and in accordance with such certificate, within six-months of the
receipt of any Net Cash Payments from any such Transfer, the Company (a) applies
such Net Cash Payments to the purchase of assets useful and intended to be used
in the business of the Company and its Subsidiaries or (b) offers to prepay the
Notes in accordance with Section 8.3 in an amount equal to such Net Cash
Payments; provided that the aggregate principal amount of Notes required to be
--------
prepaid in connection with any such Transfer shall not exceed the product of (A)
the percentage that the revenues of, or attributable to, the Subsidiary Stock so
transferred represents to the consolidated revenues of the Company and its
Subsidiaries and (B) the aggregate outstanding principal amount of the Notes at
the time of such Transfer.
No Transfer of substantially all of the assets of the Company shall have
the effect of releasing the Company (or any Successor Entity permitted under
Section 10.2) from its liability under this Agreement or the Notes.
5. Leverage Ratios.
The Company will not permit at any time (a) the Senior Debt Leverage
Ratio to exceed 3.25 to 1 or (b) the Total Debt Leverage Ratio to exceed
4.0 to 1.
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<PAGE>
6. Interest Coverage Ratio.
The Company will not permit the Interest Coverage Ratio to be less than
3.5 to 1 as at the end of each fiscal quarter.
7. Liens.
The Company will not, and will not permit any of its Subsidiaries to,
create or suffer to exist, any Lien other than Permitted Liens.
8. Indebtedness.
The Company will not, and will not permit any of its Subsidiaries to,
create, incur, assume, or in any manner become liable, directly or indirectly in
respect of, or suffer to exist any Indebtedness (other than Excluded
Indebtedness) unless at the time such Indebtedness is incurred and after giving
Pro Forma Effect thereto, (a) the total amount of Priority Debt does not exceed
15% of Cash Flow for the most recently completed Rolling Fiscal Period and (b)
no Default or Event of Default shall have occurred and be continuing.
9. Restricted Payments.
The Company will not, and will not permit any Subsidiary to, declare,
order, pay, make or set apart any sums or property for Restricted Payments, if
at the time of the making of such Restricted Payment and after giving effect
thereto, (a) any Default or Event of Default shall have occurred and be
continuing or (b) the aggregate amount of Restricted Payments made in the fiscal
quarter in which such Restricted Payment is made and in the three full
immediately preceding fiscal quarters would exceed 105% of Cash Flow for the
Rolling Fiscal Period as of the date of such Restricted Payment.
Notwithstanding the occurrence or continuance of a Default or Event of Default,
the Company may make distributions to any of its limited partners in amounts
sufficient to allow any such limited partner to pay all federal income taxes
with respect to the amount of income and gain of the Company allocated to such
limited partner (assuming for this purpose that such limited partner is taxable
at the highest applicable rate of taxation).
10. Investments.
The Company will not, and will not permit any of its Subsidiaries to,
make or hold any Investment other than (a) Permitted Investments and (b) Exempt
Investments, provided that at the time of, and after giving effect to any Exempt
Investment, no Default under Section 11(b) or Event of Default shall have
occurred and be continuing.
25
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11. Limitation on Acquisitions.
The Company will not, and will not permit any Subsidiary to, acquire any
business or property from, or capital stock or other equity interest of, any
Person, provided that the foregoing restriction does not apply to any
acquisition (whether by asset or stock purchase or pursuant to a
merger) if (a) such acquisition is directly or indirectly related to the
principal lines of business of the Company and its Subsidiaries and (b) after
giving effect to such acquisition, and after giving Pro Forma Effect thereto, no
Default or Event of Default shall have occurred and be continuing.
12. Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any of its Material
Subsidiaries to, create or permit to exist any restriction of any kind on the
ability of any such Subsidiary to (a) pay dividends or make other distributions
to the Company or any Subsidiary or (b) pay any Indebtedness owed to the Company
or any Subsidiary.
13. Change in Nature of Business.
The Company will not, and will not permit any of its Material
Subsidiaries to, make any material change in the nature or conduct of its
business as carried on as of the date hereof.
14. Consolidated Net Worth.
The Company will not permit Consolidated Net Worth to be less than
$75,000,000 at any time.
11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or Make-Whole
Amount, if any, on any Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note for
more than five Business Days after the same becomes due and payable; or
(c) the Company defaults in the performance of or compliance with any
term contained in Section 10; or
(d) the Company defaults in the performance of or compliance with any
term contained herein (other than those referred to in paragraphs (a), (b) and
(c) of this Section 11) and such default is not remedied within 30 days after
the earlier of (i) a Responsible Officer obtaining actual knowledge of such
-
default and (ii) the Company
--
26
<PAGE>
receiving written notice of such default from any holder of a Note (any such
written notice to be identified as a "notice of default" and to refer
specifically to this paragraph (d) of Section 11); or
(e) any representation or warranty made in writing by or on behalf of
the Company or by any officer of the Company in this Agreement or in any writing
furnished in connection with the transactions contemplated hereby proves to have
been false or incorrect in any material respect on the date as of which made; or
(f) (i) the Company or any Material Subsidiary is in default (as
-
principal or as guarantor or other surety) in the payment of any principal of or
premium or make-whole amount or interest on any Indebtedness that is outstanding
in an aggregate principal amount of at least $10,000,000 beyond any period of
grace provided with respect thereto, or (ii) the Company or any Material
--
Subsidiary is in default in the performance of or compliance with any term of
any evidence of any Indebtedness in an aggregate outstanding principal amount of
at least $10,000,000 or of any mortgage, indenture or other agreement relating
thereto or any other condition exists, and as a consequence of such default or
condition such Indebtedness has become, or has been declared due and payable
before its stated maturity or before its regularly scheduled dates of payment;
or
(g) the General Partner, the Company or any Material Subsidiary (i) is
-
generally not paying, or admits in writing its inability to pay, its debts as
they become due, (ii) files, or consents by answer or otherwise to the filing
--
against it of, a petition for relief or reorganization or arrangement or any
other petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar law of any
jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv)
--- --
consents to the appointment of a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial part
of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi)
- --
takes partnership or corporate action (as the case may be) for the purpose of
any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction enters
an order appointing, without consent by the General Partner, the Company or any
of its Material Subsidiaries, a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial part
of its property, or constituting an order for relief or approving a petition for
relief or reorganization or any other petition in bankruptcy or for liquidation
or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of the General Partner, the
Company or any of its Material Subsidiaries, or any such petition shall be filed
against the General Partner, the Company or any of its Material Subsidiaries and
such petition shall not be dismissed within 60 days; or
(i) a final judgment or judgments (either uninsured or insured but as to
which the insurer thereof has not admitted liability) for the payment of money
aggregating in excess of $10,000,000 are rendered against one or more of the
Company and its Material Subsidiaries
27
<PAGE>
and which judgments are not, within 30 days after entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within 30 days after
the expiration of such stay; or
(j) if (i) any Plan shall fail to satisfy the minimum funding standards
-
of ERISA or the Code for any plan year or part thereof or a waiver of such
standards or extension of any amortization period is sought or granted under
section 412 of the Code, (ii) a notice of intent to terminate any Plan shall
--
have been or is reasonably expected to be filed with the PBGC or the PBGC shall
have instituted proceedings under ERISA section 4042 to terminate or appoint a
trustee to administer any Plan or the PBGC shall have notified the Company or
any ERISA Affiliate that a Plan may become a subject of any such proceedings,
(iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning
---
of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with
Title IV of ERISA, shall exceed $10,000,000, (iv) the Company or any ERISA
--
Affiliate shall have incurred or is reasonably expected to incur any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of
the Code relating to employee benefit plans, (v) the Company or any ERISA
-
Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any
--
Subsidiary establishes or amends any employee welfare benefit plan that provides
post-employment welfare benefits in a manner that would increase the liability
of the Company or any Subsidiary thereunder; and any such event or events
described in clauses (i) through (vi) above, either individually or together
with any other such event or events, would reasonably be expected to have a
Materially Adverse Effect; or
(k) any Regulatory Intervention shall occur.
As used in Section 11(j), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
1. Acceleration.
(a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 (other than an Event of Default described in
clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by
virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has
occurred, all the Notes then outstanding shall automatically become immediately
due and payable.
(b) If any other Event of Default has occurred and is continuing, the
Required Holders may at any time at its or their option, by notice or notices to
the Company, declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in paragraph (a) or (b) of Section
11 has occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such
28
<PAGE>
Event of Default may at any time, at its or their option, by notice or notices
to the Company, declare all the Notes held by it or them to be immediately due
and payable.
Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest
-
thereon and (y) the Make-Whole Amount determined in respect of such principal
-
amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
2. Other Remedies.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
3. Rescission.
At any time after any Notes have been declared due and payable pursuant
to clause (b) or (c) of Section 12.1, the holders of not less than 60% in
principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if (a)
-
the Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than non-payment of amounts
-
that have become due solely by reason of such declaration, have been cured or
have been waived pursuant to Section 17, and (c) no judgment or decree has been
-
entered for the payment of any monies due pursuant hereto or to the Notes. No
rescission and annulment under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.
4. No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder of any Note
in exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such
29
<PAGE>
holder's rights, powers or remedies. No right, power or remedy conferred by this
Agreement or by any Note upon any holder thereof shall be exclusive of any other
right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Without limiting the
obligations of the Company under Section 15, the Company will pay to the holder
of each Note on demand such further amount as shall be sufficient to cover all
costs and expenses of such holder incurred in any enforcement or collection
under this Section 12, including, without limitation, reasonable attorneys'
fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
1. Registration of Notes.
The Company shall keep at its principal executive office a register for
the registration and registration of transfers of Notes. The name and address
of each holder of one or more Notes, each transfer thereof and the name and
address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
2. Transfer and Exchange of Notes.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1. Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred (a) to a Competitor without the prior written consent of the
Company, provided that any holder of a Note may transfer a Note to a Competitor
that is purchasing such Note for resale to a Person that is not a Competitor or
(b) in denominations of less than $1,000,000, provided that if necessary to
enable the registration of transfer by a holder of its entire holding of Notes,
one Note may be in a denomination of less than $1,000,000. Any transferee, by
its acceptance of a Note registered in its name (or the name of its nominee),
shall be deemed to have made the representation set forth in Section 6.2.
30
<PAGE>
3. Replacement of Notes.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of such Note is, or is a nominee
for, an original Purchaser or another holder of a Note with a minimum net worth
of at least $50,000,000, such Person's own unsecured agreement of indemnity
shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
14. PAYMENTS ON NOTES.
1. Place of Payment.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if
any, and interest becoming due and payable on the Notes shall be made in New
York, New York at the principal office of Citibank, N.A. in such jurisdiction.
The Company may at any time, by notice to each holder of a Note, change the
place of payment of the Notes so long as such place of payment shall be either
the principal office of the Company in such jurisdiction or the principal office
of a bank or trust company in such jurisdiction.
31
<PAGE>
2. Home Office Payment.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that is the direct
or indirect transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have made in this
Section 14.2.
15. EXPENSES, ETC.
1. Transaction Expenses.
Whether or not the transactions contemplated hereby are consummated, the
Company will pay all costs and expenses (including reasonable attorneys' fees of
a special counsel and, if reasonably required, local or other counsel) incurred
by you and each Other Purchaser or holder of a Note in connection with such
transactions and in connection with any amendments, waivers or consents under or
in respect of this Agreement or the Notes (whether or not such amendment, waiver
or consent becomes effective), including, without limitation: (a) the costs and
-
expenses incurred in enforcing or defending (or determining whether or how to
enforce or defend) any rights under this Agreement or the Notes or in responding
to any subpoena or other legal process or informal investigative demand issued
in connection with this Agreement or the Notes, or by reason of being a holder
of any Note, and (b) the costs and expenses, including financial advisors' fees,
-
incurred in connection with the insolvency or bankruptcy of the Company or any
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes. The Company will pay, and
will save you and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses if any, of brokers and finders (other
than those retained by you).
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<PAGE>
2. Survival.
The obligations of the Company under Section 15 will survive the payment
or transfer of any Note, the enforcement, amendment or waiver of any provision
of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed representations and warranties of the Company under this Agreement.
Subject to the preceding sentence, this Agreement and the Notes embody the
entire agreement and understanding between you and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
17. AMENDMENT AND WAIVER.
1. Requirements.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
-
provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it
is used in such Sections), will be effective as to you unless consented to by
you in writing, and (b) no such amendment or waiver may, without the written
-
consent of the holder of each Note at the time outstanding affected thereby, (i)
-
subject to the provisions of Section 12 relating to acceleration or rescission,
change the amount or time of any prepayment or payment of principal of, or
reduce the rate or change the time of payment or method of computation of
interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage
--
of the principal amount of the Notes the holders of which are required to
consent to any such amendment or waiver, or (iii) amend any of Sections 8,
---
11(a), 11(b), 12, 17 or 20 (it being understood that any amendment to Section
10.3 or 10.4 or to the definition of "Change of Control" in Schedule B that does
not terminate the Company's obligation to offer to prepay Notes in the
circumstances contemplated by Section 8, will not be deemed an amendment of
Section 8 or a change in the amount or time of any prepayment).
33
<PAGE>
2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
------------
(irrespective of the amount of Notes then owned by it) with reasonably
sufficient information, sufficiently far in advance of the date a decision is
required, to enable such holder to make an informed and considered decision with
respect to any proposed amendment, waiver or consent in respect of any of the
provisions hereof or of the Notes. The Company will deliver executed or true
and correct copies of each amendment, waiver or consent effected pursuant to the
provisions of this Section 17 to each holder of outstanding Notes promptly
following the date on which it is executed and delivered by, or receives the
consent or approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause
-------
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes or any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
3. Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note
nor any delay in exercising any rights hereunder or under any Note shall operate
as a waiver of any rights of any holder of such Note. As used herein, the term
"this Agreement" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
4. Notes held by Company, etc.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
34
<PAGE>
18. NOTICES.
All notices and communications provided for hereunder shall be in writing
and sent (a) by telecopy if the sender on the same day sends a confirming copy
-
of such notice by a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested (postage
-
prepaid), or (c) by a recognized overnight delivery service (with charges
-
prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or it
shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such address
as such other holder shall have specified to the Company in writing, or
(iii) if to the Company, to the Company at its address set forth at the
beginning hereof to the attention of G. Neal Ryland, Chief Financial Officer,
or at such other address as the Company shall have specified to the holder of
each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
-
executed, (b) documents received by you at the Closing (except the Notes
-
themselves), and (c) financial statements, certificates and other information
-
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
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
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to you prior
-
to the
35
<PAGE>
time of such disclosure, (b) subsequently becomes publicly known through
-
no act or omission by you or any person acting on your behalf, (c) otherwise
-
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
-
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, provided that you may deliver or disclose Confidential
Information to (i) your directors, officers, employees, agents, attorneys and
-
affiliates, (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes), (ii) your financial
--
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor
--- --
to which you sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this Section
20), (v) any Person from which you offer to purchase any security of the Company
-
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (vi) any federal
--
or state regulatory authority having jurisdiction over you, (vii) the National
---
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio, or (viii) any other Person to which such delivery or
----
disclosure may be necessary or appropriate (w) to effect compliance with any
-
law, rule, regulation or order applicable to you, (x) in response to any
-
subpoena or other legal process, (y) in connection with any litigation to which
-
you are a party or (z) if an Event of Default has occurred and is continuing, to
-
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
36
<PAGE>
22. MISCELLANEOUS.
1. Successors and Assigns.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
2. Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-Whole Amount or interest on
any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day without including the additional days elapsed in
the computation of the interest payable on such next succeeding Business Day.
3. Severability.
Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
4. Construction.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
5. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
6. Governing Law.
This Agreement shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the law of the State of New
York excluding choice-of-law
37
<PAGE>
principles of the law of such State that would require the application of the
laws of a jurisdiction other than such State.
7. Non-Recourse.
Notwithstanding anything to the contrary in this Agreement or any
Note, no recourse shall be had against the General Partner for the payment of
the principal of or interest or Make-Whole Amount on any Note, or for any other
payment under this Agreement or any Note. It is understood that the foregoing
shall not prevent recourse to the Company or to any of the assets of the
Company.
* * * * *
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<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
NEW ENGLAND INVESTMENT COMPANIES,
L.P.
By NEW ENGLAND INVESTMENT
COMPANIES,INC.,
its General Partner
By: KEVIN P. CHARLESTON
Senior Vice President & Treasurer
The foregoing is hereby
agreed to as of the
date thereof.
[The forms of signature by each of the Purchasers, as they appear in the
respective Note Purchase Agreements, are set forth below.]
ALLSTATE LIFE INSURANCE THE FRANKLIN LIFE INSURANCE
COMPANY COMPANY
By PATRICIA W. WILSon and
Authorized Signatory
AMERICAN GENERAL LIFE
By CHARLES D. MIRES INSURANCE COMPANY
Authorized Signatory
By JULIA S. TUCKER
Investment Officer
CONNECTICUT GENERAL LIFE CENTURY INDEMNITY COMPANY
INSURANCE COMPANY By CIGNA Investments, Inc.
By CIGNA Investments, Inc.
By DEBRA J. HEIGHT
By DEBRA J. HEIGHT Managing Director
Managing Director
39
<PAGE>
LIFE INSURANCE COMPANY OF UNITED OF OMAHA LIFE INSURANCE
NORTH AMERICA COMPANY
By CIGNA Investments, Inc.
By KENT KNUDSEN
By DEBRA J. HEIGHT Vice President
Managing Director
MUTUAL OF OMAHA INSURANCE STATE OF WISCONSIN INVESTMENT
COMPANY BOARD
By KENT KNUDSEN By JAMES M. GANNON
Vice President Assistant Investment Director
PACIFIC MUTUAL LIFE INSURANCE ALEXANDER HAMILTON LIFE
COMPANY INSURANCE COMPANY OF AMERICA
By WILLIAM R. SCHMIDT By JAMES E. MCDONALD, JR.
Assistant Vice President Second Vice President
By DIANE W. DALES
Assistant Secretary
FIRST ALEXANDER HAMILTON LIFE THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY INSURANCE COMPANY
By Lincoln Investment Management,
By JAMES E. MCDONALD, JR. Inc., Its Attorney-In-Fact
Second Vice President
By TIMOTHY L. POWELL
Second Vice President
ALLIED LIFE INSURANCE COMPANY FIRST PENN-PACIFIC LIFE INSURANCE
COMPANY
By Lincoln Investment Management,
Inc., Its Attorney-In-Fact By Lincoln Investment Management,
Inc., Its Attorney-In-Fact
By TIMOTHY L. POWELL
Second Vice President By TIMOTHY L. POWELL
Second Vice President
40
<PAGE>
LINCOLN NATIONAL REASSURANCE TEACHERS INSURANCE AND ANNUITY
COMPANY ASSOCIATION OF AMERICA
By: Lincoln Investment Management,
Inc., Its Attorney-In-Fact By LOREN S. ARCHIBALD
Managing Director
By TIMOTHY L. POWELL
Second Vice President
THE CANADA LIFE ASSURANCE THE CANADA LIFE INSURANCE
COMPANY COMPANY OF NEW YORK
By KEVIN PHELAN
Assistant Treasurer By KEVIN PHELAN
Assistant Treasurer
THE CANADA LIFE ASSURANCE NORTHERN LIFE INSURANCE
COMPANY (A&H) COMPANY
By KEVIN PHELAN By JAMES V. WITTICH
Assistant Treasurer Assistant Treasurer
National Life Investment
Management Co.
LIFE INSURANCE COMPANY OF THE
SOUTHWEST
NATIONAL LIFE INSURANCE
COMPANY By R. SCOTT HIGGINS
Vice President
By R. SCOTT HIGGINS
Vice President
National Life Investment
Management Co.
FIRST CITICORP LIFE INSURANCE BANKERS LIFE INSURANCE
COMPANY COMPANY OF NEW YORK
By LISA P. FOXWORTHY-PARKER
By CHIP CLARK As Agent for Bankers Life Insurance
Vice President Company of New York
41
<PAGE>
COLOGNE LIFE REINSURANCE LINCOLN SECURITY LIFE INSURANCE
COMPANY COMPANY
By CHIP CLARK By CHIP CLARK
Vice President Vice President
AMERICAN FAMILY MUTUAL LIFE
INSURANCE COMPANY
By PHILLIP HANNIFAN
Investment Director
42
<PAGE>
Schedule B
----------
DEFINED TERMS
-------------
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"Affiliate" means, at any time, and with respect to any Person, any
other Person (other than an Investment Company) that at such time directly or
indirectly through one or more intermediaries Controls, or is Controlled by, or
is under common Control with, such first Person. As used in this definition,
"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 securities, by contract or otherwise. Unless the
context otherwise clearly requires, any reference to an "Affiliate" is a
reference to an Affiliate of the Company.
"Broker Commission" means any amount to be paid by the Company or any
of its Subsidiaries to NESC or any broker, dealer or distributor in connection
with the distribution by NESC or such broker, dealer or distributor of any
shares in any Investment Company sponsored by the Company or any Subsidiary of
the Company.
"Broker Commission Debt" means any Indebtedness of the Company or any
of its Subsidiaries, the proceeds of which are used, directly or indirectly, to
pay Broker Commissions and which is secured by Collections Rights of the Company
or such Subsidiary.
"Business Day" means (a) for the purposes of Section 8.7 only, any
-
day other than a Saturday, a Sunday or a day on which commercial banks in New
York City are required or authorized to be closed, and (b) for the purposes of
-
any other provision of this Agreement, any day other than a Saturday, a Sunday
or a day on which commercial banks in New York, New York or Boston,
Massachusetts are required or authorized to be closed.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
1
Schedule B
<PAGE>
"Cash Flow" means, for any period, for the Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP, net
income (or net loss) for such period plus (a) Interest Expense plus (b) income
---- ----
tax expense plus (c) depreciation expense plus (d) amortization expense plus (e)
---- ---- ----
non-cash expenses to the extent deducted in determining such net income plus (f)
----
capital losses from the sale of assets determined in accordance with GAAP for
such period, plus (g) the Support Charge (not to exceed $20,000,000 in any
----
fiscal year) minus (h) capital gains on the sale of assets determined in
-----
accordance with GAAP for such period minus (i) earnings (only if positive) of
-----
any Person (other than the Company or any of its consolidated Subsidiaries) in
which the Company or any Subsidiary holds an Investment to the extent such
earnings are not distributed or otherwise paid (or are not eligible to be
distributed or paid without restriction) to the Company or any of its
consolidated Subsidiaries minus (j) cash flow attributable to Collection Rights
-----
securing Excluded Broker Commission Debt and minus (k) earnings (only if
-----
positive) attributable to any Support Investment to the extent the holder of any
Support Investment Indebtedness has recourse thereto; provided that upon any
--------
acquisition permitted by Section 10.11, the calculation of Cash Flow for any
Rolling Fiscal Period commencing prior to the effective date of such acquisition
shall be adjusted to give Pro Forma Effect to such acquisition.
"Change of Control" means the occurrence of any one of the following:
(a) Metropolitan Life Insurance Company or any successor thereto
shall cease to have beneficial ownership, directly or indirectly, through
one or more of its Subsidiaries, of at least a majority of the shares of
all classes of voting stock of the General Partner (or, if the Company is
not a limited partnership, of at least a majority of the voting interests
of all classes of voting stock of the Company); and
(b) Metropolitan Life Insurance Company or any successor thereto,
through one or more of its Subsidiaries, shall cease to own, directly or
indirectly, at least 15% of the economic interests in the Company.
"Closing" is defined in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time.
2
Schedule B
<PAGE>
"Collection Rights" means any amount owed to the Company or any of
its Subsidiaries (a) pursuant to any 12b-1 Plan of, or any similar or successor
plan of, or arrangement with, any Fund, (b) in respect of administrative or
investment advisory services furnished, pursuant to written agreements, to a
Fund by the Company or such Subsidiary or (c) from the payment of contingent
deferred sales charges or other similar charges by the shareholders of a Fund.
"Company" means New England Investment Companies, L.P. , a Delaware
limited partnership.
"Competitor" means any Person listed in Schedule 13.2 or reasonably
designated as such in a written notice to the holder of each Note, provided that
the Company shall not make any such designation more than once in any twelve-
month period and provided further that no more than 20 Persons shall be
Competitors at any one time.
"Confidential Information" is defined in Section 20.
"Consolidated Net Worth" means, at any time,
(a) the total assets of the Company and its Subsidiaries which would
be shown as assets on a consolidated balance sheet of the Company and its
Subsidiaries as of such time prepared in accordance with GAAP, after eliminating
all amounts properly attributable to minority interests, if any, in
Subsidiaries, minus
(b) the total liabilities of the Company and its Subsidiaries which
would be shown as liabilities on a consolidated balance sheet of the Company and
its Subsidiaries as of such time prepared in accordance with GAAP.
"Currency Hedging Agreement" means, for any Person, a foreign
exchange contract, currency swap, collar or cap agreement or similar arrangement
between such Person and one or more financial institutions providing for the
transfer or mitigation of currency risks either generally, periodically or under
specific contingencies. The "credit exposure" at any time of any Person under a
---------------
Currency Hedging Agreement to which such Person is a party shall be determined
3
Schedule B
<PAGE>
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Currency Hedging Agreement had terminated at
the end of such fiscal quarter and, in making such determination, if any
agreement relating to such Currency Hedging Agreement provides for the netting
of amounts payable by and to such Person thereunder or if any such agreement
provides for the simultaneous payment of amounts by and to such Person, then in
each such case, the amount of such credit exposure shall be the net amount so
determined.
"Default" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"Default Rate" means that rate of interest that is the greater of (i)
-
2% per annum above the rate of interest stated in clause (a) of the first
paragraph of the Notes or (ii) 1% over the rate of interest publicly announced
--
by Citibank, N.A. in New York, New York as its "base" or "prime" rate.
"Duff & Phelps" means Duff & Phelps Credit Rating Co.
"Environmental Laws" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"Event of Default" is defined in Section 11.
4
Schedule B
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Broker Commission Debt" means Broker Commission Debt (a)
which is secured by, and intended to be repaid solely out of the proceeds of,
Collection Rights except to the extent provided in clause (b) below and (b)
which is otherwise nonrecourse to the Company and its Subsidiaries except in the
event of (i) the amendment or termination of a 12b-1 Plan or similar plan under
which such Collection Rights would arise, (ii) changes in applicable law
relating to 12b-1 Plans which have a material adverse effect on the ability of
the Company or any applicable Subsidiary to satisfy its obligations with respect
to such Broker Commission Debt, (iii) the occurrence of any breach of a covenant
or representation customarily found in an asset-backed transaction of this type
that relate to Collection Rights, including, without limitation, fraud, willful
misconduct or gross negligence by the Company or such Subsidiary or (iv) any
amendment, modification (including any amendment or termination arising from a
change in law) or termination of any underwriting agreement, prospectus or sales
charge arrangement between the Company or such Subsidiary and any Fund relating
to the Collection Rights that secure such Broker Commission Debt; provided that
if any of the circumstances described in clauses (i) through (iv) above occurs
with respect to any Broker Commission Debt, such Broker Commission Debt shall no
longer constitute Excluded Broker Commission Debt.
"Excluded Indebtedness" means any of the following Indebtedness:
(a) Excluded Broker Commission Debt;
(b) Support Investment Indebtedness;
(c) Purchase Money Obligations of the Company and any of its
Subsidiaries in an aggregate principal amount at no time exceeding $10,000,000
and Indebtedness incurred to refinance such Purchase Money obligations, provided
that the unpaid balance thereof is not increased and the Lien securing such
Purchase Money Obligations is not extended to any other assets;
(d) Indebtedness of the Company or any of its Subsidiaries for
money borrowed from any insurance company against the cash surrender value of
any insurance
5
Schedule B
<PAGE>
policy issued by such insurance company insuring the life or lives of one
or more senior management employees, which policies are owned by the
Company or such Subsidiary, as to which the Company or such Subsidiary is
the named insured beneficiary and as to which the Company or such
Subsidiary is entitled to the full cash surrender value; provided that such
Indebtedness does not exceed the cash surrender value of such policy;
(e) Indebtedness of the Company under Currency Hedging
Agreements and Interest Rate Protection Agreements of the Company; provided
that (i) in the case of any Interest Rate Protection Agreement, such
Interest Rate Protection Agreement has been entered into to protect the
Company or any of its Subsidiaries from fluctuations either (x) in interest
rates in respect of Indebtedness incurred or to be incurred by the Company
or such Subsidiary and the credit exposure of the Company or such
Subsidiary thereunder is at no time no greater than necessary to hedge its
interest rate exposure with respect to the aggregate principal amount of
such Indebtedness or (y) in the value of investments in fixed income
securities that were acquired in the ordinary course of business and (ii)
in the case of any Currency Hedging Agreement, such Currency Hedging
Agreement covers the assets or liabilities of the Company or any of its
Subsidiaries that are denominated in a currency other than dollars of the
United States of America;
(f) Indebtedness of the Company or any of its Subsidiaries to
the Company or any Significant Subsidiary; and
(g) liabilities in respect of letters of credit or bankers
acceptances that are issued or accepted in connection with obligations that
do not constitute Indebtedness.
"Exempt Investments" means, for the Company and its Subsidiaries:
(a) Investments in Significant Subsidiaries of the Company
engaged, for a fee or other remuneration, in an Investment Management
Business;
(b) Seed Money Obligations and other Investments in Funds
constituting partnerships, trusts, limited liability corporations or
similar Persons, which Investments are acquired in the ordinary course of
business;
6
Schedule B
<PAGE>
(c) securities acquired from any Fund or any other Person if,
in the case of any such other Person, such securities were held by such
Person as a result of investment management or advisory services provided
by the Company or any of its Subsidiaries, provided that such securities
are expected to be disposed of within twelve months of such acquisition and
are not held by the Company or any of its Subsidiaries for more than twelve
months;
(d) securities held by the Company or any of its Subsidiaries
pending the formation of a Fund to which such securities will be
transferred, provided that such securities are expected to be transferred
or otherwise disposed of within twelve months of such investment;
(e) Investments in other Subsidiaries of the Company or joint
ventures engaged in the Investment Management Business, provided that
immediately prior and after giving effect to each such Investment, and
after giving Pro Forma Effect thereto, the aggregate amount of all such
Investments does not exceed 25% of Cash Flow for the most recently
completed Rolling Fiscal Period;
(f) Investments by the Company or a Subsidiary of the Company
in the ordinary course of its Investment Management Business (including but
not limited to unit investment trusts); and
(g) other Investments not exceeding $10,000,000 in the
aggregate.
"Fair Market Value" means, at any time and with respect to any
property, the sale value of such property that would be realized in an arm's-
length sale at such time between an informed and willing buyer and an informed
and willing seller (neither being under compulsion to buy or sell).
"Fitch" means Fitch Investors' Service Incorporated.
"Fund" means any Investment Company and any Person that would be
an Investment Company but for Section 3(c)(1) of the Investment Company Act that
is, in any such case, managed or sponsored by the Company or any of its
Subsidiaries or for which the Company
7
Schedule B
<PAGE>
or any such Subsidiary provides advisory, administrative, supervisory,
management, consulting, underwriting, transfer-agency, shareholder or share-
servicing or similar services.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America.
"General Partner" means NEIC and such other Person or Persons as
may be a general partner of the Company from time to time (it being understood
that if there is more than one general partner of the Company, the term "General
Partner" is intended to apply only to the managing general partner of the
Company).
"Governmental Authority" means
(a) the government of
(i) the United States of America or any State or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business, or which
asserts jurisdiction over any properties of the Company or any
Subsidiary, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"Guaranty" means, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or in effect
guaranteeing any indebtedness, dividend or other obligation of any other Person
in any manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person:
8
Schedule B
<PAGE>
(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or
-
payment of such indebtedness or obligation, or (ii) to maintain any working
--
capital or other balance sheet condition or any income statement condition
of any other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"Harris Acquisition" means the acquisition by the Company of all
of the assets of Harris Associates L.P., a Delaware limited partnership.
"holder" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 13.1.
"Indebtedness" with respect to any Person means, at any time,
without duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of
property determined in accordance with GAAP (other than any part of such
price payable in equity interests of the Company) acquired by such Person
(excluding accounts payable arising in the ordinary
9
Schedule B
<PAGE>
course of business but including all liabilities created or arising under
any conditional sale or other title retention agreement with respect to any
such property);
(c) its liabilities appearing on its balance sheet in
accordance with GAAP in respect of Capital Leases;
(d) its liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities);
(e) its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its account
by banks and other financial institutions (whether or not representing
obligations for borrowed money);
(f) its credit exposure under Interest Rate Protection
Agreements and Currency Hedging Agreements;
(g) any Guaranty of such Person with respect to liabilities
of a type described in any of clauses (a) through (f) hereof; and
(h) all other liabilities of a type described in clause (a)
through (g) above of such Person resulting from such Person being a general
partner or a member of a joint venture, whether by provision of applicable
law, contract or otherwise.
"Institutional Investor" means (a) any original purchaser of a
-
Note, (b) any holder of a Note holding more than 10% of the aggregate principal
-
amount of the Notes then outstanding, and (c) any bank, trust company, savings
-
and loan association or other financial institution, any pension plan, any
investment company, any insurance company, any broker or dealer, or any other
similar financial institution or entity, regardless of legal form.
"Interest Coverage Ratio" means, for any date, the ratio of (a)
Cash Flow for the Rolling Fiscal Period ending on or immediately prior to such
date to (b) Interest Expense for such Rolling Fiscal Period.
10
Schedule B
<PAGE>
"Interest Expense" means, for the Company and its Subsidiaries,
for any period, gross interest expense for such period (excluding interest on
any Excluded Indebtedness) plus capitalized interest for such period, in each
----
case determined on a consolidated basis, without duplication, in accordance with
GAAP.
"Interest Rate Protection Agreement" means, for any Person, an
interest rate swap, collar or cap agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally, periodically or under specific
contingencies. The "credit exposure" at any time of any Person under an Interest
---------------
Rate Protection Agreement to which such Person is a party shall be determined as
of the end of the then most recently ended fiscal quarter of such Person, based
on the assumption that such Interest Rate Protection Agreement had terminated at
the end of such fiscal quarter and, in making such determination, if any
agreement relating to such Interest Rate Protection Agreement provides for the
netting of amounts payable by and to such Person thereunder or if any such
agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such credit exposure shall be the
net amount so determined.
"Intergroup Transfer" has the meaning specified in Section 10.3.
"Investment" means, for any Person, (a) the acquisition (whether
for cash, property, services, securities or otherwise) of capital stock, bonds,
notes, debentures, partnership or other ownership interests or other securities
of any other Person and (b) the making of any advance, loan or other extension
of credit to, any other Person (including the purchase of property from another
Person subject to an understanding or agreement, contingent or otherwise, to
resell such property to such Person, but excluding any such advance, loan or
extension of credit representing the purchase price of inventory or supplies
sold by such Person in the ordinary course of business).
"Investment Advisers Act" means the Investment Advisers Act of
1940, as amended.
"Investment Company" means an "investment company" as such term is
defined in the Investment Company Act.
11
Schedule B
<PAGE>
"Investment Company Act" means the Investment Company Act of 1940,
as amended.
"Investment Management Business" means the business of providing
services involving (i) the management of an investment account or fund (or
portions thereof or a group of investment accounts or funds), (ii) the giving of
advice with respect to the investment of specific assets or funds, (iii) the
distribution of investment management products or (iv) broker-dealer operations
associated with the activities or operations described in any of the foregoing
clauses (i), (ii) and (iii).
"Lien" means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any interest or title
of any vendor, lessor, lender or other secured party to or of such Person under
any conditional sale or other title retention agreement or Capital Lease, upon
or with respect to any property or asset of such Person.
"Make-Whole Amount" is defined in Section 8.7.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, or properties of the Company and its
Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a)
-
the business, operations, affairs, financial condition, assets or properties of
the Company and its Subsidiaries taken as a whole, or (b) the ability of the
-
Company to perform its obligations under this Agreement and the Notes, or (c)
-
the validity or enforceability of this Agreement or the Notes.
"Material Subsidiary" means any Subsidiary of the Company that
would constitute a "significant subsidiary" as such term is used in Regulation
S-X of the Securities and Exchange Commission as in effect on the date of
Closing.
"Memorandum" is defined in Section 5.3.
"Moody's" means Moody's Investors Service, Inc.
12
Schedule B
<PAGE>
"Multiemployer Plan" means any Plan that is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).
"NEIC" means New England Investment Companies, Inc., a
Massachusetts corporation.
"NESC" means the New England Securities Corporation, a
Massachusetts corporation.
"Net Cash Payments" means, with respect to any Transfer, the
aggregate amount of all cash payments, the Fair Market Value of all marketable
securities and the cash proceeds of any non-cash consideration (other than
Exempt Investments) received by the Company and its Subsidiaries directly or
indirectly in connection with such Transfer; provided that (a) Net Cash Payments
shall be net of (i) the amount of any legal, title and recording tax expenses,
commissions and other reasonable fees and expenses (including reasonable
expenses of preparing the relevant property for sale) paid by the Company and
its Subsidiaries in connection with such Transfer and (ii) any Federal, state
and local income or other taxes estimated in good faith to be payable by the
Company and its Subsidiaries as a result of such Transfer and (b) Net Cash
Payments shall be net of any repayments by the Company or any of its
Subsidiaries of Indebtedness to the extent that (i) such Indebtedness is secured
by a Lien on the property that is the subject of such Transfer and (ii) the
transferee of (or holder of a Lien on) such property requires that such
Indebtedness be repaid as a condition to the purchase of such property.
"Notes" is defined in Section 1.
"Officer's Certificate" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"Ordinary Course Transfer" has the meaning specified in Section
10.3.
"Other Agreements" is defined in Section 2.
"Other Purchasers" is defined in Section 2.
13
Schedule B
<PAGE>
"Partners" means the General Partner and each other Person that is
a party to the Partnership Agreement.
"Partnership Agreement" means the Amended and Restated Agreement
of Limited Partnership of the Company, as amended from time to time.
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA or any successor thereto.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"Permitted Investments" means, for the Company and its
Subsidiaries, any of the following:
14
Schedule B
<PAGE>
(a) Investments in commercial paper rated A-1 or better by
S&P or P-1 or better by Moody's, that matures not more than 270
days from the date of issuance thereof, that is issued by a
corporation (other than an Affiliate of the Company) organized
under the laws of the United States of America or any state
thereof, Canada or any state thereof, any member of the European
Union or Japan;
(b) Investments in direct obligations of the United States
of America, or of any agency thereof, or obligations guaranteed as
to principal and interest by the United States of America, or of
any agency thereof, in either case, maturing not more than one
year from the date of acquisition thereof and other than
derivative securities such as interest-only and principal-only
mortgage-backed securities and collateralized mortgage
obligations;
(c) Investments in certificates of deposit or banker's
acceptances maturing not more than one year from the date of
issuance thereof that are issued by a bank or trust company that
is either (i) organized under the laws of the United States of
America, or any state thereof, and has capital, surplus and
undivided profits of at least $1,000,000,000 and whose long-term
certificates of deposit or long-term unsecured debt, at the time
of acquisition of such Investment, are rated A or better by S&P,
Duff & Phelps or Fitch or A2 or better by Moody's or (ii)
organized under the laws of any other country whose commercial
paper is rated A-1 or better by S&P or P-1 or better by Moody's or
whose long-term debt, at the time of acquisition of such
Investment, is rated AA or better by S&P or Aa2 or better by
Moody's and has capital, surplus and undivided profits of at least
$1,000,000,000;
(d) Investments in master note or deposit arrangements
involving securities of the type described in clauses (a), (b) or
(c) above;
(e) Investments in money market programs of Investment
Companies registered with the Securities and Exchange Commission,
which Investments, at the time of acquisition thereof, are either
rated A-1 or better by S&P or P-1 or better by Moody's (or if such
programs are not rated, the substantial majority of underlying
investments of such program, or issuers of such underlying
15
Schedule B
<PAGE>
investments, are so rated) or invested only in the types of
securities described in clauses (a) through (d) above;
(f) Investments in repurchase agreements maturing not more
than 365 days from the creation thereof, with, or accepted by, a
bank, trust company or other financial institution whose long-term
unsecured debt, at the time of acquisition of such Investment, is
rated A or better by S&P, Duff & Phelps or Fitch or A2 or better
by Moody's;
(g) Investments by the Company or any of its Subsidiaries
made in (i) Interest Rate Protection Agreements and Currency
Hedging Agreements to the extent any Indebtedness thereunder
constitutes Excluded Indebtedness; provided, in any case, that the
long-term senior unsecured debt of the counterparty thereto is
rated A- or better by S&P or A3 or better by Moody's, at the time
the Investment is made; and
(h) Investments of the Company and its Subsidiaries in
existence on the date hereof and listed in Schedule 10.7 hereto.
"Permitted Liens" means, for the Company and its Subsidiaries, any
of the following:
(a) Liens outstanding on the date hereof and listed in
Schedule 5.15;
(b) Liens securing Indebtedness of any Subsidiary to the
Company or any Significant Subsidiary of the Company;
(c) Liens for taxes, assessments and governmental charges
or levies which are not yet due or are payable without penalty or
of which the amount, applicability or validity is being contested
by the Company or one of its Subsidiaries in good faith by
appropriate proceedings and as to which adequate reserves are
being maintained in accordance with GAAP;
16
Schedule B
<PAGE>
(d) Liens resulting from any judgment or award, the time
for the appeal or petition for rehearing of which shall not have
expired, or which shall in good faith be prosecuted by an appeal
or proceeding for a review and in respect of which a stay of
execution pending such appeal or proceeding shall have been
secured, and as to which, in any case, adequate reserves are being
maintained in accordance with GAAP;
(e) Liens imposed by law, such as landlord's,
materialmen's, mechanics', carriers', workmen's and repairmen's
Liens and other similar Liens arising in the ordinary course of
business which are not delinquent or remain payable without
penalty or which are being contested or defended in good faith by
appropriate proceedings and as to which adequate reserves are
being maintained in accordance with GAAP, or which are suspended
or released by the filing of lien bonds, or deposits to obtain the
release of such Liens;
(f) pledges, deposits and other Liens made in the ordinary
course of business to secure obligations under worker's
compensation laws, unemployment insurance, social security
legislation or similar legislation or to secure public or
statutory obligations;
(g) Liens to secure the performance of bids, tenders,
contracts, leases or statutory obligations, or to secure surety,
stay or appeal or other similar types of deposits, Liens or
pledges, incurred in the ordinary course of business (to the
extent such Liens do not secure obligations for the payment of
Indebtedness for borrowed money and provided that any such
obligation is not overdue or if overdue is being contested in good
faith by appropriate proceedings and as to which adequate reserves
are being maintained in accordance with GAAP);
(h) Liens solely securing Purchase Money Obligations
incurred in the ordinary course of business provided that any such
Lien does not extend to or cover any property or assets other than
the property so financed;
(i) Liens on Collection Rights securing Broker Commission
Debt provided that in the case of any Broker Commission Debt that
does not qualify as
17
Schedule B
<PAGE>
Excluded Broker Commission Debt, such Broker Commission Debt is
permitted under Section 10.8;
(j) Liens securing Support Investment Indebtedness and
Liens on the cash value of life insurance policies securing
Indebtedness referred to in clause (d) of the definition of
Excluded Indebtedness;
(k) minor survey exceptions or minor encumbrances,
easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements,
licenses, restrictions on the use of property or minor
imperfections in title thereto which, in the aggregate, are not
material in amount, and which do not in any case materially
detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of the Company
or any of its Subsidiaries;
(l) all other Liens, provided that, after giving effect to
the creation thereof, the total amount of Priority Debt on the
date of such creation does not exceed 15% of Cash Flow for the
mostly recently completed Rolling Fiscal Period; and
(m) any modification, extension, renewal or replacement of
the foregoing, provided, however, that (i) the Liens permitted
hereunder shall not be spread to cover any additional Indebtedness
or property (other than a substitution of like property), (ii) the
aggregate amount of Indebtedness or other obligations secured by
the Lien after such extension, renewal, refinancing or replacement
does not exceed the aggregate amount of Indebtedness or other
obligations secured by the existing Lien immediately prior to such
extension, renewal, refinancing or replacement and (iii) the
Indebtedness secured by such Lien, if any, is either Excluded
Indebtedness or Indebtedness permitted under Section 10.2.
"Plan" means an "employee benefit plan" (as defined in section
3(3) of ERISA) that is or, within the preceding five years, has been established
or maintained, or to which contributions are or, within the preceding five
years, have been made or required to be made, by
18
Schedule B
<PAGE>
the Company or any ERISA Affiliate or with respect to which the Company or any
ERISA Affiliate may have any liability.
"Preferred Stock" means any class of capital stock of a corporation that
is preferred over any other class of capital stock of such corporation as to the
payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"Priority Debt" means the sum (without duplication) of (a) all
Indebtedness (other than Excluded Indebtedness) of the Company secured by any
Lien on property of the Company or any of its Subsidiaries and (b) all
Indebtedness (other than Excluded Indebtedness) of the Subsidiaries of the
Company.
"Pro Forma Effect" means, for any event, calculating the operating
results for the Rolling Fiscal Period for the date of such event as if such
event had occurred on the first day of such Rolling Fiscal Period.
"property" or "properties" means, unless otherwise specifically limited,
real or personal property of any kind, tangible or intangible, choate or
inchoate.
"Purchase Money Obligations" means any Indebtedness secured by a Lien on
assets of the Company or any Subsidiary of the Company, and any additions and
accessions thereto, that are purchased by the Company or any Subsidiary of the
Company at any time after the Notes are issued; provided that (a) the security
agreement or conditional sales or other title retention contract pursuant to
which such Lien is created (a "Purchase Money Security Agreement") shall be
entered into within 90 days after the purchase or substantial completion of the
construction of such assets and the Lien created thereunder shall at all times
be confined solely to the assets so purchased or acquired, and, if required by
such Purchase Money Security Agreement, any additions and accessions thereto,
(b) at no time shall the aggregate principal amount of the outstanding
Indebtedness secured thereby be increased, except in connection with the
purchase of additions and accessions thereto and in respect of fees and other
obligations in respect of such Indebtedness and (c)(i) the aggregate outstanding
principal amount of Indebtedness secured thereby (determined on a per asset
basis in the case of any additions and accessions) shall not at the time such
Purchase Money Security Agreement is entered into exceed 100% of the purchase
price to the Company or any Subsidiary of the assets subject thereto or (ii)
19
Schedule B
<PAGE>
the Indebtedness secured thereby shall be with recourse solely to the assets so
purchased or acquired, any accessions thereto and any proceeds therefrom.
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"Required Holders" means, at any time, the holders of at least 51% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).
"Regulatory Intervention" means (i) in the case of the Company and any
Subsidiary that is a registered investment adviser under the Investment Advisers
Act, the giving of any order by the Securities and Exchange Commission or any
state governmental body placing limitations on the activities, functions or
operations of, or suspending or revoking the registration of, the Company or
such Subsidiary or (ii) in the case of any Subsidiary that is a registered
broker-dealer, (a) any revocation by any self-regulatory organization (as
defined in Section 3(a)(26) of the Securities Exchange Act of 1934, as amended)
of such Subsidiary's membership therein, (b) any revocation by the Securities
and Exchange Commission of such Subsidiary's status as a broker-dealer or (c)
any application by the Securities Investor Protection Corporation for a decree
adjudicating that customers of such Subsidiary are in need of protection under
the Securities Investor Protection Act of 1940, as amended; provided that in any
such case, such event would reasonably be expected to have a Material Adverse
Effect.
"Responsible Officer" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this agreement.
"Restricted Payments" means for the Company and any of its Subsidiaries,
(a) any dividends or other distributions or payments on or in respect of any
equity interest of the Company or any such Subsidiary or to the holders of any
such equity interests in their capacity as such (other than payments made solely
in equity interests and dividends or distributions payable to the Company or any
Subsidiary), (b) any purchase, redemption or other acquisition for value of any
equity interest of the Company or any such Subsidiary or (c) any purchase,
redemption or other acquisition or retirement for value, prior to any scheduled
maturity, of any Subordinated
20
Schedule B
<PAGE>
Indebtedness; provided that such term shall not include any payment of a type
described in clause (a) or (b) above that is made to the holders of equity
interests in the Company to satisfy deferred obligations (whether liquidated or
contingent) with respect to the Harris Acquisition.
"Rolling Fiscal Period" means, for any date, the most recently ended full
fiscal quarter of the Company with respect to which the Company has delivered or
is required to have delivered, the financial statements referred to in Section
7.1(a) or (b) and the three immediately preceding full fiscal quarters.
"S&P" means Standard & Poor's Ratings Group, a Division of McGraw Hill,
Inc.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Seed Money Obligation" means an Investment made to provide start-up
capital to a Fund.
"Senior Debt" means, for the Company and its Subsidiaries, on a
consolidated basis, all Indebtedness of the Company and its Subsidiaries (other
than Excluded Indebtedness) required to be reported as such on the consolidated
financial statements of the Company in accordance with GAAP other than
Subordinated Indebtedness.
"Senior Debt Leverage Ratio" means, for any date, the ratio of (a) the
aggregate amount of Senior Debt as at such date to (b) Cash Flow for the Rolling
Fiscal Period ending on or immediately prior to such date.
"Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.
"Significant Subsidiary" means at any time any Subsidiary for which the
Company alone or together with any other Significant Subsidiary beneficially
owns or holds 80% or more of the Voting Interests and an 80% or greater interest
in the profits or capital thereof.
"Subordinated Indebtedness" means Indebtedness (including perpetual debt
that the Company is not required to repay) that is issued or assumed pursuant
to, or evidenced by, an
21
Schedule B
<PAGE>
indenture or other instrument containing provisions for the subordination of
such Indebtedness to the Notes which provide at a minimum that (v) the weighted
average life to maturity of such Indebtedness is longer than the maturity of the
Notes, (w) in the event of any bankruptcy, or other similar proceeding in
respect of the Company, the holders of the Notes shall be entitled to receive
payment in full in cash of all principal, Make-Whole Amount and interest on the
Notes (including all interest arising after the commencement of such proceeding
whether or not an allowed claim in such proceeding) before the holder or holders
of any such Subordinated Indebtedness shall be entitled to receive any payment
of principal, interest or premium thereon, (x) if Company has defaulted in the
payment of principal, Make-Whole Amount or interest on the Notes, the holder or
holders of any such Subordinated Indebtedness shall not be entitled to payment
of any principal, premium or interest in respect thereof unless or until such
default shall have been cured, (y) if any other Event of Default has occurred
and is continuing notice of which has been given to the Company by the Required
Holders, the holders of any such Subordinated Indebtedness shall not be entitled
to payment of any principal, premium or interest in respect thereof unless a
period of 179 days has elapsed after the giving of such notice during which time
the Notes have not been accelerated as provided in Section 12.1 and (z) that the
holder or holders of such Subordinated Indebtedness may not accelerate the
maturity thereof without at least fifteen days notice to the Company (notice of
which the Company must agree to promptly provide to the holders of the Notes);
provided that clause (v) shall not apply to Subordinated Indebtedness issued to
- --------
a seller or its affiliates in connection with an acquisition permitted by
Section 10.11.
"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to
a "Subsidiary" is a reference to a Subsidiary of the Company.
"Subsidiary Stock" means, with respect to any Person, the capital stock,
share capital, partnership interests or other equity interests (or any options
or warrants to purchase, or
22
Schedule B
<PAGE>
other securities exchangeable for or convertible into, any such capital stock,
share capital or equity interests) of or in any Subsidiary of such Person.
"Substantial Part" means, with respect to any Transfer of property of the
Company and its Subsidiaries, any portion of such property if the total revenues
for the most recently ended Rolling Fiscal Period directly attributable to such
property, and all other property sold, leased or otherwise disposed of by the
Company and its Subsidiaries (other than as an Ordinary Course Transfer or an
Intergroup Transfer) during the twelve-month period ending with the date of such
Transfer exceeds 15% of the consolidated revenues of the Company and its
consolidated Subsidiaries during such Rolling Fiscal Period.
"Support Charge" means the expense reported by the Company or any of its
Subsidiaries in connection with a Support Investment.
"Support Investment" means any Investment that qualifies as an Exempt
Investment under clause (c) of the definition of "Exempt Investment".
"Support Investment Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries the proceeds of which are used to purchase any
Support Investment and that is limited in recourse to such Support Investment.
"Total Debt" means, for the Company and its Subsidiaries, on a
consolidated basis, all Indebtedness (other than Excluded Indebtedness) of the
Company and its Subsidiaries required to be reported as such on the consolidated
financial statements of the Company in accordance with GAAP.
"Total Debt Leverage Ratio" means, for any date, the ratio of (a) the
aggregate amount of Total Debt as at such date to (b) Cash Flow for the Rolling
Fiscal Period ending on or immediately prior to such date.
"Transfer" means, with respect to any Person, any transaction, or series
of transactions in which such Person sells, conveys, transfers, leases (as
lessor) or otherwise disposes of any of its property with an aggregate Fair
Market Value in excess of $2,000,000, including, without limitation, the
issuance or disposition of Subsidiary Stock.
23
Schedule B
<PAGE>
"12b-1 Plan" means any distribution plan adopted by a Fund pursuant to
Rule 12b-1 under the Investment Company Act.
"Voting Interests" means, in the case of a corporation, capital stock of
such corporation that entitles the holder thereof to voting or proxy rights and,
in the case of a partnership, a general partnership interest therein.
24
Schedule B
<PAGE>
EXHIBIT 1
[FORM OF NOTE]
NEW ENGLAND INVESTMENT COMPANIES, L.P.
7.15% SENIOR NOTE DUE APRIL 1, 2007
No. [_____] [Date]
$[_______] PPN 644095A@0
FOR VALUE RECEIVED, the undersigned, NEW ENGLAND INVESTMENT
COMPANIES, L.P. (herein called the "Company"), a limited partnership organized
and existing under the laws of the State of Delaware hereby promises to pay to
[___________________________], or registered assigns, the principal sum of
[___________________________] DOLLARS on April 1, 2007, with interest (computed
on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid
-
balance thereof at the rate of 7.15% per annum from the date hereof, payable
quarterly on the 1st day of April, July, October and January in each year,
commencing with July 1, 1997, until the principal hereof shall have become due
and payable, and (b) to the extent permitted by law on any overdue payment
-
(including any overdue prepayment) of principal, any overdue payment of interest
and any overdue payment of any Make-Whole Amount (as defined in the Note
Purchase Agreements referred to below), payable quarterly as aforesaid (or, at
the option of the registered holder hereof, on demand), at a rate per annum from
time to time equal to the greater of (i) 9.15% or (ii) 1% over the rate of
- --
interest publicly announced by Citibank, N.A. from time to time in New York, New
York as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at Citibank, N.A. or at such other place as the Company shall have
designated by written notice to the holder of this Note as provided in the Note
Purchase Agreements referred to below.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to separate Note Purchase Agreements, dated as of March
25, 1997 (as from time to
1
Exhibit 1
<PAGE>
time amended, the "Note Purchase Agreements"), between the Company and the
respective Purchasers named therein and is entitled to the benefits thereof.
Each holder of this Note will be deemed, by its acceptance hereof, (i) to have
-
agreed to the confidentiality provisions set forth in Section 20 of the Note
Purchase Agreements and (ii) to have made the representation set forth in
--
Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
This Note is subject to prepayment, in whole or from time to time in
part, at the times and on the terms specified in the Note Purchase Agreements.
If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.
Notwithstanding anything to the contrary in this Note or the Note
Purchase Agreements, no recourse shall be had against the General Partner for
the payment of the principal of or interest or Make-Whole Amount on any Note, or
for any other payment hereunder or under the Note Purchase Agreements. It is
understood that the foregoing shall not prevent recourse to the Company or to
any of the assets of the Company.
2
Exhibit 1
<PAGE>
This Note shall be construed and enforced in accordance with the laws of
the State of New York.
NEW ENGLAND INVESTMENT COMPANIES,
L.P.
By NEW ENGLAND INVESTMENT COMPANIES,
INC., its General Partner
By
-----------------------
[Title:]
3
Exhibit 1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 29,779
<SECURITIES> 0
<RECEIVABLES> 73,404
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 112,772
<PP&E> 21,601
<DEPRECIATION> 0
<TOTAL-ASSETS> 797,487
<CURRENT-LIABILITIES> 107,758
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 379,925
<TOTAL-LIABILITY-AND-EQUITY> 797,487
<SALES> 0
<TOTAL-REVENUES> 126,797
<CGS> 0
<TOTAL-COSTS> 105,229
<OTHER-EXPENSES> 21,671
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,878
<INCOME-PRETAX> 0
<INCOME-TAX> 1,215
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,353
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0
</TABLE>
