SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1998
Commission File Number 0-19799
PILGRIM AMERICA CAPITAL 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.
5,747,677 Shares of Common Stock outstanding on July 31, 1998
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<PAGE>
INDEX
PART I. FINANCIAL INFORMATION Page
----
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.................................... 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 13
Signatures............................................................ 14
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
PILGRIM AMERICA CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
June 30, September 30,
1998 1997
- --------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 1,159 $ 219
Investments 10,048 3,127
Accounts receivable 625 458
Notes receivable 4,070 3,976
Costs assigned to management contracts acquired,
less accumulated amortization of $4,201 and $3,233 28,062 29,030
Furniture, fixtures and equipment, less
accumulated depreciation of $517 and $370 884 532
Deferred taxes 2,410 6,420
Deferred acquisition costs, less accumulated
amortization of $2,430 and $772 23,059 5,891
Other assets 2,487 994
-------- --------
TOTAL ASSETS $ 72,804 $ 50,647
======== ========
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Net liabilities of discontinued operations $ 510 $ 230
Notes payable 21,525 5,475
Accrued compensation 2,044 1,285
Accounts payable and accrued expenses 2,038 1,904
-------- --------
Total liabilities 26,117 8,894
-------- --------
Stockholders' equity:
Common stock, $.01 par value, 10,000,000 shares
authorized, 8,079,922 and 8,076,022 shares issued
with 5,747,677 and 5,799,495 shares outstanding
at June 30, 1998 and September 30, 1997 81 54
Less: Treasury stock, 2,332,245 and 2,276,527 shares
at June 30, 1998 and September 30, 1997 (9,376) (8,623)
Additional paid-in capital 48,781 48,795
Unrealized gain (loss) on investments, net of tax (49) 538
Retained earnings 7,250 989
-------- --------
Total stockholders' equity 46,687 41,753
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 72,804 $ 50,647
======== ========
- --------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
1998 1997 1998 1997
----------------------- ----------------------
<S> <C> <C> <C> <C>
Revenue:
Management and administrative fees $ 6,128 $ 4,456 $ 16,410 $ 12,630
Private account management fees 2,083 -- 3,736 --
Distribution fees 2,243 656 4,923 1,675
Commissions 1,475 125 2,290 389
Investment and other income 781 457 2,213 731
---------- ---------- ---------- -----------
Total revenue 12,710 5,694 29,572 15,425
---------- ---------- ---------- -----------
Expense:
General and administrative 3,793 1,915 8,689 5,438
Selling 2,761 1,212 6,590 3,667
Interest expense 358 112 750 380
Amortization and depreciation 1,235 571 2,857 1,668
---------- ---------- ---------- -----------
Total expense 8,147 3,810 18,886 11,153
---------- ---------- ---------- -----------
Earnings from continuing operations
before tax 4,563 1,884 10,686 4,272
Income tax (benefit) 1,884 773 4,425 (5,815)
---------- ---------- ---------- -----------
Earnings from continuing operations 2,679 1,111 6,261 10,087
---------- ---------- ---------- -----------
Earnings from operations of
discontinued mortgage business,
net of tax -- 413 -- 413
---------- ---------- ---------- -----------
Net earnings $ 2,679 $ 1,524 $ 6,261 $ 10,500
========== ========== ========== ===========
Earnings per Common and
Common Equivalent Share
Basic:
Earnings from continuing operations $ 0.47 $ 0.19 $ 1.09 $ 1.74
========== ========== ========== ===========
Net earnings $ 0.47 $ 0.26 $ 1.09 $ 1.81
========== ========== ========== ===========
Shares used in per share calculation 5,745,056 5,799,195 5,769,332 5,799,195
========== ========== ========== ===========
Diluted:
Earnings from continuing operations $ 0.40 $ 0.17 $ 0.95 $ 1.64
========== ========== ========== ===========
Net earnings $ 0.40 $ 0.24 $ 0.95 $ 1.71
========== ========== ========== ===========
Shares used in per share calculation 6,689,529 6,350,117 6,579,967 6,147,090
========== ========== ========== ===========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
For the Nine Months
Ended June 30,
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 6,261 $ 10,500
Adjustments to reconcile net earnings to net cash
used in operating activities:
Amortization and depreciation 2,839 1,668
Gain on sale of investments (720) --
Increase in accounts receivable (261) (466)
Increase (decrease) in operating liabilities 893 (3,088)
Increase in deferred acquisition costs due to
subscriptions (19,438) (3,456)
Decrease in deferred acquisition costs due to
redemptions 534 169
(Increase) decrease in deferred tax asset 4,402 (5,831)
Increase in other operating assets (1,493) (295)
-------- --------
Net cash used in operating activities (6,983) (799)
-------- --------
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Pilgrim America Funds (709) (88)
Proceeds from sale of Pilgrim America Funds 3,047 --
Other investments purchased (9,500) --
Sales of furniture, fixtures and equipment 9 12
Purchases of furniture, fixtures and equipment (514) (35)
Cash provided by (used in) discontinued operations 280 (2,103)
-------- --------
Net cash used in investing activities (7,387) (2,214)
-------- --------
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of treasury stock (753) --
Cash payment of partial shares for stock split (2) --
Proceeds from purchase of stock options 15 35
Term debt borrowing 16,050 2,975
-------- --------
Net cash provided by financing activities 15,310 3,010
-------- --------
Net increase (decrease) in cash and cash equivalents 940 (3)
Cash and cash equivalents, beginning of period 219 238
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,159 $ 235
======== ========
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES
Interest paid $ 461 $ 372
Income taxes paid 24 95
Disposal of fixed assets -- 583
- --------------------------------------------------------------------------------
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
Principles of Consolidation. The accompanying condensed consolidated financial
statements of Pilgrim America Capital Corporation and its subsidiaries (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 nine months ended June 30, 1998 are not necessarily
indicative of the results which may be expected for the fiscal year ending
September 30, 1998. For additional information, refer to the consolidated
financial statements for the fiscal year ended September 30, 1997 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 wholly owned
subsidiaries, Pilgrim America Investments, Inc.("PAI"), a registered investment
advisor, and Pilgrim America Securities, Inc.,("PAS"), a registered
broker/dealer (collectively "Pilgrim America"). The condensed consolidated
financial statements also include the Company's wholly-owned mortgage banking
subsidiaries, Express America TC, Inc., EAMC Liquidation Corp. ("EAMC"), and
EAMC's wholly-owned subsidiaries, Wesav Investment Corporation and Wesav
Investment Inc.-2.
The 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 Company also is providing management services for institutional private
accounts. The results of operations reported in the condensed consolidated
financial statements reflect these investment management activities.
Costs Assigned to Management Contracts Acquired. Costs assigned to management
contracts acquired represent the fair value of the investment management rights
acquired through the acquisition in April 1995 of such management contracts (
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 periodically analyzes costs assigned to management contracts
acquired to determine whether any impairment in value has occurred. Based upon
anticipated future cash flows from operations, in the opinion of management
there has been no impairment.
Deferred Acquisition Costs. The Company pays commissions of up to 4.0% to
authorized broker-dealers at the time that Fund shares with contingent deferred
sales charges are sold. These payments are capitalized and amortized over a
six-year period, which is the period during which the contingent deferred sales
charge is effective.
The Company periodically analyzes the recoverability of its Deferred Acquisition
Costs ("DAC Asset") by comparison of the carrying amount of the net future cash
flows to be received. If necessary, a valuation allowance is recorded to reflect
the difference between the carrying amount and the estimated future cash flows.
6
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Income Tax. Deferred tax assets and liabilities 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 tax
asset will be realized.
Net Earnings Per Common Share. Effective December 31, 1997, the Company
implemented Financial Accounting Standard No. 128 "Earnings per Share". This
statement provides accounting and reporting standards for earnings per share
("EPS"), simplifies the requirement for calculating EPS, and is compatible with
international accounting standards. This statement replaces the presentation of
primary EPS with a presentation of basic EPS. The statement requires dual
presentation of basic and diluted EPS by entities with complex capital
structures. Basic EPS includes no dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution of
securities that could share in the earnings of any entity, similar to fully
diluted EPS.
EPS for prior periods have been restated to conform to the requirements of
Statement No. 128.
Additionally, the shares outstanding and the net EPS per share data reported for
the quarter and nine months ended June 30, 1997, have been restated to give
retroactive recognition to a 50% stock dividend accounted for as a 3 for 2 stock
split that occurred in the third quarter of Fiscal 1998.
7
<PAGE>
The following is a reconciliation of the basic and diluted EPS computations for
the three months ended June 30, 1998 and June 30, 1997:
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
---- ----
(amounts in thousands,
except per share amounts)
<S> <C> <C>
Earnings for basic and diluted EPS from continuing operations $2,679 $1,111
====== ======
Net earnings for basic and diluted EPS $2,679 $1,524
====== ======
Shares of common stock and common stock equivalents:
Average number of common shares used in basic computation 5,745 5,799
Effect of dilutive securities - options 945 551
------ ------
Average shares used in diluted 6,690 6,350
====== ======
Earnings per share from continuing operations:
Basic $ 0.47 $ 0.19
Diluted $ 0.40 $ 0.17
Net earnings per share:
Basic $ 0.47 $ 0.26
Diluted $ 0.40 $ 0.24
The following is a reconciliation of the basic and diluted EPS computations for
the nine months ended June 30, 1998 and June 30, 1997:
June 30, June 30,
1998 1997
---- ----
(amounts in thousands,
except per share amounts)
Earnings for basic and diluted EPS from continuing operations $6,261 $10,087
====== =======
Net earnings for basic and diluted EPS $6,621 $10,500
====== =======
Shares of common stock and common stock equivalents:
Average number of common shares used in basic computation 5,769 5,799
Effect of dilutive securities - options 811 348
------ -------
Average shares used in diluted 6,580 6,147
====== =======
Earnings per share from continuing operations:
Basic $ 1.09 $ 1.74
Diluted $ 0.95 $ 1.64
Net earnings per share:
Basic $ 1.09 $ 1.81
Diluted $ 0.95 $ 1.71
</TABLE>
Private Accounts Management Fees As of June 30, 1998 Company managed
approximately $1.4 billion of assets in structured finance products ("Private
Accounts") including assets under management during the ramp up period. The
Company earns a management fee on these assets, and the Company may be entitled
to an additional performance fee. As part of the transactions, the Company has
acquired a $10 million equity investment in these Private Accounts.
8
<PAGE>
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 seven open-end and one
closed-end fund (each a "Fund" and collectively the "Pilgrim America Funds" or
the "Funds"). The Company also manages assets in Private Accounts. The Company
closed its third Private Account transaction on July 8, 1998 with approximately
$312 million in assets. The Company acquired $5 million in equity in this
Private Account.
RESULTS OF OPERATIONS
The following table presents comparative quarterly data regarding assets under
management and Fund sales for the four quarters ended June 30, 1998:
<TABLE>
<CAPTION>
PILGRIM AMERICA FUNDS
SELECTED FUND DATA
($000,000)
---------------------------------------------------------------------------
JUNE 30, 1998 MARCH 31, 1998 DECEMBER 31, 1997 (1) SEPTEMBER 30, 1997
------------- -------------- --------------------- ------------------
<S> <C> <C> <C> <C>
OPEN-END FUNDS:
Beginning Assets $1,508.1 $1,153.3 $ 676.0 $ 600.0
Direct Sales 359.3 307.8 175.1 66.3
Direct Redemptions (51.9) (48.9) (62.9) (22.0)
Exchanges In (Out)(2) 4.1 (4.1) 353.2 5.9
Investment Activities (3) (33.3) 100.0 11.9 25.8
-------- -------- -------- --------
Ending Assets 1,786.3 1,508.1 1,153.3 676.0
CLOSED-END FUNDS:
Beginning Assets 1,473.2 1,453.8 1,702.0 1,688.9
Direct Sales (5) 71.5 -- -- --
Exchanges In (Out)(2) -- -- (354.2) --
Investment Activities (3) 29.9 19.4 106.0 13.1
-------- -------- -------- --------
Ending Assets 1,574.6 1,473.2 1,453.8 1,702.0
PRIVATE ACCOUNTS:
Beginning Assets 870.0 587.3 230.5 --
Sales (4) 508.5 282.7 356.8 230.5
Investment Activities (3) -- -- -- --
-------- -------- -------- --------
Ending Assets 1,378.5 870.0 587.3 230.5
-------- -------- -------- --------
Ending Assets Under Management $4,739.4 $3,851.3 $3,194.4 $2,608.5
======== ======== ======== ========
</TABLE>
(1) The shareholders of Pilgrim America Bank and Thrift Fund approved
converting the Fund from a closed-end Fund to an open-end Fund at a meeting
on October 31, 1997.
(2) Net exchanges from (to) the Company's sponsored money market fund and the
conversion of Pilgrim America Bank and Thrift Fund to an open-end Fund in
October 1997.
(3) Investment activities include net investment income, realized gain/(loss),
change in appreciation/(depreciation) and net cash distributions to
shareholders. Investment activities for closed-end funds include assets
acquired
using borrowed funds.
(4) The Private Account activity includes assets under management during the
period assets were being accumulated.
(5) Registration statements covering securities to be issued pursuant to a Cash
Purchase Plan and a Shelf Offering for Prime Rate Trust (the "New
Programs") have been filed with the Securities and Exchange Commission and
became effective in May 1998.
9
<PAGE>
Quarter Ended June 30, 1998 compared to the Quarter Ended June 30, 1997
Net earnings for the June 30, 1998 quarter amounted to $2.7 million or $0.40 per
diluted share compared to net earnings of $1.5 million or $.24 per diluted share
for the quarter ended June 30, 1997. Net earnings for the June 30, 1997 quarter
consisted of earnings from the Company's continuing investment management
business of $1.1 million, or $.17 per diluted share, and earnings from the
operations of the discontinued mortgage business of $413,000 or $.07 per diluted
share.
REVENUE. Revenue for the June 30, 1998 quarter increased by $7.0 million over
revenue for the June 30, 1997 quarter.
Net management and administrative fees, the Company's largest revenue source,
increased $1.7 million in the current quarter compared to the June 30, 1997
quarter. Private Account management fees increased $2.1 million in the current
quarter compared to the June 30, 1997 quarter during which the Company had not
yet begun to engage in Private Account management. Management and administrative
fees and Private Account management fees are based on assets under management
which averaged $4.2 billion during the current quarter and $ 2.2 billion during
the June 30, 1997 quarter.
The conversion of the Pilgrim America Bank and Thrift Fund to an open-end Fund
in October 1997, along with higher sales of open-end Funds during the current
quarter as compared to the June 30, 1997 quarter resulted in an increase in
distribution fees of $1.6 million. Distribution fees are realized from the sale
of certain Fund shares.
During the quarter ended June 30, 1998 the Company began selling shares of
Pilgrim America Prime Rate Trust under the New Programs. The sales commission
received from the sale of these shares along with the increased sales of
open-ended Fund shares during the current quarter as compared to the June 30,
1997 quarter resulted in an increase in commission revenue of $1.4 million.
Investment and other income for the June 30, 1998 quarter increased by $324,000,
primarily from interest income earned on the new equity investments in the
Private Accounts.
EXPENSE. Total expense, excluding amortization, depreciation and interest
expense, for the current quarter increased by $3.4 million compared to the June
30, 1997 quarter. This increase in expenses was primarily a result of an
increase in general and administrative expenses of $1.9 million due to an
increase in personnel and compensation and a $1.5 million increase in selling
expenses primarily due to increased Fund share sales.
Interest expense increased $246,000 for the current quarter compared to the
quarter ended June 30, 1997 primarily due to increase in borrowings of $15.0
million. (See Liquidity).
Amortization and depreciation expenses increased by $664,000 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 OPERATIONS, NET OF TAX. Earnings from discontinued
operations, net of tax, had no activity affecting earnings for the current
quarter compared to contribution to earnings of $413,000 for the quarter ended
June 30, 1997, which was the result of the reduction of certain loss allowances
related to that business.
Nine Months Ended June 30, 1998 compared to the Nine Months Ended June 30, 1997
Net earnings for the nine months ended June 30, 1998 were $6.3 million, or $0.95
per diluted share compared to net earnings of $10.5 million or $1.71 per diluted
share for the nine months ended June 30, 1997. Net earnings for the June 30,
1997 reporting period consisted of earnings before taxes form the Company's
continuing investment management business of $4.3 million, a tax benefit of $5.8
million, and earnings from the operations of the discontinued mortgage business
of $413,000.
REVENUE. Revenue for the nine months ended June 30, 1998 increased by $14.1
million over revenue for the nine months ended June 30, 1997.
10
<PAGE>
Net management and administrative fees, the Company's largest revenue source,
increased $3.8 million in the nine months ended June 30, 1998 compared to the
nine months ended June 30, 1997. Private Account management fees increased $3.7
million for the nine months ending June 30, 1998 compared to the nine months
ending June 30, 1997 during which the Company had not yet begun to engage in
Private Account management. Management and administrative fees and Private
Account management fees are based on assets under management which averaged $3.5
billion during the nine months ended June 30, 1998 and $ 2.0 billion during the
nine months ended June 30, 1997.
The conversion of the Pilgrim America Bank and Thrift Fund to an open-end Fund
in October 1997, along with higher sales of open-end Funds during the nine
months ended June 30, 1998 compared to the nine months ending June 30, 1997
resulted in an increase in distribution fees of $3.2 million. Distribution fees
are realized from the sale of certain Fund shares.
During the nine months ended June 30, 1998 the Company began selling shares of
Pilgrim America Prime Rate Trust in accordance with the New Programs. The sales
commission received from the sale of these shares along with the increase of
open-ended Funds sales during the current fiscal year as compared to fiscal 1997
resulted in an increase in commission revenue of $1.9 million.
Investment and other income for the nine months ended June 30, 1998 increased by
$1.5 million compared to the nine months ended June 30, 1997, primarily from
interest income earned on the new equity investments in the Private Accounts and
one time gains from the sale of investments in the Funds.
EXPENSE. Total expense, excluding amortization, depreciation and interest
expense, for the nine months ended June 30, 1998 increased by $6.2 million
compared to the nine months ended June 30, 1997. This increase in expenses was
primarily a result of an increase in general and administrative expenses of $3.3
million due to an increase in personnel and compensation and a $2.9 million
increase in selling expenses primarily due to increased Fund share sales.
Interest expense increased $370,000 for the nine months ended June 30, 1998
compared to the nine months ended June 30, 1997 primarily due to an increase in
borrowings of $15.0 million. (See Liquidity).
Amortization and depreciation expenses increased by $1.2 million 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 OPERATIONS, NET OF TAX. Earnings from discontinued
operations, net of tax, had no activity effecting earnings for the current
fiscal year compared to $413,000 for fiscal 1997, which was the result of the
reduction of certain loss allowance related to that business.
LIQUIDITY
The Company's principal liquidity needs arise in connection with general and
administrative expenses, selling expenses, including commissions paid by the
Company in connection with the sale of Fund shares, and equity investments made
by the Company in connection with the management of Private Accounts. The
Company's principal liquidity and capital resources include cash flow from
operations and borrowings available at June 30, 1998 under a $35 million credit
agreement ("the Credit Agreement"). During the first nine months of fiscal 1998,
the Company used $6.3 million in its operations and $8.1 million in its
investing activities and $753,000 to repurchase the Company's stock. The Company
funded these uses of cash through its financing activities which included $16.0
million from borrowings.
One of the Company's principal uses of cash is the payment of commissions in
connection with the sale of the open-end Funds B shares. The Company's payment
of these commissions is funded primarily with the Company's borrowings available
under the Credit Agreement. The Company also can fund B share sales by selling
its DAC Asset which had a balance at June 30, 1998 of $23.1 million. The
11
<PAGE>
Company's inability to borrow funds or sell its DAC Asset could have an adverse
affect on the Company's ability to finance the continued sale of open-end Fund B
shares. For the nine months ended June 30, 1998, the Company had cash outflows
of $19.4 million for the payment of B share commissions.
The Company intends to continue funding its investment management operations
with cash provided by operations and with borrowings obtained under the Credit
Agreement. The Company's Credit Agreement was amended and restated on July 31,
1998 and allows the Company or the Company's wholly owned subsidiary Pilgrim
America Group, Inc ("PAG") to borrow up to $55 million to be used for various
purposes including (i) general corporate working capital; (ii) acquisition of
investment management contracts; (iii) financing of commissions paid by the
Company in connection with sales of Fund shares subject to a contingent deferred
sales charge, (iv) financing Private Account equity investments and (v)
repurchasing Company stock. The agreement contains restrictive covenants which
require PAG and the Company to maintain certain financial ratios and prohibits
certain "restricted payments" including dividends by the Company to its
shareholders. Borrowings under the Credit Agreement are collateralized by a
pledge by the Company of the stock of its wholly owned subsidiary PAG, by a
pledge of PAG of the stock of its wholly owned subsidiaries, by a security
interest in the assets of the Company, PAG and PAG's wholly owned subsidiaries,
and by a guarantee by PAG's wholly owned subsidiary, PAI.
At July 31, 1998 the Company had borrowings of approximately $26.1 million
outstanding under the Credit Agreement and approximately $28.9 million
additional borrowings available.
The Company, through its wholly owned discontinued mortgage subsidiaries, owns
mortgage loans and foreclosed real estate. The Company's investments in these
loans and foreclosed real estate are funded with the Company's borrowings
available under the Credit Agreement. Any increase in repurchase loan activity
due to the Company's discontinued operations, beyond that forecasted by the
Company, may have an adverse effect on the Company's liquidity.
On August 5, 1997, the Company's Board of Directors approved repurchasing up to
750,000 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 the Credit Agreement to repurchase the shares. As of June 30,
1998, the Company had repurchased 55,650 shares pursuant to this authorization.
12
<PAGE>
PART II - OTHER INFORMATION
ITEMS 1. THROUGH 5. ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Third Amended and Restated Credit Agreement
27.0 Financial Data Schedules
(b) Reports on Form 8-K.
None
13
<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, 1998 /s/ James R. Reis
----------------------------------
James R. Reis
Vice-Chairman and Chief Financial Officer
(Principal Accounting Officer)
14
Exhibit 10.1
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT (the
"Agreement"), dated as of July 31, 1998 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"), the banks which are signatories hereto (individually, a "Bank" and,
together with any Persons that become a party hereto pursuant to Section 9.6,
the "Banks") and U.S. BANK NATIONAL ASSOCIATION, a national banking association,
one of the Banks, as agent for the Banks (in such capacity, the "Agent").
WHEREAS, PAG, PACC and the U.S. Bank are the parties to that
certain Second Amended and Restated Credit Agreement dated as of July 31, 1997,
as amended (the "Existing Credit Agreement"); and
WHEREAS, PAG, PACC and U.S. Bank desire to amend and restate
the Existing Credit Agreement in its entirety, and to add the other Banks as
lenders.
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):
"12B-1 FEES": With respect to any Fund, rights to receive
investment distribution fees from such Fund as provided in rule 12b-1 of the SEC
under the Investment Company Act in accordance with the Prospectus relating to
such Fund.
"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.
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"ADVANCE": Any portion of the outstanding Loans by the Banks
as to which the Borrowers have elected one of the available interest rate
options. 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. (0) 80a-15(a).
"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 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 Persons 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.
"AGENT": As defined in the opening paragraph hereof.
"AGENT FEES": As defined in Section 2.16(a).
"AGGREGATE COMMITMENT AMOUNTS": As of any date, the sum of the
Commitment Amounts of all the Banks.
"APPLICABLE LENDING OFFICE": For each Bank and for each type
of Advance, the office of such Bank listed on the signature page hereof or such
other domestic or foreign office of such Bank (or of an Affiliate of such Bank)
as such Bank may specify from time to time to the Agent and the Borrowers as the
office by which its Advances of such type are to be made and maintained.
"APPLICABLE MARGIN": Subject to the last sentence of this
definition, with respect to the period beginning on the tenth day of the first
month after the month in which the financial statements and compliance
certificate required by Sections 5.1(c) and (d) with respect to a fiscal quarter
are delivered and ending on the ninth day of the first month after the month in
which the financial statements and compliance certificate required by Sections
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5.1(c) and 5.1(d) with respect to the subsequent fiscal quarter are delivered,
the percentage specified as applicable to Reference Rate Advances or Eurodollar
Rate Advances, as appropriate, based on the Cash Flow Leverage Ratio calculated
as of the end of the fiscal quarter for which such financial statements and
compliance certificate have been delivered:
Cash Flow Eurodollar Reference
Leverage Ratio Rate Advances Rate Advances
-------------- ------------- -------------
Less than or equal to
2.25:1 0.85% 0%
Greater than 2.25:1 0.95% 0%
During the period beginning on the Closing Date and ending on August 9, 1998,
the Applicable Margin for Eurodollar Rate Advances shall be 0.85%. For any
subsequent period beginning on the tenth day of the first month after the month
in which the financial statements and compliance certificate required by
Sections 5.1(c) and (d) with respect to a quarter are required to be but are not
delivered and ending on the ninth day of first month after the month in which
such financial statements and compliance certificate are delivered, the
Applicable Margin for Eurodollar Rate Advances shall be 0.95%.
"ASSIGNEE": As defined in Section 9.6.
"BANK": As defined in the opening paragraph hereof.
"BOARD": The Board of Governors of the Federal Reserve System
or any successor thereto.
"BORROWER": As defined in the opening paragraph hereof.
"BORROWER LOAN DOCUMENTS": This Agreement, the Notes, and any
of the Security Documents to be executed by the Borrowers.
"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.
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"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.
"CASH EQUIVALENTS": Investments of the Borrowers of the type
described in Sections 6.10(c), (d), (e) and (f).
"CASH FLOW LEVERAGE RATIO": On any date of determination, the
ratio of (a) Interest-bearing Indebtedness on such date to (b) EBITDA for the
Measurement Period ending on such date.
"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": July 31, 1998, provided that on or before such
date all the conditions precedent to the obligation of the Banks to make the
initial Revolving Loan, as set forth in Article III, have been satisfied.
"CLO INVESTMENTS": Investments by an Advisory Subsidiary in
subordinated, interest-only or residual interests in Collateralized Loan
Obligations or the pool of commercial loans, high-yield bonds or emerging market
obligations securing or otherwise backing Collateralized Loan Obligations.
"CODE": The Internal Revenue Code of 1986, as amended.
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"COLLATERALIZED LOAN OBLIGATION": A security secured or
otherwise backed by a pool of commercial loans, high-yield bonds or emerging
market obligations managed by an Advisory Subsidiary.
"COMMITMENT": With respect to any Bank, the agreement of such
Bank to make Revolving Loans to, and purchase risk participations in Letters of
Credit issued by the Agent for the account of, the Borrowers in an aggregate
principal amount outstanding at any time not to exceed such Bank's 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": With respect to any Bank, initially the
amount set opposite such bank's name on Schedule 1.1(a) as its Commitment
Amount, but as the same may be reduced pursuant to Section 2.15.
"COMMITMENT FEES": As defined in Section 2.16(b).
"COMMITMENT PERCENTAGE": With respect to any Bank, the
percentage equivalent of a fraction, the numerator of which is the Commitment
Amount of such Bank and the denominator of which is the Aggregate Commitment
Amounts.
"CONTINGENT DEFERRED SALES CHARGE": With respect to any Fund,
the contingent deferred sales charges payable, either directly or by withholding
from the proceeds of the redemption of the shares of such Fund, by the
shareholders of such Fund on any redemption of shares of such Fund in accordance
with the Prospectus relating to such Fund and the Rules of Fair Practice.
"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.
"EBITDA": For any period of determination, the consolidated
net income of PACC before deductions for income taxes, interest expense,
depreciation and amortization, all as determined in accordance with GAAP.
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"EBITDA MARGIN": For any Measurement Period, the ratio
(expressed as a percentage) (a) EBITDA bears to (b) the total revenue of PACC
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 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) on such date, or the rate for such deposits determined by the
Agent at such time based on such other published service of general application
as shall be selected by the Agent for such purpose; provided, that in lieu of
determining the rate in the foregoing manner, the Agent may determine the rate
based on rates at which 30 day United States dollar deposits are offered to the
Agent in the interbank Eurodollar market for delivery in Immediately Available
Funds on such date in an amount approximately equal to the Advance by the Agent
to which the Eurodollar Rate is to apply (rounded upward, if necessary, to the
nearest 1/16 of 1%). oReuters Screen LIBO pageo means the display designated as
page oLIBOo 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 oEurocurrency Liabilitieso as such term is defined in
Regulation D of the Board. The rate of interest applicable to any outstanding
Eurodollar Rate Advances 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.
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"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 Interest-bearing
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 closed-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.
"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.
"GUARANTEED OBLIGATIONS": As defined in Section 9.17.
"GUARANTY": The guaranty of PAII, of even date herewith (as
the same may be amended, modified, supplemented or restated) and any
acknowledgments or affirmations thereof, or a guaranty of any other Advisory
Subsidiary, in the form of Exhibit A, (as the same may be amended, modified,
supplemented or restated, and any acknowledgements or affirmations thereof).
"HOLDING ACCOUNT": A deposit account belonging to the Agent
for the benefit of the Banks 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 Agent 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.
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"INDEBTEDNESS": With respect to any Person at the time of any
determination, without duplication, all obligations, contingent or otherwise, of
such Person which in 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 bankersAE 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.
"INTEREST-BEARING INDEBTEDNESS": At the time of any
determination, all Indebtedness of the Borrowers and their Subsidiaries other
than current liabilities incurred in the ordinary course of business which are
not indebtedness for borrowed money.
"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 stand-by letter of credit
issued by the Agent pursuant to this Agreement for the account of the Borrowers.
"LETTER OF CREDIT FEE": As defined in Section 2.16(c).
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"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 Notes, the Security
Documents and the Guaranties.
"MAJORITY BANKS": At any time, Banks holding at least 66-2/3%
of the aggregate unpaid principal amount of the Notes or, if no Loans are at the
time outstanding hereunder, Banks whose Total Percentages aggregate at least
66-2/3%.
"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 Borrowers 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 B.
"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 Borrowers
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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.
"PERMITTED ADVISORY SUBSIDIARY AGREEMENTS": As defined in
Section 5.12(b).
"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 PAG, of even date herewith, 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.
"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.
"RATE PROTECTION AGREEMENTS": Any interest rate swap, cap or
option agreement, or any other agreement between the Borrower and any Bank or
another counterparty acceptable to the Agent pursuant to which the Borrower
hedges interest rate risk with respect to a portion of its floating-rate
financing.
"REFERENCE RATE": The rate of interest from time to time
publicly announced by the Agent as its "reference rate." The Agent 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
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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 Banks 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 Borrowers, 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 Notes are paid in full, all Letters of Credit have expired or been
terminated and the Commitments have 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.
"SEC": The Securities and Exchange Commission, and any
successor thereto or to the functions thereof.
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"SECURITIES ACT": The Securities Act of 1933, as amended.
"SECURITY AGREEMENTS": The Security Agreements of PAG, PAII
and PASI, of even date herewith in the form of Exhibits C, D and E,
respectively, any Security Agreement of an Advisory Subsidiary in the form of
Exhibit D; and any Security Agreement of any other Subsidiary in the form of
Exhibit E; in each case whereby the respective grantors grant to the Agent, for
the benefit of the Banks, a security interest in the personal property described
therein to secure the Obligations, 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 any other agreement or instrument
pursuant to which the Borrowers or any other Person creates or perfects a Lien
on property in favor of the Agent 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(b).
"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 Commitments are terminated pursuant to Section
7.2 or (c) the date on which the Commitments are reduced to zero pursuant to
Section 2.15.
"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.
"TOTAL PERCENTAGE": With respect to any Bank, (a) prior to the
Termination Date, such Bank's Commitment Percentage, and (b) from and after the
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Termination Date, the percentage equivalent of a fraction, the numerator of
which is the principal balance of such Bank's Loans outstanding and the
denominator of which is the principal balance of all Loans outstanding.
"TRADEMARK ASSIGNMENT": The Collateral Assignment (Trademarks)
of PAG of even date herewith, as the same may be supplemented, amended, or
otherwise modified and in effect from time to time.
"TRANSFORMATION DATE": July 30, 1999.
"U.S. BANK": U.S. Bank National Association, in its capacity
as one of the Banks hereunder.
"UNPAID DRAWING": As defined in Section 2.11.
"UNUSED REVOLVING COMMITMENT": With respect to any Bank as of
any date of determination, the amount by which such Bank's Commitment Amount
exceeds such Bank's Total Percentage of 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 Banks 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".
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ARTICLE II
TERMS OF THE CREDIT FACILITIES
PART A -- TERMS OF LENDING
Section 2.1 LENDING COMMITMENTS.
2.1(a) REVOLVING CREDIT. On the terms and subject to
the conditions hereof, each Bank severally 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 Borrowers 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 Aggregate
Commitment Amounts. Revolving Loans hereunder shall be made by the
several Banks ratably in the proportion of their respective Commitment
Amounts. Revolving Loans may be obtained and maintained, at the
election of the Borrowers but subject to the limitations hereof, as
Reference Rate Advances or Eurodollar Rate Advances.
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
each Bank's Revolving Loans shall be converted into a term loan (the
"Term Loan") from each Bank on the terms and subject to the conditions
set forth herein. The Term Loans 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. On the Closing
Date, each Bank shall make a Revolving Loan hereunder in an amount
equal to its Commitment Percentage of the amount of loans outstanding
under the Existing Credit Agreement. Any subsequent 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 Agent 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 $300,000 or, if more, an integral multiple thereof, (iii)
whether such Revolving Loans are to be funded as Reference Rate
Advances or Eurodollar Rate Advances. The Agent 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 Agent's record of the terms of such telephone request. The
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Agent shall promptly notify each other Bank of the receipt of such
request, the matters specified therein, and of such Bank's ratable
share of the requested Revolving Loans. On the date of the requested
Revolving Loans, each Bank shall provide its share of the requested
Revolving Loans to the Agent in Immediately Available Funds not later
than 3:00 p.m., Minneapolis time. Unless the Agent determines that any
applicable condition specified in Article III has not been satisfied,
the Agent will make available to the Borrower at the Agent's principal
office in Minneapolis, Minnesota in Immediately Available Funds not
later than 4:00 p.m. (Minneapolis time) on the requested Revolving Loan
Date the amount of the requested Revolving Loans. If the Agent has made
a Revolving Loan to the Borrower on behalf of a Bank but has not
received the amount of such Revolving Loan from such Bank by the time
herein required, such Bank shall pay interest to the Agent on the
amount so advanced at the overnight Federal Funds rate from the date of
such Revolving Loan to the date funds are received by the Agent from
such Bank, such interest to be payable with such remittance from such
Bank of the principal amount of such Revolving Loan (provided, however,
that the Agent shall not make any Revolving Loan on behalf of a Bank if
the Agent has received prior notice from such Bank that it will not
make such Revolving Loan). If the Agent does not receive payment from
such Bank by the next Business Day after the date of any Revolving
Loan, the Agent shall be entitled to recover such Revolving Loan, with
interest thereon at the rate (or rates) then applicable to the such
Revolving Loan, on demand, from the Borrower, without prejudice to the
Agent's and the Borrower's rights against such Bank. If such Bank pays
the Agent the amount herein required with interest at the overnight
Federal Funds rate before the Agent has recovered from the Borrower,
such Bank shall be entitled to the interest payable by the Borrower
with respect to the Revolving Loan in question accruing from the date
the Agent made such Revolving Loan.
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 Agent a written
notice electing whether the Term Loans are to be funded as Eurodollar
Rate Advances or Reference Rate Advances.
Section 2.3 NOTES. The Loans of each Bank shall be evidenced
by a single Note payable to the order of such Bank in a principal amount equal
to such Bank's Commitment Amount originally in effect. Upon receipt of each
Bank's Notes from the Borrowers, the Agent shall mail such Notes to such Bank
via overnight delivery. Each 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 such 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 any 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
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amount of all Loans made by such Bank less all payments of principal thereof
made by the Borrowers.
Section 2.4 CONVERSIONS. 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 into a Eurodollar Rate Advance if a Default or Event of Default has
occurred and is continuing on the proposed date of continuation or conversion.
Advances may be converted to Eurodollar Rate Advances only in minimum amounts,
as to the aggregate amount of the Advances of all Banks so converted, of
$300,000 or if more, an integral multiple thereof. The Borrowers shall give the
Agent written notice of any conversion of any Advances and such notice must be
given so as to be received by the Agent not later than 12:00 noon (Minneapolis
time) on the date of the requested conversion. Each such notice shall specify
(a) the amount to be converted, and (b) the date for the conversion (which must
be a Business Day). Any notice given by the Borrower under this Section shall be
irrevocable. All conversions of Advances must be made uniformly and ratably
among the Banks.
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) Upon the occurrence of any Event of Default each
Advance shall, at the option of the Majority Banks, bear interest until
paid in full at the "Default Rate," which shall be 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.
(e) Interest accrued under the Existing Credit
Agreement through the Closing Date shall be payable on the first
Quarterly Payment Date after the Closing Date.
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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
Letters of Credit are outstanding on the Maturity Date, or if Letters of Credit
are 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 Letters 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 Agent 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).
Section 2.7 PREPAYMENTS.
2.7(a) PROCEEDS OF ASSET SALES. Within one Business
Day following the receipt of the proceeds of any sale of any CLO
Investments, Advisory Contracts, 12b-1 Fees and the related Contingent
Deferred Sales Charges, or interests therein (including but not limited
to stock in Advisory Subsidiaries or other Subsidiaries) by either
Borrower or any Subsidiary occurring after the Closing Date, to the
extent the sum of the proceeds of all such sales received after the
Closing Date, net of the actual cash expenses and taxes paid or
incurred by any Borrower or any Subsidiary thereof in connection with
such sales, exceeds Three Million Dollars ($3,000,000), the Borrowers
shall prepay the Loans and the Aggregate Commitment Amounts shall be
reduced by an amount equal to fifty percent (50%) of such excess;
PROVIDED, HOWEVER that this Section 2.7(a) shall not be deemed to
authorize any sale or other transfer that would otherwise be prohibited
by Section 6.2.
2.7(b) OPTIONAL PREPAYMENTS. The Borrowers may prepay
Loans, in whole or in part, at any time, without premium or penalty.
Each partial prepayment shall be in an aggregate amount for all the
Banks of $300,000 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.
2.7(c) APPLICATION OF PREPAYMENTS. Amounts prepaid on
the Loans under this Section 2.7 shall be for the account of each Bank
in proportion to its share of outstanding Loans, and amounts prepaid on
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the Term Loans under this Section 2.7 shall be applied to the
installments due on the Term Loans 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 Agent, for the benefit of the Banks,
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 or renewed in any amount which, after giving
effect to such issuance or renewal, 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 Agent 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 Agent may require that such
request be made on such letter of credit application and reimbursement agreement
form as the Agent may from time to time specify, along with satisfactory
evidence of the authority and incumbency of the officials of the Borrowers
making such request. The Agent shall promptly notify the other Banks of the
receipt of the request and the matters specified therein. On the date of each
issuance of a Letter of Credit the Agent shall send notice to the other Banks of
such issuance.
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, except as otherwise agreed by the Borrowers and the Majority
Banks.
Section 2.11 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. If
the Agent has received documents purporting to draw under a Letter of Credit
that the Agent believes conform to the requirements of the Letter of Credit, or
if the Agent 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 Agent
does not believe conforms to the requirements of the Letter of Credit, it will
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notify the Borrowers of that fact. The Borrowers shall reimburse the Agent 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 Agent for the
full amount of such drawing by 10:00 a.m. on the date on which the Agent in its
notice indicated that it would pay such drawing, until reimbursed from the
proceeds of Loans pursuant to Section 2.14 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 Agent for any amount drawn on any
Letter of Credit and to repay the Agent for any Advances made under Section 2.14
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 Agent, any 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 Agent nor any Bank nor officers, directors or employees of any
thereof shall be liable or responsible for, and the obligations of the Borrowers
to the Agent and the Banks 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;
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(iii) The acceptance by the Agent 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 Agent 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
Agent, and the Agent 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 agent's willful
misconduct or gross negligence in determining whether documents presented under
any Letter of Credit comply with the terms thereof.
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 Agent or any Bank's obligation to make Loans to cover
Unpaid Drawings, or (b) shall impose on any 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 Agent or any Bank of issuing or maintaining any
Letter of Credit, or reduce the amount of any sum received or receivable by the
Agent or any Bank hereunder, then, upon demand (which demand shall be given by
the Agent or Bank promptly after it determines such increased cost or
reduction), the Borrowers shall pay to the Agent or such Bank the additional
amount or amounts as will compensate the Agent or such Bank for such increased
cost or reduction. A certificate submitted to the Borrowers by the Agent or a
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. Failure on the part of the Agent or a
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 Agent's or that Bank's rights to demand compensation for any increased
costs or reduction in amounts received or receivable in any subsequent period.
PART C -- GENERAL
Section 2.14 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 Agent shall give the other Banks notice to that effect,
specifying the amount thereof, in which event each Bank is authorized (and the
Borrowers hereby so authorize each 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 such Bank's Revolving Percentage of the amount of the Unpaid
Drawing. The Agent shall notify each Bank by 11:00 a.m. (Minneapolis time) on
the date such Unpaid Drawing occurs of the amount of the Loan to be made by such
Bank. Notices received after such time shall be deemed to have been received on
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the next Business Day. Each Bank shall then make such Loan (regardless of
noncompliance with the applicable conditions precedent specified in Article III
hereof and regardless of whether an Event of Default then exists) and each Bank
shall provide the Agent with the proceeds of such Revolving Loan in Immediately
Available Funds, at the office of the Agent, not later than 2:00 p.m.
(Minneapolis time) on the day on which such Bank received such notice. The Agent
shall apply the proceeds of such Loan directly to reimburse itself for such
Unpaid Drawing. If any portion of any such amount paid to the Agent should be
recovered by or on behalf of the Borrower from the Agent in bankruptcy, by
assignment for the benefit of creditors or otherwise, the loss of the amount so
recovered shall be ratably shared between and among the Banks in the manner
contemplated by Section 8.11 hereof. If at the time the Banks makes Loans
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 Agent for the account of the Banks 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%). If for any reason any Bank is unable
to make a Loan to the Borrower to reimburse the Agent for an Unpaid Drawing,
then such Bank shall immediately purchase from the Agent a risk participation in
such Unpaid Drawing, at par, in an amount equal to such Bank's Commitment
Percentage of the Unpaid Drawing (before deducting the amount of any Commitment
Loans made by other Banks to reimburse the Agent for such Unpaid Drawing). In
consideration of and in furtherance of the foregoing, each Bank hereby
unconditionally and absolutely agrees to pay to the Agent, for the Agent's own
account, such Bank's Commitment Percentage of each Unpaid Drawing (before
deducting the amount of any Loans made by other Banks to reimburse the Agent for
such Unpaid Drawing). The Agent shall promptly notify each Bank that is unable
to make a Loan to reimburse the Agent for an Unpaid Drawing of that Bank's
Commitment Percentage of such Unpaid Drawing. Each Bank shall pay to the Agent,
not later than 2:00 p.m. (Minneapolis time) on the date it receives such notice,
such Bank's Commitment Percentage of such Unpaid Drawing.
Section 2.15 OPTIONAL REDUCTION OF AGGREGATE COMMITMENT
AMOUNTS OR TERMINATION OF COMMITMENT. The Borrowers may, at any time, upon not
less than thirty days prior written notice to the Agent, reduce the Aggregate
Commitment Amounts ratably, with any such reduction in a minimum amount for all
the Banks of $5,000,000, or, if more, in an integral multiple of $1,000,000;
PROVIDED, HOWEVER, that the Borrowers may not at any time reduce the Aggregate
Commitment Amounts 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 Agent, terminate the Commitments in their entirety.
Section 2.16 FEES.
2.16(a) AGENT FEES. The Borrowers shall pay to the
Agent fees (the "Agent Fees") in accordance with a letter agreement
between the Borrowers and the Agent.
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2.16(b) COMMITMENT FEE. The Borrowers shall pay to
the Agent, for the account of each Bank, fees (the "Commitment Fees")
in an amount determined by applying a rate of thirteen and one-half one
hundredths of one percent (.135%) per annum to the average daily Unused
Revolving Commitment of such Bank 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. The Borrower shall pay
to the Agent for the account of the Banks, quarterly in arrears on each
Quarterly Payment Date and on the Maturity Date, a fee (a "Letter of
Credit Fee") in an amount determined by applying the Applicable Margin
for Eurodollar Rate Advances to the average daily outstanding face
amount of each Letter of Credit during the period of three months
ending on such Quarterly Payment Date or the period ending on the
Maturity Date. In addition to the Letter of Credit Fee, the Borrower
shall pay to the Agent, for its own account, for each Letter of Credit
(a) on demand, all issuance, amendment, drawing and other fees
regularly charged by the Agent to its letter of credit customers, (b)
on each Quarterly Payment Date and on the Maturity Date, a fronting fee
determined by applying a per annum rate of one-tenth of one percent
(0.10%) to the average daily outstanding face amount of such Letter of
Credit during the period of three months ending on such Quarterly
Payment Date or the period ending on the Maturity Date, and (c) on
demand, all out-of-pocket expenses incurred by the Agent 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 Agent or the Banks 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 Agent at
its main office in Minneapolis, Minnesota. Funds received after such time shall
be deemed to have been received on the next Business Day. The Agent will
promptly distribute in like funds to each Bank its ratable share of each such
payment of principal, interest, Commitment Fees and Letter of Credit Fees by the
Agent for the account of the Banks. Whenever any payment to be made hereunder or
on the Notes 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.
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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 the date for determining the Adjusted Eurodollar Rate for any
Eurodollar Rate Advance, any Bank determines in good faith (which determination
shall be conclusive and binding, absent error) that:
(a) deposits in dollars (in the applicable amount) are not
being made available to such Bank in the relevant market, or
(b) the Adjusted Eurodollar Rate will not adequately and
fairly reflect the cost to such Bank of funding or maintaining
Eurodollar Rate Advances,
such Bank shall promptly give notice to the Borrower and the Agent of such
determination, whereupon the obligation of such Bank to make or continue, or to
convert any Advances to, Eurodollar Rate Advances shall be suspended until such
Bank notifies the Borrower and the Agent that the circumstances giving rise to
such suspension no longer exist. While any such suspension continues, all
further Advances by such Bank shall be made as Reference Rate Advances. No such
suspension shall affect the interest rate then in effect for any Eurodollar Rate
Advance outstanding at the time such suspension is imposed.
Section 2.21 INCREASED COST. If any Regulatory Change:
(a) shall subject any Bank (or its Applicable Lending
Office) to any tax, duty or other charge with respect to its Eurodollar
Rate Advances, its Notes or its obligation to make Eurodollar Rate
Advances or shall change the basis of taxation of payment to any Bank
(or its Applicable Lending Office) of the principal of or interest on
its Eurodollar Rate Advances or any other amounts due under this
Agreement in respect of its 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 such Bank or its Applicable Lending Office
imposed by the jurisdiction in which such Bank's principal office or
Applicable Lending Office is located); or
(b) shall impose, modify or deem applicable any
reserve, special deposit 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, any bank's Applicable Lending Office or shall impose on
any Bank (or its Applicable Lending Office) or the interbank Eurodollar
market any other condition affecting its Eurodollar Rate Advances, its
Notes or its obligation to make Eurodollar Rate Advances;
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and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making or maintaining any Eurodollar Rate
Advance, or to reduce the amount of any sum received or receivable by such Bank
(or its Applicable Lending Office) under this Agreement or under its Notes,
then, within 30 days after demand by such Bank (with a copy to the Agent), the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction. Each Bank will
promptly notify the Borrower and the Agent of any event of which it has
knowledge, occurring after the date hereof, which will entitle such Bank to
compensation pursuant to this Section and will designate a different Applicable
Lending Office if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. A certificate of any 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, each Bank shall use reasonable averaging and
attribution methods. Failure on the part of any Bank to demand compensation for
any increased costs or reduction in amounts received or receivable with respect
to any Eurodollar Rate Advance shall not constitute a waiver of such bank's
rights to demand compensation for any increased costs or reduction in amounts
received or receivable in any subsequent period. No Bank shall be entitled to
compensation otherwise payable under this Section 2.21 for any period more than
six months prior to the date on which the Bank first notifies the Borrower of
the change resulting in the increased cost.
Section 2.22 ILLEGALITY. If any Regulatory Change shall make
it unlawful or impossible for any Bank to make, maintain or fund any Eurodollar
Rate Advances, such Bank shall notify the Borrower and the Agent, whereupon the
obligation of such Bank to make or continue, or to convert any Advances to,
Eurodollar Rate Advances shall be suspended until such Bank notifies the
Borrower and the Agent that the circumstances giving rise to such suspension no
longer exist. Before giving any such notice, such Bank shall designate a
different Applicable Lending Office if such designation will avoid the need for
giving such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank determines that it may not lawfully
continue to maintain any Eurodollar Rate Advances, all of the affected Advances
shall be automatically converted to Reference Rate Advances as of the date of
such bank's notice, and upon such conversion the Borrower shall indemnify such
Bank in accordance with Section 9.12.
Section 2.23 CAPITAL ADEQUACY. In the event that any
Regulatory Change reduces or shall have the effect of reducing the rate of
return on any bank's capital or the capital of its parent corporation (by an
amount such Bank deems material) as a consequence of its Commitments and/or its
Loans to a level below that which such Bank or its parent corporation could have
achieved but for such Regulatory Change (taking into account such bank's
policies and the policies of its parent corporation with respect to implementing
capital adequacy requirements), then the Borrower shall, within 30 days after
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written notice and demand from such Bank (with a copy to the Agent), pay to such
Bank additional amounts sufficient to compensate such Bank or its parent
corporation for such reduction. Any determination by such Bank under this
Section and any certificate as to the amount of such reduction given to the
Borrower by such Bank shall be final, conclusive and binding for all purposes,
absent error. No Bank shall be entitled to compensation otherwise payable under
this Section 2.23 for any period more than six months prior to the date on which
the Bank first notifies the Borrower of the change resulting in the reduced rate
of return.
Section 2.24 WITHHOLDING TAXES.
(a) BANKS TO SUBMIT FORMS. Each Bank represents to the
Borrowers and the Agent that, as of the date it becomes a Bank and at all times
thereafter, it is either (i) a corporation organized under the laws of the
United States or any State thereof or (ii) entitled to complete exemption from
United States withholding tax imposed on or with respect to any payments,
including fees, to be made pursuant to this Agreement (x) under an applicable
provision of a tax convention to which the United States is a party or (y)
because it is acting through a branch, agency or office in the United States and
any payment to be received by it hereunder is effectively connected with a trade
or business in the United States. Each Bank that is not a United States person
(as such term is defined in Section 7701(a)(30) of the Code) shall submit to the
Borrowers and the Agent, on or before the later of the Closing Date or the day
on which such Bank becomes a Bank, duly completed and signed copies of either
Form 1001 (relating to such Bank and entitling it to a complete exemption from
withholding on all payments to be received by such Bank hereunder) or Form 4224
(relating to all payments to be received by such Bank hereunder) of the United
States Internal Revenue Service. Thereafter and from time to time, each such
Bank shall submit to the Borrowers and the Agent such additional duly completed
and signed copies of one or the other of such Forms (or such successor Forms as
shall be adopted from time to time by the relevant United States taxing
authorities) as may be (i) reasonably requested by the Borrowers or the Agent
and (ii) required and permitted under then-current United States law or
regulations to avoid United States withholding taxes on payments in respect of
all payments to be received by such Bank hereunder. Upon the request of the
Borrowers or the Agent, each Bank that is a United States person (as such term
is defined in Section 7701(a)(30) of the Code) shall submit to the Borrowers and
the Agent a certificate in such form as is reasonably satisfactory to the
Borrowers and the Agent to the effect that it is such a United States person.
(b) INABILITY OF A BANK. If any Bank that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code)
determines that, as a result of any Regulatory Change, the Borrowers are
required by law or regulation to make any deduction, withholding or backup
withholding of any taxes, levies, imposts, duties, fees, liabilities or similar
charges of the United States of America, any possession or territory of the
United States of America (including the Commonwealth of Puerto Rico) or any area
subject to the jurisdiction of the United States of America ("U.S. TAXES") from
any payments to a Bank pursuant to any Loan Document in respect of the
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Obligations payable to such Bank then or thereafter outstanding, the amount
payable will be increased to the amount which, after deduction from such
increased amount of all U.S. Taxes required to be withheld or deducted
therefrom, will yield the amount required under any Loan Document to be paid
with respect thereto; PROVIDED, that the Borrowers shall not be required to pay
any additional amount pursuant to this Section 2.24(b) to any Bank (i) that is
not, either on the date this Agreement is executed by such Bank or on the date
such Bank becomes such under Section 9.6(c), either (x) entitled to submit Form
1001 (relating to such Bank and entitling it to a complete exemption from
withholding on all payments to be received by such Bank hereunder) or Form 4224
(relating to all payments to be received by such Bank hereunder) or (y) a United
States person (as such term is defined in Section 7701(a)(30) of the Code), or
(ii) that has failed to submit any form or certificate that it was required to
file pursuant to subsection (a) and entitled to file under applicable law or
(iii) arising from such bank's failure to comply with any certification,
identification or other similar requirement under United States income tax laws
or regulations (including backup withholding) to establish entitlement to
exemption from such U.S. Taxes; and PROVIDED, FURTHER, that if a Bank, as a
result of any amount paid by the Borrowers to such Bank pursuant to this Section
2.24, shall realize a tax credit or refund, which tax credit or refund would not
have been realized but for the borrowers payment of such amount, such Bank shall
pay to the Borrowers an amount equal to such tax credit or refund. Each Bank may
determine the portion, if any, of any tax credit or refund attributable to the
Borrowers' payments using such attribution and accounting methods as such Bank
reasonably selects, and such bank's determination of the portion of any tax
credit or refund attributable to the borrower's payments shall be conclusive in
the absence of manifest error. The obligation of the Borrowers under this
Section 2.24(b) shall survive the payment in full of the Obligations and the
termination of the Commitments of such Bank.
(c) SUBSTITUTION OF BANK. In the event either Borrower is
required pursuant to this Section 2.24 to pay any additional amount to any Bank,
such Bank shall, if no Event of Default has occurred and is continuing, upon the
request of such Borrower to such Bank and the Agent, assign, pursuant to and in
accordance with the provisions of Section 9.6, all of its rights and obligations
under this Agreement and under the Notes to another Bank or an Assignee selected
by the Borrower and reasonably satisfactory to the Agent, in consideration for
(i) the payment by such assignee to the assigning Bank of the principal of, and
interest accrued and unpaid to the date of such assignment on, the Note or Notes
of such Bank, (ii) the payment by such Borrower to the assigning Bank of any and
all other amounts owing to such Bank under any provision of this Agreement
accrued and unpaid to the date of such assignment and (iii) such borrower's
release of the assigning Bank from any further obligation or liability under
this Agreement. Notwithstanding anything to the contrary in this Section
2.24(c), in no event shall the replacement of any Bank result in a decrease in
the aggregate Commitments without the written consent of the Majority Banks.
Section 2.25 EXTENSION OF TRANSFORMATION DATE. The Borrowers
may, in an amendment in writing signed by the Majority Banks, extend the
Transformation Date; provided, however, that if one or more Banks does not
approve the extension of the Transformation Date, the Borrowers may at any time
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thereafter prior to the Transformation Date previously in effect, in its sole
discretion, require the assignment of such bank's rights and delegation of such
bank's obligations under the Loan Documents, pursuant to Section 9.6 to any
other Bank or another assignee selected by the Borrowers and acceptable to the
Agent that is willing to agree to such extension, in consideration for (i) the
payment by such assignee to the assigning Bank of the principal of, and interest
accrued and unpaid to the date of such assignment on, the Note of such Bank,
(ii) the payment by the Borrowers to the assigning Bank of any and all fees
owing to such Bank under any provision of this Agreement accrued and unpaid to
the date of such assignment and (iii) the Borrowers' release of the assigning
Bank from any further obligation or liability under its Commitment. The
Transformation Date shall be extended with respect to all Banks that have
approved the extension and all such assignees. The Transformation Date shall be
deemed to have occurred with respect to any Bank that has not approved the
extension and whose Loans and Commitment have not been assigned as described
above, and the outstanding principal balance of the Loans made by each such Bank
that has not approved the extension or assigned its Loans and Commitment shall
be payable as provided in Section 2.6 for Term Loans. On such date, the
Aggregate Commitment Amounts listed on Schedule 1.1 shall be reduced to reflect
the termination of such Banks' Commitments.
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 Agent shall have received the
following in sufficient counterparts (except for the Notes) for each
Bank:
(i) A Note, drawn to the order of each Bank, and
executed by the Borrowers and dated the date of this Agreement.
(ii) Security Agreements executed by PAG, PAII and
PASI, respectively.
(iii) Pledge Agreements, in the form of Exhibits F
and G, executed by the Borrowers.
(iv) A Guaranty executed by PAII.
(v) A Trademark Assignment, in the form of Exhibit H,
executed by PAG.
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(vi) Copies of the corporate resolutions of PAG,
PAII, PASI and PACC authorizing the execution, delivery and performance
of the Loan Documents 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.
(vii) 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 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.
(viii) A certificate of the Secretary or Assistant
Secretary of each of PAG, PACC, PAII and PASI certifying their
respective Certificates of Incorporation and Bylaws.
(ix) Long-form certificates of good standing for PAG,
PAII, PASI and PACC in the respective jurisdictions of their
incorporation and 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 thirty (30) days
prior to the Closing Date.
(x) 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.
(xi) Evidence of compliance with the insurance
requirements of Section 5.3.
(xii) A copy of a letter (in form and substance
acceptable to the Agent) from the Borrower to KPMG Peat Marwick
concerning the agent's and the banks reliance on financial statements
audited by such accountants and appraising KPMG Peat Marwick of such
reliance.
(xiii) A written opinion of Bryan Cave LLP, counsel
to the Borrowers, PAII and PASI, addressed to the Agent and dated the
Closing Date, covering the matters set forth in Exhibit I hereto.
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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 Agent shall have received for itself, and,
as applicable, for the account of the Banks, (A) the Agent 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 Agent payable pursuant to Section 8.2.
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 Agent; any
pledged collateral (together with stock powers and other instruments of
assignment, as applicable) shall have been duly delivered to the Agent;
and the priority and perfection of the Liens created by the Security
Documents shall have been established to the satisfaction of the Agent
and its counsel.
Section 3.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTERS OF
CREDIT. The obligation of the Banks to make any Loans or of the Agent to 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 Agent 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.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Banks to enter into this Agreement and to make
Loans hereunder, and to induce the Agent to issue and the Banks to participate
in Letters of Credit, the Borrowers represent and warrant to the Banks:
Section 4.1 ORGANIZATION, STANDING, ETC. Each Borrower 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 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 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 it or the business conducted by it make such qualification
necessary and the failure so to qualify would permanently preclude such Borrower
or Subsidiary from enforcing its rights with respect to any assets or expose
such Borrower or 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 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 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
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which each of them is a party 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 or any such Subsidiary, or (c) result in a breach of or constitute a
default under any agreement, lease or instrument to which the Borrowers or any
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,
1997, and the unaudited financial statements of each of the Borrowers as at
March 31, 1998, as heretofore furnished to the Banks, 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 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, 1997, 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
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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 either Borrower 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 Banks) 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 and no 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 6.12. Neither
of the Borrowers and no Subsidiary has 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 books of the Borrowers in respect of taxes and other governmental charges
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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 possess or have 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 their business, without known conflict with the rights of others.
Section 4.12 BURDENSOME RESTRICTIONS. Neither of the Borrowers
and no Subsidiary 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 no Subsidiary 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 no Subsidiary 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 no Subsidiary 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.
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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, a list of all related
Fund Agreements, and a list of all issuers of Collateralized Loan Obligations
for which PAII manages, services and advises the issuer with respect to the pool
of commercial loans, high-yield bonds and emerging market obligations securing
or otherwise backing such Collateralized Loan Obligations. All Fund Agreements
are in full force and effect.
Section 4.19 MILLENNIUM COMPLIANCE. The Borrowers have
reviewed and assessed their business operations and computer systems with
respect to the "year 2000 problem" (that is, that computer applications and
equipment used by the Borrowers, directly or indirectly through third parties,
may not be able to properly perform date-sensitive functions before, during and
after January 1, 2000) and, based on that review and assessment, the Borrowers
have no reason to believe that the year 2000 problem will result in a material
adverse change on the business, condition (financial or otherwise), operations
or prospects of the Borrowers and their Subsidiaries taken as a whole, or on the
Borrowers' ability to repay the Banks.
Section 4.20 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 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
Banks 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 Banks hereunder to make Loans or
of the Agent hereunder 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 Majority Banks shall
otherwise consent in writing:
Section 5.1 FINANCIAL STATEMENTS AND REPORTS. The Borrowers
will furnish to the Banks:
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
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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 Agent,
together with any management letters, management reports or other
supplementary written comments or reports to the Borrowers or their
boards of directors furnished by such accountants.
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 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, (ii) a report on the Net Asset Value of all Advisory Funds,
and (iii) a report on all Collateralized Loan Obligations outstanding,
in form acceptable to the Agent, 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 Agent.
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5.1(f) Immediately upon any officer of either of the
Borrowers becoming aware of any Default or Event of Default, a notice
describing the nature thereof and what action such 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 (a) 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, or (b) any action by the Borrowers, any
Subsidiary or any issuer, trustee or holders of any Collateralized Loan
Obligations to make any modification to, waive any provision of, or
fail to renew any CLO Investment or Permitted Advisory Subsidiary
Agreement relating to such Collateralized Loan Obligations, 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 or the issuer of any Collateralized Loan
Obligations, or on the value of any CLO Investment, in an amount
exceeding $250,000, 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, the Funds and the Collateralized Loan
Obligations as any 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 Agent or any 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 Agent or
such Bank may designate. So long as no Event of Default exists, the expenses of
the Agent or any Bank for such visits, inspections and examinations shall be at
the expense of the Agent or 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
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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.
Section 5.9 NOTICE OF LITIGATION. The Borrowers will give
prompt written notice to the Agent 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 of the Borrowers and the Subsidiaries 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 (a) cause each Fund for which a Subsidiary acts as
investment advisor or principal distributor to continue such Subsidiary in such
capacity and (b) except in the ordinary course of business and consistent with
past practices, 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 6.10(h),
on and at all times after the Business Day following such acquisition, to comply
with the following requirements:
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(a) not have any (i) business other than (A) the
business of serving as investment adviser for Advisory Funds pursuant
to Advisory Contracts and receiving payments thereunder, and (B) the
business of performing collateral management, servicing and advisory
duties for the issuers of Collateralized Loan Obligations and receiving
payments therefor, (ii) assets other than Advisory Contracts, assets
necessary to the performance by such Advisory Subsidiary of its
obligations under such Advisory Contracts, CLO Investments and assets
necessary to the performance by such Advisory Subsidiary of its
obligations as manager, servicer and advisor to the issuers of
Collateralized Loan Obligations, or (iii) liabilities other than
liabilities under 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
(x) Advisory Contracts, (y) agreements relating to management,
servicing and advisory duties to issuers of Collateralized Loan
Obligations, and (z) other agreements necessary to the performance by
such Advisory Subsidiary of its obligations under agreements described
in clauses (x) and (y) above (collectively, the "Permitted Advisory
Subsidiary Agreements"); provided that such 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 Borrowers;
(c) distribute (by dividend or otherwise) all of its
revenue, less actual expenses incurred in performing its obligations
under Permitted Advisory Subsidiary Agreements, 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 Agent;
(d) be incorporated under the Delaware General
Corporation Act;
(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);
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(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;
(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 Agent or the Majority Banks,
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 Agent or the Majority
Banks may 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 Agent or the Banks the rights granted now
or hereafter intended to be granted to the Agent or the Banks 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 Agent or the Banks in order to carry out the
intention or facilitate the performance of the provisions of any Loan Document.
The Borrowers will furnish to the Agent evidence satisfactory to the Agent of
every such recording, filing or registration.
ARTICLE VI
NEGATIVE COVENANTS
Until any obligation of the Banks hereunder to make Loans or
of the Agent hereunder to issue Letters of Credit shall have expired or been
terminated, no Letter of Credit remains outstanding and the Note and all of the
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other Obligations have been paid in full, unless the Majority Banks 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 and Collateralized Loan
Obligations (i) underwritten by any Subsidiary of the Borrower or (ii)
in which the Borrowers or any Subsidiary of a Borrower makes an
Investment permitted under Section 6.10(i) or Section 6.10(j), in the
ordinary course of business;
6.2(b) sales of rights to receive 12b-1 Fees and the
related Contingent Deferred Sales Charges, 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;
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;
6.2(e) the sale of CLO Investments; and
6.2(f) the sale of Advisory Contracts or rights
related thereto.
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
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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
Agent) 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 Agent 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
6.10(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 Banks 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 Banks 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
Agent. 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. Neither PACC nor PAG will
make any Restricted Payments unless, both before and after giving effect
thereto, no 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.
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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.
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 Agent 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 Agent.
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 Agent.
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 Agent a
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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.
6.10(j) Investments by Advisory Subsidiaries in CLO
Investments (including, without limitation, Investments in
Collateralized Loan Obligations).
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.
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 6.12(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 Banks.
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.
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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.
6.12(i) Liens in favor of any landlord covering any
leasehold improvements at the leased premises.
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 CASH FLOW LEVERAGE RATIO. The Borrowers will not
permit the Cash Flow Leverage Ratio as of the last day of any fiscal quarter of
the Borrowers to be more than 3.0 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) $2,500,000,000 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).
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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), 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 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 Agent of any 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 Agent or any 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.
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 Banks, (ii) the date the Borrowers should have
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given notice of such failure to the Banks pursuant to Section 5.1, or
(iii) the date the Agent or any 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 $500,000 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
collateral given as security therefor. For purposes of this Section,
Indebtedness of either Borrower or any Subsidiary shall be deemed
"material" if it exceeds $500,000 as to any item of Indebtedness or in
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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 Agent 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 Agent or the Banks 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 Agent.
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 judgment of the Majority Banks, 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.
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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 Notes 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 Agent, at the
direction of the Majority Banks, may (i) declare the Commitments terminated,
whereupon the Commitments shall terminate and (ii) declare the outstanding
unpaid principal balance of the Notes, the accrued and unpaid interest thereon
and all other Obligations to be forthwith due and payable, whereupon the Notes,
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 Notes to the contrary notwithstanding. Upon
the occurrence of any of the events described in clauses (a) or (b) of the
preceding sentence the Agent 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 each 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, such Bank.
Such right shall exist whether or not such 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. Each Bank agrees that, as promptly as is
reasonably possible after the exercise of any such setoff right, it shall notify
the Borrowers and the Agent of its exercise of such setoff right; provided,
however, that the failure of any 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 any Bank to all
rights of banker's Lien, setoff and counterclaim available pursuant to law.
ARTICLE VIII
THE AGENT
The following provisions shall govern the relationship of the
Agent with the Banks.
Section 8.1 APPOINTMENT AND AUTHORIZATION. Each Bank appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such respective powers under the Loan Documents as are delegated to the
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto. Neither the Agent nor any of its directors, officers or
employees shall be liable for any action taken or omitted to be taken by it
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under or in connection with the Loan Documents, except for its own gross
negligence or willful misconduct. The Agent shall act as an independent
contractor in performing its obligations as Agent hereunder and nothing herein
contained shall be deemed to create any fiduciary relationship among or between
the Agent, the Borrowers or the Banks.
Section 8.2 NOTE HOLDERS. The Agent may treat the payee of any
Note as the holder thereof until written notice of transfer shall have been
filed with it, signed by such payee and in form satisfactory to the Agent.
Section 8.3 CONSULTATION WITH COUNSEL. The Agent may consult
with legal counsel selected by it and shall not be liable for any action taken
or suffered in good faith by it in accordance with the advice of such counsel.
Section 8.4 LOAN DOCUMENTS. The Agent shall not be under a
duty to examine or pass upon the validity, effectiveness, genuineness or value
of any of the Loan Documents or any other instrument or document furnished
pursuant thereto, and the Agent shall be entitled to assume that the same are
valid, effective and genuine and what they purport to be.
Section 8.5 U.S. BANK AND AFFILIATES. With respect to its
Commitment and the Loans made by it, U.S. Bank shall have the same rights and
powers under the Loan Documents as any other Bank and may exercise the same as
though it were not the Agent consistent with the terms thereof, and U.S. Bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrower as if it were not the Agent.
Section 8.6 ACTION BY AGENT. Except as may otherwise be
expressly stated in this Agreement, the Agent shall be entitled to use its
discretion with respect to exercising or refraining from exercising any rights
which may be vested in it by, or with respect to taking or refraining from
taking any action or actions which it may be able to take under or in respect
of, the Loan Documents. The Agent shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Majority Banks, and such instructions shall be
binding upon all holders of Notes; provided, however, that the Agent shall not
be required to take any action which exposes the Agent to personal liability or
which is contrary to the Loan Documents or applicable law. The Agent shall incur
no liability under or in respect of any of the Loan Documents by acting upon any
notice, consent, certificate, warranty or other paper or instrument believed by
it to be genuine or authentic or to be signed by the proper party or parties and
to be consistent with the terms of this Agreement.
Section 8.7 CREDIT ANALYSIS. Each Bank has made, and shall
continue to make, its own independent investigation or evaluation of the
operations, business, property and condition, financial and otherwise, of the
Borrowers in connection with entering into this Agreement and has made its own
appraisal of the creditworthiness of the Borrowers. Except as explicitly
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provided herein, the Agent has no duty or responsibility, either initially or on
a continuing basis, to provide any Bank with any credit or other information
with respect to such operations, business, property, condition or
creditworthiness, whether such information comes into its possession on or
before the first Event of Default or at any time thereafter.
Section 8.8 NOTICES OF EVENT OF DEFAULT, ETC. In the event
that the Agent shall have acquired actual knowledge of any Event of Default or
Default, the Agent shall promptly give notice thereof to the Banks.
Section 8.9 INDEMNIFICATION. Each Bank agrees to indemnify the
Agent, as Agent (to the extent not reimbursed by the Borrower), ratably
according to such bank's Commitment Percentage, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on or incurred by the Agent in any way relating to or arising out of the
Loan Documents or any action taken or omitted by the Agent under the Loan
Documents, provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the agent's gross negligence or
willful misconduct. No payment by any Bank under this Section shall relieve the
Borrower of any of its obligations under this Agreement.
Section 8.10 PAYMENTS AND COLLECTIONS. All funds received by
the Agent in respect of any payments made by the Borrowers on the Notes,
Commitment Fees or Letter of Credit Fees shall be distributed forthwith by the
Agent ratably among the Banks, in like currency and funds as received. All funds
received by the Agent in respect of any payments made by the Borrowers on any
Term Notes shall be distributed forthwith by the Agent ratably among the Banks,
in like currency and funds as received. After any Event of Default has occurred,
all funds received by the Agent, whether as payments by the Borrowers or as
realization on collateral, shall (except as may otherwise be required by law) be
distributed by the Agent in the following order: (a) first to the Agent or any
Bank who has incurred unreimbursed costs of collection with respect to any
Obligations hereunder, ratably to the Agent and each Bank in the proportion that
the costs incurred by the Agent or such Bank bear to the total of all such costs
incurred by the Agent and all Banks; (b) next to the Agent for the account of
the Banks (in accordance with their respective Total Percentages) for
application on the Notes and the Unpaid Drawings; (c) next to the Agent for the
account of the Banks (in accordance with their respective Commitment
Percentages) for any unpaid Commitment Fees or Letter of Credit Fees owing by
the Borrower hereunder; and (d) last to the Agent to be held in the Holding
Account to cover the Borrower's reimbursement and other obligations with respect
to any outstanding Letters of Credit.
Section 8.11 SHARING OF PAYMENTS. If any Bank shall receive
and retain any payment, voluntary or involuntary, whether by setoff, application
of deposit balance or security, or otherwise, in respect of Indebtedness under
this Agreement or the Notes in excess of such bank's share thereof as determined
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under this Agreement, then such Bank shall purchase from the other Banks for
cash and at face value and without recourse, such participation in the Notes
held by such other Banks as shall be necessary to cause such excess payment to
be shared ratably as aforesaid with such other Banks; provided, that if such
excess payment or part thereof is thereafter recovered from such purchasing
Bank, the related purchases from the other Banks shall be rescinded ratably and
the purchase price restored as to the portion of such excess payment so
recovered, but without interest. Subject to the participation purchase
obligation above, and to the next sentence, each Bank agrees to exercise any and
all rights of setoff, counterclaim or banker's lien first fully against any
Notes and participations therein held by such Bank, next to any other
Indebtedness of the Borrower to such Bank arising under or pursuant to this
Agreement and to any participations held by such Bank in Indebtedness of the
Borrower arising under or pursuant to this Agreement, and only then to any other
Indebtedness of the Borrower to such Bank.
Section 8.12 ADVICE TO BANKS. The Agent shall forward to the
Banks copies of all notices, financial reports and other communications received
hereunder from the Borrower by it as Agent, excluding, however, notices, reports
and communications which by the terms hereof are to be furnished by the
Borrowers directly to each Bank.
Section 8.13 RESIGNATION. If at any time U.S. Bank shall deem
it advisable, in its sole discretion, it may submit to each of the Banks and the
Borrowers a written notification of its resignation as Agent under this
Agreement, such resignation to be effective upon the appointment of a successor
Agent, but in no event later than 30 days from the date of such notice. Upon
submission of such notice of resignation, the Majority Banks may appoint a
successor Agent, with the prior written approval of the Borrowers (which
approval will not be unreasonably withheld).
ARTICLE IX
MISCELLANEOUS
Section 9.1 MODIFICATIONS. Notwithstanding any provisions to
the contrary herein, any term of this Agreement may be amended with the written
consent of the Borrower; provided that no amendment, modification or waiver of
any provision of this Agreement or any other Loan Document or consent to any
departure therefrom by the Borrower or other party thereto shall in any event be
effective unless the same shall be in writing and signed by the Majority Banks,
and then such amendment, modification, waiver or consent shall be effective only
in the specific instance and for the purpose for which given. (The Agent may
enter into amendments or modifications of, and grant consents and waivers to
departure from the provisions of, those Loan Documents to which the Banks are
not signatories without the Banks joining therein, PROVIDED the Agent has first
obtained the separate prior written consent to such amendment, modification,
consent or waiver from the Majority Banks.) Notwithstanding the foregoing, no
such amendment, modification, waiver or consent shall:
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9.1(a) Reduce the rate or extend the time of payment
of any principal of or interest on the Notes, or modify any of the
provisions of any Note with respect to the payment or repayment
thereof, without the consent of the holder of each Note so affected; or
9.1(b) Increase the amount or extend the time of the
Commitment of any Bank, without the consent of such Bank; or
9.1(c) Reduce the rate or extend the time of payment
of any fee payable to a Bank, without the consent of the Bank affected;
or
9.1(d) Except as may otherwise be expressly provided
in any of the other Loan Documents, release any material portion of
collateral securing, or any guaranties for, all or any part of the
Obligations without the consent of all the Banks; or
9.1(e) Amend the definition of Majority Banks or
otherwise reduce the percentage of the Banks required to approve or
effectuate any such amendment, modification, waiver, or consent,
without the consent of all the Banks; or
9.1(f) Amend any of the foregoing Sections 9.1 (a)
through (e) or this Section 9.1 (f) without the consent of all the
Banks; or
9.1(g) Amend any provision of this Agreement relating
to the Agent in its capacity as Agent without the consent of the Agent;
or
9.1(h) Amend any provision of this Agreement relating
to the issuance of Letters of Credit without the consent of the Agent.
Section 9.2 EXPENSES; AMENDMENT OR WAIVER FEE. Whether or not
the transactions contemplated hereby are consummated, the Borrowers agree to
reimburse the Agent 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 Agent) 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 Agent and each Bank upon demand for all reasonable out-of-pocket
expenses (including expenses of legal counsel) paid or incurred by the Agent or
any 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 (or such greater amount as may be specified by the Banks) to
each Bank on the effective date of any amendment to, modification of or waiver
of any provision of this Agreement if any Bank determines, in its sole
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discretion, that its policies or practices required such Bank to obtain the
approval of any credit committee or similar approval authority for the execution
of such amendment, modification or waiver.
Section 9.3 WAIVERS, ETC. No failure on the part of the Agent
or any 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 9.4 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 Agent under Article II hereof shall be
deemed to have been given only when received by the Agent.
Section 9.5 TAXES. The Borrowers agree to pay, and save the
Agent and any 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 9.6 SUCCESSORS AND ASSIGNS; DISPOSITION OF LOANS;
TRANSFEREES.
9.6(a) This Agreement shall be binding upon and inure
to the benefit of the Borrower, the Banks, the Agent, all future
holders of the Notes, and their respective successors and assigns,
except that the Borrower may not assign or transfer any of its rights
or obligations under this Agreement without the prior written consent
of each Bank.
9.6(b) Any Bank may, in the ordinary course of its
commercial banking business and in accordance with applicable law, at
any time sell to one or more banks or other entities ("PARTICIPANTS")
participating interests in any Revolving Loan, Term Loan or other
Obligation owing to such Bank, any Revolving Note or Term Note held by
such Bank, and any Revolving Commitment or Term Loan Commitment of such
Bank, or any other interest of such Bank hereunder. In the event of any
such sale by a Bank of participating interests to a Participant, (i)
such bank's obligations under this Agreement to the other parties to
this Agreement shall remain unchanged, (ii) such Bank shall remain
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solely responsible for the performance thereof, (iii) such Bank shall
remain the holder of any such Revolving Note or Term Note for all
purposes under this Agreement, (iv) the Borrower and the Agent shall
continue to deal solely and directly with such Bank in connection with
such bank's rights and obligations under this Agreement and (v) the
agreement pursuant to which such Participant acquires its participating
interest herein shall provide that such Bank shall retain the sole
right and responsibility to enforce the Obligations, including, without
limitation the right to consent or agree to any amendment,
modification, consent or waiver with respect to this Agreement or any
other Loan Document, PROVIDED that such agreement may provide that such
Bank will not consent or agree to any such amendment, modification,
consent or waiver with respect to the matters set forth in Sections
9.1(a) - (d), or to any release of all or substantially all of the
collateral, without the prior consent of such Participant. The Borrower
agrees that if amounts outstanding under this Agreement, the Revolving
Notes, the Term Notes and the Loan Documents are due and unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to
have, to the extent permitted by applicable law, the right of setoff in
respect of its participating interest in amounts owing under this
Agreement and any Revolving Note, Term Note or other Loan Document to
the same extent as if the amount of its participating interest were
owing directly to it as a Bank under this Agreement or any Revolving
Note, Term Note or other Loan Document; PROVIDED, that such right of
setoff shall be subject to the obligation of such Participant to share
with the Banks, and the Banks agree to share with such Participant, as
provided in subsection 8.11. The Borrower also agrees that each
Participant shall be entitled to the benefits of subsections 2.20,
2.21, 2.22, 2.23, 2.24 and 9.2 with respect to its participation in the
Commitments, Revolving Loans and Term Loans; PROVIDED, that no
Participant shall be entitled to receive any greater amount pursuant to
such subsections than the transferor Bank would have been entitled to
receive in respect of the amount of the participation transferred by
such transferor Bank to such Participant had no such transfer occurred.
9.6(c) Each Bank may, from time to time, with the
consent of the Agent and, except during the occurrence and during the
continuance of an Event of Default, the Borrowers (which consents shall
not be unreasonably withheld), assign to other lenders ("ASSIGNEES")
part of its Revolving Commitment Amount (but not less than $5,000,000
to any Bank), together with equivalent proportions of the Revolving
Loans, obligation to purchase risk participations in Letters of Credit,
and Term Loans then held by that Bank. Each such assignment shall be
pursuant to an agreement in substantially the form of Exhibit J, which
agreement shall specify in each instance the portion of the Obligations
evidenced by the Revolving Notes and Term Notes which is to be assigned
to each Assignee and the portion of the Revolving Commitment Amount of
the assigning Bank to be assumed by each Assignee (each, an "Assignment
Agreement"); PROVIDED, HOWEVER, that unless the assignment is to the
affiliate of a Bank the assigning Bank must pay to the Agent a
processing and recordation fee of $3,500; PROVIDED, FURTHER, that the
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aggregate amount of the Commitment which is the subject of the
assignment shall be $5,000,000 or an integral multiple of $1,000,000 in
excess thereof, except (I) in the case of an assignment by one Bank to
another Bank, in which case the aggregate amount of the Commitment
which is the subject of the assignment shall be $1,000,000 or an
integral multiple of $1,000,000 in excess thereof, and (II) in the case
of the assignment by any Bank of its Commitment and Loan in full, and
PROVIDED, that following any such assignment, the transferring Bank
shall (i) continue to hold a Revolving Commitment Amount in an amount
not less than $5,000,000, unless it has assigned its Commitment in
full. Any Assignee, to the extent of such assignment (unless otherwise
provided therein), shall have all the rights and obligations of a Bank
hereunder and the assigning Bank shall be released from its duties and
obligations under this Agreement to the extent of such assignment. Upon
the execution of each Assignment Agreement by the assigning Bank, the
relevant Assignee, the Borrower and the Agent, payment to the assigning
Bank by such Assignee of the purchase price for the portion of the
Obligations being acquired by it, payment by the assigning bank to the
Agent of the processing and recording fee and receipt by the Borrower
of a copy of the relevant Assignment Agreement, (x) such Assignee
lender shall thereupon become a "Bank" for all purposes of this
Agreement with a Commitment, Commitment Percentage and a Total
Percentage in the amount set forth in such Assignment Agreement and
with all the rights, powers and obligations afforded a Bank under this
Agreement, (y) such assigning Bank shall have no further liability for
funding the portion of its Commitment assumed by such Assignee and (z)
the address for notices to such Assignee shall be as specified in the
Assignment Agreement executed by it. Concurrently with the execution
and delivery of each Assignment Agreement, the assigning Bank shall
surrender to the Agent the Note a portion of which is being assigned,
and the Borrower shall execute and deliver a Note to the Assignee in
the amount of its Commitment or the outstanding principal amount of its
Loans, as applicable, and a new Note to the assigning Bank in the
amount of its Commitment or the outstanding principal amount of its
Loans, as applicable, after giving effect to the reduction occasioned
by such assignment, all such Notes to constitute "Notes" for all
purposes of this Agreement and of the other Loan Documents.
9.6(d) The Borrower shall not be liable for any costs
incurred by the Banks in effecting any participation or assignment.
9.6(e) Each Bank may disclose to any Assignee or
Participant and to any prospective Assignee or Participant any and all
financial information in such bank's possession concerning the Borrower
or any of its Subsidiaries which has been delivered to such Bank by or
on behalf of the Borrower or any of its Subsidiaries pursuant to this
Agreement or which has been delivered to such Bank by or on behalf of
the Borrower or any of its Subsidiaries in connection with such bank's
credit evaluation of the Borrower or any of its Subsidiaries prior to
entering into this Agreement, PROVIDED that prior to disclosing such
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information, such Bank shall first obtain the agreement of such
prospective Assignee or Participant to comply with the provisions of
Section 9.7.
Section 9.7 CONFIDENTIALITY OF INFORMATION. The Agent and each
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 Agent
and any Bank pursuant to the provisions hereof is used only for the purposes of
this Agreement and any other relationship between the Agent, the Banks, and the
Borrowers and shall not be divulged to any Person other than the Agent, the
Banks, the Borrowers and their 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 Agent or any 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 any Bank or by any applicable law, rule, regulation or
judicial process, the opinion of such bank's counsel concerning the making of
such disclosure to be binding on the parties hereto. No Bank shall incur any
liability to the Borrowers by reason of any disclosure permitted by this Section
9.7.
Section 9.8 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 9.9 CONSENT TO JURISDICTION. AT THE OPTION OF THE
AGENT, 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
57
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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 9.10 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE
BANKS, AND THE AGENT IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 9.11 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 Agent and shall survive
the making of the Loans by the Banks and the execution and delivery to the Agent
by the Borrowers of the Note, regardless of any investigation made by or on
behalf of the Agent, 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 9.2, 9.5 and 9.12 shall survive payment in full of the Obligations and
the termination of the Commitment.
Section 9.12 INDEMNIFICATION. The Borrower hereby agrees to
defend, protect, indemnify and hold harmless the Agent and the Banks and their
respective Affiliates and the directors, officers, employees, attorneys and
agents of the Agent and the Banks and their respective 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 but excluding costs incurred by the Agent and the Banks in the
ordinary course of their business, such as costs of funds, employee salaries and
overhead, except to the extent the Borrower is liable thereunder under another
provision of the Loan Documents) 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, the creation of a Lien in
favor of the Agent or the Banks under any Loan Document or any
transaction contemplated by any Loan Document; or
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(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 Banks 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 (i) resulting from
such Indemnitee's gross negligence or willful misconduct, or (ii) arising in
connection with a dispute between the Borrower and such Indemnitee in which the
Borrowers is determined, in a final judgment entered by a court of competent
jurisdiction, to have no liability to or a definitive right to recover damages
from such Indemnitee. 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 Borrower hereunder the indemnities and obligations of the
Borrower contained in this Section shall survive the payment in full of the
other Obligations.
Section 9.13 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 9.14 ENTIRE AGREEMENT. This Agreement and the other
Loan Documents embody the entire agreement and understanding between the
Borrowers and the Banks 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 9.15 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 9.16 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) no
Bank has a fiduciary relationship to the Borrowers, the relationship being
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solely that of debtor and creditor, (c) no joint venture exists between the
Borrowers and any Bank, and (d) no Bank undertakes any 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 Agent or any Bank is for the protection of the Banks and neither of the
Borrowers nor any third party is entitled to rely thereon.
Section 9.17 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 K
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
---------------------------
Title
------------------------
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
---------------------------
Title
------------------------
Address for Borrower:
Two Renaissance Square, Ste. 1200
40 North Central Avenue
Phoenix, AZ 85004-4424
Attention: James M. Hennessy
Telecopier: (602) 417-8301
U.S. BANK NATIONAL ASSOCIATION
By
---------------------------
Title
------------------------
Address:
U.S. Bank Place - MPFP0702
601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: Mark A. Bagley
Telecopier: (612) 973-0832
[SIGNATURE PAGE TO THIRD AMENDED
AND RESTATED CREDIT AGREEMENT]
S-1
<PAGE>
BANK ONE ARIZONA, NA
By
---------------------------
Title
------------------------
Address:
201 North Central Avenue
21st Floor AZ1-1178
Phoenix, AZ 85004
Attention: Michelle Schechner
STATE STREET BANK AND
TRUST COMPANY
By
---------------------------
Its
--------------------------
Address:
1776 Heritage Drive
JAB4SW
North Quincy, MA 02171
Attention: Edward A. Siegel
[SIGNATURE PAGE TO THIRD AMENDED
AND RESTATED CREDIT AGREEMENT]
S-1
<PAGE>
EXHIBITS
A - Guaranty
B - Revolving Note
C - PAG Security Agreement
D - PASI Security Agreement
E - PAII Security Agreement
F - PAG Pledge Agreement
G - PACC Pledge Agreement
H - Collateral Assignment (Trademarks)
I - Matters to be Covered by Opinion of Counsel to the Borrowers
J - Form of Assignment Agreement
K - Terms With Respect to Guaranteed Obligations
SCHEDULES
4.6 - Litigation
4.17 - Subsidiaries
4.18 - Funds
[SIGNATURE PAGE TO THIRD AMENDED
AND RESTATED CREDIT AGREEMENT]
S-1
<PAGE>
EXHIBIT A
GUARANTY
THIS GUARANTY, dated as of July 31, 1998, is made and given by
Pilgrim America Investments, Inc., a Delaware corporation (the "Guarantor").
RECITALS
A. Pilgrim America Group, Inc., a Delaware corporation, and
Pilgrim America Capital Corporation, a Delaware corporation (together, the
"Borrowers"), the financial institutions from time to time party thereto as
lenders and U.S. Bank National Association, as agent, have entered into a Third
Amended and Restated Credit Agreement dated as of July 31, 1998 (as the same may
hereafter be amended, restated, or otherwise modified from time to time, the
"Credit Agreement").
B. It is a condition precedent to the obligation of the Banks
to extend credit accommodations pursuant to the Credit Agreement that this
Guaranty be executed and delivered by the Guarantor.
C. The Guarantor expects to derive benefits from the extension
of credit accommodations to the Borrowers by the Banks and finds it
advantageous, desirable and in its best interests to execute and deliver this
Guaranty to the Banks.
NOW, THEREFORE, In consideration of the credit accommodations
to be extended to the Borrowers and for other good and valuable consideration,
the Guarantor hereby covenants and agrees with the Banks as follows:
Section 1. DEFINED TERMS. Capitalized terms used in this
Guaranty without definition shall have the meaning given in the Credit
Agreement. In addition, as used in this Guaranty, the following terms shall have
the meaning indicated:
"OBLIGATIONS" shall mean all indebtedness, liabilities and
obligations of the Borrowers to the Banks and the Agent of every kind, nature or
description under the Credit Agreement, including without limitation 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
and any letter of credit reimbursement obligations and fees, and in all of the
foregoing cases whether due or to become due, and whether now existing or
hereafter arising or incurred.
Section 2. THE GUARANTY. Subject always to the following
Section, the Guarantor hereby absolutely and unconditionally guarantees to the
Banks and the Agent the payment when due (whether at a stated maturity or
earlier by reason of acceleration or otherwise) and performance of the
Obligations.
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Section 3. LIMITATION; INSOLVENCY LAWS. Notwithstanding any
other provision hereof, the obligation of the Guarantor on this Guaranty is
limited to the amount which can be guaranteed by the Guarantor under applicable
federal and state laws relating to the insolvency of debtors without this
Guaranty being held to be avoidable or unenforceable. The Guarantor acknowledges
and agrees that Obligations may be created and continued in any amount, without
affecting or impairing the liability of the Guarantor hereunder, and the Banks
may pay (or allow for the payment of) Obligations out of any sums received by or
available to the Banks on account of Obligations from the Borrowers or any other
Person (except the Guarantor), from the properties of the Borrowers or such
other Persons, out of collateral security or from any other source and such
payment (or allowance) shall not reduce, affect or impair the liability of the
Guarantor hereunder. The liability of the Guarantor shall be a continuing
liability and shall not be affected by (nor shall anything herein contained be
deemed a limitation upon) the amount of credit which may be extended to the
Borrowers, the number of transactions with the Borrowers, repayments by the
Borrowers, or the allocation by the Banks of repayments by the Borrowers, it
being the understanding of the Guarantor that the Guarantor's liability shall
continue hereunder so long as there are any Obligations outstanding and until
the expiration of the obligations, if any, of the Bank to extend credit
accommodations to the Borrowers. Any payment made by the Guarantor hereunder
shall be effective to reduce or discharge such liability only if accompanied by
a written transmittal document, received by the Agent, advising the Banks that
such payment is made under this Guaranty for such purpose. To the extent that
any payment to, or realization by, the Banks on the guaranteed Obligations
exceeds the limitations of this Section and is otherwise subject to avoidance
and recovery in any such proceeding, the amount subject to avoidance shall in
all events be limited to the amount by which such actual payment or realization
exceeds such limitation, and this Guaranty as limited shall in all events remain
in full force and effect and be fully enforceable against the Guarantor. This
Section is intended solely to preserve the rights of the Banks hereunder against
the Guarantor and neither the Guarantor, the Borrowers, any other guarantor of
the Obligations nor any other Person shall have any right, claim or defense
under this Section that would not otherwise be available under applicable
insolvency laws.
Section 4. CONTINUING GUARANTY. This Guaranty is a complete
and continuing guaranty of payment and performance of the Obligations. This
Guaranty being a guarantee of payment and not of collectibility and being
absolute and unconditional, 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,
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<PAGE>
notice of dishonor, nonpayment or 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
either Borrower 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 Borrower or any other Person for such deficiency is discharged pursuant
to statute, judicial decision or otherwise. The acceptance of this Guaranty by
the Banks and the Agent is not intended and does not release any liability
previously existing of any guarantor or surety of any indebtedness of the
Borrowers to any Bank.
Section 5. OTHER TRANSACTIONS. Each of the Banks and the Agent
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 the Borrowers or by any other Person, or to forward or deliver any or
all such collateral and security directly to the Borrowers or such other Person
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, any note or other instrument evidencing the
Obligations or any part thereof and any other agreement with respect to the
Obligations, waive compliance by 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 any Bank or the Agent to realize upon any of the Obligations of the Borrowers
to the Banks or the Agent, or upon any collateral or security for any or all of
the Obligations, nor by the taking by any Bank or the Agent of (or the failure
to take) any other guaranty or guaranties to secure the Obligations, nor by the
taking by any Bank or the Agent 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 any Bank or the Agent, 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 any Bank or the Agent
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<PAGE>
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 6. ACTIONS NOT REQUIRED. The Guarantor hereby waives
any and all right to cause a marshalling of the assets of the Borrowers or any
other action by any court or other governmental body with respect thereto or to
cause the Banks or the Agent to proceed against any security for the Obligations
or any other recourse which the Banks or the Agent may have with respect thereto
and further waives any and all requirements that the Banks or the Agent
institute any action or proceeding at law or in equity, or obtain any judgment,
against either Borrower or any 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 7. NO SUBROGATION. Notwithstanding any payment or
payments made by the Guarantor hereunder or any setoff or application of funds
of the Guarantor by the Banks or the Agent, the Guarantor shall not be entitled
to be subrogated to any of the rights of any Bank or the Agent against the
Borrowers or any other guarantor or any collateral security or guaranty or right
of offset held by any Bank or the Agent for the payment of the Obligations, nor
shall the Guarantor seek or be entitled to seek any contribution or
reimbursement from the Borrowers or any other guarantor in respect of payments
made by the Guarantor hereunder.
Section 8. 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, shall
be applied by the Banks and the Agent as provided in the Credit Agreement.
Section 9. RECOVERY OF PAYMENT. If any payment received by any
Bank or the Agent 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 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
4
<PAGE>
"irrevocable payment" refer to payments that cannot be set aside, recovered,
rescinded or required to be returned for any reason.
Section 10. 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 any Bank or the Agent.
Neither the Banks nor the Agent shall have any obligation to provide the
Guarantor with any advice whatsoever or to inform the Guarantor at any time of
the Banks' or the Agent's actions, evaluations or conclusions on the financial
condition or any other matter concerning the Borrowers.
Section 11. REMEDIES. All remedies afforded to the Banks or
the Agent 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 any Bank or
the Agent, shall be deemed to be in exclusion of any of the other remedies
available to any Bank or the Agent and no one such remedy shall in any way limit
or prejudice any other legal or equitable remedy which any Bank or the Agent 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 any Bank or the Agent.
Section 12. 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 Borrower 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 13. COSTS AND EXPENSES. The Guarantor will pay or
reimburse each Bank and the Agent on demand for all out-of-pocket expenses
(including in each case all reasonable fees and expenses of counsel) incurred by
that Bank or the Agent 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 14. WAIVERS AND AMENDMENTS. This Guaranty can be
waived, modified, amended, terminated or discharged only explicitly in a writing
signed by all of the Banks and the Agent. A waiver so signed shall be effective
only in the specific instance and for the specific purpose given.
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Section 15. NOTICES. Except when telephonic notice is
expressly authorized by this Guaranty, 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 16. GUARANTOR ACKNOWLEDGEMENTS. The Guarantor hereby
acknowledges that (a) counsel has advised the Guarantor in the negotiation,
execution and delivery of this Guaranty, (b) the Banks and the Agent have no
fiduciary relationship to the Guarantor, the relationship being solely that of
debtor and creditors, and (c) no joint venture exists between the Guarantor, the
Banks and the Agent.
Section 17. REPRESENTATIONS AND WARRANTIES. The Guarantor
hereby represents and warrants to the Banks and the Agent that:
17(a) The Guarantor 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.
17(b) The Guarantor has the corporate 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.
17(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).
17(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 the Guarantor, (ii) violate
or contravene any provision of its Articles of Incorporation or bylaws,
or (iii) result in a breach of or constitute a default under any
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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. The Guarantor 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).
17(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 the part of the Guarantor 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.
17(f) There are no actions, suits or proceedings
pending or, to the knowledge of the Guarantor, 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 the Guarantor, 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.
17(g) The Guarantor expects to derive benefits from
the transactions resulting in the creation of the Obligations. The
Banks and the Agent may rely conclusively on the continuing warranty,
hereby made, that the Guarantor continues to be benefitted by the
Banks' extension of credit accommodations to the Borrowers and the
Banks and the Agent 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 Banks and the Agent without regard to the receipt,
nature or value of any such benefits.
17(h) All representations and warranties pertaining
to the Guarantor made by the Borrowers in the Credit Agreement are true
and correct.
Section 18. COVENANTS. The Guarantor hereby covenants and
agrees that for so long as this Guaranty remains in full force and effect, (a)
the Guarantor shall perform and comply with all covenants made by the Borrowers
pertaining to the Guarantor in the Credit Agreement; and (b) the Guarantor shall
perform or comply with all covenants made by the Borrowers pertaining to the
Guarantor in the Pledge Agreements, including but not limited to the provisions
of Section 7(b) of the Pledge Agreement which prohibit the issuance of stock or
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other securities in addition to or in substitution of the "Pledged Shares" (as
defined in the Pledge Agreement), except to the Borrowers.
Section 19. 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 Banks 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, each Bank, the Agent and their
respective successors, transferees, and assigns. Without limiting the generality
of the foregoing clause (c), any Bank or the Agent 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 20. REAFFIRMATION. The Guarantor agrees that when so
requested by any Bank or the Agent from time to time it will promptly execute
and deliver to such Bank or the Agent a written reaffirmation of this Guaranty
in such form as such Bank or the Agent may require.
Section 21. REVOCATION. Notwithstanding any other provision
hereof, the Guarantor may revoke this Guaranty prospectively as to future
transactions by written notice to that effect actually received by the Agent. No
such revocation shall release, impair or affect in any manner any liability
hereunder with respect to Obligations created, contracted, assumed or incurred
prior to receipt by the Agent of written notice of revocation, or Obligations
created, contracted, assumed or incurred after receipt of such notice pursuant
to any contract entered into by the Banks or the Agent prior to receipt of such
notice, or any renewals or extensions thereof, theretofore or thereafter made,
or any interest accrued or accruing on such Obligations, or all other costs,
expenses and attorneys' fees arising from such Obligations.
Section 22. 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
8
<PAGE>
Guaranty or any other statement, instrument or transaction contemplated hereby
or relating hereto.
Section 23. CONSENT TO JURISDICTION. AT THE OPTION OF THE
BANKS OR THE AGENT, THIS GUARANTY MAY BE ENFORCED IN ANY FEDERAL COURT OR
MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY OR RAMSEY COUNTY, 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 BANKS OR THE AGENT 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 24. WAIVER OF JURY TRIAL. EACH OF THE GUARANTOR, EACH
BANK AND THE AGENT, BY THEIR EXECUTION AND DELIVERY OR ACCEPTANCE OF THIS
GUARANTY, IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 25. 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 26. GENERAL. All representations and warranties
contained in this Guaranty or in any other agreement between the Guarantor and
the Banks or the Agent 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.
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IN WITNESS WHEREOF, the Guarantor has executed this Guaranty
as of the date first above written.
PILGRIM AMERICA INVESTMENTS,
INC.
By
----------------------------
James R. Reis
Vice Chairman
Address for the Guarantor:
Two Renaissance Square, Ste. 1200
40 North Central Avenue
Phoenix, AZ 85004-4424
Address for the Agent:
U.S. Bank National Association
U.S. Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Mark A. Bagley
Fax (612) 973-0832
10
<PAGE>
EXHIBIT B TO
CREDIT AGREEMENT
NOTE
$__,000,000 July 31, 1998
Minneapolis, Minnesota
FOR VALUE RECEIVED, PILGRIM AMERICA GROUP, INC., a Delaware
corporation, and PILGRIM AMERICA CAPITAL CORPORATION, a Delaware corporation,
hereby jointly and severally promise to pay to the order of [BANK] (the "Bank")
at the main office of U.S. BANK NATIONAL ASSOCIATION (the "Agent") in
Minneapolis, Minnesota, in lawful money of the United States of America in
Immediately Available Funds (as such term and each other capitalized term used
herein are defined in the Credit Agreement hereinafter referred to) at the times
set forth in the Credit Agreement, the principal amount of _________ MILLION AND
NO/100 DOLLARS ($__,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 360 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 one of the Notes referred to in the Third Amended
and Restated Credit Agreement dated as of July 31, 1998 (as the same may
hereafter be from time to time amended, restated or otherwise modified, the
"Credit Agreement") among the undersigned, the Bank and the other banks named
therein, and the Agent. 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.
<PAGE>
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 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 C TO
CREDIT AGREEMENT
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of July 31, 1998, is made
and given by PILGRIM AMERICA GROUP, INC., a Delaware corporation (the
"Grantor"), to U.S. BANK NATIONAL ASSOCIATION, a national banking association,
as "Agent" under, and for the benefit of the "Banks" party to, the "Credit
Agreement" (as those terms are defined below).
RECITALS
A. The Grantor, Pilgrim America Capital Corporation ("PACC")
(together the "Borrowers"), the lenders party thereto, (the "Banks") and U.S.
Bank National Association, as agent for the Banks (the "Agent") have entered
into a Third Amended and Restated Credit Agreement dated as of July 31, 1998 (as
the same may hereafter be amended, supplemented, extended, restated, or
otherwise modified from time to time, the "Credit Agreement") pursuant to which
the Banks have agreed to extend to the Borrowers certain credit accommodations.
B. It is a condition precedent to the obligation of the Banks
to extend credit accommodations pursuant to the terms of the Credit Agreement
that this Agreement be executed and delivered by the Grantor.
C. The Grantor finds it advantageous, desirable and in its
best interests to comply with the requirement that it execute and deliver this
Security Agreement to the Agent.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Banks to enter into the Credit Agreement and to extend credit
accommodations to the Borrowers thereunder, the Grantor hereby agrees with the
Agent, for the benefit of the Banks and the Agent, as follows:
Section 1. DEFINED TERMS.
1(a) As used in this Agreement, terms capitalized and used
herein without being defined shall 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
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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.
"ACCOUNT DEBTOR" shall mean a Person who is obligated on or
under any Account, Chattel Paper, Instrument 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 Agent 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.
"EVENT OF DEFAULt" shall have the meaning given to such term
in Section 15 hereof.
"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.
2
<PAGE>
"INSTRUMENT" shall mean a draft, check, certificate of
deposit, note, bill of exchange, security or any other writing which
evidences a right to the payment of money and is not itself a security
agreement or lease and is of a type which is transferred in the
ordinary course of business by delivery with any necessary endorsement
or assignment.
"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.
"LIEN" shall mean any security interest, mortgage, pledge,
lien, charge, encumbrance, title retention agreement or analogous
instrument or device (including the interest of the lessors under
capitalized leases), in, of or on any assets or properties of the
Person referred to.
"OBLIGATIONS" shall mean (a) all indebtedness, liabilities and
obligations of the Borrowers to the Banks and Agent of every kind,
nature or description under the Credit Agreement, including without
limitation the Grantor's obligation on any promissory note or notes
under the Credit Agreement and any note or notes hereafter issued in
substitution or replacement thereof and any letter of credit
reimbursement obligations and fees, (b) all liabilities of the Grantor
under this Agreement, (c) any and all obligations of either Borrower to
any Bank under Rate Protection Agreements, and (d) any and all other
liabilities and obligations of the Borrowers to the Banks and the Agent
of every kind, nature and description, whether direct or indirect or
hereafter acquired by the Banks or the Agent from any Person, whether
absolute or contingent, regardless of how such liabilities arise or by
what agreement or instrument they may be evidenced, 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.
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
3
<PAGE>
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 Agent, for the benefit of the Banks, 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, rental agreements and other
Chattel Paper and insurance proceeds; (ii) all books, correspondence,
credit files, records, invoices, bills of lading, 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
Accounts, General Intangibles, 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 Agent 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 Banks and the Agent
shall have no obligation or liability under Accounts, Chattel Paper, General
4
<PAGE>
Intangibles and other items included in the Collateral by reason of this
Agreement, nor shall the Banks or the Agent 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 Agent) 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 those to be released in connection with the execution
and delivery hereof and those as may have been filed (a) in favor of the Agent
relating to this Agreement, or (b) to perfect Liens permitted by the Credit
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 Agent
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 Agent, (ii) the Agent 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 Agent'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 of the Grantor and the office where it keeps its books and
records concerning the Collateral are located at its address set forth on the
signature page hereof. All items of Collateral and Inventory existing on the
date of this Agreement are located at the places specified on Schedule I hereto.
The Grantor will immediately notify the Agent 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 Agent provide the Agent 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
5
<PAGE>
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 Agent has been
given at least 30 days prior written notice thereof and the Grantor has executed
and delivered to the Agent 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 Agent in writing, each Account, Contract and General
Intangible constituting or evidencing 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 such obligation. Without the Agent'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 per Account Debtor or other obligor in any calendar year. The
Grantor will perform and comply in all material respects with all its
obligations under the 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.
Section 8. FURTHER ASSURANCES; ATTORNEY-IN-FACT.
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 Agent may reasonably request, in order to perfect
and protect the Security Interest granted or purported to be granted
hereby or to enable the Agent 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
Agent: (i) mark, or permit the Agent to mark, conspicuously its books,
records, and accounts showing or dealing with the Collateral, with a
legend, in form and substance satisfactory to the Agent, indicating
that each such item of Collateral is subject to the Security Interest
granted hereby; (ii) deliver and pledge to the Agent all instruments,
duly indorsed or accompanied by duly executed instruments of transfer
or assignment, with full recourse to the Grantor, all in form and
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<PAGE>
substance satisfactory to the Agent; (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 Agent 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 Agent may request,
in order to perfect, preserve, and enhance the Security Interest
granted or purported to be granted hereby; and (iv) obtain waivers, in
form satisfactory to the Agent, of any other party to any Contract
consenting to the Agent's interest therein.
8(b) The Grantor hereby authorizes the Agent 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 Agent from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as
the Agent may reasonably request, all in reasonable detail and in form
and substance reasonably satisfactory to the Agent.
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 Agent, any Bank 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 Agent or any Bank furnish
7
<PAGE>
to the Agent a report on its Accounts, Contracts and General Intangibles, naming
the Account Debtors or other obligors thereon, the amount due and the aging
thereof. The Agent or its designee is authorized to contact Account Debtors 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 Agent 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 AGENT. If the Grantor at any time
fails to perform or observe any of the foregoing agreements, the Agent shall
have (and the Grantor hereby grants to the Agent) 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 Agent's option, in the Agent's
name) and to take any and all other actions which the Agent 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 Agent on demand the amount of all monies expended and all costs and
expenses (including reasonable attorneys' fees and legal expenses) incurred by
the Agent in connection with or as a result of the performance or observance of
such agreements or the taking of such action by the Agent, 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 AGENT'S DUTIES. The powers conferred on the
Agent hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. The Agent 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 Agent to comply with any such
request shall not itself be deemed a failure to exercise reasonable care, and no
failure of the Agent 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 Agent
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 Agent accords its own
property of like kind. The Agent 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 Agent 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
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<PAGE>
other rights pertaining to any Collateral. The Agent 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 Agent's possession
if the Agent 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 Agent to comply with any such request shall not of itself be deemed a
failure to exercise reasonable care.
Section 15. DEFAULT. Each of the following occurrences shall
constitute an Event of Default under this Agreement: (a) the Grantor shall fail
to observe or perform any covenant or agreement applicable to the Grantor under
this Agreement; or (b) any representation or warranty made by the Grantor in
this Agreement or any schedule, exhibit, supplement or attachment hereto or in
any financial statements, or reports or certificates heretofore or at any time
hereafter submitted by or on behalf of the Grantor to the Agent shall prove to
have been false or materially misleading when made; or (c) any Event of Default
shall occur under the Credit Agreement.
Section 16. REMEDIES ON DEFAULT. Upon the occurrence of an
Event of Default and at any time thereafter:
16(a) The Agent may exercise and enforce any and all
rights and remedies available upon default to a secured party under the
Uniform Commercial Code.
16(b) The Agent 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, including lands, plants, buildings,
Equipment, Inventory and other property as may be necessary or
appropriate in the judgment of the Agent to permit or enable the Agent
to exercise the remedies with respect to the Collateral, as the Agent
may elect, and to use and operate said properties for said purposes and
for such length of time as the Agent may deem necessary or appropriate
for said purposes without the payment of any compensation to Grantor
therefor. The Agent may require the Grantor to, and the Grantor hereby
agrees that it will, at its expense and upon request of the Agent
forthwith, assemble all or part of the Collateral as directed by the
Agent and make it available to the Agent at a place or places to be
designated by the Agent.
16(c) Any sale of Collateral may be in one or more
parcels at public or private sale, at any of the Agent's offices or
elsewhere, for cash, on credit, or for future delivery, and upon such
other terms as the Agent may reasonably believe are commercially
reasonable. The Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given, and the
Agent may adjourn any public or private sale from time to time by
announcement made at the time and place fixed therefor, and such sale
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<PAGE>
may, without further notice, be made at the time and place to which it
was so adjourned.
16(d) The Agent 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, exercise its remedies
with respect to the Collateral, and the Grantor's rights under all
licenses and all franchise agreements shall inure to the Agent's
benefit until the Obligations are paid in full.
16(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 Agent 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.
16(f) The Agent 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.
16(g) The Grantor appoints the Agent 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 17. REMEDIES AS TO CERTAIN RIGHTS TO PAYMENT. Upon the
occurrence of an Event of Default and at any time thereafter the Agent may
notify any Account Debtor or other Person obligated on any Accounts or other
Collateral that the same have been assigned or transferred to the Agent and that
the same should be performed as requested by, or paid directly to, the Agent, as
the case may be. The Grantor shall join in giving such notice, if the Agent so
requests. The Agent may, in the Agent'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 Agent is hereby granted the right to take any action which the
Agent may reasonably deem necessary or desirable in order to realize on the
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<PAGE>
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 such 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 Agent and shall not be commingled with any funds or property of
the Grantor and shall be forthwith remitted to the Agent for application on the
Obligations.
Section 18. APPLICATION OF PROCEEDS. All cash proceeds
received by the Agent 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
Agent, be held by the Agent as collateral for, or then or at any time thereafter
be applied in whole or in part against, all or any part of the Obligations
(including, without limitation, any expenses of the Agent payable pursuant to
Section 19 hereof). If the Agent shall apply such cash proceeds to the
Obligations, they shall be applied as follows:
FIRST, to the payment of all reasonable costs and
expenses incurred by the Agent in connection with such collection, sale
or disposition or otherwise in connection with this Security Agreement,
including all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by the
Agent hereunder on behalf of the Grantor and any other costs or
expenses incurred in connection with the exercise of any right or
remedy hereunder;
SECOND, to the payment of the Obligations consisting
of principal of, interest on and fees with respect to the Loans and the
Commitments, until such Obligations have been paid in full;
THIRD, to the payment in full of the other Obligations
until all of the Obligations have been paid in full;
FOURTH, to the Company, its successors or assigns or
as a court of competent jurisdiction may otherwise direct.
Section 19. COSTS AND EXPENSES; INDEMNITY. The Grantor will
pay or reimburse the Agent 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 Agent 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 Agent and the Banks 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
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<PAGE>
Security Interest hereby created (including enforcement of this Agreement) or
the actions of the Agent or any Bank pursuant hereto, except claims, losses or
liabilities resulting from the gross negligence or willful misconduct of the
party seeking indemnification as determined by a final judgment of a court of
competent jurisdiction. Any liability of the Grantor to indemnify and hold the
Agent and the Banks 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 20. 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 Agent. 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 Agent. All
rights and remedies of the Agent shall be cumulative and may be exercised singly
in any order or sequence, or concurrently, at the Agent'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 Agent of its
remedies hereunder, absent this waiver.
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 Agent and the Banks have no
fiduciary relationship to the Grantor, the relationship being solely that of
debtor and creditor, and (c) no joint venture exists between the Grantor, the
Agent and the Banks.
Section 23. 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
Banks to extend credit accommodations to the Grantor, (b) be binding upon the
Grantor, its successors and assigns, and (c) inure to the benefit of the Banks
12
<PAGE>
and the Agent, and be enforceable by the Agent, and their respective successors,
transferees, and assigns. Without limiting the generality of the foregoing
clause (c), the Banks or the Agent 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 24. TERMINATION OF SECURITY INTEREST. Upon payment in
full of the Obligations, the expiration of all obligations of the Banks to
extend credit accommodations to the Grantor and termination of all Rate
Protection Agreements, the Security Interest granted hereby shall terminate.
Upon any such termination, the Agent will return to the Grantor such of the
Collateral then in the possession of the Agent 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 Agent. 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 25. 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 26. CONSENT TO JURISDICTION. AT THE OPTION OF THE
AGENT, THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE
COURT SITTING IN HENNEPIN COUNTY; AND THE GRANTOR CONSENTS TO THE JURISDICTION
AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS
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<PAGE>
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 AGENT 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 27. WAIVER OF NOTICE AND HEARING. THE GRANTOR HEREBY
WAIVES ALL RIGHTS TO A JUDICIAL HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE
AGENT 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 28. WAIVER OF JURY TRIAL. EACH OF THE GRANTOR, THE
BANKS AND THE AGENT, BY ITS EXECUTION AND DELIVERY OR ACCEPTANCE OF THIS
AGREEMENT, 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 29. 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 30. GENERAL. All representations and warranties
contained in this Agreement or in any other agreement between the Grantor and
the Agent 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 Agent. 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.
PILGRIM AMERICA GROUP, INC.
By
----------------------------
James R. Reis
Vice Chairman
Address for Grantor:
Two Renaissance Square, Ste. 1200
40 North Central Avenue
Phoenix, AZ 85004-4424
Grantor's Tax ID: 95-4516050
Address for the Agent:
U.S. Bank National Association
601 Second Avenue South
Minneapolis, MN 55402-4302
Fax (612)
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SCHEDULE I
to
Security Agreement
Locations of Equipment and Inventory
as of Date of Security Agreement
[Locations to be provided, including county. Locations not owned by Grantor
should be specified with name of landlord or warehouse.]
<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 July 31, 1998, is made and
given by PILGRIM AMERICA SECURITIES, INC., a Delaware corporation (the
"Grantor"), to U.S. BANK NATIONAL ASSOCIATION, a national banking association,
as "Agent" under, and for the benefit of the "Banks" party to, the "Credit
Agreement" (as those terms are defined below).
RECITALS
A. Pilgrim America Group, Inc. ("PAG"), Pilgrim America Capital
Corporation ("PACC") (together the "Borrowers"), the lenders party thereto, (the
"Banks") and U.S. Bank National Association, as agent for the Banks (the
"Agent") have entered into a Third Amended and Restated Credit Agreement dated
as of July 31, 1998 (as the same may hereafter be amended, supplemented,
extended, restated, or otherwise modified from time to time, the "Credit
Agreement") pursuant to which the Banks have agreed to extend to the Borrowers
certain credit accommodations.
B. It is a condition precedent to the obligation of the Banks to
extend credit accommodations 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 a Borrower, and
the Borrower will use part of the loans made to it 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 Borrower 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 Banks to enter into the Credit Agreement and to extend credit
accommodations to the Borrowers thereunder, the Grantor hereby agrees with the
Agent, for the benefit of the Banks and the Agent, as follows:
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Section 1. DEFINED TERMS.
1(a) As used in this Agreement, terms capitalized and used
herein without being defined shall 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.
"ACCOUNT DEBTOR" shall mean a Person who is obligated on or
under any Account, Contract or General Intangible.
"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.
"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 Agent 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.
"EVENT OF DEFAULt" shall have the meaning given to such term in
Section 15 hereof.
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<PAGE>
"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 Banks and Agent of every kind,
nature or description under the Credit Agreement, including without
limitation 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 and any letter of credit
reimbursement obligations and fees, (b) all liabilities of the Grantor
under this Agreement, (c) any and all obligations of either Borrower to
any Bank under Rate Protection Agreements, and (d) any and all other
liabilities and obligations of the Borrowers or the Grantor the Banks
and the Agent of every kind, nature and description, whether direct or
indirect or hereafter acquired by the Banks or the Agent from any
Person, whether absolute or contingent, regardless of how such
liabilities arise or by what agreement or instrument they may be
evidenced, 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.
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
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<PAGE>
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, subject to the limitations
set forth in Section 21 below, the Grantor hereby grants to the Agent, for the
benefit of the Banks, 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, rental agreements and other Chattel
Paper and insurance proceeds; (ii) all books, correspondence, credit
files, records, invoices, bills of lading, 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
Accounts, General Intangibles, 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 Agent of any of the rights hereunder shall not
release the Grantor from any of its duties or obligations under the Contracts
4
<PAGE>
and other items included in the Collateral, and (c) the Banks and the Agent
shall have no obligation or liability under Accounts, Contracts, General
Intangibles and other items included in the Collateral by reason of this
Agreement, nor shall the Banks or the Agent 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 Agent) 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 those to be released in connection with the execution
and delivery hereof and those as may have been filed (a) in favor of the Agent
relating to this Agreement, or (b) to perfect Liens permitted by the Credit
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 Agent 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 Agent,
(ii) the Agent 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 Agent'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 of the Grantor and the office where it keeps its books and
records concerning the Collateral are located at its address set forth on the
signature page hereof. All items of Collateral and Inventory existing on the
date of this Agreement are located at the places specified on Schedule I hereto.
The Grantor will immediately notify the Agent 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 Agent provide the Agent 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
5
<PAGE>
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 Agent has been
given at least 30 days prior written notice thereof and the Grantor has executed
and delivered to the Agent 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 Agent in writing, each Account, Contract and General
Intangible constituting or evidencing 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 such obligation. Without the Agent'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 per Account Debtor or other obligor in any calendar year. The
Grantor will perform and comply in all material respects with all its
obligations under the 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 Agent to withdraw amounts so deposited and deposit the same into an
operating account of the Grantor with the Agent. From and after the occurrence
and during the continuance of a Default or an Event of Default, the Agent may
hold all such amounts as Collateral, for the benefit of the Banks, or apply the
same to the Obligations as provided in Section 17.
Section 8. FURTHER ASSURANCES; ATTORNEY-IN-FACT.
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 Agent may reasonably
request, in order to perfect and protect the Security Interest granted or
purported to be granted hereby or to enable the Agent 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
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<PAGE>
time to time at the request of the Agent: (i) mark, or permit the Agent to mark,
conspicuously its books, records, and accounts showing or dealing with the
Collateral, with a legend, in form and substance satisfactory to the Agent,
indicating that each such item of Collateral is subject to the Security Interest
granted hereby; (ii) deliver and pledge to the Agent 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
Agent; (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 Agent 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 Agent may request, in order
to perfect, preserve, and enhance the Security Interest granted or purported to
be granted hereby; and (iv) obtain waivers, in form satisfactory to the Agent,
of any other party to any Contract consenting to the Agent's interest therein.
8(b) The Grantor hereby authorizes the Agent 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 Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Agent may reasonably
request, all in reasonable detail and in form and substance reasonably
satisfactory to the Agent.
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 Agent, any Bank or its representatives to
examine or inspect any Collateral, any evidence of Collateral and the Grantor's
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books and records concerning the Collateral, wherever located. The Grantor will
from time to time when requested by the Agent or any Bank furnish to the Agent a
report on its Accounts, Contracts and General Intangibles, naming the Account
Debtors or other obligors thereon, the amount due and the aging thereof. The
Agent or its designee is authorized to contact Account Debtors 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
Agent 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 AGENT. If the Grantor at any time
fails to perform or observe any of the foregoing agreements, the Agent shall
have (and the Grantor hereby grants to the Agent) 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 Agent's option, in the Agent's
name) and to take any and all other actions which the Agent 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 Agent on demand the amount of all monies expended and all costs and
expenses (including reasonable attorneys' fees and legal expenses) incurred by
the Agent in connection with or as a result of the performance or observance of
such agreements or the taking of such action by the Agent, 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 AGENT'S DUTIES. The powers conferred on the
Agent hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. The Agent 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 Agent to comply with any such
request shall not itself be deemed a failure to exercise reasonable care, and no
failure of the Agent 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 Agent
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 Agent accords its own
property of like kind. The Agent 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
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<PAGE>
the Agent 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 Agent 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 Agent's possession
if the Agent 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 Agent to comply with any such request shall not of itself be deemed a
failure to exercise reasonable care.
Section 15. DEFAULT. Each of the following occurrences shall
constitute an Event of Default under this Agreement: (a) the Grantor shall fail
to observe or perform any covenant or agreement applicable to the Grantor under
this Agreement; or (b) any representation or warranty made by the Grantor in
this Agreement or any schedule, exhibit, supplement or attachment hereto or in
any financial statements, or reports or certificates heretofore or at any time
hereafter submitted by or on behalf of the Grantor to the Agent shall prove to
have been false or materially misleading when made; or (c) any Event of Default
shall occur under the Credit Agreement.
Section 16. REMEDIES ON DEFAULT. Upon the occurrence of an
Event of Default and at any time thereafter:
16(a) The Agent may exercise and enforce any and all
rights and remedies available upon default to a secured party under the
Uniform Commercial Code.
16(b) The Agent 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
Agent to permit or enable the Agent to exercise the remedies with
respect to the Collateral, as the Agent may elect, and to use and
operate said properties for said purposes and for such length of time as
the Agent may deem necessary or appropriate for said purposes without
the payment of any compensation to Grantor therefor. The Agent may
require the Grantor to, and the Grantor hereby agrees that it will, at
its expense and upon request of the Agent forthwith, assemble all or
part of the Collateral as directed by the Agent and make it available to
the Agent at a place or places to be designated by the Agent.
16(c) Any sale of Collateral may be in one or more
parcels at public or private sale, at any of the Agent's offices or
elsewhere, for cash, on credit, or for future delivery, and upon such
other terms as the Agent may reasonably believe are commercially
reasonable. The Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given, and the Agent
may adjourn any public or private sale from time to time by announcement
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<PAGE>
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.
16(d) The Agent 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, exercise its remedies with respect to the
Collateral, and the Grantor's rights under all licenses and all
franchise agreements shall inure to the Agent's benefit until the
Obligations are paid in full.
16(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 22 hereof at least ten calendar days prior to the date of
intended disposition or other action, and the Agent 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.
16(f) The Agent 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.
16(g) The Grantor appoints the Agent 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 17. REMEDIES AS TO CERTAIN RIGHTS TO PAYMENT. Upon the
occurrence of an Event of Default and at any time thereafter the Agent may
notify any Account Debtor or other Person obligated on any Accounts or other
Collateral that the same have been assigned or transferred to the Agent and that
the same should be performed as requested by, or paid directly to, the Agent, as
the case may be. The Grantor shall join in giving such notice, if the Agent so
requests. The Agent may, in the Agent'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 Agent is hereby granted the right to take any action which the
Agent 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
10
<PAGE>
documents received in payment of or on account of the Collateral. If any
payments on any such 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 Agent and shall not be commingled with any funds or property of
the Grantor and shall be forthwith remitted to the Agent for application on the
Obligations.
Section 18. APPLICATION OF PROCEEDS. All cash proceeds received
by the Agent 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 Agent, be
held by the Agent as collateral for, or then or at any time thereafter be
applied in whole or in part against, all or any part of the Obligations
(including, without limitation, any expenses of the Agent payable pursuant to
Section 19 hereof). If the Agent shall apply such cash proceeds to the
Obligations, they shall be applied as follows:
FIRST, to the payment of all reasonable costs and
expenses incurred by the Agent in connection with such collection, sale
or disposition or otherwise in connection with this Security Agreement,
including all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by the
Agent hereunder on behalf of the Grantor and any other costs or expenses
incurred in connection with the exercise of any right or remedy
hereunder;
SECOND, to the payment of the Obligations consisting of
principal of, interest on and fees with respect to the Loans and the
Commitments, until such Obligations have been paid in full;
THIRD, to the payment in full of the other Obligations
until all of the Obligations have been paid in full;
FOURTH, to the Company, its successors or assigns or as
a court of competent jurisdiction may otherwise direct.
Section 19. COSTS AND EXPENSES; INDEMNITY. The Grantor will pay
or reimburse the Agent 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 Agent 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 Agent and the Banks 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 actions of the Agent or any Bank pursuant hereto, except claims, losses or
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<PAGE>
liabilities resulting from the gross negligence or willful misconduct of the
party seeking indemnification as determined by a final judgment of a court of
competent jurisdiction. Any liability of the Grantor to indemnify and hold the
Agent and the Banks 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 20. 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 Agent. 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 Agent. All
rights and remedies of the Agent shall be cumulative and may be exercised singly
in any order or sequence, or concurrently, at the Agent'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 Agent of its
remedies hereunder, absent this waiver.
Section 21. 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.
Notwithstanding any other provision hereof, the amount of the Obligations
secured hereunder is limited to the amount which may be so secured under
applicable federal and state laws relating to the insolvency of debtors without
this Agreement or the Security Interest being held to be avoidable or
unenforceable. The Grantor acknowledges and agrees that Obligations may be
created and continued in any amount, without affecting or impairing the
liability of the Grantor hereunder or the Security Interest. 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 Agent and the Banks 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 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 Agent 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, their
properties or estates, or any collateral, property, Liens or other rights or
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<PAGE>
remedies whatsoever. The Grantor agrees not to exercise any right of
contribution, recourse, subrogation or reimbursement available to the Grantor
against the Borrowers or any other Person or property, unless and until all
Obligations and all other debts, liabilities and obligations owed by the
Borrower 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 Agent and the Banks may rely conclusively on
the continuing warranty, hereby made, that the Grantor continues to be
benefitted by the Bank's extension of credit accommodations to the Borrower and
the neither the Agent nor any Bank shall have any duty to inquire into or
confirm the receipt of any such benefits, and this Agreement shall be effective
and enforceable by the Agent without regard to the receipt, nature or value of
any such benefits.
Section 22. 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 23. 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 Agent and the Banks have no
fiduciary relationship to the Grantor, the relationship being solely that of
debtor and creditor, and (c) no joint venture exists between the Grantor, the
Agent and the Banks.
Section 24. REPRESENTATIONS AND WARRANTIES. The Grantor hereby
represents and warrants to the Agent and the Banks that:
24(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.
24(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.
24(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
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enforcement of creditors' rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or at
law).
24(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.
24(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.
24(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 25. 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
Banks to extend credit accommodations to the Grantor, (b) be binding upon the
Grantor, its successors and assigns, and (c) inure to the benefit of the Banks
and the Agent, and be enforceable by the Agent, and their respective successors,
transferees, and assigns. Without limiting the generality of the foregoing
clause (c), the Banks or the Agent 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
14
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similarly transfer all or any portion of its rights under this Security
Agreement to such Persons.
Section 26. TERMINATION OF SECURITY INTEREST. Upon payment in
full of the Obligations, the expiration of all obligations of the Banks to
extend credit accommodations to the Grantor and termination of all Rate
Protection Agreements, the Security Interest granted hereby shall terminate.
Upon any such termination, the Agent will return to the Grantor such of the
Collateral then in the possession of the Agent 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 Agent. 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 27. 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 28. CONSENT TO JURISDICTION. AT THE OPTION OF THE AGENT,
THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT
SITTING IN HENNEPIN COUNTY; 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 AGENT AT ITS
OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE
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JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
SECTION 29. WAIVER OF NOTICE AND HEARING. THE GRANTOR HEREBY
WAIVES ALL RIGHTS TO A JUDICIAL HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE
AGENT 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 30. WAIVER OF JURY TRIAL. EACH OF THE GRANTOR, THE BANKS
AND THE AGENT, BY ITS EXECUTION AND DELIVERY OR ACCEPTANCE OF THIS AGREEMENT,
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 31. 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 32. GENERAL. All representations and warranties
contained in this Agreement or in any other agreement between the Grantor and
the Agent 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 Agent. Captions in this
Agreement are for reference and convenience only and shall not affect the
interpretation or meaning of any provision of this Agreement.
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.
PILGRIM AMERICA SECURITIES,
INC.
By ________________________
Title _______________________
Address for Grantor:
Two Renaissance Square, Ste. 1200
40 North Central Avenue
Phoenix, AZ 85004-4424
Grantor's Tax ID #
Address for the Agent:
U.S. Bank National Association
601 Second Avenue South
Minneapolis, MN 55402-4302
Fax (612)
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SCHEDULE I
to
Security Agreement
Locations of Equipment and Inventory
as of Date of Security Agreement
[Locations to be provided, including county. Locations not owned by Grantor
should be specified with name of landlord or warehouse.]
<PAGE>
SCHEDULE II
to
Security Agreement
Trade Names and Trade Styles
[To be provided.]
<PAGE>
EXHIBIT E TO
CREDIT AGREEMENT
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of July 31, 1998, is made and
given by PILGRIM AMERICA INVESTMENTS, INC., a Delaware corporation (the
"Grantor"), to U.S. BANK NATIONAL ASSOCIATION, a national banking association,
as "Agent" under, and for the benefit of the "Banks" party to, the "Credit
Agreement" (as those terms are defined below).
RECITALS
A. Pilgrim America Group, Inc. ("PAG"), Pilgrim America Capital
Corporation ("PACC") (together the "Borrowers"), the lenders party thereto, (the
"Banks") and U.S. Bank National Association, as agent for the Banks (the
"Agent") have entered into a Third Amended and Restated Credit Agreement dated
as of July 31, 1998 (as the same may hereafter be amended, supplemented,
extended, restated, or otherwise modified from time to time, the "Credit
Agreement") pursuant to which the Banks have agreed to extend to the Borrowers
certain credit accommodations.
B. It is a condition precedent to the obligation of the Banks to
extend credit accommodations 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 a Borrower, and
the Borrower will use part of the loans made to it 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 Borrower 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 Banks to enter into the Credit Agreement and to extend credit
accommodations to the Borrowers thereunder, the Grantor hereby agrees with the
Agent, for the benefit of the Banks and the Agent, as follows:
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Section 1. DEFINED TERMS.
1(a) As used in this Agreement, terms capitalized and used
herein without being defined shall 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.
"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 Agent 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.
"EVENT OF DEFAULt" shall have the meaning given to such term in
Section 15 hereof.
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"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 Banks and Agent of every kind,
nature or description under the Credit Agreement, including without
limitation 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 and any letter of credit
reimbursement obligations and fees, (b) all liabilities of the Grantor
under this Agreement, (c) any and all obligations of either Borrower to
any Bank under Rate Protection Agreements, and (d) any and all other
liabilities and obligations of the Borrowers or the Grantor to the Banks
and the Agent of every kind, nature and description, whether direct or
indirect or hereafter acquired by the Banks or the Agent from any
Person, whether absolute or contingent, regardless of how such
liabilities arise or by what agreement or instrument they may be
evidenced, 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.
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
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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, subject to the limitations
set forth in Section 21 below, the Grantor hereby grants to the Agent, for the
benefit of the Banks, 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, rental agreements and other Chattel
Paper and insurance proceeds; (ii) all books, correspondence, credit
files, records, invoices, bills of lading, 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
Accounts, General Intangibles, 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 Agent 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 Banks and the Agent
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shall have no obligation or liability under Accounts, Contracts, General
Intangibles and other items included in the Collateral by reason of this
Agreement, nor shall the Banks or the Agent 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 Agent) 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 those to be released in connection with the execution
and delivery hereof and those as may have been filed (a) in favor of the Agent
relating to this Agreement, or (b) to perfect Liens permitted by the Credit
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 Agent 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 Agent,
(ii) the Agent 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 Agent'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 of the Grantor and the office where it keeps its books and
records concerning the Collateral are located at its address set forth on the
signature page hereof. All items of Collateral and Inventory existing on the
date of this Agreement are located at the places specified on Schedule I hereto.
The Grantor will immediately notify the Agent 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 Agent provide the Agent 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
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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 Agent has been
given at least 30 days prior written notice thereof and the Grantor has executed
and delivered to the Agent 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 Agent in writing, each Account, Contract and General
Intangible constituting or evidencing 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 such obligation. Without the Agent'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 per Account Debtor or other obligor in any calendar year. The
Grantor will perform and comply in all material respects with all its
obligations under the 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 Agent to withdraw amounts so deposited and deposit the same into an
operating account of the Grantor with the Agent. From and after the occurrence
and during the continuance of a Default or an Event of Default, the Agent may
hold all such amounts as Collateral, for the benefit of the Banks, or apply the
same to the Obligations as provided in Section 18.
Section 8. FURTHER ASSURANCES; ATTORNEY-IN-FACT.
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 Agent may reasonably
request, in order to perfect and protect the Security Interest granted or
purported to be granted hereby or to enable the Agent 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 Agent: (i) mark, or permit the Agent to mark,
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conspicuously its books, records, and accounts showing or dealing with the
Collateral, with a legend, in form and substance satisfactory to the Agent,
indicating that each such item of Collateral is subject to the Security Interest
granted hereby; (ii) deliver and pledge to the Agent 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
Agent; (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 Agent 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 Agent may request, in order
to perfect, preserve, and enhance the Security Interest granted or purported to
be granted hereby; and (iv) obtain waivers, in form satisfactory to the Agent,
of any other party to any Contract consenting to the Agent's interest therein.
8(b) The Grantor hereby authorizes the Agent 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 Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Agent may reasonably
request, all in reasonable detail and in form and substance reasonably
satisfactory to the Agent.
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 Agent, any Bank 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
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from time to time when requested by the Agent or any Bank furnish to the Agent a
report on its Accounts, Contracts and General Intangibles, naming the Account
Debtors or other obligors thereon, the amount due and the aging thereof. The
Agent or its designee is authorized to contact Account Debtors 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
Agent 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 AGENT. If the Grantor at any time
fails to perform or observe any of the foregoing agreements, the Agent shall
have (and the Grantor hereby grants to the Agent) 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 Agent's option, in the Agent's
name) and to take any and all other actions which the Agent 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 Agent on demand the amount of all monies expended and all costs and
expenses (including reasonable attorneys' fees and legal expenses) incurred by
the Agent in connection with or as a result of the performance or observance of
such agreements or the taking of such action by the Agent, 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 AGENT'S DUTIES. The powers conferred on the
Agent hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. The Agent 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 Agent to comply with any such
request shall not itself be deemed a failure to exercise reasonable care, and no
failure of the Agent 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 Agent
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 Agent accords its own
property of like kind. The Agent 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 Agent has or is deemed to have knowledge of such matters, or as to the
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taking of any necessary steps to preserve rights against any Persons or any
other rights pertaining to any Collateral. The Agent 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 Agent's possession
if the Agent 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 Agent to comply with any such request shall not of itself be deemed a
failure to exercise reasonable care.
Section 15. DEFAULT. Each of the following occurrences shall
constitute an Event of Default under this Agreement: (a) the Grantor shall fail
to observe or perform any covenant or agreement applicable to the Grantor under
this Agreement; or (b) any representation or warranty made by the Grantor in
this Agreement or any schedule, exhibit, supplement or attachment hereto or in
any financial statements, or reports or certificates heretofore or at any time
hereafter submitted by or on behalf of the Grantor to the Agent shall prove to
have been false or materially misleading when made; or (c) any Event of Default
shall occur under the Credit Agreement.
Section 16. REMEDIES ON DEFAULT. Upon the occurrence of an Event
of Default and at any time thereafter:
16(a) The Agent may exercise and enforce any and all
rights and remedies available upon default to a secured party under the
Uniform Commercial Code.
16(b) The Agent 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
Agent to permit or enable the Agent to exercise the remedies with
respect to the Collateral, as the Agent may elect, and to use and
operate said properties for said purposes and for such length of time as
the Agent may deem necessary or appropriate for said purposes without
the payment of any compensation to Grantor therefor. The Agent may
require the Grantor to, and the Grantor hereby agrees that it will, at
its expense and upon request of the Agent forthwith, assemble all or
part of the Collateral as directed by the Agent and make it available to
the Agent at a place or places to be designated by the Agent.
16(c) Any sale of Collateral may be in one or more
parcels at public or private sale, at any of the Agent's offices or
elsewhere, for cash, on credit, or for future delivery, and upon such
other terms as the Agent may reasonably believe are commercially
reasonable. The Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given, and the Agent
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.
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16(d) The Agent 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, exercise its remedies with respect to the
Collateral, and the Grantor's rights under all licenses and all
franchise agreements shall inure to the Agent's benefit until the
Obligations are paid in full.
16(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 22 hereof at least ten calendar days prior to the date of
intended disposition or other action, and the Agent 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.
16(f) The Agent 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.
16(g) The Grantor appoints the Agent 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 17. REMEDIES AS TO CERTAIN RIGHTS TO PAYMENT. Upon the
occurrence of an Event of Default and at any time thereafter the Agent may
notify any Account Debtor or other Person obligated on any Accounts or other
Collateral that the same have been assigned or transferred to the Agent and that
the same should be performed as requested by, or paid directly to, the Agent, as
the case may be. The Grantor shall join in giving such notice, if the Agent so
requests. The Agent may, in the Agent'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 Agent is hereby granted the right to take any action which the
Agent 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 such Collateral are received by the Grantor after an Event of
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Default has occurred, such payments shall be held in trust by the Grantor as the
property of the Agent and shall not be commingled with any funds or property of
the Grantor and shall be forthwith remitted to the Agent for application on the
Obligations.
Section 18. APPLICATION OF PROCEEDS. All cash proceeds received
by the Agent 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 Agent, be
held by the Agent as collateral for, or then or at any time thereafter be
applied in whole or in part against, all or any part of the Obligations
(including, without limitation, any expenses of the Agent payable pursuant to
Section 19 hereof). If the Agent shall apply such cash proceeds to the
Obligations, they shall be applied as follows:
FIRST, to the payment of all reasonable costs and
expenses incurred by the Agent in connection with such collection, sale
or disposition or otherwise in connection with this Security Agreement,
including all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by the
Agent hereunder on behalf of the Grantor and any other costs or expenses
incurred in connection with the exercise of any right or remedy
hereunder;
SECOND, to the payment of the Obligations consisting of
principal of, interest on and fees with respect to the Loans and the
Commitments, until such Obligations have been paid in full;
THIRD, to the payment in full of the other Obligations
until all of the Obligations have been paid in full;
FOURTH, to the Grantor, its successors or assigns or as
a court of competent jurisdiction may otherwise direct.
Section 19. COSTS AND EXPENSES; INDEMNITY. The Grantor will pay
or reimburse the Agent 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 Agent 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 Agent and the Banks 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 actions of the Agent or any Bank pursuant hereto, except claims, losses or
liabilities resulting from the gross negligence or willful misconduct of the
party seeking indemnification as determined by a final judgment of a court of
competent jurisdiction. Any liability of the Grantor to indemnify and hold the
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Agent and the Banks 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 20. 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 Agent. 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 Agent. All
rights and remedies of the Agent shall be cumulative and may be exercised singly
in any order or sequence, or concurrently, at the Agent'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 Agent of its
remedies hereunder, absent this waiver.
Section 21. 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.
Notwithstanding any other provision hereof, the amount of the Obligations
secured hereunder is limited to the amount which may be so secured under
applicable federal and state laws relating to the insolvency of debtors without
this Agreement or the Security Interest being held to be avoidable or
unenforceable. The Grantor acknowledges and agrees that Obligations may be
created and continued in any amount, without affecting or impairing the
liability of the Grantor hereunder or the Security Interest. 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 Agent and the Banks 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 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 Agent 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, 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
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against the Borrowers or any other Person or property, unless and until all
Obligations and all other debts, liabilities and obligations owed by the
Borrower 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 Agent and the Banks may rely conclusively on
the continuing warranty, hereby made, that the Grantor continues to be
benefitted by the Bank's extension of credit accommodations to the Borrower and
the neither the Agent nor any Bank shall have any duty to inquire into or
confirm the receipt of any such benefits, and this Agreement shall be effective
and enforceable by the Agent without regard to the receipt, nature or value of
any such benefits.
Section 22. 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 23. 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 Agent and the Banks have no
fiduciary relationship to the Grantor, the relationship being solely that of
debtor and creditor, and (c) no joint venture exists between the Grantor, the
Agent and the Banks.
Section 24. REPRESENTATIONS AND WARRANTIES. The Grantor hereby
represents and warrants to the Agent and the Banks that:
24(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.
24(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.
24(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
13
<PAGE>
principles (whether enforcement is sought by proceedings in equity or at
law).
24(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.
24(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.
24(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 25. 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
Banks to extend credit accommodations to the Grantor, (b) be binding upon the
Grantor, its successors and assigns, and (c) inure to the benefit of the Banks
and the Agent, and be enforceable by the Agent, and their respective successors,
transferees, and assigns. Without limiting the generality of the foregoing
clause (c), the Banks or the Agent may assign or otherwise transfer all or any
portion of its rights and obligations under the Credit Agreement to any other
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<PAGE>
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 26. TERMINATION OF SECURITY INTEREST. Upon payment in
full of the Obligations, the expiration of all obligations of the Banks to
extend credit accommodations to the Grantor and termination of all Rate
Protection Agreements, the Security Interest granted hereby shall terminate.
Upon any such termination, the Agent will return to the Grantor such of the
Collateral then in the possession of the Agent 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 Agent. 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 27. 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 28. CONSENT TO JURISDICTION. AT THE OPTION OF THE AGENT,
THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT
SITTING IN HENNEPIN COUNTY; 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 AGENT AT ITS
OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE
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<PAGE>
JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
SECTION 29. WAIVER OF NOTICE AND HEARING. THE GRANTOR HEREBY
WAIVES ALL RIGHTS TO A JUDICIAL HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE
AGENT 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 30. WAIVER OF JURY TRIAL. EACH OF THE GRANTOR, THE BANKS
AND THE AGENT, BY ITS EXECUTION AND DELIVERY OR ACCEPTANCE OF THIS AGREEMENT,
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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<PAGE>
Section 31. 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 32. GENERAL. All representations and warranties
contained in this Agreement or in any other agreement between the Grantor and
the Agent 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 Agent. Captions in this
Agreement are for reference and convenience only and shall not affect the
interpretation or meaning of any provision of this Agreement.
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.
PILGRIM AMERICA INVESTMENTS,
INC.
By
-------------------------------
James R. Reis
Vice Chairman
Address for Grantor:
Two Renaissance Square, Ste. 1200
40 North Central Avenue
Phoenix, AZ 85004-4424
Grantor's Tax ID #:
Address for the Agent:
U.S. Bank National Association
601 Second Avenue South
Minneapolis, MN 55402-4302
Fax (612)
17
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SCHEDULE I
to
Security Agreement
Locations of Equipment and Inventory
as of Date of Security Agreement
[Locations to be provided, including county. Locations not owned by Grantor
should be specified with name of landlord or warehouse.]
<PAGE>
SCHEDULE II
to
Security Agreement
Trade Names and Trade Styles
[To be provided.]
<PAGE>
EXHIBIT F TO
CREDIT AGREEMENT
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of July 31, 1998, is made and
given by PILGRIM AMERICA CAPITAL CORPORATION, a Delaware corporation (the
"Pledgor"), to U.S. BANK NATIONAL ASSOCIATION, a national banking association,
as "Agent" under, and for the benefit of the "Banks" party to the "Credit
Agreement" (as that term is defined below).
RECITALS
A. The Pledgor, Pilgrim America Group, Inc. ("PAG") (together,
the "Borrowers"), the lenders party thereto (the "Banks") and U.S. Bank National
Association, as agent for the Banks (the "Agent"), have entered into a Third
Amended and Restated Credit Agreement dated as of July 31, 1998 (as the same may
hereafter be amended, restated, or otherwise modified from time to time, the
"Credit Agreement") pursuant to which the Banks have agreed to extend to the
Pledgor certain credit accommodations.
B. The Pledgor is the owner of the shares (the "Pledged
Shares") of stock described in Part I of Schedule I hereto issued by the
corporation or corporations named therein.
C. It is a condition precedent to the obligation of the Banks
to extend credit accommodations pursuant to the terms of the Credit Agreement
that this Agreement be executed and delivered by the Pledgor.
D. The Pledgor finds it advantageous, desirable and in the
best interests of the Pledgor to comply with the requirement that this Agreement
be executed and delivered to the Agent.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Banks to enter into the Credit Agreement and to extend credit
accommodations to the Borrowers thereunder, the Pledgor hereby agrees with the
Agent, for the benefit of the Banks and the Agent, as follows:
Section 1. DEFINED TERMS.
1(a) As used in this Agreement, terms capitalized and used
without being defined shall have the meanings given them in the Credit Agreement
and the following terms shall have the meanings indicated:
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"COLLATERAL" shall have the meaning given to such term in
Section 2.
"EVENT OF DEFAULT" shall have the meaning given to such term
in Section 11.
"OBLIGATIONS" shall mean (a) all indebtedness, liabilities and
obligations of the Borrowers to the Banks and Agent of every kind, nature or
description under the Credit Agreement, including without limitation 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
and any letter of credit reimbursement obligations and fees, (b) all liabilities
of the Pledgor under this Agreement, (c) any and all obligations of either
Borrower to any Bank under Rate Protection Agreements, and (d) any and all other
liabilities and obligations of the Borrowers to the Banks and the Agent of every
kind, nature and description, whether direct or indirect or hereafter acquired
by the Banks or the Agent from any Person, whether absolute or contingent,
regardless of how such liabilities arise or by what agreement or instrument they
may be evidenced, and in all of the foregoing cases whether due or to become
due, and whether now existing or hereafter arising or incurred.
"PLEDGED SHARES" shall have the meaning given to such term in
Recital B above.
"SECURITY INTEREST" shall have the meaning given to such term
in Section 2.
1(b) TERMS DEFINED IN UNIFORM COMMERCIAL CODE. All other terms
used in this Agreement that are not specifically defined herein or the
definitions of which are not incorporated herein by reference shall have the
meaning assigned to such terms in the Uniform Commercial Code in effect in the
State of Minnesota as of the date first above written to the extent such other
terms are defined therein.
1(c) SINGULAR/PLURAL, ETC. 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 Pledge
Agreement unless otherwise provided.
Section 2. PLEDGE. As security for the payment and performance
of all of the Obligations, the Pledgor hereby pledges to the Agent and grants to
the Agent a security interest, for the benefit of the Banks, (the "Security
Interest"), in the following (the "Collateral"):
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<PAGE>
2(a) The Pledged Shares and the certificates
representing the Pledged Shares, and all dividends, cash, instruments
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Shares.
2(b) All additional shares of stock of any issuer of
the Pledged Shares or other direct Subsidiary of the Pledgor from time
to time acquired by the Pledgor in any manner, and the certificates
representing such additional shares, and all dividends, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of
such shares.
2(c) All proceeds of any and all of the foregoing
(including proceeds that constitute property of types described above).
Section 3. DELIVERY OF COLLATERAL. All certificates and
instruments representing or evidencing the Pledged Shares shall be delivered to
the Agent contemporaneously with the execution of this Agreement. All
certificates and instruments representing or evidencing Collateral received by
the Pledgor after the execution of this Agreement shall be delivered to the
Agent promptly upon the Pledgor's receipt thereof. All such certificates and
instruments shall be held by or on behalf of the Agent pursuant hereto and shall
be in suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Agent. The Agent shall have the right at any time,
whether before or after an Event of Default, to cause any or all of the
Collateral to be transferred of record into the name of the Agent or its nominee
(but subject to the rights of the Pledgor under Section 6) and to exchange
certificates representing or evidencing Collateral for certificates of smaller
or larger denominations. Notwithstanding any of the foregoing, as to any
Collateral consisting of book-entry or uncertificated securities or securities
which are held by a third Person, the Pledgor shall deliver to the Agent
evidence satisfactory to the Agent that such Collateral has been registered in
the name of, or as pledged to, the Agent. Such evidence shall include the
acknowledgment of the issuer or Person holding such Collateral that such issuer
or Person holds such Collateral as agent for the Agent and that such Collateral
is identified on the books of such issuer or third Person as belonging to or
pledged to the Agent.
Section 4. CERTAIN WARRANTIES AND COVENANTS. The Pledgor makes
the following warranties and covenants:
4(a) The Pledgor has title to the Pledged Shares and
will have title to each other item of Collateral hereafter acquired,
free of all Liens except the Security Interest.
3
<PAGE>
4(b) The Pledgor has full power and authority to
execute this Pledge Agreement, to perform the Pledgor's obligations
hereunder and to subject the Collateral to the Security Interest
created hereby.
4(c) No financing statement covering all or any part
of the Collateral is on file in any public office (except for any
financing statements filed by the Agent.
4(d) The Pledged Shares have been duly authorized and
validly issued by the issuer thereof and are fully paid and
non-assessable. The certificates representing the Pledged Shares are
genuine. The Pledged Shares are not subject to any offset or similar
right or claim of the issuers thereof.
4(e) The Pledged Shares constitute the percentage of
the issued and outstanding shares of stock of the respective issuers
thereof indicated on Schedule I (or, if no such percentage is so
indicated, one hundred percent).
Section 5. FURTHER ASSURANCES. The Pledgor agrees that at any
time and from time to time, at the expense of the Pledgor, the Pledgor will
promptly execute and deliver all further instruments and documents, and take all
further action that may be necessary or that the Agent may reasonably request,
in order to perfect and protect the Security Interest or to enable the Agent to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral (but any failure to request or assure that the Pledgor execute and
deliver such instruments 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).
Section 6. VOTING RIGHTS; DIVIDENDS; ETC.
6(a) Subject to paragraph (d) of this Section 6, the
Pledgor shall be entitled to exercise or refrain from exercising any
and all voting and other consensual rights pertaining to the Pledged
Shares or any other stock that becomes part of the Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Agreement or the Credit Agreement; provided, however, that the Pledgor
shall not exercise or refrain from exercising any such right if such
action could reasonably be expected to have a material adverse effect
on the value of the Collateral or any material part thereof.
6(b) Subject to paragraph (e) of this Section 6, the
Pledgor shall be entitled to receive, retain, and use in any manner not
prohibited by the Credit Agreement any and all interest and dividends
paid in respect of the Collateral; PROVIDED, HOWEVER, that any and all
4
<PAGE>
(i) dividends paid or payable other than in cash in respect
of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any
Collateral,
(ii) dividends and other distributions paid or payable in cash
in respect of any Collateral in connection with a partial or
total liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in-surplus, and
(iii) cash paid, payable or otherwise distributed in respect
of principal of, or in redemption of, or in exchange for, any
Collateral,
shall be, and shall be forthwith delivered to the Agent to hold as,
Collateral and shall, if received by the Pledgor, be received in trust
for the benefit of the Agent, be segregated from the other property or
funds of the Pledgor, and be forthwith delivered to the Agent as
Collateral in the same form as so received (with any necessary
indorsement or assignment). The Pledgor shall, upon request by the
Agent, promptly execute all such documents and do all such acts as may
be necessary or desirable to give effect to the provisions of this
Section 6 (b).
6(c) The Agent shall execute and deliver (or cause to
be executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and other rights that it is
entitled to exercise pursuant to Section 6 (a) hereof and to receive
the dividends and interest that it is authorized to receive and retain
pursuant to Section 6 (b) hereof.
6(d) Upon the occurrence and during the continuance
of any Event of Default, the Agent shall have the right in its sole
discretion, and the Pledgor shall execute and deliver all such proxies
and other instruments as may be necessary or appropriate to give effect
to such right, to terminate all rights of the Pledgor to exercise or
refrain from exercising the voting and other consensual rights that it
would otherwise be entitled to exercise pursuant to Section 6 (a)
hereof, and all such rights shall thereupon become vested in the Agent
who shall thereupon have the sole right to exercise or refrain from
exercising such voting and other consensual rights; provided, however,
that the Agent shall not be deemed to possess or have control over any
voting rights with respect to any Collateral unless and until the Agent
has given written notice to the Pledgor that any further exercise of
such voting rights by the Pledgor is prohibited and that the Agent
and/or its assigns will henceforth exercise such voting rights; and
provided, further, that neither the registration of any item of
Collateral in the Agent's name nor the exercise of any voting rights
5
<PAGE>
with respect thereto shall be deemed to constitute a retention by the
Agent of any such Collateral in satisfaction of the Obligations or any
part thereof.
6(e) Upon the occurrence and during the continuance
of any Event of Default:
(i) all rights of the Pledgor to receive the dividends and
interest that it would otherwise be authorized to receive and
retain pursuant to Section 6(b) hereof shall cease, and all
such rights shall thereupon become vested in the Bank who
shall thereupon have the sole right to receive and hold such
dividends as Collateral, and
(ii) all payments of interest and dividends that are received
by the Pledgor contrary to the provisions of paragraph (i) of
this Section 6 (e) shall be received in trust for the benefit
of the Banks and the Agent, shall be segregated from other
funds of the Pledgor and shall be forthwith paid over to the
Agent as Collateral in the same form as so received (with any
necessary indorsement).
Section 7. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES.
7(a) Except as may be permitted by the Credit
Agreement, the Pledgor agrees that it will not (i) sell, assign (by
operation of law or otherwise) or otherwise dispose of, or grant any
option with respect to, any of the Collateral, or (ii) create or permit
to exist any Lien, upon or with respect to any of the Collateral.
7(b) The Pledgor agrees that it will (i) cause each
issuer of the Pledged Shares that it controls not to issue any stock or
other securities in addition to or in substitution for the Pledged
Shares issued by such issuer, except to the Pledgor, and (ii) pledge
hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any and all additional shares of stock or other securities of
each issuer of the Pledged Shares.
Section 8. AGENT APPOINTED ATTORNEY-IN-FACt. The Pledgor
hereby appoints the Agent the Pledgor's attorney-in-fact, with full authority in
the place and stead of such Pledgor and in the name of such Pledgor or
otherwise, from time to time in the Agent's good-faith discretion, to take any
action and to execute any instrument that the Agent may reasonably believe
necessary or advisable to accomplish the purposes of this Agreement (subject to
the rights of the Pledgor under Section 6 hereof), in a manner consistent with
the terms hereof, including, without limitation, to receive, indorse and collect
all instruments made payable to the Pledgor representing any dividend or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
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<PAGE>
Section 9. AGENT MAY PERFORM. If the Pledgor fails to perform
any agreement contained herein, the Agent may itself perform, or cause
performance of, such agreement, and the reasonable expenses of the Agent
incurred in connection therewith shall be payable by the Pledgor under Section
14 hereof.
Section 10. THE AGENT'S DUTIES. The powers conferred on the
Agent hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. The Agent shall be
deemed to have exercised reasonable care in the safekeeping of any Collateral in
its possession if such Collateral is accorded treatment substantially equal to
the safekeeping which the Agent accords its own property of like kind. Except
for the safekeeping of any Collateral in its possession and the accounting for
monies and for other properties actually received by it hereunder, the Agent
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 Agent 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 Agent will take action in the nature of exchanges, conversions,
redemption, tenders and the like requested in writing by the Pledgor with
respect to any of the Collateral in the Agent's possession if the Agent 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 Agent to comply
with any such request shall not of itself be deemed a failure to exercise
reasonable care.
Section 11. DEFAULT. Each of the following occurrences shall
constitute an Event of Default under this Agreement: (a) the Pledgor shall fail
to observe or perform any covenant or agreement applicable to the Pledgor under
this Agreement within fifteen (15) days after the earlier to occur of (i) the
date the Pledgor gives notice of such failure to the Agent, or (ii) the date the
Agent gives notice of such failure to the Pledgor; or (b) any representation or
warranty made by the Pledgor in this Agreement or in any financial statements,
reports or certificates heretofore or at any time hereafter submitted by or on
behalf of the Pledgor to the Agent shall prove to have been false or materially
misleading when made; or (c) any Event of Default shall occur under the Credit
Agreement (beyond the applicable cure period specified therein).
Section 12. REMEDIES UPON DEFAULT. If any Event of Default
shall have occurred and be continuing:
12(a) The Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the Uniform Commercial Code of the State
of Minnesota (the "Code") in effect at that time (whether or not the
Code then applies to the affected Collateral), and may, without notice
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<PAGE>
except as specified below, sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any exchange,
broker's board or at any of the Agent's offices or elsewhere, for cash,
on credit or for future delivery, and upon such other terms as the
Agent may reasonably believe are commercially reasonable. The Pledgor
agrees that, to the extent notice of sale shall be required by law, at
least ten days prior notice to the Pledgor of the time and place of any
public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. The Agent may adjourn any public or private sale
from time to time by announcement 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. The Pledgor 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
Agent of its remedies hereunder, absent this waiver.
12(b) The Agent may notify any Person obligated on
any of the Collateral that the same has been assigned or transferred to
the Agent and that the same should be performed as requested by, or
paid directly to, the Agent, as the case may be. The Pledgor shall join
in giving such notice, if the Agent so requests. The Agent may, in the
Agent's name or in the Pledgor'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 Person.
12(c) Any cash held by the Agent as Collateral and
all cash proceeds received by the Agent 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 Agent, be held by the Agent as
collateral for, or then or at any time thereafter be applied in whole
or in part by the Agent against, all or any part of the Obligations
(including any expenses of the Agent payable pursuant to Section 15
hereof). If the Agent shall apply such cash proceeds to the
Obligations, they shall be applied as follows:
FIRST, to the payment of all reasonable costs and
expenses incurred by the Agent in connection with such collection, sale
or disposition or otherwise in connection with this Pledge Agreement,
including all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by the
Agent hereunder on behalf of the Pledgor and any other costs or
expenses incurred in connection with the exercise of any right or
remedy hereunder;
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SECOND, to the payment of the Obligations consisting
of principal of, interest on and fees with respect to the Loans and the
Commitments, until such Obligations have been paid in full;
THIRD, to the payment in full of the other Obligations
until all of the Obligations have been paid in full;
FOURTH, to the Pledgor, its successors or assigns or
as a court of competent jurisdiction may otherwise direct.
Section 13. REGISTRATION RIGHTS. If the Agent shall determine
to exercise its right to sell all or any of the Collateral pursuant to Section
12 hereof, the Pledgor agrees that, upon request of the Agent, the Pledgor will,
at its own expense:
13(a) execute and deliver, and cause the issuer(s) of
the Pledged Shares to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts and things,
as may be necessary or, in the opinion of the Agent, advisable to
register such Collateral under the provisions of the Securities Act,
and to cause the registration statement relating thereto to become
effective and to remain effective for such period as prospectuses are
required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectus which, in the opinion
of the Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
SEC applicable thereto;
13(b) use its best efforts to qualify the Collateral
under any applicable state securities or "Blue Sky" laws and to obtain
all necessary governmental approvals for the sale of the Collateral, as
requested by the Bank;
13(c) cause the issuer(s) of the Pledged Shares to
make available to its security holders, as soon as practicable, an
earnings statement that will satisfy the provisions of Section 11(a) of
the Securities Act; and
13(d) do or cause to be done all such other acts and
things as may be necessary to make such sale of the Collateral or any
part thereof valid and binding and in compliance with applicable law.
Section 14. WAIVER OF CERTAIN CLAIMS. The Pledgor acknowledges
that because of present or future circumstances, a question may arise under the
Securities Act of 1933, as from time to time amended (the "Securities Act"),
with respect to any disposition of the Collateral permitted hereunder. The
Pledgor understands that compliance with the Securities Act may very strictly
limit the course of conduct of the Agent if the Agent were to attempt to dispose
of all or any portion of the Collateral and may also limit the extent to which
or the manner in which any subsequent transferee of the Collateral or any
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portion thereof may dispose of the same. There may be other legal restrictions
or limitations affecting the Agent in any attempt to dispose of all or any
portion of the Collateral under the applicable Blue Sky or other securities laws
or similar laws analogous in purpose or effect. The Agent may be compelled to
resort to one or more private sales to a restricted group of purchasers who will
be obliged to agree, among other things, to acquire such Collateral for their
own account for investment only and not to engage in a distribution or resale
thereof. The Pledgor agrees that neither the Agent nor any Bank shall incur any
liability, and any liability of the Pledgor for any deficiency shall not be
impaired, as a result of the sale of the Collateral or any portion thereof at
any such private sale in a manner that in all other respects is commercially
reasonable (within the meaning of Section 9-504(3) of the Uniform Commercial
Code). The Pledgor hereby waives any claims against the Agent arising by reason
of the fact that the price at which the Collateral may have been sold at such
sale was less than the price that might have been obtained at a public sale or
was less than the aggregate amount of the Obligations, even if the Agent shall
accept the first offer received and does not offer any portion of the Collateral
to more than one possible purchaser. The Pledgor further agrees that the Agent
has no obligation to delay sale of any Collateral for the period of time
necessary to permit the issuer of such Collateral to qualify or register such
Collateral for public sale under the Securities Act, applicable Blue Sky laws
and other applicable state and federal securities laws, even if said issuer
would agree to do so. Without limiting the generality of the foregoing, the
provisions of this Section would apply if, for example, the Agent were to place
all or any portion of the Collateral for private placement by an investment
banking firm, or if such investment banking firm purchased all or any portion of
the Collateral for its own account, or if the Agent placed all or any portion of
the Collateral privately with a purchaser or purchasers.
Section 15. COSTS AND EXPENSES; INDEMNITY. The Pledgor will
pay or reimburse the Agent on demand for all reasonable 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 Agent 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 Pledgor shall indemnify and hold the Agent
and the Banks harmless from and against any and all claims, losses and
liabilities (including reasonable attorneys' fees) resulting from this Agreement
(including enforcement of this Agreement) or the actions of the Agent or any
Bank pursuant hereto, except claims, losses or liabilities resulting from the
gross negligence or willful misconduct of the party seeking indemnification. Any
liability of the Pledgor to indemnify and hold the Agent and the Banks harmless
pursuant to the preceding sentence shall be part of the Obligations secured by
the Security Interest. The obligations of the Pledgor under this Section shall
survive any termination of this Agreement.
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Section 16. WAIVERS AND AMENDMENTS; REMEDIES. Notwithstanding
any provisions to the contrary herein, any term of this Agreement may be amended
with the written consent of the Pledgor; provided that no amendment,
modification or waiver of any provision of this Agreement or consent to any
departure herefrom by the Pledgor or other party thereto shall in any event be
effective unless the same shall be in writing and signed by the Agent, and then
such amendment, modification, waiver or consent shall be effective only in the
specific instance and for the purpose for which given. The Security Interest can
be released, only explicitly in a writing signed by the Agent. 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 Agent. All rights and
remedies of the Agent shall be cumulative and may be exercised singly in any
order or sequence, or concurrently, at the Agent'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.
Section 17. 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 three days after the date of mailing if mailed.
Section 18. PLEDGOR ACKNOWLEDGEMENTS. The Pledgor hereby
acknowledges that (a) the Pledgor has been advised by counsel in the
negotiation, execution and delivery of this Agreement, (b) the Banks and the
Agent have no fiduciary relationship to the Pledgor, the relationship being
solely that of debtor and creditor, and (c) no joint venture exists between the
Pledgor, the Banks and the Agent.
Section 19. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER
CREDIT AGREEMENT. This Agreement shall create a continuing security interest in
the Collateral and shall (a) remain in full force and effect until the payment
in full of the Obligations and the expiration of the obligation, if any, of the
Banks to extend credit accommodations to the Borrowers, (b) be binding upon the
Pledgor, its successors and assigns, and (c) inure to the benefit of the Banks
and the Agent, and be enforceable by the Agent, and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(c), the Banks or the Agent may assign or otherwise transfer all or any portion
of its rights and obligations under the Credit Agreement to any other Person to
the extent and in the manner provided in the Credit Agreement, and may transfer
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all or any portion of its rights under this Pledge Agreement to such Persons in
connection therewith.
Section 20. TERMINATION OF SECURITY INTEREST. Upon payment in
full of the Obligations (except for contingent indemnity and other contingent
Obligations not yet due and payable) and the expiration of any obligation of the
Banks to extend credit accommodations to the Borrowers, the security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the Pledgor. Upon any such termination, the Agent will return to the Pledgor
such of the Collateral as shall not have been sold or otherwise applied pursuant
to the terms hereof and execute and deliver to the Pledgor such documents as the
Pledgor shall reasonably request to evidence such termination. Any reversion or
return of the Collateral upon termination of this Agreement and any instruments
of transfer or termination shall be at the expense of the Pledgor and shall be
without warranty by, or recourse on, the Agent. As used in this Section,
"Pledgor" includes any assigns of Pledgor, any Person holding a subordinate
security interest in any part of the Collateral or whoever else may be lawfully
entitled to any part of the Collateral.
SECTION 21. GOVERNING LAW AND CONSTRUCTION. THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF MINNESOTA, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED
STATES APPLICABLE TO NATIONAL BANKS; PROVIDED, HOWEVER, THAT NO EFFECT SHALL BE
GIVEN TO CONFLICT OF LAWS PRINCIPLES OF THE STATE OF MINNESOTA, 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 22. CONSENT TO JURISDICTION. AT THE OPTION OF THE
AGENT, THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE
COURT SITTING IN HENNEPIN COUNTY OR RAMSEY COUNTY, MINNESOTA; AND THE PLEDGOR
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 PLEDGOR COMMENCES
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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 AGENT 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 23. WAIVER OF JURY TRIAL. EACH OF THE PLEDGOR, THE
AGENT AND EACH BANK, BY ITS EXECUTION AND DELIVERY OR ACCEPTANCE OF THIS
AGREEMENT, 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 24. 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 25. GENERAL. All representations and warranties
contained in this Agreement or in any other agreement between the Pledgor and
the Agent shall survive the execution, delivery and performance of this
Agreement and the creation and payment of the Obligations. The Pledgor waives
notice of the acceptance of this Agreement by the Agent. 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 Pledgor has caused this Pledge
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
PLEDGOR:
PILGRIM AMERICA CAPITAL
CORPORATION
By
----------------------------
James R. Reis
Vice Chairman
Address for Pledgor:
Two Renaissance Square, Ste. 1200
40 North Central Avenue
Phoenix, AZ 85004-4424
Attention: James R. Reis
Telecopier: (602) 417-8301
Address for the Agent:
U.S. Bank National Association
U.S. Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Mark A. Bagley
Telecopier No.: (612) 973-0832
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SCHEDULE I
PLEDGED STOCK
Stock Issuer:
Percentage Ownership:
Class of Stock:
Certificate No(s).:
Par Value:
Number of Shares:
15
<PAGE>
EXHIBIT G TO
CREDIT AGREEMENT
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of July 31, 1998, is made and
given by PILGRIM AMERICA GROUP, INC., a Delaware corporation (the "Pledgor"), to
U.S. BANK NATIONAL ASSOCIATION, a national banking association, as "Agent"
under, and for the benefit of the "Banks" party to the "Credit Agreement" (as
that term is defined below).
RECITALS
A. The Pledgor, Pilgrim America Capital Corporation ("PACC")
(together, the "Borrowers"), the lenders party thereto (the "Banks") and U.S.
Bank National Association, as agent for the Banks (the "Agent"), have entered
into a Third Amended and Restated Credit Agreement dated as of July 31, 1998 (as
the same may hereafter be amended, restated, or otherwise modified from time to
time, the "Credit Agreement") pursuant to which the Banks have agreed to extend
to the Pledgor certain credit accommodations.
B. The Pledgor is the owner of the shares (the "Pledged
Shares") of stock described in Part I of Schedule I hereto issued by the
corporation or corporations named therein.
C. It is a condition precedent to the obligation of the Banks
to extend credit accommodations pursuant to the terms of the Credit Agreement
that this Agreement be executed and delivered by the Pledgor.
D. The Pledgor finds it advantageous, desirable and in the
best interests of the Pledgor to comply with the requirement that this Agreement
be executed and delivered to the Agent.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Banks to enter into the Credit Agreement and to extend credit
accommodations to the Borrowers thereunder, the Pledgor hereby agrees with the
Agent, for the benefit of the Banks and the Agent, as follows:
Section 1. DEFINED TERMS.
1(a) As used in this Agreement, terms capitalized and used
without being defined shall have the meanings given them in the Credit Agreement
and the following terms shall have the meanings indicated:
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"COLLATERAL" shall have the meaning given to such term in
Section 2.
"EVENT OF DEFAULT" shall have the meaning given to such term
in Section 11.
"OBLIGATIONS" shall mean (a) all indebtedness, liabilities and
obligations of the Borrowers to the Banks and Agent of every kind, nature or
description under the Credit Agreement, including without limitation 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
and any letter of credit reimbursement obligations and fees, (b) all liabilities
of the Pledgor under this Agreement, (c) any and all obligations of either
Borrower to any Bank under Rate Protection Agreements, and (d) any and all other
liabilities and obligations of the Borrowers to the Banks and the Agent of every
kind, nature and description, whether direct or indirect or hereafter acquired
by the Banks or the Agent from any Person, whether absolute or contingent,
regardless of how such liabilities arise or by what agreement or instrument they
may be evidenced, and in all of the foregoing cases whether due or to become
due, and whether now existing or hereafter arising or incurred.
"PLEDGED SHARES" shall have the meaning given to such term in
Recital B above.
"SECURITY INTEREST" shall have the meaning given to such term
in Section 2.
1(b) TERMS DEFINED IN UNIFORM COMMERCIAL CODE. All other terms
used in this Agreement that are not specifically defined herein or the
definitions of which are not incorporated herein by reference shall have the
meaning assigned to such terms in the Uniform Commercial Code in effect in the
State of Minnesota as of the date first above written to the extent such other
terms are defined therein.
1(c) SINGULAR/PLURAL, ETC. 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 Pledge
Agreement unless otherwise provided.
Section 2. PLEDGE. As security for the payment and performance
of all of the Obligations, the Pledgor hereby pledges to the Agent and grants to
the Agent a security interest, for the benefit of the Banks, (the "Security
Interest"), in the following (the "Collateral"):
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2(a) The Pledged Shares and the certificates
representing the Pledged Shares, and all dividends, cash, instruments
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Shares.
2(b) All additional shares of stock of any issuer of
the Pledged Shares or other direct Subsidiary of the Pledgor from time
to time acquired by the Pledgor in any manner, and the certificates
representing such additional shares, and all dividends, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of
such shares.
2(c) All proceeds of any and all of the foregoing
(including proceeds that constitute property of types described above).
Section 3. DELIVERY OF COLLATERAL. All certificates and
instruments representing or evidencing the Pledged Shares shall be delivered to
the Agent contemporaneously with the execution of this Agreement. All
certificates and instruments representing or evidencing Collateral received by
the Pledgor after the execution of this Agreement shall be delivered to the
Agent promptly upon the Pledgor's receipt thereof. All such certificates and
instruments shall be held by or on behalf of the Agent pursuant hereto and shall
be in suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Agent. The Agent shall have the right at any time,
whether before or after an Event of Default, to cause any or all of the
Collateral to be transferred of record into the name of the Agent or its nominee
(but subject to the rights of the Pledgor under Section 6) and to exchange
certificates representing or evidencing Collateral for certificates of smaller
or larger denominations. Notwithstanding any of the foregoing, as to any
Collateral consisting of book-entry or uncertificated securities or securities
which are held by a third Person, the Pledgor shall deliver to the Agent
evidence satisfactory to the Agent that such Collateral has been registered in
the name of, or as pledged to, the Agent. Such evidence shall include the
acknowledgment of the issuer or Person holding such Collateral that such issuer
or Person holds such Collateral as agent for the Agent and that such Collateral
is identified on the books of such issuer or third Person as belonging to or
pledged to the Agent.
Section 4. CERTAIN WARRANTIES AND COVENANTS. The Pledgor makes
the following warranties and covenants:
4(a) The Pledgor has title to the Pledged Shares and
will have title to each other item of Collateral hereafter acquired,
free of all Liens except the Security Interest.
3
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4(b) The Pledgor has full power and authority to
execute this Pledge Agreement, to perform the Pledgor's obligations
hereunder and to subject the Collateral to the Security Interest
created hereby.
4(c) No financing statement covering all or any part
of the Collateral is on file in any public office (except for any
financing statements filed by the Agent.
4(d) The Pledged Shares have been duly authorized and
validly issued by the issuer thereof and are fully paid and
non-assessable. The certificates representing the Pledged Shares are
genuine. The Pledged Shares are not subject to any offset or similar
right or claim of the issuers thereof.
4(e) The Pledged Shares constitute the percentage of
the issued and outstanding shares of stock of the respective issuers
thereof indicated on Schedule I (or, if no such percentage is so
indicated, one hundred percent).
Section 5. FURTHER ASSURANCES. The Pledgor agrees that at any
time and from time to time, at the expense of the Pledgor, the Pledgor will
promptly execute and deliver all further instruments and documents, and take all
further action that may be necessary or that the Agent may reasonably request,
in order to perfect and protect the Security Interest or to enable the Agent to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral (but any failure to request or assure that the Pledgor execute and
deliver such instruments 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).
Section 6. VOTING RIGHTS; DIVIDENDS; ETC.
6(a) Subject to paragraph (d) of this Section 6, the
Pledgor shall be entitled to exercise or refrain from exercising any
and all voting and other consensual rights pertaining to the Pledged
Shares or any other stock that becomes part of the Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Agreement or the Credit Agreement; provided, however, that the Pledgor
shall not exercise or refrain from exercising any such right if such
action could reasonably be expected to have a material adverse effect
on the value of the Collateral or any material part thereof.
6(b) Subject to paragraph (e) of this Section 6, the
Pledgor shall be entitled to receive, retain, and use in any manner not
prohibited by the Credit Agreement any and all interest and dividends
paid in respect of the Collateral; PROVIDED, HOWEVER, that any and all
4
<PAGE>
(i) dividends paid or payable other than in cash in respect
of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any
Collateral,
(ii) dividends and other distributions paid or payable in cash
in respect of any Collateral in connection with a partial or
total liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in-surplus, and
(iii) cash paid, payable or otherwise distributed in respect
of principal of, or in redemption of, or in exchange for, any
Collateral,
shall be, and shall be forthwith delivered to the Agent to hold as,
Collateral and shall, if received by the Pledgor, be received in trust
for the benefit of the Agent, be segregated from the other property or
funds of the Pledgor, and be forthwith delivered to the Agent as
Collateral in the same form as so received (with any necessary
indorsement or assignment). The Pledgor shall, upon request by the
Agent, promptly execute all such documents and do all such acts as may
be necessary or desirable to give effect to the provisions of this
Section 6 (b).
6(c) The Agent shall execute and deliver (or cause to
be executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and other rights that it is
entitled to exercise pursuant to Section 6 (a) hereof and to receive
the dividends and interest that it is authorized to receive and retain
pursuant to Section 6 (b) hereof.
6(d) Upon the occurrence and during the continuance
of any Event of Default, the Agent shall have the right in its sole
discretion, and the Pledgor shall execute and deliver all such proxies
and other instruments as may be necessary or appropriate to give effect
to such right, to terminate all rights of the Pledgor to exercise or
refrain from exercising the voting and other consensual rights that it
would otherwise be entitled to exercise pursuant to Section 6 (a)
hereof, and all such rights shall thereupon become vested in the Agent
who shall thereupon have the sole right to exercise or refrain from
exercising such voting and other consensual rights; provided, however,
that the Agent shall not be deemed to possess or have control over any
voting rights with respect to any Collateral unless and until the Agent
has given written notice to the Pledgor that any further exercise of
such voting rights by the Pledgor is prohibited and that the Agent
and/or its assigns will henceforth exercise such voting rights; and
provided, further, that neither the registration of any item of
Collateral in the Agent's name nor the exercise of any voting rights
5
<PAGE>
with respect thereto shall be deemed to constitute a retention by the
Agent of any such Collateral in satisfaction of the Obligations or any
part thereof.
6(e) Upon the occurrence and during the continuance
of any Event of Default:
(i) all rights of the Pledgor to receive the dividends and
interest that it would otherwise be authorized to receive and
retain pursuant to Section 6(b) hereof shall cease, and all
such rights shall thereupon become vested in the Bank who
shall thereupon have the sole right to receive and hold such
dividends as Collateral, and
(ii) all payments of interest and dividends that are received
by the Pledgor contrary to the provisions of paragraph (i) of
this Section 6 (e) shall be received in trust for the benefit
of the Banks and the Agent, shall be segregated from other
funds of the Pledgor and shall be forthwith paid over to the
Agent as Collateral in the same form as so received (with any
necessary indorsement).
Section 7. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES.
7(a) Except as may be permitted by the Credit
Agreement, the Pledgor agrees that it will not (i) sell, assign (by
operation of law or otherwise) or otherwise dispose of, or grant any
option with respect to, any of the Collateral, or (ii) create or permit
to exist any Lien, upon or with respect to any of the Collateral.
7(b) The Pledgor agrees that it will (i) cause each
issuer of the Pledged Shares that it controls not to issue any stock or
other securities in addition to or in substitution for the Pledged
Shares issued by such issuer, except to the Pledgor, and (ii) pledge
hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any and all additional shares of stock or other securities of
each issuer of the Pledged Shares.
Section 8. AGENT APPOINTED ATTORNEY-IN-FACt. The Pledgor
hereby appoints the Agent the Pledgor's attorney-in-fact, with full authority in
the place and stead of such Pledgor and in the name of such Pledgor or
otherwise, from time to time in the Agent's good-faith discretion, to take any
action and to execute any instrument that the Agent may reasonably believe
necessary or advisable to accomplish the purposes of this Agreement (subject to
the rights of the Pledgor under Section 6 hereof), in a manner consistent with
the terms hereof, including, without limitation, to receive, indorse and collect
all instruments made payable to the Pledgor representing any dividend or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
6
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Section 9. AGENT MAY PERFORM. If the Pledgor fails to perform
any agreement contained herein, the Agent may itself perform, or cause
performance of, such agreement, and the reasonable expenses of the Agent
incurred in connection therewith shall be payable by the Pledgor under Section
14 hereof.
Section 10. THE AGENT'S DUTIES. The powers conferred on the
Agent hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. The Agent shall be
deemed to have exercised reasonable care in the safekeeping of any Collateral in
its possession if such Collateral is accorded treatment substantially equal to
the safekeeping which the Agent accords its own property of like kind. Except
for the safekeeping of any Collateral in its possession and the accounting for
monies and for other properties actually received by it hereunder, the Agent
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 Agent 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 Agent will take action in the nature of exchanges, conversions,
redemption, tenders and the like requested in writing by the Pledgor with
respect to any of the Collateral in the Agent's possession if the Agent 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 Agent to comply
with any such request shall not of itself be deemed a failure to exercise
reasonable care.
Section 11. DEFAULT. Each of the following occurrences shall
constitute an Event of Default under this Agreement: (a) the Pledgor shall fail
to observe or perform any covenant or agreement applicable to the Pledgor under
this Agreement within fifteen (15) days after the earlier to occur of (i) the
date the Pledgor gives notice of such failure to the Agent, or (ii) the date the
Agent gives notice of such failure to the Pledgor; or (b) any representation or
warranty made by the Pledgor in this Agreement or in any financial statements,
reports or certificates heretofore or at any time hereafter submitted by or on
behalf of the Pledgor to the Agent shall prove to have been false or materially
misleading when made; or (c) any Event of Default shall occur under the Credit
Agreement (beyond the applicable cure period specified therein).
Section 12. REMEDIES UPON DEFAULT. If any Event of Default
shall have occurred and be continuing:
12(a) The Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the Uniform Commercial Code of the State
of Minnesota (the "Code") in effect at that time (whether or not the
Code then applies to the affected Collateral), and may, without notice
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<PAGE>
except as specified below, sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any exchange,
broker's board or at any of the Agent's offices or elsewhere, for cash,
on credit or for future delivery, and upon such other terms as the
Agent may reasonably believe are commercially reasonable. The Pledgor
agrees that, to the extent notice of sale shall be required by law, at
least ten days prior notice to the Pledgor of the time and place of any
public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. The Agent may adjourn any public or private sale
from time to time by announcement 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. The Pledgor 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
Agent of its remedies hereunder, absent this waiver.
12(b) The Agent may notify any Person obligated on
any of the Collateral that the same has been assigned or transferred to
the Agent and that the same should be performed as requested by, or
paid directly to, the Agent, as the case may be. The Pledgor shall join
in giving such notice, if the Agent so requests. The Agent may, in the
Agent's name or in the Pledgor'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 Person.
12(c) Any cash held by the Agent as Collateral and
all cash proceeds received by the Agent 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 Agent, be held by the Agent as
collateral for, or then or at any time thereafter be applied in whole
or in part by the Agent against, all or any part of the Obligations
(including any expenses of the Agent payable pursuant to Section 15
hereof). If the Agent shall apply such cash proceeds to the
Obligations, they shall be applied as follows:
FIRST, to the payment of all reasonable costs and
expenses incurred by the Agent in connection with such collection, sale
or disposition or otherwise in connection with this Pledge Agreement,
including all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by the
Agent hereunder on behalf of the Pledgor and any other costs or
expenses incurred in connection with the exercise of any right or
remedy hereunder;
8
<PAGE>
SECOND, to the payment of the Obligations consisting
of principal of, interest on and fees with respect to the Loans and the
Commitments, until such Obligations have been paid in full;
THIRD, to the payment in full of the other Obligations
until all of the Obligations have been paid in full;
FOURTH, to the Pledgor, its successors or assigns or
as a court of competent jurisdiction may otherwise direct.
Section 13. REGISTRATION RIGHTS. If the Agent shall determine
to exercise its right to sell all or any of the Collateral pursuant to Section
11 hereof, the Pledgor agrees that, upon request of the Agent, the Pledgor will,
at its own expense:
13(a) execute and deliver, and cause the issuer(s) of
the Pledged Shares to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts and things,
as may be necessary or, in the opinion of the Agent, advisable to
register such Collateral under the provisions of the Securities Act,
and to cause the registration statement relating thereto to become
effective and to remain effective for such period as prospectuses are
required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectus which, in the opinion
of the Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
SEC applicable thereto;
13(b) use its best efforts to qualify the Collateral
under any applicable state securities or "Blue Sky" laws and to obtain
all necessary governmental approvals for the sale of the Collateral, as
requested by the Bank;
13(c) cause the issuer(s) of the Pledged Shares to
make available to its security holders, as soon as practicable, an
earnings statement that will satisfy the provisions of Section 11(a) of
the Securities Act; and
13(d) do or cause to be done all such other acts and
things as may be necessary to make such sale of the Collateral or any
part thereof valid and binding and in compliance with applicable law.
Section 14. WAIVER OF CERTAIN CLAIMS. The Pledgor acknowledges
that because of present or future circumstances, a question may arise under the
Securities Act of 1933, as from time to time amended (the "Securities Act"),
with respect to any disposition of the Collateral permitted hereunder. The
Pledgor understands that compliance with the Securities Act may very strictly
limit the course of conduct of the Agent if the Agent were to attempt to dispose
of all or any portion of the Collateral and may also limit the extent to which
or the manner in which any subsequent transferee of the Collateral or any
9
<PAGE>
portion thereof may dispose of the same. There may be other legal restrictions
or limitations affecting the Agent in any attempt to dispose of all or any
portion of the Collateral under the applicable Blue Sky or other securities laws
or similar laws analogous in purpose or effect. The Agent may be compelled to
resort to one or more private sales to a restricted group of purchasers who will
be obliged to agree, among other things, to acquire such Collateral for their
own account for investment only and not to engage in a distribution or resale
thereof. The Pledgor agrees that neither the Agent nor any Bank shall incur any
liability, and any liability of the Pledgor for any deficiency shall not be
impaired, as a result of the sale of the Collateral or any portion thereof at
any such private sale in a manner that in all other respects is commercially
reasonable (within the meaning of Section 9-504(3) of the Uniform Commercial
Code). The Pledgor hereby waives any claims against the Agent arising by reason
of the fact that the price at which the Collateral may have been sold at such
sale was less than the price that might have been obtained at a public sale or
was less than the aggregate amount of the Obligations, even if the Agent shall
accept the first offer received and does not offer any portion of the Collateral
to more than one possible purchaser. The Pledgor further agrees that the Agent
has no obligation to delay sale of any Collateral for the period of time
necessary to permit the issuer of such Collateral to qualify or register such
Collateral for public sale under the Securities Act, applicable Blue Sky laws
and other applicable state and federal securities laws, even if said issuer
would agree to do so. Without limiting the generality of the foregoing, the
provisions of this Section would apply if, for example, the Agent were to place
all or any portion of the Collateral for private placement by an investment
banking firm, or if such investment banking firm purchased all or any portion of
the Collateral for its own account, or if the Agent placed all or any portion of
the Collateral privately with a purchaser or purchasers.
Section 15. COSTS AND EXPENSES; INDEMNITY. The Pledgor will
pay or reimburse the Agent on demand for all reasonable 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 Agent 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 Pledgor shall indemnify and hold the Agent
and the Banks harmless from and against any and all claims, losses and
liabilities (including reasonable attorneys' fees) resulting from this Agreement
(including enforcement of this Agreement) or the actions of the Agent or any
Bank pursuant hereto, except claims, losses or liabilities resulting from the
gross negligence or willful misconduct of the party seeking indemnification. Any
liability of the Pledgor to indemnify and hold the Agent and the Banks harmless
pursuant to the preceding sentence shall be part of the Obligations secured by
the Security Interest. The obligations of the Pledgor under this Section shall
survive any termination of this Agreement.
10
<PAGE>
Section 16. WAIVERS AND AMENDMENTS; REMEDIES. Notwithstanding
any provisions to the contrary herein, any term of this Agreement may be amended
with the written consent of the Pledgor; provided that no amendment,
modification or waiver of any provision of this Agreement or consent to any
departure herefrom by the Pledgor or other party thereto shall in any event be
effective unless the same shall be in writing and signed by the Agent, and then
such amendment, modification, waiver or consent shall be effective only in the
specific instance and for the purpose for which given. The Security Interest can
be released, only explicitly in a writing signed by the Agent. 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 Agent. All rights and
remedies of the Agent shall be cumulative and may be exercised singly in any
order or sequence, or concurrently, at the Agent'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.
Section 17. 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 three days after the date of mailing if mailed.
Section 18. PLEDGOR ACKNOWLEDGEMENTS. The Pledgor hereby
acknowledges that (a) the Pledgor has been advised by counsel in the
negotiation, execution and delivery of this Agreement, (b) the Banks and the
Agent have no fiduciary relationship to the Pledgor, the relationship being
solely that of debtor and creditor, and (c) no joint venture exists between the
Pledgor, the Banks and the Agent.
Section 19. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER
CREDIT AGREEMENT. This Agreement shall create a continuing security interest in
the Collateral and shall (a) remain in full force and effect until the payment
in full of the Obligations and the expiration of the obligation, if any, of the
Banks to extend credit accommodations to the Borrowers, (b) be binding upon the
Pledgor, its successors and assigns, and (c) inure to the benefit of the Banks
and the Agent, and be enforceable by the Agent, and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(c), the Banks or the Agent may assign or otherwise transfer all or any portion
of its rights and obligations under the Credit Agreement to any other Person to
the extent and in the manner provided in the Credit Agreement, and may transfer
11
<PAGE>
all or any portion of its rights under this Pledge Agreement to such Persons in
connection therewith.
Section 20. TERMINATION OF SECURITY INTEREST. Upon payment in
full of the Obligations (except for contingent indemnity and other contingent
Obligations not yet due and payable) and the expiration of any obligation of the
Banks to extend credit accommodations to the Borrowers, the security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the Pledgor. Upon any such termination, the Agent will return to the Pledgor
such of the Collateral as shall not have been sold or otherwise applied pursuant
to the terms hereof and execute and deliver to the Pledgor such documents as the
Pledgor shall reasonably request to evidence such termination. Any reversion or
return of the Collateral upon termination of this Agreement and any instruments
of transfer or termination shall be at the expense of the Pledgor and shall be
without warranty by, or recourse on, the Agent. As used in this Section,
"Pledgor" includes any assigns of Pledgor, any Person holding a subordinate
security interest in any part of the Collateral or whoever else may be lawfully
entitled to any part of the Collateral.
SECTION 21. GOVERNING LAW AND CONSTRUCTION. THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF MINNESOTA, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED
STATES APPLICABLE TO NATIONAL BANKS; PROVIDED, HOWEVER, THAT NO EFFECT SHALL BE
GIVEN TO CONFLICT OF LAWS PRINCIPLES OF THE STATE OF MINNESOTA, 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 22. CONSENT TO JURISDICTION. AT THE OPTION OF THE
AGENT, THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE
COURT SITTING IN HENNEPIN COUNTY OR RAMSEY COUNTY, MINNESOTA; AND THE PLEDGOR
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 PLEDGOR COMMENCES
12
<PAGE>
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 AGENT 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 23. WAIVER OF JURY TRIAL. EACH OF THE PLEDGOR, THE
AGENT AND EACH BANK, BY ITS EXECUTION AND DELIVERY OR ACCEPTANCE OF THIS
AGREEMENT, 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 24. 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 25. GENERAL. All representations and warranties
contained in this Agreement or in any other agreement between the Pledgor and
the Agent shall survive the execution, delivery and performance of this
Agreement and the creation and payment of the Obligations. The Pledgor waives
notice of the acceptance of this Agreement by the Agent. Captions in this
Agreement are for reference and convenience only and shall not affect the
interpretation or meaning of any provision of this Agreement.
13
<PAGE>
IN WITNESS WHEREOF, the Pledgor has caused this Pledge
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
PLEDGOR:
PILGRIM AMERICA GROUP, INC.
By
---------------------------
James R. Reis
Vice Chairman
Address for Pledgor:
Two Renaissance Square, Ste. 1200
40 North Central Avenue
Phoenix, AZ 85004-4424
Attention: James M. Hennessy
Telecopier: (602) 417-8301
Address for the Agent:
U.S. Bank National Association
U.S. Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Mark A. Bagley
Telecopier No.: (612) 973-0832
14
<PAGE>
SCHEDULE I
PLEDGED STOCK
Stock Issuer:
Percentage Ownership:
Class of Stock:
Certificate No(s).:
Par Value:
Number of Shares:
15
<PAGE>
EXHIBIT H TO
CREDIT AGREEMENT
COLLATERAL ASSIGNMENT (TRADEMARKS)
This COLLATERAL ASSIGNMENT (TRADEMARKS), dated as of July 31,
1998, is made and given by PILGRIM AMERICA GROUP, INC., a Delaware corporation
(the "Assignor") to U.S. BANK NATIONAL ASSOCIATION, a national banking
association, as Agent (in such capacity, together with any successor in such
capacity, the "Assignee") for the Banks (the "Banks") party to the Credit
Agreement described below.
RECITALS
A. The Assignor, the Assignee and the Banks have entered into
a Third Amended and Restated Credit Agreement dated as of July 31, 1998 (as the
same may hereafter be amended, supplemented, extended, restated, or otherwise
modified from time to time, the "Credit Agreement") pursuant to which the Banks
have agreed to extend to the Assignor certain credit accommodations.
B. The Assignor has pledged and granted to the Assignee a
security interest in the property described in a Security Agreement of even date
herewith (as the same may be amended, supplemented, extended, restated or
otherwise modified from time to time, the "Security Agreement") by and between
Assignor and Assignee, which property includes general intangibles, including,
without limitation, applications for patents, applications for trademarks,
trademarks, trade names, copyrights, patents, inventions and trade secrets.
C. In order to induce the Banks to enter into the Credit
Agreement and extend the credit accommodations to the Assignor thereunder, and
in order to secure the payment and performance of (i) all liabilities and
obligations of the Assignor to the Assignee and the Banks arising under the
Credit Agreement, whether now existing or hereafter arising; and (ii) all
liabilities and obligations of the Assignor to the Assignee and the Banks under
the Security Agreement or any other "Loan Documents" (as defined in the Credit
Agreement) whether now existing or hereafter at any time arising; (the
liabilities and obligations set forth in the preceding clauses (i) and (ii)
being hereinafter referred to as the "Liabilities"), the Assignor is willing to
enter into this Assignment.
NOW, THEREFORE, in consideration of the premises and to induce
the Banks to extend credit accommodations under the Credit Agreement, the
parties hereto agree as follows:
1
<PAGE>
1. The Assignor does hereby assign all of its right, title and
interest in and to all of the present trademarks and trade names and the
registrations and applications therefor owned by the Assignor (the
"Trademarks"), including but not limited to those set forth on Exhibit A hereto,
and including, without limitation, all proceeds thereof together with the right
to recover for past, present and future infringements, all rights corresponding
thereto throughout the world and all renewals and extensions thereof, together
with the goodwill of the business associated with said Trademarks, said
Trademarks to be held and enjoyed by the Assignee for the benefit of the Banks,
and for their legal representatives, successors and assigns, as fully and
entirely as the same would have been held by the Assignor had this Assignment
not been made. The foregoing assignment shall be effective only upon the
occurrence of an Event of Default under the Credit Agreement and upon written
notice by the Assignee to the Assignor of the acceptance by the Assignee of this
Assignment, which written notice shall constitute conclusive proof of the
matters set forth therein.
2. The Assignor hereby covenants and warrants that:
(a) to the best of the Assignor's knowledge, the Trademarks
are subsisting and have not been adjudged invalid or unenforceable,
in whole or in part;
(b) to the best of the Assignor's knowledge, each of the
Trademarks material to the conduct of the Assignor's business is valid
and enforceable;
(c) no claim has been made to the Assignor or, to the
knowledge of the Assignor, to any other person, that use of any of the
Trademarks does or may violate the rights of any third person and no
claim has been made by the Assignor that any other person is infringing
upon the rights of the Assignor under the Trademarks;
(d) the Assignor has the unqualified right to enter into this
Assignment and perform its terms;
(e) the Assignor will be, until the Liabilities shall have
been satisfied in full and the Loan Documents shall have been
terminated, in compliance with statutory notice requirements relating
to its use of the Trademarks;
(f) to the best of the Assignor's knowledge, the Assignor is
the sole and exclusive owner of the entire and unencumbered right,
title and interest in and to each of the Trademarks, free and clear of
any liens, charges and encumbrances, including without limitation,
licenses and covenants by the Assignor not to sue third persons;
2
<PAGE>
(g) the Trademarks are all of the Trademarks owned by the
Assignor; and
(h) the Assignor will, at any time upon request, communicate
to the Assignee, its successors and assigns, any facts relating to the
Trademarks or the history thereof as may be known to the Assignor or
its officers, employees and agents, and cause such officers, employees
and agents to testify as to the same in any infringement or other
litigation at the request of the Assignee without the Assignee's prior
written consent.
3. The Assignor agrees that, until the rights of the Assignee
in the Trademarks are terminated pursuant to Section 6, it will not enter into
any agreement that is inconsistent with its obligations under this Assignment.
4. If, before the Liabilities shall have been satisfied in
full, the Assignor shall obtain rights to any new trademark or trade name, or
become entitled to the benefit of any trademark application, registration,
trademark or trade name or any renewal or extension of any trademark
registration, such shall be included in the definition of "Trademarks" as used
in this Assignment. Section 1 hereof shall automatically apply thereto and the
Assignor shall give to the Assignee prompt notice thereof in writing. The
Assignor authorizes the Assignee to modify this Assignment, without the consent
of the Assignor, by amending Exhibit A hereto to include any future trademark or
trade name.
5. The Assignor agrees not to sell, assign or encumber its
interest in, or grant any license with respect to, any of the Trademarks, except
for the licenses listed on Exhibit B hereto or otherwise with the Assignee's
prior written consent.
6. The Assignor agrees that it will authorize, execute and
deliver to Assignee all documents requested by Assignee to facilitate the
purposes of this Assignment, including but not limited to documents required to
record Assignee's interest in any appropriate office in any domestic or foreign
jurisdiction. At such time as the Credit Agreement and the other Loan Documents
shall have been terminated in accordance with their terms, the Assignee shall on
demand of the Assignor execute and deliver to the Assignor all termination
statements and other instruments as may be necessary or proper to terminate this
Assignment and assign to the Assignor all the Assignee's rights in the
Trademarks, subject to any disposition thereof which may have been made by the
Assignee pursuant to this Assignment or the Loan Documents.
7. The Assignor shall have the duty, through counsel
reasonably acceptable to the Assignee, (i) to prosecute diligently any pending
Trademark application as of the date of this Assignment or thereafter until the
Credit Agreement and the Loan Documents shall have been terminated in accordance
with their terms; PROVIDED, that, subject to the final sentence of this Section
3
<PAGE>
7, the Assignor may abandon any such application upon thirty days' written
notice to the Assignee, (ii) to make application on those trademarks and
tradenames which are unregistered but capable of being registered and which a
prudent person would reasonably cause to be registered and (iii) to preserve and
maintain all rights in all Trademarks which a prudent person would reasonably
preserve and maintain. Any expenses incurred in connection with applications
that constitute Trademarks shall be borne by the Assignor. The Assignor shall
not abandon any application presently pending that constitutes a Trademark
without the written consent of the Assignee.
8. Upon the occurrence and during the continuance of an Event
of Default, the Assignee shall have the right but shall in no way be obligated
to bring suit in its own name, the name of the Assignor, or the name of the
Banks to enforce or to defend the Trademarks and any license thereunder if the
Assignor has failed to bring such suit in circumstances in which a prudent
person would have brought such suit. The Assignor shall at the request of the
Assignee do any and all lawful acts and execute any and all proper documents
required by the Assignee in aid of such enforcement or defense (including
without limitation participation as a plaintiff or defendant in any proceeding)
and the Assignor shall promptly, upon demand, reimburse and indemnify the
Assignee for all reasonable costs and expenses incurred by the Assignee in the
exercise of its rights under this Section.
9. This Assignment shall also serve to evidence the security
interest in the Trademarks granted by the Assignor to the Assignee pursuant to
the Security Agreement.
10. No course of dealing with the Assignor and the Assignee,
failure to exercise, nor any delay in exercising, on the part of the Assignee,
any right, power or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
11. All of the Assignee's rights and remedies with respect to
the Trademarks, whether established hereby, by any other agreements or by law
shall be cumulative and may be exercised singularly or concurrently.
12. This Assignment is subject to modification only by a
writing signed by the parties, except as provided in Section 4 hereof.
13. This Assignment shall inure to the benefit of and be
enforceable by the Assignee and its successors, transferees and assigns, and be
binding upon the Assignor and its successors and assigns.
14. This Assignment and the rights and obligations of the
parties hereunder shall be construed in accordance with and governed by the laws
4
<PAGE>
(without giving effect to the conflicts of law principles thereof) of (i) any
state as to rights or interests hereunder which arise under the laws of such
state, (ii) the United States of America as to rights and interests hereunder
which are registered or for the registration of which application is pending
with the United States Patent and Trademark Office and (iii) the State of
Minnesota in all other respects. Whenever possible, each provision of this
Assignment 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 applicable law, but if any provision of this Assignment or any
other statement, instrument or transaction contemplated hereby or relating
hereto shall be held to be prohibited or invalid under 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 Assignment or any other statement, instrument or
transaction contemplated hereby or relating hereto. In the event of any conflict
within, between or among the provisions of this Assignment, any other Loan
Document or any other statement, instrument or transaction contemplated hereby
or thereby or relating hereto or thereto, those provisions giving the Assignee
the greater right shall govern.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
5
<PAGE>
IN WITNESS WHEREOF, the Assignor has executed this instrument
as of the date first above written.
PILGRIM AMERICA GROUP, INC.
By
--------------------------
James R. Reis
Vice Chairman
Address for Assignor:
Two Renaissance Square, Ste. 1200
40 North Central Avenue
Phoenix, AZ 85004-4424
Attention: James M. Hennessy
Telecopier: (602) 417-8301
Address for Assignee:
U.S. Bank National Association
U.S. Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Mark A. Bagley
Fax (612) 973-0832
6
<PAGE>
EXHIBIT A TO
COLLATERAL ASSIGNMENT
(TRADEMARKS)
TRADEMARKS
TRADEMARK APPLICATIONS
<PAGE>
EXHIBIT B TO
COLLATERAL ASSIGNMENT
(TRADEMARKS)
LICENSES
None
<PAGE>
EXHIBIT I TO
CREDIT AGREEMENT
MATTERS TO BE COVERED BY
OPINION OF COUNSEL
TO THE BORROWERS
The opinion of counsel to the Pilgrim America Group, Inc. and
Pilgrim America Capital Corporation (collectively, the "Borrowers") which is
called for by Section 3.1(a)(xiii) of the Third Amended and Restated Credit
Agreement, shall be addressed to the Banks and dated the Closing Date. It shall
be satisfactory in form and substance to the Agent and shall cover the matters
set forth below, subject to such assumptions, exceptions and qualifications as
may be acceptable to the Agent and counsel to the Agent. 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
1
<PAGE>
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 with the execution, delivery
and performance of, or the legality, validity, binding effect or enforceability
of, the Loan Documents.
6. 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.
7. 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.
8. 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 T, U or X of the Board.
9. 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.
10. The execution, delivery and performance by each of PAII
and PASI 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.
11. The Loan Documents to which each of PAII and PASI is a
party constitute the legal, valid and binding obligations of each of PAII and
PASI, enforceable against it in accordance with their respective terms.
2
<PAGE>
12. The execution, delivery and performance by PAII and PSII
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, 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.
13. 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.
14. 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.
15. 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.
16. 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.
17. The financing statements to be filed under the Security
Agreements are in appropriate form for filing with the offices identified
thereon. Assuming that such financing statements have been duly filed with said
offices and that PAG, PAII and PASI have rights in the collateral described
therein, such financing statements shall perfect the security interests granted
to the Agent, for the benefit of the Banks, pursuant to the Security Agreements
to the extent such security interests may be perfected by filing financing
statements under the Uniform Commercial Code of the States of Arizona and
California.
3
<PAGE>
18. There has been created under the Pledge Agreements a valid
security interest in the Pledged Shares (as defined therein) in favor of the
Agent, for the benefit of the Banks. Assuming delivery to, and the continued
possession by, the Agent of the certificates representing the Pledged Shares,
said security interests shall be perfected.
4
<PAGE>
EXHIBIT J
TO CREDIT AGREEMENT
ASSIGNMENT AGREEMENT
ASSIGNMENT AGREEMENT, dated as of 199, among ____________ (the
"TRANSFEROR BANK"), _____________ (the "PURCHASING BANK"), Pilgrim America
Group, Inc., a Delaware corporation ("PAG"), Pilgrim America Capital
Corporation, a Delaware corporation ("PACC"), (together, the "Borrowers" and
each a "Borrower"), and U.S. BANK NATIONAL ASSOCIATION, a national banking
association, one of the Banks, as agent for the Banks (in such capacity, the
"Agent") under the Credit Agreement described below (in such capacity, the
"AGENT").
W I T N E S S E T H
WHEREAS, this Assignment Agreement is being executed and delivered in
accordance with subsection 9.6(c) of the Third Amended and Restated Credit
Agreement dated as of July 31, 1998, among the Borrowers, the Transferor Bank
and the other Banks party thereto, and the Agent (as from time to time amended,
supplemented or otherwise modified in accordance with the terms thereof, the
"CREDIT AGREEMENT"; terms defined therein being used herein as therein defined);
WHEREAS, the Purchasing Bank (if it is not already a Bank party to the
Credit Agreement) wishes to become a Bank party to the Credit Agreement; and
WHEREAS, the Transferor Bank is selling and assigning to the Purchasing
Bank rights, obligations and commitments under the Credit Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Upon the execution and delivery of this Assignment Agreement by the
Purchasing Bank, the Transferor Bank, the Agent, and the Borrowers, the
Purchasing Bank [shall be] [shall continue to be] a Bank party to the Credit
Agreement for all purposes thereof.
2. Effective on ______________ , 199_ (the "Effective Date"), the
Transferor Bank hereby sells and assigns to the Purchasing Bank, without
recourse, a portion of its Revolving Commitment Amount equal to
$_______________, a portion of its Term Loan [Commitment Amount] equal to
$_______________ (collectively, the "Assignment Amounts"), and corresponding
portions of the principal amount of and all interest accrued on its Loans
outstanding under the Credit Agreement. Together with the Assigned Amounts, the
Transferor Bank hereby assigns to the Purchasing Bank a pro rata share of the
Transferor Bank's interest as a Bank in the Loan Documents (the Assigned
1
<PAGE>
Amounts, such Loans and such interest in the Loan Documents being hereinafter
referred to as the "Assigned Interest"). The Purchasing Bank hereby assumes the
Assigned Amounts and the Transferor Bank's related obligations under the Loan
Documents.
3. On the Effective Date, the Purchasing Bank shall pay to the
Transferor Bank a purchase price (the "Purchase Price") equal to the outstanding
principal amount of the Loans included in the Assigned Interest as of the day
preceding the Effective Date. The Transferor Bank acknowledges receipt from the
Purchasing Bank of an amount equal to the Purchase Price.
4. All interest and Revolving Commitment Fees accrued on the Assigned
Interest for the billing period in which the Effective Date falls shall be paid
to the Agent as provided in the Credit Agreement, and distributed by the Agent
(a) with respect to amounts accrued before the Effective Date, to the Transferor
Bank and (b) with respect to amounts accrued on or after the Effective Date, to
the Purchasing Bank. The Transferor Bank has made arrangements with the
Purchasing Bank with respect to the portion, if any, to be paid by the
Transferor Bank to the Purchasing Bank of other fees heretofore received by the
Transferor Bank pursuant to the Credit Agreement.
5. Subject to the provisions of paragraph 4 above, from and after the
Effective Date, principal, interest, fees and other amounts that would otherwise
be payable to or for the account of the Transferor Bank pursuant to the Credit
Agreement and the other Loan Documents in respect of the Assigned Interest
shall, instead, be payable to or for the account of the Purchasing Bank. Each
time the Banks are asked, from and after the Effective Date, to make Loans or
otherwise extend credit under the Loan Documents, the Agent shall advise the
Purchasing Bank, as provided in the Credit Agreement, of the request, and the
Purchasing Bank shall be solely responsible for making a Loan or otherwise
extending credit in accordance with its Assigned Interest.
6. Concurrently with the execution and delivery hereof, (i) the
Borrowers, the Transferor Bank and the Purchasing Bank shall make appropriate
arrangements so that a replacement Revolving Note and replacement Term Notes are
issued to the Transferor Bank (unless it has transferred its entire Revolving
Commitment and Term Loan [Commitment]), and a new Revolving Note and new Term
Notes are issued to the Purchasing Bank, in each case in principal amounts
reflecting, in accordance with the Credit Agreement, their Revolving Commitments
(as adjusted pursuant to this Assignment Agreement) and [the outstanding
principal balance of their Term Loans] [their Term Loan Commitments], (ii) as
and to the extent provided in the Credit Agreement, the Agent shall prepare and
distribute to the Borrowers and the Banks a revised schedule of the Commitments,
Loans and credit percentages of each Bank, after giving effect to the assignment
of the Assigned Interest, and (iii) the Transferor Bank shall pay to the Agent a
processing and recordation fee of [$3,500].
2
<PAGE>
7. The Transferor Bank (a) represents and warrants to the Purchasing
Bank that it is the legal and beneficial owner of the interest being assigned by
it hereunder and that such interest is free and clear of any adverse claim; (b)
represents and warrants to the Purchasing Bank that the copies of the Loan
Documents and the related agreements, certificates, opinion and letters
previously delivered to the Purchasing Bank are true and correct copies of the
Loan Documents and related agreements, certificates, opinion and letters
executed by and/or delivered in connection with the closing of the credit
facility contemplated by the Credit Agreement, other than the letter agreement
described in Section 2.16(a) of the Credit Agreement; (c) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the Loan
Documents or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of any of the Loan Documents or any other instrument or
document furnished pursuant thereto; and (d) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrowers, or the performance or observance by the Borrowers or any other Person
of any of their respective obligations under the Loan Documents or any other
instrument or document furnished pursuant thereto.
8. The Purchasing Bank (a) confirms to the Transferor Bank and the
Agent that it has received a copy of the Loan Documents together with such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Agreement; (b) acknowledges that it
has, independently and without reliance upon the Transferor Bank, the Agent or
any Bank and instead in reliance upon its own review of such documents and
information as the Purchasing Bank deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and agrees that it will,
independently and without reliance upon the Transferor Bank, the Agent or any
Bank, and based on such documents and information as the Purchasing Bank shall
deem appropriate at the time, continue to make its own credit decision in taking
or not taking action under the Loan Documents; and (c) agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Loan Documents are required to be performed by the Purchasing Bank as a
Bank under the Credit Agreement.
9. The Transferor Bank and the Purchasing Bank each individually
represents and warrants that (a) it is validly existing and in good standing and
has all requisite power to enter into this Agreement and to carry out the
provisions hereof and has duly authorized the execution and delivery of this
Agreement; (b) the execution and delivery of this Agreement and the performance
of the obligations hereunder do not violate any provision of law, any order,
rule or regulation of any court or governmental agency or its charter, articles
of incorporation or bylaws or constitute a default under any agreement or other
instrument to which it is a party or by which it is bound; and (c)it has duly
executed and delivered this Agreement, and this Agreement constitutes a legal,
valid and binding obligation enforceable against it in accordance with its
terms.
3
<PAGE>
10. Each of the parties to this Assignment Agreement agrees that at any
time and from time to time upon the written request of any other party, it will
execute and deliver such further documents and do such further acts and things
as such other party may reasonably request in order to effect the purposes of
this Assignment Agreement.
11. The address for notices to the Purchasing Bank as well as
administrative information with respect to the Purchasing Bank is as set out
below:
12. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF MINNESOTA.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective duly authorized officers as of the
date first set forth above.
--------------------------------------,
Transferor Bank
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
--------------------------------------,
as Purchasing Bank
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
U.S. BANK NATIONAL ASSOCIATION,
as Agent
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
CONSENTED AND ACKNOWLEDGED
PILGRIM AMERICA GROUP, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
CONSENTED AND ACKNOWLEDGED
PILGRIM AMERICA CAPITAL CORPORATION
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
5
<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)(xii) of the Third Amended and Restated
Credit Agreement shall be addressed to the Agent and dated the Closing Date. It
shall be satisfactory in form and substance to the Agent and shall cover the
matters set forth below, subject to such assumptions, exceptions and
qualifications as may be acceptable to the Agent and counsel to the Agent. 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
1
<PAGE>
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 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.
2
<PAGE>
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, 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>
SCHEDULE 4.6 TO
CREDIT AGREEMENT
LITIGATION
Not Supplied
<PAGE>
PILGRIM AMERICA CAPITAL
CORPORATION
ORGANIZATIONAL CHART
<TABLE>
<CAPTION>
Pilgrim America Capital Corporation ("PACC")
(Delaware)
|
|
----------------------------------------------------------------------------------
| | |
| | |
<S> <C> <C>
Pilgrim America Group, Inc. ("PAG") EAMC Liquidation Company ("EALC) Express America T.C. Corporation
(Delaware) (Michigan) (Delaware)
100% owned by PACC (100 shares) 100% owned by PACC (100 shares) 100% owned by PACC (100 shares)
| |
| |
| |
Pilgrim America Investments, Inc. Wesav Investments Corporation
(Delaware) (Delaware)
100% owned by PAG (100 shares) 100% owned by EALC (100 shares)
| |
| |
Pilgrim America Securities, Inc. Wesav Investments, Inc.2
(Delaware) (Delaware)
100% owned by PAG (100 shares) 100% owned by EALC (100 shares)
|
|
Pilgrim America Financial, Inc.
(Delaware)
100% owned by PAG (100 shares)
</TABLE>
SCHEDULE 4.17
<PAGE>
SCHEDULE 4.18 TO
CREDIT AGREEMENT
FUNDS AND FUND AGREEMENTS
PILGRIM AMERICA INVESTMENTS, INC.
<TABLE>
<CAPTION>
Fund Name Fund Agreement
--------- --------------
<S> <C>
Pilgrim America Masters Series, Inc. Investment Management Agreement
Pilgrim America Masters Asia-Pacific Equity Fund (dated June 8, 1995)
Pilgrim America Masters MidCap Value Fund
Pilgrim America Masters LargeCap Value Fund
Pilgrim America Investment Funds, Inc. Investment Management Agreement
Pilgrim America High Yield Fund (dated April 7, 1995)
Pilgrim Government Securities Income Fund, Inc. Investment Management Agreement
Pilgrim Government securities Income Fund (dated April 7, 1995)
Pilgrim Prime Rate Trust Investment Management Agreement
(dated April 7, 1995)
Pilgrim America Bank and Thrift Fund, Inc. Investment Management Agreement
(dated April 7, 1995)
Pilgrim America Investment Funds, Inc. Investment Management Agreement
Pilgrim America MagnaCap Fund (dated April 7, 1995)
</TABLE>
<PAGE>
SCHEDULE 4.18 TO
CREDIT AGREEMENT
page 2
ISSUERS OF COLLATERALIZED LOAN OBLIGATIONS
1. ML CLO XII Pilgrim America (Cayman) Ltd. (Issuer)
ML CLO XII Pilgrim America (Delaware) Corp. (Co-Issuer)
2. ML CLO XV Pilgrim America (Cayman) Ltd. (Issuer)
ML CLO XV Pilgrim America (Delaware) Corp. (Co-Issuer)
3. Pilgrim America CBO I Ltd. (Issuer)
Pilgrim America CBO I Corporation (Co-Issuer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,159
<SECURITIES> 10,048
<RECEIVABLES> 625
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,832
<PP&E> 1,401
<DEPRECIATION> 517
<TOTAL-ASSETS> 72,804
<CURRENT-LIABILITIES> 4,592
<BONDS> 0
0
0
<COMMON> 81
<OTHER-SE> 46,606
<TOTAL-LIABILITY-AND-EQUITY> 72,804
<SALES> 12,710
<TOTAL-REVENUES> 12,710
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,789
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 358
<INCOME-PRETAX> 4,563
<INCOME-TAX> 1,884
<INCOME-CONTINUING> 2,679
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.40
</TABLE>
