<PAGE>
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, 1996
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 1-09772
PIMCO ADVISORS L.P.
(Exact name of registrant as specified in its charter)
Delaware 06-1349805
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
800 Newport Center Drive
Newport Beach, CA 92660
(Address of principal executive offices)
(Zip Code)
(714) 717-7022
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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.
Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes No
----- -----
As of March 31, 1996, 13,588,764 publicly traded Class A units of limited
partner interest and 26,532,391 privately-held Class A units of limited partner
interest were issued and outstanding. There were 800,000 units of general
partner interest issued and outstanding at March 31, 1996. In addition, there
were 32,960,826 privately-held Class B units of limited partner interests issued
and outstanding at March 31, 1996.
<PAGE>
PIMCO ADVISORS L.P.
INDEX
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Statements of Financial Condition as of
March 31, 1996 and December 31, 1995 3
Consolidated Statements of Operations for the three months
ended March 31, 1996 and 1995 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
2
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
PIMCO Advisors L.P. and Subsidiaries
Consolidated Statements of Financial Condition
(Unaudited)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 42,017,070 $ 34,915,170
Fees receivable 56,965,420 57,351,994
Short term investments 10,818,056 11,531,226
Notes receivable 1,572,702 1,230,168
Other assets - current 2,822,142 2,620,639
------------ ------------
Total current assets 114,195,390 107,649,197
Investments in limited partnerships 3,562,854 3,384,237
Fixed assets, net of accumulated depreciation 10,506,357 10,743,184
Intangible assets, net of accumulated amortization 234,829,536 243,831,819
Other non current assets 5,945,740 3,983,358
------------ ------------
Total assets $369,039,877 $369,591,795
============ ============
Liabilities and Partners' Capital
- ---------------------------------
Current liabilities:
Accounts payable, accrued expenses and
other current liabilities $ 18,703,024 $ 16,040,212
Accrued compensation 31,290,476 21,246,685
------------ ------------
Total current liabilities 49,993,500 37,286,897
Other non current liabilities 729,517 748,265
------------ ------------
Total liabilities 50,723,017 38,035,162
------------ ------------
Partners' Capital
General Partner (800,000 units issued
and outstanding) 3,326,005 3,456,973
Class A Limited Partners (40,121,155
units issued and outstanding) 221,897,156 228,465,440
Class B Limited Partners (32,960,826
units issued and outstanding) 107,001,351 114,806,204
Unamortized compensation (13,907,652) (15,171,984)
------------ ------------
Total Partners' Capital 318,316,860 331,556,633
------------ ------------
Total liabilities and partners' capital $369,039,877 $369,591,795
============ ============
</TABLE>
See accompanying notes.
3
<PAGE>
PIMCO Advisors L.P. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
--------------------------------
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Revenues:
Investment advisory fees:
Private accounts $48,794,710 $44,577,961
Proprietary Funds 31,109,699 17,700,252
Distribution and servicing fees 11,015,507 8,476,101
Other 300,136 363,949
----------- -----------
Total revenues 91,220,052 71,118,263
----------- -----------
Expenses:
Compensation and benefits 41,297,732 35,094,262
Amortization of intangibles, Restricted Unit and Option Plans 10,266,615 10,178,220
Commissions 8,874,258 6,242,478
General and administrative 4,691,795 2,309,389
Occupancy and equipment 2,311,971 1,906,719
Other 4,569,672 3,010,410
----------- -----------
Total expenses 72,012,043 58,741,478
----------- -----------
Operating income 19,208,009 12,376,785
Equity in income of limited partnership 35,350 48,287
Other income 509,056 758,592
----------- -----------
Income before taxes 19,752,415 13,183,664
Provision for taxes 388,971 43,650
----------- -----------
Net income $19,363,444 $13,140,014
=========== ===========
Net income allocated to:
General Partner $ 245,035 $ 207,988
Class A Limited Partner Units 12,288,834 10,404,144
Class B Limited Partner Units 6,829,575 2,527,882
----------- -----------
Total $19,363,444 $13,140,014
=========== ===========
Net income per unit:
General Partner and Class A Limited Partner unit $ 0.31 $ 0.26
=========== ===========
Class B Limited Partner unit $ 0.19 $ 0.07
=========== ===========
Cash distributions paid per unit:
General Partner and Class A Limited Partner unit $ 0.470 $ 0.239
=========== ===========
Class B Limited Partner unit $ 0.444 $ 0.077
----------- -----------
</TABLE>
See accompanying notes.
4
<PAGE>
PIMCO Advisors L.P. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
--------------------------------
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 19,363,444 $ 13,140,014
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization, Restricted Unit and Option Plans 11,020,214 10,788,408
Equity in income of limited partnerships (35,350) (48,287)
Unrealized loss on investments 164,569 -
Change in operating assets and liabilities:
Fees receivable 386,574 (13,691,714)
Other assets (2,163,884) (1,594,422)
Accounts payable, accrued expenses and other current liabilities 2,662,811 (86,773)
Accrued compensation 10,043,791 12,674,420
Other liabilities (18,748) (784,903)
Other (15,932) 523
------------ ------------
Net cash provided by operating activities 41,407,489 20,397,266
------------ ------------
Cash flows from investing activities:
Purchases of fixed assets (619,560) (2,124,793)
Proceeds from sale of fixed assets 128,650 13,200
Notes receivable advances (359,357) (106,156)
Sale of securities 783,570 -
Investments in limited partnerships and other (371,344) (300,000)
------------ ------------
Net cash used in investing activities (438,041) (2,517,749)
------------ ------------
Cash flows from financing activities:
Cash distributions paid (33,867,549) (12,293,523)
------------ ------------
Net cash used in financing activities (33,867,549) (12,293,523)
------------ ------------
Net increase in cash and cash equivalents 7,101,899 5,585,994
Cash and cash equivalents, beginning of period 34,915,170 55,003,751
------------ ------------
Cash and cash equivalents, end of period $ 42,017,069 $ 60,589,745
============ ============
Supplemental disclosures:
Taxes paid $ 321,957 $ 61,200
============ ============
</TABLE>
See accompanying notes.
5
<PAGE>
PIMCO Advisors L.P.
Notes to Consolidated Financial Statements
(Unaudited)
1) The condensed consolidated financial statements included herein have
been prepared without audit in accordance with the instructions to Form 10-Q
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. In the
opinion of PIMCO Partners, G.P., the General Partner, all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement
of (a) the financial condition at March 31, 1996 and December 31, 1995, (b) the
results of operations for three-month periods ended March 31, 1996 and 1995, and
(c) the cash flows for the three-month periods ended March 31, 1996 and 1995,
for PIMCO Advisors L.P. ("PA") have been made. It is suggested that these
unaudited condensed consolidated financial statements be read in conjunction
with the consolidated financial statements and notes included in PA's Annual
Report on Form 10-K for the year ended December 31, 1995. Certain
reclassifications have been made to conform the prior period presentation to the
current period presentation. These interim results may not be indicative of the
results which may occur in the future. (See Item 2 - Management's Discussion and
Analysis of Financial Condition and Results of Operations - Results of
Operations).
2) Earnings per unit are computed under the two-class method and are based
on the weighted average number of units outstanding, assuming the exercise of
dilutive unit options. See Exhibit 11 for the computation of the weighted
average number of units outstanding during the periods.
Distributions, on the units outstanding, are paid quarterly in arrears to
unitholders of record as of the thirtieth day of the first month following each
quarter-end.
3) In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123. "Accounting for Stock-Based
Compensation", which will be effective for the Company beginning January 1,
1996. SFAS No. 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply APB Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. PA will continue to apply APB Opinion No. 25 to its unit
based compensation awards to employees and will disclose the required pro forma
effect on net income and earnings per unit in the annual financial statements.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PIMCO Advisors L.P. and subsidiaries ("PA") are primarily involved in
investment advisory services. The investment advisor subsidiaries are as
follows:
Pacific Investment Management Company ("Pacific Investment
Management") and its wholly owned subsidiary, StocksPLUS Management,
Inc. ("StocksPLUS"), manages primarily fixed income investments, with
approximately $76.9 billion in assets under management;
Columbus Circle Investors ("CCI") and its wholly owned subsidiary,
Columbus Circle Trust Company ("CCTC"), manages primarily equity and
equity related investments, with approximately $13.7 billion in assets
under management;
Cadence Capital Management ("Cadence") manages equity and equity
related investments, with approximately $2.6 billion in assets under
management;
Parametric Portfolio Associates ("Parametric"), manages equity and
equity related investments, with approximately $1.6 billion in assets
under management;
NFJ Investment Group ("NFJ"), manages equity and equity related
investments, with approximately $1.5 billion in assets under
management; and
Blairlogie Capital Management ("Blairlogie"), manages equity and
equity related investments, with approximately $673 million in assets
under management.
The subsidiaries are each a registered investment advisor and collectively they
provide a broad array of investment management and advisory services for
clients, using separate and distinct investment management styles.
In addition to the investment management subsidiaries, PA sponsors two mutual
fund families: PIMCO Funds (funds for institutional and 401 (k)/defined
contribution investors) and PIMCO Advisors Funds (retail funds and the Cash
Accumulation Trust).
RESULTS OF OPERATIONS FOR 1996 COMPARED TO 1995
PA derives substantially all its revenues and net income from advisory fees for
investment management services provided to its institutional and individual
clients and advisory, distribution and servicing fees for services provided to
its two proprietary families of mutual funds ("Proprietary Funds").
Generally, such fees are determined based upon a percentage of client assets
under management and are billed quarterly to institutional clients, either in
advance or arrears, depending on the agreement with the client, and monthly in
arrears to Proprietary Funds. Revenues are determined in large part based upon
the level of assets under management; which itself is dependent upon factors
including market conditions, client decisions to add or withdraw assets from
PA's management and from PA's ability to attract new clients. In addition, PA
has certain accounts which are subject to performance based fee schedules
wherein performance relative to the S&P 500 Index or other benchmarks over a
particular time period can result in additional fees. Such performance based
fees can have a significant effect on revenues, and provide an opportunity to
earn higher fees (as well as lower) than could be obtained under fee
arrangements based solely on a percentage of assets under management.
PA's consolidated 1996 first quarter revenues, including those of its wholly
owned distributor PIMCO Advisors Distribution Company ("PADCO"), were $91.2
million compared to $71.1 million in the first quarter of 1995, up $20.1
million. Advisory revenues were $79.9 million in the first quarter of 1996
compared to $62.3 million for the same period in 1995, up $17.6 million.
Advisory revenue increases resulted from both the commitment of new assets by
institutional clients and from market appreciation. These increases were further
enhanced by an increase in performance based fees, which amounted to $3.5
million during the first quarter of 1996 as compared to $2.5 million during the
same period in 1995. The increase in performance based fees occurred principally
in a product line that seeks to outperform the S&P 500 Index.
7
<PAGE>
Revenues by operating entity were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
-------- --------
<S> <C> <C>
(In millions)
Pacific Investment Management $51.1 $39.5
CCI 15.5 11.9
Cadence 4.0 3.1
Parametric 0.8 0.9
NFJ 1.7 1.4
PADCo 12.7 8.8
Other(1) 5.4 5.5
----- -----
$91.2 $71.1
===== =====
</TABLE>
(1) Includes PA's Institutional Services (formerly PFAMCo) and Mutual Funds
divisions and Blairlogie.
Compensation and benefits in the first quarter of 1996 of $41.3 million were
$6.2 million higher than the same period in 1995. These increases reflect
additional staffing, at both Pacific Investment Management and CCI, as well as
higher profit sharing expenses which are based on profits of each of the
investment advisor subsidiaries.
Commission expenses, incurred by PADCO related to sales and servicing of retail
mutual funds, increased $2.6 million to $8.9 million in the three months of 1996
compared to the same period a year ago, reflecting higher trail commissions due
to an increased level of qualifying assets, as well as increased "up front"
commissions on higher current sales levels.
General and administrative expenses amounted to $4.6 million during the first
quarter 1996, an increase of $2.4 million over the same period a year ago. This
increase can be primarily attributed to the conversion of Pacific Investment
Management's institutional fund family to a fixed administrative fee basis
resulting in increases to this cost category for expenses previously borne
directly by the funds. There is a corresponding increase in revenues related to
this conversion. These incremental costs account for substantially all of this
increase.
Occupancy and equipment has increased by $405,000 to $2.3 million in the first
quarter of 1996 from the same period a year ago, primarily due to additional
office space and equipment as a result of the additional staffing discussed
above.
Other expenses in the first quarter of 1996 increased by $1.6 million from 1995
due principally to increases in marketing and promotional costs and professional
fees as well as reductions in reimbursement agreements with Pacific Mutual
related to operating losses of certain subsidiaries, as those subsidiaries have
approached or surpassed profitability.
Net income per unit is computed under the two-class method which allocates net
income to Class A and Class B Limited Partner units in proportion to the
Operating Profit Available for Distribution for each class. Operating Profit
Available for Distribution is defined by PA's partnership agreement and is
computed as the sum of net income plus non-cash charges from the amortization of
intangible assets, non-cash compensation expenses arising from option and
restricted unit plans and losses of any subsidiary which is not a flow-through
entity for tax purposes. Class A Limited Partner and General Partner units are
entitled to a priority distribution of $1.88 per unit per year until December
31, 1997. Because of this, the amount of Operating Profit Available for
Distribution allocated to such units is currently greater than the amount
allocated to Class B Limited Partner units. As a result, the net income
allocated per Class A Limited Partner and General Partner units is currently
greater than the net income allocated per Class B Limited Partner unit. Due to
the priority distribution, any dilution to net income per unit from the assumed
exercise of unit options is currently applied entirely to Class B Limited
Partner units.
8
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
PA's and its predecessor entities' combined business has not historically been
capital intensive. In general, working capital requirements had been satisfied
out of operating cash flow or short-term borrowings. PA will make quarterly
profit-sharing payments and distributions to its unitholders. PA may need to
finance profit-sharing payments using short-term borrowings.
PA had approximately $52.8 million of cash and cash equivalents and short-term
investments at March 31, 1996 compared to approximately $46.5 million at
December 31, 1995. PA's liquidity not otherwise used for quarterly distributions
will be used for general purposes including profit-sharing payments and for
brokers' commissions on sales of mutual fund shares distributed without a front-
end sales load. PA believes that the level of such commissions may increase in
the future due to the introduction of new products and mutual fund pricing
structures which may require an alternate financing source.
The Partnership distributes substantially all of its "Operating Profit Available
for Distribution", after appropriate reserves, to its partners. Distributions
are paid quarterly, in arrears, on the units outstanding to unitholders of
record on the thirtieth day of the first month following each quarter-end.
During the first three months of 1996, the Partnership distributed $0.47 per
Class A Limited Partner and General Partner unit and $0.444 per Class B Limited
Partner unit related to the fourth quarter of 1995's earnings. The Partnership
declared a first quarter distribution of $0.47 per Class A Limited Partner and
General Partner unit payable to holders of record on April 30,1996. The payment
date for this distribution is May 15, 1996. The Partnership declared a first
quarter distribution of $0.318 per Class B Limited Partner unit payable to
holders of record on April 30, 1996. The payment date for this distribution is
May 30, 1996.
PA currently has no long-term debt. In April 1996, the Partnership obtained a
$25 million, four year revolving line of credit for working capital purposes.
ECONOMIC FACTORS
The general economy including interest rates, inflation and client responses to
economic factors will affect, to some degree, the operations of PA. As a
significant portion of assets under management are fixed income funds,
fluctuations in interest rates could have a material impact on the operations of
PA. PA's advisory business is generally not capital intensive and therefore any
effect of inflation, other than on interest rates, is not expected to have a
significant impact on its operations or financial condition. Client responses to
the economy, including decisions as to the amount of assets deposited may also
impact the operations of PA. Any resulting revenue fluctuations may or may not
be recoverable in the pricing of services offered by PA.
9
<PAGE>
PART II: OTHER INFORMATION
Item 5. In April 1996, PIMCO Advisors L.P. ("PA") entered into a Credit
Agreement (the "Credit Agreement") with Citicorp USA, Inc. pursuant to which PA
may borrow up to $25 million. Any unpaid balance owing under the Credit
Agreement must be paid on September 30, 1999. Also, during any 365-day period,
there must be a period of 30 consecutive days during which no amount is
outstanding. The Credit Agreement: (i) restricts PA's ability to borrow and to
merge or consolidate; (ii) requires PA to maintain certain financial ratios; and
(iii) provides that a change of control over PA is an event of default. No
amount is currently outstanding under the Credit Agreement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.23 Credit Agreement dated as of April 12, 1996 between PIMCO Advisors
L.P. as borrower and Citicorp USA, Inc. as lender and agent.
11 Computations of Net Income Per Unit.
27 Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter of 1996.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
PIMCO Advisors L.P.
By /s/ William D. Cvengros
------------------------------------
William D. Cvengros
Chief Executive Officer
By /s/ Robert M. Fitzgerald
------------------------------------
Robert M. Fitzgerald
Principal Accounting Officer
May 14, 1996
11
<PAGE>
EXHIBIT 10.23
- -------------------------------------------------------------------------------
U.S. $25,000,000
CREDIT AGREEMENT
Dated as of April 12, 1996
Between
PIMCO ADVISORS L.P.,
as Borrower,
-- --------
and
CITICORP USA, INC.,
as Initial Lender and as Agent
-- ------- ------ --- -- -----
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1.01. Certain Defined Terms.......................................... 1
SECTION 1.02. Computation of Time Periods................................... 13
SECTION 1.03. Accounting Terms.............................................. 14
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances.................................................. 14
SECTION 2.02. Making the Advances........................................... 14
SECTION 2.03. Fees.......................................................... 15
SECTION 2.04. Termination or Reduction of the Commitments................... 15
SECTION 2.05. Repayment..................................................... 16
SECTION 2.06. Interest...................................................... 16
SECTION 2.07. Interest Rate Determination................................... 16
SECTION 2.08. Optional Conversion of Advances............................... 17
SECTION 2.09. Prepayments................................................... 17
SECTION 2.10. Increased Costs............................................... 17
SECTION 2.11. Illegality.................................................... 18
SECTION 2.12. Payments and Computations..................................... 18
SECTION 2.13. Taxes......................................................... 19
SECTION 2.14. Sharing of Payments, Etc...................................... 21
SECTION 2.15. Use of Proceeds............................................... 21
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Section 2.01......... 21
SECTION 3.02. Conditions Precedent to Each Borrowing........................ 23
SECTION 3.03. Determinations Under Section 3.01............................. 23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower................ 24
</TABLE>
<PAGE>
ii
ARTICLE V
COVENANTS OF THE BORROWER
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 5.01. Affirmative Covenants........................................ 25
SECTION 5.02. Negative Covenants........................................... 28
SECTION 5.03. Financial Covenants.......................................... 29
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default............................................ 29
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action..................................... 31
SECTION 7.02. Agent's Reliance, Etc........................................ 32
SECTION 7.03. Citicorp and Affiliates...................................... 32
SECTION 7.04. Lender Credit Decision....................................... 32
SECTION 7.05. Indemnification.............................................. 32
SECTION 7.06. Successor Agent.............................................. 33
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc.............................................. 33
SECTION 8.02. Notices, Etc................................................. 34
SECTION 8.03. No Waiver; Remedies.......................................... 34
SECTION 8.04. Costs and Expenses........................................... 34
SECTION 8.05. Right of Setoff.............................................. 35
SECTION 8.06. Binding Effect............................................... 35
SECTION 8.07. Assignments and Participations............................... 36
SECTION 8.08. Governing Law................................................ 38
SECTION 8.09. Execution in Counterparts.................................... 38
SECTION 8.10. Jurisdiction, Etc............................................ 38
SECTION 8.11. Waiver of Jury Trial......................................... 39
</TABLE>
<PAGE>
iii
SCHEDULES
- ---------
Schedule I - List of Applicable Lending Offices
Schedule 4.01(a) - Subsidiaries
Schedule 4.01(h) - Investment Company Act
EXHIBITS
- --------
Exhibit A - Form of Promissory Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Opinion of Counsel for the Borrower
<PAGE>
CREDIT AGREEMENT
Dated as of April 12, 1996
PIMCO ADVISORS L.P., a Delaware limited partnership (the "Borrower"),
--------
and CITICORP USA, INC. ("Citicorp"), as the initial lender hereunder (the
--------
"Initial Lender") and as agent (the "Agent") for the Lenders (as hereinafter
-------------- -----
defined), agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"12b-1 Plan" means the distribution plans adopted by the Funds
----------
pursuant to Rule 12b-1 under the Investment Company Act.
"Advance" means an advance by a Lender to the Borrower pursuant to
-------
Article II, and refers to a Base Rate Advance or a Eurodollar Rate Advance
(each of which shall be a "Type" of Advance).
----
"Affiliate" means, with respect to any Person (the "Affected Person"),
--------- ---------------
any other Person (a) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is in common control with,
the Affected Person, (b) which beneficially owns or holds 5% or more of the
Voting Interests of the Affected Person or (c) 5% or more of the Voting
Interests of which are beneficially owned or held by the Affected Person.
The term "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 Interests, by contract or
otherwise.
"Agent" has the meaning specified in the recital of parties to this
-----
Agreement.
"Agent's Account" means the account of the Agent maintained by the
---------------
Agent at Citibank's office at 399 Park Avenue, New York, New York 10043,
Account No.40610794, Attention: Pimco Advisors, or such other account
maintained by the Agent and designated by the Agent in a written notice to
the Lenders and the Borrower.
"Applicable Lending Office" means, with respect to each Lender, such
-------------------------
Lender's Domestic Lending Office in the case of a Base Rate Advance and
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
Advance.
"Applicable Margin" means, as of any date, a percentage per annum
-----------------
determined by reference to the ratio of all Indebtedness (other than
Excluded Broker Commission Debt) of the Borrower and its Subsidiaries to
Consolidated EBITDA of the Borrower and its Subsidiaries for the Rolling
Period most recently ended as set forth below:
<PAGE>
2
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Indebtedness to EBITDA Applicable Margin Applicable Margin for
Ratio of the Borrower for Base Rate Advances Eurodollar Rate Advances
------------------------------------------------------------------------------------
<S> <C> <C>
equal to or less than 1.25 0.0% .2500%
------------------------------------------------------------------------------------
equal to or less than 2.00 0.0% .3125%
------------------------------------------------------------------------------------
greater than 2.00 0.0% .5000%
------------------------------------------------------------------------------------
</TABLE>
"Applicable Percentage" means, as of any date, a percentage per annum
---------------------
determined by reference to the ratio of all Indebtedness (other than
Excluded Broker Commission Debt) of the Borrower and its Subsidiaries to
Consolidated EBITDA of the Borrower and its Subsidiaries for the Rolling
Period most recently ended as set forth below:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Indebtedness to Applicable Percentage for
EBITDA Eurodollar Rate Advances
--------------------------------------------------------------------------------
<S> <C>
equal to or less than 1.25 .1250%
--------------------------------------------------------------------------------
equal to or less than 2.00 .1875%
--------------------------------------------------------------------------------
greater than 2.00 .2500%
--------------------------------------------------------------------------------
</TABLE>
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by a Lender and an Eligible Assignee, and accepted by the Agent, in
substantially the form of Exhibit C hereto .
"Base Rate" means a fluctuating interest rate per annum in effect from
---------
time to time, which rate per annum shall at all times be equal to the
highest of:
(a) the rate of interest announced publicly by Citibank in New
York, New York, from time to time, as Citibank's base rate;
(b) the sum (adjusted to the nearest 1/4 of 1% or, if there
is no nearest 1/4 of 1%, to the next higher 1/4 of 1%) of (i) 1/2 of
1% per annum, plus (ii) the rate obtained by dividing (A) the latest
----
three-week moving average of secondary market morning offering rates
in the United States for three-month certificates of deposit of
major United States money market banks, such three-week moving average
(adjusted to the basis of a year of 360 days) being determined weekly
on each Monday (or, if such day is not a Business Day, on the next
succeeding Business Day) for the three-week period ending on the
previous Friday by Citibank on the basis of such rates reported by
certificate of deposit dealers to and published by the Federal Reserve
Bank of New York or, if such publication shall be suspended or
terminated, on the basis of quotations for such rates received by
Citibank from three New York certificate of deposit dealers of
recognized standing selected by Citibank, by (B) a percentage equal to
100% minus the average of the daily percentages specified during such
three-week period by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement (including, but not limited to, any emergency,
supplemental or other marginal reserve requirement) for Citibank with
respect to liabilities consisting of or including (among other
liabilities) three-month U.S. dollar non-personal time deposits in the
United States, plus (iii) the average during such three-week period of
----
the annual assessment rates estimated by Citibank for determining the
then current annual assessment payable by Citibank to the Federal
Deposit Insurance Corporation (or any successor) for insuring U.S.
dollar deposits of Citibank in the United States; and
<PAGE>
3
(c) 1/2 of one percent per annum above the Federal Funds Rate.
"Base Rate Advance" means an Advance that bears interest as
-----------------
provided in Section 2.06(a)(i).
"Board of Directors" has the meaning specified in the Partnership
------------------
Agreement.
"Borrower" has the meaning specified in the recital of parties to this
--------
Agreement.
"Borrowing" means a borrowing consisting of Advances of the same
---------
Type made on the same day by the Lenders.
"Broker Commission Debt" means (a) Indebtedness incurred by the
----------------------
Borrower or any Subsidiary of the Borrower for the purpose of funding
Broker Commissions or (b) the amount of any financing obtained through the
sale, discount or securitization of Collection Rights, which in either case
may or may not be secured by Collection Rights.
"Broker Commissions" means the amounts paid by the Borrower or any
------------------
Subsidiary of the Borrower to unaffiliated broker-dealers or other
distributors in connection with the distribution by such broker-dealers or
other distributors of mutual funds sponsored by the Borrower or any
Subsidiary of the Borrower.
"Business Day" means a day of the year on which banks are not required
------------
or authorized by law to close in New York City and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings are
carried on in the London interbank market.
"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.
"Capitalized Lease Obligation" shall mean any rental obligation of any
----------------------------
Person which, under GAAP, would be required to be capitalized on the books
of such Person, taken at the amount thereof accounted for as indebtedness
(net of interest expense) in accordance with such principles.
<PAGE>
4
"Change of Control" means any of the following: (a) PIMCO GP shall
-----------------
at any time cease to be the managing general partner of the Borrower; (b)
Pacific Mutual shall fail to maintain beneficial ownership of at least 50%
of the aggregate economic interest in PIMCO GP; or (c) Pacific Mutual shall
cease to be, directly or indirectly through a wholly owned Subsidiary, a
general partner of PIMCO GP.
"Citibank" means Citibank, N.A.
--------
"Citicorp" has the meaning specified in the recital of parties to this
--------
Agreement.
"Class A Units" means the units of limited partner interest of the
-------------
Borrower designated as Class A LP Units and any Restructuring Securities
issued in exchange therefor.
"Class B Units" means the units of limited partner interest of the
-------------
Borrower designated as Class B LP Units and any Restructuring Securities
issued in exchange therefor.
"Clean-Up Period" means, during any 365-day period, any period of 30
---------------
consecutive days designated by the Borrower upon at least one Business
Day's notice prior to the commencement of such Clean-Up Period.
"Collection Rights" means amounts subject to receipt by the Borrower
-----------------
or any Subsidiary of the Borrower (a) pursuant to any 12b-1 Plan of, or any
similar or successor plan of, or arrangement with, any Fund, (b) in respect
of the provision of administrative or investment advisory services to a
closed end Fund pursuant to agreements or (c) on account of contingent
deferred sales charges or other similar charges by shareholders of any
Funds.
"Commitment" has the meaning specified in Section 2.01.
----------
"Consolidated" refers to the consolidation of accounts in accordance
------------
with GAAP.
"Convert", "Conversion" and "Converted" each refers to a conversion of
------- ---------- ---------
Advances of one Type into Advances of the other Type pursuant to Section
2.07 or 2.08.
"Default" means any Event of Default or any event that would
-------
constitute an Event of Default but for the requirement that notice be given
or time elapse or both.
"Domestic Lending Office" means, with respect to any Lender, the
-----------------------
office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule I hereto or in the Assignment and Acceptance pursuant
to which it became a Lender, or such other office of such Lender as such
Lender may from time to time specify to the Borrower and the Agent.
"EBITDA" means, for any period, Operating Profit Available for
------
Distribution plus interest expense for such period.
<PAGE>
5
"Effective Date" has the meaning specified in Section 3.01.
--------------
"Eligible Assignee" means (a) a Lender, (b) an Affiliate of a Lender
-----------------
and (c) any other Person approved by the Agent and the Borrower, such
approval not to be unreasonably withheld or delayed; provided, however,
-------- -------
that neither the Borrower nor an Affiliate of the Borrower shall qualify as
an Eligible Assignee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of
---------------
ERISA is a member of the Borrower's controlled group, or under common
control with the Borrower, within the meaning of Section 414 of the
Internal Revenue Code.
"ERISA Event" means (a) the occurrence of a reportable event, within
-----------
the meaning of Section 4043 of ERISA, with respect to any Plan unless the
30-day notice requirement with respect to such event has been waived by the
PBGC; (b)the application for a minimum funding waiver with respect to a
Plan; (c) the provision by the administrator of any Plan of a notice of
intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA
(including any such notice with respect to a plan amendment referred to in
Section 4041(e) of ERISA); (d) the cessation of operations at a facility of
the Borrower or any of its ERISA Affiliates in the circumstances described
in Section 4062(e) of ERISA; (e) the withdrawal by the Borrower or any of
its ERISA Affiliates from a Multiple Employer Plan during a plan year for
which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (f) the failure by the Borrower or any of its ERISA Affiliates to
make a payment to a Plan if the conditions for the imposition of a lien
under Section 302(f)(1) of ERISA are satisfied; (g) the adoption of an
amendment to a Plan requiring the provision of security to such Plan,
pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of ERISA
that could constitute grounds for the termination of, or the appointment of
a trustee to administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that term in
------------------------
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender, the
-------------------------
office of such Lender specified as its "Eurodollar Lending Office" opposite
its name on Schedule I hereto or in the Assignment and Acceptance pursuant
to which it became a Lender (or, if no such office is SPECIFIED, its
Domestic Lending Office), or such other office of such Lender as such
Lender may from time to time specify to the Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period for each Eurodollar
---------------
Rate Advance comprising part of the same Borrowing, an interest rate per
annum equal to the rate per annum obtained by dividing (a) the average
(rounded upward to the nearest whole multiple of 1/16 of 1 % per annum, if
such average is not such a multiple) of the rate per annum at which
deposits in U.S. dollars are offered by the principal office of Citibank in
London, England to prime banks in the London interbank market at 11:00 A.M.
(London time) two Business Days before the first day of such Interest
Period in an amount substantially equal to Citibank's Eurodollar Rate
Advance comprising part of such Borrowing to be outstanding during such
Interest Period and for a period equal to such Interest Period by (b) a
percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for
such Interest Period.
<PAGE>
6
"Eurodollar Rate Advance" means an Advance that bears interest as
-----------------------
provided in Section 2.06(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for all
----------------------------------
Eurodollar Rate Advances comprising part of the same Borrowing means the
reserve percentage applicable two Business Days before the first day of
such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve requirement) for a
member bank of the Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities
(or with respect to any other category of liabilities that includes
deposits by reference to which the interest rate on Eurodollar Rate
Advances is determined) having a term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
-----------------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Excluded Broker Commission Debt" means Broker Commission Debt (a) the
-------------------------------
proceeds of which are used primarily to fund payments of Broker Commissions
and (b) as to which the lender under such Indebtedness or the purchaser of
Collection Rights (or any securitization vehicle) does not have any
recourse whatsoever against the Borrower or a Subsidiary of the Borrower
except in the event of (i) the amendment, which is adverse to the interest
of the Borrower or such Subsidiary, 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 Borrower or such Subsidiary to satisfy its
obligations under the 12b-1 or similar plan, sales charge arrangement or
other arrangement pursuant to which such Collection Rights would arise,
(iii) ordinary and customary provisions for liability for fraud, gross
negligence or willful misconduct or breach of representations relating to
the validity and collection of Collection Rights and the Borrower's or such
Subsidiary's status under the Investment Company Act or (iv) any amendment
or modification, which is adverse to the interest of the Borrower or such
Subsidiary (including those required by changes in law) or to lenders or
purchasers, or any termination of, any underwriting agreement, prospectus
or sales charge arrangement of the Borrower or such Subsidiary with any
Fund in respect of which Collection Rights have been transferred in
connection with such transaction.
"Federal Funds Rate" means, for any period, a fluctuating interest
------------------
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal
<PAGE>
7
funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Fund" means any "investment company", as defined in the Investment
----
Company Act, or any Person that would be an "investment company" but for
Section 3(c)(1) of the Investment Company Act, managed by the Borrower or
any Subsidiary of the Borrower or for which the Borrower or such Subsidiary
provides advisory, administrative, supervisory, management, consulting,
underwriting, transfer agency, shareholder or share servicing or similar
services.
"GAAP" has the meaning specified in Section 1.03.
----
"GP Units" means the units of general partner interest in the Borrower
--------
designated as General Partner Units and any Restructuring Securities issued
in exchange therefor.
"Guaranty" means, with respect to any Person, any obligation (other
--------
than obligations arising from the indorsement of negotiable instruments for
deposit or collection in the ordinary course of business) of such Person
guarantying or in effect guarantying 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:
(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 working
capital, equity accounts or any 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 goods, 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 to the extent of such Guaranty.
"Indebtedness" with respect to any Person means, at any time, without
------------
duplication:
<PAGE>
8
(a) its liabilities for borrowed money;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the
ordinary 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) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (even if it has not
assumed or otherwise become liable for such liabilities);
(e) all 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) Swaps of such Person;
(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 clauses (a)
through (g) above of such Person resulting from such Person being a
general partner or joint venturer, whether by provision of applicable
law, contract or otherwise.
"Initial Lender" has the meaning specified in the recital of parties
--------------
to this Agreement.
"Interest Period" means, for each Eurodollar Rate Advance comprising
---------------
part of the same Borrowing, the period commencing on the date of such
Eurodollar Rate Advance or the date of the Conversion of any Base Rate
Advance into such Eurodollar Rate Advance and ending on the last day of the
period selected by the Borrower pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one, two and three months,
as the Borrower may, upon notice received by the Agent not later than 11:00
A.M. (New York City time) on the third Business Day prior to the first day
of such Interest Period, select; provided, however, that:
-------- -------
(i) the Borrower may not select any Interest Period that ends
after the Termination Date;
(ii) Interest Periods commencing on the same date for Eurodollar
Rate Advances comprising part of the same Borrowing shall be of the
same duration;
<PAGE>
9
(iii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day, provided, however, that, if such extension would cause
-------- -------
the last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day; and
(iv) whenever the first day of any Interest Period occurs on a
day of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months
in such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Investment Company Act" means the Investment Company Act of 1940, as
----------------------
amended.
"Investments" means all investments, in cash or by delivery of
-----------
property, made directly or indirectly in any other Person, whether by
acquisition of shares of capital stock, other equity interests,
indebtedness, or other obligations or securities, or by loan, advance,
capital contribution or otherwise.
"Lenders" means the Initial Lender and each Person that shall become a
-------
party hereto pursuant to Section 8.07.
"Liens" means any interest in property securing an obligation owed to,
-----
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but
not limited to the lien arising from a security interest, mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment, or bailment for security purposes. For the purposes hereof, a
Person shall be deemed to be the owner of any property which it has
acquired or holds subject to a conditional sale agreement, Capital Lease or
other arrangement pursuant to which title to the property has been retained
by or vested in some other Person for security purposes, and such retention
or vesting shall constitute a Lien.
"Material Adverse Change" means any material adverse change in the
-----------------------
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or the Borrower and its
Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or the Borrower and its
Subsidiaries taken as a whole, (b) the rights and remedies of the Agent or
any Lender under this Agreement or any Note or (c) the ability of the
Borrower to perform its obligations under this Agreement or any Note.
<PAGE>
10
"Multiemployer Plan" means a multiemployer plan, as defined in Section
------------------
4001(a)(3) of ERISA, to which the Borrower or any of its ERISA Affiliates
is making or accruing an obligation to make contributions, or has within
any of the preceding five plan years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
----------------------
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Borrower or any of its ERISA Affiliates and at least one Person other than
the Borrower and its ERISA Affiliates or (b) was so maintained and in
respect of which the Borrower or any of its ERISA Affiliates could have
liability under Section 4064 or 4069 of ERISA in the event such plan has
been or were to be terminated.
"New General Partner" has the meaning specified in the definition of
-------------------
"Restructuring".
-------------
"Note" means a promissory note of the Borrower payable to the order of
----
any Lender, in substantially the form of Exhibit A hereto, evidencing the
aggregate indebtedness of the Borrower to such Lender resulting from the
Advances made by such Lender.
"Notice of Borrowing" has the meaning specified in Section 2.02.
-------------------
"Operating Board" has the meaning specified in the Partnership
---------------
Agreement.
"Operating Income Available for Distribution" has the meaning
-------------------------------------------
specified in the Partnership Agreement.
"Pacific Mutual" means Pacific Mutual Life Insurance Company, a
--------------
California corporation.
"Partnership Agreement" means the Amended and Restated Agreement of
---------------------
Limited Partnership of PIMCO Advisors L.P. dated as of October 31, 1994, as
amended.
"PBGC" means the Pension Benefit Guaranty Corporation.
----
"Permitted Liens" means:
---------------
(a) Liens for property taxes and assessments or governmental
charges or levies and Liens securing claims or demands of carriers,
warehousemen, landlords, mechanics and materialmen for which
appropriate GAAP reserves have been set aside;
(b) Liens of or resulting from any judgment or award, the time
for the appeal or petition for rehearing of which shall not have
expired, or in respect of which shall at any time in good faith be
prosecuted by an appeal or proceeding for a review shall have been
secured for which appropriate GAAP reserves have been set aside;
<PAGE>
11
(c) Liens incidental to the conduct of business or the
ownership of properties and assets (including Liens in connection with
worker's compensation, unemployment insurance and other like laws,
warehousemen's and attorney's liens and statutory landlord's liens)
and Liens to secure the performance of bids, tenders or trade
contracts, or to secure statutory obligations, surety or appeal bonds
or other Liens of like general nature incurred in the ordinary course
of business and not in connection with the borrowing of money;
provided, in each case, the obligation secured is not overdue or, if
--------
overdue, is being contested in good faith by appropriate actions or
proceedings;
(d) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use
of real properties, which are necessary for the conduct of the
activities of a Person's business or which customarily exist on
properties of corporations engaged in similar activities and similarly
situated and which do not in any event materially impair their use in
the operation of the business of such Person;
(e) Liens solely securing Purchase Money Obligations of the
Borrower and its Subsidiaries incurred in the ordinary course of
business; and
(f) Liens on Collection Rights securing Broker Commission Debt
and Underwriting Discount Debt.
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, unincorporated association,
joint venture, limited liability company or other entity, or a government
or any political subdivision or agency thereof.
"PIMCO GP" means PIMCO Partners, G.P., a California general
--------
partnership and general partner of the Borrower.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
----
"Purchase Money Obligations" means, with respect to any Person, any
--------------------------
Indebtedness (including Capitalized Lease Obligations) secured by a Lien on
assets related to the business of such Person, and any additions and
accessions thereto, that are purchased by such Person, provided that (a)
the security agreement or conditional sales or other title retention
contract pursuant to which the Lien on such assets is created
(collectively, 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 shall at all times be confined solely to
the assets so purchased or acquired, and any additions and accessions
thereto to the extent of the fair market value of such additions and
accessions and any proceeds therefrom, (b) at no time shall the aggregate
principal amount of the outstanding Indebtedness secured thereby be
increased, except in connection with 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
<PAGE>
12
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 such Person of the assets subject thereto or (ii) the
Indebtedness secured thereby shall be with recourse solely to the assets so
purchased or acquired, any accessions thereto and any proceeds therefrom.
"Register" has the meaning specified in Section 8.07(c).
--------
"Reportable Event" shall mean any of the events set forth in section
----------------
4043(b) of ERISA or the regulations thereunder, a withdrawal from a plan
described in section 4063 of ERISA, or a cessation of operations described
in section 4062 of ERISA.
"Required Lenders" means at any time Lenders owed at least a majority
----------------
in interest of the then aggregate unpaid principal amount of the Advances
owing to Lenders, or, if no such principal amount is then outstanding,
Lenders having at least a majority in interest of the Commitments .
"Restructuring" means (a) the formation of a corporation or other
-------------
entity structured to distribute, and to prevent any restriction on its
ability to distribute, all cash received by it from the Borrower other than
cash required for the payment of taxes and operational expenses arising
from the operations of such corporation (the "New General Partner") which
will be admitted as an additional general partner of the Borrower (but not
the managing general partner), and the exchange of its shares of common
stock for Units held by the public, or (b) any other restructuring of the
Borrower which maintains taxation of the Borrower as a partnership. The
Restructuring effecting the exchange of shares of common stock for Units
held by the public is anticipated to occur on or before January 1, 1998 or
at a later date before the end of the period provided by law in which the
Borrower would not be subject to taxation as a corporation.
"Restructuring Securities" means publicly traded shares of common
------------------------
stock the New General Partner in connection with the Restructuring in
exchange for Units.
"Rolling Period" means, with respect to any fiscal quarter the
--------------
consecutive four fiscal quarter period ending on the last day of such
fiscal quarter.
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Significant Subsidiary" means at any time any Subsidiary of the
----------------------
Partnership that would constitute a "significant subsidiary" as defined in
Regulation S-X of the Securities and Exchange Commission as in effect on
the date hereof.
"Single Employer Plan" means a single employer plan, as defined in
--------------------
Section 4001(a)(l5) of ERISA, that (a) is maintained for employees of the
Borrower or any of its ERISA Affiliates and no Person other than the
Borrower and its ERISA Affiliates or (b) was so maintained and in respect
of which the Borrower or any of its ERISA Affiliates could have liability
under Section 4069 of ERISA in the event such plan has been or were to be
terminated.
<PAGE>
13
"Subsidiary" means, in relation to any Person, any corporation or
----------
other entity acquired or otherwise maintained at any future date, of which
over 50% of the outstanding voting rights are beneficially owned (either
alone or through Subsidiaries of such Person or together with Subsidiaries
of such Person) by such Person.
"Swaps" means, with respect to any Person, payment obligations with
-----
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount
of the obligation under any Swap shall be the amount determined in respect
thereof as of the end of the then most recently ended fiscal quarter of
such Person, based on the assumption that such Swap had terminated at the
end of such fiscal quarter, and in making such determination, if any
agreement relating to such Swap 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 obligation shall be the net amount so determined.
"Termination Date" means the earlier of September 30, 1999 and the
----------------
date of termination in whole of the Commitments pursuant to Section 2.04 or
6.01.
"Type" has the meaning specified in the definition of "Advance".
---- -------
"Underwriting Discount Debt" means Indebtedness incurred by the
--------------------------
Borrower or any Subsidiary of the Borrower for the purpose of funding
Underwriting Discounts.
"Underwriting Discounts" means amounts paid by the Borrower or any
----------------------
Subsidiary of the Borrower to unaffiliated broker-dealers in connection
with the underwriting or best efforts distribution of the offering of
capital stock of a closed end Fund (including, without limitation,
Indebtedness incurred for such purpose under this Agreement).
"Units" means, collectively, the Class A Units, the Class B Units and
-----
the GP Units.
"Voting Interests" means (a) any security of any class, or equivalent
----------------
interest in any Person, the holders of which are ordinarily, in the absence
of contingencies, entitled to elect a majority of corporate directors (or
Persons performing similar functions), and (b) in the case of any
partnership, a general partnership interest therein, even if responsibility
for management of such partnership is vested, by contract or otherwise, in
any Person other than the holder of such general partnership interest, and
the percentage of Voting Interests in such partnership held by such general
partner shall be deemed to be its percentage economic interest therein.
SECTION 1.02. Computation of Time Periods. In this Agreement in the
---------------------------
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
<PAGE>
14
SECTION 1.03. Accounting Terms. All accounting terms not specifically
----------------
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Section 4.01(e) ("GAAP").
----
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. (a) Each Lender severally agrees, on the
------------
terms and conditions hereinafter set forth, to make Advances to the Borrower
from time to time on any Business Day during the period from the Effective Date
until the Termination Date in an aggregate amount not to exceed at any time
outstanding the amount set forth opposite such Lender's name on the signature
pages hereof or, if such Lender has entered into any Assignment and Acceptance,
set forth for such Lender in the Register maintained by the Agent pursuant to
Section 8.07(c), as such amount may be reduced pursuant to Section 2.04 (such
Lender's "Commitment"). Each Borrowing shall be in an aggregate amount of
----------
$5,000,000 or an integral multiple of $1,000,000 in excess thereof and shall
consist of Advances of the same Type made on the same day by the Lenders ratably
according to their respective Commitments. Within the limits of each Lender's
Commitment, the Borrower may borrow under this Section 2.01, prepay pursuant to
Section 2.09 and reborrow under this Section 2.01.
(b) Clean-Up Periods. Notwithstanding the provisions in Section
----------------
2.01(a), no Advance may be made under Section 2.01(a) during any Clean-Up
Period.
SECTION 2.02. Making the Advances. (a) Each Borrowing shall be made on
-------------------
notice, given not later than 11:00 A.M. (New York City time) on the third
Business Day prior to the date of the proposed Borrowing in the case of a
Borrowing consisting of Eurodollar Rate Advances, or the first Business Day
prior to the date of the proposed Borrowing in the case of a Borrowing
consisting of Base Rate Advances, by the Borrower to the Agent, which shall give
to each Lender prompt notice thereof by telecopier or telex. Each such notice of
a Borrowing (a "Notice of Borrowing") shall be by telecopier or telex, confirmed
-------------------
immediately in writing, in substantially the form of Exhibit B hereto,
specifying therein the requested (i) date of such Borrowing, (ii) Type of
Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing,
and (iv) in the case of a Borrowing consisting of Eurodollar Rate Advances,
initial Interest Period for each such Advance. Each Lender shall, before 11:00
A.M. (New York City time) on the date of such Borrowing, make available for the
account of its Applicable Lending Office to the Agent at the Agent's Account, in
same day funds, such Lender's ratable portion of such Borrowing. After the
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Agent will make such funds available to the
Borrower at the Agent's address referred to in Section 8.02.
(b) Anything in subsection (a) above to the contrary notwithstanding,
(i) the Borrower may not select Eurodollar Rate Advances for any Borrowing if
the aggregate amount of such Borrowing is less than $1,000,000 or if the
obligation of the Lenders to make Eurodollar Rate Advances shall then be
suspended pursuant to Section 2.07 or 2.11 and (ii) the Eurodollar Rate Advances
may not be outstanding as part of more than five separate Borrowings.
<PAGE>
15
(c) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. In the case of any Borrowing that the related Notice of Borrowing
specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall
indemnify each Lender against any loss, cost or expense incurred by such Lender
as a result of any failure to fulfill on or before the date specified in such
Notice of Borrowing for such Borrowing the applicable conditions set forth in
Article III, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund the
Advance to be made by such Lender as part of such Borrowing when such Advance,
as a result of such failure, is not made on such date.
(d) Unless the Agent shall have received notice from a Lender prior
to the date of any Borrowing that such Lender will not make available to the
Agent such Lender's ratable portion of such Borrowing, the Agent may assume that
such Lender has made such portion available to the Agent on the date of such
Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Lender shall not
have so made such ratable portion available to the Agent, such Lender and the
Borrower severally agree to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Agent, at (i) in the case of the Borrower, the interest rate
applicable at the time to Advances comprising such Borrowing and (ii) in the
case of such Lender, the Federal Funds Rate. If such Lender shall repay to the
Agent such corresponding amount, such amount so repaid shall constitute such
Lender's Advance as part of such Borrowing for purposes of this Agreement.
(e) The failure of any Lender to make the Advance to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation, if
any, hereunder to make its Advance on the date of such Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Fees. (a) Facility Fee. The Borrower agrees to pay to
---- ------------
the Agent for the account of each Lender a facility fee on the aggregate amount
of such Lender's Commitment from the date hereof in the case of the Initial
Lender and from the effective date specified in the Assignment and Acceptance
pursuant to which it became a Lender in the case of each other Lender until the
Termination Date at a rate per annum equal to the Applicable Percentage in
effect from time to time, payable in arrears quarterly on the last day of each
quarter, commencing June 30, 1996, and ending on the Termination Date.
(b) Agent's Fees. The Borrower shall pay to the Agent for its own
------------
account such fees as may from time to time be agreed between the Borrower and
the Agent.
SECTION 2.04. Termination or Reduction of the Commitments. The
-------------------------------------------
Borrower shall have the right, upon at least three Business Days' notice to the
Agent, to terminate in whole or reduce ratably in part the unused portions of
the respective Commitments of the Lenders, provided that each partial reduction
--------
shall be in the aggregate amount of $1,000,000 or an integral multiple of
$1,000,000 in excess thereof.
<PAGE>
16
SECTION 2.05. Repayment. The Borrower shall repay to the Agent for the
---------
ratable account of the Lenders on the Termination Date the aggregate principal
amount of the Advances then outstanding.
SECTION 2.06. Interest. (a) Scheduled Interest. The Borrower shall pay
-------- ------------------
interest on the unpaid principal amount of each Advance owing to each Lender
from the date of such Advance until such principal amount shall be paid in full,
at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a Base
------------------
Rate Advance, a rate per annum equal at all times to the sum of (A) the Base
Rate in effect from time to time plus (B) the Applicable Margin in effect from
----
time to time, payable in arrears quarterly on the last day of each March, June,
September and December during such periods and on the date such Base Rate
Advance shall be Converted or paid in full.
(ii) Eurodollar Rate Advances. During such periods as such Advance is
------------------------
a Eurodollar Rate Advance, a rate per annum equal at all times during each
Interest Period for such Advance to the sum of (A) the Eurodollar Rate for such
Interest Period for such Advance plus (B) the Applicable Margin in effect from
----
time to time, payable in arrears on the last day of such Interest Period and, if
such Interest Period has a duration of more than three months, on each day that
occurs during such Interest Period every three months from the first day of such
Interest Period and on the date such Eurodollar Rate Advance shall be Converted
or paid in full.
(b) Default Interest. Upon the occurrence and during the continuance
----------------
of an Event of Default under Section 6.01(a), the Borrower shall pay interest on
(i) the unpaid principal amount of each Advance owing to each Lender, payable in
arrears on the dates referred to in clause (a)(i) or (a)(ii) above, at a rate
per annum equal at all times to 2% per annum above the rate per annum required
to be paid on such Advance pursuant to clause (a)(i) or (a)(ii) above and (ii)
the amount of any interest, fee or other amount payable hereunder that is not
paid when due, from the date such amount shall be due until such amount shall be
paid in full, payable in arrears on the date such amount shall be paid in full
and on demand, at a rate per annum equal at all times to 2% per annum above the
rate per annum required to be paid on Base Rate Advances pursuant to clause
(a)(i) above.
SECTION 2.07. Interest Rate Determination. (a) The Agent shall give
---------------------------
prompt notice to the Borrower and the Lenders of the applicable interest rate
determined by the Agent for purposes of Section 2.06(a)(i) or (ii).
(b) If, with respect to any Eurodollar Rate Advances, the Required
Lenders notify the Agent that the Eurodollar Rate for any Interest Period for
such Advances will not adequately reflect the cost to such Required Lenders of
making, funding or maintaining their respective Eurodollar Rate Advances for
such Interest Period, the Agent shall forthwith so notify the Borrower and the
Lenders, whereupon (i) each Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base Rate
Advance, and (ii) the obligation of the Lenders to make, or to Convert Advances
into, Eurodollar Rate Advances shall be suspended until the Agent shall notify
the Borrower and the Lenders that the circumstances causing such suspension no
longer exist.
<PAGE>
17
(c) If the Borrower shall fail to select the duration of any Interest
Period for any Eurodollar Rate Advances in accordance with the provisions
contained in the definition of "Interest Period" in Section 1.01, the Agent will
forthwith so notify the Borrower and the Lenders and such Advances will
automatically, on the last day of the then existing Interest Period therefor,
Convert into Base Rate Advances.
(d) On the date on which the aggregate unpaid principal amount of
Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment
or prepayment or otherwise, to less than $1,000,000, such Advances shall
automatically Convert into Base Rate Advances.
(e) Upon the occurrence and during the continuance of any Event of
Default (i) each Eurodollar Rate Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance and
(ii) the obligation of the Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended.
SECTION 2.08. Optional Conversion of Advances. The Borrower may on any
-------------------------------
Business Day, upon notice given to the Agent not later than 11:00 A.M. (New York
City time) on the third Business Day prior to the date of the proposed
Conversion and subject to the provisions of Sections 2.07 and 2.11, Convert all
Advances of one Type comprising the same Borrowing into Advances of the other
Type; provided, however, that any Conversion of Eurodollar Rate Advances
-------- -------
into Base Rate Advances shall be made only on the last day of an Interest Period
for such Eurodollar Rate Advances, any Conversion of Base Rate Advances into
Eurodollar Rate Advances shall be in an amount not less than the minimum amount
specified in Section 2.02(b) and no Conversion of any Advances shall result in
more separate Borrowings than permitted under Section 2.02(b). Each such notice
of a Conversion shall, within the restrictions specified above, specify (i) the
date of such Conversion, (ii) the Advances to be Converted, and (iii) if such
Conversion is into Eurodollar Rate Advances, the duration of the initial
Interest Period for each such Advance. Each notice of Conversion shall be
irrevocable and binding on the Borrower.
SECTION 2.09. Prepayments. (a) Optional. The Borrower may, upon at
----------- --------
least one Business Day's notice to the Agent stating the proposed date and
aggregate principal amount of the prepayment, and if such notice is given the
Borrower shall prepay the outstanding principal amount of the Advances
comprising part of the same Borrowing in whole or ratably in part, together with
accrued interest to the date of such prepayment on the principal amount prepaid;
provided, however, that (i) each partial prepayment shall be in an aggregate
- -------- -------
principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess
thereof and (ii) in the event of any such prepayment of a Eurodollar Rate
Advance, the Borrower shall be obligated to reimburse the Lenders in respect
thereof pursuant to Section 8.04(c).
(b) Mandatory. The Borrower shall, on the first day of each Clean-Up
---------
Period, prepay in full the Advances then outstanding.
SECTION 2.10. Increased Costs. (a) If, due to either (i) the
---------------
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Lender of agreeing to make or
making, funding or
<PAGE>
18
maintaining Eurodollar Rate Advances, then the Borrower shall from time to time,
upon demand by such Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender additional amounts sufficient to compensate
such Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to the Borrower and the Agent by such Lender, shall be
conclusive and binding for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend hereunder and other commitments of this type, then, upon demand by such
Lender (with a copy of such demand to the Agent), the Borrower shall pay to the
Agent for the account of such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's commitment to lend hereunder. A certificate as to such amounts
submitted to the Borrower and the Agent by such Lender shall be conclusive and
binding for all purposes, absent manifest error.
SECTION 2.11. Illegality. Notwithstanding any other provision of this
----------
Agreement, if any Lender shall notify the Agent that the introduction of or any
change in or in the interpretation of any law or regulation makes it unlawful,
or any central bank or other governmental authority asserts that it is unlawful,
for any Lender or its Eurodollar Lending Office to perform its obligations
hereunder to make Eurodollar Rate Advances or to fund or maintain Eurodollar
Rate Advances hereunder, (i) each Eurodollar Rate Advance will automatically,
upon such demand, Convert into a Base Rate Advance and (ii) the obligation of
the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall
be suspended until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
SECTION 2.12. Payments and Computations. (a) The Borrower shall make
-------------------------
each payment hereunder and under the Notes not later than 11:00 A.M. (New York
City time) on the day when due in U.S. dollars to the Agent at the Agent's
Account in same day funds. The Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal or interest or
facility fees ratably (other than amounts payable pursuant to Section 2.10, 2.13
or 8.04(c)) to the Lenders for the account of their respective Applicable
Lending Offices, and like funds relating to the payment of any other amount
payable to any Lender to such Lender for the account of its Applicable Lending
Office, in each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of an Assignment and Acceptance and recording of
the information contained therein in the Register pursuant to Section 8.07(c),
from and after the effective date specified in such Assignment and Acceptance,
the Agent shall make all payments hereunder and under the Notes in respect of
the interest assigned thereby to the Lender assignee thereunder, and the parties
to such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) The Borrower hereby authorizes each Lender, if and to the extent
payment owed to such Lender is not made when due hereunder or under the Note
held by such Lender, to
<PAGE>
19
charge from time to time against any or all of the Borrower's accounts with such
Lender any amount so due.
(c) All computations of interest based on the Base Rate shall be made
by the Agent on the basis of a year of 365 or 366 days, as the case may be, and
all computations of interest based on the Eurodollar Rate or the Federal Funds
Rate and of facility fees shall be made by the Agent on the basis of a year of
360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest or
facility fees are payable. Each determination by the Agent of an interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
(d) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or facility fee, as the case
may be; provided, however, that, if such extension would cause payment of
-------- -------
interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(e) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Lenders hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Lender on
such due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the Agent,
each Lender shall repay to the Agent forthwith on demand such amount distributed
to such Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to the Agent, at the Federal Funds Rate.
SECTION 2.13. Taxes. (a) Any and all payments by the Borrower
-----
hereunder or under the Notes shall be made, in accordance with Section 2.12,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Agent, taxes
---------
imposed on its income, and franchise taxes imposed on it in lieu of income
taxes, by the jurisdiction under the laws of which such Lender or the Agent (as
the case may be) is organized or any political subdivision thereof and, in the
case of each Lender, taxes imposed on its income, and franchise taxes imposed on
it in lieu of income taxes, by the jurisdiction of such Lender's Applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
-----
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to any Lender or the Agent, (i) the sum payable shall be increased as may
be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.13) such Lender or
the Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.
<PAGE>
20
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or under the Notes or
from the execution, delivery or registration of, or otherwise with respect to,
this Agreement or the Notes (hereinafter referred to as "Other Taxes").
-----------
(c) The Borrower will indemnify each Lender and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.13) paid by such Lender or the Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. This indemnification shall be made within 30 days from the date such
Lender or the Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower will furnish to the Agent, at its address referred to in Section 8.02,
the original or a certified copy of a receipt evidencing payment thereof. In the
case of any payment hereunder or under the Notes by or on behalf of the Borrower
through an account or branch outside the United States or on behalf of the
Borrower by a payor that is not a United States person, if the Borrower
determines that no Taxes are payable in respect thereof, the Borrower shall
furnish, or shall cause such payor to furnish, to the Agent, at such address, an
opinion of counsel acceptable to the Agent stating that such payment is exempt
from Taxes. For purposes of this subsection (d) and subsection (e), the terms
"United States" and "United States person" shall have the meanings specified in
------------- --------------------
Section 7701 of the Internal Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of this
Agreement in the case of the Initial Lender and on the date of the Assignment
and Acceptance pursuant to which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by the Borrower
(but only so long as such Lender remains lawfully able to do so), shall provide
the Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or
any successor or other form prescribed by the Internal Revenue Service,
certifying that such Lender is exempt from or entitled to a reduced rate of
United States withholding tax on payments of interest pursuant to this Agreement
or the Notes. If the form provided by a Lender at the time such Lender first
becomes a party to this Agreement indicates a United States interest withholding
tax rate in excess of zero, withholding tax at such rate shall be considered
excluded from "Taxes" as defined in Section 2.13(a). If any form or document
referred to in this subsection (e) requires the disclosure of information, other
than information necessary to compute the tax payable and information required
on the date hereof by Internal Revenue Service form 1001 or 4224, that the
Lender reasonably considers to be confidential, the Lender shall give notice
thereof to the Borrower and shall not be obligated to include in such form or
document such confidential information.
(f) For any period with respect to which a Lender has failed to
provide the Borrower with the appropriate form described in Section 2.13(e)
(other than if such failure is due to a change in law occurring subsequent to
----- ----
the date on which a form originally was required to be provided, or if such form
otherwise is not required under the first sentence of subsection (e) above),
such Lender shall not be entitled to indemnification under Section 2.13(a) with
respect to Taxes imposed by the United States; provided, however, that should a
-------- -------
Lender become subject to Taxes
<PAGE>
21
because of its failure to deliver a form required hereunder, the Borrower shall
take such steps as the Lender shall reasonably request to assist the Lender to
recover such Taxes.
SECTION 2.14. Sharing of Payments, Etc. If any Lender shall obtain any
------------------------
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Advances owing to it (other than
pursuant to Section 2.10, 2.13 or 8.04(c)) in excess of its ratable share of
payments on account of the Advances obtained by all the Lenders, such Lender
shall forthwith purchase from the other Lenders such participations in the
Advances owing to them as shall be necessary to cause such purchasing Lender to
share the excess payment ratably with each of them; provided, however, that if
-------- -------
all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and such
Lender shall repay to the purchasing Lender the purchase price to the extent of
such recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.14
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Borrower in the amount of such
participation.
SECTION 2.15. Use of Proceeds. The proceeds of the Advances shall be
---------------
available (and the Borrower agrees that it shall use such proceeds) for general
partnership or corporate purposes, as the case may be, of the Borrower and its
Subsidiaries.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Section 2.01. Section
-----------------------------------------------------
2.01 of this Agreement shall become effective on and as of the first date (the
"Effective Date") on which the following conditions precedent have been
--------------
satisfied:
(a) There shall have occurred no Material Adverse Change since
December 31, 1995.
(b) There shall exist no action, suit, investigation, litigation or
proceeding affecting the Borrower or any of its Subsidiaries pending or
threatened before any court, governmental agency or arbitrator that (i)
could be reasonably likely to have a Material Adverse Effect or (ii)
purports to affect the legality, validity or enforceability of this
Agreement or any Note or the consummation of the transactions contemplated
hereby.
(c) All governmental and third party consents and approvals necessary
in connection with the transactions contemplated hereby shall have been
obtained (without the imposition of any conditions that are not acceptable
to the Lenders) and shall remain in effect, and no law or regulation shall
be applicable in the reasonable judgment of the Lenders that
<PAGE>
22
restrains, prevents or imposes materially adverse conditions upon the
transactions contemplated hereby.
(d) The Borrower shall have notified each Lender and the Agent in
writing as to the proposed Effective Date.
(e) The Borrower shall have paid all accrued fees and expenses of the
Agent and the Lenders (including the accrued fees and expenses of counsel
to the Agent).
(f) On the Effective Date, the following statements shall be true and
the Agent shall have received for the account of each Lender a certificate
signed by a duly authorized officer of the Borrower, dated the Effective
Date, stating that:
(i) The representations and warranties contained in Section
4.01 are correct on and as of the Effective Date, and
(ii) No event has occurred and is continuing that constitutes a
Default.
(g) The Agent shall have received on or before the Effective Date the
following, each dated such day (unless otherwise indicated), in form and
substance satisfactory to the Agent and (except for the Notes) in
sufficient copies for each Lender:
(i) The Notes to the order of the Lenders, respectively.
(ii) Certified copies of the resolutions of the Board of
Directors of the Borrower approving this Agreement and the Notes, and
of all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Agreement and the
Notes.
(iii) A certificate of the Secretary or an Assistant Secretary of
the Borrower certifying the names and true signatures of the
authorized representatives of the Borrower authorized to sign this
Agreement and the Notes and the other documents to be delivered
hereunder.
(iv) A copy of the amended and restated certificate of limited
partnership of the Borrower filed in November 1994 and each amendment
thereto, certified (as of a date reasonably near the Effective Date)
by the Secretary of State of the State of Delaware as being a true and
correct copy thereof.
(v) A copy of a certificate of the Secretary of State of the
State of Delaware, dated reasonably near the Effective Date, listing
the certificate of limited partnership of the Borrower and each
amendment thereto on file in his or her office and certifying that (A)
such amendments are the only amendments to the Borrower's certificate
of limited partnership on file in his or her office, (B) the Borrower
has paid all franchise taxes to the date of such certificate (C) the
Borrower is duly organized and in good standing under the laws of the
State of Delaware.
<PAGE>
23
(vi) A certified copy of the Partnership Agreement, duly
executed.
(vii) Such financial, business and other information regarding
the Borrower and its Subsidiaries as the Lenders shall have requested,
including, without limitation, information as to possible contingent
liabilities, tax matters, environmental matters, obligations under
ERISA and welfare plans (as defined in Section 3(1) of ERISA),
collective bargaining agreements and other arrangements with
employees.
(viii) A favorable opinion of Newton B. Schott, Esq., Senior Vice
President-Legal for the Borrower, substantially in the form of Exhibit
D hereto and as to such other matters as any Lender through the Agent
may reasonably request.
(ix) A favorable opinion of Shearman & Sterling, counsel for
the Agent, in form and substance satisfactory to the Agent.
SECTION 3.02. Conditions Precedent to Each Borrowing. The obligation
--------------------------------------
of each Lender to make an Advance on the occasion of each Borrowing shall be
subject to the conditions precedent that the Effective Date shall have occurred
and on the date of such Borrowing (a) the following statements shall be true
(and each of the giving of the applicable Notice of Borrowing and the acceptance
by the Borrower of the proceeds of such Borrowing shall constitute a
representation and warranty by the Borrower that on the date of such Borrowing
such statements are true):
(i) The representations and warranties contained in Section 4.01 are
correct on and as of the date of such Borrowing, before and after giving
effect to such Borrowing and to the application of the proceeds therefrom,
as though made on and as of such date, and
(ii) No event has occurred and is continuing, or would result from
such Borrowing or from the application of the proceeds therefrom, that
constitutes a Default;
and (b) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request.
SECTION 3.03. Determinations Under Section 3.01. For purposes of
---------------------------------
determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Agent responsible for the transactions contemplated by this Agreement
shall have received notice from such Lender prior to the proposed Effective
Date, as notified by the Borrower to the Lenders, specifying its objection
thereto. The Agent shall promptly notify the Lenders of the occurrence of the
Effective Date.
<PAGE>
24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
----------------------------------------------
Borrower represents and warrants as follows:
(a) (i) The Borrower has been duly formed and is validly existing in
good standing as a limited partnership under the laws of the State of Delaware
and has all requisite partnership power and authority to own or lease and
operate its properties and to carry on its business as now conducted and as
proposed to be conducted. There is no authorized or outstanding class of capital
stock or ownership units of the Borrower other than the Units. The outstanding
Units have been validly issued.
(ii) Set forth on Schedule 4.01(a) hereto is a complete and accurate
list of all Subsidiaries of the Borrower, showing as of the date hereof (as to
each such Subsidiary) the jurisdiction of its incorporation or organization, the
number of shares of each class of capital stock or ownership units authorized,
and the number outstanding, on the date hereof and the percentage of the
outstanding shares or units of each such class owned (directly or indirectly) by
the Borrower and the number of shares or units covered by all outstanding
options, warrants, rights of conversion or purchase and similar rights at the
date hereof. All of the outstanding capital stock or ownership units of all of
such Subsidiaries has been validly issued, is fully paid and nonassessable and
is owned by the Borrower or one or more of its Subsidiaries free and clear of
all Liens. Each such Subsidiary is duly organized (or formed), validly (or
legally) existing and in good standing under the laws of the jurisdiction of its
incorporation or organization.
(b) The execution, delivery and performance by the Borrower of this
Agreement and the Notes, and the consummation of the transactions contemplated
hereby, are within the Borrower's partnership powers, have been duly authorized
by all necessary partnership action, and do not contravene (i) the Partnership
Agreement or (ii) law or any contractual restriction binding on or affecting the
Borrower.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other third
party is required for the due execution, delivery and performance by the
Borrower of this Agreement or the Notes.
(d) This Agreement has been, and each of the Notes when delivered
hereunder will have been, duly executed and delivered by the Borrower. This
Agreement is, and each of the Notes when delivered hereunder will be, the legal,
valid and binding obligation of the Borrower enforceable against the Borrower in
accordance with their respective terms.
(e) There is no pending or threatened action, suit, investigation,
litigation or proceeding, affecting the Borrower or any of its Subsidiaries
before any court, governmental agency or arbitrator that (i) could be reasonably
likely to have a Material Adverse Effect or
<PAGE>
25
(ii) purports to affect the legality, validity or enforceability of
this Agreement or any Note or the consummation of the transactions
contemplated hereby.
(f) No proceeds of any Advance will be used to acquire any
equity security of a class that is registered pursuant to Section 12
of the Securities Exchange Act of 1934.
(g) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U issued by the Board of Governors of the Federal Reserve
System), and no proceeds of any Advance will be used to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock.
(h) Except as described on Schedule 4.01(h) hereto, the
Borrower is not an "investment company," or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act. Each transaction between the
Borrower or a Subsidiary of the Borrower and any Person identified on such
Schedule 4.01(h) has been conducted in all material respects in compliance with
all applicable laws, rules, regulations and orders. Neither the making of any
Advances nor the application of the proceeds or repayment thereof by the
Borrower, nor the consummation of the other transactions contemplated hereby,
will violate any provision of the Investment Company Act or any rule, regulation
or order of the Securities and Exchange Commission thereunder.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
---------------------
remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
-------------------------
Subsidiaries to comply, in all material respects, with all applicable laws,
rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
---------------------
Subsidiaries to pay and discharge, before the same shall become delinquent,
(i) all taxes, assessments and governmental charges or levies imposed upon
it or upon its property and (ii) all lawful claims that, if unpaid, might
by law become a Lien upon its property; provided, however, that neither the
-------- -------
Borrower nor any of its Subsidiaries shall be required to pay or discharge
any such tax, assessment, charge or claim that is being contested in good
faith and by proper proceedings and as to which appropriate reserves are
being maintained, unless and until any Lien resulting therefrom attaches to
its property and becomes enforceable against its other creditors.
<PAGE>
26
(c) Maintenance of Insurance. Maintain, and cause each of its
------------------------
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks
as is usually carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which the Borrower or such
Subsidiary operates.
(d) Preservation of Partnership or Corporate Existence, Etc. Preserve
--------------------------------------------------------
and maintain, and cause each of its Subsidiaries to preserve and maintain,
its partnership or corporate existence, as the case may be, rights and
franchises; provided, however, that (i) the Borrower may effect the
-------- -------
Restructuring, (ii) the Borrower and its Subsidiaries may consummate any
merger or consolidation permitted under Section 5.02(b), (iii) any current
Subsidiary of the Borrower which is organized as a partnership may take any
and all actions necessary to become a limited liability company and (iv)
neither the Borrower nor any of its Subsidiaries shall be required to
preserve any right or franchise if the Operating Board shall determine that
the preservation thereof is no longer desirable in the conduct of the
business of the Borrower or such Subsidiary, as the case may be, and that
the loss thereof is not disadvantageous in any material respect to the
Borrower, such Subsidiary or the Lenders.
(e) Visitation Rights. At any reasonable time and from time to time,
-----------------
permit the Agent or any of the Lenders or any agents or representatives
thereof, to examine and make copies of and abstracts from the records and
books of account of, and visit the properties of, the Borrower and any of
its Subsidiaries, and to discuss the affairs, finances and accounts of the
Borrower and any of its Subsidiaries with any of their officers or
directors and with their independent certified public accountants.
(f) Keeping of Books. Keep, and cause each of its Subsidiaries to
----------------
keep, proper books of record and account, in which full and correct entries
shall be made of all financial transactions and the assets and business of
the Borrower and each such Subsidiary in accordance with generally accepted
accounting principles in effect from time to time.
(g) Maintenance of Properties, Etc. Maintain and preserve, and cause
------------------------------
each of its Subsidiaries to maintain and preserve, all of its properties
that are used or useful in the conduct of its business in good working
order and condition, ordinary wear and tear excepted.
(h) Transactions with Affiliates. Conduct, and cause each of its
----------------------------
Subsidiaries to conduct, all transactions otherwise permitted under this
Agreement with any of their Affiliates on terms that are fair and
reasonable and no less favorable to the Borrower or such Subsidiary than it
would obtain in a comparable arm's-length transaction with a Person not an
Affiliate; provided, however, that any such transaction approved by the
-------- -------
Board of Directors shall be deemed to be on terms that are fair and
reasonable and no less favorable to the Borrower or such Subsidiary than it
would obtain in a comparable arm's-length transaction with a Person not an
Affiliate.
(i) Reporting Requirements. Furnish to the Agent:
----------------------
<PAGE>
27
(i) as soon as available and in any event within 60 days after the
end of each of the first three quarters of each fiscal year of the
Borrower, a Consolidated balance sheet of the Borrower and its Subsidiaries
as of the end of such quarter and Consolidated statements of income and
cash flows of the Borrower and its Subsidiaries for the period commencing
at the end of the previous fiscal year and ending with the end of such
quarter, duly certified (subject to year-end audit adjustments) by the
chief financial officer of the Borrower as having been prepared in
accordance with GAAP and setting forth in comparative form the figures for
the corresponding period in the preceding fiscal year, all in reasonable
detail and consistent with prior practice; provided that if any such Person
--------
is required to file a Quarterly Report on Form 10-Q with the Securities and
Exchange Commission, such report may be delivered in lieu of the financial
statements otherwise required under this paragraph (i);
(ii) as soon as available and in any event within 105 days after the
end of each fiscal year of the Borrower, a copy of the annual audit report
for such year for the Borrower and its Subsidiaries, containing a
Consolidated balance sheet of the Borrower and its Subsidiaries as of the
end of such fiscal year and Consolidated statements of income and cash
flows of the Borrower and its Subsidiaries for such fiscal year, in each
case accompanied by an opinion acceptable to the Required Lenders by a
nationally recognized firm of independent public accountants setting forth
in comparative form the figures for the previous fiscal year; provided that
--------
if any such Person is required to file an Annual Report on Form 10-K with
the Securities and Exchange Commission, such report may be delivered in
lieu of the financial statements otherwise required under this paragraph
(ii);
(iii) together with each delivery of financial statements pursuant to
paragraphs (i) and (ii) above, an officer's certificate signed by the chief
financial officer of the Borrower (A) stating that the signer has reviewed
the terms of this Agreement and of the Notes and has made, or caused to be
made under such signer's supervision, a review in reasonable detail of the
transactions and condition of the Borrower and its Subsidiaries during the
accounting period covered by such financial statements and that such review
has not disclosed the existence during or at the end of such accounting
period, and that the signer does not have knowledge of the existence, as at
the date of such officer's certificate, of any condition or event which
constitutes a Default, or, if any condition or event existed or exists,
specifying the nature and period of existence thereof and what action the
Borrower has taken or is taking or proposes to take with respect thereto,
and (B) setting forth computations demonstrating in reasonable detail
compliance during and at the end of such accounting period with the
financial covenants contained in Section 5.03.
(iv) as soon as possible and in any event within five days after the
occurrence of each Default continuing on the date of such statement, a
statement of the chief financial officer of the Borrower setting forth
details of such Default and the action that the Borrower has taken and
proposes to take with respect thereto;
<PAGE>
28
(v) promptly after the sending or filing thereof, copies of all
reports that the Borrower sends to any of its securityholders, and
copies of all reports and registration statements that the Borrower or
any Subsidiary files with the Securities and Exchange Commission or
any national securities exchange;
(vi) promptly after the commencement thereof, notice of all
actions and proceedings before any court, governmental agency or
arbitrator affecting the Borrower or any of its Subsidiaries of the
type described in Section 4.01(e); and
(vii) such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of its
Subsidiaries as any Lender through the Agent may from time to time
reasonably request.
(j) Restructuring. Promptly furnish to the Agent (A) such agreements,
-------------
documents and other information concerning the Restructuring as is
reasonably requested by the Agent and (B) either (1) an original copy of
each opinion of counsel delivered in connection with the Restructuring
addressed to each of the Lenders and the Agent or (2) a letter addressed to
each of the Lenders and the Agent from each of the counsel rendering
opinions in connection with the Restructuring stating that each of the
Lenders and the Agent may rely upon the opinion of such counsel delivered
in connection with the Restructuring, with a copy of such opinion attached
to such letter.
SECTION 5.02. Negative Covenants. So long as any Advance shall remain
------------------
unpaid or any Lender shall have any Commitment hereunder, the Borrower will not:
(a) Liens, Etc. Create or suffer to exist, or permit any of its
-----------
Subsidiaries to create or suffer to exist, any Lien on or with respect to
any of its properties, whether now owned or hereafter acquired, or assign,
or permit any of its Subsidiaries to assign, any right to receive income,
other than Permitted Liens.
(b) Mergers Sales of Assets, Etc. 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, or permit
any of its Subsidiaries to do so, except that any Subsidiary of the
Borrower may merge or consolidate with or into, or dispose of assets to,
any other Subsidiary of the Borrower, and except that any Subsidiary of the
Borrower may merge into or dispose of assets to the Borrower and the
Borrower may merge with any other Person so long as the Borrower is the
surviving entity, provided, in each case, that no Default shall have
--------
occurred and be continuing at the time of such proposed transaction or
would result therefrom.
(c) Accounting Changes. Make or permit, or permit any of its
------------------
Subsidiaries to make or permit, any change in accounting policies or
reporting practices, except as required by generally accepted accounting
principles.
(d) Indebtedness. Create of suffer to exist, or permit any of its
------------
Subsidiaries to create or suffer to exist, any Indebtedness (other than
Excluded Broker Commission Debt)
<PAGE>
29
which would cause the ratio of all such Indebtedness of the Borrower and
its Subsidiaries to Consolidated EBITDA of the Borrower and its
Subsidiaries for the Rolling Period most recently ended to rise above .67
to 1.
SECTION 5.03. Financial Covenants. So long as any Advance shall remain
-------------------
unpaid or any Lender shall have any Commitment hereunder, the Borrower will:
(a) Interest Coverage Ratio. Maintain, as of the end of each fiscal
-----------------------
quarter ending on or after March 31, 1996, a ratio of Consolidated EBITDA
of the Borrower and its Subsidiaries for the Rolling Period then ended to
interest payable on, and amortization of debt discount in respect of, all
Indebtedness (other than Excluded Broker Commission Debt) during such
Period of not less than 5 to 1.
(b) Fixed Charge Coverage Ratio. Maintain a ratio of Consolidated
---------------------------
EBITDA of the Borrower and its Subsidiaries for the Rolling Period then
ended, as at the end of each fiscal quarter on or after March 31, 1996, to
all Indebtedness (other than Excluded Broker Commission Debt) of the
Borrower and its Subsidiaries of not less than 3 to 1.
(c) Minimum EBITDA. Maintain, as of the end of each fiscal quarter
--------------
ending on or after March 31, 1996, Consolidated EBITDA of the Borrower and
its Subsidiaries for the Rolling Period then ended of not less than
$80,000,000.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
-----------------
("Events of Default") shall occur and be continuing:
-----------------
(a) The Borrower shall fail (i) to pay any principal of any Advance
when the same becomes due and payable, (ii) to pay any interest on any
Advance within three days after such interest becomes due and payable or
(iii) to pay any other amount under this Agreement or any Note within three
days after such amount becomes due and payable; or
(b) Any representation or warranty made by the Borrower herein or by
the Borrower (or any of its officers) in connection with this Agreement
shall prove to have been incorrect in any material respect when made; or
(c) (i) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 5.01(d), (e), (h) or (i), 5.02
or 5.03 or (ii) the Borrower shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement on its part to be
performed or observed if such failure shall remain unremedied for 10 days
after written notice thereof shall have been given to the Borrower by the
Agent or any Lender; or
<PAGE>
30
(d) The Borrower or any of its Subsidiaries shall fail to pay
any principal of or premium or interest on any Indebtedness that is
outstanding in a principal or notional amount of at least $5,000,000
in the aggregate (but excluding Indebtedness outstanding hereunder) of
the Borrower or such Subsidiary (as the case may be), when the same
becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such Indebtedness; or any other
event shall occur or condition shall exist under any agreement or
instrument relating to any such Indebtedness and shall continue after
the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate,
or to permit the acceleration of, the maturity of such Indebtedness;
or any such Indebtedness shall be declared to be due and payable, or
required to be prepaid or redeemed (other than by a regularly
scheduled required prepayment or redemption), purchased or defeased,
or an offer to prepay, redeem, purchase or defease such Indebtedness
shall be required to be made, in each case prior to the stated
maturity thereof; or
(e) The Borrower or any of its Subsidiaries shall generally not
pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Borrower or any of its Subsidiaries
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its property and, in
the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 30 days, or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for
relief against, or the appointment of a receiver, trustee, custodian
or other similar official for, it or for any substantial part of its
property) shall occur; or the Borrower or any of its Subsidiaries
shall take any corporate action to authorize any of the actions set
forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess of
$5,000,000 shall be rendered against the Borrower or any of its
Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there
shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal
or otherwise, shall not be in effect; or
(g) Any nonmonetary judgment or order shall be rendered against
the Borrower or any of its Subsidiaries that could be reasonably
expected to have a Material Adverse Effect, and there shall be any
period of 10 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(h) There shall be any involuntary termination or suspension
(which suspension continues for a period of ten consecutive Business
Days) or any voluntary termination or
<PAGE>
31
suspension (which suspension continues for a period of ten consecutive
Business Days) arising out of a regulatory proceeding or investigation
(whether administrative, civil or criminal) of the Partnership's or
any Significant Subsidiary's federal licenses or registration to act
as an investment advisor or a broker-dealer; or
(i) A Change of Control; or
(j) The Borrower or any of its ERISA Affiliates shall incur, or
shall be reasonably likely to incur liability in excess of $5,000,000
in the aggregate as a result of one or more of the following: (i) the
occurrence of any ERISA Event; (ii) the partial or complete withdrawal
of the Borrower or any of its ERISA Affiliates from a Multiemployer
Plan; or (iii) the reorganization or termination of a Multiemployer
Plan;
then, and in any such event, the Agent (i) shall at the request, or may
with the consent, of the Required Lenders, by notice to the Borrower,
declare the obligation of each Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the
request, or may with the consent, of the Required Lenders, by notice to the
Borrower, declare the Notes, all interest thereon and all other amounts
payable under this Agreement to be forthwith due and payable, whereupon the
Notes, all such interest and all such amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived by the Borrower;
provided, however, that in the event of an actual or deemed entry of an
-------- -------
order for relief with respect to the Borrower under the Federal Bankruptcy
Code, (A) the obligation of each Lender to make Advances shall
automatically be terminated and (B) the Notes, all such interest and all
such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby appoints
------------------------
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers and discretion under this Agreement as are delegated to the
Agent by the terms hereof, together with such powers and discretion as are
reasonably incidental thereto. As to any manners not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding upon all Lenders
and all holders of Notes; provided, however, that the Agent shall not be
-------- -------
required to take any action that exposes the Agent to personal liability or that
is contrary to this Agreement or applicable law. The Agent agrees to give to
each Lender prompt notice of each notice given to it by the Borrower pursuant to
the terms of this Agreement.
<PAGE>
32
SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor any of its
---------------------
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement,
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Agent: (i) may treat the
payee of any Note as the holder thereof until the Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is the payee of such
Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section
8.07; (ii) may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement; (iv) shall not have any duty
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement on the part of the Borrower or
to inspect the property (including the books and records) of the Borrower; (v)
shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant hereto; and (vi) shall incur
no liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier,
telegram or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 7.03. Citicorp and Affiliates. With respect to its Commitment,
-----------------------
the Advances made by it and the Note issued to it, Citicorp shall have the same
rights and powers under this Agreement as any other Lender and may exercise the
same as though it were not the Agent; and the term "Lender" or "Lenders" shall,
unless otherwise expressly indicated, include Citicorp in its individual
capacity. Citicorp and its Affiliates may accept deposits from, lend money to,
act as trustee under indentures of, accept investment banking engagements from
and generally engage in any kind of business with, the Borrower, any of its
Subsidiaries and any Person who may do business with or own securities of the
Borrower or any such Subsidiary, all as if Citicorp were not the Agent and
without any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it
----------------------
has, independently and without reliance upon the Agent or any other Lender and
based on the financial statements referred to in Section 4.01 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 7.05. Indemnification. The Lenders agree to indemnify the
---------------
Agent (to the extent not reimbursed by the Borrower), ratably according to the
respective principal amounts of the Notes then held by each of them (or if no
Notes are at the time outstanding or if any Notes are held by Persons that are
not Lenders, ratably according to the respective amounts of their Commitments),
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against the Agent in any way relating to or arising out of this Agreement or
<PAGE>
33
any action taken or omitted by the Agent under this Agreement, provided that no
--------
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse the Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including
counsel fees) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, to the
extent that the Agent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Agent. The Agent may resign at any time by
---------------
giving written notice thereof to the Lenders and the Borrower and may be removed
at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days after
the retiring Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $50,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Article VII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Agreement or the Notes, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
-------- -------
writing and signed by all the Lenders, do any of the following: (a) waive any of
the conditions specified in Section 3.01, (b) increase the Commitments of the
Lenders or subject the Lenders to any additional obligations, (c) reduce the
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, (e)
change the percentage of the Commitments or of the aggregate unpaid principal
amount of the Notes, or the number of Lenders, that shall be required for the
Lenders or any of them to take any action hereunder or (f) amend this Section
8.01; and provided further that no amendment, waiver or consent shall, unless in
-------- -------
writing and signed by the Agent in addition to the Lenders required above to
take such action, affect the rights or duties of the Agent under this Agreement
or any Note.
<PAGE>
34
SECTION 8.02. Notices, Etc. All notices and other communications
------------
provided for hereunder shall be in writing (including telecopier, telegraphic or
telex communication) and mailed, telecopied, telegraphed, telexed or delivered,
if to the Borrower, at its address at 800 Newport Center Drive, Suite 100,
Newport Beach, CA 92660, Attention: Chief Financial Officer, telecopier no.:
(714) 759-9451; if to the Initial Lender, at its Domestic Lending Office
specified opposite its name on Schedule I hereto; if to any other Lender, at its
Domestic Lending Office specified in the Assignment and Acceptance pursuant to
which it became a Lender; and if to the Agent, at its address at 399 Park
Avenue, New York, New York 10043, Attention: Investment Banks Managed Funds
Department, telecopier no.: (212) 371-6309; or, as to the Borrower or the Agent,
at such other address as shall be designated by such party in a written notice
to the other parties and, as to each other party, at such other address as shall
be designated by such party in a written notice to the Borrower and the Agent.
All such notices and communications shall, when mailed, telecopied, telegraphed
or telexed, be effective when deposited in the mails, telecopied, delivered to
the telegraph company or confirmed by telex answerback, respectively, except
that notices and communications to the Agent pursuant to Article II, III or VII
shall not be effective until received by the Agent.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any
-------------------
Lender or the Agent to exercise, and no delay in exercising, any right hereunder
or under any Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on
------------------
demand all costs and expenses of the Agent in connection with the preparation,
execution, delivery, administration, modification and amendment of this
Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, (A) all due diligence, syndication (including
printing, distribution and bank meetings), transportation, computer,
duplication, appraisal, consultant and audit expenses and (B) the reasonable
fees and expenses of counsel for the Agent with respect thereto and with respect
to advising the Agent as to its rights and responsibilities under this
Agreement. The Borrower further agrees to pay on demand all costs and expenses
of the Agent and the Lenders, if any (including, without limitation, reasonable
counsel fees and expenses), in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement, the Notes and
the other documents to be delivered hereunder, including, without limitation,
reasonable fees and expenses of counsel for the Agent and each Lender in
connection with the enforcement of rights under this Section 8.04(a).
(b) The Borrower agrees to indemnify and hold harmless the Agent and
each Lender and each of their Affiliates and their officers, directors,
employees, agents and advisors (each, an "Indemnified Party") from and against
-----------------
any and all claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and expenses of counsel) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of, or in connection with the
preparation for a defense of, any investigation, litigation or proceeding
arising out of, related to or in connection with the Notes, this Agreement, any
of the transactions contemplated herein or the actual or proposed use of the
proceeds of the Advances, whether or not such investigation, litigation or
proceeding is brought by the Borrower, its directors, shareholders or creditors
or an Indemnified Party or any other Person or any Indemnified Party is
<PAGE>
35
otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated, except to the extent such claim, damage, loss liability
or expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct or from any representation or warranty made by the Agent, if
any, as to its obligations to any Lender or Eligible Assignee. The Borrower also
agrees not to assert any claim against the Agent, any Lender, any of their
Affiliates, or any of their respective directors, officers, employees, attorneys
and agents, on any theory of liability, for special, indirect, consequential or
punitive damages arising out of or otherwise relating to the Notes, this
Agreement, any of the transactions contemplated herein or the actual or proposed
use of the proceeds of the Advances.
(c) If any payment of principal of, or Conversion of, any Eurodollar Rate
Advance is made by the Borrower to or for the account of a Lender other than on
the last day of the Interest Period for such Advance, as a result of a payment
or Conversion pursuant to Section 2.07(d) or (e), 2.09 or 2.11, acceleration of
the maturity of the Notes pursuant to Section 6.01 or for any other reason, the
Borrower shall, upon demand by such Lender (with a copy of such demand to the
Agent), pay to the Agent for the account of such Lender any amounts required to
compensate such Lender for any additional losses, costs or expenses that it may
reasonably incur as a result of such payment or Conversion, including, without
limitation, any loss (including loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by any Lender to fund or maintain such Advance.
(d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
Sections 2.10, 2.13 and 8.04 shall survive the payment in full of principal,
interest and all other amounts payable hereunder and under the Notes.
SECTION 8.05. Right of Setoff. Upon (i) the occurrence and during the
---------------
continuance of any Event of Default and (ii) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Lender and each of its Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender or such
Affiliate to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under this
Agreement and the Note held by such Lender, whether or not such Lender shall
have made any demand under this Agreement or such Note and although such
obligations may be unmatured. Each Lender agrees promptly to notify the Borrower
after any such setoff and application, provided that the failure to give such
--------
notice shall not affect the validity of such setoff and application. The rights
of each Lender and its Affiliates under this Section are in addition to other
rights and remedies (including, without limitation, other rights of setoff) that
such Lender and its Affiliates may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective
--------------
(other than Section 2.01, which shall only become effective upon satisfaction of
the conditions precedent set forth in Section 3.01) when it shall have been
executed by the Borrower and the Agent and when the Agent shall have been
notified by the Initial Lender that the Initial Lender has executed it and
thereafter
<PAGE>
36
shall be binding upon and inure to the benefit of the Borrower, the Agent and
each Lender and their respective successors and assigns, except that the
Borrower shall not have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Lenders.
SECTION 8.07. Assignments and Participations. (a) Each Lender may
------------------------------
assign to one or more Persons all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitment, the Advances owing to it and the Note or Notes held by it);
provided, however, that (i) each such assignment shall be of a constant, and not
- -------- -------
a varying, percentage of all rights and obligations under this Agreement, (ii)
except in the case of an assignment to a Person that, immediately prior to such
assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $5,000,000 or an integral multiple of $1,000,000 in excess
thereof, (iii) each such assignment shall be to an Eligible Assignee, and (iv)
the parties to each such assignment shall execute and deliver to the Agent, for
its acceptance and recording in the Register, an Assignment and Acceptance,
together with any Note subject to such assignment and a processing and
recordation fee of $3,000. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, (A) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (B) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi)
such assignee appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement as
are delegated to the Agent by the terms hereof, together with such
<PAGE>
37
powers and discretion as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all of the
obligations that by the terms of this Agreement are required to be performed by
it as a Lender.
(c) The Agent shall maintain at its address referred to in Section
8.02 a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the Lenders and
the Commitment of, and principal amount of the Advances owing to, each Lender
from time to time (the "Register"). The entries in the Register shall be
--------
conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent and the Lenders may treat each Person whose name is recorded
in the Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with any Note or Notes subject to such assignment, the Agent shall, if
such Assignment and Acceptance has been completed and is in substantially the
form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record
the information contained therein in the Register and (iii) give prompt notice
thereof to the Borrower. Within five Business Days after its receipt of such
notice, the Borrower, at its own expense, shall execute and deliver to the Agent
in exchange for the surrendered Note a new Note to the order of such Eligible
Assignee in an amount equal to the Commitment assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a Commitment
hereunder, a new Note to the order of the assigning Lender in an amount equal to
the Commitment retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially the form of Exhibit A
hereto.
(e) Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment,
the Advances owing to it and the Note or Notes held by it); provided, however,
-------- -------
that (i) such Lender's obligations under this Agreement (including, without
limitation, its Commitment to the Borrower hereunder) shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) such Lender shall remain the holder
of any such Note for all purposes of this Agreement, (iv) the Borrower, the
Agent and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and (v) no participant under any such participation shall have any
right to approve any amendment or waiver of any provision of this Agreement or
any Note, or any consent to any departure by the Borrower therefrom, except to
the extent that such amendment, waiver or consent would reduce the principal of,
or interest on, the Notes or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation, or postpone any date
fixed for any payment of principal of, or interest on, the Notes or any fees or
other amounts payable hereunder, in each case to the extent subject to such
participation.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or
<PAGE>
38
participant or proposed assignee or participant, any information relating to the
Borrower furnished to such Lender by or on behalf of the Borrower.
(g) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion of
its rights under this Agreement (including, without limitation, the Advances
owing to it and the Note held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the Federal Reserve
System.
SECTION 8.08. Governing Law. This Agreement and the Notes shall be
-------------
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 8.09. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.10. Jurisdiction, Etc. (a) Each of the parties hereto hereby
-----------------
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by law,
in such federal court. Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect any right that any party may
otherwise have to bring any action or proceeding relating to this Agreement or
the Notes in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the Notes
in any New York State or federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
<PAGE>
SECTION 8.11. Waiver of Jury Trial. Each of the Borrower, the Agent
--------------------
and the Lenders hereby irrevocably waives all right to trial by jury in any
action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the Notes or the
actions of the Agent or any Lender in the negotiation, administration,
performance or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
PIMCO ADVISORS L.P.
By /s/ William D. Cvengros
-------------------------
Name: WILLIAM D. CVENGROS
Title: CHIEF EXECUTIVE OFFICER
CITICORP USA, INC.,
as Agent
BY____________________
Name:
Title:
Initial Lender
--------------
Commitment
- ----------
$25,000,000 CITICORP USA, INC.
By /s/ B. Danforth Ely
---------------------
Name: B. DANFORTH ELY
Title: VICE PRESIDENT
<PAGE>
SCHEDULE I TO THE
CREDIT AGREEMENT
-----------------
APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
Name of
<S> <C> <C>
Initial Lender Eurodollar Lending Office Domestic Lending Office
- -------------- ------------------------- -----------------------
Citicorp USA. Inc. 399 Park Avenue 399 Park Avenue
New York, NY 10043 New York, NY 10043
</TABLE>
<PAGE>
SCHEDULE 4.01(a) TO THE
CREDIT AGREEMENT
------------------
SUBSIDIARIES
------------
<TABLE>
<CAPTION>
Jurisdiction of Authorized % Owned by
Incorporation Common Stock Outstanding Borrower directly
Subsidiary or Formation (Shares) Shares or indirectly
- ---------- ------------------ ------------- ----------- -----------------
<S> <C> <C> <C> <C>
Cadence Capital Delaware 1,000 100 100%
Management Inc.
Columbus Circle Delaware 1,000 100 100%
Investors Management
Inc.
NFJ Management Inc. Delaware 1,000 100 100%
Parametric Management Delaware 1,000 100 100%
Inc.
PIMCO Management Inc. Delaware 1,000 100 100%
PIMCO Advisors Delaware 1,000 100 100%
Distribution Company
Blairlogie Holdings U.K. (limited 100%
Limited liability company)
Blairlogie Capital U.K. (limited 75.25%
Management partnership)
Cadence Capital Delaware (general 100%
Management partnership)
Columbus Circle Delaware (general 100%
Investors partnership)
NFJ Investment Group Delaware (general 100%
partnership)
Parametric Portfolio Delaware (general 100%
Associates partnership)
Pacific Investment Delaware (general 100%
Management Company partnership)
</TABLE>
No corporate subsidiary has an authorized class of stock other than common
stock. No subsidiary has shares or units covered by options. warrants, rights of
conversion or purchase or similar rights.
<PAGE>
SCHEDULE 4.01(h) TO THE
CREDIT AGREEMENT
--------------------
INVESTMENT COMPANY ACT
----------------------
The Borrower is an "affiliated person" of the following investment companies:
PIMCO Advisors Funds
Cash Accumulation Trust
PIMCO Funds including the Equity Advisors Series
<PAGE>
EXHIBIT A TO THE
CREDIT AGREEMENT
----------------
FORM OF PROMISSORY NOTE
U.S.$________ Dated: _______, 199_
FOR VALUE RECEIVED, the undersigned, PIMCO ADVISORS L.P., a Delaware
limited partnership (the "Borrower"), HEREBY PROMISES TO PAY to the order of
--------
______________ (the "Lender") for the account of its Applicable Lending Office
------
on the Termination Date (each as defined in the Credit Agreement referred to
below) the principal sum of U.S.$________ or, if less, the aggregate principal
amount of the Advances made by the Lender to the Borrower pursuant to the Credit
Agreement dated as of April 12, 1996 among the Borrower, the Lender and certain
other lenders parties thereto, and Citicorp USA, Inc., as Agent for the Lender
and such other lenders (as amended or modified from time to time, the "Credit
------
Agreement"; unless otherwise defined herein, the terms defined therein being
- ---------
used herein as therein defined) outstanding on the Termination Date.
The Borrower promises to pay interest on the unpaid principal amount
of each Advance from the date of such Advance until such principal amount is
paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Citicorp USA, Inc., as Agent, at _________, Account
No._______, in same day funds. Each Advance owing to the Lender by the Borrower
pursuant to the Credit Agreement, and all payments made on account of principal
thereof, shall be recorded by the Lender and, prior to any transfer hereof,
endorsed on the grid attached hereto which is part of this Promissory Note.
This Promissory Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement. The Credit Agreement, among
other things, (i) provides for the making of Advances by the Lender to the
Borrower from time to time in an aggregate amount not to exceed at any time
outstanding the U.S. dollar amount first above mentioned, the indebtedness of
the Borrower resulting from each such Advance being evidenced by this Promissory
Note, and (ii) contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.
PIMCO ADVISORS L.P.
BY_____________________
Name:
Title:
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
================================================================================
Amount of
Amount of Principal Paid Unpaid Principal Notation
Date Advance or Prepaid Balance Made By
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
================================================================================
<PAGE>
EXHIBIT B TO THE
CREDIT AGREEMENT
----------------
FORM OF NOTICE OF BORROWING
Citicorp USA, Inc., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
[Date]
Attention: __________
Ladies and Gentlemen:
The undersigned, PIMCO Advisors L.P., refers to the Credit Agreement, dated as
of April 12, 1996 (as amended or modified from time to time, the "Credit
------
Agreement", unless otherwise defined herein, the terms defined therein being
- ---------
used herein as therein defined), among the undersigned, certain Lenders parties
thereto and Citicorp USA, Inc., as Agent for said Lenders, and hereby gives you
notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the
undersigned hereby requests a Borrowing under the Credit Agreement, and in that
connection sets forth below the information relating to such Borrowing (the
"Proposed Borrowing") as required by Section 2.02(a) of the Credit Agreement:
------------------
(i) The Business Day of the Proposed Borrowing is _______, 199_.
(ii) The Type of Advances comprising the Proposed Borrowing is [Base
Rate Advances] [Eurodollar Rate Advances].
(iii) The aggregate amount of the Proposed Borrowing is $ .
[(iv) The initial Interest Period for each Eurodollar Rate Advance
made as part of the Proposed Borrowing is ___ month[s].]
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties contained in Section 4.01 of
the Credit Agreement are correct, before and after giving effect to the
Proposed Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date; and
<PAGE>
2
(B) no event has occurred and is continuing, or would result from
such Proposed Borrowing or from the application of the proceeds therefrom,
that constitutes a Default.
Very truly yours,
PIMCO ADVISORS L.P.
BY______________
Name:
Title:
<PAGE>
EXHIBIT C TO THE
CREDIT AGREEMENT
----------------
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of April 12, 1996
(as amended or modified from time to time, the "Credit Agreement") among PIMCO
----------------
Advisors L.P., a Delaware limited partnership (the "Borrower"), the Lenders (as
--------
defined in the Credit Agreement) and Citicorp USA, Inc., as agent for the
Lenders (the "Agent"). Unless otherwise defined herein, terms defined in the
-----
Credit Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule I hereto
agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, an interest in and to
the Assignor's rights and obligations under the Credit Agreement as of the date
hereof equal to the percentage interest specified on Schedule I hereto of all
outstanding rights and obligations under the Credit Agreement. After giving
effect to such sale and assignment, the Assignee's Commitment and the amount of
the Advances owing to the Assignee will be as set forth on Schedule I hereto.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Agreement
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under the
Credit Agreement or any other instrument or document furnished pursuant thereto;
and (iv) attaches the Note held by the Assignor and requests that the Agent
exchange such Note for a new Note payable to the order of the Assignee in an
amount equal to the Commitment assumed by the Assignee pursuant hereto or new
Notes payable to the order of the Assignee in an amount equal to the Commitment
assumed by the Assignee pursuant hereto and the Assignor in an amount equal to
the Commitment retained by the Assignor under the Credit Agreement,
respectively, as specified on Schedule I hereto.
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under the Credit Agreement as are
delegated to the Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (v) agrees that it will
<PAGE>
2
perform in accordance with their terms all of the obligations that by the terms
of the Credit Agreement are required to be performed by it as a Lender; and (vi)
attaches any U.S. Internal Revenue Service forms required under Section 2.13 of
the Credit Agreement.
4. Following the execution of this Assignment and Acceptance, it
will be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "Effective Date") shall
--------------
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1 hereto.
5. Upon such acceptance and recording by the Agent, as of the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and after
the Effective Date, the Agent shall make all payments under the Credit Agreement
and the Notes in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest and facility fees with respect
thereto) to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement and the Notes for periods
prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule
1 to this Assignment and Acceptance to be executed by their officers thereunto
duly authorized as of the date specified thereon.
<PAGE>
Schedule I
to
Assignment and Acceptance
Percentage interest assigned: __%
Assignee's Commitment: $_________
Aggregate outstanding principal
amount of Advances assigned: $_________
Principal amount of Note
payable to Assignee: $_________
Principal amount of Note
payable to Assignor: $_________
Effective Date: _________________, 19__*
[NAME OF ASSIGNOR], as Assignor
By___________________
Title:
Dated: ___________, 19__
[NAME OF ASSIGNEE], as Assignee
By____________________
Title:
Domestic Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
- -----------------------------
* This date should be no earlier than five Business Days after the delivery of
this Assignment and Acceptance to the Agent.
<PAGE>
2
Accepted [and Approved] this
___day of ______, 199_
CITICORP USA, INC., as Agent
By_______________________
Name:
Title:
[Approved this ___ day
of ________, 199_
PIMCO ADVISORS L.P.
By_______________________
Name:
Title:]*
- -----------------------------
* Required if the Assignee is an Eligible Assignee solely by reason of clause
(c) of the definition of "Eligible Assignee".
<PAGE>
PIMCO Advisors L.P.
EXHIBIT D TO THE
CREDIT AGREEMENT
----------------
FORM OF OPINION OF
COUNSEL FOR THE BORROWER
2187 Atlantic Street
Stamford, CT 06902
P I M C 0 Tel: 203 352-4900
April 12, 1996
To each of the Lenders parties to the
Credit Agreement dated as of April 12, 1996
among PIMCO Advisors L.P., said Lenders
and Citicorp USA, Inc., as Agent for said Lenders,
and to Citicorp USA, Inc. as Agent
PIMCO Advisors L.P.
------------------
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 3.01 of the
Credit Agreement, dated as of April 12, 1996 (the "Credit Agreement"), among
PIMCO Advisors L.P. (the "Borrower"), the Lenders parties thereto and Citicorp
USA, Inc., as Agent for said Lenders. Unless otherwise defined here, terms
defined in the Credit Agreement are used herein as therein defined.
I am Senior Vice President-Legal of the Borrower and have acted as
counsel for the Borrower in connection with the preparation, execution and
delivery of the Credit Agreement.
In that connection, I have examined:
l . The Credit Agreement.
2. The documents furnished by the Borrower pursuant to Article III
of the Credit Agreement.
I have also examined the originals, or copies certified to my satisfaction, of
the documents listed in a certificate of the chief financial officer of the
Borrower, dated the date hereof (the "Certificate"), certifying that the
documents listed in such certificate are all of the indentures, loan or credit
agreements, leases, guaranties, mortgages, security agreements, bonds, notes and
other agreements or instruments, and all of the orders, writs, judgments,
awards, injunctions and decrees, that affect or purport to affect the Borrower's
right to borrow money or the Borrower's obligations under the Credit Agreement
or the Notes. In addition, I have examined the originals, or copies certified to
my satisfaction, as such other corporate records of the Borrower, certificates
of public officials and of officers of the Borrower, and agreements, instruments
and other documents, as I have deemed necessary as a basis for the opinions
expressed below. As to questions of fact material to such opinions, I have, when
relevant facts were not independently established by me, relied upon
certificates of the Borrower or its officers or of public officials. I have
assumed the due execution and delivery, pursuant to due authorization, of the
Credit Agreement by the Initial Lender and the Agent.
<PAGE>
To each of the Lenders Parties
to the Credit Agreement
dated April 12, 1996
Page 2
My opinions expressed below are limited to the law of the State of New
York, the Delaware Revised Uniform Limited Partnership Act and the Federal law
of the United States.
Based upon the foregoing and upon such investigation as I have deemed
necessary and subject to the qualifications set forth below, I am of the
following opinion:
1. The Borrower has been duly formed and is validly existing and in
good standing as a limited partnership under the laws of the
State of Delaware and has all requisite partnership power and
authority to own or lease its properties and to carry on its
business as now conducted and as proposed to be conducted. There
is no authorized or outstanding class of capital stock or
ownership units of the Borrower other than the Units. The Units
have been validly issued, are fully paid and nonassessable.
2 The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes, and the consummation of the
transactions contemplated thereby, are within the Borrower's
partnership powers, have been duly authorized by all necessary
partnership action, and do not contravene (i) the Partnership
Agreement or (ii) any law, rule or regulation applicable to the
Borrower (including, without limitation, Regulation X of the
Board of Governors of the Federal Reserve System) or (iii) any
contractual or legal restriction contained in any document
listed in the Certificate or, to the best of my knowledge,
contained in any other similar document. The Credit Agreement
and the Notes have been duly executed and delivered on behalf of
the Borrower.
3. No authorization, approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or
any other third party is required for the due execution,
delivery and performance by the Borrower of the Credit Agreement
and the Notes.
4. The Credit Agreement is, and after giving effect to the initial
Borrowing, the Notes will be, the legal, valid and binding
obligation of the Borrower enforceable against the Borrower in
accordance with their respective terms.
5. To the best of my knowledge, there are no pending or overtly
threatened actions or proceedings against the Borrower or any of
its Subsidiaries before any court, governmental agency or
arbitrator that purport to affect the legality, validity,
binding effect or enforceability of the Credit Agreement or any
of the Notes or the consummation of the transactions
contemplated thereby or that are likely to have a materially
adverse effect upon the financial condition or operations of the
Borrower or any of its Subsidiaries.
<PAGE>
To each of the Lenders Parties
to the Credit Agreement
dated April 12, 1996
Page 3
6. The provisions of the Credit Agreement and the Notes (without
regard for any provisions thereof limiting the payment of
interest or any other sums thereunder to the highest rate
permitted by applicable law) do not violate any applicable law
of the State of New York relating to usury.
7. Except as described on Schedule 4.01(h) to the Credit Agreement,
the Borrower is not an "investment company," or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the
Investment Company Act.
The opinions set forth above are subject to the following qualifications:
(a) My opinion in paragraph 4 above is subject to the effect
of any applicable bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar law
affecting creditors' rights generally.
(b) My opinion in paragraph 4 above is subject to the effect
of general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good
faith and fair dealing (regardless of whether considered
in a proceeding in equity or at law).
(c) With respect to paragraph 1 above, assuming that the
holders of Units of limited partner interest, as limited
partners of the Partnership, do not participate in the
control of the business of the Partnership, the holders of
Class A LP Units or Class B LP Units under the Partnership
Agreement, as limited partners of the Partnership, have no
liability in excess of their obligations to make
contributions to the Partnership, their obligations to
make other payments provided for in the Partnership
Agreement and their share of the Partnership's assets and
undistributed profits (subject to an obligation of a
limited partner of a limited partnership no greater than
the obligation of such limited partner to repay (i) to the
limited partnership, to the extent provided under repealed
6 Del. C. 17-608, for a period of one (1) year after any
------
rightful return, any part of its contribution to the
limited partnership rightfully returned to it, but only to
the extent necessary to discharge the limited
partnership's liabilities to creditors who extended credit
to the limited partnership during the period the said
contribution was held by the limited partnership, and (ii)
any funds wrongfully returned to the extent provided under
repealed 6 Del. C. 17-608 or wrongfully distributed to
-------
it).
<PAGE>
To each of the Lenders Parties
to the Credit Agreement
dated April 12, 1996
Page 4
(d) I express no opinion as to (i) Section 2.14 of the Credit
Agreement insofar as it provides that any Lender
purchasing a participation from another Lender pursuant
thereto may exercise setoff or similar rights with respect
to such participation, (ii) Section 8.05 of the Credit
Agreement insofar as its authorizes each Lender to set off
and apply any deposits at any time held, and any other
indebtedness at any time owing, by such Lender to or for
the account of the Borrower and (iii) the effect of the
law of any jurisdiction other than the State of New York
wherein any Lender may be located or wherein enforcement
of the Credit Agreement or the Notes may be sought that
limits the rates of interest legally chargeable or
collectible.
I am aware that Shearman & Sterling will rely upon the opinions set
forth in paragraphs 1, 2 and 3 of this opinion in rendering their opinion
furnished pursuant to Section 3.01 of the Credit Agreement.
Very truly yours,
Newton B. Schott, Jr.
NBS/lk
<PAGE>
EXHIBIT 11
PIMCO Advisors L.P.
Computations of Primary Net Income Per Unit
(in thousands, except per unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended March 31,
------------------------------------
General Partner
and Class A Class B
------------------------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $19,363 $13,140 $19,363 $13,140
======= ======= ======= =======
Weighted average number of units outstanding 40,921 40,818 32,961 32,961
Weighted average effect of Limited Partnership
unit options 1,474 1,096 1,355 -
------- ------- ------- -------
Weighted average number of units and unit
equivalents used to calculate net income per unit 42,395 41,914 34,316 32,691
======= ======= ======= =======
Net income per unit $ 0.31 $ 0.26 $ 0.19 $ 0.07
======= ======= ======= =======
</TABLE>
PIMCO Advisors L.P.
Computations of Fully Diluted Net Income Per Unit
(in thousands, except per unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended March 31,
------------------------------------
General Partner
and Class A Class B
------------------------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $19,363 $13,140 $19,363 $13,140
======= ======= ======= =======
Weighted average number of units 40,921 40,818 32,961 32,961
outstanding
Weighted average effect of Limited Partnership
unit options 1,474 1,096 1,355 -
------- ------- ------- -------
Weighted average number of units and unit equivalents
used to calculate net income per unit 42,395 41,914 34,316 32,691
======= ======= ======= =======
Net income per unit $ 0.31 $ 0.26 $ 0.19 $ 0.07
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PIMCO
ADVISORS L.P. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS 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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 42,017
<SECURITIES> 10,818
<RECEIVABLES> 56,965
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 114,195
<PP&E> 10,506<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 369,040
<CURRENT-LIABILITIES> 49,994
<BONDS> 0
<COMMON> 332,225<F2>
0
0
<OTHER-SE> (13,908)<F3>
<TOTAL-LIABILITY-AND-EQUITY> 369,040
<SALES> 0<F4>
<TOTAL-REVENUES> 91,220<F5>
<CGS> 0<F4>
<TOTAL-COSTS> 63,011<F6>
<OTHER-EXPENSES> 9,002<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 19,752
<INCOME-TAX> 389
<INCOME-CONTINUING> 19,363
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,363
<EPS-PRIMARY> .31<F8>
<EPS-DILUTED> .19<F9>
<FN>
<F1>Net of accumulated depreciation and amortization.
<F2>Entity is a partnership. Amount shown represents Partners' Capital.
<F3>Amount shown comprises Unamortized Compensation.
<F4>The partnership is in the service business and has no sales or cost of goods
sold of tangible products.
<F5>Amount shown comprises revenues from services.
<F6>Amount shown comprises costs of services.
<F7>Amount shown is from amortization of intangible assets.
<F8>Amount shown is for the Partnership's General Partner and Class A Limited
Partner Units.
<F9>Amount is for the Partnership's Class B Limited Partner Units.
</FN>
</TABLE>
