SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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Commission File Number 0-19799
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PILGRIM AMERICA CAPITAL CORPORATION
-----------------------------------
F/K/A/ EXPRESS AMERICA HOLDINGS CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 86-0670679
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
40 North Central Avenue, Suite 1200, Phoenix, AZ 85004
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 417-8100
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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 [ ]
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
3,866,130 Shares of Common Stock outstanding on August 7, 1997
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<PAGE>
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
----
<S> <C> <C> <C>
Item 1. Financial Statements
(a) Condensed Consolidated Financial Statements........................... 3
(b) Notes to Condensed Consolidated Financial Statements.................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................... 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................ 11
Item 6. Exhibits and Reports on Form 8-K............................................. 11
Signatures................................................................................. 12
</TABLE>
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
PILGRIM AMERICA CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share amounts)
June 30, September 30,
1997 1996
- --------------------------------------------------------------------------------
Assets
Cash and cash equivalents $ 235 $ 238
Investments 2,637 2,462
Accounts receivable 331 216
Notes receivable 3,938 3,587
Costs assigned to management contracts acquired, less
accumulated amortization of $2,910 and$1,943 29,352 30,320
Furniture, fixtures and equipment, less accumulated
depreciation of $330 and $1,378 521 1,144
Deferred taxes 7,581 1,750
Deferred acquisition costs, less accumulated amortization
of $554 and $131 4,783 1,939
Other assets 1,000 899
-------- --------
Total assets $ 50,378 $ 42,555
======== ========
- --------------------------------------------------------------------------------
Liabilities and stockholders' equity
Liabilities:
Net liabilities of discontinued operations $ 707 $ 3,392
Notes payable 6,575 3,600
Accounts payable and accrued expenses 2,687 5,775
-------- --------
Total liabilities 9,969 12,767
-------- --------
Stockholders' equity:
Common stock, $.01 par value, 10,000,000 shares
authorized, 5,383,860 shares issued, with
3,866,130 shares outstanding 54 54
Less: Treasury stock, 1,517,730 shares (8,623) (8,623)
Additional paid-in capital 48,793 48,759
Unrealized gain on investments 420 333
Accumulated deficit (235) (10,735)
-------- --------
Total stockholders' equity 40,409 29,788
-------- --------
Total liabilities and stockholders' equity $ 50,378 $ 42,555
======== ========
- --------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
June 30, June 30,
1997 1996 1997 1996
------------------------- --------------------------
<S> <C> <C> <C> <C>
Revenues
Management and administrative fees $ 4,456 $ 3,084 $ 12,630 $ 9,077
Distribution fees 656 307 1,675 773
Investment and other income 582 214 1,120 567
----------- ----------- ----------- -----------
Total revenues 5,694 3,605 15,425 10,417
----------- ----------- ----------- -----------
- --------------------------------------------------------------------------------------------------------
Expenses
General and administrative 2,027 1,903 5,818 5,834
Selling 1,212 1,818 3,667 4,941
Amortization and depreciation 571 526 1,668 1,477
----------- ----------- ----------- -----------
Total expense 3,810 4,247 11,153 12,252
----------- ----------- ----------- -----------
Earnings (loss) from continuing operations
before income taxes (benefit) 1,884 (642) 4,272 (1,835)
Income taxes (benefit) 773 - (5,815) -
----------- ----------- ----------- -----------
Net earnings (loss) from continuing operations 1,111 (642) 10,087 (1,835)
----------- ----------- ----------- -----------
Net earnings from operations of
discontinued mortgage business, net of tax 413 - 413 -
----------- ----------- ----------- -----------
Net earnings (loss) $ 1,524 ($ 642) $ 10,500 ($ 1,835)
=========== =========== =========== ===========
- --------------------------------------------------------------------------------------------------------
Earnings (Loss) per Common and
Common Equivalent Share
Primary:
Earnings (loss) from continuing operations $ 0.26 ($ 0.13) $ 2.46 ($ 0.38)
=========== =========== =========== ===========
Net earnings (loss) $ 0.36 ($ 0.13) $ 2.56 ($ 0.38)
=========== =========== =========== ===========
Shares used in per share calculation 4,233,411 4,877,860 4,098,060 4,877,860
=========== =========== =========== ===========
Fully Diluted:
Earnings (loss) from continuing operations $ 0.26 ($ 0.13) $ 2.35 ($ 0.38)
=========== =========== =========== ===========
Net earnings (loss) $ 0.35 ($ 0.13) $ 2.45 ($ 0.38)
=========== =========== =========== ===========
Shares used in per share calculation 4,335,799 4,877,860 4,283,279 4,877,860
=========== =========== =========== ===========
- --------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
PILGRIM AMERICA CAPTIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended June 30,
- -------------------------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ 10,500 ($ 1,835)
Adjustments to reconcile net earnings (loss) to net cash provided by
(used in) operating activities:
Amortization and depreciation 1,668 1,477
Increase in accounts receivable (466) (340)
Decrease in operating liabilities (3,088) (865)
Increase in deferred acquisition costs (3,287) (1,267)
Increase in deferred tax asset (5,831) --
(Increase) decrease in other operating assets (295) 591
-------- --------
Net cash used in operating activities (799) (2,239)
-------- --------
- -------------------------------------------------------------------------------------------
Cash flows from investing activities
Investment in Pilgrim America Funds (88) (22)
Sales of furniture, fixtures and equipment 12 129
Purchases of furniture, fixtures and equipment (35) (235)
Cash used in discontinued operations (2,103) (173)
-------- --------
Net cash used in investing activities (2,214) (301)
-------- --------
- -------------------------------------------------------------------------------------------
Cash flows from financing activities
Redemption of preferred stock -- (338)
Proceeds from purchase of stock options 35 --
Term debt borrowing 2,975 1,500
-------- --------
Net cash provided by financing activities 3,010 1,162
-------- --------
Net decrease in cash and cash equivalents (3) (1,378)
Cash and cash equivalents, beginning of period 238 1,858
-------- --------
Cash and cash equivalents, end of period $ 235 $ 480
======== ========
- -------------------------------------------------------------------------------------------
Supplemental disclosures
Interest paid $ 372 $ 103
Income taxes paid 95 2
Income tax refund recieved -- 12
- -------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF FINANCIAL STATEMENT PRESENTATION
Name Change. On April 25, 1997, Express America Holdings Corporation
changed its name to Pilgrim America Capital Corporation (NASDAQ: PACC) (the
"Company") in order to better reflect that the Company's operating business is
managing six open-end and two closed-end mutual funds under the Pilgrim America
name.
Principles of Consolidation. The accompanying condensed consolidated
financial statements of the Company were prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for fair presentation have been
included. Operating results for the three and nine months ended June 30, 1997
are not necessarily indicative of the results which may be expected for the
fiscal year ending September 30, 1997. For additional information, refer to the
consolidated financial statements for the fiscal year ended September 30, 1996
which are included in the Company's Form 10-K.
The condensed consolidated financial statements include the Company's
wholly owned subsidiary, Pilgrim America Group, Inc. ("PAG") and PAG's
subsidiaries, Pilgrim America Investments, Inc., a registered investment
advisor, and Pilgrim America Securities, Inc., a registered broker/dealer
(collectively "Pilgrim America"). Pilgrim America commenced operations upon the
acquisition (the "Acquisition") of certain assets of Pilgrim Group, Inc. on
April 7, 1995. The condensed consolidated financial statements also include the
Company's wholly-owned mortgage banking subsidiaries, Express America TC, Inc.,
EAMC Liquidation Corp., the successor (as of December 27, 1996) to Express
America Mortgage Corporation ("EAMC"), and EAMC's wholly-owned subsidiaries,
Wesav Investment Corporation and Wesav Investment Inc.-2.
Prior to April 7, 1995, the Company's principal business consisted of
mortgage banking activities, including the origination, sale, and servicing of
loans collateralized by first mortgages on residential real estate. On February
28, 1995 the Company announced the discontinuance of the remainder of its
mortgage banking operations. Consequently, all of the operating results of the
Company's mortgage banking activities are reported as discontinued operations.
After the Acquisition, the continuing operating activities of the
Company consist primarily of providing investment management and related
services to various open-end and closed-end investment companies operating under
the Pilgrim and Pilgrim America names (the "Funds"). The results of continuing
operations reported in the condensed consolidated financial statements reflect
these investment management activities.
Reclassifications. Certain reclassifications have been made to prior
period financial statements to conform with current period presentation.
6
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Costs Assigned to Management Contracts Acquired. Costs assigned to
management contracts acquired represents the fair value of the investment
management rights acquired through the Acquisition and also represents the
excess of the purchase price (including liabilities assumed) over the fair value
of net assets acquired and resulting costs from the Acquisition. These amounts
are being amortized on a straight-line basis over 25 years.
The Company analyzes costs assigned to management contracts acquired
periodically to determine whether any impairment in value has occurred. Based
upon anticipated future income from operations, in the opinion of management
there has been no impairment.
Income Tax. Deferred tax assets are initially recognized for temporary
differences between the consolidated financial statement carrying amount and the
tax bases of assets and liabilities which will result in future deductible
amounts and operating loss and tax credit carryforwards. A valuation allowance
is then established to reduce the deferred tax asset to the level at which it is
"more likely than not" that the tax benefits will be realized. The Company
recorded an income tax benefit during the nine months ended June 30, 1997 as a
result of a change in the valuation allowance for the Company's deferred tax
asset. The change in the valuation allowance resulted from management's
determination that it is more likely than not that the deferred asset will be
realized.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
General
The Company is a holding company that, through its wholly-owned
subsidiaries, provides investment management and related services for six
open-end and two closed-end funds (each a "Fund" and collectively the "Pilgrim
America Funds" or the "Funds"). The Board of Directors of Pilgrim America Bank
and Thrift Fund approved converting the Fund from a closed-end fund to an
open-end fund subject to obtaining shareholder approval at a meeting scheduled
for October 16, 1997.
The Company commenced its investment management operations on April 7,
1995, when it consummated the acquisition (the "Acquisition") of certain of the
net assets of Pilgrim Group, Inc. (now known as Atlas Financial Group, Inc.) for
$28.1 million.
Prior to the Acquisition, the Company was engaged in the mortgage
banking business, deriving revenues primarily from mortgage loan servicing and
origination. On February 28, 1995, the Company announced the discontinuance of
all remaining mortgage banking operations and continues to wind-down its
mortgage operations by selling its remaining mortgage banking related assets.
7
<PAGE>
Results of Operations
The following table presents comparative quarterly data regarding Fund
assets under management and Fund sales for the five quarters ended June 30,
1997:
<TABLE>
<CAPTION>
Pilgrim America Funds
Selected Fund Data (Unaudited)
($000,000)
-----------------------------------------------------------------
June 30, September 30, December 31, March 31, June 30,
1996 1996 1996 1997 1997
- ------------------- -------- ------------- ------------ --------- --------
<S> <C> <C> <C> <C> <C>
Direct Sales $ 40.5 $ 38.3 $ 49.0 $ 74.0 $ 60.7
Exchanges Out (1) (1.2) (0.5) (1.1) 0.4 (1.1)
Redemptions (9.1) (9.8) (15.9) (16.6) (30.8)
-------- -------- -------- -------- --------
Net Sales $ 30.2 $ 28.0 $ 32.0 $ 57.8 $ 28.8
======== ======== ======== ======== ========
Ending Assets Under
Management (2) $1,451.7 $1,704.5 $2,022.6 $2,138.0 $2,288.9
======== ======== ======== ======== ========
</TABLE>
(1) Net Exchanges from (to) the Company's sponsored money market fund.
(2) Includes net assets plus borrowings by Pilgrim America Prime Rate Trust for
investment purposes of $345 million, $323 million, $286 million and $179
million at June 30, 1997, March 31, 1997, December 31, 1996 and September
30, 1996, respectively.
Quarter Ended June 30, 1997 Compared to the Quarter Ended June 30, 1996
Net earnings for the June 30, 1997 quarter amounted to $1.5 million, or
$0.36 per share compared to a net loss of $642,000, or $0.13 per share for the
quarter ended June 30, 1996. Net earnings for the June 30, 1997 quarter consist
of net earnings from the Company's continuing investment management business of
$1.1 million, or $0.26 per share, and net earnings from the operations of the
discontinued mortgage business of $413,000 or $0.10 per share.
Revenues. Revenues for the June 30, 1997 quarter increased by $2.1
million over revenues for the June 30, 1996 quarter. This increase primarily
resulted from an increase in management and administrative fees of $1.4 million.
Management and administrative fees are based on assets under management which
averaged $2.20 billion during the current quarter and $1.43 billion during the
June 30, 1996 quarter.
In addition, higher sales of open-end funds during the current quarter
as compared to the June 30, 1996 quarter resulted in increased distribution fees
of $349,000. Distribution fees are realized from the sale of certain fund
shares.
Investment and other income for the June 30, 1997 quarter increased by
$368,000 primarily as a result of a reduction of loss allowances related to a
certain note receivable held in connection with the Company's sale of the
mortgage banking servicing operations.
Expenses. Total expenses for the current quarter decreased by $437,000
compared to the June 30, 1996 quarter. This decrease in expenses primarily
resulted from lower personnel costs due to a reduction in staff and lower
selling expenses.
8
<PAGE>
Amortization and depreciation expenses increased by $45,000 between the
two quarters primarily as a result of an increase in the amortization of
deferred acquisition costs. Deferred acquisition costs are commissions paid on
the sale of certain fund shares. These commissions are capitalized and amortized
over a six-year period.
Earnings from discontinued mortgage operations, net of tax. Earnings
from discontinued mortgage operations, net of tax increased by $413,000 for the
current quarter compared to the quarter ended June 30, 1996, as a result of the
reduction of certain loss allowances related to that business.
Nine Months Ended June 30, 1997 Compared to the Nine Months Ended June 30, 1996.
Net earnings for the nine months ended June 30, 1997 were $10.5
million, or $2.56 per share, compared to a net loss of $1.8 million, or $0.38
per share for the nine months ended June 30, 1996. Net earnings for the current
reporting period consisted of net earnings from the Company's continuing
investment management business of $10.1 million, or $2.46 per share, and net
earnings from the operation of the discontinued mortgage business of $413,000 or
$0.10 per share.
Revenues. Revenues for the nine months ended June 30, 1997 increased by
$5.0 million over revenues for the nine months ended June 30, 1996. This
increase primarily resulted from an increase in management and administrative
fees of $3.6 million. Management and administrative fees are based on assets
under management which averaged $2.0 billion during the first nine months of
fiscal 1997 and $1.4 billion during the first nine months of fiscal 1996.
In addition, higher sales of open-end funds during the current
reporting period as compared to the June 30, 1996 reporting period resulted in
increased distribution fees of $902,000. Distribution fees are realized from the
sale of certain fund shares.
Investment and other income for the nine months ended June 30, 1997
increased by $553,000 primarily as a result of a reduction of loss allowances
related to a certain note receivable held in connection with the Company's sale
of the mortgage banking servicing operations.
Expenses. Total expenses for the nine months ended June 30, 1997
decreased by $1.1 million compared to the nine months ended June 30, 1996. This
decrease primarily resulted from lower personnel costs due to a reduction in
staff and lower selling expenses.
Amortization and depreciation expenses increased by $191,000 between
the two reporting periods primarily as a result of an increase in the
amortization of deferred acquisition costs. Deferred acquisition costs are
commissions paid on the sale of certain fund shares. These commissions are
capitalized and amortized over a six year period.
Earnings from discontinued mortgage operations, net of tax. Earnings
from discontinued mortgage operations, net of tax increased by $413,000 for the
current nine months compared to the nine months ended June 30, 1996, as a result
of the reduction of certain loss allowances related to that business.
9
<PAGE>
Liquidity
The Company intends to continue funding its investment management
operations with cash provided by operations and with borrowings obtained under
its credit agreement. The Company believes that it will have adequate cash
necessary to meet expected cash needs both from cash generated from operations
and borrowings available under its credit agreement.
On July 31, 1997, the Company and its lender amended and restated its
credit agreement. The new agreement allows the Company to borrow up to $20
million for any corporate purpose including: (i) general corporate working
capital, (ii) acquisition of investment management rights, (iii) financing of
commissions paid by the Company on certain mutual fund shares and (iv)
repurchasing the Company's stock.
On August 5, 1997, the Company's Board of Directors approved
repurchasing up to 500,000 shares of its common stock from time to time in open
market transactions. The Company will use cash generated from operations or
borrowings obtained under its credit agreement to acquire the shares.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On May 23, 1997 the Company entered into an agreement with the Federal
Deposit Insurance Corporation ("FDIC") to settle all claims in a civil action
filed in December 1995 by the FDIC in the United States District Court, District
of Arizona. The FDIC action against the Company and other defendants sought at
least $20 million in actual damages and $80 million in punitive damages. This
settlement covers all FDIC claims asserted against the Company and certain of
its officers and directors.
The Company settled with its Director and Officer liability insurance carrier
under the policy providing coverage for this matter.
No charge to earnings resulted from this settlement.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 Second Amended and Restated Credit Agreement dated as of July
31, 1997 by and between Pilgrim America Group, Inc. and First
Bank National Association.
27.0 Financial Data Schedules
(b) Reports on Form 8-K.
During the quarter ended June 30, 1997, the Company filed one Current
Report on Form 8-K relating to an event of April 25, 1997.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
PILGRIM AMERICA CAPITAL CORPORATION
Date: August 7, 1997 /s/ James R. Reis
-----------------
James R. Reis
Vice-Chairman and Chief Financial
Officer (Principal Accounting
Officer)
SECOND AMENDED AND
RESTATED CREDIT AGREEMENT
by and between
PILGRIM AMERICA GROUP, INC.,
PILGRIM AMERICA CAPITAL CORPORATION
and
FIRST BANK NATIONAL ASSOCIATION
dated as of July 31, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS AND ACCOUNTING TERMS..................................1
Section 1.1 Defined Terms..........................................1
Section 1.2 Accounting Terms and Calculations ....................12
Section 1.3 Computation of Time Periods ..........................12
Section 1.4 Other Definitional Terms..............................12
ARTICLE II - TERMS OF THE CREDIT FACILITIES...................................13
Section 2.1 Lending Commitments...................................13
Section 2.2 Procedure for Loans...................................13
Section 2.3 Notes.................................................14
Section 2.4 Conversions and Continuations ........................14
Section 2.5 Interest Rates, Default Interest and Payments ........15
Section 2.6 Repayment.............................................15
Section 2.7 Optional Prepayments..................................16
Section 2.8 Letters of Credit.....................................16
Section 2.9 Procedures for Letters of Credit......................16
Section 2.10 Terms of Letters of Credit............................17
Section 2.11 Agreement to Repay Letter of Credit Drawings..........17
Section 2.12 Obligations Absolute..................................17
Section 2.13 Increased Cost for Letters of Credit..................18
Section 2.14 Optional Reduction of Commitment Amount or
Termination of Commitment............................19
Section 2.15 Loans to Cover Unpaid Drawings........................19
Section 2.16 Fees..................................................19
Section 2.17 Computation...........................................20
Section 2.18 Payments..............................................20
Section 2.19 Use of Loan Proceeds..................................20
Section 2.20 Interest Rate Not Ascertainable, Etc..................20
Section 2.21 Increased Cost........................................21
Section 2.22 Illegality............................................22
Section 2.23 Increased Capital Requirements .......................22
ARTICLE III - CONDITIONS PRECEDENT............................................23
Section 3.1 Conditions Precedent to the Initial Revolving
Loan................................................23
Section 3.2 Conditions Precedent to all Loans and Letters
of Credit ..........................................25
ARTICLE IV - REPRESENTATIONS AND WARRANTIES...................................25
Section 4.1 Organization, Standing, Etc...........................25
Section 4.2 Authorization and Validity ...........................26
Section 4.3 No Conflict; No Default...............................26
Section 4.4 Government Consent....................................27
Section 4.5 Financial Statements and Condition....................27
Section 4.6 Litigation............................................27
Section 4.7 ERISA.................................................28
Section 4.8 Federal Reserve Regulations ..........................28
Section 4.9 Title to Property; Leases; Liens; Subordination ......28
Section 4.10 Taxes.................................................28
Section 4.11 Trademarks, Patents...................................29
Section 4.12 Burdensome Restrictions...............................29
Section 4.13 Force Majeure.........................................29
<PAGE>
Section 4.14 Investment Company Act................................29
Section 4.15 Public Utility Holding Company Act ...................29
Section 4.16 Retirement Benefits...................................29
Section 4.17 Subsidiaries..........................................29
Section 4.18 Fund Agreements.......................................30
Section 4.19 Full Disclosure.......................................30
ARTICLE V - AFFIRMATIVE COVENANTS.............................................30
Section 5.1 Financial Statements and Reports .....................30
Section 5.2 Corporate Existence...................................32
Section 5.3 Insurance.............................................32
Section 5.4 Payment of Taxes and Claims ..........................32
Section 5.5 Inspection............................................33
Section 5.6 Maintenance of Properties.............................33
Section 5.7 Books and Records.....................................33
Section 5.8 Compliance............................................33
Section 5.9 Notice of Litigation..................................34
Section 5.10 ERISA.................................................34
Section 5.11 Fund Agreements.......................................34
Section 5.12 Advisory Subsidiaries.................................34
Section 5.13 Further Assurances....................................36
ARTICLE VI - NEGATIVE COVENANTS...............................................37
Section 6.1 Merger................................................37
Section 6.2 Disposition of Assets.................................37
Section 6.3 Plans.................................................38
Section 6.4 Change in Nature of Business .........................38
Section 6.5 Subsidiaries..........................................38
Section 6.6 Negative Pledges; Subsidiary Restrictions ............38
Section 6.7 Restricted Payments...................................38
Section 6.8 Transactions with Affiliates .........................39
Section 6.9 Accounting Changes....................................39
Section 6.10 Investments...........................................39
Section 6.11 Indebtedness..........................................40
Section 6.12 Liens.................................................40
Section 6.13 Contingent Obligations................................41
Section 6.14 Funded Debt Leverage Ratio............................41
Section 6.15 Fixed Charge Coverage Ratio...........................42
Section 6.16 Minimum Fund Balances.................................42
Section 6.17 EBITDA ...............................................42
Section 6.18 Loan Proceeds.........................................42
ARTICLE VII - EVENTS OF DEFAULT AND REMEDIES..................................42
Section 7.1 Events of Default.....................................42
Section 7.2 Remedies..............................................45
Section 7.3 Offset................................................45
ARTICLE VIII - MISCELLANEOUS..................................................46
Section 8.1 Modifications.........................................46
Section 8.2 Expenses; Amendment or Waiver Fee ....................46
Section 8.3 Waivers, etc..........................................46
<PAGE>
Section 8.4 Notices...............................................46
Section 8.5 Taxes.................................................47
Section 8.6 Successors and Assigns; Disposition of Loans;
Transferees ........................................47
Section 8.7 Confidentiality of Information .......................48
Section 8.8 Governing Law and Construction .......................48
Section 8.9 Consent to Jurisdiction...............................48
Section 8.10 Waiver of Jury Trial..................................49
Section 8.11 Survival of Agreement.................................49
Section 8.12 Indemnification.......................................49
Section 8.13 Captions..............................................50
Section 8.14 Entire Agreement......................................50
Section 8.15 Counterparts..........................................50
Section 8.16 Borrower Acknowledgements.............................51
Section 8.17 Joint and Several Obligations ........................51
<PAGE>
EXHIBIT 10.1
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT (the "Agreement"),
dated as of July 31, 1997 is by and between PILGRIM AMERICA GROUP, INC., a
Delaware corporation ("PAG"), PILGRIM AMERICA CAPITAL CORPORATION, a Delaware
corporation ("PACC"), (together, the "Borrowers" and each a "Borrower"), and
FIRST BANK NATIONAL ASSOCIATION, a national banking association (the "Bank").
WHEREAS, PAG and the Bank are the parties to that certain
Amended and Restated Credit Agreement dated as of July 31, 1996 (the "Existing
Credit Agreement"); and
WHEREAS, PACC, the owner of all the issued and outstanding
capital stock of PAG, has guarantied the Obligations of PAG to the Bank pursuant
to a certain Guaranty, and granted a security interest in the stock of PAG to
secure such Obligations and Guaranty pursuant to a certain Pledge Agreement,
both dated April 28, 1995; and
WHEREAS, PACC desires to become a Borrower under the credit
facilities to be provided to PAG by the Bank; and
WHEREAS, the PAG, PACC and the Bank desire to amend and
restate the Existing Credit Agreement in its entirety.
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
---------
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms. As used in this Agreement the
following terms shall have the following respective meanings (and such meanings
shall be equally applicable to both the singular and plural form of the terms
defined, as the context may require):
"Adjusted Eurodollar Rate": On any date of determination, the
rate (rounded upward, if necessary, to the next one-hundredth of one percent)
determined by dividing the Eurodollar Rate on such date by 1.00 minus the
Eurodollar Reserve Percentage.
"Advance": Any portion of the outstanding Loans as to which
the Borrowers have elected one of the available interest rate options and, if
applicable, an Interest Period. An Advance may be a Eurodollar Rate Advance or a
Reference Rate Advance.
"Advisory Contracts": Contracts of the type described in 15
U.S.C. SS 80a-15(a).
-1-
<PAGE>
"Advisory Fund": Any Fund for which an Advisory Subsidiary
acts as investment adviser and is entitled to receive fees out of the assets of
such Fund, pursuant to an Advisory Contract.
"Advisory Subsidiary": PAII and any other Subsidiary of the
PAG that acts as investment adviser for any Advisory Fund and, as such, is party
to Advisory Contracts.
"Affiliate": When used with reference to any Person, (a) each
Person that, directly or indirectly, controls, is controlled by or is under
common control with, the Person referred to, (b) each Person which beneficially
owns or holds, directly or indirectly, twenty-five percent or more of any class
of voting stock of the Person referred to (or if the Person referred to is not a
corporation, twenty-five percent or more of the equity interest), (c) each
Person, twenty-five percent of more of the voting stock (or if such Person is
not a corporation, twenty-five percent or more of the equity interest) of which
is beneficially owned or held, directly or indirectly, by the Person referred
to, and (d) each of such Person's officers, directors, joint venturers and
partners. The term control (including the terms "controlled by" and "under
common control with") means the possession, directly, of the power to direct or
cause the direction of the management and policies of the Person in question.
"Applicable Margin": With respect to:
(a) Reference Rate Advances, 0%; and
(b) Eurodollar Advances, 0.95%.
"Board": The Board of Governors of the Federal Reserve System
or any successor thereto.
"Business Day": Any day (other than a Saturday, Sunday or
legal holiday in the State of Minnesota) on which national banks are permitted
to be open in Minneapolis, Minnesota.
"Capital Expenditures": For any period, the sum of all amounts
that would, in accordance with GAAP, be included as additions to property, plant
and equipment on a consolidated statement of cash flow for the Borrowers during
such period.
"Capitalized Lease": A lease of (or other agreement conveying
the right to use) real or personal property with respect to which at least a
portion of the rent or other amounts thereon constitute Capitalized Lease
Obligations.
"Capitalized Lease Obligations": As to any Person, the
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board), and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13).
"Cash Balances": As of any date of determination, on a
consolidated basis, cash balances as reflected on the books of the Borrowers and
their Subsidiaries, giving effect to any checks drawn on any accounts.
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"Cash Equivalents": Investments of the Borrowers of the type
described in Sections 6.11(c), (d), (e) and (f).
"Change of Control": The occurrence, after the Closing Date,
of any of the following circumstances: (a) PACC not owning, directly or
indirectly, all equity securities of PAG; or (b) PAG not owning, directly or
indirectly, all equity securities of any Subsidiary that has executed and
delivered a Security Agreement; or (c) any Person or two or more Persons acting
in concert acquiring beneficial ownership (within the meaning of Rule 13d-3 of
the Securities and Exchange Commission under the Securities Exchange Act of
1934), directly or indirectly, of securities of PACC (or other securities
convertible into such securities) representing twenty-five percent or more of
the combined voting power of all securities of PACC entitled to vote in the
election of directors; or (d) during any period of up to twelve consecutive
months, whether commencing before or after the Closing Date, individuals who at
the beginning of such twelve-month period were directors of PACC ceasing for any
reason to constitute a majority of the Board of Directors of PACC (other than by
reason of death, disability or scheduled retirement).
"Closing Date": The Business Day on which all the conditions
precedent to the obligation of the Bank to make the initial Revolving Loan, as
set forth in Article III, have been satisfied.
"Closing Fee": As defined in Section 2.16(a).
"Code": The Internal Revenue Code of 1986, as amended.
"Commitment": The obligation of the Bank to make Revolving
Loans to the Borrower in an aggregate principal amount outstanding at any time
not to exceed the Commitment Amount, and on the Transformation Date to convert
the outstanding principal balance thereof to a Term Loan, upon the terms and
subject to the conditions and limitations of this Agreement.
"Commitment Amount": $20,000,000, as the same may be reduced
pursuant to Section 2.14.
"Commitment Fees": As defined in Section 2.16(b).
"Contingent Obligation": With respect to any Person at the
time of any determination, without duplication, any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary obligor") in any
manner, whether directly or otherwise; provided, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit, in each
case in the ordinary course of business.
"Default": Any event which, with the giving of notice (whether
such notice is required under Section 7.1, or under some other provision of this
Agreement, or otherwise) or lapse of time, or both, would constitute an Event of
Default.
"Domestic Reserve Percentage": As of any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board for determining the maximum reserve requirement (including without
limitation any basic, supplemental or
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emergency reserves) for a member bank of the Federal Reserve System, with
deposits comparable in amount to those held by the Bank, in respect of new
non-personal time deposits in dollars having a maturity comparable to the
related Interest Period and in an amount of $100,000 or more. The rate of
interest applicable to any outstanding CD Rate Advance shall be adjusted
automatically on and as of the effective date of any change in the Domestic
Reserve Percentage.
"EBITDA": For any period of determination, the consolidated
net income of PAG before deductions for income taxes, interest expense,
depreciation and amortization, all as determined in accordance with GAAP.
"EBITDA Margin": For any Measurement Period, the ratio
(expressed as a percentage) (a) EBITDA bears to (b) the total revenue of PAG and
its Subsidiaries on a consolidated basis.
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate": Any trade or business (whether or not
incorporated) that is a member of a group of which the Borrowers are a member
and which is treated as a single employer under Section 414 of the Code.
"Eurodollar Business Day": A Business Day which is also a day
for trading by and between banks in United States dollar deposits in the
interbank Eurodollar market and a day on which banks are open for business in
New York City.
"Eurodollar Rate": With respect to each Eurodollar Rate
Advance on any date of determination, the average offered rate for deposits in
United States dollars (rounded upward, if necessary, to the nearest 1/16 of 1%)
for delivery of such deposits on such date, for 30 days, which appears on the
Reuters Screen LIBO page as of 11:00 a.m., London time (or such other time as of
which such rate appears) two Eurodollar Business Days prior to such date, or the
rate for such deposits determined by the Bank at such time based on such other
published service of general application as shall be selected by the Bank for
such purpose; provided, that in lieu of determining the rate in the foregoing
manner, the Bank may determine the rate based on rates at which United States
dollar deposits are offered to the Bank in the interbank Eurodollar market at
such time for delivery in Immediately Available Funds on such date in an amount
approximately equal to the Advance by the Bank to which such Interest Period is
to apply (rounded upward, if necessary, to the nearest 1/16 of 1%). "Reuters
Screen LIBO page" means the display designated as page "LIBO" on the Reuters
Monitor Money Rate Screen (or such other page as may replace the LIBO page on
such service for the purpose of displaying London interbank offered rates of
major banks for United States dollar deposits).
"Eurodollar Rate Advance": An Advance with respect to which
the interest rate is determined by reference to the Adjusted Eurodollar Rate.
"Eurodollar Reserve Percentage": As of any day, that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board for determining the maximum reserve requirement
(including any basic, supplemental or emergency reserves) for a member bank of
the Federal Reserve System, with deposits comparable in amount to those held by
the Bank, in respect of "Eurocurrency Liabilities" as such term is defined in
Regulation D of the Board. The rate of interest applicable to any outstanding
Eurodollar Rate Advances
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shall be adjusted automatically on and as of the effective date of any change in
the Eurodollar Reserve Percentage.
"Event of Default": Any event described in Section 7.1.
"Exchange Act": The Securities Exchange Act of 1934, as
amended.
"Fixed Charge Coverage Ratio": For any Measurement Period, the
ratio that (a) EBITDA for such Measurement Period bears to (b) the sum of the
Borrowers' consolidated interest expense for such Measurement Period plus
one-fifth (1/5) of the outstanding principal balance of the Indebtedness of the
Borrowers and their Subsidiaries as of the last day of such Measurement Period,
determined on a consolidated basis for the Borrowers and their Subsidiaries.
"Fund": Each open-end or close-end investment company
registered under the Investment Company Act, or separate series of shares of any
such company representing interests in a separate pool of Investments.
"Fund Agreements": All investment advisory agreements,
distribution agreements and other agreements under which the Borrowers or any
Subsidiary is entitled to compensation (including, without limitation,
contingent deferred sales charges) for services rendered to any Fund.
"Funded Debt": At the time of any determination, the sum of
(a) that portion of Total Indebtedness with a final maturity in excess of one
year after such time of determination (including any current portion thereof),
plus (b) any Indebtedness of the Borrowers or any Subsidiary excluded in
calculating Total Indebtedness and having a final maturity in excess of one year
after such time of determination (including the current portion thereof).
"GAAP": Generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of any
date of determination.
"Guaranty": The guaranty of PAII, dated April28, 1995 (as the
same may be amended, modified, supplemented or restated) and any acknowledgments
or affirmations thereof, or a guaranty of any Advisory Subsidiary in the form of
Exhibit B.
"Holding Account": A deposit account belonging to the Bank
into which the Borrowers may be required to make deposits pursuant to the
provisions of this Agreement, such account to be under the sole dominion and
control of the Bank and not subject to withdrawal by the Borrowers, with any
amounts therein to be held for application toward payment of any outstanding
Letters of Credit when drawn upon.
"Immediately Available Funds": Funds with good value on the
day and in the city in which payment is received.
"Indebtedness": With respect to any Person at the time of any
determination, without duplication, all obligations, contingent or otherwise, of
such Person which in
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accordance with GAAP should be classified upon the balance sheet of such Person
as liabilities, but in any event including: (a) all obligations of such Person
for borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person upon which interest charges are customarily paid or accrued, (d) all
obligations of such Person under conditional sale or other title retention
agreements relating to property purchased by such Person, (e) all obligations of
such Person issued or assumed as the deferred purchase price of property or
services, (f) all obligations of others secured by any Lien on property owned or
acquired by such Person, whether or not the obligations secured thereby have
been assumed, (g) all Capitalized Lease Obligations of such Person, (h) all
obligations of such Person in respect of interest rate protection agreements,
(i) all obligations of such Person, actual or contingent, as an account party in
respect of letters of credit or bankers' acceptances, (j) all obligations of any
partnership or joint venture as to which such Person is or may become personally
liable, and (k) all Contingent Obligations of such Person.
"Investment": The acquisition, purchase, making or holding of
any stock or other security, any loan, advance, contribution to capital,
extension of credit (except for trade and customer accounts receivable for
inventory sold or services rendered in the ordinary course of business and
payable in accordance with customary trade terms), any acquisitions of real or
personal property (other than real and personal property acquired in the
ordinary course of business) and any purchase or commitment or option to
purchase stock or other debt or equity securities of or any interest in another
Person or any integral part of any business or the assets comprising such
business or part thereof. The amount of any Investment shall be the original
cost of such Investment plus the cost of all additions thereto, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment.
"Investment Advisers Act": The Investment Advisers Act of
1940, as amended.
"Investment Company Act": The Investment Company Act of 1940,
as amended.
"Letter of Credit": An irrevocable letter of credit issued by
the Bank pursuant to this Agreement for the account of the Borrowers.
"Letter of Credit Fee": As defined in Section 2.16(c).
"Letter of Credit Usage": As of any date, the sum of (a)the
amount of all Unpaid Drawings plus (b)the amount available to be drawn under all
outstanding Letters of Credit.
"Lien": With respect to any Person, any security interest,
mortgage, pledge, lien, charge, encumbrance, title retention agreement or
analogous instrument or device (including the interest of each lessor under any
Capitalized Lease), in, of or on any assets or properties of such Person, now
owned or hereafter acquired, whether arising by agreement or operation of law.
"Loan": A Revolving Loan or the Term Loan.
"Loan Documents": This Agreement, the Note, the Security
Documents and the Guaranty.
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"Maturity Date": The earlier of (a) the eighth Quarterly
Payment Date occurring after the Transformation Date and (b) the date on which
the Obligations become due and payable pursuant to Section 7.2 hereof.
"Measurement Period": The twelve consecutive months or four
consecutive fiscal quarters, as applicable, ending on the last day of any month
or fiscal quarter.
"Multiemployer Plan": A multiemployer plan, as such term is
defined in Section 4001 (a) (3) of ERISA, which is maintained (on the Closing
Date, within the five years preceding the Closing Date, or at any time after the
Closing Date) for employees of the Borrower or any ERISA Affiliate.
"NASD": The National Association of Securities Dealers, Inc.,
and any successor thereto or to the functions thereof.
"Net Asset Value": With respect to any Fund, as of the date of
any determination, the net asset value of such Fund computed in the manner net
asset value was computed for purposes of its reports to the shareholders of such
Funds.
"Note": A promissory note of the Borrowers in the form of
Exhibit A.
"Obligations": The Borrowers' obligations in respect of the
due and punctual payment of principal and interest on the Note when and as due,
whether by acceleration or otherwise and all fees (including Commitment Fees),
expenses, indemnities, reimbursements and other obligations of the Borrower
under this Agreement or any other Loan Document, in all cases whether now
existing or hereafter arising or incurred.
"PAII": Pilgrim America Investments, Inc., a Delaware
corporation.
"PASI": Pilgrim America Securities, Inc., a Delaware
corporation.
"PBGC": The Pension Benefit Guaranty Corporation, established
pursuant to Subtitle A of Title IV of ERISA, and any successor thereto or to the
functions thereof.
"Person": Any natural person, corporation, partnership,
limited partnership, limited liability company, joint venture, firm,
association, trust, unincorporated organization, government or governmental
agency or political subdivision or any other entity, whether acting in an
individual, fiduciary or other capacity.
"Plan": Each employee benefit plan (whether in existence on
the Closing Date or thereafter instituted), as such term is defined in Section 3
of ERISA, maintained for the benefit of employees, officers or directors of the
Borrowers or of any ERISA Affiliate.
"Pledge Agreements": The Pledge Agreement of PACC and the
Pledge Agreement of the PAG, both dated as of April 28, 1995, as the same may be
supplemented, amended or otherwise modified and in effect from time to time.
"Prohibited Transaction": The respective meanings assigned to
such term in Section 4975 of the Code and Section 406 of ERISA.
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"Prospectus": With respect to any Fund, the prospectus and
related statement of additional information filed with the SEC under the
Securities Act in respect of the shares of such Fund, as the same may be amended
or supplemented from time to time.
"Quarterly Payment Date": The last Business Day of each of
March, June, September and December.
"Reference Rate": The rate of interest from time to time
publicly announced by the Bank as its "reference rate." The Bank may lend to its
customers at rates that are at, above or below the Reference Rate. For purposes
of determining any interest rate hereunder or under any other Loan Document
which is based on the Reference Rate, such interest rate shall change as and
when the Reference Rate shall change.
"Reference Rate Advance": An Advance with respect to which the
interest rate is determined by reference to the Reference Rate.
"Regulatory Change": Any change after the Closing Date in
federal, state or foreign laws or regulations or the adoption or making after
such date of any interpretations, directives or requests applying to a class of
banks including the Bank under any federal, state or foreign laws or regulations
(whether or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration thereof.
"Reportable Event": A reportable event as defined in Section
4043 of ERISA and the regulations issued under such Section, with respect to a
Plan, excluding, however, such events as to which the PBGC by regulation has
waived the requirement of Section 4043(a) of ERISA that it be notified within 30
days of the occurrence of such event, provided that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any waiver in
accordance with Section 412(d) of the Code.
"Restricted Payments": With respect to the Borrowers,
collectively, all dividends or other distributions of any nature (cash,
securities other than common stock of the Borrower, assets or otherwise), and
all payments on any class of equity securities (including warrants, options or
rights therefor) issued by the Borrowers, whether such securities are authorized
or outstanding on the Closing Date or at any time thereafter and any redemption
or purchase of, or distribution in respect of, any of the foregoing, whether
directly or indirectly.
"Revolving Loan": As defined in Section 2.1(a).
"Revolving Loan Date": The date of the making of any Revolving
Loans hereunder.
"Revolving Loan Period" The period from the Closing Date to
and including the day preceding the Transformation Date, and if there is no
Transformation Date, from the Closing Date to and including the date on which
the Note is paid in full and the Commitment has expired or been terminated.
"Rules of Fair Practice": The Rules of Fair Practice of the
NASD, as amended, and the rules, regulations and interpretations of the NASD in
respect thereto.
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"SEC": The Securities and Exchange Commission, and any
successor thereto or to the functions thereof.
"Securities Act": The Securities Act of 1933, as amended.
"Security Agreements": The Security Agreements of PAG, PAII
and PASI, all dated as of April 28, 1995; any Security Agreement of an Advisory
Subsidiary in the form of Exhibit C; and any Security Agreement of any other
Subsidiary in the form of Exhibit D entered into thereafter, in each case as the
same may be supplemented, amended or otherwise modified and in effect from time
to time.
"Security Documents": The Security Agreements, the Pledge
Agreements, the Trademark Assignment and all other agreements, documents and
instruments delivered hereto or thereto or in connection herewith or therewith
creating, perfecting or otherwise providing for any Lien to secure the
Obligations, in each case as amended, supplemented, restated or otherwise
modified and in effect from time to time.
"Selling Agent": Each Person which acts as any Subsidiary's
direct or indirect distributor, underwriter, broker, dealer or agent for the
shares of any Fund.
"SIPA": The Securities Investor Protection Act of 1970, as
amended.
"SIPC": The Securities Investor Corporation established
pursuant to SIPA, or any successor thereto or to the functions thereof.
"Subsidiary": With respect to any Person, any corporation or
other entity of which securities or other ownership interests having ordinary
voting power for the election of a majority of the board of directors or other
Persons performing similar functions are owned by such Person either directly or
through one or more Subsidiaries.
"Term Loan": As defined in Section 2.1.
"Term Loan Period": The period from the Transformation Date to
and including the Maturity Date.
"Termination Date": The earliest of (a) the Transformation
Date, (b) the date on which the Commitment is terminated pursuant to Section 7.2
or (c) the date on which the Commitment is terminated pursuant to Section 2.14.
"Total Indebtedness": At the time of any determination, the
amount, on a consolidated basis, of all obligations, liabilities and
indebtedness of the Borrower and its Subsidiaries as determined in accordance
with GAAP.
"Total Outstandings": As of any date of determination, the sum
of (a) the aggregate unpaid principal balance of Loans outstanding on such date,
(b) the Letter of Credit Usage on such date.
"Trademark Assignment": The Collateral Assignment of
Trademarks of PAG dated as of April 28, 1995, as the same may be supplemented,
amended, or otherwise modified and in effect from time to time.
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"Transformation Date": July 30, 1998.
"Unpaid Drawing": As defined in Section 2.11.
"Unused Commitment": As of any date of determination, the
amount by which the Commitment Amount exceeds the Total Outstandings on such
date.
Section 1.2 Accounting Terms and Calculations. Except as may
be expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder shall be made
in accordance with GAAP. To the extent any change in GAAP affects any
computation or determination required to be made pursuant to this Agreement,
such computation or determination shall be made as if such change in GAAP had
not occurred unless the Borrowers and the Bank agree in writing on an adjustment
to such computation or determination to account for such change in GAAP.
Section 1.3 Computation of Time Periods. In this Agreement, in
the computation of a period of time from a specified date to a later specified
date, unless otherwise stated the word "from" means "from and including" and the
word "to" or "until" each means "to but excluding".
Section 1.4 Other Definitional Terms. The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. References to Sections, Exhibits, Schedules and like references
are to this Agreement unless otherwise expressly provided. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly requires,
"or" has the inclusive meaning represented by the phrase "and/or".
ARTICLE II
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TERMS OF THE CREDIT FACILITIES
Part A -- Terms of Lending
--------------------------
Section 2.1 Lending Commitments.
2.1(a) Revolving Credit. On the Closing Date, each
"Revolving Loan" outstanding under the Existing Credit Agreement shall
become a Revolving Loan hereunder, and each "Advance" outstanding under
the Existing Credit Agreement shall become a Eurodollar Rate Advance
hereunder. On the terms and subject to the conditions hereof, the Bank
agrees to make a revolving credit facility available as loans (each, a
"Revolving Loan" and, collectively, the "Revolving Loans") to the
Borrowers on a revolving basis at any time and from time to time from
the Closing Date to the Termination Date, during which period the
Borrower may borrow, repay and reborrow in accordance with the
provisions hereof, provided, that no Revolving Loan will be made in any
amount which, after giving effect thereto, would cause the Total
Outstandings to exceed the Commitment Amount. Revolving Loans may be
obtained and maintained, at the election of the Borrowers but subject
to the limitations hereof, as Reference Rate Advances, Eurodollar Rate
Advances.
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2.1(b) Conversion to Term Loan. On the Transformation
Date, provided that no Default or Event of Default has occurred and is
continuing, the aggregate outstanding principal balance on such date of
the Revolving Loans shall be converted into a term loan (the "Term
Loan") on the terms and subject to the conditions set forth herein. The
Term Loan or portions thereof may be maintained, at the election of the
Borrowers but subject to the limitations hereof, as Reference Rate
Advances or Eurodollar Rate Advances.
Section 2.2 Procedure for Loans.
2.2(a) Procedure for Revolving Loans. Any request by
the Borrowers for Revolving Loans hereunder shall be made by PACC, on
behalf of the Borrowers, in writing or by telephone and must be given
so as to be received by the Bank not later than 12:00 noon (Minneapolis
time) on the requested Revolving Loan Date. Each request for Revolving
Loans hereunder shall be irrevocable and shall be deemed a
representation by the Borrower that on the requested Revolving Loan
Date and after giving effect to the requested Revolving Loans, the
applicable conditions specified in Article III have been and will be
satisfied. Each request for Revolving Loans hereunder shall specify (i)
the requested Revolving Loan Date, (ii) the aggregate amount of
Revolving Loans to be made on such date, which shall be in a minimum
amount of $100,000 or, if more, an integral multiple thereof, and (iii)
whether such Revolving Loans are to be funded as Reference Rate
Advances or Eurodollar Rate Advances. The Bank may rely on any
telephone request for Revolving Loans hereunder which it believes in
good faith to be genuine, and the Borrowers hereby waive the right to
dispute the Bank's record of the terms of such telephone request.
Unless the Bank determines that any applicable condition specified in
Article III has not been satisfied, the Bank will make available to the
Borrower at the Bank's principal office in Minneapolis, Minnesota in
Immediately Available Funds not later than 3:00 p.m. (Minneapolis time)
on the requested Revolving Loan Date the amount of the requested
Revolving Loans.
2.2(b) Procedure for Conversion to Term Loan. Not
later than 12:00 noon (Minneapolis time) one Business Day prior to the
Transformation Date, the Borrowers shall deliver to the Bank a written
notice electing whether the Term Loan is to be funded as Eurodollar
Rate Advances or Reference Rate Advances.
Section 2.3 Notes. The Loans shall be evidenced by a single
Note payable to the order of the Bank in a principal amount equal to the
Commitment Amount originally in effect. The Bank shall enter in its ledgers and
records the amount of each Loan, the various Advances made, converted or
continued and the payments made thereon, and the Bank is authorized by the
Borrowers to enter on a schedule attached to its Note a record of such Loans,
Advances and payments; provided, however that the failure by the Bank to make
any such entry or any error in making such entry shall not limit or otherwise
affect the obligation of the Borrowers hereunder and on the Note, and, in all
events, the principal amounts owing by the Borrowers in respect of the Note
shall be the aggregate amount of all Loans made by the Bank less all payments of
principal thereof made by the Borrowers.
Section 2.4 Conversions and Continuations. On the terms and
subject to the limitations hereof, the Borrowers shall have the option at any
time and from time to time to convert all or any portion of the Advances into
Reference Rate Advances or Eurodollar Rate Advances; provided, however that no
Advance may be converted to or continued as a
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Eurodollar Rate Advance if a Default or Event of Default has occurred and is
continuing on the proposed date of continuation or conversion. The Borrowers
shall give the Bank written notice of any continuation or conversion of any
Advances and such notice must be given so as to be received by the Bank not
later than 12:00 noon (Minneapolis time) on the date of the requested conversion
to Reference Rate Advances or Eurodollar Rate Advances. Each such notice shall
specify (a) the amount to be continued or converted, and (b) the date for the
continuation or conversion (which must be a Business Day). Any notice given by
the Borrower under this Section shall be irrevocable.
Section 2.5 Interest Rates, Default Interest and Payments.
Interest shall accrue and be payable on the Advances as follows:
(a) Each Eurodollar Rate Advance shall bear interest
on the unpaid principal amount thereof at a floating rate per annum
equal to the sum of (A) the Adjusted Eurodollar Rate, plus (B) the
Applicable Margin.
(b) Each Reference Rate Advance shall bear interest
on the unpaid principal amount thereof at a floating rate per annum
equal to the sum of (A) the Reference Rate, plus (B) the Applicable
Margin.
(c) Any Advance not paid when due, whether at the
date scheduled therefor or earlier upon acceleration, shall bear
interest until paid in full at a rate per annum equal to the sum of (1)
the Reference Rate, plus (2) the Applicable Margin for Reference Rate
Advances, plus (3) 2.0%.
(d) Interest shall be payable in arrears on the
Quarterly Payment Date and, with respect to any Loan, on the date such
Loan becomes due and payable in full; provided that interest under
Section 2.5 (c) shall be payable on demand.
(g) Interest accrued under the Existing Credit
Agreement through the Closing Date shall be payable on the date
provided for herein.
Section 2.6 Repayment. The unpaid principal balance of the
Note, together with all accrued and unpaid interest thereon, shall be due and
payable on the Maturity Date. In addition, the Total Outstandings on the
Transformation Date shall be reduced in eight quarterly installments, each in an
amount equal to one-eighth of the Total Outstandings as of the Transformation
Date, on each Quarterly Payment Date beginning with the first Quarterly Payment
Date after the Transformation Date. The Borrowers shall prepay the Term Loan on
each Quarterly Payment date in an amount equal to the required reduction. If a
Letter of Credit is outstanding on the Maturity Date, or if a Letter of Credit
is outstanding after the Transformation Date in an amount in excess of the
amount of Total Outstandings permitted to remain outstanding, the Borrowers
shall deposit into the Holding Account an amount sufficient to cause the amount
deposited in the Holding Account to equal the undrawn face amount of such
outstanding Letter of Credit or such excess, as applicable. At any time after
such deposit is made and all outstanding Obligations, other than Obligations
with respect to outstanding Letters of Credit, have been paid in full, if an
outstanding Letter of Credit expires or is reduced without the full amount
thereof having been drawn, the Bank shall withdraw from the Holding Account and
deliver to the Borrowers an amount equal to the amount by which the amount on
deposit in the Holding Account exceeds the aggregate undrawn face amount of
outstanding Letters of Credit (after giving effect to such expiration or
reduction).
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Section 2.7 Optional Prepayments. The Borrowers may prepay
Loans, in whole or in part, at any time, without premium or penalty. Any such
prepayment must be accompanied by accrued and unpaid interest on the amount
prepaid. Each partial prepayment shall be in an aggregate amount for all the
Banks of $100,000 or an integral multiple thereof. Amounts paid (unless
following an acceleration or upon termination of the Commitment) or prepaid
under this Section 2.7 during the Revolving Period may be reborrowed upon the
terms and subject to the conditions and limitations of this Agreement. Amounts
paid or prepaid on the Term Loan under this Section 2.7 shall be applied to the
installments due on the Term Loan in the inverse order of their maturities.
Part B -- Terms of the Letter of Credit Facility
------------------------------------------------
Section 2.8 Letters of Credit. Upon the terms and subject to
the conditions of this Agreement, the Bank agrees to (a) issue Letters of Credit
for the account of the Borrowers from time to time during the Revolving Loan
Period in such amounts as the Borrowers shall request, and (b) renew existing
Letters of Credit during the Term Loan Period, in each case in an amount not
exceeding the lesser of (i) the amount of the Letter of Credit being renewed,
and (ii) the amount of the Total Outstandings permitted to remain outstanding on
the date of such renewal; provided that no Letter of Credit will be issued in
any amount which, after giving effect to such issuance, would cause (A) Total
Outstandings to exceed the Commitment Amount during the Revolving Loan Period,
or the amount of Total Outstandings permitted to remain outstanding under
Section 2.6 during the Term Loan Period, or (B) the Letter of Credit Usage to
exceed $5,000,000.
Section 2.9 Procedures for Letters of Credit. Each request for
a Letter of Credit shall be made by PACC, on behalf of the Borrowers, in
writing, by telex, facsimile transmission or electronic conveyance received by
the Bank by 2:00 p.m., Minneapolis time, on a Business Day which is not less
than one Business Day preceding the requested date of issuance (which shall also
be a Business Day). Each request for a Letter of Credit shall be deemed a
representation by the Borrowers that on the date of issuance of such Letter of
Credit and after giving effect thereto the applicable conditions specified in
Article III have been and will be satisfied. The Bank may require that such
request be made on such letter of credit application and reimbursement agreement
form as the Bank may from time to time specify, along with satisfactory evidence
of the authority and incumbency of the officials of the Borrowers making such
request.
Section 2.10 Terms of Letters of Credit. Letters of Credit
shall be issued in support of obligations of the Borrowers, other than
obligations relating to borrowing money or obtaining other financing, incurred
in the ordinary course of business. No Letter of Credit may have a term longer
than 12 months.
Section 2.11 Agreement to Repay Letter of Credit Drawings. If
the Bank has received documents purporting to draw under a Letter of Credit that
the Bank believes conform to the requirements of the Letter of Credit, or if the
Bank has decided that it will comply with the Borrowers' written or oral request
or authorization to pay a drawing on any Letter of Credit that the Bank does not
believe conforms to the requirements of the Letter of Credit, it will notify the
Borrowers of that fact. The Borrowers shall reimburse the Bank by 9:30 a.m.
(Minneapolis time) on the day on which such drawing is to be paid in Immediately
Available Funds in an amount equal to the amount of such drawing. Any amount by
which the Borrowers have failed to reimburse the Bank for the full amount of
such drawing by 10:00 a.m. on the date on which the Bank in its notice indicated
that it would pay such drawing, until
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reimbursed from the proceeds of Loans pursuant to Section 2.15 or out of funds
available in the Holding Account, is an "Unpaid Drawing."
Section 2.12 Obligations Absolute. The obligation of the
Borrowers under Section 2.11 to repay the Bank for any amount drawn on any
Letter of Credit and to repay the Bank for any Advances made under Section 2.15
to cover Unpaid Drawings shall be absolute, unconditional and irrevocable, shall
continue for so long as any Letter of Credit is outstanding notwithstanding any
termination of this Agreement, and shall be paid strictly in accordance with the
terms of this Agreement, under all circumstances whatsoever, including without
limitation the following circumstances:
(a) Any lack of validity or enforceability of any Letter of
Credit;
(b) The existence of any claim, setoff, defense or other right
which the Borrowers may have or claim at any time against any
beneficiary, transferee or holder of any Letter of Credit (or any
Person for whom any such beneficiary, transferee or holder may be
acting), the Bank or any other Person, whether in connection with a
Letter of Credit, this Agreement, the transactions contemplated hereby,
or any unrelated transaction; or
(c) Any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever.
Neither the Bank nor its officers, directors or employees shall be liable or
responsible for, and the obligations of the Borrowers to the Bank shall not be
impaired by:
(i) The use which may be made of any Letter of Credit or
for any acts or omissions of any beneficiary,
transferee or holder thereof in connection therewith;
(ii) The validity, sufficiency or genuineness of
documents, or of any endorsements thereon, even if
such documents or endorsements should, in fact, prove
to be in any or all respects invalid, insufficient,
fraudulent or forged;
(iii) The acceptance by the Bank of documents that appear
on their face to be in order, without responsibility
for further investigation, regardless of any notice
or information to the contrary; or
(iv) Any other action of the Bank in making or failing to
make payment under any Letter of Credit if in good
faith and in conformity with U.S. or foreign laws,
regulations or customs applicable thereto.
Notwithstanding the foregoing, the Borrowers shall have a claim against the
Bank, and the Bank shall be liable to the Borrowers, to the extent, but only to
the extent, of any direct, as opposed to consequential, damages suffered by the
Borrowers which the Borrowers prove were caused by the Bank's willful misconduct
or gross negligence in determining whether documents presented under any Letter
of Credit comply with the terms thereof.
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Section 2.13 Increased Cost for Letters of Credit. If any
Regulatory Change shall either (a) impose, modify or make applicable any
reserve, deposit, capital adequacy or similar requirement against Letters of
Credit issued by the Bank, or (b) shall impose on the Bank any other conditions
affecting this Agreement or any Letter of Credit; and the result of any of the
foregoing is to increase the cost to the Bank of issuing or maintaining any
Letter of Credit, or reduce the amount of any sum received or receivable by the
Bank hereunder, then, upon demand (which demand shall be given by the Bank
promptly after it determines such increased cost or reduction), the Borrowers
shall pay to the Bank the additional amount or amounts as will compensate the
Bank for such increased cost or reduction. A certificate submitted to the
Borrowers by the Bank setting forth the basis for the determination of such
additional amount or amounts necessary to compensate the Bank as aforesaid shall
be conclusive and binding on the Borrowers absent error.
Part C -- General
-----------------
Section 2.14 Optional Reduction of Commitment Amount or
Termination of Commitment. The Borrowers may, at any time, upon not less than
thirty days prior written notice to the Bank, reduce the Commitment Amount, with
any such reduction in a minimum amount of $1,000,000, or, if more, in an
integral multiple of $250,000; provided, however, that the Borrowers may not at
any time reduce the Commitment Amount below the Total Outstandings. The
Borrowers may, at any time when there are no Letters of Credit outstanding, upon
not less than thirty days prior written notice to the Bank, terminate the
Commitment in its entirety.
Section 2.15 Loans to Cover Unpaid Drawings. Whenever any
Unpaid Drawing exists for which there are not then funds in the Holding Account
to cover the same, the Bank is authorized (and the Borrowers do here so
authorize the Bank) to, and shall, make a Revolving Loan or, after the
Transformation Date, increase the Term Loan to the Borrowers in an amount equal
to the amount of the Unpaid Drawing. The Bank shall apply the proceeds of such
Revolving Loan or increase directly to reimburse itself for such Unpaid Drawing.
If at the time the Bank makes a Loan pursuant to the provisions of this Section,
the applicable conditions precedent specified in Article III shall not have been
satisfied, the Borrowers shall pay to the Bank interest on the funds so advanced
at a floating rate per annum equal to the sum of the Reference Rate plus the
Applicable Margin plus two percent (2.00%).
Section 2.16 Fees.
2.16(a) Closing Fees. The Borrowers shall pay to the
Bank on the date of this Agreement a closing fee (the "Closing Fee") in
an amount equal to $7,500.
2.16(b) Commitment Fee. The Borrowers shall pay to
the Bank fees (the "Commitment Fees") in an amount determined by
applying a rate of eighteen onehundredths of one percent (.18%) per
annum to the average daily Unused Commitment for the period from the
Closing Date to the Termination Date. Such Commitment Fees are payable
in arrears on each Quarterly Payment Date and on the Termination Date.
2.16(c) Letter of Credit Fees. For each Letter of
Credit issued, the Borrowers shall pay to the Bank, in advance payable
on the date of issuance, a fee (a "Letter of Credit Fee") in an amount
determined by applying a per annum rate equal to the Applicable Margin
for Eurodollar Rate Advances then in effect to the original face
<PAGE>
amount of the Letter of Credit for the period from the date of issuance
to the scheduled expiration date of such Letter of Credit. In addition
to the Letter of Credit Fee, the Borrowers shall pay to the Bank, on
demand, all issuance, amendment, drawing and other fees regularly
charged by the Bank to its letter of credit customers and all
out-of-pocket expenses incurred by the Bank in connection with the
issuance, amendment, administration or payment of any Letter of Credit.
Section 2.17 Computation. Commitment Fees, Letter of Credit
Fees and interest on the Loans shall be computed on the basis of actual days
elapsed and a year of 360 days.
Section 2.18 Payments. Payments and prepayments of principal
of, and interest on, the Note and all fees, expenses and other obligations under
this Agreement payable to the Bank shall be made without setoff or counterclaim
in Immediately Available Funds not later than 3:00 p.m. (Minneapolis time) on
the dates called for under this Agreement to the Bank at its main office in
Minneapolis, Minnesota. Funds received after such time shall be deemed to have
been received on the next Business Day. Whenever any payment to be made
hereunder or on the Note shall be stated to be due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time, in the case of a payment of principal, shall be included
in the computation of any interest on such principal payment.
Section 2.19 Use of Loan Proceeds. The proceeds of the
Revolving Loans shall be used by the Borrowers and the Subsidiaries for their
general business purposes in a manner not in conflict with any of the Borrowers'
covenants in this Agreement.
Section 2.20 Interest Rate Not Ascertainable, Etc. If, on or
prior to any date for determining the Adjusted Eurodollar Rate for any
Eurodollar Rate Advance, the Bank determines (which determination shall be
conclusive and binding, absent error) that:
(a) deposits in dollars (in the applicable amount)
are not being made available to the Bank in the relevant market for
such Interest Period, or
(b) the Adjusted Eurodollar Rate will not adequately
and fairly reflect the cost to the Bank of funding or maintaining
Eurodollar Rate Advances,
the Bank shall forthwith give notice to the Borrowers of such determination,
whereupon the obligation of the Bank to make or continue, or to convert any
Advances to, Eurodollar Rate Advances shall be suspended until the Bank notifies
the Borrower that the circumstances giving rise to such suspension no longer
exist. While any such suspension continues, all Advances shall be maintained as
Reference Rate Advances.
Section 2.21 Increased Cost. If any Regulatory Change:
(a) shall subject the Bank to any tax, duty or other
charge with respect to its Eurodollar Rate Advances, the Note, or its
obligation to make Eurodollar Rate Advances or shall change the basis
of taxation of payment to the Bank of the principal of or interest on
Eurodollar Rate Advances or any other amounts due under this Agreement
in respect of Eurodollar Rate Advances or its obligation to make
Eurodollar Rate Advances (except for changes in the rate of tax on the
overall net income of the Bank imposed by the jurisdiction in which the
Bank's principal office is located); or
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(b) shall impose, modify or deem applicable any
reserve, special deposit, capital requirement or similar requirement
(including, without limitation, any such requirement imposed by the
Board, but excluding with respect to any Eurodollar Rate Advance any
such requirement to the extent included in calculating the applicable
Adjusted Eurodollar Rate) against assets of, deposits with or for the
account of, or credit extended by, the Bank's applicable lending office
or shall impose on the Bank (or its applicable lending office) or on
the interbank Eurodollar market any other condition affecting its
Eurodollar Rate Advances, the Note or its obligation to make Eurodollar
Rate Advances;
and the result of any of the foregoing is to increase the cost to the Bank of
making or maintaining any Eurodollar Rate Advance, or to reduce the amount of
any sum received or receivable by the Bank under this Agreement or under the
Note, then, within 30 days after demand by the Bank, the Borrowers shall pay to
the Bank such additional amount or amounts as will compensate the Bank for such
increased cost or reduction; provided, that the Borrowers shall not be obligated
to pay any such additional amount (i) unless the Bank shall first have notified
the Borrowers in writing that it intends to seek such compensation pursuant to
this Section, or (ii) to the extent such additional amount is attributable to
the period ending 91 days prior to the date of the first such notice with
respect to such Regulatory Change (the "Excluded Period"), except to the extent
any amount is attributable to the Excluded Period as a result of the retroactive
application of the applicable Regulatory Change. A certificate of the Bank
claiming compensation under this Section, setting forth the additional amount or
amounts to be paid to it hereunder and stating in reasonable detail the basis
for the charge and the method of computation, shall be conclusive in the absence
of error. In determining such amount, the Bank may use any reasonable averaging
and attribution methods. Failure on the part of the Bank to demand compensation
for any increased costs or reduction in amounts received or receivable with
respect to any period shall not constitute a waiver of the Bank's rights to
demand compensation for any increased costs or reduction in amounts received or
receivable in any subsequent period.
Section 2.22 Illegality. If any Regulatory Change shall make
it unlawful or impossible for the Bank to make, maintain or fund any Eurodollar
Rate Advances, the Bank shall notify the Borrowers, whereupon the obligation of
the Bank to make or continue, or to convert any Advances to, Eurodollar Rate
Advances shall be suspended until the Bank notifies the Borrowers that the
circumstances giving rise to such suspension no longer exist, and all Eurodollar
Rate Advances shall be automatically converted to Reference Rate Advances as of
the date of the Bank's notice.
Section 2.23 Increased Capital Requirements. In the event
that, as a result of any Regulatory Change, compliance by the Bank with any
applicable law or governmental rule, requirement, regulation, guideline or order
(whether or not having the force of law) regarding capital adequacy has the
effect of reducing the rate of return on the Bank's capital as a consequence of
the Commitment or amounts outstanding under the Note to a level below that which
the Bank would have achieved but for such compliance (taking into consideration
the Bank's policies with respect to capital adequacy), then from time to time
the Borrowers shall pay to the Bank, within thirty days after written demand by
the Bank, such additional amount or amounts as will compensate the Bank for such
reduction; provided that the Borrowers shall not be obligated to pay any such
additional amount (i) unless the Bank shall first have notified the Borrowers in
writing that it intends to seek such compensation pursuant to this Section, or
(ii) to the extent such additional amount is attributable to the period ending
91 days prior to
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<PAGE>
the date of the first such notice with respect to such Regulatory Change (the
"Excluded Period"), except to the extent any amount is attributable to the
Excluded Period as a result of the retroactive application of the applicable
Regulatory Change. A certificate, which shall be conclusive except for manifest
error, as to the amount of any such reduction (including calculations in
reasonable detail showing how the Bank computed such reduction and a statement
that the Bank has not allocated to the Commitment or amounts outstanding under
the Note a proportionately greater amount of such reduction than is attributable
to each of its other commitments to lend or to each of its other outstanding
credit extensions that are affected similarly by such compliance by the Bank,
whether or not the Bank allocates any portion of such reduction to such other
commitments or credit extensions, shall be furnished promptly by the Bank to the
Borrowers.
ARTICLE III
-----------
CONDITIONS PRECEDENT
Section 3.1 Conditions Precedent to the Initial Revolving
Loan. The making of the initial Revolving Loan and the issuance of the initial
Letter of Credit shall be subject to the prior or simultaneous fulfillment of
the following conditions:
3.1(a) Documents. The Bank shall have received the
following:
(i) The Note, executed by the Borrowers and dated the
date of this Agreement.
(ii) Reaffirmations of Security Agreement, in the
form of Exhibits E, F, G and executed by PAG, PAII and PASI,
respectively.
(iii) Reaffirmations of Pledge Agreement, in the form
of Exhibits H and I, executed by the Borrowers.
(iv) A Reaffirmation of Guaranty, in the form of
Exhibit J, executed by PAII.
(v) Copies of the corporate resolutions of PAG, PAII,
PASI and PACC authorizing the execution, delivery and performance of
the Loan Documents or reaffirmations thereof to which each of them is a
party, certified as of the Closing Date by the respective Secretary or
an Assistant Secretary of PAG, PAII, PASI and PACC.
(vi) Incumbency certificates showing the names and
titles and bearing the signatures of the officers of PAG, PAII, PASI
and PACC authorized to execute the Loan Documents or reaffirmations
thereof to which each of them is a party and, in the case of each
Borrower, to request Loans and conversions and continuations of
Advances hereunder, certified as of the Closing Date by the respective
Secretary or an Assistant Secretary of PAG, PAII, PASI and PACC.
(vii) A certificate of the Secretary or Assistant
Secretary of each of PAG, PACC, PAII and PASI certifying that their
respective Certificates of Incorporation and Bylaws have not been
repealed, rescinded, amended or otherwise modified since copies of the
same were delivered to the Bank on April 28, 1995.
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<PAGE>
(viii) Long-form certificates of good standing for
PAG, PAII, PASI and PACC in the respective jurisdictions of their
incorporation, and for the Borrowers, PAII and PASI in all of the
jurisdictions in which the character of the properties owned or leased
by it or the business conducted by it makes such qualification
necessary, certified by the appropriate governmental officials as of a
date not more than ten (10) days prior to the Closing Date.
(ix) A certificate dated the Closing Date of the
chief executive officer or chief financial officer of the Borrowers
certifying that:
(A) All representations and warranties set
forth in Article IV are true and correct as of the Closing
Date, and
(B) On the Closing Date, after giving effect
to the making of the initial Revolving Loan, no Event of
Default or Default shall have occurred or will exist.
(x) Evidence of compliance with the insurance
requirements of Section 5.3.
(xi) A written opinion of Bryan Cave LLP, counsel to
the Borrowers, PAII and PASI, addressed to the Bank and dated the
Closing Date, covering the matters set forth in Exhibit K hereto.
3.1(b) Additional Conditions. The following
conditions shall exist:
(i) The Borrowers shall have performed and complied
with all agreements, terms and conditions contained in this Agreement
required to be performed or complied with by the Borrowers prior to or
simultaneously with the Closing Date.
(ii) The Bank shall have received (A) the Closing Fee
and (B) all fees and other amounts due and payable by the Borrowers on
or prior to the Closing Date, including the reasonable fees and
expenses of counsel to the Bank payable pursuant to Section 8.2.
(iii) The Bank shall have received a written
notification from Express America TC, Inc. ("EATC") terminating the
Bank's commitment to extent further credit to EATC, and a request for a
Revolving Loan from PACC, the owner of all of the issued and
outstanding capital stock of EATC, in an amount equal to EATC's
outstanding obligations to the Bank, directing the Bank to apply such
Revolving Loan to repay such outstanding obligations.
3.1(c) Security Documents. All Security Documents (or
financing statements with respect thereto) shall have been appropriately filed
or recorded to the satisfaction of the Bank; any pledged collateral shall have
been duly delivered to the Bank; and the priority and perfection of the Liens
created by the Security Documents shall have been established to the
satisfaction of the Bank and its counsel.
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<PAGE>
Section 3.2 Conditions Precedent to all Loans and Letters of
Credit. The obligation of the Bank to make any Loans or issue any Letters of
Credit hereunder shall be subject to the fulfillment of the following
conditions:
3.2(a) Representations and Warranties. The
representations and warranties contained in Article IV shall be true and correct
on and as of each Revolving Loan Date, with the same force and effect as if made
on such date.
3.2(b) No Default. No Default or Event of Default
shall have occurred and be continuing on any Revolving Loan Date, or will exist
after giving effect to the Loans made on such date.
3.2(c) Notices and Requests. The Bank shall have
received the Borrowers' request for such Revolving Loan as required under
Section 2.2, or the Borrowers' request for the issuance of such Letter of Credit
as required under Section 2.9.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and to make
Loans hereunder, the Borrowers represent and warrant to the Bank:
Section 4.1 Organization, Standing, Etc. PAG is a corporation
duly incorporated and validly existing and in good standing under the laws of
the jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now conducted, to enter into the Loan
Documents or reaffirmations thereof to which it is a party and to perform its
obligations under the Loan Documents to which it is a party. PACC is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to carry on its business as now conducted, to enter into the
Loan Documents or reaffirmations thereof to which it is a party, and to perform
its obligations under the Loan Documents to which it is a party. Each Subsidiary
is a corporation duly incorporated and validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to carry on its business as now conducted, to
enter into the Loan Documents or reaffirmations thereof to which it is a party,
and to perform its obligations under the Loan Documents to which it is a party.
Each of the Borrowers and each of their Subsidiaries (a) holds all certificates
of authority, licenses and permits necessary to carry on the business as now
conducted in each jurisdiction in which it is carrying on such business, except
where the failure to hold such certificates, licenses or permits would not have
a material adverse effect on the business, operations, property, assets or
condition, financial or otherwise, of the Borrowers and the Subsidiaries taken
as a whole, and (b) is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which the character of the properties owned,
leased or operated by the Borrowers or the business conducted by the Borrowers
make such qualification necessary and the failure so to qualify would
permanently preclude the Borrowers or such Subsidiary from enforcing its rights
with respect to any assets or expose the Borrowers or such Subsidiary to any
liability, which in either case would be material to the Borrowers and the
Subsidiaries taken as a whole. PASI is duly registered with the SEC as a
broker-dealer, is a member in good standing of the NASD, and is not in arrears
with respect to any assessment made on it by the SIPC. Each Advisory Subsidiary
is duly registered with the SEC as an investment adviser. PASI maintains
procedures and internal controls reasonably
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adapted to insure that it does not extend or maintain credit to or for its
customers other than in accordance with the provisions of Regulation T of the
Board, and officers of PASI regularly supervise its activities and the
activities of employees of PASI to reasonably ensure that PASI does not extend
or maintain credit to or for customers other than in accordance with the
provisions of Regulation T of the Board.
Section 4.2 Authorization and Validity. The execution,
delivery and performance by each of the Borrowers and each Subsidiary of the
Loan Documents to which it is a party or reaffirmations thereof have been duly
authorized by all necessary corporate action, and Loan Documents when executed
will constitute the legal, valid and binding obligations of the Borrowers and
each Subsidiary, enforceable against each of them in accordance with their
respective terms, subject to limitations as to enforceability which might result
from bankruptcy, insolvency, moratorium and other similar laws affecting
creditors' rights generally and general principles of equity.
Section 4.3 No Conflict; No Default. The execution, delivery
and performance by the Borrowers and each Subsidiary of the Loan Documents to
which each of them is a party or reaffirmations thereof will not (a) violate any
provision of any law, statute, rule or regulation or any order, writ, judgment,
injunction, decree, determination or award of any court, governmental agency or
arbitrator presently in effect having applicability to the Borrowers and such
Subsidiary, (b) violate or contravene any provision of the Certificate of
Incorporation or bylaws of the Borrowers and such Subsidiary, or (c) result in a
breach of or constitute a default under any agreement, lease or instrument to
which the Borrowers or such Subsidiary is a party or by which they or any of
their properties may be bound or result in the creation of any Lien thereunder.
None of the Borrowers or any Subsidiary is in default under or in violation of
any such law, statute, rule or regulation, order, writ, judgment, injunction,
decree, determination or award or any such indenture, loan or credit agreement
or other agreement, lease or instrument in any case in which the consequences of
such default or violation could have a material adverse effect on the business,
operations, properties, assets or condition (financial or otherwise) of the
Borrowers and their Subsidiaries taken as a whole. Without limiting the
foregoing, the Borrowers and each Subsidiary are in compliance with all
applicable capital requirements of all governmental authorities applicable to
them, including, without limitation, Rule 15c3-1 under the Exchange Act, as the
same is modified with respect to PASI in accordance with the undertaking
outlined in paragraph 2 of the letter dated March 2, 1995 from PASI to the NASD
District Committee for District No. 2, and as the same may be further modified
from time to time by the NASD.
Section 4.4 Government Consent. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority is required
on the part of the Borrowers or any Subsidiary to authorize, or is required in
connection with the execution, delivery and performance of, or the legality,
validity, binding effect or enforceability of, the Loan Documents, except for
any necessary filing or recordation of or with respect to any of the Security
Documents.
Section 4.5 Financial Statements and Condition. The audited
consolidated financial statements of each of the Borrowers, as at September 30,
1996, and the unaudited financial statements of each of the Borrowers as at
March 31, 1997, as heretofore furnished to the Bank, have been prepared in
accordance with GAAP on a consistent basis (except for the absence of footnotes
and subject to year-end audit adjustments as to the interim statements) and
fairly present the financial condition of each Borrower and its Subsidiaries as
at such dates
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and the results of their operations and changes in financial position for the
respective periods then ended. As of the dates of such financial statements,
neither Borrower nor any Subsidiary had any material obligation, contingent
liability, liability for taxes or long-term lease obligation which is not
reflected in such financial statements or in the notes thereto. Since September
30, 1996, there has been no material adverse change in the business, operations,
property, assets or condition, financial or otherwise, of either Borrower and
its Subsidiaries taken as a whole.
Section 4.6 Litigation. Except as described on Schedule 4.6,
there are no actions, suits or proceedings pending or, to the knowledge of the
Borrowers, threatened against or affecting the Borrowers or any Subsidiary, or
any of their properties before any court or arbitrator, or any governmental
department, board, agency or other instrumentality which, if determined
adversely to the Borrowers or any Subsidiary, would have a material adverse
effect on the business, operations, property or condition (financial or
otherwise) of the Borrowers and the Subsidiaries taken as a whole or on the
ability of the Borrowers or any Subsidiary to perform its obligations under the
Loan Documents.
Section 4.7 ERISA. Each Plan is in substantial compliance with
all applicable requirements of ERISA and the Code and with all material
applicable rulings and regulations issued under the provisions of ERISA and the
Code setting forth those requirements. No Reportable Event has occurred and is
continuing with respect to any Plan. All of the minimum funding standards
applicable to such Plans have been satisfied and there exists no event or
condition which would reasonably be expected to result in the institution of
proceedings to terminate any Plan under Section 4042 of ERISA. With respect to
each Plan subject to Title IV of ERISA, as of the most recent valuation date for
such Plan, the present value (determined on the basis of reasonable assumptions
employed by the independent actuary for such Plan and previously furnished in
writing to the Bank) of such Plan's projected benefit obligations did not exceed
the fair market value of such Plan's assets.
Section 4.8 Federal Reserve Regulations. Neither of the
Borrowers nor any Subsidiary is engaged principally or as one of its important
activities in the business of extending credit for the purpose of purchasing or
carrying margin stock (as defined in Regulation U of the Board). The value of
all margin stock owned by either of the Borrowers does not constitute more than
25% of the value of the assets of that Borrower.
Section 4.9 Title to Property; Leases; Liens; Subordination.
Each of the Borrowers and each of their Subsidiaries has (a) good and marketable
title to its real properties and (b) good and sufficient title to, or valid,
subsisting and enforceable leasehold interest in, its other material properties,
including all real properties (other than property disposed of since the date of
such financial statements in the ordinary course of business). None of such
properties is subject to a Lien, except as allowed under Section 6.13. Neither
of the Borrowers and none of their Subsidiaries have subordinated any of their
rights under any obligation owing to them to the rights of any other person.
Section 4.10 Taxes. The Borrowers and their Subsidiaries have
filed all federal, state and local tax returns required to be filed and has paid
or made provision for the payment of all taxes due and payable pursuant to such
returns and pursuant to any assessments made against it or any of its property
and all other taxes, fees and other charges imposed on it or any of its property
by any governmental authority (other than taxes, fees or charges the amount or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which reserves in accordance with GAAP have been
provided on the books of the Borrowers). The charges, accruals and reserves on
the
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books of the Borrowers in respect of taxes and other governmental charges are
adequate and the Borrowers know of no proposed material tax assessment against
the Borrowers, any Subsidiary or any of their assets or of any basis therefor.
Section 4.11 Trademarks, Patents. The Borrowers and their
Subsidiaries possesses or has the right to use all of the patents, trademarks,
trade names, service marks and copyrights, and applications therefor, and all
technology, know-how, processes, methods and designs used in or necessary for
the conduct of its business, without known conflict with the rights of others.
Section 4.12 Burdensome Restrictions. Neither of the Borrowers
and none of their Subsidiaries is a party to or otherwise bound by any
indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any charter, corporate or partnership restriction which
would foreseeably have a material adverse effect on the business, properties,
assets, operations or condition (financial or otherwise) of the Borrowers and
the Subsidiaries taken as a whole or on the ability of the Borrowers and the
Subsidiaries to carry out their obligations under any Loan Document.
Section 4.13 Force Majeure. Since the date of the most recent
financial statement referred to in Section 4.5, the business, properties and
other assets of the Borrowers and the Subsidiaries have not been materially and
adversely affected in any way as the result of any fire or other casualty,
strike, lockout, or other labor trouble, embargo, sabotage, confiscation,
condemnation, riot, civil disturbance, activity of armed forces or act of God.
Section 4.14 Investment Company Act. Neither of the Borrowers
and none of their Subsidiaries is an "investment company" or a company
"controlled" by an investment company within the meaning of the Investment
Company Act of 1940, as amended.
Section 4.15 Public Utility Holding Company Act. Neither of
the Borrowers and none of their Subsidiaries is a "holding company" or a
"subsidiary company" of a holding company or an "affiliate" of a holding company
or of a subsidiary company of a holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 4.16 Retirement Benefits. Except as required under
Section 4980B of the Code, Section 601 of ERISA or applicable state law, neither
of the Borrowers and none of their Subsidiaries is obligated to provide
post-retirement medical or insurance benefits with respect to employees or
former employees.
Section 4.17 Subsidiaries. Schedule 4.17 sets forth as of the
date of this Agreement a list of all Subsidiaries and the number and percentage
of the shares of each class of capital stock owned beneficially or of record by
the Borrowers or any Subsidiary therein, and the jurisdiction of incorporation
of each Subsidiary.
Section 4.18 Fund Agreements. Schedule 4.18 sets forth as of
the date of this agreement, a list of all Funds for which PAII acts as
investment adviser or PASI acts as principal distributor, and a list of all
related Fund Agreements. All Fund Agreements are in full force and effect.
Section 4.19 Full Disclosure. Subject to the following
sentence, neither the financial statements referred to in Section 4.5 nor any
other certificate, written statement, exhibit or report furnished by or on
behalf of the Borrowers in connection with or pursuant to
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this Agreement contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements contained
therein not misleading. Certificates or statements furnished by or on behalf of
the Borrowers to the Bank consisting of projections or forecasts of future
results or events have been prepared in good faith and based on good faith
estimates and assumptions of the management of the Borrowers, and the Borrowers
have no reason to believe that such projections or forecasts are not reasonable.
ARTICLE V
---------
AFFIRMATIVE COVENANTS
Until any obligation of the Bank hereunder to make the
Revolving Loans and the Term Loan or to issue Letters of Credit shall have
expired or been terminated, no Letter of Credit remains outstanding and the Note
and all of the other Obligations have been paid in full, unless the Bank shall
otherwise consent in writing:
Section 5.1 Financial Statements and Reports. The Borrowers
will furnish to the Bank:
5.1(a) As soon as available and in any event within
ninety days after the end of each fiscal year of the Borrowers, the consolidated
financial statements of each of the Borrowers and its respective Subsidiaries
consisting of at least statements of income, cash flow and changes in
stockholders' equity, and a consolidated balance sheet as at the end of such
year, setting forth in each case in comparative form corresponding figures from
the previous annual audit, certified without qualification by KPMG Peat Marwick
or other independent certified public accountants of recognized national
standing selected by the Borrowers and acceptable to the Bank, together with (a)
any management letters, management reports or other supplementary written
comments or reports to the Borrowers or their boards of directors furnished by
such accountants and (b) a letter from such accountants addressed to the Bank
acknowledging that the Bank is extending credit in reliance on such financial
statements and authorizing such reliance.
5.1(b) Together with the audited financial statements
required under Section 5.1(a), a statement by the accounting firm performing
such audit to the effect that it has reviewed this Agreement and that in the
course of performing its examination nothing came to its attention that caused
it to believe that any Default or Event of Default exists, or, if such Default
or Event of Default exists, describing its nature.
5.1(c) As soon as available and in any event within
forty-five days after the end of each March, June, September and December, and
thirty days after the end of each other month, unaudited consolidated statements
of income, cash flow and changes in stockholders' equity for each of the
Borrowers and its respective Subsidiaries for such month and for the period from
the beginning of such fiscal year to the end of such month, and a consolidated
balance sheet of each of the Borrowers as at the end of such month, setting
forth in comparative form figures for the corresponding period for the preceding
fiscal year, accompanied by a certificate signed by the chief financial officers
of each of the Borrowers stating that such financial statements present fairly
the financial condition of the Borrowers and the Subsidiaries and that the same
have been prepared in accordance with GAAP.
5.1(d) Together with the unaudited financial
statements required under Section 5.1(c), (i) a compliance certificate signed by
the chief financial officers of each of the
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Borrowers demonstrating in reasonable detail compliance (or noncompliance, as
the case may be) with Sections 6.10(h) and 6.13 through 6.17 as at the end of
such month and stating that as at the end of such month there did not exist any
Default or Event of Default or, if such Default or Event of Default existed,
specifying the nature and period of existence thereof and what action the
Borrower proposes to take with respect thereto, and (ii) a report on the Net
Asset Value of all Advisory Funds in form acceptable to the Bank, signed by the
chief financial officers of each of the Borrowers.
5.1(e) As soon as practicable and in any event prior
to the beginning of each fiscal year of the Borrowers, statements of forecasted
income and cash flow for the Borrowers and the Subsidiaries for each month in
such fiscal year and a forecasted consolidated balance sheet of the Borrowers
and the Subsidiaries, together with supporting assumptions, as at the end of
each month, all in reasonable detail and reasonably satisfactory in scope to the
Bank.
5.1(f) Immediately upon any officer of the Borrowers
becoming aware of any Default or Event of Default, a notice describing the
nature thereof and what action the Borrower proposes to take with respect
thereto.
5.1(g) Immediately upon any officer of the Borrowers
becoming aware of the occurrence, with respect to any Plan, of any Reportable
Event or any Prohibited Transaction, a notice specifying the nature thereof and
what action the Borrower proposes to take with respect thereto, and, when
received, copies of any notice from PBGC of intention to terminate or have a
trustee appointed for any Plan.
5.1(h) Promptly upon the mailing or filing thereof,
copies of all financial statements, reports and proxy statements mailed to the
shareholders of PACC or any Fund, and copies of all registration statements,
periodic reports and other documents filed with the Securities and Exchange
Commission (or any successor thereto) or any national securities exchange.
5.1(i) Immediately upon any officer of the Borrowers
becoming aware of any action by the Borrowers, any Subsidiary or any Fund to
make any modification to, waive any provision of, or fail to renew any Fund
Agreement, to the extent such modification, waiver or non-renewal would have an
adverse effect on the amount of compensation payable to the Borrowers or any
Subsidiary by any Fund in an amount exceeding $100,000, a notice describing the
same and what action the Borrowers propose to take with respect thereto.
5.1(j) From time to time, such other information
regarding the business, operation and financial condition of the Borrowers, the
Subsidiaries and the Funds as the Bank may reasonably request.
Section 5.2 Corporate Existence. The Borrowers will maintain,
and cause their Subsidiaries to maintain, their corporate existence in good
standing under the laws of their respective jurisdictions of incorporation and
their qualification to transact business in each jurisdiction where failure so
to qualify would permanently preclude either Borrower or any such Subsidiary
from enforcing its rights with respect to any material asset or would expose
either Borrower or any such Subsidiary to any material liability; provided,
however, that nothing herein shall prohibit the merger or liquidation of any
Subsidiary allowed under Section 6.1.
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Section 5.3 Insurance. The Borrowers shall maintain, and shall
cause their Subsidiaries to maintain, with financially sound and reputable
insurance companies such insurance as may be required by law and such other
insurance in such amounts and against such hazards as is customary in the case
of reputable firms engaged in the same or similar business and similarly
situated.
Section 5.4 Payment of Taxes and Claims. The Borrowers shall
file, and cause their Subsidiaries to file, all tax returns and reports which
are required by law to be filed by them and will pay, and cause their
Subsidiaries to pay, before they become delinquent all taxes, assessments and
governmental charges and levies imposed upon it or its property and all claims
or demands of any kind (including but not limited to those of suppliers,
mechanics, carriers, warehouses, landlords and other like Persons) which, if
unpaid, might result in the creation of a Lien upon its property; provided that
the foregoing items need not be paid if they are being contested in good faith
by appropriate proceedings, and as long as the Borrowers' or Subsidiaries' title
to its property is not materially adversely affected, their use of such property
in the ordinary course of its business is not materially interfered with and
adequate reserves with respect thereto have been set aside on the Borrowers' or
such Subsidiary's books in accordance with GAAP.
Section 5.5 Inspection. The Borrowers shall permit any Person
designated by the Bank to visit and inspect any of the properties, corporate
books and financial records of the Borrowers and the Subsidiaries, to examine
and to make copies of the books of accounts and other financial records of the
Borrowers and the Subsidiaries, and to discuss the affairs, finances and
accounts of the Borrowers and the Subsidiaries with, and to be advised as to the
same by, its officers at such reasonable times and intervals as the Bank may
designate. So long as no Event of Default exists, the expenses of the Bank for
such visits, inspections and examinations shall be at the expense of the Bank,
but any such visits, inspections and examinations made while any Event of
Default is continuing shall be at the expense of the Borrowers.
Section 5.6 Maintenance of Properties. The Borrowers will
maintain, and cause their Subsidiaries to maintain, their properties used or
useful in the conduct of its business in good condition, repair and working
order, and supplied with all necessary equipment, and make all necessary
repairs, renewals, replacements, betterments and improvements thereto, all as
may be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
Section 5.7 Books and Records. The Borrowers will keep, and
will cause their Subsidiaries to keep, adequate and proper records and books of
account in which full and correct entries will be made of their dealings,
business and affairs.
Section 5.8 Compliance. The Borrowers will comply, and will
cause their Subsidiaries to comply, in all material respects with all laws,
rules, regulations, orders, writs, judgments, injunctions, decrees or awards to
which they may be subject; provided, however, that failure so to comply shall
not be a breach of this covenant if such failure does not have, or is not
reasonably expected to have, a materially adverse effect on the properties,
business, prospects or condition (financial or otherwise) of the Borrowers or
the Subsidiaries and the Borrowers or the Subsidiaries are acting in good faith
and with reasonable dispatch to cure such noncompliance.
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Section 5.9 Notice of Litigation. The Borrowers will give
prompt written notice to the Bank of the commencement of any action, suit or
proceeding before any court or arbitrator or any governmental department, board,
agency or other instrumentality affecting the Borrowers or their Subsidiaries or
any property of the Borrowers or their Subsidiaries or to which either Borrower
or any Subsidiary is a party in which an adverse determination or result could
have a material adverse effect on the business, operations, property or
condition (financial or otherwise) of the Borrowers and the Subsidiaries taken
as a whole or on the ability the Borrowers to perform their obligations under
the Loan Documents, stating the nature and status of such action, suit or
proceeding.
Section 5.10 ERISA. The Borrowers will maintain, and cause
their Subsidiaries to maintain, each Plan in compliance with all material
applicable requirements of ERISA and of the Code and with all applicable rulings
and regulations issued under the provisions of ERISA and of the Code and will
not and not permit any of the ERISA Affiliates to (a) engage in any transaction
in connection with which the Borrowers or any of the ERISA Affiliates would be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code, in either case in an amount
exceeding $50,000, (b) fail to make full payment when due of all amounts which,
under the provisions of any Plan, the Borrowers or any ERISA Affiliate is
required to pay as contributions thereto, or permit to exist any accumulated
funding deficiency (as such term is defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, with respect to any Plan in an
aggregate amount exceeding $50,000 or (c) fail to make any payments in an
aggregate amount exceeding $50,000 to any Multiemployer Plan that the Borrowers
or any of the ERISA Affiliates may be required to make under any agreement
relating to such Multiemployer Plan or any law pertaining thereto.
Section 5.11 Fund Agreements. Subject to its fiduciary
obligations and except as may otherwise be required by law, the Borrowers will
use their best efforts to cause each Fund for which a Subsidiary acts as
investment advisor or principal distributor to continue such Subsidiary in such
capacity and not to reduce the compensation payable to such Subsidiary for its
services to such Fund in any material respect.
Section 5.12 Advisory Subsidiaries. The Borrowers will cause
PAII, on and at all times after the Closing Date, and any Advisory Subsidiary
acquired hereafter as a result of an Investment permitted under Section 6.11(h),
on and at all times after the Business Day following such acquisition, to comply
with the following requirements:
(a) not have any (i) business other than the business
of serving as investment adviser for Advisory Funds pursuant to
Advisory Contracts and receiving payments thereunder, (ii) assets other
than Advisory Contracts and assets necessary to the performance by such
Advisory Subsidiary of its obligations under such Advisory Contracts,
or (iii) liabilities other than liabilities under Advisory Contracts or
other agreements permitted pursuant to Section 5.12(b);
(b) not enter into any agreements or other
arrangements with any Affiliate or any unaffiliated Person, other than
(y) Advisory Contracts and (z) other agreements necessary to the
performance by such Advisory Subsidiary of its obligations under
Advisory Contracts; provided that such Advisory Contracts and other
agreements are entered into upon fair and reasonable terms no less
favorable to such Advisory Subsidiary than would obtain in a comparable
arm's-length available to a Person unaffiliated with the Borrower;
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(c) distribute (by dividend or otherwise) all of its
revenue, less actual expenses incurred in performing its obligations
under Advisory Contracts, and subject to any restrictions applicable
under the Delaware General Corporation Act or other applicable
corporate statute, or the Investment Advisers Act or any state law
applicable to investment advisers, to PAG by means of a deposit into an
account of PAG with the Bank;
(d) be incorporated under the Delaware General
Corporation Act and provide in its Certificate or Articles of
Incorporation that, until the Obligations have been paid in full and
the Commitment has been terminated, no action of the types described in
Sections 7.1(e), (f) or (g) may be taken without the prior written
consent of the Bank;
(e) conduct its business solely in its own name
through its duly authorized officers or agents so as not to mislead
others as to the identity of the Person with which those others are
concerned, and use its best efforts to avoid the appearance of
conducting business on behalf of the Borrowers or any other Subsidiary
or Affiliate of the Borrowers, or that the assets of such Advisory
Subsidiary are available to pay the creditors of the Borrowers or any
Subsidiary or Affiliate of the Borrowers (without limiting the
generality of the foregoing, all oral and written communications,
including, without limitation, letters, invoices, purchase orders,
contracts and statements will be made solely in the name of such
Advisory Subsidiary);
(f) maintain corporate records and books of account
separate from those of the Borrowers and any Subsidiary or Affiliate of
the Borrowers;
(g) obtain proper authorization from its board of
directors of all corporate action requiring such authorization, and
hold meetings of its board of directors and hold not less frequently
than four times per annum;
(h) obtain proper authorization from its shareholder
of all corporate action requiring shareholder approval;
(i) pay its operating expenses and liabilities from
its own funds;
(j) disclose in its annual and interim financial
statements the effects of such Advisory Subsidiary's transactions in
accordance with generally accepted accounting principles; and
(k) keep its assets and its liabilities wholly
separate from those of all other Persons, including, but not limited
to, the Borrowers and any other Subsidiaries or Affiliates of the
Borrowers.
Section 5.13 Further Assurances. The Borrowers will, and will
cause their Subsidiaries to, promptly correct any defect or error that may be
discovered in any Loan Document or in the execution, acknowledgment or
recordation thereof. Promptly upon request by the Bank, the Borrowers also will,
and will cause their Subsidiaries to, do, execute, acknowledge, deliver, record,
re-record, file, re-file, register and re-register, any and all assignments,
estoppel certificates, financing statements and continuations thereof, notices
of assignment, transfers, certificates, assurances and other instruments as the
Bank may
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reasonable require from time to time in order: (a) to carry out more effectively
the purposes of the Loan Documents; (b) to perfect and maintain the validity,
effectiveness and priority of any Liens intended to be created by the Loan
Documents; and (c) to better assure, convey, grant, assign, transfer, preserve,
protect and confirm unto the Bank the rights granted now or hereafter intended
to be granted to the Bank under any Loan Document or under any other instrument
executed in connection with any Loan Document or that the Borrowers or their
Subsidiaries may be or become bound to convey, mortgage or assign to the Bank in
order to carry out the intention or facilitate the performance of the provisions
of any Loan Document. The Borrowers will furnish to the Bank evidence
satisfactory to the Bank of every such recording, filing or registration.
ARTICLE VI
----------
NEGATIVE COVENANTS
Until any obligation of the Bank hereunder to make the
Revolving Loans and the Term Loan or to issue any Letter of Credit shall have
expired or been terminated, no Letter of Credit remains outstanding and the Note
and all of the other Obligations have been paid in full, unless the Bank shall
otherwise consent in writing:
Section 6.1 Merger. The Borrowers will not merge or
consolidate or enter into any analogous reorganization or transaction with any
Person or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution) or permit any Subsidiary to do any of the foregoing; provided,
however, any Subsidiary of PAG, other than an Advisory Subsidiary, may be merged
with or liquidated into any wholly-owned Subsidiary (if such wholly-owned
Subsidiary is the surviving corporation) of PAG, and any Subsidiary of PACC that
is not PAG or a Subsidiary of PAG may be merged with or liquidated into any
other wholly-owned Subsidiary of PACC that is not PAG or a Subsidiary of PAG (if
such wholly-owned Subsidiary is the surviving corporation).
Section 6.2 Disposition of Assets. The Borrowers will not, and
will not permit any of their Subsidiaries to, directly or indirectly, sell,
assign, lease, convey, transfer or otherwise dispose of (whether in one
transaction or a series of transactions) any property (including accounts and
notes receivable, with or without recourse) or enter into any agreement to do
any of the foregoing, except:
6.2(a) sales of Fund shares (i) underwritten by any
Subsidiary of the Borrower or (ii) in which the Borrowers or any Subsidiary
makes an Investment permitted under Section 6.11(i), in the ordinary course of
business;
6.2(b) sales of rights to receive investment
distribution fees as provided in rule 12b-1 of the SEC under the Investment
Company Act, provided that, both before and after giving effect thereto, no
Default or Event of Default would have occurred and be continuing;
6.2(c) the sale of equipment to the extent that (i)
such equipment is no longer useful in such Borrower's or Subsidiary's business,
(ii) is exchanged for credit against the purchase price of similar replacement
equipment, or (iii) the proceeds of such sale are applied with reasonable
promptness to the purchase price of similar replacement equipment; and
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6.2(d) the resale of mortgage related assets
reacquired by the Borrowers or their Subsidiaries pursuant to the terms of
agreements relating to the sale of such mortgage related assets existing on the
date hereof.
Section 6.3 Plans. The Borrowers will not permit, and will not
allow their Subsidiaries to permit, any event to occur or condition to exist
which would permit any Plan to terminate under any circumstances which would
cause the Lien provided for in Section 4068 of ERISA to attach to any assets of
the Borrowers or any Subsidiary; and the Borrower will not permit, as of the
most recent valuation date for any Plan subject to Title IV of ERISA, the
present value (determined on the basis of reasonable assumptions employed by the
independent actuary for such Plan and previously furnished in writing to the
Bank) of such Plan's projected benefit obligations to exceed the fair market
value of such Plan's assets.
Section 6.4 Change in Nature of Business. The Borrowers will
not (a) own any assets other than the stock of their Subsidiaries, Cash Balances
and Cash Equivalents held through the Bank or its Affiliates, the trademarks
subject to the Trademark Assignment, and fixed assets or personal property used
in the business of the Borrowers and their Subsidiaries, (b) will not permit any
Advisory Subsidiaries to take any action that would cause, or authorize, any
violation of Section 5.12, and (c) will not permit any Subsidiary to make any
material change in the nature of the business of such Subsidiary as carried on
at the date hereof or, if later, the date such Subsidiary is acquired.
Section 6.5 Subsidiaries. After the date of this Agreement,
the Borrowers will not, and will not permit their Subsidiaries to, form or
acquire any corporation which would thereby become a Subsidiary, except for
Subsidiaries acquired as a result of Investments permitted pursuant to Section
6.11(h).
Section 6.6 Negative Pledges; Subsidiary Restrictions. The
Borrowers will not, and will not permit their Subsidiaries to, enter into any
agreement, bond, note or other instrument with or for the benefit of any Person
other than the Bank which would (i) prohibit the Borrowers or any Subsidiary
from granting, or otherwise limit the ability of the Borrowers or any Subsidiary
to grant, to the Bank any Lien on any assets or properties of the Borrowers or
any Subsidiary, or (ii) require the Borrowers or any Subsidiary to grant a Lien
to any other Person if the Borrowers or any Subsidiary grants any Lien to the
Bank. The Borrowers will not permit any Subsidiary to place or allow any
restriction, directly or indirectly, on the ability of such Subsidiary to (a)
pay dividends or any distributions on or with respect to such Subsidiary's
capital stock or (b) make loans or other cash payments to the Borrowers.
Section 6.7 Restricted Payments. PACC will not make any
Restricted Payments, and PAG will not make any Restricted Payments if, either
before or after giving effect thereto, an Event of Default or Default will have
occurred and be continuing.
Section 6.8 Transactions with Affiliates. The Borrowers will
not, and will not permit their Subsidiaries to, enter into any transaction with
any Affiliate of the Borrowers, except upon fair and reasonable terms no less
favorable to the Borrowers or such Subsidiaries than would obtain in a
comparable arm's-length transaction with a Person not an Affiliate.
Section 6.9 Accounting Changes. The Borrowers will not, and
will not permit their Subsidiaries to, make any significant change in accounting
treatment or reporting practices, except as required by GAAP, or change their
fiscal year.
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Section 6.10 Investments. The Borrowers will not, and will not
permit their Subsidiaries to, acquire for value, make, have or hold any
Investments, except:
6.10(a) Investments existing on the date of this
Agreement.
6.10(b) Travel and relocation advances to management
personnel and employees in the ordinary course of business.
6.10(c) Investments by the Borrowers in readily
marketable obligations issued or guaranteed by the United States or any agency
thereof and supported by the full faith and credit of the United States.
6.10(d) Investments by the Borrowers in certificates
of deposit or bankers' acceptances issued by the Bank or any other commercial
bank organized under the laws of the United States or any State thereof which
has (i) combined capital and surplus of at least $100,000,000, and (ii) a credit
rating with respect to its unsecured indebtedness from a nationally recognized
rating service that is satisfactory to the Bank.
6.10(e) Investments by the Borrowers in commercial
paper given the highest rating by a nationally recognized rating service.
6.10(f) Investments by the Borrowers in repurchase
agreements relating to securities issued or guaranteed as to principal and
interest by the United States of America.
6.10(g) Investments by the Borrowers in other readily
marketable Investments in debt securities which are reasonably acceptable to the
Bank.
6.10(h) Other Investments by PAG consisting of the
acquisition of all or substantially all of the capital stock of, or assets of,
Persons engaged in the business of serving as investment advisors to or
principal distributors for Funds, provided (i) the aggregate Net Asset Value of
all Funds with respect to which any Subsidiary becomes the investment advisor,
or the investment advisor becomes a Subsidiary, as a result of all such
Investments does not exceed $500,000,000, (ii) the aggregate consideration paid
for any such Investment does not exceed five percent (5%) of the Net Asset Value
of all Funds with respect to which any Subsidiary becomes the investment
advisor, or the investment advisor becomes a Subsidiary, as a result of such
Investments, and (iii) in the case of any Investment resulting in the
acquisition of new Subsidiary, such Subsidiary is or becomes a wholly-owned
Subsidiary and executes and delivers to the Bank a Security Agreement and, if
such Subsidiary is an Advisory Subsidiary, a Guaranty simultaneously with such
Investment.
6.10(i) Investments in Advisory Funds, or any similar
investment in a management investment pool that is not a Fund but that is
managed by an Advisory Subsidiary.
Any Investments under clauses (c), (d), (e) or (f) above must mature within one
year of the acquisition thereof by the Borrowers.
Section 6.11 Indebtedness. The Borrowers will not, and will
not permit their Subsidiaries to, incur, create, issue, assume or suffer to
exist any Indebtedness, except:
6.11(a) The Obligations.
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6.11(b) Current liabilities, other than for borrowed
money, incurred in the ordinary course of business.
6.11(c) Indebtedness secured by Liens permitted under
Section 6.13(h) hereof in an amount not to exceed $1,000,000.
Section 6.12 Liens. The Borrowers will not, and will not
permit their Subsidiaries to, create, incur, assume or suffer to exist any Lien,
or enter into, or make any commitment to enter into, any arrangement for the
acquisition of any property through conditional sale, lease-purchase or other
title retention agreements, with respect to any property now owned or hereafter
acquired by either Borrower or a Subsidiary, except:
6.12(a) Liens granted to the Bank.
6.12(b) Deposits or pledges to secure payment of
workers' compensation, unemployment insurance, old age pensions or other social
security obligations, in the ordinary course of business of either Borrower or a
Subsidiary.
6.12(c) Liens for taxes, fees, assessments and
governmental charges not delinquent or to the extent that payment therefor shall
not at the time be required to be made in accordance with the provisions of
Section 5.4.
6.12(d) Liens of carriers, warehousemen, mechanics
and materialmen, and other like Liens arising in the ordinary course of
business, for sums not due or to the extent that payment therefor shall not at
the time be required to be made in accordance with the provisions of Section
5.4.
6.12(e) Liens incurred or deposits or pledges made or
given in connection with, or to secure payment of, indemnity, performance or
other similar bonds.
6.12(f) Liens arising solely by virtue of any
statutory or common law provision relating to banker's liens, rights of set-off
or similar rights and remedies as to deposit accounts or other funds maintained
with a creditor depository institution; provided that (i) such deposit account
is not a dedicated cash collateral account and is not subject to restriction
against access by the Borrowers or a Subsidiary in excess of those set forth by
regulations promulgated by the Board, and (ii) such deposit account is not
intended by the Borrowers or any Subsidiary to provide collateral to the
depository institution.
6.12(g) Encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on the use of real
property and landlord's Liens under leases on the premises rented, which do not
materially detract from the value of such property or impair the use thereof in
the business of the Borrowers or a Subsidiary.
6.12(h) The interest of any lessor under any
Capitalized Lease entered into after the Closing Date or purchase money Liens on
equipment acquired after the Closing Date; provided, that, (i) the Indebtedness
secured thereby is otherwise permitted by this Agreement and (ii) such Liens are
limited to the equipment acquired and do not secure Indebtedness other than the
related Capitalized Lease Obligations or the purchase price of such equipment.
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6.12(i) A Lien in favor of the PAG's landlord
covering tenant improvements located in PAG's office in Phoenix, Arizona and
financed by such landlord, to secure all of PAG's obligations under the lease
for such office premises as in effect on May31, 1995.
Section 6.13 Contingent Obligations. The Borrowers will not,
and will not permit their Subsidiaries to, be or become liable on any Contingent
Obligations.
Section 6.14 Funded Debt Leverage Ratio. The Borrowers will
not permit the ratio of (i) Funded Debt as of the last day of any fiscal quarter
of the Borrowers, to (ii) EBITDA, for the Measurement Period ending on that
date, to be more than 4.0 to 1.0.
Section 6.15 Fixed Charge Coverage Ratio. The Borrowers will
not permit the Fixed Charge Coverage Ratio, as of the last day of any month, for
the Measurement Period ending on that date, to be less than 1.50 to 1.00.
Section 6.16 Minimum Fund Balances. The Borrowers will not
permit the sum of the Net Asset Values of all Advisory Funds at any time to be
less than the greater of (a) $1,350,000,000 or (b) ninety percent of the sum of
such Net Asset Values at the end of the most recently completed fiscal quarter
(or, in the case of a measurement at the end of any fiscal quarter, the
preceding fiscal quarter).
Section 6.17 EBITDA. The Borrower will not permit the EBITDA
Margin, as the last day of any month, for the Measurement Period ending on that
date, to be less than 25.0%.
Section 6.18 Loan Proceeds. The Borrowers will not use any
part of the proceeds of the Loans directly or indirectly, and whether
immediately, incidentally or ultimately, (a) to purchase or carry margin stock
(as defined in Regulation U of the Board), other than to the extent used to make
Restricted Payments to PACC to fund the repurchase of its outstanding capital
stock, or to extend credit to others for the purpose of purchasing or carrying
margin stock or to refund Indebtedness originally incurred for such purpose or
(b) for any purpose which entails a violation of, or which is inconsistent with,
the provisions of Regulations G, U or X of the Board.
ARTICLE VII
-----------
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default. The occurrence of any one or
more of the following events shall constitute an Event of Default:
7.1(a) The Borrowers shall fail to make when due,
whether by acceleration or otherwise, any payment of principal of or interest on
either Note or any other Obligation required to be made to the Bank pursuant to
this Agreement.
7.1(b) Any representation or warranty made by or on
behalf of either Borrower or any Subsidiary in this Agreement or any other Loan
Document or by or on behalf of either Borrower or any Subsidiary in any
certificate, statement, report or document herewith or hereafter furnished to
the Bank pursuant to this Agreement or any other Loan Document shall prove to
have been false or misleading in any material respect on the date as of which
the facts set forth are stated or certified.
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7.1(c) The Borrowers shall fail to comply with
Sections 5.2, 5.3, 5.12 or 5.13, any Section of Article VI, or the Borrowers or
any Subsidiary shall fail to comply with Section 4, 6, 8 or 13, the first
sentence of Section 7 or the second sentence of Section 14 of the Security
Agreements to which it is a party.
7.1(d) The Borrowers or any Subsidiary shall fail to
comply with any other agreement, covenant, condition, provision or term
contained in this Agreement or any other Loan Document (other than those
hereinabove set forth in this Section 7.1) and such failure to comply shall
continue for thirty calendar days after whichever of the following dates is the
earliest: (i) the date the Borrowers give notice of such failure to the Bank,
(ii) the date the Borrowers should have given notice of such failure to the
Banks pursuant to Section 5.1, or (iii) the date the Bank gives notice of such
failure to the Borrowers.
7.1(e) Either Borrower or any Subsidiary shall become
insolvent or shall generally not pay its debts as they mature or shall apply
for, shall consent to, or shall acquiesce in the appointment of a custodian,
trustee or receiver of such Borrower or Subsidiary or for a substantial part of
the property thereof or, in the absence of such application, consent or
acquiescence, a custodian, trustee or receiver shall be appointed for either
Borrower or a Subsidiary or for a substantial part of the property thereof and
shall not be discharged within 45 days, or either Borrower or any Subsidiary
shall make an assignment for the benefit of creditors.
7.1(f) Any bankruptcy, reorganization, debt
arrangement or other proceedings under any bankruptcy or insolvency law shall be
instituted by or against either Borrower or any Subsidiary, and, if instituted
against either Borrower or any Subsidiary, shall have been consented to or
acquiesced in by such Borrower or Subsidiary, or shall remain undismissed for 60
days, or an order for relief shall have been entered against such Borrower or
Subsidiary.
7.1(g) Any dissolution or liquidation proceeding not
permitted by Section 6.1 shall be instituted by or against either Borrower or
any Subsidiary and, if instituted against either Borrower or any Subsidiary,
shall be consented to or acquiesced in by such Borrower or Subsidiary or shall
remain for 45 days undismissed.
7.1(h) A judgment or judgments for the payment of
money in excess of the sum of $100,000 in the aggregate shall be rendered
against either Borrower or any Subsidiary and either (i) the judgment creditor
executes on such judgment or (ii) such judgment remains unpaid or undischarged
for more than 60 days from the date of entry thereof or such longer period
during which execution of such judgment shall be stayed during an appeal from
such judgment.
7.1(i) The maturity of any material Indebtedness of
either Borrower (other than Indebtedness under this Agreement) or any Subsidiary
shall be accelerated, or either Borrower or any Subsidiary shall fail to pay any
such material Indebtedness when due (after the lapse of any applicable grace
period) or, in the case of such Indebtedness payable on demand, when demanded
(after the lapse of any applicable grace period), or any event shall occur or
condition shall exist and shall continue for more than the period of grace, if
any, applicable thereto and shall have the effect of causing, or permitting the
holder of any such Indebtedness or any trustee or other Person acting on behalf
of such holder to cause, such material Indebtedness to become due prior to its
stated maturity or to realize upon any
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collateral given as security therefor. For purposes of this Section,
Indebtedness of either Borrower or any Subsidiary shall be deemed "material" if
it exceeds $100,000 as to any item of Indebtedness or in the aggregate for all
items of Indebtedness with respect to which any of the events described in this
Section 7.1(i) has occurred.
7.1(j) Any execution or attachment shall be issued
whereby any substantial part of the property of either Borrower or any
Subsidiary or any of the stock of either Borrower or any Subsidiary shall be
taken or attempted to be taken and the same shall not have been vacated or
stayed within 30 days after the issuance thereof.
7.1(k) Any Advisory Subsidiary shall repudiate or
purport to revoke its Guaranty or any Guaranty for any reason shall cease to be
in full force and effect as to any Advisory Subsidiary, or shall be judicially
declared null and void.
7.1(l) Any Security Document shall, at any time,
cease to be in full force and effect or shall be judicially declared null and
void, or the validity or enforceability thereof shall be contested by either
Borrower or any Subsidiary, or the Bank shall cease to have a valid and
perfected security interest having the priority contemplated thereunder in all
of the collateral described therein, other than by action or inaction of the
Bank if (i) the aggregate value of the collateral affected by any of the
foregoing exceeds $25,000 and (ii) any of the foregoing shall remain unremedied
for ten days or more after receipt of notice thereof by the Borrowers from the
Bank.
7.1(m) The SEC shall have revoked, or taken any
action to revoke, the broker/dealer or investment adviser registration of any
Subsidiary.
7.1(n) PAG or any Subsidiary shall have failed to
meet the minimum capital requirements prescribed from time to time by Rule
15c3-1 under the Exchange Act and applicable to it.
7.1(o) The SEC, the NASD or any other authority shall
have modified or terminated, or proposed to modify or terminate Rule 12b-1 under
the Investment Company Act or the Rules of Fair Practice in a manner which
could, in the sole judgment of the Bank, result in a material adverse effect on
the business, operations, properties, assets or condition (financial or
otherwise) of the Borrowers and the Subsidiaries taken as a whole.
7.1(p) PASI or any other Subsidiary that is a
broker/dealer shall cease to be a member in good standing of the NASD.
7.1(q) The SIPC shall have applied or shall have
announced its intention to apply for a decree adjudicating that customers of PAG
or any Subsidiary are in need of protection under SIPA.
7.1(r) Any Change of Control shall occur.
Section 7.2 Remedies. If (a) any Event of Default described in
Sections 7.1(e), (f), (g) or (q) shall occur with respect to either Borrower,
the Commitment shall automatically terminate and the Note and all other
Obligations shall automatically become immediately due and payable; or (b) any
other Event of Default shall occur and be continuing, then the Bank may (i)
declare the Commitment terminated, whereupon the Commitment shall terminate and
(ii) declare the outstanding unpaid principal balance of the Note, the accrued
and unpaid
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interest thereon and all other Obligations to be forthwith due and payable,
whereupon the Note, all accrued and unpaid interest thereon and all such
Obligations shall immediately become due and payable, in each case without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived, anything in this Agreement or in the Note to the
contrary notwithstanding. Upon the occurrence of any of the events described in
clauses (a) or (b) of the preceding sentence the Bank may exercise all rights
and remedies under any of the Loan Documents, and enforce all rights and
remedies under any applicable law.
Section 7.3 Offset. In addition to the remedies set forth in
Section 7.2, upon the occurrence of any Event of Default and thereafter while
the same be continuing, the Borrowers hereby irrevocably authorizes the Bank to
set off any Obligations against all deposits and credits of the Borrowers with,
and any and all claims of the Borrowers or any Subsidiary against, the Bank.
Such right shall exist whether or not the Bank shall have made any demand
hereunder or under any other Loan Document, whether or not the Obligations, or
any part thereof, or deposits and credits held for the account of the Borrowers
or any of their Subsidiaries is or are matured or unmatured, and regardless of
the existence or adequacy of any collateral, guaranty or any other security,
right or remedy available to the Bank. The Bank agrees that, as promptly as is
reasonably possible after the exercise of any such setoff right, it shall notify
the Borrowers of its exercise of such setoff right; provided, however, that the
failure of the Bank to provide such notice shall not affect the validity of the
exercise of such setoff rights. Nothing in this Agreement shall be deemed a
waiver or prohibition of or restriction on the Bank to all rights of banker's
Lien, setoff and counterclaim available pursuant to law.
ARTICLE VIII
------------
MISCELLANEOUS
Section 8.1 Modifications. Notwithstanding any provisions to
the contrary herein, any term of this Agreement may be amended with the written
consent of the Borrowers; provided that no amendment, modification or waiver of
any provision of this Agreement or consent to any departure by the Borrowers
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Bank, and then such amendment, modification, waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.
Section 8.2 Expenses; Amendment or Waiver Fee. Whether or not
the transactions contemplated hereby are consummated, the Borrowers agree to
reimburse the Bank upon demand for all reasonable out-of-pocket expenses paid or
incurred by the Bank (including filing and recording costs and fees and expenses
of Dorsey & Whitney LLP, counsel to the Bank) in connection with the
negotiation, preparation, approval, review, execution, delivery, administration,
amendment, modification and interpretation of this Agreement and the other Loan
Documents and any commitment letters relating thereto. The Borrowers shall also
reimburse the Bank upon demand for all reasonable out-of-pocket expenses
(including expenses of legal counsel) paid or incurred by the Bank in connection
with the collection and enforcement of this Agreement and any other Loan
Document. The obligations of the Borrowers under this Section shall survive any
termination of this Agreement. In addition, the PACC shall pay a fee of
$1,500.00 to the Bank on the effective date of any amendment to, modification of
or waiver of any provision of this Agreement if the Bank determines, in its sole
discretion, that its policies or practices required the Bank to obtain the
approval of any credit
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committee or similar approval authority for the execution of such amendment,
modification or waiver.
Section 8.3 Waivers, etc. No failure on the part of the Bank
or the holder of a Note to exercise and no delay in exercising any power or
right hereunder or under any other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any power or right preclude
any other or further exercise thereof or the exercise of any other power or
right. The remedies herein and in the other Loan Documents provided are
cumulative and not exclusive of any remedies provided by law.
Section 8.4 Notices. Except when telephonic notice is
expressly authorized by this Agreement, any notice or other communication to any
party in connection with this Agreement shall be in writing and shall be sent by
manual delivery, telegram, telex, facsimile transmission, overnight courier or
United States mail (postage prepaid) addressed to such party at the address
specified on the signature page hereof, or at such other address as such party
shall have specified to the other party hereto in writing. All periods of notice
shall be measured from the date of delivery thereof if manually delivered, from
the date of sending thereof if sent by telegram, telex or facsimile
transmission, from the first Business Day after the date of sending if sent by
overnight courier, or from four days after the date of mailing if mailed;
provided, however, that any notice to the Bank under Article II hereof shall be
deemed to have been given only when received by the Bank.
Section 8.5 Taxes. The Borrowers agree to pay, and save the
Bank harmless from all liability for, any stamp or other taxes which may be
payable with respect to the execution or delivery of this Agreement or the
issuance of the Note, which obligation of the Borrowers shall survive the
termination of this Agreement.
Section 8.6 Successors and Assigns; Disposition of Loans;
Transferees. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that the
Borrowers may not assign their rights or delegate their obligations hereunder or
under any other Loan Document without the prior written consent of the Bank. The
Bank may at any time sell, assign, transfer, grant participations in, or
otherwise dispose of any portion of the Commitment, the Loans and/or Advances
(each such interest so disposed of being herein called a "Transferred Interest")
to banks or other financial institutions ("Transferees"). The Borrowers agree
that each Transferee shall be entitled to the benefits of Sections 2.21, 2.22,
2.23, 2.24, 8.2 and 8.12 with respect to its Transferred Interest and that each
Transferee may exercise any and all rights of banker's Lien, setoff and
counterclaim as if such Transferee were a direct lender to the Borrowers. If the
Bank makes any assignment to a Transferee, then upon notice to the Borrowers
such Transferee, to the extent of such assignment (unless otherwise provided
therein), shall become a "Bank" hereunder and shall have all the rights and
obligations of the Bank hereunder and the Bank shall be released from its duties
and obligations under this Agreement to the extent of such assignment.
Notwithstanding the sale by the Bank of any participation hereunder, (a) no
participant shall be deemed to be or have the rights and obligations of the Bank
hereunder except that any participant shall have a right of setoff under Section
7.3 as if it were the Bank and the amount of its participation were owing
directly to such participant by the Borrowers and (b) the Bank shall not in
connection with selling any such participation condition the Bank's rights in
connection with consenting to amendments or granting waivers concerning any
matter under any Loan Document upon obtaining the consent of such participant
other than on matters relating to (i) any reduction in the amount of any
principal of, or the amount of or rate of interest on, the Note or Advance in
which such
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participation is sold, (ii) any postponement of the date fixed for any payment
of principal of or interest on the Note or Advance in which such participation
is sold, (iii) the release or subordination of any material portion of any
collateral other than pursuant to the terms of any Security Document or (iv) the
release of any Guaranty.
Section 8.7 Confidentiality of Information. The Bank shall use
reasonable efforts to assure that information about the Borrowers and their
operations, affairs and financial condition, not generally disclosed to the
public or to trade and other creditors, which is furnished to the Bank pursuant
to the provisions hereof is used only for the purposes of this Agreement and any
other relationship between the Bank and the Borrowers and shall not be divulged
to any Person other than the Bank, its Affiliates and their respective officers,
directors, employees and agents, except: (a) to their attorneys and accountants,
(b) in connection with the enforcement of the rights of the Bank hereunder and
under the Note, the Guaranties and the Security Documents or otherwise in
connection with applicable litigation, (c) in connection with assignments and
participations and the solicitation of prospective assignees and participants
referred to in the immediately preceding Section, and (d) as may otherwise be
required or requested by any regulatory authority having jurisdiction over the
Bank or by any applicable law, rule, regulation or judicial process, the opinion
of the Bank's counsel concerning the making of such disclosure to be binding on
the parties hereto. The Bank shall not incur any liability to the Borrowers by
reason of any disclosure permitted by this Section 8.7.
Section 8.8 Governing Law and Construction. THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT AND THE NOTES SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT
TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE
UNITED STATES APPLICABLE TO NATIONAL BANKS. Whenever possible, each provision of
this Agreement and the other Loan Documents and any other statement, instrument
or transaction contemplated hereby or thereby or relating hereto or thereto
shall be interpreted in such manner as to be effective and valid under such
applicable law, but, if any provision of this Agreement, the other Loan
Documents or any other statement, instrument or transaction contemplated hereby
or thereby or relating hereto or thereto shall be held to be prohibited or
invalid under such applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement, the other Loan
Documents or any other statement, instrument or transaction contemplated hereby
or thereby or relating hereto or thereto.
Section 8.9 Consent to Jurisdiction. AT THE OPTION OF THE
BANK, THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE ENFORCED IN ANY FEDERAL
COURT OR MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY, MINNESOTA; AND THE
BORROWERS CONSENT TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVE ANY
ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWERS
COMMENCE ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT
THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS
AGREEMENT, THE BANK AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED
TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER
CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Section 8.10 Waiver of Jury Trial. EACH OF THE BORROWERS AND
THE BANK IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING
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ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 8.11 Survival of Agreement. All representations,
warranties, covenants and agreement made by the Borrower herein or in the other
Loan Documents and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other Loan
Document shall be deemed to have been relied upon by the Bank and shall survive
the making of the Loans by the Bank and the execution and delivery to the Bank
by the Borrowers of the Note, regardless of any investigation made by or on
behalf of the Bank, and shall continue in full force and effect as long as any
Obligation is outstanding and unpaid and so long as the Commitment have not been
terminated; provided, however, that the obligations of the Borrowers under
Sections 8.2, 8.5 and 8.12 shall survive payment in full of the Obligations and
the termination of the Commitment.
Section 8.12 Indemnification. The Borrowers hereby agree to
defend, protect, indemnify and hold harmless the Bank and its Affiliates and the
directors, officers, employees, attorneys and agents of the Bank and its
Affiliates (each of the foregoing being an "Indemnitee" and all of the foregoing
being collectively the "Indemnitees") from and against any and all claims,
actions, damages, liabilities, judgments, costs and expenses (including all
reasonable fees and disbursements of counsel which may be incurred in the
investigation or defense of any matter) imposed upon, incurred by or asserted
against any Indemnitee, whether direct, indirect or consequential and whether
based on any federal, state, local or foreign laws or regulations (including
securities laws, environmental laws, commercial laws and regulations), under
common law or on equitable cause, or on contract or otherwise:
(a) by reason of, relating to or in connection with
the execution, delivery, performance or enforcement of any Loan
Document, any commitments relating thereto, or any transaction
contemplated by any Loan Document; or
(b) by reason of, relating to or in connection with
any credit extended or used under the Loan Documents or any act done or
omitted by any Person, or the exercise of any rights or remedies
thereunder, including the acquisition of any collateral by the Bank by
way of foreclosure of the Lien thereon, deed or bill of sale in lieu of
such foreclosure or otherwise;
provided, however, that the Borrowers shall not be liable to any Indemnitee for
any portion of such claims, damages, liabilities and expenses resulting from
such Indemnitee's gross negligence or willful misconduct. In the event this
indemnity is unenforceable as a matter of law as to a particular matter or
consequence referred to herein, it shall be enforceable to the full extent
permitted by law.
This indemnification applies, without limitation, to any act,
omission, event or circumstance existing or occurring on or prior to the later
of the Termination Date or the date of payment in full of the Obligations,
including specifically Obligations arising under clause (b) of this Section. The
indemnification provisions set forth above shall be in addition to any liability
the Borrowers may otherwise have. Without prejudice to the survival of any other
obligation of the Borrowers hereunder the indemnities and obligations of the
Borrowers contained in this Section shall survive the payment in full of the
other Obligations.
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Section 8.13 Captions. The captions or headings herein and any
table of contents hereto are for convenience only and in no way define, limit or
describe the scope or intent of any provision of this Agreement.
Section 8.14 Entire Agreement. This Agreement and the other
Loan Documents embody the entire agreement and understanding between the
Borrowers and the Bank with respect to the subject matter hereof and thereof.
This Agreement supersedes all prior agreements and understandings relating to
the subject matter hereof. Nothing contained in this Agreement or in any other
Loan Document, expressed or implied, is intended to confer upon any Persons
other than the parties hereto any rights, remedies, obligations or liabilities
hereunder or thereunder.
Section 8.15 Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 8.16 Borrower Acknowledgements. The Borrowers hereby
acknowledge that (a) they have been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents, (b) the
Bank has no fiduciary relationship to the Borrowers, the relationship being
solely that of debtor and creditor, (c) no joint venture exists between the
Borrowers and the Bank, and (d) the Bank undertakes no responsibility to the
Borrowers to review or inform the Borrowers of any matter in connection with any
phase of the business or operations of the Borrowers and the Borrowers shall
rely entirely upon their own judgment with respect to its business, and any
review, inspection or supervision of, or information supplied to, the Borrowers
by the Bank is for the protection of the Bank and neither of the Borrowers nor
any third party is entitled to rely thereon.
Section 8.17 Joint and Several Obligations. Each Borrower
shall be jointly and severally liable for the Obligations arising in connection
with Loans made to it and Letters of Credit issued for its account, and the
Obligations arising in connection with Loans made to the other Borrower and
Letters of Credit issued for the account of the other Borrower; provided,
however, that if it is at any time determined that either Borrower is liable as
a guarantor (and not as a co-obligor or co-borrower) with respect to such
Obligations arising in connection with Loans made to the other Borrower and
Letters of Credit issued for the account of the other Borrower (the "Guaranteed
Obligations"), each Borrower hereby agrees to the terms set forth on Exhibit L
hereto with respect to the Guaranteed Obligations.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
PILGRIM AMERICA
CAPITAL CORPORATION
By /s/James R. Reis
----------------
Title Vice Chairman
-------------
Address for Borrower:
Two Renaissance Square, Ste. 1200
40 North Central Avenue
Phoenix, AZ 85004-4424
Attention: James R. Reis
Telecopier: (602) 417-8301
PILGRIM AMERICA GROUP, INC.
By /s/James R. Reis
----------------
Title Vice Chairman
-------------
Address for Borrower:
Two Renaissance Square, Ste. 1200
40 North Central Avenue
Phoenix, AZ 85004-4424
Attention: James R. Reis
Telecopier: (602) 417-8301
FIRST BANK NATIONAL ASSOCIATION
By /s/Mark A. Bagley
-----------------
Title Vice President
--------------
Address:
First Bank Place - MPFP0702
601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: Mark A. Bagley
Telecopier: (612) 973-0665
[SIGNATURE PAGE TO SECOND AMENDED
AND RESTATED CREDIT AGREEMENT]
S-41
<PAGE>
EXHIBITS
- --------
A - Revolving Note
B - Advisory Subsidiary Guaranty
C - Advisory Subsidiary Security Agreement
D - Other Subsidiary Security Agreement
E - Reaffirmation of PAG Security Agreement
F - Reaffirmation of PAII Security Agreement
G - Reaffirmation of PASI Security Agreement
H - Reaffirmation of PAG Pledge Agreement
I - Reaffirmation of the PACC Pledge Agreement
J - Reaffirmation of the PAII Guaranty
K - Matters to be Covered by Opinion of Counsel to the Borrowers
L - Terms With Respect to Guaranteed Obligations
SCHEDULES
- ---------
4.6 - Litigation
4.17 - Subsidiaries
4.18 - Funds
<PAGE>
EXHIBIT A TO
CREDIT AGREEMENT
REVOLVING NOTE
$20,000,000 July 31, 1997
Minneapolis, Minnesota
FOR VALUE RECEIVED, PILGRIM AMERICA GROUP, INC., a Delaware
corporation, and PILGRIM AMERICA CAPITAL CORPORATION, a Delaware corporation,
hereby jointly and severally promise to pay to the order of FIRST BANK NATIONAL
ASSOCIATION (the "Bank") at its main office in Minneapolis, Minnesota, in lawful
money of the United States of America in Immediately Available Funds (as such
term and each other capitalized term used herein are defined in the Credit
Agreement hereinafter referred to) at the times set forth in the Credit
Agreement the principal amount of TWENTY MILLION AND NO/100 DOLLARS
($20,000,000) or, if less, the aggregate unpaid principal amount of all Loans
made by the Bank under the Credit Agreement, and to pay interest (computed on
the basis of actual days elapsed and a year of 364 days) in like funds on the
unpaid principal amount hereof from time to time outstanding at the rates and
times set forth in the Credit Agreement.
This note is the Note referred to in the Second Amended and
Restated Credit Agreement dated as of July 31, 1997 (as the same may hereafter
be from time to time amended, restated or otherwise modified, the "Credit
Agreement") between the undersigned and the Bank. This note is secured, it is
subject to certain permissive and mandatory prepayments and its maturity is
subject to acceleration, in each case upon the terms provided in said Credit
Agreement.
In the event of default hereunder, the undersigned agrees to
pay all costs and expenses of collection, including reasonable attorneys' fees.
The undersigned waives demand, presentment, notice of nonpayment, protest,
notice of protest and notice of dishonor.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS
<PAGE>
PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES
APPLICABLE TO NATIONAL BANKS.
PILGRIM AMERICA GROUP, INC.
By
------------------------
Title
-----------------------
PILGRIM AMERICA
CAPITAL CORPORATION
By
------------------------
Title
-----------------------
<PAGE>
EXHIBIT E TO
CREDIT AGREEMENT
REAFFIRMATION OF SECURITY AGREEMENT
The undersigned, Pilgrim America Group, Inc. ("PAG") hereby
reaffirms that (i) the Security Agreement by and between PAG and First Bank
National Association (the "Bank") dated as of April 28, 1995, as the same may
have been amended from time to time (the "Security Agreement"), remains in full
force and effect, and (ii) the security interests granted pursuant to the
Security Agreement secure, among other things, the obligations of PAG and
Pilgrim America Capital Corporation (collectively, the "Borrowers") and duties
under that certain Second Amended and Restated Credit Agreement by and between
the Borrowers and the Bank dated of even date herewith.
Date: July 31, 1997.
PILGRIM AMERICA GROUP, INC.
By
Its
<PAGE>
EXHIBIT F TO
CREDIT AGREEMENT
REAFFIRMATION OF SECURITY AGREEMENT
Reference is made to that certain Security Agreement (the
"Security Agreement") dated as of April 28, 1995, made and given by the
undersigned to secure the Obligations (as defined in the Security Agreement) of
Pilgrim America Group, Inc. ("PAG") to First Bank National Association (the
"Bank").
The undersigned hereby (a) consents to the terms of that
certain Second Amended and Restated Credit Agreement dated as of July 31, 1997
by and between PAG and Pilgrim America Capital Corporation (collectively, the
"Borrowers") and the Bank (the "Credit Agreement") and to the execution and
delivery of the Credit Agreement by the Borrowers; (b) agrees that the
obligations of the Borrowers to the Bank under the Credit Agreement constitute
"Obligations" within the meaning of the above-referenced Security Agreement; and
(c) agrees and reaffirms that the security interests granted pursuant to the
Security Agreement secure, among other things, the Borrowers' obligations and
duties under the Credit Agreement and the obligations of the undersigned under
the Security Agreement. The undersigned further reaffirms that all of the terms,
covenants and conditions of the Security Agreement remain in full force and
effect.
Date: July 31, 1997.
PILGRIM AMERICA INVESTMENTS, INC.
By
Its
<PAGE>
EXHIBIT G TO
CREDIT AGREEMENT
REAFFIRMATION OF SECURITY AGREEMENT
Reference is made to that certain Security Agreement (the
"Security Agreement") dated as of April 28, 1995, made and given by the
undersigned to secure the Obligations (as defined in the Security Agreement) of
Pilgrim America Group, Inc. ("PAG") to First Bank National Association (the
"Bank").
The undersigned hereby (a) consents to the terms of that
certain Second Amended and Restated Credit Agreement dated as of July 31, 1997
by and between PAG and Pilgrim America Capital Corporation (collectively, the
"Borrowers") and the Bank (the "Credit Agreement") and to the execution and
delivery of the Credit Agreement by the Borrowers; (b) agrees that the
obligations of the Borrowers to the Bank under the Credit Agreement constitute
"Obligations" within the meaning of the above-referenced Security Agreement; and
(c) agrees and reaffirms that the security interests granted pursuant to the
Security Agreement secure, among other things, the Borrowers' obligations and
duties under the Credit Agreement and the obligations of the undersigned under
the Security Agreement. The undersigned further reaffirms that all of the terms,
covenants and conditions of the Security Agreement remain in full force and
effect.
Date: July 31, 1997.
PILGRIM AMERICA SECURITIES, INC.
By
Its
<PAGE>
EXHIBIT H TO
CREDIT AGREEMENT
REAFFIRMATION OF PLEDGE AGREEMENT
The undersigned, Pilgrim America Group, Inc. ("PAG") hereby
reaffirms that (i) the Pledge Agreement by and between PAG and First Bank
National Association (the "Bank") dated as of April 28, 1995, as the same may
have been amended from time to time (the "Pledge Agreement"), remains in full
force and effect, and (ii) the security interests granted pursuant to the Pledge
Agreement secure, among other things, the obligations and duties of PAG and
Pilgrim America Capital Corporation (collectively, the "Borrowers") under that
certain Second Amended and Restated Credit Agreement by and between the
Borrowers and the Bank dated of even date herewith.
Date: July 31, 1997
PILGRIM AMERICA GROUP, INC.
By
Its
<PAGE>
EXHIBIT I TO
CREDIT AGREEMENT
REAFFIRMATION OF PLEDGE AGREEMENT
Reference is made to that certain Pledge Agreement (the
"Pledge"), dated as of April 28, 1995, made and given by the undersigned to
secure the Obligations (as defined in the Pledge) of Pilgrim America Group, Inc.
("PAG") to First Bank National Association (the "Bank").
The undersigned hereby (a) consents to the terms of that
certain Second Amended and Restated Credit Agreement dated as of July 31, 1997
by and between the undersigned and PAG, as borrowers (collectively, the
"Borrowers") and the Bank (the "Credit Agreement") and to the execution and
delivery of the Credit Agreement by PAG; (b) agrees that the obligations of the
Borrowers to the Bank under the Credit Agreement constitute "Obligations" within
the meaning of the above-referenced Pledge; and (c) agrees and reaffirms that
the security interests granted pursuant to the Pledge Agreement secure, among
other things, the Borrowers' obligations and duties under the Credit Agreement.
The undersigned further reaffirms that all of the terms, covenants and
conditions of the Pledge remain in full force and effect.
Date: July 31, 1997
PILGRIM AMERICA
CAPITAL CORPORATION
By
Its
<PAGE>
EXHIBIT J TO
CREDIT AGREEMENT
REAFFIRMATION OF GUARANTY
Reference is made to that certain Guaranty (the "Guaranty")
dated as of April 28, 1995, made and given by the undersigned to secure the
Obligations (as defined in the Guaranty) of Pilgrim America Group, Inc. ("PAG")
to First Bank National Association (the "Bank").
The undersigned hereby (a) consents to the terms of that
certain Amended and Restated Credit Agreement dated as of July 31, 1997 by and
between PAG and Pilgrim America Capital Corporation (collectively, the
"Borrowers") and the Bank (the "Credit Agreement") and to the execution and
delivery of the Credit Agreement by the Borrowers; and (b) agrees that the
obligations of the Borrowers to the Bank under the Credit Agreement constitute
"Obligations" within the meaning of the above-referenced Guaranty. The
undersigned further agrees and reaffirms that such Obligations are guaranteed by
the undersigned in accordance with the terms and conditions of the Guaranty, and
that all of the terms, covenants and conditions of the Guaranty remain in full
force and effect.
Date: July 31, 1997
PILGRIM AMERICA INVESTMENTS, INC.
By
Its
<PAGE>
Schedule 4.6
LITIGATION
----------
<PAGE>
Schedule 4.17
PAG Subsidiaries
----------------
PACC Subsidiaries
-----------------
[TO BE COMPLETED BY BORROWERS]
<PAGE>
EXHIBIT B TO
CREDIT AGREEMENT
GUARANTY
THIS GUARANTY, dated as of , is made and given by
___________________________, a Delaware corporation (the "Guarantor"), in favor
of FIRST BANK NATIONAL ASSOCIATION, a national banking association (the "Bank").
RECITALS
A. Pilgrim America Group, Inc. ("PAG"), a Delaware corporation
and Pilgrim America Capital Corporation ("PACC"), a Delaware corporation
(collectively, the "Borrowers"), and the Bank have entered into a Second Amended
and Restated Credit Agreement dated as of July 31, 1997 (as the same may
hereafter be amended, restated, or otherwise modified from time to time, the
"Credit Agreement") pursuant to which the Bank has agreed to extend certain
credit accommodations to the Borrowers.
B. It is a condition precedent to the obligation of the Bank
to continue extending credit to the Borrowers pursuant to the Credit Agreement
that this Guaranty be executed and delivered by the Guarantor.
C. The Guarantor is a wholly owned subsidiary of PAG, and the
Borrowers will use part of the loans made to them by the Bank pursuant to the
terms of the Credit Agreement to finance the business of the Guarantor.
D. The Guarantor expects to derive benefits from the loans to
the Borrowers by the Bank and finds it advantageous, desirable and in its best
interests to execute and deliver this Guaranty to the Bank.
NOW, THEREFORE, in consideration of the loans to be extended
to the Borrowers and for other good and valuable consideration, the Guarantor
hereby covenants and agrees with the Bank as follows:
Section 1. Defined Terms. As used in this Guaranty, terms
capitalized and used without being defined shall have the meanings given them in
the Credit Agreement.
Section 2. The Guaranty. The Guarantor hereby absolutely and
unconditionally guarantees to the Bank the payment when due (whether at a stated
maturity or earlier by reason of acceleration or otherwise) and performance of
the Obligations.
Section 3. Continuing Guaranty. This Guaranty is an absolute,
unconditional, complete and continuing guaranty of payment and performance of
the Obligations, and the obligations of the Guarantor hereunder shall not be
released, in whole or in part, by any action or thing which might, but for this
provision of this Guaranty, be deemed a legal or equitable discharge of a surety
or guarantor, other than irrevocable payment and performance in full of the
Obligations. No notice of the Obligations to which this Guaranty may apply, or
of any renewal or extension thereof need be given to the Guarantor and none of
the foregoing acts shall release the Guarantor from liability hereunder. The
Guarantor hereby expressly waives (a) demand of payment, presentment, protest,
notice of dishonor, nonpayment or
1
<PAGE>
nonperformance on any and all forms of the Obligations; (b) notice of acceptance
of this Guaranty and notice of any liability to which it may apply; (c) all
other notices and demands of any kind and description relating to the
Obligations now or hereafter provided for by any agreement, statute, law, rule
or regulation; and (d) any and all defenses of the Borrowers pertaining to the
Obligations except for the defense of discharge by payment. The Guarantor shall
not be exonerated with respect to the Guarantor's liabilities under this
Guaranty by any act or thing except irrevocable payment and performance of the
Obligations, it being the purpose and intent of this Guaranty that the
Obligations constitute the direct and primary obligations of the Guarantor and
that the covenants, agreements and all obligations of the Guarantor hereunder be
absolute, unconditional and irrevocable. The Guarantor shall be and remain
liable for any deficiency remaining after foreclosure of any mortgage, deed of
trust or security agreement securing all or any part of the Obligations, whether
or not the liability of either of the Borrowers or any other Person for such
deficiency is discharged pursuant to statute, judicial decision or otherwise.
The acceptance of this Guaranty by the Bank is not intended and does not release
any liability previously existing of any guarantor or surety of any indebtedness
of the Borrowers to the Bank.
Section 4. Other Transactions. The Bank is expressly
authorized (a) to exchange, surrender or release with or without consideration
any or all collateral and security which may at any time be placed with it by
either of the Borrowers or by any other Person, or to forward or deliver any or
all such collateral and security directly to either of the Borrowers for
collection and remittance or for credit, or to collect the same in any other
manner without notice to the Guarantor; and (b) to amend, modify, extend or
supplement the Credit Agreement or any other Loan Document, any note or other
instrument evidencing the Obligations or any part thereof and any other
agreement with respect to the Obligations, waive compliance by either of the
Borrowers or any other Person with the respective terms thereof and settle or
compromise any of the Obligations without notice to the Guarantor and without in
any manner affecting the absolute liabilities of the Guarantor hereunder. No
invalidity, irregularity or unenforceability of all or any part of the
Obligations or of any security therefor or other recourse with respect thereto
shall affect, impair or be a defense to this Guaranty. The liabilities of the
Guarantor hereunder shall not be affected or impaired by any failure, delay,
neglect or omission on the part of the Bank to realize upon any of the
Obligations of the Borrowers to the Bank, or upon any collateral or security for
any or all of the Obligations, nor by the taking by the Bank of (or the failure
to take) any other guaranty or guaranties to secure the Obligations, nor by the
taking by the Bank of (or the failure to take or the failure to perfect its
security interest in or other lien on) collateral or security of any kind. No
act or omission of the Bank, whether or not such action or failure to act varies
or increases the risk of, or affects the rights or remedies of the Guarantor,
shall affect or impair the obligations of the Guarantor hereunder. The Guarantor
acknowledges that this Guaranty is in effect and binding without reference to
whether this Guaranty is signed by any other Person or Persons, that possession
of this Guaranty by the Bank shall be conclusive evidence of due delivery hereof
by the Guarantor and that this Guaranty shall continue in full force and effect,
both as to the Obligations then existing and/or thereafter created,
notwithstanding the release of or extension of time to any other guarantor of
the Obligations or any part thereof.
Section 5. Actions Not Required. The Guarantor hereby waives
any and all right to cause a marshalling of the assets of either of the
Borrowers or any other action by any court or other governmental body with
respect thereto or to cause the Bank to proceed against any security for the
Obligations or any other recourse which the Bank may have with respect thereto
and further waives any and all requirements that the Bank institute any action
or proceeding at law or in equity, or obtain any judgment, against either of the
Borrowers or any
2
<PAGE>
other Person, or with respect to any collateral security for the Obligations, as
a condition precedent to making demand on or bringing an action or obtaining
and/or enforcing a judgment against, the Guarantor upon this Guaranty. The
Guarantor further acknowledges that time is of the essence with respect to the
Guarantor's obligations under this Guaranty. Any remedy or right hereby granted
which shall be found to be unenforceable as to any Person or under any
circumstance, for any reason, shall in no way limit or prevent the enforcement
of such remedy or right as to any other Person or circumstance, nor shall such
unenforceability limit or prevent enforcement of any other remedy or right
hereby granted.
Section 6. No Subrogation. Notwithstanding any payment or
payments made by the Guarantor hereunder or any setoff or application of funds
of the Guarantor by the Bank, the Guarantor shall not be entitled to be
subrogated to any of the rights of the Bank against the Borrowers or any other
guarantor or any collateral security or guaranty or right of offset held by the
Bank for the payment of the Obligations, nor shall the Guarantor seek or be
entitled to seek any contribution or reimbursement from either of the Borrowers
or any other guarantor in respect of payments made by the Guarantor hereunder,
until all amounts owing to the Bank by the Borrowers on account of the
Obligations are irrevocably paid in full. If any amount shall be paid to the
Guarantor on account of such subrogation rights at any time when all of the
Obligations shall not have been irrevocably paid in full, such amount shall be
held by the Guarantor in trust for the Bank, segregated from other funds of the
Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to
the Bank in the exact form received by the Guarantor (duly indorsed by the
Guarantor to the Bank, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as the Bank may determine.
Section 7. Application of Payments. Any and all payments upon
the Obligations made by the Guarantor or by any other Person, and/or the
proceeds of any or all collateral or security for any of the Obligations, may be
applied by the Bank on such items of the Obligations as the Bank may elect.
Section 8. Recovery of Payment. If any payment received by the
Bank and applied to the Obligations is subsequently set aside, recovered,
rescinded or required to be returned for any reason (including, without
limitation, the bankruptcy, insolvency or reorganization of either of the
Borrowers or any other obligor), the Obligations to which such payment was
applied shall for the purposes of this Guaranty be deemed to have continued in
existence, notwithstanding such application, and this Guaranty shall be
enforceable as to such Obligations as fully as if such application had never
been made. References in this Guaranty to amounts "irrevocably paid" or to
"irrevocable payment" refer to payments that cannot be set aside, recovered,
rescinded or required to be returned for any reason.
Section 9. Borrowers' Financial Condition. The Guarantor is
familiar with the financial condition of the Borrowers, and the Guarantor has
executed and delivered this Guaranty based on the Guarantor's own judgment and
not in reliance upon any statement or representation of the Bank. The Bank shall
have no obligation to provide the Guarantor with any advice whatsoever or to
inform the Guarantor at any time of the Bank's actions, evaluations or
conclusions on the financial condition or any other matter concerning either of
the Borrowers.
Section 10. Remedies. All remedies afforded to the Bank by
reason of this Guaranty are separate and cumulative remedies and it is agreed
that no one of such remedies, whether or not exercised by the Bank, shall be
deemed to be in exclusion of any of the other
3
<PAGE>
remedies available to the Bank and no one of such remedies shall in any way
limit or prejudice any other legal or equitable remedy which the Bank may have
hereunder and with respect to the Obligations. Mere delay or failure to act
shall not preclude the exercise or enforcement of any rights and remedies
available to the Bank.
Section 11. Bankruptcy of the Borrowers. The Guarantor
expressly agrees that the liabilities and obligations of the Guarantor under
this Guaranty shall not in any way be impaired or otherwise affected by the
institution by or against either of the Borrowers or any other Person of any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or any other similar proceedings for relief under any bankruptcy law or similar
law for the relief of debtors and that any discharge of any of the Obligations
pursuant to any such bankruptcy or similar law or other law shall not diminish,
discharge or otherwise affect in any way the obligations of the Guarantor under
this Guaranty, and that upon the institution of any of the above actions, such
obligations shall be enforceable against the Guarantor.
Section 12. Costs and Expenses. The Guarantor will pay or
reimburse the Bank on demand for all out-of-pocket expenses (including in each
case all reasonable fees and expenses of counsel) incurred by the Bank arising
out of or in connection with the enforcement of this Guaranty against the
Guarantor or arising out of or in connection with any failure of the Guarantor
to fully and timely perform the obligations of the Guarantor hereunder.
Section 13. Waivers and Amendments. This Guaranty can be
waived, modified, amended, terminated or discharged only explicitly in a writing
signed by the Bank. A waiver so signed shall be effective only in the specific
instance and for the specific purpose given.
Section 14. Notices. Any notice or other communication to any
party in connection with this Guaranty shall be in writing and shall be sent by
manual delivery, telegram, telex, facsimile transmission, overnight courier or
United States mail (postage prepaid) addressed to such party at the address
specified on the signature page hereof, or at such other address as such party
shall have specified to the other party hereto in writing. All periods of notice
shall be measured from the date of delivery thereof if manually delivered, from
the date of sending thereof if sent by telegram, telex or facsimile
transmission, from the first business day after the date of sending if sent by
overnight courier, or from four days after the date of mailing if mailed.
Section 15. Guarantor Acknowledgements. The Guarantor hereby
acknowledges that (a) counsel has advised the Guarantor in the negotiation,
execution and delivery of this Guaranty, (b) the Bank has no fiduciary
relationship to the Guarantor, the relationship being solely that of debtor and
creditor, and (c) no joint venture exists between the Guarantor and the Bank.
Section 16. Representations and Warranties. The Guarantor
hereby represents and warrants to the Bank that:
16(a) It is a corporation duly organized, validly
existing and in good standing under the laws of Delaware and has the
power and authority and the legal right to own and operate its
properties and to conduct the business in which it is currently
engaged.
4
<PAGE>
16(b) It has the power and authority and the legal
right to execute and deliver, and to perform its obligations under,
this Guaranty and has taken all necessary corporate action to authorize
such execution, delivery and performance.
16(c) This Guaranty constitutes its legal, valid and
binding obligation enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
16(d) The execution, delivery and performance of this
Guaranty will not (i) violate any provision of any law, statute, rule
or regulation or any order, writ, judgment, injunction, decree,
determination or award of any court, governmental agency or arbitrator
presently in effect having applicability to it, (ii) violate or
contravene any provision of its organizational documents, or (iii)
result in a breach of or constitute a default under any indenture, loan
or credit agreement or any other agreement, lease or instrument to
which it is a party or by which it or any of its properties may be
bound or result in the creation of any lien thereunder. It is not in
default under or in violation of any such law, statute, rule or
regulation, order, writ, judgment, injunction, decree, determination or
award or any such indenture, loan or credit agreement or other
agreement, lease or instrument in any case in which the consequences of
such default or violation could have a material adverse effect on its
business, operations, properties, assets or condition (financial or
otherwise).
16(e) No order, consent, approval, license,
authorization or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority is
required on its part to authorize, or is required in connection with
the execution, delivery and performance of, or the legality, validity,
binding effect or enforceability of, this Guaranty.
16(f) There are no actions, suits or proceedings
pending or, to its knowledge, threatened against or affecting it or any
of its properties before any court or arbitrator, or any governmental
department, board, agency or other instrumentality which, if determined
adversely to it, would have a material adverse effect on its business,
operations, property or condition (financial or otherwise) or on its
ability to perform its obligations hereunder.
16(g) It expects to derive benefits from the
transactions resulting in the creation of the Obligations. The Bank may
rely conclusively on the continuing warranty, hereby made, that the
Guarantor continues to be benefitted by the Bank's extension of credit
accommodations to the Borrowers and the Bank shall have no duty to
inquire into or confirm the receipt of any such benefits, and this
Guaranty shall be effective and enforceable by the Bank without regard
to the receipt, nature or value of any such benefits.
Section 17. Continuing Guaranty; Assignments under Credit
Agreement. This Guaranty shall (a) remain in full force and effect until
irrevocable payment in full of the Obligations and the expiration of the
obligations, if any, of the Bank to extend credit accommodations to the
Borrowers, (b) be binding upon the Guarantor, its successors and assigns and (c)
inure to the benefit of, and be enforceable by, the Bank and its successors,
transferees, and assigns. Without limiting the generality of the foregoing
clause (c), the Bank
5
<PAGE>
may assign or otherwise transfer all or any portion of its rights and
obligations under the Credit Agreement to any other Persons to the extent and in
the manner provided in the Credit Agreement and may similarly transfer all or
any portion of its rights under this Guaranty to such Persons.
Section 18. Governing Law and Construction. THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS GUARANTY SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES
THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO
NATIONAL BANKS. Whenever possible, each provision of this Guaranty and any other
statement, instrument or transaction contemplated hereby or relating hereto
shall be interpreted in such manner as to be effective and valid under such
applicable law, but, if any provision of this Guaranty or any other statement,
instrument or transaction contemplated hereby or relating hereto shall be held
to be prohibited or invalid under such applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Guaranty or any other statement, instrument or transaction contemplated hereby
or relating hereto.
Section 19. Consent to Jurisdiction. AT THE OPTION OF THE
BANK, THIS GUARANTY MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE
COURT SITTING IN HENNEPIN COUNTY, MINNESOTA, MINNESOTA; AND THE GUARANTOR
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT
THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE GUARANTOR
COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT
THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS
GUARANTY, THE BANK AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED
TO ONE OF THE JURISDICTIONS AND VENUES ABOVE- DESCRIBED, OR IF SUCH TRANSFER
CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Section 20. Waiver of Jury Trial. EACH OF THE GUARANTOR, BY
ITS EXECUTION AND DELIVERY HEREOF, AND THE BANK, BY ITS ACCEPTANCE HEREOF,
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 21. Counterparts. This Guaranty may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument.
Section 22. General. All representations and warranties
contained in this Guaranty or in any other agreement between the Guarantor and
the Bank shall survive the execution, delivery and performance of this Guaranty
and the creation and payment of the Obligations. Captions in this Guaranty are
for reference and convenience only and shall not affect the interpretation or
meaning of any provision of this Guaranty.
6
<PAGE>
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty
as of the date first above written.
GUARANTOR:
----------------------------
By
------------------------
Title
----------------------
Address:
Two Renaissance Square, Ste. 1200
40 North Central Avenue
Phoenix, AZ 85004-4424
Attention: James R. Reis
Telecopier: (602) 661-3572
Address for the Bank:
First Bank National Association
First Bank Place - MPFP0702
601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: Jose A. Peris
Telecopier: (612) 973-0825
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EXHIBIT C TO
CREDIT AGREEMENT
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of , is made and given by
_____________, a Delaware corporation (the "Grantor"), to FIRST BANK NATIONAL
ASSOCIATION, a national banking association (the "Secured Party").
RECITALS
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A. Pilgrim America Group, Inc. ("PAG"), a Delaware corporation
and Pilgrim America Capital Corporation ("PACC"), a Delaware corporation
(collectively as the "Borrowers"), and the Secured Party have entered into a
Second Amended and Restated Credit Agreement dated as of July 31, 1997 (as the
same may hereafter be amended, restated, or otherwise modified from time to
time, the "Credit Agreement") pursuant to which the Secured Party has agreed to
extend to the Borrowers certain credit accommodations.
B. It is a condition precedent to the obligation of the
Secured Party to continue extending credit to the Borrowers pursuant to the
terms of the Credit Agreement that this Agreement be executed and delivered by
the Grantor.
C. The Grantor is a wholly owned subsidiary of PAG, and the
Borrowers will use part of the loans made to them by the Secured Party pursuant
to the terms of the Credit Agreement to finance the business of the Grantor.
D. The Grantor expects to derive benefits from the extension
of credit accommodations to the Borrowers by the Secured Party and finds it
advantageous, desirable and in its best interests to execute and deliver this
Security Agreement to the Secured Party.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Secured Party to enter into the Credit Agreement and extend loans
to the Borrowers thereunder, the Grantor hereby agrees with the Secured Party
for the Secured Party's benefit as follows:
Section 1. Defined Terms.
1(a) As used in this Agreement, terms capitalized and used
herein without being defined will have the meanings given them in the Credit
Agreement and the following terms shall have the meanings indicated:
"Account" shall mean the rights of the Grantor to payment for
goods sold or leased or for services rendered, whether or not such
right is evidenced by an instrument or chattel paper and whether or not
such right has been earned by performance, all guaranties and security
therefor, and all interests related thereto, including without
limitation, all rights to receive "sales charges" (as defined in the
Rules of Fair Practice) (including, without limitation, Contingent
Deferred Sales Charge), fees payable out of the assets of any Fund
pursuant to Rule 12b-1 of the SEC under the Investment Company Act, and
fees payable under Advisory Contracts.
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"Account Debtor" shall mean a Person who is obligated on or
under any Account, Contract or General Intangible.
"Collateral" shall mean all property and rights in property
now owned or hereafter at any time acquired by the Grantor in or upon
which a Security Interest is granted to the Secured Party by the
Grantor under this Agreement.
"Collateral Account" shall mean the Grantor's account number
________ with the Secured Party, or any other account of the Grantor
with the Secured Party subsequently substituted therefor.
"Contracts" shall mean any and all agreements to which the
Grantor is a party, now existing or hereafter entered into, as the same
may from time to time be amended, supplemented or otherwise modified
(including (a) all rights of the Grantor to receive moneys due and to
become due to it thereunder or in connection therewith, (b) all rights
of the Grantor to damages arising out of, or for, breach or default in
respect thereof and (c) all rights of the Grantor to perform and to
exercise all remedies thereunder), including all Fund Agreements and
all agreements with Selling Agents.
"Equipment" shall mean all machinery, equipment, furniture,
furnishings and fixtures, including all accessions, accessories and
attachments thereto, and any guaranties, warranties, indemnities and
other agreements of manufacturers, vendors and others with respect to
such Equipment.
"Financing Statement" shall have the meaning given to such
term in Section 4 hereof.
"General Intangibles" shall mean any personal property (other
than goods, Accounts, Contracts and money) including choses in action,
causes of action, contract rights, corporate and other business
records, inventions, designs, patents, patent applications, service
marks, trademarks, tradenames, trade secrets, engineering drawings,
good will, registrations, copyrights, licenses, franchises, customer
lists, tax refund claims, royalties, licensing and product rights,
rights to the retrieval from third parties of electronically processed
and recorded data and all rights to payment resulting from an order of
any court.
"Inventory" shall mean any and all goods or securities owned
or held by or for the account of the Grantor for sale or lease, or for
furnishing under a contract of service, in each case wherever the same
shall be located.
"Obligations" shall mean (a) all indebtedness, liabilities and
obligations of the Borrowers to the Secured Party of every kind, nature
or description under the Credit Agreement and the Loan Documents,
including the Borrowers' obligation on any promissory note or notes
under the Credit Agreement and any note or notes hereafter issued in
substitution or replacement thereof, (b) any and all other liabilities
and obligations of the Borrowers to the Secured Party of every kind,
nature and description, whether direct or indirect or hereafter
acquired by the Secured Party from any Person, absolute or contingent,
regardless of how such liabilities arise or by what agreement or
instrument they may be evidenced, and (c) all liabilities of the
Grantor under this Agreement, and in all of the foregoing cases whether
due or to become due, and whether now existing or hereafter arising or
incurred.
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"Security Interest" shall have the meaning given such term in
Section 2 hereof.
1(b) All other terms used in this Agreement which are not
specifically defined herein shall have the meaning assigned to such terms in the
Uniform Commercial Code in effect in the State of Minnesota as of the date of
this Agreement to the extent such other terms are defined therein.
1(c) Unless the context of this Agreement otherwise clearly
requires, references to the plural include the singular, the singular, the
plural and "or" has the inclusive meaning represented by the phrase "and/or."
The words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation." The words "hereof," "herein," "hereunder,"
and similar terms in this Agreement refer to this Agreement as a whole and not
to any particular provision of this Agreement. References to Sections are
references to Sections in this Security Agreement unless otherwise provided.
Section 2. Grant of Security Interest. As security for the
payment and performance of all of the Obligations, the Grantor hereby grants to
the Secured Party a security interest (the "Security Interest") in all of the
Grantor's right, title, and interest in and to the following, whether now or
hereafter owned, existing, arising or acquired and wherever located:
2(a) All Accounts.
2(b) All Contracts other than Advisory Contracts.
2(c) All Equipment.
2(d) All General Intangibles.
2(e) All Inventory.
2(f) To the extent not otherwise included in the foregoing,
(i) all other rights to the payment of money, including rents and other
sums payable to the Grantor under leases or rental agreements and other
Chattel Paper and insurance proceeds; (ii) all books, correspondence,
credit files, records, invoices, bills of lading, warehouse receipts
and other documents relating to any of the foregoing, including,
without limitation, all tapes, cards, disks, computer software,
computer runs, and other papers and documents in the possession or
control of the Grantor or any computer bureau from time to time acting
for the Grantor; (iii) all rights in, to and under all policies
insuring the life of any officer, director, stockholder or employee of
the Grantor, the proceeds of which are payable to the Grantor; and (iv)
all accessions and additions to, parts and appurtenances of,
substitutions for and replacements of any of the foregoing.
2(g) To the extent not otherwise included, all proceeds and
products of any and all of the foregoing.
Section 3. Grantor Remains Liable. Anything herein to the
contrary notwithstanding, (a) the Grantor shall remain liable under the
Contracts and other items included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Secured Party of any of the rights hereunder shall not release the Grantor from
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any of its duties or obligations under the Contracts and other items included in
the Collateral, and (c) the Secured Party shall have no obligation or liability
under the Contracts and other items included in the Collateral by reason of this
Agreement, nor shall the Secured Party be obligated to perform any of the
obligations or duties of the Grantor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
Section 4. Title to Collateral. The Grantor has (or will have
at the time it acquires rights in Collateral hereafter acquired or arising) and
will maintain so long as the Security Interest may remain outstanding, title to
each item of Collateral (including the proceeds and products thereof), free and
clear of all Liens except the Security Interest and except Liens permitted by
the Credit Agreement. The Grantor will defend the Collateral against all claims
or demands of all Persons (other than the Secured Party) claiming the Collateral
or any interest therein. As of the date of execution of this Security Agreement,
no effective financing statement or other similar document used to perfect and
preserve a security interest under the laws of any jurisdiction (a "Financing
Statement") covering all or any part of the Collateral is on file in any
recording office, except such as may have been filed in favor of the Secured
Party relating to this Agreement.
Section 5. Disposition of Collateral. The Grantor will not
sell, lease or otherwise dispose of, or discount or factor with or without
recourse, any Collateral, except as permitted by the Credit Agreement. The Bank
shall, at the request of the Grantor, release its security interest in any
Collateral sold by the Grantor in a transaction permitted by Section 6.2 of the
Credit Agreement, effective upon the sale thereof, provided that (i) the
purchaser of such Collateral agrees to pay the entire purchase price for such
Collateral to the Grantor by means of deposits into an account of the Grantor
with the Bank, (ii) the Grantor obtains a security interest in the agreement
pursuant to which such Collateral was sold and any right, title or interest in
the Collateral sold thereunder retained by the Grantor, and (iii) the
purchaser(s) under any such agreement consent to the Bank's security interests
described in clause (ii) above.
Section 6. Names, Offices, Locations. The Grantor does
business solely under its own name and the trade names and styles, if any, set
forth on Schedule II hereto. Except as noted on said Schedule, no such trade
names or styles and no trademarks or other similar marks owned by the Grantor
are registered with any governmental unit. The chief place of business and chief
executive office and the office where it keeps its books and records concerning
the Collateral is located at its address set forth on the signature page hereof.
All items of Collateral existing on the date of this Agreement are located at
the places specified on Schedule I hereto. The Grantor will immediately notify
the Secured Party of any additional state in which any item of Collateral is
hereafter located. The Grantor will from time to time at the request of the
Secured Party provide the Secured Party with current lists as to the locations
of the Collateral. The Grantor will not permit any Collateral or any records
pertaining to collateral to be located in any state or area in which, in the
event of such location, a financing statement covering such Collateral would be
required to be, but has not in fact been, filed in order to perfect the Security
Interest. The Grantor will not change its name or the location of its chief
place of business and chief executive office unless the Secured Party has been
given at least 30 days prior written notice thereof and the Grantor has executed
and delivered to the Secured Party such Financing Statements and other
instruments required or appropriate to continue the perfection of the Security
Interest.
Section 7. Rights to Payment. Except as the Grantor may
otherwise advise the Secured Party in writing, each Account, Contract and
General Intangible constituting a right to
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payment is (or, in the case of all future Collateral, will be when arising or
issued) the valid, genuine and legally enforceable obligation of the Account
Debtor or other obligor named therein or in the Grantor's records pertaining
thereto as being obligated to pay or perform such obligation. Without the
Secured Party's prior written consent, the Grantor will not agree to any
modifications, amendments, subordinations, cancellations or terminations of the
obligations of any such Account Debtors or other obligors except in the ordinary
course of business and in amounts not exceeding $250,000 in the aggregate in any
calendar year. The Grantor will perform and comply in all material respects with
all its obligations under its Contracts and exercise promptly and diligently its
rights thereunder. The Grantor shall, at its own expense, take all necessary
action to collect, as and when due, all amounts due with respect to amounts
payable under or with respect to the Accounts, Contracts and General
Intangibles, including the taking of such action with respect to collection as
the Grantor may deem advisable. The Grantor shall cause all amounts payable to
it under any Fund Agreement to be paid by the Account Debtor or other obligor
therein directly into the Collateral Account. Except after the occurrence and
during the continuance of a Default or an Event of Default, the Grantor shall be
entitled to cause the Secured Party to withdraw amounts so deposited and deposit
the same into an operating account of the Grantor with the Secured Party. From
and after the occurrence and during the continuance of a Default or an Event of
Default, the Secured Party may hold all such amounts as collateral for the
Obligations or apply the same to the Obligations as provided in Section 17.
Section 8. Further Assurances.
8(a) The Grantor agrees that from time to time, at
its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be
necessary or that the Secured Party may reasonably request, in order to
perfect and protect the Security Interest granted or purported to be
granted hereby or to enable the Secured Party to exercise and enforce
its rights and remedies hereunder with respect to any Collateral (but
any failure to request or assure that the Grantor execute and deliver
such instrument or documents or to take such action shall not affect or
impair the validity, sufficiency or enforceability of this Agreement
and the Security Interest, regardless of whether any such item was or
was not executed and delivered or action taken in a similar context or
on a prior occasion). Without limiting the generality of the foregoing,
the Grantor will promptly and from time to time at the request of the
Secured Party: (i) mark, or permit the Secured Party to mark,
conspicuously its books, records, and accounts showing or dealing with
the Collateral, with a legend, in form and substance satisfactory to
the Secured Party, indicating that each such item of Collateral is
subject to the Security Interest granted hereby; (ii) deliver and
pledge to the Secured Party, all instruments, duly indorsed or
accompanied by duly executed instruments of transfer or assignment,
with full recourse to the Grantor, all in form and substance
satisfactory to the Secured Party; (iii) execute and file such
Financing Statements or continuation statements in respect thereof, or
amendments thereto, and such other instruments or notices (including
fixture filings with any necessary legal descriptions as to any goods
included in the Collateral which the Secured Party determines might be
deemed to be fixtures, and instruments and notices with respect to
vehicle titles), as may be necessary or desirable, or as the Secured
Party may request, in order to perfect, preserve, and enhance the
Security Interest granted or purported to be granted hereby; and (iv)
obtain consents, in form satisfactory to the Secured Party, of any
other party to any Contract consenting to the Secured Party's interest
therein.
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8(b) The Grantor hereby authorizes the Secured Party
to file one or more Financing Statements or continuation statements in
respect thereof, and amendments thereto, relating to all or any part of
the Collateral without the signature of the Grantor where permitted by
law. A photocopy or other reproduction of this Agreement or any
Financing Statement covering the Collateral or any part thereof shall
be sufficient as a Financing Statement where permitted by law.
8(c) The Grantor will furnish to the Secured Party
from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Secured Party may reasonably request, all in
reasonable detail and in form and substance reasonably satisfactory to
the Secured Party.
Section 9. Taxes and Claims. The Grantor will promptly pay all
taxes and other governmental charges levied or assessed upon or against any
Collateral or upon or against the creation, perfection or continuance of the
Security Interest, as well as all other claims of any kind (including claims for
labor, material and supplies) against or with respect to the Collateral, except
to the extent (a) such taxes, charges or claims are being contested in good
faith by appropriate proceedings, (b) such proceedings do not involve any
material danger of the sale, forfeiture or loss of any of the Collateral or any
interest therein and (c) such taxes, charges or claims are adequately reserved
against on the Grantor's books in accordance with generally accepted accounting
principles.
Section 10. Books and Records. The Grantor will keep and
maintain at its own cost and expense satisfactory and complete records of the
Collateral, including a record of all payments received and credits granted with
respect to all Accounts, Contracts and General Intangibles.
Section 11. Inspection, Reports, Verifications. The Grantor
will at all reasonable times permit the Secured Party or its representatives to
examine or inspect any Collateral, any evidence of Collateral and the Grantor's
books and records concerning the Collateral, wherever located. The Grantor will
from time to time when requested by the Secured Party furnish to the Secured
Party a report on its Accounts, Contracts and General Intangibles naming the
Account Debtor or other obligors thereon, the amount due and the aging thereof.
The Secured Party or its designee is authorized to contact Account Debtor and
other Persons obligated on any such Collateral from time to time to verify the
existence, amount and/or terms of such Collateral.
Section 12. Notice of Loss. The Grantor will promptly notify
the Secured Party of any loss of or material damage to any material item of
Collateral or of any substantial adverse change, known to Grantor, in any
material item of Collateral or the prospect of payment or performance thereof.
Section 13. Action by the Secured Party. If the Grantor at any
time fails to perform or observe any of the foregoing agreements, the Secured
Party shall have (and the Grantor hereby grants to the Secured Party) the right,
power and authority (but not the duty) to perform or observe such agreement on
behalf and in the name, place and stead of the Grantor (or, at the Secured
Party's option, in the Secured Party's name) and to take any and all other
actions which the Secured Party may reasonably deem necessary to cure or correct
such failure (including, without limitation, the payment of taxes, the
satisfaction of Liens, the procurement and maintenance of insurance, the
execution of assignments, security agreements
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and Financing Statements, and the indorsement of instruments); and the Grantor
shall thereupon pay to the Secured Party on demand the amount of all monies
expended and all costs and expenses (including reasonable attorneys' fees and
legal expenses) incurred by the Secured Party in connection with or as a result
of the performance or observance of such agreements or the taking of such action
by the Secured Party, together with interest thereon from the date expended or
incurred at the highest lawful rate then applicable to any of the Obligations,
and all such monies expended, costs and expenses and interest thereon shall be
part of the Obligations secured by the Security Interest.
Section 14. The Secured Party's Duties. The powers conferred
on the Secured Party hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such powers.
The Secured Party shall be deemed to have exercised reasonable care in the
custody and preservation of any of the Collateral in its possession if it takes
such action for that purpose as Grantor requests in writing, but failure of the
Secured Party to comply with any such request shall not itself be deemed a
failure to exercise reasonable care, and no failure of the Secured Party to
preserve or protect any rights with respect to such Collateral not so requested
by the Grantor shall be deemed a failure to exercise reasonable care in the
custody or preservation of such Collateral. The Secured Party shall also be
deemed to have exercised reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to the safekeeping which the Secured Party accords its own
property of like kind. The Secured Party shall have no duty, as to any
Collateral, as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Collateral, whether or not the Secured Party has or is deemed to have knowledge
of such matters, or as to the taking of any necessary steps to preserve rights
against any Persons or any other rights pertaining to any Collateral. The
Secured Party will take action in the nature of exchanges, conversions,
redemptions, tenders and the like requested in writing by the Grantor with
respect to the Collateral in the Secured Party's possession if the Secured Party
in its reasonable judgment determines that such action will not impair the
Security Interest or the value of the Collateral, but a failure of the Secured
Party to comply with any such request shall not of itself be deemed a failure to
exercise reasonable care.
Section 15. Remedies on Default. Upon the occurrence of an
Event of Default and at any time thereafter:
15(a) The Secured Party may exercise and enforce any
and all rights and remedies available upon default to a secured party
under the Uniform Commercial Code.
15(b) The Secured Party shall have the right to enter
upon and into and take possession of all or such part or parts of the
properties of the Grantor as may be necessary or appropriate in the
judgment of the Secured Party to permit or enable the Secured Party to
exercise its rights with respect to the Collateral, as the Secured
Party may elect, and to use and operate said properties for said
purposes and for such length of time as the Secured Party may deem
necessary or appropriate for said purposes without the payment of any
compensation to Grantor therefor. The Secured Party may require the
Grantor to, and the Grantor hereby agrees that it will, at its expense
and upon request of the Secured Party forthwith, assemble all or part
of the Collateral as directed by the Secured Party and make it
available to the Secured Party at a place or places to be designated by
the Secured Party.
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15(c) Any sale of Collateral may be in one or more
parcels at public or private sale, at any of the Secured Party's
offices or elsewhere, for cash, on credit, or for future delivery, and
upon such other terms as the Secured Party may believe are commercially
reasonable. The Secured Party shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given, and the
Secured Party may adjourn any public or private sale from time to time
by announcement made at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to
which it was so adjourned.
15(d) The Secured Party is hereby granted a license
or other right to use, without charge, all of the Grantor's property,
including, without limitation, all of the Grantor's labels, trademarks,
copyrights, patents and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in exercising its
rights with respect to the Collateral, and the Grantor's rights under
all licenses and all franchise agreements shall inure to the Secured
Party's benefit until the Obligations are paid in full.
15(e) If notice to the Grantor of any intended
disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given in the manner specified for the giving of notice in
Section 21 hereof at least ten calendar days prior to the date of
intended disposition or other action, and the Secured Party may
exercise or enforce any and all other rights or remedies available by
law or agreement against the Collateral, against the Grantor, or
against any other Person or property.
15(f) The Secured Party is hereby granted, upon
written notice to the Grantor and any other Person entitled to receive
such notice under any Contract, the right to assume, become bound by,
and agree to perform and observe the covenants, agreements, obligations
and conditions to be performed and observed under such Contract and to
exercise all of the rights, powers and privileges of the Grantor
thereunder.
15(g) The Grantor appoints the Secured Party as the
Grantor's attorney-in-fact, with full power of substitution, to perform
any act which the Grantor has agreed to perform but has failed to do
so, which appointment is coupled with an interest and irrevocable.
Section 16. Remedies as to Contracts and Rights to Payment.
Upon the occurrence of an Event of Default and at any time thereafter the
Secured Party may notify any Account Debtor or other Person obligated on any
Collateral that the same have been assigned or transferred to the Secured Party
and that the same should be performed as requested by, or paid directly to, the
Secured Party, as the case may be. The Grantor shall join in giving such notice,
if the Secured Party so requests. The Secured Party may, in the Secured Party's
name or in the Grantor's name, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of, or securing, any such
Collateral or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, modify, amend or change the obligation of any such
Account Debtor or other Person. The Secured Party is hereby granted the right to
take any action which the Secured Party may reasonably deem necessary or
desirable in order to realize on the Collateral, including, the power to endorse
in the name of the Grantor, with recourse to the Grantor, any checks, drafts,
notes or other instruments or documents received in payment of or on account of
the Collateral. If any
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payments on any Collateral are received by the Grantor after an Event of Default
has occurred, such payments shall be held in trust by the Grantor as the
property of the Secured Party and shall not be commingled with any funds or
property of the Grantor and shall be forthwith remitted to the Secured Party for
application on the Obligations.
Section 17. Application of Proceeds. All cash proceeds
received by the Secured Party in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the discretion
of the Secured Party, be held by the Secured Party as collateral for, or then or
at any time thereafter be applied in whole or in part by the Secured Party
against, all or any part of the Obligations (including, without limitation, any
expenses of the Secured Party payable pursuant to Section 18 hereof).
Section 18. Costs and Expenses; Indemnity. The Grantor will
pay or reimburse the Secured Party on demand for all out-of-pocket expenses
(including in each case all filing and recording fees and taxes and all
reasonable fees and expenses of counsel and of any experts and agents) incurred
by the Secured Party in connection with the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest and the
preparation, administration, continuance, amendment or enforcement of this
Agreement, and all such costs and expenses shall be part of the Obligations
secured by the Security Interest. The Grantor shall indemnify and hold the
Secured Party harmless from and against any and all claims, losses and
liabilities (including reasonable attorneys' fees) growing out of or resulting
from this Agreement and the Security Interest hereby created (including
enforcement of this Agreement) or the Secured Party's actions pursuant hereto,
except claims, losses or liabilities resulting from the Secured Party's gross
negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction. Any liability of the Grantor to indemnify and hold the
Secured Party harmless pursuant to the preceding sentence shall be part of the
Obligations secured by the Security Interest. The obligations of the Grantor
under this Section shall survive any termination of this Agreement.
Section 19. Waivers; Remedies; Marshalling. This Agreement can
be waived, modified, amended, terminated or discharged, and the Security
Interest can be released, only explicitly in a writing signed by the Secured
Party. A waiver so signed shall be effective only in the specific instance and
for the specific purpose given. Mere delay or failure to act shall not preclude
the exercise or enforcement of any rights and remedies available to the Secured
Party. All rights and remedies of the Secured Party shall be cumulative and may
be exercised singly in any order or sequence, or concurrently, at the Secured
Party's option, and the exercise or enforcement of any such right or remedy
shall neither be a condition to nor bar the exercise or enforcement of any
other. The Grantor hereby waives all requirements of law, if any, relating to
the marshalling of assets which would be applicable in connection with the
enforcement by the Secured Party of its remedies hereunder, absent this waiver.
Section 20. Waiver of Defenses. The Grantor waives the benefit
of any and all defenses and discharges available to a guarantor, surety,
indorser or accommodation party, dependent on its character as such. Without
limiting the generality of the foregoing, the Grantor (in such capacity) waives
presentment, demand for payment, and notice of nonpayment or protest of any note
or any other instrument evidencing any of the Obligations; and the Grantor
agrees that its liability hereunder and the Security Interest hereby created
shall not be affected or impaired in any way by any of the following acts and
things (which the Secured Party may do from time to time without notice to the
Grantor): (a) by any sale, pledge, surrender, compromise, settlement, release,
renewal, extension, indulgence, alteration, substitution, exchange, change in,
modification, or other disposition of any of the Obligations
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or any evidence thereof or any collateral therefor, (b) by any acceptance or
release of collateral for or guarantors of any of the Obligations, (c) by any
failure, neglect or omission to realize upon or protect any of the Obligations,
or to obtain, perfect, enforce or realize upon any collateral therefor, or to
exercise any Lien upon or right of appropriation of any moneys, credits or
property toward the liquidation of any of the Obligations, or (d) by any
application of payments or credits upon any of the Obligations. The Secured
Party shall not be required, before exercising its rights under this Agreement,
to first resort for payment of any of the Obligations to the Borrowers or any
other Persons, its or their properties or estates, or any collateral, property,
Liens or other rights or remedies whatsoever. The Grantor agrees not to exercise
any right of contribution, recourse, subrogation or reimbursement available to
the Grantor against either of the Borrowers or any other Person or property,
unless and until all Obligations and all other debts, liabilities and
obligations owed by the Borrowers and the Grantor to the Secured Party have been
paid and discharged. The Grantor expects to derive benefits from the
transactions resulting in the creation of the Obligations. The Secured Party may
rely conclusively on the continuing warranty, hereby made, that the Grantor
continues to be benefitted by the Secured Party's extension of credit
accommodations to the Borrowers and the Secured Party shall have no duty to
inquire into or confirm the receipt of any such benefits, and this Agreement
shall be effective and enforceable by the Secured Party without regard to the
receipt, nature or value of any such benefits.
Section 21. Notices. Any notice or other communication to any
party in connection with this Agreement shall be in writing and shall be sent by
manual delivery, telegram, telex, facsimile transmission, overnight courier or
United States mail (postage prepaid) addressed to such party at the address
specified on the signature page hereof, or at such other address as such party
shall have specified to the other party hereto in writing. All periods of notice
shall be measured from the date of delivery thereof if manually delivered, from
the date of sending thereof if sent by telegram, telex or facsimile
transmission, from the first business day after the date of sending if sent by
overnight courier, or from four days after the date of mailing if mailed.
Section 22. Grantor Acknowledgements. The Grantor hereby
acknowledges that (a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement, (b) the Secured Party has no fiduciary
relationship to the Grantor, the relationship being solely that of debtor and
creditor, and (c) no joint venture exists between the Grantor and the Secured
Party.
Section 23. Representations and Warranties. The Grantor hereby
represents and warrants to the Secured Party that:
23(a) The Grantor is a corporation duly incorporated,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power and
authority and the legal right to own and operate its properties and to
conduct the business in which it is currently engaged.
23(b) The Grantor has the corporate power and
authority and the legal right to execute and deliver, and to perform
its obligations under, this Agreement and has taken all necessary
corporate action to authorize such execution, delivery and performance.
23(c) This Agreement constitutes a legal, valid and
binding obligation of the Grantor enforceable in accordance with its
terms, except as enforceability may be
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<PAGE>
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
23(d) The execution, delivery and performance of this
Agreement will not (i) violate any provision of any law, statute, rule
or regulation or any order, writ, judgment, injunction, decree,
determination or award of any court, governmental agency or arbitrator
presently in effect having applicability to the Grantor, (ii) violate
or contravene any provision of the Articles of Incorporation or bylaws
of the Grantor, or (iii) result in a breach of or constitute a default
under any indenture, loan or credit agreement or any other agreement,
lease or instrument to which the Grantor is a party or by which it or
any of its properties may be bound or result in the creation of any
Lien thereunder. The Grantor is not in default under or in violation of
any such law, statute, rule or regulation, order, writ, judgment,
injunction, decree, determination or award or any such indenture, loan
or credit agreement or other agreement, lease or instrument in any case
in which the consequences of such default or violation could have a
material adverse effect on the business, operations, properties, assets
or condition (financial or otherwise) of the Grantor.
23(e) Except for filings, recordings and
registrations to perfect the Security Interest, no order, consent,
approval, license, authorization or validation of, or filing, recording
or registration with, or exemption by, any governmental or public body
or authority is required on the part of the Grantor to authorize, or is
required in connection with the execution, delivery and performance of,
or the legality, validity, binding effect or enforceability of, this
Agreement.
23(f) There are no actions, suits or proceedings
pending or, to the knowledge of the Grantor, threatened against or
affecting the Grantor or any of its properties before any court or
arbitrator, or any governmental department, board, agency or other
instrumentality which, if determined adversely to the Grantor, would
have a material adverse effect on the business, operations, property or
condition (financial or otherwise) of the Grantor or on the ability of
the Grantor to perform its obligations hereunder.
Section 24. Continuing Security Interest; Assignments under
Credit Agreement. This Agreement shall (a) create a continuing security interest
in the Collateral and shall remain in full force and effect until payment in
full of the Obligations and the expiration of the obligations, if any, of the
Secured Party to extend credit accommodations to the Borrowers, (b) be binding
upon the Grantor, its successors and assigns, and (c) inure to the benefit of,
and be enforceable by, the Secured Party and its successors, transferees, and
assigns. Without limiting the generality of the foregoing clause (c), the
Secured Party may assign or otherwise transfer all or any portion of its rights
and obligations under the Credit Agreement to any other Persons to the extent
and in the manner provided in the Credit Agreement and may similarly transfer
all or any portion of its rights under this Security Agreement to such Persons.
Section 25. Termination of Security Interest. Upon payment in
full of the Obligations and the expiration of any obligation of the Secured
Party to make loans to the Borrowers, the Security Interest granted hereby shall
terminate. Upon any such termination, the Secured Party will return to the
Grantor such of the Collateral then in the possession of the Secured Party as
shall not have been sold or otherwise applied pursuant to the terms hereof and
execute and deliver to the Grantor such documents as the Grantor shall
reasonably request
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<PAGE>
to evidence such termination. Any reversion or return of Collateral upon
termination of this Agreement and any instruments of transfer or termination
shall be at the expense of the Grantor and shall be without warranty by, or
recourse on, the Secured Party. As used in this Section, "Grantor" includes any
assigns of Grantor, any Person holding a subordinate security interest in any of
the Collateral or whoever else may be lawfully entitled to any part of the
Collateral.
Section 26. Governing Law and Construction. THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES
THEREOF, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE MANDATORILY GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF MINNESOTA. Whenever possible, each provision of this Agreement and any
other statement, instrument or transaction contemplated hereby or relating
hereto shall be interpreted in such manner as to be effective and valid under
such applicable law, but, if any provision of this Agreement or any other
statement, instrument or transaction contemplated hereby or relating hereto
shall be held to be prohibited or invalid under such applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement or any other statement, instrument or
transaction contemplated hereby or relating hereto.
Section 27. Consent to Jurisdiction. AT THE OPTION OF THE
SECURED PARTY, THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA
STATE COURT SITTING IN HENNEPIN COUNTY, MINNESOTA; AND THE GRANTOR CONSENTS TO
THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE
IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE GRANTOR COMMENCES ANY ACTION
IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING
DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE
SECURED PARTY AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO
ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT
BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Section 28. Waiver of Notice and Hearing. THE GRANTOR HEREBY
WAIVES ALL RIGHTS TO A JUDICIAL HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE
SECURED PARTY OF ITS RIGHTS TO POSSESSION OF THE COLLATERAL WITHOUT JUDICIAL
PROCESS OR OF ITS RIGHTS TO REPLEVY, ATTACH, OR LEVY UPON THE COLLATERAL WITHOUT
PRIOR NOTICE OR HEARING. THE GRANTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY
COUNSEL OF ITS CHOICE WITH RESPECT TO THIS PROVISION AND THIS AGREEMENT.
Section 29. Waiver of Trial by Jury. EACH OF THE GRANTOR, BY
ITS EXECUTION AND DELIVERY HEREOF, AND THE BANK, BY ITS ACCEPTANCE HEREOF,
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
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Section 30. Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, but all such counterparts together shall constitute but
one and the same instrument.
Section 31. General. All representations and warranties
contained in this Agreement or in any other agreement between the Grantor and
the Secured Party shall survive the execution, delivery and performance of this
Agreement and the creation and payment of the Obligations. The Grantor waives
notice of the acceptance of this Agreement by the Secured Party. Captions in
this Agreement are for reference and convenience only and shall not affect the
interpretation or meaning of any provision of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Security
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
-----------------------------
By
--------------------------
Title
-----------------------
Address for Grantor:
Two Renaissance Square, Ste. 1200
40 North Central Avenue
Phoenix, AZ 85004-4424
Attention: James R. Reis
Telecopier: (602) 661-3572
Grantor's Tax ID # [ ]
Address for the Secured Party:
First Bank National Association
First Bank Place - MPFP0702
601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: Jose A. Peris
Telecopier: (612) 973-0825
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SCHEDULE I
to
Security Agreement
Locations of Collateral
Two Renaissance Square, Ste. 1200
40 North Central Avenue
Phoenix, AZ 85004-4424
<PAGE>
SCHEDULE II
to
Security Agreement
Trade Names and Trade Styles
[To be provided.]
<PAGE>
EXHIBIT D TO
CREDIT AGREEMENT
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of is made and given by
_____________, a Delaware corporation (the "Grantor"), to FIRST BANK NATIONAL
ASSOCIATION, a national banking association (the "Secured Party").
RECITALS
--------
A. Pilgrim America Group, Inc. ("PAG"), a Delaware corporation
and Pilgrim America Capital Corporation ("PACC"), a Delaware corporation
(collectively as the "Borrowers"), and the Secured Party have entered into a
Second Amended and Restated Credit Agreement dated as of July 31, 1997 (as the
same may hereafter be amended, restated, or otherwise modified from time to
time, the "Credit Agreement") pursuant to which the Secured Party has agreed to
extend to the Borrowers certain credit accommodations.
B. It is a condition precedent to the obligation of the
Secured Party to continue extending credit to the Borrowers pursuant to the
terms of the Credit Agreement that this Agreement be executed and delivered by
the Grantor.
C. The Grantor is a wholly owned subsidiary of PAG, and the
Borrowers will use part of the loans made to them by the Secured Party pursuant
to the terms of the Credit Agreement to finance the business of the Grantor.
D. The Grantor expects to derive benefits from the extension
of credit accommodations to the Borrowers by the Secured Party and finds it
advantageous, desirable and in its best interests to execute and deliver this
Security Agreement to the Secured Party.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Secured Party to enter into the Credit Agreement and extend loans
to the Borrowers thereunder, the Grantor hereby agrees with the Secured Party
for the Secured Party's benefit as follows:
Section 1. Defined Terms.
1(a) As used in this Agreement, terms capitalized and used
herein without being defined will have the meanings given them in the Credit
Agreement and the following terms shall have the meanings indicated:
"Account" shall mean the rights of the Grantor to payment for
goods sold or leased or for services rendered, whether or not such
right is evidenced by an instrument or chattel paper and whether or not
such right has been earned by performance, all guaranties and security
therefor, and all interests related thereto, including without
limitation, all rights to receive "sales charges" (as defined in the
Rules of Fair Practice) (including, without limitation, Contingent
Deferred Sales Charge), fees payable out of the assets of any Fund
pursuant to Rule 12b-1 of the SEC under the Investment Company Act, and
fees payable under Advisory Contracts.
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<PAGE>
"Account Debtor" shall mean a Person who is obligated on or
under any Account, Contract or General Intangible.
"Collateral" shall mean all property and rights in property
now owned or hereafter at any time acquired by the Grantor in or upon
which a Security Interest is granted to the Secured Party by the
Grantor under this Agreement.
"Contracts" shall mean any and all agreements to which the
Grantor is a party, now existing or hereafter entered into, as the same
may from time to time be amended, supplemented or otherwise modified
(including (a) all rights of the Grantor to receive moneys due and to
become due to it thereunder or in connection therewith, (b) all rights
of the Grantor to damages arising out of, or for, breach or default in
respect thereof and (c) all rights of the Grantor to perform and to
exercise all remedies thereunder), including all Fund Agreements and
all agreements with Selling Agents.
"Equipment" shall mean all machinery, equipment, furniture,
furnishings and fixtures, including all accessions, accessories and
attachments thereto, and any guaranties, warranties, indemnities and
other agreements of manufacturers, vendors and others with respect to
such Equipment.
"Financing Statement" shall have the meaning given to such
term in Section 4 hereof.
"General Intangibles" shall mean any personal property (other
than goods, Accounts, Contracts and money) including choses in action,
causes of action, contract rights, corporate and other business
records, inventions, designs, patents, patent applications, service
marks, trademarks, tradenames, trade secrets, engineering drawings,
good will, registrations, copyrights, licenses, franchises, customer
lists, tax refund claims, royalties, licensing and product rights,
rights to the retrieval from third parties of electronically processed
and recorded data and all rights to payment resulting from an order of
any court.
"Inventory" shall mean any and all goods or securities owned
or held by or for the account of the Grantor for sale or lease, or for
furnishing under a contract of service, in each case wherever the same
shall be located.
"Obligations" shall mean (a) all indebtedness, liabilities and
obligations of the Borrowers to the Secured Party of every kind, nature
or description under the Credit Agreement and the Loan Documents,
including the Borrowers' obligation on any promissory note or notes
under the Credit Agreement and any note or notes hereafter issued in
substitution or replacement thereof, (b) any and all other liabilities
and obligations of the Borrowers to the Secured Party of every kind,
nature and description, whether direct or indirect or hereafter
acquired by the Secured Party from any Person, absolute or contingent,
regardless of how such liabilities arise or by what agreement or
instrument they may be evidenced, and (c) all liabilities of the
Grantor under this Agreement, and in all of the foregoing cases whether
due or to become due, and whether now existing or hereafter arising or
incurred.
"Security Interest" shall have the meaning given such term in
Section 2 hereof.
2
<PAGE>
1(b) All other terms used in this Agreement which are not
specifically defined herein shall have the meaning assigned to such terms in the
Uniform Commercial Code in effect in the State of Minnesota as of the date of
this Agreement to the extent such other terms are defined therein.
1(c) Unless the context of this Agreement otherwise clearly
requires, references to the plural include the singular, the singular, the
plural and "or" has the inclusive meaning represented by the phrase "and/or."
The words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation." The words "hereof," "herein," "hereunder,"
and similar terms in this Agreement refer to this Agreement as a whole and not
to any particular provision of this Agreement. References to Sections are
references to Sections in this Security Agreement unless otherwise provided.
Section 2. Grant of Security Interest. As security for the
payment and performance of all of the Obligations, the Grantor hereby grants to
the Secured Party a security interest (the "Security Interest") in all of the
Grantor's right, title, and interest in and to the following, whether now or
hereafter owned, existing, arising or acquired and wherever located:
2(a) All Accounts.
2(b) All Contracts.
2(c) All Equipment.
2(d) All General Intangibles.
2(e) All Inventory.
2(f) To the extent not otherwise included in the foregoing,
(i) all other rights to the payment of money, including rents and other
sums payable to the Grantor under leases or rental agreements and other
Chattel Paper and insurance proceeds; (ii) all books, correspondence,
credit files, records, invoices, bills of lading, warehouse receipts
and other documents relating to any of the foregoing, including,
without limitation, all tapes, cards, disks, computer software,
computer runs, and other papers and documents in the possession or
control of the Grantor or any computer bureau from time to time acting
for the Grantor; (iii) all rights in, to and under all policies
insuring the life of any officer, director, stockholder or employee of
the Grantor, the proceeds of which are payable to the Grantor; and (iv)
all accessions and additions to, parts and appurtenances of,
substitutions for and replacements of any of the foregoing.
2(g) To the extent not otherwise included, all proceeds and
products of any and all of the foregoing.
Section 3. Grantor Remains Liable. Anything herein to the
contrary notwithstanding, (a) the Grantor shall remain liable under the
Contracts and other items included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Secured Party of any of the rights hereunder shall not release the Grantor from
any of its duties or obligations under the Contracts and other items included in
the Collateral, and (c) the Secured Party shall have no obligation or liability
under the Contracts and other items included in the Collateral by reason of this
Agreement, nor shall the Secured Party be
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<PAGE>
obligated to perform any of the obligations or duties of the Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
Section 4. Title to Collateral. The Grantor has (or will have
at the time it acquires rights in Collateral hereafter acquired or arising) and
will maintain so long as the Security Interest may remain outstanding, title to
each item of Collateral (including the proceeds and products thereof), free and
clear of all Liens except the Security Interest and except Liens permitted by
the Credit Agreement. The Grantor will defend the Collateral against all claims
or demands of all Persons (other than the Secured Party) claiming the Collateral
or any interest therein. As of the date of execution of this Security Agreement,
no effective financing statement or other similar document used to perfect and
preserve a security interest under the laws of any jurisdiction (a "Financing
Statement") covering all or any part of the Collateral is on file in any
recording office, except such as may have been filed in favor of the Secured
Party relating to this Agreement.
Section 5. Disposition of Collateral. The Grantor will not
sell, lease or otherwise dispose of, or discount or factor with or without
recourse, any Collateral, except as permitted by the Credit Agreement. The Bank
shall, at the request of the Grantor, release its security interest in any
Collateral sold by the Grantor in a transaction permitted by Section 6.2 of the
Credit Agreement, effective upon the sale thereof, provided that (i) the
purchaser of such Collateral agrees to pay the entire purchase price for such
Collateral to the Grantor by means of deposits into an account of the Grantor
with the Bank, (ii) the Grantor obtains a security interest in the agreement
pursuant to which such Collateral was sold and any right, title or interest in
the Collateral sold thereunder retained by the Grantor, and (iii) the
purchaser(s) under any such agreement consent to the Bank's security interests
described in clause (ii) above.
Section 6. Names, Offices, Locations. The Grantor does
business solely under its own name and the trade names and styles, if any, set
forth on Schedule II hereto. Except as noted on said Schedule, no such trade
names or styles and no trademarks or other similar marks owned by the Grantor
are registered with any governmental unit. The chief place of business and chief
executive office and the office where it keeps its books and records concerning
the Collateral is located at its address set forth on the signature page hereof.
All items of Collateral existing on the date of this Agreement are located at
the places specified on Schedule I hereto. The Grantor will immediately notify
the Secured Party of any additional state in which any item of Collateral is
hereafter located. The Grantor will from time to time at the request of the
Secured Party provide the Secured Party with current lists as to the locations
of the Collateral. The Grantor will not permit any Collateral or any records
pertaining to collateral to be located in any state or area in which, in the
event of such location, a financing statement covering such Collateral would be
required to be, but has not in fact been, filed in order to perfect the Security
Interest. The Grantor will not change its name or the location of its chief
place of business and chief executive office unless the Secured Party has been
given at least 30 days prior written notice thereof and the Grantor has executed
and delivered to the Secured Party such Financing Statements and other
instruments required or appropriate to continue the perfection of the Security
Interest.
Section 7. Rights to Payment. Except as the Grantor may
otherwise advise the Secured Party in writing, each Account, Contract and
General Intangible constituting a right to payment is (or, in the case of all
future Collateral, will be when arising or issued) the valid, genuine and
legally enforceable obligation of the Account Debtor or other obligor named
therein or in the Grantor's records pertaining thereto as being obligated to pay
or perform
4
<PAGE>
such obligation. Without the Secured Party's prior written consent, the Grantor
will not agree to any modifications, amendments, subordinations, cancellations
or terminations of the obligations of any such Account Debtors or other obligors
except in the ordinary course of business and in amounts not exceeding $250,000
in the aggregate in any calendar year. The Grantor will perform and comply in
all material respects with all its obligations under its Contracts and exercise
promptly and diligently its rights thereunder. The Grantor shall, at its own
expense, take all necessary action to collect, as and when due, all amounts due
with respect to amounts payable under or with respect to the Accounts, Contracts
and General Intangibles, including the taking of such action with respect to
collection as the Grantor may deem advisable. The Grantor shall cause all
amounts payable to it under any Fund Agreements to be paid by the Account Debtor
or other obligor thereon directly into the Collateral Account. Except after the
occurrence and during the continuance of a Default or an Event of Default, the
Grantor shall be entitled to cause the Secured Party to withdraw amounts so
deposited and deposit the same into an operating account of the Grantor with the
Secured Party. From and after the occurrence and during the continuance of a
Default or an Event of Default, the Secured Party may hold all such amounts as
collateral for the Obligations or apply the same to the Obligations as provided
in Section 17.
Section 8. Further Assurances.
8(a) The Grantor agrees that from time to time, at
its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be
necessary or that the Secured Party may reasonably request, in order to
perfect and protect the Security Interest granted or purported to be
granted hereby or to enable the Secured Party to exercise and enforce
its rights and remedies hereunder with respect to any Collateral (but
any failure to request or assure that the Grantor execute and deliver
such instrument or documents or to take such action shall not affect or
impair the validity, sufficiency or enforceability of this Agreement
and the Security Interest, regardless of whether any such item was or
was not executed and delivered or action taken in a similar context or
on a prior occasion). Without limiting the generality of the foregoing,
the Grantor will promptly and from time to time at the request of the
Secured Party: (i) mark, or permit the Secured Party to mark,
conspicuously its books, records, and accounts showing or dealing with
the Collateral, with a legend, in form and substance satisfactory to
the Secured Party, indicating that each such item of Collateral is
subject to the Security Interest granted hereby; (ii) deliver and
pledge to the Secured Party, all instruments, duly indorsed or
accompanied by duly executed instruments of transfer or assignment,
with full recourse to the Grantor, all in form and substance
satisfactory to the Secured Party; (iii) execute and file such
Financing Statements or continuation statements in respect thereof, or
amendments thereto, and such other instruments or notices (including
fixture filings with any necessary legal descriptions as to any goods
included in the Collateral which the Secured Party determines might be
deemed to be fixtures, and instruments and notices with respect to
vehicle titles), as may be necessary or desirable, or as the Secured
Party may request, in order to perfect, preserve, and enhance the
Security Interest granted or purported to be granted hereby; and (iv)
obtain consents, in form satisfactory to the Secured Party, of any
other party to any Contract consenting to the Secured Party's interest
therein.
8(b) The Grantor hereby authorizes the Secured Party
to file one or more Financing Statements or continuation statements in
respect thereof, and amendments thereto, relating to all or any part of
the Collateral without the signature
5
<PAGE>
of the Grantor where permitted by law. A photocopy or other
reproduction of this Agreement or any Financing Statement covering the
Collateral or any part thereof shall be sufficient as a Financing
Statement where permitted by law.
8(c) The Grantor will furnish to the Secured Party
from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Secured Party may reasonably request, all in
reasonable detail and in form and substance reasonably satisfactory to
the Secured Party.
Section 9. Taxes and Claims. The Grantor will promptly pay all
taxes and other governmental charges levied or assessed upon or against any
Collateral or upon or against the creation, perfection or continuance of the
Security Interest, as well as all other claims of any kind (including claims for
labor, material and supplies) against or with respect to the Collateral, except
to the extent (a) such taxes, charges or claims are being contested in good
faith by appropriate proceedings, (b) such proceedings do not involve any
material danger of the sale, forfeiture or loss of any of the Collateral or any
interest therein and (c) such taxes, charges or claims are adequately reserved
against on the Grantor's books in accordance with generally accepted accounting
principles.
Section 10. Books and Records. The Grantor will keep and
maintain at its own cost and expense satisfactory and complete records of the
Collateral, including a record of all payments received and credits granted with
respect to all Accounts, Contracts and General Intangibles.
Section 11. Inspection, Reports, Verifications. The Grantor
will at all reasonable times permit the Secured Party or its representatives to
examine or inspect any Collateral, any evidence of Collateral and the Grantor's
books and records concerning the Collateral, wherever located. The Grantor will
from time to time when requested by the Secured Party furnish to the Secured
Party a report on its Accounts, Contracts and General Intangibles naming the
Account Debtor or other obligors thereon, the amount due and the aging thereof.
The Secured Party or its designee is authorized to contact Account Debtor and
other Persons obligated on any such Collateral from time to time to verify the
existence, amount and/or terms of such Collateral.
Section 12. Notice of Loss. The Grantor will promptly notify
the Secured Party of any loss of or material damage to any material item of
Collateral or of any substantial adverse change, known to Grantor, in any
material item of Collateral or the prospect of payment or performance thereof.
Section 13. Action by the Secured Party. If the Grantor at any
time fails to perform or observe any of the foregoing agreements, the Secured
Party shall have (and the Grantor hereby grants to the Secured Party) the right,
power and authority (but not the duty) to perform or observe such agreement on
behalf and in the name, place and stead of the Grantor (or, at the Secured
Party's option, in the Secured Party's name) and to take any and all other
actions which the Secured Party may reasonably deem necessary to cure or correct
such failure (including, without limitation, the payment of taxes, the
satisfaction of Liens, the procurement and maintenance of insurance, the
execution of assignments, security agreements and Financing Statements, and the
indorsement of instruments); and the Grantor shall thereupon pay to the Secured
Party on demand the amount of all monies expended and all costs and expenses
(including reasonable attorneys' fees and legal expenses) incurred by the
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<PAGE>
Secured Party in connection with or as a result of the performance or observance
of such agreements or the taking of such action by the Secured Party, together
with interest thereon from the date expended or incurred at the highest lawful
rate then applicable to any of the Obligations, and all such monies expended,
costs and expenses and interest thereon shall be part of the Obligations secured
by the Security Interest.
Section 14. The Secured Party's Duties. The powers conferred
on the Secured Party hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such powers.
The Secured Party shall be deemed to have exercised reasonable care in the
custody and preservation of any of the Collateral in its possession if it takes
such action for that purpose as Grantor requests in writing, but failure of the
Secured Party to comply with any such request shall not itself be deemed a
failure to exercise reasonable care, and no failure of the Secured Party to
preserve or protect any rights with respect to such Collateral not so requested
by the Grantor shall be deemed a failure to exercise reasonable care in the
custody or preservation of such Collateral. The Secured Party shall also be
deemed to have exercised reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to the safekeeping which the Secured Party accords its own
property of like kind. The Secured Party shall have no duty, as to any
Collateral, as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Collateral, whether or not the Secured Party has or is deemed to have knowledge
of such matters, or as to the taking of any necessary steps to preserve rights
against any Persons or any other rights pertaining to any Collateral. The
Secured Party will take action in the nature of exchanges, conversions,
redemptions, tenders and the like requested in writing by the Grantor with
respect to the Collateral in the Secured Party's possession if the Secured Party
in its reasonable judgment determines that such action will not impair the
Security Interest or the value of the Collateral, but a failure of the Secured
Party to comply with any such request shall not of itself be deemed a failure to
exercise reasonable care.
Section 15. Remedies on Default. Upon the occurrence of an
Event of Default and at any time thereafter:
15(a) The Secured Party may exercise and enforce any
and all rights and remedies available upon default to a secured party
under the Uniform Commercial Code.
15(b) The Secured Party shall have the right to enter
upon and into and take possession of all or such part or parts of the
properties of the Grantor as may be necessary or appropriate in the
judgment of the Secured Party to permit or enable the Secured Party to
exercise its rights with respect to the Collateral, as the Secured
Party may elect, and to use and operate said properties for said
purposes and for such length of time as the Secured Party may deem
necessary or appropriate for said purposes without the payment of any
compensation to Grantor therefor. The Secured Party may require the
Grantor to, and the Grantor hereby agrees that it will, at its expense
and upon request of the Secured Party forthwith, assemble all or part
of the Collateral as directed by the Secured Party and make it
available to the Secured Party at a place or places to be designated by
the Secured Party.
15(c) Any sale of Collateral may be in one or more
parcels at public or private sale, at any of the Secured Party's
offices or elsewhere, for cash, on credit, or for future delivery, and
upon such other terms as the Secured Party may believe are
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<PAGE>
commercially reasonable. The Secured Party shall not be obligated to
make any sale of Collateral regardless of notice of sale having been
given, and the Secured Party may adjourn any public or private sale
from time to time by announcement made at the time and place fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
15(d) The Secured Party is hereby granted a license
or other right to use, without charge, all of the Grantor's property,
including, without limitation, all of the Grantor's labels, trademarks,
copyrights, patents and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in exercising its
rights with respect to the Collateral, and the Grantor's rights under
all licenses and all franchise agreements shall inure to the Secured
Party's benefit until the Obligations are paid in full.
15(e) If notice to the Grantor of any intended
disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given in the manner specified for the giving of notice in
Section 21 hereof at least ten calendar days prior to the date of
intended disposition or other action, and the Secured Party may
exercise or enforce any and all other rights or remedies available by
law or agreement against the Collateral, against the Grantor, or
against any other Person or property.
15(f) The Secured Party is hereby granted, upon
written notice to the Grantor and any other Person entitled to receive
such notice under any Contract, the right to assume, become bound by,
and agree to perform and observe the covenants, agreements, obligations
and conditions to be performed and observed under such Contract and to
exercise all of the rights, powers and privileges of the Grantor
thereunder.
15(g) The Grantor appoints the Secured Party as the
Grantor's attorney-in-fact, with full power of substitution, to perform
any act which the Grantor has agreed to perform but has failed to do
so, which appointment is coupled with an interest and irrevocable.
Section 16. Remedies as to Contracts and Rights to Payment.
Upon the occurrence of an Event of Default and at any time thereafter the
Secured Party may notify any Account Debtor or other Person obligated on any
Collateral that the same have been assigned or transferred to the Secured Party
and that the same should be performed as requested by, or paid directly to, the
Secured Party, as the case may be. The Grantor shall join in giving such notice,
if the Secured Party so requests. The Secured Party may, in the Secured Party's
name or in the Grantor's name, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of, or securing, any such
Collateral or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, modify, amend or change the obligation of any such
Account Debtor or other Person. The Secured Party is hereby granted the right to
take any action which the Secured Party may reasonably deem necessary or
desirable in order to realize on the Collateral, including, the power to endorse
in the name of the Grantor, with recourse to the Grantor, any checks, drafts,
notes or other instruments or documents received in payment of or on account of
the Collateral. If any payments on any Collateral are received by the Grantor
after an Event of Default has occurred, such payments shall be held in trust by
the Grantor as the property of the Secured Party and
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<PAGE>
shall not be commingled with any funds or property of the Grantor and shall be
forthwith remitted to the Secured Party for application on the Obligations.
Section 17. Application of Proceeds. All cash proceeds
received by the Secured Party in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the discretion
of the Secured Party, be held by the Secured Party as collateral for, or then or
at any time thereafter be applied in whole or in part by the Secured Party
against, all or any part of the Obligations (including, without limitation, any
expenses of the Secured Party payable pursuant to Section 18 hereof).
Section 18. Costs and Expenses; Indemnity. The Grantor will
pay or reimburse the Secured Party on demand for all out-of-pocket expenses
(including in each case all filing and recording fees and taxes and all
reasonable fees and expenses of counsel and of any experts and agents) incurred
by the Secured Party in connection with the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest and the
preparation, administration, continuance, amendment or enforcement of this
Agreement, and all such costs and expenses shall be part of the Obligations
secured by the Security Interest. The Grantor shall indemnify and hold the
Secured Party harmless from and against any and all claims, losses and
liabilities (including reasonable attorneys' fees) growing out of or resulting
from this Agreement and the Security Interest hereby created (including
enforcement of this Agreement) or the Secured Party's actions pursuant hereto,
except claims, losses or liabilities resulting from the Secured Party's gross
negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction. Any liability of the Grantor to indemnify and hold the
Secured Party harmless pursuant to the preceding sentence shall be part of the
Obligations secured by the Security Interest. The obligations of the Grantor
under this Section shall survive any termination of this Agreement.
Section 19. Waivers; Remedies; Marshalling. This Agreement can
be waived, modified, amended, terminated or discharged, and the Security
Interest can be released, only explicitly in a writing signed by the Secured
Party. A waiver so signed shall be effective only in the specific instance and
for the specific purpose given. Mere delay or failure to act shall not preclude
the exercise or enforcement of any rights and remedies available to the Secured
Party. All rights and remedies of the Secured Party shall be cumulative and may
be exercised singly in any order or sequence, or concurrently, at the Secured
Party's option, and the exercise or enforcement of any such right or remedy
shall neither be a condition to nor bar the exercise or enforcement of any
other. The Grantor hereby waives all requirements of law, if any, relating to
the marshalling of assets which would be applicable in connection with the
enforcement by the Secured Party of its remedies hereunder, absent this waiver.
Section 20. Waiver of Defenses. The Grantor waives the benefit
of any and all defenses and discharges available to a guarantor, surety,
indorser or accommodation party, dependent on its character as such. Without
limiting the generality of the foregoing, the Grantor (in such capacity) waives
presentment, demand for payment, and notice of nonpayment or protest of any note
or any other instrument evidencing any of the Obligations; and the Grantor
agrees that its liability hereunder and the Security Interest hereby created
shall not be affected or impaired in any way by any of the following acts and
things (which the Secured Party may do from time to time without notice to the
Grantor): (a) by any sale, pledge, surrender, compromise, settlement, release,
renewal, extension, indulgence, alteration, substitution, exchange, change in,
modification, or other disposition of any of the Obligations or any evidence
thereof or any collateral therefor, (b) by any acceptance or release of
collateral for or guarantors of any of the Obligations, (c) by any failure,
neglect or omission to realize upon or protect any of the Obligations, or to
obtain, perfect, enforce or realize upon any
9
<PAGE>
collateral therefor, or to exercise any Lien upon or right of appropriation of
any moneys, credits or property toward the liquidation of any of the
Obligations, or (d) by any application of payments or credits upon any of the
Obligations. The Secured Party shall not be required, before exercising its
rights under this Agreement, to first resort for payment of any of the
Obligations to the Borrowers or any other Persons, its or their properties or
estates, or any collateral, property, Liens or other rights or remedies
whatsoever. The Grantor agrees not to exercise any right of contribution,
recourse, subrogation or reimbursement available to the Grantor against either
of the Borrowers or any other Person or property, unless and until all
Obligations and all other debts, liabilities and obligations owed by the
Borrowers and the Grantor to the Secured Party have been paid and discharged.
The Grantor expects to derive benefits from the transactions resulting in the
creation of the Obligations. The Secured Party may rely conclusively on the
continuing warranty, hereby made, that the Grantor continues to be benefitted by
the Secured Party's extension of credit accommodations to the Borrowers and the
Secured Party shall have no duty to inquire into or confirm the receipt of any
such benefits, and this Agreement shall be effective and enforceable by the
Secured Party without regard to the receipt, nature or value of any such
benefits.
Section 21. Notices. Any notice or other communication to any
party in connection with this Agreement shall be in writing and shall be sent by
manual delivery, telegram, telex, facsimile transmission, overnight courier or
United States mail (postage prepaid) addressed to such party at the address
specified on the signature page hereof, or at such other address as such party
shall have specified to the other party hereto in writing. All periods of notice
shall be measured from the date of delivery thereof if manually delivered, from
the date of sending thereof if sent by telegram, telex or facsimile
transmission, from the first business day after the date of sending if sent by
overnight courier, or from four days after the date of mailing if mailed.
Section 22. Grantor Acknowledgements. The Grantor hereby
acknowledges that (a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement, (b) the Secured Party has no fiduciary
relationship to the Grantor, the relationship being solely that of debtor and
creditor, and (c) no joint venture exists between the Grantor and the Secured
Party.
Section 23. Representations and Warranties. The Grantor hereby
represents and warrants to the Secured Party that:
23(a) The Grantor is a corporation duly incorporated,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power and
authority and the legal right to own and operate its properties and to
conduct the business in which it is currently engaged.
23(b) The Grantor has the corporate power and
authority and the legal right to execute and deliver, and to perform
its obligations under, this Agreement and has taken all necessary
corporate action to authorize such execution, delivery and performance.
23(c) This Agreement constitutes a legal, valid and
binding obligation of the Grantor enforceable in accordance with its
terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in
equity or at law).
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23(d) The execution, delivery and performance of this
Agreement will not (i) violate any provision of any law, statute, rule
or regulation or any order, writ, judgment, injunction, decree,
determination or award of any court, governmental agency or arbitrator
presently in effect having applicability to the Grantor, (ii) violate
or contravene any provision of the Articles of Incorporation or bylaws
of the Grantor, or (iii) result in a breach of or constitute a default
under any indenture, loan or credit agreement or any other agreement,
lease or instrument to which the Grantor is a party or by which it or
any of its properties may be bound or result in the creation of any
Lien thereunder. The Grantor is not in default under or in violation of
any such law, statute, rule or regulation, order, writ, judgment,
injunction, decree, determination or award or any such indenture, loan
or credit agreement or other agreement, lease or instrument in any case
in which the consequences of such default or violation could have a
material adverse effect on the business, operations, properties, assets
or condition (financial or otherwise) of the Grantor.
23(e) Except for filings, recordings and
registrations to perfect the Security Interest, no order, consent,
approval, license, authorization or validation of, or filing, recording
or registration with, or exemption by, any governmental or public body
or authority is required on the part of the Grantor to authorize, or is
required in connection with the execution, delivery and performance of,
or the legality, validity, binding effect or enforceability of, this
Agreement.
23(f) There are no actions, suits or proceedings
pending or, to the knowledge of the Grantor, threatened against or
affecting the Grantor or any of its properties before any court or
arbitrator, or any governmental department, board, agency or other
instrumentality which, if determined adversely to the Grantor, would
have a material adverse effect on the business, operations, property or
condition (financial or otherwise) of the Grantor or on the ability of
the Grantor to perform its obligations hereunder.
Section 24. Continuing Security Interest; Assignments under
Credit Agreement. This Agreement shall (a) create a continuing security interest
in the Collateral and shall remain in full force and effect until payment in
full of the Obligations and the expiration of the obligations, if any, of the
Secured Party to extend credit accommodations to the Borrowers, (b) be binding
upon the Grantor, its successors and assigns, and (c) inure to the benefit of,
and be enforceable by, the Secured Party and its successors, transferees, and
assigns. Without limiting the generality of the foregoing clause (c), the
Secured Party may assign or otherwise transfer all or any portion of its rights
and obligations under the Credit Agreement to any other Persons to the extent
and in the manner provided in the Credit Agreement and may similarly transfer
all or any portion of its rights under this Security Agreement to such Persons.
Section 25. Termination of Security Interest. Upon payment in
full of the Obligations and the expiration of any obligation of the Secured
Party to make loans to the Borrowers, the Security Interest granted hereby shall
terminate. Upon any such termination, the Secured Party will return to the
Grantor such of the Collateral then in the possession of the Secured Party as
shall not have been sold or otherwise applied pursuant to the terms hereof and
execute and deliver to the Grantor such documents as the Grantor shall
reasonably request to evidence such termination. Any reversion or return of
Collateral upon termination of this Agreement and any instruments of transfer or
termination shall be at the expense of the Grantor and shall be without warranty
by, or recourse on, the Secured Party. As used in this
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Section, "Grantor" includes any assigns of Grantor, any Person holding a
subordinate security interest in any of the Collateral or whoever else may be
lawfully entitled to any part of the Collateral.
Section 26. Governing Law and Construction. THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES
THEREOF, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE MANDATORILY GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF MINNESOTA. Whenever possible, each provision of this Agreement and any
other statement, instrument or transaction contemplated hereby or relating
hereto shall be interpreted in such manner as to be effective and valid under
such applicable law, but, if any provision of this Agreement or any other
statement, instrument or transaction contemplated hereby or relating hereto
shall be held to be prohibited or invalid under such applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement or any other statement, instrument or
transaction contemplated hereby or relating hereto.
Section 27. Consent to Jurisdiction. AT THE OPTION OF THE
SECURED PARTY, THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA
STATE COURT SITTING IN HENNEPIN COUNTY, MINNESOTA; AND THE GRANTOR CONSENTS TO
THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE
IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE GRANTOR COMMENCES ANY ACTION
IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING
DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE
SECURED PARTY AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO
ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT
BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Section 28. Waiver of Notice and Hearing. THE GRANTOR HEREBY
WAIVES ALL RIGHTS TO A JUDICIAL HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE
SECURED PARTY OF ITS RIGHTS TO POSSESSION OF THE COLLATERAL WITHOUT JUDICIAL
PROCESS OR OF ITS RIGHTS TO REPLEVY, ATTACH, OR LEVY UPON THE COLLATERAL WITHOUT
PRIOR NOTICE OR HEARING. THE GRANTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY
COUNSEL OF ITS CHOICE WITH RESPECT TO THIS PROVISION AND THIS AGREEMENT.
Section 29. Waiver of Trial by Jury. EACH OF THE GRANTOR, BY
ITS EXECUTION AND DELIVERY HEREOF, AND THE BANK, BY ITS ACCEPTANCE HEREOF,
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 30. Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, but all such counterparts together shall constitute but
one and the same instrument.
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Section 31. General. All representations and warranties
contained in this Agreement or in any other agreement between the Grantor and
the Secured Party shall survive the execution, delivery and performance of this
Agreement and the creation and payment of the Obligations. The Grantor waives
notice of the acceptance of this Agreement by the Secured Party. Captions in
this Agreement are for reference and convenience only and shall not affect the
interpretation or meaning of any provision of this Agreement.
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IN WITNESS WHEREOF, the Grantor has caused this Security
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
-----------------------------
By
--------------------------
Title
-----------------------
Address for Grantor:
Two Renaissance Square, Ste. 1200
40 North Central Avenue
Phoenix, AZ 85004-4424
Attention: James R. Reis
Telecopier: (602) 661-3572
Grantor's Tax ID # [ ]
Address for the Secured Party:
First Bank National Association
First Bank Place - MPFP0702
601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: Jose A. Peris
Telecopier: (612) 973-0825
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SCHEDULE I
to
Security Agreement
Locations of Collateral
Two Renaissance Square, Ste. 1200
40 North Central Avenue
Phoenix, AZ 85004-4424
<PAGE>
SCHEDULE II
to
Security Agreement
Trade Names and Trade Styles
[To be provided.]
<PAGE>
EXHIBIT K TO
CREDIT AGREEMENT
MATTERS TO BE COVERED BY
OPINION OF COUNSEL
TO THE BORROWERS
The opinion of counsel to the Pilgrim America Group, Inc.
("PAG") and Pilgrim America Capital Corporation (collectively, the "Borrowers")
which is called for by Section 3.1(a)(xi) of the Second Amended and Restated
Credit Agreement shall be addressed to the Bank and dated the Closing Date. It
shall be satisfactory in form and substance to the Bank and shall cover the
matters set forth below, subject to such assumptions, exceptions and
qualifications as may be acceptable to the Bank and counsel to the Bank. With
respect to opinions on the validity and enforceability of those loan documents
which provide that they are to be governed by the laws of the State of
Minnesota, counsel may opine that such documents would be valid and binding
under the laws of the State of Arizona. Capitalized terms used herein have the
respective meanings given such terms in the Credit Agreement.
1. Each Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to carry on its business as now
conducted, to enter into the Loan Documents to which it is a party and to
perform all of its obligations under each and all of the foregoing. Each
Borrower is duly qualified and in good standing as a foreign corporation in all
of the jurisdictions in which the character of the properties owned or leased by
it or the business conducted by it makes such qualification necessary and the
failure to so qualify would permanently preclude such Borrower from enforcing
its rights with respect to any material asset or expose such Borrower to any
material liability.
2. The execution, delivery and performance by each Borrower of
the Loan Documents to which it is a party have been duly authorized by all
necessary corporate action by such Borrower.
3. The Loan Documents to which each Borrower is a party
constitute the legal, valid and binding obligations of such Borrower,
enforceable against such Borrower in accordance with their respective terms.
4. The execution, delivery and performance by each Borrower of
the Loan Documents to which it is a party will not (i) violate any provision of
any law, statute, rule or regulation or, to the best knowledge of such counsel,
any order, writ, judgment, injunction, decree, determination or award of any
court, governmental agency or arbitrator presently in effect having
applicability to either Borrower, (ii) violate or contravene any provision of
the Certificate of Incorporation or bylaws of either Borrower, or (iii) result
in a breach of or constitute a default under any indenture, loan or credit
agreement or any other agreement, lease or instrument known to such counsel to
which either Borrower is a party or by which it or any of its properties may be
bound or result in the creation of any Lien thereunder.
5. No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by, any
governmental or public body or authority is required on the part of either
Borrower to authorize, or is required in connection
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<PAGE>
with the execution, delivery and performance of, or the legality, validity,
binding effect or enforceability of, the Loan Documents.
6. To the best knowledge of such counsel, there are no
actions, suits or proceedings pending or threatened against or affecting either
Borrower, any Subsidiary of either Borrower or any of their respective
properties before any court or arbitrator, or any governmental department,
board, agency or other instrumentality which (i) challenge the legality,
validity or enforceability of the Loan Documents, or (ii) if determined
adversely to such Borrower, would have a material adverse effect on the
business, operations, property or condition (financial or otherwise) of the
Borrowers and the Subsidiaries as a consolidated enterprise or on the ability of
the Borrowers to perform their obligations under the Loan Documents.
7. Neither Borrower is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
8. The Borrower is not a "holding company," a "subsidiary of a
holding company" or an affiliate of a "holding company" within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
9. The making of the Loans contemplated by the Credit
Agreement, and the application of the proceeds thereof as provided in the Credit
Agreement, will not violate Regulations G, U or X of the Board.
10. Each of PAII and PASI is a corporation duly incorporated
and validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to carry on its
business as now conducted, to enter into the Loan Documents to which it is a
party and to perform all of its obligations under each and all of the foregoing.
Each of PAII and PASI is duly qualified and in good standing as a foreign
corporation in all of the jurisdictions in which the character of the properties
owned or leased by it or the business conducted by it makes such qualification
necessary and the failure to so qualify would permanently preclude it from
enforcing its rights with respect to any material asset or expose it to any
material liability.
11. The execution, delivery and performance by each of PAII
and PASI of the reaffirmations of the Loan Documents to which it is a party
required under the Credit Agreement have been duly authorized by all necessary
corporate action by it.
12. The Loan Documents to which each of PAII and PASI is a
party, as reaffirmed and modified, constitute the legal, valid and binding
obligations of each of PAII and PASI, enforceable against it in accordance with
their respective terms.
13. The execution, delivery and performance by PAII and PSII
of the reaffirmations of the Loan Documents to which it is a party will not (i)
violate any provision of any law, statute, rule or regulation or, to the best
knowledge of such counsel, any order, writ, judgment, injunction, decree,
determination or award of any court, governmental agency or arbitrator presently
in effect having applicability to PAII or PSII, (ii) violate or contravene any
provision of the Articles of Incorporation or bylaws of PAII or PSII, or (iii)
result in a breach of or constitute a default under any indenture, loan or
credit agreement or any other agreement,
2
<PAGE>
lease or instrument known to such counsel to which PAII or PSII is a party or by
which it or any of its properties may be bound or result in the creation of any
Lien thereunder.
14. No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by, any
governmental or public body or authority is required on the part of PAII or PSII
to authorize, or is required in connection with the execution, delivery and
performance of, or the legality, validity, binding effect or enforceability of,
the reaffirmations of the Loan Documents.
15. Neither PAII nor PASI is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
16. Neither PAII nor PASI is a "holding company," a
"subsidiary of a holding company" or an affiliate of a "holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
17. After giving effect to the amendment and restatement of
the Existing Credit Agreement pursuant to the Credit Agreement and the
reaffirmations of the Security Agreements and Pledge Agreements required under
the Credit Agreement, the Liens created pursuant to the Security Agreements and
the Pledge Agreements will remain in full force and effect, will secure the
Obligations, and will have the same priority as they had prior to such
amendment, restatement and reaffirmations.
3
<PAGE>
EXHIBIT L TO
CREDIT AGREEMENT
TERMS WITH RESPECT TO GUARANTEED OBLIGATIONS
--------------------------------------------
1. Obligations Absolute. No act or thing need occur to
establish the liability of each Borrower for its Guaranteed Obligations, and no
act or thing, except full payment and discharge of all such Guaranteed
Obligations, shall in any way exonerate either Borrower or modify, reduce, limit
or release the liability of either Borrower for its Guaranteed Obligations. The
obligations of each Borrower for its Guaranteed Obligations shall be absolute,
unconditional, and irrevocable, and shall not be subject to any right of setoff
or counterclaim by such Borrower.
2. Continuing Guaranty. Each Borrower shall be liable for its
Guaranteed Obligations, plus accrued interest thereon and all attorneys' fees,
collection costs and enforcement expenses referable thereto. Guaranteed
Obligations may be created and continued in any amount without affecting or
impairing the liability of either Borrower therefor. No notice of such
Guaranteed Obligations already or hereafter contracted or acquired by the Bank,
or any renewal or extension of any thereof need be given to either Borrower and
none of the foregoing acts shall release either Borrower from liability
hereunder. The agreement of each Borrower pursuant to the Credit Agreement with
respect to its Guaranteed Obligations is an absolute, unconditional and
continuing guaranty of payment of such Guaranteed Obligations and shall continue
to be in force and be binding upon such Borrower until such Guaranteed
Obligations are paid in full and the Credit Agreement is terminated, and the
Bank may continue, at any time and without notice to either Borrower, to extend
credit or other financial accommodations and loan monies to or for the benefit
of the other Borrower on the faith thereof. Each Borrower hereby waives, to the
fullest extent permitted by law, any right it may have to revoke or terminate
its guaranty of the Guaranteed Obligations before the Guaranteed Obligations are
paid in full and the Credit Agreement is terminated. In the event either
Borrower shall have any right under applicable law to otherwise terminate or
revoke its guaranty of the Guaranteed Obligations which cannot be waived, such
termination or revocation shall not be effective until written notice of such
termination or revocation, signed by such Borrower, is actually received by the
Bank's officer responsible for such matters. Any notice of termination or
revocation described above shall not affect such Borrower's guaranty of the
Guaranteed Obligations in relation to (i) any of the Guaranteed Obligations that
arose prior to receipt thereof or (ii) any of the Guaranteed Obligations created
after receipt thereof, if such Guaranteed Obligations were incurred either
through loans by the Bank or Letters of Credit issued by the Bank pursuant to
its existing financing arrangements with the other Borrower, including, without
limitation, advances, readvances or letters of credit in an aggregate
outstanding amount not to exceed the aggregate amount of the Commitment as of
the time such notice of termination or revocation was received, and/or for the
purpose of protecting any collateral, including, but not limited, to all
protective advances, costs, expenses, and attorneys' and paralegals' fees,
whensoever made, advanced or incurred by the Bank in connection with the
Guaranteed Obligations. If, in reliance on either Borrower's guaranty of its
Guaranteed Obligations, the Bank makes loans or other advances to or for the
benefit of the other Borrower or takes other action under this Agreement after
such aforesaid termination or revocation by the undersigned but prior to the
receipt by the Bank of said written notice as set forth above, the rights of the
Bank shall be the same as if such termination or revocation had not occurred.
<PAGE>
3. Other Transactions. Whether or not any existing
relationship between the Borrowers has been changed or ended, the Bank may, but
shall not be obligated to, enter into transactions resulting in the creation or
continuance of other obligations of either Borrower to the Bank, without consent
or approval by the other Borrower and without notice to the other Borrower, and
all such obligations shall be guaranteed by virtue of the Credit Agreement. The
liability of the Borrowers under the Credit Agreement with respect to the
Guaranteed Obligations shall not be affected or impaired by any of the following
acts or things (which the Bank is expressly authorized to do, omit or suffer
from time to time, without notice to or approval by the Borrowers): (i) any
acceptance of collateral security, other guarantors, accommodation parties or
sureties for any or all Guaranteed Obligations; (ii) any one or more extensions
or renewals of Guaranteed Obligations (whether or not for longer than the
original period) or any modification of the interest rates, maturities or other
contractual terms applicable to any Guaranteed Obligations; (iii) any waiver or
indulgence granted to the other Borrower, any delay or lack of diligence in the
enforcement of Guaranteed Obligations, or any failure to institute proceedings,
file a claim, give any required notices or otherwise protect any Guaranteed
Obligations; (iv) any full or partial release of, settlement with, or agreement
not to sue, the other Borrower or any other guarantor or other person liable in
respect of any Guaranteed Obligations; (v) any discharge of any evidence of
Guaranteed Obligations or the acceptance of any instrument in renewal thereof or
substitution therefor; (vi) any failure to obtain collateral security for
Guaranteed Obligations, or to see to the proper or sufficient creation and
perfection thereof, or to establish the priority thereof, or to protect, ensure,
or enforce any collateral security, or any modification, substitution,
discharge, impairment or loss of any collateral security; (vii) any foreclosure
or enforcement of any collateral security; (viii) any transfer of any Guaranteed
Obligations or any evidence thereof; (ix) any order of application of any
payments or credits upon Guaranteed Obligations; (x) any release of any
collateral security for Guaranteed Obligations; (xi) any amendment to or
modification of, any agreement between the Bank and the other Borrower, or any
waiver of compliance by the other Borrower with the terms thereof; and (xii) any
election by the Bank under Section 1111(b) of the United States Bankruptcy Code.
4. Waivers of Defenses and Rights. Each Borrower waives any
and all defenses, claims and discharges of the other Borrower, or any other
obligor, pertaining to the Guaranteed Obligations, except the defense of
discharge by payment in full. Without limiting the generality of the foregoing,
neither Borrower will assert, plead or enforce against the Bank any defense of
waiver, release, discharge in bankruptcy, statute of limitations, res judicata,
statute of frauds, anti-deficiency statute, fraud, usury, illegality or
unenforceability which may be available to the other Borrower or any other
person liable in respect of any Guaranteed Obligations, or any setoff available
against the Bank to the other Borrower or any such other person, whether or not
on account of a related transaction. Each Borrower expressly agrees that such
Borrower shall be and remain liable for any deficiency remaining after
foreclosure of any mortgage or security interest securing Guaranteed
Obligations, whether or not the liability of or any other obligor for such
deficiency is discharged pursuant to statute, judicial decision or contract.
Each Borrower waives presentment, demand for payment, notice of dishonor or
nonpayment, and protest of any instrument evidencing Guaranteed Obligations.
Each Borrower agrees that its liability under the Credit Agreement for the
Guaranteed Obligations shall be primary and direct, and that the Bank shall not
be required first to resort for payment of the Guaranteed Obligations to the
other Borrower or other persons or their properties, or first to enforce,
realize upon or exhaust any collateral security for the Guaranteed Obligations,
or to commence any action or obtain any judgment against the other Borrower or
against any such collateral security or to pursue any other right or remedy the
Bank may have against the
<PAGE>
other Borrower before enforcing the liability of such Borrower for the
Guaranteed Obligations under the Credit Agreement.
5. Approval of Credit. Each of the Borrowers has,
independently and without reliance upon the Bank or its directors, officers,
agents or employees, and instead in reliance upon information furnished by the
other Borrower and upon such other information as such Borrower deemed
appropriate, made its own independent credit analysis and decision to guaranty
the obligations of the other Borrower pursuant to the Credit Agreement.
6. Waiver of Subrogation. Each Borrower expressly waives any
and all rights of subrogation, reimbursement, indemnity, exoneration,
contribution or any other claim which it may now or hereafter have against the
other Borrower, any endorser or any other guarantor of all or any part of the
Guaranteed Obligations, and each Borrower hereby waives any benefit of, and any
right to participate in, any security or collateral given to the Bank to secure
payment of the Guaranteed Obligations or any other liability of the other
Borrower to the Bank. Each Borrower further agrees that any and all claims it
may have against the other Borrower, any endorser or any other guarantor of all
or any part of the Guaranteed Obligations or against any of their respective
properties, whether arising by reason of any payment by such Borrower to the
Bank pursuant to the provisions hereof or otherwise, is hereby waived. In
furtherance, and not in limitation of the preceding waivers, each Borrower
hereby agrees that any payment to the Bank by such Borrower on account of the
Guaranteed Obligations and any loan made to or obligation incurred from the
other Borrower shall be deemed to be a contribution to the capital of the other
Borrower, and after giving effect to such payment, loan or other obligation such
Borrower shall not a creditor of the other Borrower.
<PAGE>
<TABLE>
<CAPTION>
PILGRIM AMERICA CAPITAL CORPORATION
ORGANIZATION CHART
PILGRIM AMERICA CAPITAL CORPORATION
(Formerly Express America Holdings Corporation)
State of Incorporation: Delaware
Publically traded - NASDAQ Symbol PACC
Authorized to do business as a foreign corporation in the following states:
Arizona
<S> <C> <C>
|
| Discontinued Mortgage Operations
--------------------------------------------------------------------------------------------
| | |
PILGRIM AMERICA GROUP, INC. EXPRESS AMERICA T.C. CORP. EAMC LIQUIDATION CORP.
(Formerly Newco Holdings Management Corp.)
State of Incorporation: Delaware State of Incorporation: Michigan
State of Incorporation: Delaware uthorized as a foreign corporation in: Authorized as a foreign corporation in:
Authorized as a foreign corporation in: Arizona Arizona
Arizona
Share Ownership: Share Ownership:
Share Ownership: Pilgrim America Capital Corp. 100% Pilgrim America Capital Corp. 100%
Pilgrim America Capital Corp. 100% |
| |
-----------------------------------------------------| |
| | |
PILGRIM AMERICA INVESTMENTS, INC. PILGRIM AMERICA SECURITIES, INC. |
(Formerly Newco Advisory Corporation) (Formerly Newco Distributors Corporation) |
|
State of Incorporation: Delaware State of Incorporation: Delaware |
Authorized as a foreign corporation in: Authorized as a foreign corporation in: |
Arizona Alabama |
Arizona |
Share Ownership: |
Pilgrim America Group, Inc. 100% Company is registered as a broker-dealer |
in various states, refer to |
NASD Form BD Status Report. |
|
Share Ownership: |
Pilgrim America Group, Inc. 100% |
|
---------------------------------------------|
| |
WESAV INVESTMENTS CORP. WESAV INVESTMENTS INC. 2
State of Incorporation: Delaware State of Incorporation: Delaware
Authorized as a foreign corporation in: Authorized as a foreign corporation in:
Arizona Arizona
Share Ownership: Share Ownership:
EAMC Liquidation Corp. 100% EAMC Liquidation Corp. 100%
</TABLE>
SCHEDULE 4.17
<PAGE>
Pilgrim America Funds
<TABLE>
<CAPTION>
Management
Fund Name Net Assets* Agreement Date
- -------------------------------------- ------------------------ ---------------------
<S> <C> <C>
Pilgrim America MagnaCap Fund $ 363,958,526 04/07/95
Pilgrim America High Yield Fund $ 92,165,137 04/07/95
Pilgrim Govt. Securities Income Fund $ 31,579,183 04/07/95
Pilgrim America Masters Series:
Asia-Pacific Equity Fund $ 73,928,398 06/08/95
Midcap Value Fund $ 53,256,769 06/08/95
Largecap Value Fund $ 29,061,602 06/08/95
Pilgrim America Bank and Thrift Fund $ 315,032,313 04/07/95
(Net Assets +
Pilgrim America Prime Rate Trust $ 1,354,239,699 Borrowings) 04/07/95
------------------------
Total $2,313,221,627.00
</TABLE>
*As of July 24, 1997
SCHEDULE 4.18
<PAGE>
SCHEDULE 4.6
LITIGATION
Information held at bank.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 882860
<NAME> Pilgrim America Capital Corporation
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 235
<SECURITIES> 2637
<RECEIVABLES> 331
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2905
<PP&E> 851
<DEPRECIATION> 330
<TOTAL-ASSETS> 50378
<CURRENT-LIABILITIES> 3394
<BONDS> 0
0
0
<COMMON> 54
<OTHER-SE> 40355
<TOTAL-LIABILITY-AND-EQUITY> 50378
<SALES> 0
<TOTAL-REVENUES> 15425
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11153
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4272
<INCOME-TAX> (5815)
<INCOME-CONTINUING> 10087
<DISCONTINUED> 413
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10500
<EPS-PRIMARY> 2.56
<EPS-DILUTED> 2.45
</TABLE>
