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, 1999
Commission File Number 0-19799
PILGRIM CAPITAL CORPORATION
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(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)
(602) 417-8100
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Registrant's telephone number, including area code
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. 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.
5,088,077 Shares of Common Stock Outstanding on August 4, 1999
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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........ 7
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............................. 18
Signatures................................................................ 19
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
PILGRIM CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(dollars in thousands, except share amounts)
June 30, September 30,
1999 1998
-------- -------------
ASSETS
Cash and cash equivalents $ 3,564 $ 763
Investments 20,422 18,808
Accounts receivable 2,291 1,566
Notes receivable 4,139 4,136
Costs assigned to management contracts acquired, less
accumulated amortization of $5,597 and $4,523 52,195 27,740
Furniture, fixtures and equipment, less accumulated
depreciation of $618 and $536 1,307 879
Deferred acquisition costs, less accumulated
amortization of $172 and $3,442 1,485 26,562
Incentive management fees receivable 2,290 1,103
Other assets 1,736 1,938
-------- --------
TOTAL ASSETS $ 89,429 $ 83,495
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current income taxes payable $ 1,332 $ --
Deferred tax liability 1,148 --
Term note payable 24,063 --
Revolver note payable 6,980 30,375
Accrued compensation 2,454 2,763
Accounts payable and accrued expenses 6,503 3,793
-------- --------
Total liabilities 42,480 36,931
-------- --------
Stockholders' equity:
Common stock, $.01 par value, 10,000,000 shares
authorized, 8,090,222 and 8,081,722 shares issued,
with 5,084,477 and 5,588,477 shares outstanding at
June 30, 1999 and September 30, 1998 81 81
Less: Treasury stock of 3,005,745 and 2,493,245 at
cost on June 30, 1999 and September 30, 1998 (22,215) (12,530)
Additional paid-in capital 48,844 48,790
Retained earnings 20,218 10,296
Accumulated other comprehensive earnings
Unrealized gain (loss) on investments, net of tax 21 (73)
-------- --------
Total stockholders' equity 46,949 46,564
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 89,429 $ 83,495
======== ========
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
PILGRIM CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
----------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Management and administrative fees $ 7,588 $ 6,128 $ 21,125 $ 16,410
Distribution fees 2,231 2,243 4,717 4,923
Structured finance products management fees 3,363 2,083 9,678 3,736
Commissions 81 1,475 407 2,290
Investments and other income 562 781 2,756 2,213
---------- ---------- ---------- ----------
Total revenues 13,825 12,710 38,683 29,572
---------- ---------- ---------- ----------
Expenses:
General and administrative 3,903 3,793 11,899 8,689
Selling 3,258 2,761 7,878 6,590
Interest expense 313 358 647 750
Amortization and depreciation 559 1,235 1,419 2,857
---------- ---------- ---------- ----------
Total expense 8,033 8,147 21,843 18,886
---------- ---------- ---------- ----------
Earnings before income tax 5,792 4,563 16,840 10,686
Income tax 2,375 1,884 6,918 4,425
---------- ---------- ---------- ----------
Net earnings $ 3,417 $ 2,679 $ 9,922 $ 6,261
========== ========== ========== ==========
Earnings per Common and Common Equivalent Share
Basic:
Net earnings $ 0.66 $ 0.47 $ 1.88 $ 1.09
========== ========== ========== ==========
Shares used in per share calculation 5,154,261 5,745,056 5,273,016 5,769,332
========== ========== ========== ==========
Diluted:
Net earnings $ 0.58 $ 0.40 $ 1.64 $ 0.95
========== ========== ========== ==========
Shares used in per share calculation 5,921,307 6,689,529 6,056,602 6,579,967
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
PILGRIM CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
------------------ ------------------
1999 1998 1999 1998
------- ------- -------- -------
<S> <C> <C> <C> <C>
Net earnings $ 3,417 $ 2,679 $ 9,922 $ 6,261
Other comprehensive earnings, net of tax:
Unrealized holding gains (losses) arising
during the period 35 (100) 99 (162)
Less: Reclassification adjustment for gains
included in net earnings (5) -- (5) (425)
------- ------- -------- -------
Comprehensive earnings $ 3,447 $ 2,579 $ 10,016 $ 5,674
======= ======= ======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
PILGRIM CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended June 30,
--------------------
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 9,922 $ 6,261
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization and depreciation 1,422 2,839
Gain on sale of investments (8) (720)
Gain on sale of deferred acquisition costs (294) --
Increase in accounts receivable (728) (261)
Increase in incentive management fee receivable (1,187) (708)
Increase in deferred acquisition costs due to sales of fund shares (8,886) (19,438)
Decrease in deferred acquisition costs due to redemptions 27 534
Net change in deferred tax asset/current tax liability 3,194 4,402
Decrease in operating liabilities 2,401 1,173
Increase in other operating assets (575) (785)
-------- --------
Net cash provided by (used in) operating activities 5,288 (6,703)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Pilgrim Funds -- (709)
Sale of Pilgrim Funds 508 3,047
Investments in structured finance products (4,045) (9,500)
Principal distributions from structured finance product investments 2,133 --
Acquisition of Nicholas Applegate funds (25,529) --
Sales of furniture, fixtures and equipment -- 9
Purchases of furniture, fixtures and equipment (648) (514)
-------- --------
Net cash used in investing activities (27,581) (7,667)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock (9,685) (753)
Cash payment of shares for stock split -- (2)
Proceeds from exercise of stock options 54 15
Proceeds from sale of deferred acquisition costs 34,057 --
Borrowings 668 16,050
-------- --------
Net cash provided by financing activities 25,094 15,310
-------- --------
Net increase in cash and cash equivalents 2,801 940
Cash and cash equivalents, beginning of period 763 219
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,564 $ 1,159
======== ========
SUPPLEMENTAL DISCLOSURES
Interest paid $ 1,066 $ 461
Income taxes paid 3,869 24
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
PILGRIM 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 Capital Corporation, formerly known as Pilgrim America
Capital Corporation until June 21, 1999, 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
three and nine months ended June 30, 1999 are not necessarily indicative of the
results which may be expected for the fiscal year ending September 30, 1999. For
additional information, refer to the consolidated financial statements for the
fiscal year ended September 30, 1998 which are included in the Company's Form
10-K/A for that year.
The condensed consolidated financial statements include the Company's wholly
owned subsidiary, Pilgrim Group, Inc. ("PGI") and PGI's wholly owned
subsidiaries, Pilgrim Investments, Inc. ("PII"), a registered investment
advisor, and Pilgrim Securities, Inc. ("PSI"), a registered broker/dealer
(collectively "Pilgrim"). The condensed consolidated financial statements also
include the Company's wholly owned mortgage banking subsidiaries, Express
America TC, Inc., EAMC Liquidation Corp. ("EAMC") which are in the winding down
stages.
The activities of the Company consist primarily of providing investment
management and related services to various open-end and closed-end investment
companies (each a "Fund" and collectively the "Pilgrim Funds" or the "Funds")
and structured finance products which are loan and bond funds that the Company
manages for institutional investors ("Structured Finance Products"), operating
under the Pilgrim name. The results of operations reported in the condensed
consolidated financial statements reflect these investment management
activities.
INVESTMENTS. The Company has investments in Structured Finance Products in
addition to other marketable securities.
In recording income from its investments in Structured Finance Products, the
Company records its equity in the earnings and losses of Structured Finance
Products' investments and evaluates the investment for impairment by comparing
the net present values of projected future cash flows with the investments'
carrying values. The investments' cash flows and timings are a function of
actual and forecasted loan and bond defaults and their related losses, trading
gains and losses, projected interest receipts and expenses, and net cash flow
allocations based on product specific indenture requirements. In projecting
defaults and losses, the Company reviews specific problem credits and forecasts
the anticipated losses. The remaining credits in the portfolios are forecasted
using default assumptions of 2% annually with related recovery rates of
approximately 70% of the defaults. Projected interest receipts and expenses are
based on current portfolio and market interest rates.
COSTS ASSIGNED TO MANAGEMENT CONTRACTS ACQUIRED. Costs assigned to management
contracts acquired represent the fair value of the investment management rights
acquired through two acquisitions. These acquisitions consist of the acquisition
of the management contracts for one closed-end and five open-end Pilgrim Funds
("Pilgrim Acquisition") in April 1995 and the May 1999 acquisition of the
management contracts for eleven open-end retail funds from Nicholas Applegate
Capital Management ("NACM Acquisition"). The costs assigned to management
contracts acquired represents the excess of the purchase price over the fair
value of net assets acquired and resulting costs from the acquisitions. These
acquisition costs are being amortized on a straight-line basis over a period of
20 years for the NACM Acquisition and 25 years for the Pilgrim Acquisition.
7
<PAGE>
PILGRIM CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company periodically analyzes costs assigned to management contracts
acquired to determine whether any impairment in value has occurred. Based upon
anticipated undiscounted 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 4.00% to
authorized broker-dealers at the time that certain Fund shares are sold. The
commissions are recovered via distribution fees received from the related shares
and contingent deferred sales charges ("CDSC"s) received if the Fund
shareholders redeem shares during a specified period (up to six years). Such
commission costs are capitalized as Deferred Acquisition Costs ("DAC") and
amortized over the period that the CDSC is in effect. On December 11, 1998, the
Company sold without recourse its existing September 30, 1998 DAC asset related
to certain of the Funds' shares (the "B Shares") and has agreed to sell such DAC
("B Share DAC") assets generated on future B Share sales through November 2000.
The Company funds the B Share DAC daily and sells the asset monthly. The
purchaser of the B Share DAC asset is entitled to 0.75%, annualized, in
distribution fees paid from B Share assets and all CDSCs received from any
redemptions of the related B Shares. Prior to the sale of the B Share DAC asset,
the Company amortized the B Share DAC asset over a six-year period, which is the
period during which the CDSC is in effect for such shares.
In conjunction with the acquisition of the Nicholas Applegate Capital
Management's ("NACM") eleven open-end retai1 funds which included Class C
shares, the Company began offering Class C shares on several of its open-end
funds. The Class C shares pay commissions up to 1% to authorized broker dealers
at the time that the Class C shares are sold. The Commissions are recovered via
distribution fees received from the related shares and CDSC's received should
the shareholder redeem shares during the first year. The C share commission
costs are capitalized as DAC and are amortized over a one-year period.
INCENTIVE MANAGEMENT FEES RECEIVABLE. The Company receives management fees from
the Structured Finance Products as follows: (i) between 0.15% and 0.35% base
management fee which is generally senior to leveraged borrowings in the
Structured Finance Product vehicle, (ii) between 0.0% and 0.35% secondary
management fee which is subordinated to certain payments on leveraged borrowings
and (iii) an additional management fee on each Structured Finance Product
ranging from 0.15% to 0.625% of annual net assets if specified investment
returns are met ("Incentive Management Fees"). Incentive Management Fees are
typically anticipated to be received in future periods.
Incentive Management Fee revenues represent the increase in the present value of
the Incentive Management Fee Receivable for the period for each Structured
Finance Product.
In determining the present value of Incentive Management Fees Receivable, the
Company projects the timing of Incentive Management Fee payments based on
product specific projected returns to the equity investors in the Structured
Finance Products. Product specific equity returns and their timings are a
function of forecasted loan and bond defaults and their related losses, trading
gains and losses, projected interest receipts and expenses, and net cash flow
allocations based on product specific indenture requirements. In projecting
defaults and losses, the Company reviews specific problem credits and forecasts
the anticipated losses. The remaining credits in the portfolios are forecasted
using default assumptions of 2% annually with related recovery rates of
approximately 70% of the defaults. Projected interest receipts and expenses are
based on current portfolio and market interest rates. If the projected investor
returns are in excess of the minimums defined in the indentures, the Company
uses a 10% discount rate to calculate the present value of the related Incentive
Management Fee. Should the anticipated performance of the Structured Finance
Product result in a present value lower than Incentive Management Fees accrued,
the Company would be required to write down the receivable to its net present
value, to reflect the impairment of the asset. Additionally, volatility of
investment performance may result in lower income recognition in some periods.
8
<PAGE>
PILGRIM CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Incentive Management Fees Receivable is reported separately on the Company's
condensed consolidated balance sheet.
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. The Company
accounts for income taxes under the provisions of SFAS 109, "Accounting for
Income Taxes". Under SFAS 109 deferred tax liabilities and assets are determined
based on the difference between the financial statement and tax bases of assets
and liabilities, using tax rates in effect for the year in which differences are
expected to reverse.
NET EARNINGS PER SHARE. Basic earnings per share ("EPS") is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS is computed by dividing income
available for common shareholders by the weighted average number of common
shares outstanding adjusted for the effect of dilutive common stock equivalents,
including stock options, during the period.
The following is a reconciliation of the basic and diluted EPS computations for
the three and nine months ended June 30, 1998 and 1999 (amounts in thousands,
except per share amounts):
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
------------------ -----------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net earnings for basic and diluted EPS $3,417 $2,679 $9,922 $6,261
====== ====== ====== ======
Shares of common stock and common stock equivalents:
Average number of common
shares used in basic computation 5,154 5,745 5,273 5,769
Effect of dilutive securities - options 767 945 784 811
------ ------ ------ ------
Average shares used in diluted computation 5,921 6,690 6,057 6,580
====== ====== ====== ======
Net earnings per share:
Basic $ 0.66 $ 0.47 $ 1.88 $ 1.09
====== ====== ====== ======
Diluted $ 0.58 $ 0.40 $ 1.64 $ 0.95
====== ====== ====== ======
</TABLE>
COMPREHENSIVE INCOME Comprehensive income is defined as the change in equity of
a business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes to equity during a
period except those resulting from investments by owners and distribution to
owners. The SFAS requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be reported in
a financial statement that is displayed with the same prominence as other
financial statements. The SFAS requires that an enterprise (1) classify items of
other comprehensive income by their nature in a financial statement and (2)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid in capital in the equity section of the
statement of financial condition. No earnings per share disclosure of the effect
of comprehensive income is required under the SFAS.
9
<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 eighteen open-end Funds,
one closed-end Fund and six Structured Finance Products.
RESULTS OF OPERATIONS
The following table presents comparative quarterly data regarding assets under
management, Fund share sales and increases in Structured Finance Products assets
for the four quarters ended June 30, 1999:
PILGRIM FUNDS
SELECTED FUND DATA (unaudited)
($000,000)
June 30, March 31, December 31, September 30,
1999 1999 1998 1998
-------- --------- ------------ -------------
Open-End Funds:
Beginning Assets $1,827.1 $1,899.9 $ 1,614.3 $ 1,786.3
Acquired Fund Assets 1,548.8 N/A N/A N/A
Direct Sales 154.8 105.1 178.7 210.0
Direct Redemptions (194.3) (138.3) (85.1) (91.7)
Exchanges In (Out)(1) 2.5 (8.4) 2.1 (8.5)
Investment Activities (2) 149.2 (31.2) 189.9 (281.8)
-------- -------- --------- ---------
Ending Assets 3,488.1 1,827.1 1,899.9 1,614.3
-------- -------- --------- ---------
CLOSED-END FUNDS: (5)
Beginning Assets 1,733.2 1,751.3 1,663.4 1,574.6
Direct Sales (4) 7.60 1.00 28.0 71.6
Investment Activities (2) (10.0) (19.1) 59.9 17.2
-------- -------- --------- ---------
Ending Assets 1,730.8 1,733.2 1,751.3 1,663.4
-------- -------- --------- ---------
STRUCTURED FINANCE PRODUCTS: (6)
Beginning Assets 2,166.7 2,068.3 1,896.0 1,378.5
Increases (3) 173.0 98.4 172.3 517.5
-------- -------- --------- ---------
Ending Assets 2,339.7 2,166.7 2,068.3 1,896.0
-------- -------- --------- ---------
Ending Assets Under Management $7,558.7 $5,727.0 $ 5,719.5 $ 5,173.7
======== ======== ========= =========
- ----------
(1) Net exchanges from (to) the Company's sponsored money market fund.
(2) 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.
(3) Includes assets accumulated in Structured Finance Product transactions that
had not closed as of the related quarter end date. Such transactions were
in the ramp up stages at those dates.
(4) Registration statements covering securities to be issued pursuant to a Cash
Purchase Plan and a Shelf Offering for Prime Rate Trust (the "PPR
Programs") were filed with the Securities and Exchange Commission and are
now effective.
(5) The Company's Closed-end Fund is allowed to borrow up to 33 1/3% of assets
for investment purposes.
(6) Structured Finance Products are capitalized primarily through debt
financing by a special purpose entity created for each product. The debt is
typically secured by the assets of the particular Structured Finance
Product.
10
<PAGE>
QUARTER ENDED JUNE 30, 1999 TO QUARTER ENDED JUNE 30, 1998
Net earnings for the June 30, 1999 quarter amounted to $3.4 million or $.58 per
diluted share compared to net earnings of $2.7 million or $.40 per diluted share
for the quarter ended June 30, 1998.
REVENUES. Revenues for the June 30, 1999 quarter were $13.8 million, an increase
of $1.1 million or 9% over revenues for the June 30, 1998 quarter.
Management and administrative fees, the Company's largest revenue source, were
$7.6 million in the current quarter, an increase of $1.5 million or 25% compared
to the June 30, 1998 quarter. These revenues are derived from the Company's
open-end and closed-end Funds, which averaged $4.2 billion in assets under
management during the current quarter, an increase of $1.0 billion or 33% over
Fund assets under management in the quarter ended June 30, 1998; $680 million of
this increase was attributable to the average net assets of NACM held since May
21, 1999. Structured Finance Product management fees increased $1.3 million or
62% over the comparable quarter as a result of the increase of Structured
Finance Product month end average assets under management of $1.0 billion or
88%.
Distribution fees of $2.2 million for the quarter ended June 30, 1999 was flat
compared to the quarter ended June 30, 1998, even though Fund average net assets
which generate distribution fee income increased $855 million or 51% during the
comparable quarters. The relatively flat distribution fee income for the periods
is attributable to the fact that the Company sold its B Share DAC asset and the
related rights to receive 0.75% of the 1.00% annualized distribution fees paid
by the Funds' B Share assets effective September 30, 1998. The Company amended
its B Share sales agreement to include the B shares of the NACM Funds that the
Company acquired in May 1999. Accordingly, no related B Share distribution fees
were recorded during the current quarter. This decrease in distribution revenues
due to the B Share sale was offset in the June 30, 1999 quarter end due to
distribution fees being received on the NACM Funds (excluding the B Shares sold)
for the period from May 21, 1999 to June 30, 1999.
Commission revenue for the quarter ended June 30, 1999 was $81,000, a decrease
of $1.4 million or nearly 100% compared to the June 30, 1998 quarter. Commission
revenue consists of commissions from the sales of the Company's open-end funds,
CDSC fees earned and commissions from the sales of shares of Pilgrim Prime Rate
Trust. The commissions from open-end funds was $56,000 for the quarter ended
June 30, 1999, a decrease of $588,000 compared to the quarter ended June 30,
1998. This decrease was attributable to the decrease in sales of the open-end
funds, which were $154.8 million for the June 30, 1999 quarter, a decrease of
$204.5 million or 57% over the June 30, 1998 quarter. The commission revenue
from CDSC fees was $14,000 for the quarter ended June 30, 1999, a decrease of
$89,000 or 86% compared to the quarter ended June 30, 1998. The decrease in CDSC
fees is due to the sale of the B Share DAC asset which resulted in no CDSC fees
being collected on B Share assets in fiscal 1999. The commission revenue from
the sales of Pilgrim Prime Rate Trust under the PPR Programs was $11,000 for the
quarter ended June 30, 1999 a decrease of $717,000 or 99% from the June 30, 1998
quarter. The decrease in commissions on sales of shares of Pilgrim Prime Rate
Trust is due to a reduced market premium over net asset value during the current
period.
Investment and other income for the June 30, 1999 quarter was $562,000, a
decrease of $219,000 or 28% over the June 30, 1998 quarter. The decrease is
attributable primarily to three factors. First, income from the Company's
investments in Structured Finance Products decreased by $496,000 to $123,000 for
the quarter. This decrease was a result of the ongoing evaluation of the
expected future cash flows of the Structured Finance Products, and the resulting
adjustment to the carrying value of the Structured Finance Products (See Notes
to Condensed Consolidated Financial Statements "Investments"). This decrease was
offset by a gain of $208,000 recognized on the early termination of the
Company's lease and related sublease in Century City, CA. Finally, the Company
recognized gains of $65,000 in the current quarter on sales of its B Share DAC
asset which the Company began selling in the current fiscal year.
11
<PAGE>
EXPENSES. Total expenses, excluding amortization, depreciation and interest
expense, for the current quarter were $7.2 million, an increase of $600,000 or
9% compared to the June 30, 1998 quarter. This net increase in expenses was
primarily a result of a $110,000 increase in general and administrative expenses
due to an increase in personnel and compensation and a $497,000 increase in
selling expenses due to the Company's acquisition of the NACM Funds. Until May
21, 1999, the Company was reimbursed its direct expenses of distributing the
NACM Funds. The Company had entered into an agreement in January 1999 with NACM
to acquire the right to manage the NACM Funds and completed this transaction on
May 21, 1999. Per an agreement with NACM dated February 1, 1999 the Company's
broker dealer subsidiary, PSI, began distributing shares of the NACM Funds. NACM
agreed to reimburse the Company for the direct costs of selling shares of the
NACM Funds up to certain limits based on the expenses incurred. The Company
reduced its selling expenses by $1.3 million for the quarter ended June 30, 1999
for the reimbursed costs of distributing the NACM Funds from April 1, 1999
through May 21, 1999.
Interest expense was $313,000 in the quarter ended June 30, 1999, a decrease of
$45,000 or 13% compared to the quarter ended June 30, 1998. The decrease in
interest expense between quarters is primarily attributable to the sale of the
DAC asset in December 1998. The funds received in December from the sale of the
DAC asset were used to pay down debt outstanding under the Company's Credit
Agreement. This decrease was partially offset in the June 30, 1999 quarter due
to the funds that were borrowed on May 21, 1999 to purchase the NACM Funds (see
"Liquidity").
Amortization and depreciation expenses decreased $676,000 primarily as a result
of the sale of the B Share DAC asset. The DAC Asset consisted of commissions
paid on the sale of certain Funds shares. Prior to the sale of the B Share DAC
asset these commissions were capitalized and amortized over a six-year period.
The Company began selling C shares in conjunction with the NACM Acquisition in
May 1999. The Company pays a 1% commission to the broker for C shares sold and
amortizes these costs over 1 year.
NINE MONTHS ENDED JUNE 30, 1999 TO NINE MONTHS ENDED JUNE 30, 1998
Net earnings for the nine months ended June 30, 1999 were $9.9 million or $1.64
per diluted share compared to $6.3 million or $.95 per diluted share for the
nine months ended June 30, 1998.
REVENUES. Revenues for the nine months ended June 30, 1999 were $38.7 million,
an increase of $9.1 million or 31% over revenues for the nine months ended June
30, 1998.
Management and administrative fees were $21.1 million in the current nine
months; an increase of $4.7 million or 29% compared to the nine months ended
June 30, 1998. These revenues are derived from the Company's open-end and
closed-end Funds, which averaged $3.8 billion in assets under management during
the first nine months of the current fiscal year, an increase of $967 million or
35% over Fund average net assets under management in the nine months ended June
30, 1998: $227 million of this increase was attributable to the average net
assets of NACM held since May 21, 1999. Structured Finance Product management
fees increased $6.0 million or 162% over the comparable nine months as a result
of the increase of $1.3 billion or 164% in Structured Finance Products month end
average assets under management.
Distribution fees of $4.7 million, for the nine months ended June 30, 1999
decreased $206,000 or 4% compared to the nine months ended June 30, 1998, even
though fund average net assets which generate distribution fee income increased
$701 million or 52% during the comparable nine months. The decrease in
distribution fee income is attributable to the Company's sale of its B Share DAC
asset on December 11, 1998 and the related rights to receive 0.75% of the 1.00%
annualized distribution fees paid by the Funds' B Share assets. The Company
amended its B Shares sales agreement to include the B Shares of the NACM Funds
that the Company acquired in May 1999. Accordingly, no related B Share
distribution fees were recorded for fiscal 1999. This decrease in distribution
revenues due to the B Share sale was offset in fiscal 1999 by distribution fees
being received on the NACM Funds (excluding the B Shares sold) for the period
from May 21, 1999 to June 30, 1999.
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Commission revenue for the nine months ended June 30, 1999 was $407,000, a
decrease of $1.9 million or 82% compared to the nine months ended June 30, 1998.
Commission revenue consists of commissions from the sales of the Company's
open-end funds, CDSC fees earned and commissions for the sales of shares of
Pilgrim Prime Rate Trust. The commissions from open-end funds was $322,000 for
the nine months ended June 30, 1999, a decrease of $1.1 million compared to the
nine months ended June 30, 1998. This decrease was attributable to a decrease in
sales of the open-end funds which were $438.6 million for the nine months ended
June 30, 1999, $403.6 million or 48% lower than the nine months ended June 30,
1998. The commission revenue from CDSC fees was $14,000 for the nine months
ended June 30, 1999, a decrease of $176,000 or 93% compared to the nine months
ended June 30, 1998. The decrease in CDSC fees is due to the sale of the B Share
DAC asset which resulted in no CDSC fees being collected on B Share assets in
fiscal 1999. The commission revenue from the sales of Pilgrim Prime Rate Trust
under the PPR Programs was $71,000 for the nine months ended June 30, 1999 a
decrease of $657,000 or 90% from the nine months ended June 30, 1998. The
decrease in commissions on sales of shares of Pilgrim Prime Rate Trust is due to
a reduced market premium over net asset value during the current fiscal year.
Investment and other income for the nine months ended June 30, 1999 was $2.8
million, an increase of $543,000 or 25% over the nine months ended June 30,
1998. The primary factors contributing to the increase were as follows: 1)
income from the Company's investments in Structured Finance Products increased
by $940,000 to $1.8 million as a result of three additional Structured Finance
Product investments which closed after June 30, 1998. The Company had Structured
Finance Product investments of $20.3 million as of June 30, 1999 versus $10.0
million at June 30, 1998; 2) an increase of $294,000 reflecting gains on sales
of B Share DAC assets which began in the current year; 3) a gain of $208,000 in
the current period recognized on the termination of the Century City lease; 4) a
decrease of $720,000 due to the gain the Company recognized on the sale of its
investments in the Pilgrim Funds made in prior periods; and 5) a decrease of
$211,000 in dividend income on the Company's investments in those Funds.
EXPENSES. Total expenses, excluding amortization, depreciation and interest
expense, for the nine months ended June 30, 1999 were $19.8 million an increase
of $4.5 million or 29% compared to the nine months ended June 30, 1998. This
increase was primarily a result of a $3.2 million increase in general and
administrative expenses due to an increase in personnel and compensation, a $1.3
million increase in selling expenses primarily related to a increase in the
Company's sales and marketing costs in the nine months ended June 30, 1999
reduced by expense reimbursements due to the Company for distributing shares of
the NACM Funds from February 1, 1999 until May 21, 1999 when the NACM Funds were
purchased by the Company. The Company entered into an agreement during January
1999 with NACM to acquire the right to manage the NACM Funds and as of February
1, 1999 the Company's broker dealer subsidiary, PSI, began distributing shares
of the NACM Funds. NACM agreed to reimburse the Company for the direct costs of
selling shares of the NACM Funds up to certain limits based on the expenses
incurred. The Company reduced its selling expenses by $2.3 million for the nine
months ended June 30, 1999 for the reimbursed costs of distributing the NACM
Funds from February 1, 1999 through May 21, 1999.
Interest expense was $647,000 for the nine months ended June 30, 1999 a decrease
of $103,000 or 14% compared to the nine months ended June 30, 1998. The decrease
in interest expense between the comparable periods is primarily attributable to
the sale of the DAC asset in December 1998. The Company was reimbursed by the
purchaser of the DAC asset for the interest expense that the Company incurred
related to borrowings between the effective date of the sale, September 30,
1998, and the date the funds were received at the closing of the transaction in
December 1998. The funds received in December from the sale of the DAC asset
were used to pay down debt outstanding under the Company's Credit Agreement.
This decrease was partially offset due to the funds that were borrowed on May
21, 1999 to purchase the NACM Funds (see "Liquidity").
Amortization and depreciation expenses decreased $1.4 million primarily as a
result of the sale of the B Share DAC asset. The DAC asset consisted of
commissions paid on the sale of certain Funds' shares. Prior to the sale of the
B share DAC asset these commissions were capitalized and amortized over a
six-year period. The Company began selling C shares in conjunction with the NACM
Acquisition in May 1999. The Company pays a 1% Commission to the broker for C
shares sold and amortizes these costs over 1 year.
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<PAGE>
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 investments made by the
Company in connection with the management of Structured Finance Products. The
Company also purchases shares of its common stock pursuant to authorization
given by its board of directors. The Company's principal sources of liquidity
and capital resources include cash flow from operations and borrowings available
under a $75 million credit agreement ("the Credit Agreement"). During the first
nine months of fiscal 1999, the Company's operations provided net cash of $5.3
million and the Company used $27.6 million of net cash in its investing
activities, including $25.5 million invested on May 21, 1999 in the management
contracts of NACM, and $4.0 million used for the Company's equity investment in
a new Structured Finance Product asset which was partially offset by $2.1
million in principal distributions received by the Company from these
investments. The Company had a net increase in cash from financing activity due
to the $34.1 million received from the ongoing sales of the DAC asset offset by
$9.7 million in purchases of the Company's stock and an increase in borrowings
of $668,000.
One of the Company's principal uses of cash is the payment of commissions in
connection with the sale of B Shares. Such costs are capitalized as DAC assets
and are recovered through distribution fees and CDSC fees received from the B
Share assets. On December 11, 1998, the Company sold its September 30, 1998 DAC
asset for $26.5 million and agreed to sell any DAC assets generated through B
Share sales through November 1999, (B Share Sales Agreement") with a right of
first refusal on a two-year extension thereafter. In May 1999 the Company
amended the B Shares Sales Agreement to include future sales of the newly
acquired NACM Funds' B shares to increase the B shares sales limit to $50
million, and to extend the initial term to November 2000. The purchaser of the
DAC asset is entitled to 0.75%, annualized, in distribution fees paid from B
Share assets and all CDSCs received from any redemptions of the related B
Shares. If the Company's B Shares Sales Agreement expires and the Company is
unable to sell its DAC assets or to borrow to fund commissions, the Company's
ability to finance the continued sale of open-end Fund B Shares could be
adversely effected.
The Company uses a significant portion of its cash to invest in Structured
Finance Products that it manages. The Company may be required to invest an
agreed upon percentage in each new Structured Finance Product on the date the
transaction closes. If the Company was unable to generate funds from operations
or to borrow funds needed to invest in new Structured Finance Products this
could have an adverse effect on the Company's ability to continue to close and
manage additional Structured Finance Product assets. As of June 30, 1999 the
Company had $20.3 million invested in Structured Finance Products.
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 May 21,
1999, and allows the Company or the Company's wholly owned subsidiary Pilgrim
Group, Inc. ("PGI") to borrow up to $25 million in term debt ("Term Debt") and
$50 million in revolving loans ("Revolver"). The Term Debt was used for the
purchase of the NACM Funds and has a four-year repayment schedule. The Revolver
can 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 Structured Finance Product
investments and (v) repurchasing Company stock. The agreement contains
restrictive covenants which require PGI 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 PGI, by a pledge of
PGI of the stock of its wholly owned subsidiaries, by a security interest in the
assets of the Company, PGI and PGI's wholly owned subsidiaries, Pilgrim
Investments, Inc. ("PII") and Pilgrim Securities, Inc., and by a guarantee by
PGI's wholly owned subsidiary, PII.
14
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At June 30, 1999 the Company had approximately $24.1 million in Term Debt and
$7.0 million in Revolver debt outstanding under the Credit Agreement and had
approximately $43.0 million additional borrowings available.
On August 5, 1997, the Company's Board of Directors approved purchasing up to
750,000 shares of its common stock from time to time in open market
transactions. The Company may use cash generated from operations or borrowings
obtained under the Credit Agreement to purchase the shares. As of June 30, 1999,
the Company had purchased 729,150 shares pursuant to this authorization. In
August 1998, the Company's Board of Directors approved the purchase from time to
time of an additional 500,000 shares of common stock.
SUBSEQUENT EVENT
On July 22, 1999 the Company entered into a merger agreement with ReliaStar
Financial Corp. and its wholly owned subsidiary, Northstar Holdings, providing
for the merger of the Company with and into Northstar.
Under the terms of the merger agreement, upon consummation of the merger each
outstanding Pilgrim Share will be converted into the right to receive .50 shares
of ReliaStar common stock plus $12.50 in cash subject to certain possible
adjustments. The merger agreement contemplates that the merger will be accounted
for under the purchase method of accounting and will be tax free to the
Company's stockholders as to the shares of ReliaStar common stock that they
receive. Consummation of the merger is subject to customary conditions,
including approval by the Company's stockholders.
YEAR 2000
Many existing computer programs only use two digits to identify a year in the
date field. The change from 1999 to 2000 may cause many computer applications to
fail or create erroneous results. The endeavor to correct this year 2000 problem
has commonly become known as Y2K and affects virtually all companies.
The Company is working to ensure that its information technology systems
("systems") will, along with those of its third party service providers ("third
parties" or "third party"), continue to function properly upon the arrival of
the year 2000. The Company has developed and is implementing a comprehensive Y2K
plan (the "plan") to complete all internal system upgrades or conversions by the
fourth quarter of fiscal 1999. A significant part of the plan involves upgrading
hardware and software to newer versions that have been certified to be Y2K
compliant. To date, most of the Company's current hardware and software systems
have been certified, by the manufacturers, as Y2K compliant. Based on the
Company's plan, it is estimated that incremental expenses for the Y2K project
will not have a material impact on the Company's operations or financial
results. To date, the Company has spent approximately $817,000 on upgrading its
hardware and software systems to those that are Y2K compliant and to accommodate
the Company's growth. The Company estimates that the remaining cost to complete
the implementation of the plan will be between $50,000 and $200,000. The Company
will use its own cash or to the extent available borrow from its line of credit
for any Y2K expenditure. It is the Company's policy to capitalize all costs for
hardware and software that have a useful life of over one-year. The cost of
these assets will be depreciated based on the estimated useful life. Costs for
remediation and testing are expensed as incurred.
The Company is measuring its progress by following the three action phases
outlined in its plan: Assessment, Remediation/Implementation and Testing. The
Assessment phase included completing an inventory of all-internal and external
systems, office equipment, third party dependencies, physical facilities,
business issues and creating a budget and strategy to address the Y2K issue. The
Remediation/Implementation phase includes upgrading or replacing hardware and
software systems, issuance of Company statements of Y2K readiness, compliance
with regulatory disclosure requirements, development of a Y2K contingency plan
and contacting and monitoring third parties. The Testing phase includes several
levels of testing some of which rely upon third parties. The Company must
15
<PAGE>
test internal systems on a stand-alone basis and also complete point-to-point
testing with some third parties. Additionally, the Company will obtain the
results of certain third party testing that will be conducted on behalf of the
Company and its affiliates on an industry wide basis. The table below summarizes
the status of the Company's Y2K readiness.
STATUS OF Y2K READINESS
% Completed
Y2k Plan Phase As of July 1, 1999 Completion Target Date
-------------- ------------------ ----------------------
Assessment 100% 01/31/99
Remediation/Implementation 99% 09/30/99
Testing 95% 10/31/99
The Company's core business activities are highly dependent upon certain third
parties that are classified as Y2K "mission critical". A failure of any single
mission critical third party or combination of parties could likely have a
material negative impact to the Company' ability to conduct its business. As
part of its plan, the Company has been monitoring the Y2K progress of such
mission critical third parties. To date based upon written disclosures provided
by such third parties, the Company has not received any significant indication
that a mission critical third party will likely experience a Y2K failure.
Below is a summary table that sets forth the most current Y2K status as
disclosed by certain of the Company's mission critical third parties:
MISSION CRITICAL THIRD PARTY - Y2K STATUS
Third Party Current Status Last Update
- ----------- -------------- -----------
Fund Transfer Agent The five major systems of the Transfer Agent 6/99
system are Y2K ready. Testing of contingency
plan will continue through 1999.
Fund Custodian The information technology (IT) applications: 6/99
Correction 99% complete
Testing & Implementation 99% complete
Ninety three percent (93%) of the sub-custodian 6/99
net work has been assessed to have a "high
degree" of Y2K readiness.
Fund Accounting Agent Achieved goal of Y2K readiness production 6/99
environment by 12/98. Testing will continue
throughout 1999.
Communication Vendors Both vendors have remediation and renovation 7/99
well under way.
Electrical Vendor All IT and non IT systems have been inventoried. 6/99
All renovations are scheduled for completion by
mid 1999.
Corporate Banker Systems are compliant. Testing continues 4/99
through mid-1999
The Company is developing a contingency plan with the objective of providing
reasonable alternatives to systems, third party vendors, facilities and
procedures enabling the Company to conduct its core business operations if
confronted with a Y2K failure. The scope of the contingency plan includes
mission critical systems, physical facilities and the Company's communication
systems. The contingency plan will provide the Company guidance should it or any
of the Company's primary third party providers fail to meet its goals and be
Year 2000 compliant and includes an alternate vendor list for its third party
mission critical providers. The Company has determined that even though it has a
list of alternative vendors selected, it cannot ensure that these alternates
will be Y2K ready or have the wherewithal to accept the Company business. The
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Company has also determined that there are some third party mission critical
vendors that do not have an alternate source. The Company relies heavily on its
third party mission critical systems to conduct its day to day business
operations and to the extent that its contingency plan fails, the Company's
financial condition may be adversely effected.
The Company's ability to manage the Y2K issue is subject to uncertainties beyond
its control and actual results could differ materially from what has been
discussed above. There are several factors that could effect the Y2K issue for
the Company, including; the success of the Company in identifying systems and
programs that are affected by Y2K; the amount and nature of testing on internal
and external systems that is required: the installation, programming, and
systems work related to upgrading or replacing each of the affected programs;
the cost, magnitude and availability of labor and consulting to complete the
required Y2K projects and the success of the Company's external third party
providers and other industry or governmental entities in addressing their Y2K
issues and assessing their risks.
The failure of the Company, the Company's mission critical third party providers
or other industry or governmental entities to resolve Y2K issues could have a
material adverse affect on the Company's business, financial condition, and
results of operations. The Company could become the subject of legal claims
regarding its inability to operate its business due to Y2K failures by it or any
of its mission critical third party vendors. The Company is also regulated by
several governmental agencies that may decide to impose fines or sanctions that
could adversely effect the Company's ability to do business or in some cases
require the Company to cease operations. The Company could also experience a
decline in assets under management if investors in its Funds become concerned
about the Y2K problem and withdraw their investments. A decline in assets under
management would have an adverse effect upon the Company's business, financial
condition and results of operations.
FORWARD LOOKING STATEMENT
When used in this Form 10-Q and in future filings by the Company with the
Securities and Commission, in the Company's press releases and in oral
statements made with the approval of an authorized executive officer, the words
or phrases, "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project", or similar expressions are intended to
identify "forward looking" statements, within the meaning of the Private
Securities Litigation Reform Act of 1995. All assumptions, anticipations,
expectations and forecasts contained herein are forward looking statements that
involve risks and uncertainties. Discussions in Management's Discussion and
Analysis about the Company's estimated completion dates for phases of the
Company's Year 2000 plan, related cost estimates, statements about possible
effects of the year 2000 problem and related contingency plans are also "forward
looking" statements. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
cautions readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date, made, and should be read in
conjunction with the risk disclosures. The Company wishes to advise readers that
the factors in the Year 2000 discussed above could affect the Company's
financial performance and could cause the Company's actual results for future
periods to differ materially from any opinions or statements expressed with
respect to future periods in any current statements.
The Company will not undertake and specifically declines any obligation to
release publicly the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
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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 The Fourth Amended and Restated Credit Agreement by and between
the Company and US Bank National Association dated as of May 21,
1999
27.0 Financial Data
(b) Reports on Form 8-K.
The Company filed one report on Form 8-K on July 28, 1999 reporting
the execution of a plan and agreement of merger reached with ReliaStar
Financial Corp. to acquire the Company.
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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 CAPITAL CORPORATION
Date: August 13, 1999 /s/ James R. Reis
-----------------------------------------
James R. Reis
Vice-Chairman and Chief Financial Officer
(Principal Accounting Officer)
19
FOURTH AMENDED AND RESTATED
CREDIT AGREEMENT
THIS FOURTH AMENDED AND RESTATED CREDIT AGREEMENT (the "Agreement"), dated
as of May 21, 1999 is by and among PILGRIM GROUP, INC., formerly known as
Pilgrim America Group, Inc., a Delaware corporation ("PGI"), 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"), U.S. BANK NATIONAL ASSOCIATION, a national banking
association, one of the Banks, as agent for the Banks (in such capacity, the
"Agent"), and as swing-line lender, and COMMERZBANK AG, a national banking
association, one of the Banks as co-agent for the Banks (in such capacity, the
"Agent").
WHEREAS, PGI, PACC and certain of the Banks (the "Existing Banks") are the
parties to that certain Third Amended and Restated Credit Agreement dated as of
July 31, 1998, as amended (the "Existing Credit Agreement");
WHEREAS, PACC and "NACM" (as defined below) have entered into the
"Acquisition Agreement (NACM)" (as defined below) dated as of January 28, 1999,
pursuant to which PACC will purchase certain of the assets of NACM;
WHEREAS, in connection with the acquisition of NACM, the Borrowers have
requested additional financing from the Banks; and
WHEREAS, PGI, PACC and the Existing Banks desire to amend and restate the
Existing Credit Agreement in its entirety, and to add the additional Banks as
parties hereto, and such additional Banks desire to become parties hereto and
provide financing to the Borrower on the terms set forth herein.
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):
-1-
<PAGE>
"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.
"12b-1 SALE": Sales by PSI of certain 12b-1 Fees and related Contingent
Deferred Sales Charges pursuant to a Pilgrim Program Master Agreement by and
among PGI, PII, PSI, PLT Finance, L.P., Putnam, Lovell, de Guardiola & Thornton
Inc. and Bankers Trust Company, as Funding and Collection Agent, dated December
11, 1998, and the other agreements, documents and instruments contemplated
thereby, as originally in effect and as amended, supplemented or otherwise
modified with the consent of the Agent.
"ACQUISITION": Any transaction or series of transactions by which either
Borrower acquires, either directly or through an Affiliate or Subsidiary or
otherwise, (a) any or all of the stock or other securities of any class of any
Person or (b) a substantial portion of the assets or management and distribution
rights with respect to funds, or a division or line of business of any Person.
"ACQUISITION AGREEMENT (NACM)": That certain Agreement dated as of January
28, 1999 by and between PACC and NACM.
"ACQUISITION (NACM)": The purchase by PACC of certain management and
distribution rights associated with certain funds managed by NACM identified on
Schedule 1.1(a) hereto, pursuant to the terms of the Acquisition Agreement
(NACM).
"ACQUISITION CLOSING DATE (NACM)": May 21, 1999, or such other date as may
be proposed by the Borrowers and agreed to by the Banks on which all the
conditions in the Acquisition Documents have been satisfied or (with the consent
of the Banks), waived.
"ACQUISITION DOCUMENTS (NACM)": The Acquisition Agreement (NACM), and all
other agreements, instruments, certificates and other documents executed and
delivered pursuant to or in connection therewith, as the same may be
supplemented, amended or otherwise modified.
"ADJUSTED EURODOLLAR RATE": With respect to each Eurodollar Rate Advance or
Swing Line Loan, the rate (rounded upward, if necessary, to the next
one-hundredth of one percent) determined by dividing the applicable Eurodollar
Rate by 1.00 minus the Eurodollar Reserve Percentage.
"ADVANCE": Any portion of the outstanding Revolving Loans or any Term Loan
made by a Bank as to which one of the available interest rate options and, if
pertinent, an Interest Period, is applicable. An Advance may be a Eurodollar
Rate Advance or a Reference Rate Advance.
-2-
<PAGE>
"ADVISORY CONTRACTS": Contracts of the type described in 15 U.S.C. ss.
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": PII and any other Subsidiary of PGI that acts as
investment adviser for any Advisory Fund and, as such, is party to Advisory
Contracts.
"AFFILIATE": When used with reference to any Person, (a) each Person that,
directly or indirectly, controls, is controlled by or is under common control
with, the Person referred to, (b) each Person which beneficially owns or holds,
directly or indirectly, twenty-five percent or more of any class of voting stock
of the Person referred to (or if the Person referred to is not a corporation,
twenty-five percent or more of the equity interest), (c) each Person,
twenty-five percent of more of the voting stock (or if such Person is not a
corporation, twenty-five percent or more of the equity interest) of which is
beneficially owned or held, directly or indirectly, by the Person referred to,
and (d) each of such Person's officers, directors, joint venturers and partners.
The term control (including the terms "controlled by" and "under common control
with") means the possession, directly, of the power to direct or cause the
direction of the management and policies of the Person in question.
"AGENT": As defined in the opening paragraph hereof.
"AGENT FEES": As defined in SECTION 2.10(a).
"AGGREGATE REVOLVING COMMITMENT AMOUNT": As of any date of determination,
up to and including the date preceding the Transformation Date (or, if there is
no Transformation Date, up to and including the date on which the Revolving
Notes are paid in full and the Revolving Commitments have expired or been
terminated), the sum of the Revolving Commitment Amounts of all the Banks.
"APPLICABLE FEE PERCENTAGE": Subject to the last sentence of this
definition, with respect to the period beginning on the first 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 last day of the month in which the financial
statements and compliance certificate required by Sections 5.1(c) and 5.1(d)
with respect to the subsequent fiscal quarter are delivered, the percentage
specified as the Applicable Fee Percentage based on the Cash Flow Leverage Ratio
calculated as of the end of the preceding fiscal quarter for which such
financial statements and compliance certificate have been delivered:
-3-
<PAGE>
Cash Flow Leverage Ratio Applicable Fee Percentage
------------------------ -------------------------
Less than or equal to 1.25:1 0.125%
Greater than 1.25:1
but less than 1.75:1 0.15%
Greater than or equal to
1.75:1 but less than 2.25:1 0.20%
Greater than or equal to 2.25:1 0.25%
During the period beginning on the Closing Date and ending on August 31, 1999,
the Applicable Fee Percentage shall be 0.15%. For any subsequent period
beginning on the first day of the 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
last day of the month in which such financial statements and compliance
certificate are delivered, the Applicable Fee Percentage shall be as specified
for a Cash Flow Leverage Ratio greater than or equal to 2.25 to 1.0.
"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 first 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 last day of the month in which the financial statements and
compliance certificate required by Sections 5.1(c) and 5.1(d) with respect to
the subsequent fiscal quarter are delivered, shall mean the percentage specified
as appropriate to Reference Rate Advances or Eurodollar Rate Advances for 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 1.25:1 0.85% 0%
Greater than 1.25:1
but less than 1.75:1 1.00% 0%
Greater than or equal to
1.75:1 but less than 2.25:1 1.30% 0%
Greater than or equal to 2.25:1 1.60% 0%
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During the period beginning on the Closing Date and ending on August 31, 1999,
the Applicable Margin for Eurodollar Rate Advances shall be 1.00%. For any
subsequent period beginning on the first 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 last day of the month in which such financial
statements and compliance certificate are delivered, the Applicable Margin for
Eurodollar Rate Advances shall be as specified for a Cash Flow Leverage Ratio
greater than or equal to 2.25:1.
"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 PGI; or (b) PGI not owning, directly or indirectlt, 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) any event or occurrence as a result of which a majority of the members of
the Board of Directors of the Borrower are not Continuing Directors.
"CLOSING DATE": May 21, 1999, provided that on or before such date all the
conditions precedent to the obligation of the Banks to make the initial Loans,
as set forth in Article III, have been satisfied.
"CLOSING FEE": As defined in SECTION 2.10(c) hereto.
"CLO INVESTMENTS": Investments by an Advisory Subsidiary in subordinated
Collateralized Loan Obligations for which PII has a CLO Management Contract.
"CLO MANAGEMENT CONTRACT": A contract or agreement entered into by PII for
its own account (and not as nominee or subservicer), whether now existing or
hereafter entered into, pursuant to which PII manages or services a pool of
assets securing or otherwise backing Collateralized Loan Obligations.
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"CODE": The Internal Revenue Code of 1986, as amended.
"COLLATERALIZED LOAN OBLIGATION": A security issued by a special purpose
vehicle secured or otherwise backed by a pool of assets, including but not
limited to commercial loans, public and private high-yield bonds, equities or
distressed situation debt.
"COMMITMENTS": The Revolving Commitments and the Term Loan A Commitments.
"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.
"CONTINUING DIRECTOR": means, as of any date of determination, any member
of the Board of Directors of the Borrower who (i) was a member of such Board of
Directors on the date of this Agreement or (ii) was nominated for election or
elected or appointed to such Board of Directors by the Board of Directors at a
time when a majority of the Board consisted of Continuing Directors.
"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.
"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.
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<PAGE>
"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 Swing Line Loan 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, and with respect to each Interest Period applicable to a Eurodollar Rate
Advance, the average offered rate for deposits in United States dollars (rounded
upward, if necessary, to the nearest 1/16 of 1%) for delivery of such deposits
on the first day of such Interest Period for the number of days in such Interest
Period, which appears on the Reuters Screen LIBO Page as of 11:00 a.m., London
time (or such other time as of which such rate appears) two Eurodollar Business
Days prior to the first day of such Interest Period, or in either case 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 United States
dollar deposits are offered to the Agent in the interbank Eurodollar market for
delivery in Immediately Available Funds on such date and for the applicable
period in an amount approximately equal to the Swing Line Loan or Advance by the
Agent to which the Eurodollar Rate is to apply (rounded upward, if necessary, to
the nearest 1/16 of 1%). "Reuters Screen LIBO Page" means the display designated
as Page "LIBO" on the Reuters Monitor Money Rate Screen (or such other Page as
may replace the LIBO Page on such service for the purpose of displaying London
interbank offered rates of major banks for United States dollar deposits).
"EURODOLLAR RATE ADVANCE": An Advance with respect to which the interest
rate is determined by reference to the Adjusted Eurodollar Rate.
"EURODOLLAR RESERVE PERCENTAGE": As of any day, that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board for
determining the maximum reserve requirement (including any basic, supplemental
or emergency reserves) for a member bank of the Federal Reserve System, with
deposits comparable in amount to those held by the Bank, in respect of
"Eurocurrency Liabilities" as such term is defined in Regulation D of the Board.
The rate of interest applicable to any outstanding Eurodollar Rate Advances
shall be adjusted automatically on and as of the effective date of any change in
the Eurodollar Reserve Percentage.
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<PAGE>
"EVENT OF DEFAULT": Any event described in SECTION 7.1.
"EXCHANGE ACT": The Securities Exchange Act of 1934, as amended.
"EXISTING CREDIT AGREEMENT": As defined in the recitals hereto.
"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 Revolving Loans, PLUS the sum of the
scheduled payments on Term Loans required during the twelve months following the
end 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 PII, dated as of July 31, 1998 (as the same may
have been and may hereafter 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 acknowledgments or affirmations thereof).
"IMMEDIATELY AVAILABLE FUNDS": Funds with good value on the day and in the
city in which payment is received.
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<PAGE>
"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 bankers' acceptances, (j)
all obligations of any partnership or joint venture as to which such Person is
or may become personally liable, and (k) all Contingent Obligations of such
Person.
"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.
"INTEREST PERIOD": With respect to each Eurodollar Rate Advance, the period
commencing on the date of such Advance or on the last day of the immediately
preceding Interest Period, if any, applicable to an outstanding Advance and
ending one, two, three or six months thereafter, as the Borrowers may elect in
the applicable notice of borrowing, continuation or conversion; PROVIDED THAT:
(a) Any Interest Period that would otherwise end on a day which is not
a Eurodollar Business Day shall be extended to the next succeeding
Eurodollar Business Day unless such Eurodollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Eurodollar Business Day;
(b) Any Interest Period that begins on the last Eurodollar Business
Day of a calendar month (or a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Eurodollar Business Day of a calendar month; and
(c) Any Interest Period applicable to an Advance on a Revolving Loan
that would otherwise end after the Transformation Date shall end on the
Transformation Date, and any Interest Period applicable to an Advance on a
Term Loan that would otherwise end after the scheduled maturity of such
Term Loan shall end on such maturity.
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<PAGE>
Interest Periods shall be selected so that the installment payments on the
Term Notes and mandatory payments of Revolving Loans and Swing Line Loans
can be paid without having to pay a Eurodollar Rate Advance prior to the
last day of the Interest Period applicable thereto.
"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.
"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.
"LOANS": A Revolving Loan, Term Loan or a Swing Line Loan.
"LOAN DOCUMENTS": This Agreement, the Notes, the Security Documents and the
Guaranty.
"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 (TERM LOAN A)": The earlier of (a) March 31, 2003 and (b)
the date on which the Obligations become due and payable pursuant to SECTION 7.2
hereof.
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<PAGE>
"MATURITY DATE (TERM LOAN B)": The earlier of (a) the twelfth 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.
"NACM": Nicholas Applegate Capital Management, a California Limited
Partnership.
"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 Revolving Note, a Term Note or the Swing Line Note.
"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 Revolving Commitment Fees),
expenses, indemnities, reimbursements and other obligations of the Borrowers
under this Agreement or any other Loan Document, in all cases whether now
existing or hereafter arising or incurred.
"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.
"PII": Pilgrim Investments, Inc., a Delaware corporation.
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<PAGE>
"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 PGI each dated as of July 31, 1998, as the same may have been and may
hereafter be supplemented, amended or otherwise modified and in effect from time
to time, and any acknowledgments or affirmations thereof.
"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.
"PSI": Pilgrim Securities, Inc., a Delaware corporation.
"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 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,
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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 COMMITMENT": With respect to any Bank, the agreement of such
Bank to make Revolving Loans to, and purchase risk participations in Swing Line
Loans issued by the Swing Line Lender for the account of, the Borrowers in an
aggregate principal amount outstanding at any time not to exceed such Bank's
Revolving Commitment Amount, and on the Transformation Date to convert the
outstanding principal balance thereof to a Term Loan B, upon the terms and
subject to the conditions and limitations of this Agreement.
"REVOLVING COMMITMENT AMOUNT": With respect to any Bank, initially the
amount set opposite such Bank's name on Schedule 1.1(b) hereto as its Revolving
Commitment Amount, but as the same may be reduced pursuant to SECTION 2.09.
"REVOLVING COMMITMENT FEES": As defined in SECTION 2.10(b).
"REVOLVING COMMITMENT PERCENTAGE": With respect to any Bank, the percentage
equivalent of a fraction, the numerator of which is the Revolving Commitment
Amount of such Bank and the denominator of which is the Aggregate Revolving
Commitment Amount.
"REVOLVING LOAN": As defined in SECTION 2.1(b).
"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 Revolving
Notes are paid in full and the Revolving Commitments have expired or been
terminated.
"REVOLVING NOTE": A promissory note in the form of Exhibit B hereto.
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"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.
"SECURITIES ACT": The Securities Act of 1933, as amended.
"SECURITY AGREEMENTS": The Security Agreements of PGI, PII and PSI, dated
as of July 31, 1998, any Security Agreement of an Advisory Subsidiary in the
form of Exhibit C; and any Security Agreement of any other Subsidiary in the
form of Exhibit D; 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
has been and may hereafter be supplemented, amended or otherwise modified and in
effect from time to time, and any acknowledgments or affirmations thereof.
"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.
"SWING LINE FACILITY": The discretionary revolving credit facility provided
by the Swing Line Lender to the Borrowers in an aggregate amount not to exceed
$2,500,000 at any time outstanding upon the terms and subject to the conditions
of this Agreement.
"SWING LINE LENDER": U.S. Bank National Association, acting in the capacity
of the lender of Swing Line Loans hereunder.
"SWING LINE LOANS": As defined in SECTION 2.1(c).
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"SWING LINE LOAN DATE": The date of the making of any Swing Line Loans
hereunder.
"SWING LINE LOAN OUTSTANDINGS": As of any date of determination, the
aggregate unpaid principal balance of Swing Line Loans outstanding on such date.
"SWING LINE NOTE": A promissory note in the form of Exhibit E.
"TERM LOAN A": As defined in SECTION 2.1(a).
"TERM LOAN A COMMITMENT": With respect to a Bank, the agreement of such
Bank to make a Term Loan A to the Borrower in an amount equal to such Bank's
Term Loan A Commitment Amount upon the terms and subject to the conditions of
this Agreement.
"TERM LOAN A COMMITMENT AMOUNT": With respect to a Bank, the amount set
forth opposite such Bank's name on Schedule 1.1(b) hereof as its Term Loan A
Commitment Amount.
"TERM LOAN A PERCENTAGE": With respect to any Bank, the percentage
equivalent of a fraction, the numerator of which is the amount of the Term Loan
A Commitment of such Bank and the denominator of which is the sum of the Term
Loan A Commitments of all the Banks.
"TERM LOAN B": As defined in SECTION 2.1(d).
"TERM LOAN B PERIOD": The period from the Transformation Date to and
including the Maturity Date (Term Loan B).
"TERM NOTE": A promissory note in the form of Exhibit F hereto.
"TOTAL OUTSTANDINGS": As of any date of determination, the aggregate unpaid
principal balance of Loans outstanding on such date.
"TOTAL PERCENTAGE": With respect to any Bank, (a) prior to the
Transformation Date, the percentage equivalent of a fraction, the numerator of
which is the sum of the Revolving Commitment Amount of such Bank and the
outstanding principal balance of such Bank's Term Loan A and the denominator of
which is the sum of the Aggregate Revolving Commitment Amount and aggregate
outstanding principal balance of the Term Loan A, and (b) from and after the
Transformation Date, the percentage equivalent of a fraction, the numerator of
which is the outstanding principal balance of such Bank's outstanding Term
Loans, and the denominator of which is the aggregate outstanding principal
balance of the Term Loan.
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"TOTAL REVOLVING OUTSTANDINGS": As of any date of determination, the
aggregate unpaid principal balance of Revolving Loans and Swing Line Loans
outstanding on such date.
"TRADEMARK ASSIGNMENT": The Collateral Assignment (Trademarks) of PGI dated
as of July 31, 1998, as the same may have been and may hereafter be
supplemented, amended, or otherwise modified and in effect from time to time,
and any acknowledgments or affirmations thereof.
"TRANSFORMATION DATE": May 19, 2000, as the same may be extended pursuant
to SECTION 2.20.
"U.S. BANK": U.S. Bank National Association, in its capacity as one of the
Banks hereunder.
"UNUSED REVOLVING COMMITMENT": As of any date of determination, the
Aggregate Revolving Commitment Amount minus the Total Revolving Outstandings.
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. On the terms and subject to the conditions
hereof, each Bank severally agrees to make the following lending facilities
available to the Borrowers:
2.1(a) TERM LOAN A. A term loan from each Bank (each being a "Term
Loan A" and, collectively, the "Term Loans A") to the Borrowers on the
Closing Date in an amount from each Bank equal to its Term Loan A
Commitment Amount. The sum of the Term Loan A Commitment Amounts is
$25,000,000. The Term Loans A and any portion of the balance thereof may be
made, maintained, continued and converted to Reference Rate Advances or
Eurodollar Rate Advances as the Borrowers may elect in their notice of
borrowing, continuation or conversion.
2.1(b) REVOLVING CREDIT. 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 Transformation 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 Revolving Outstandings
to exceed the Aggregate Revolving Commitment Amounts, and provided,
further, that no Bank shall be required to make any Loan if, after giving
effect thereto, the sum of the outstanding principal balance of such Bank's
Revolving Note plus such Bank's Revolving Commitment Percentage of the
outstanding principal balance of the Swing Line Note would exceed such
Bank's Revolving Commitment Amount. Revolving Loans hereunder shall be made
by the several Banks ratably in the proportion of their respective
Revolving 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(c) SWING LINE LOANS. A swing line credit facility available as
loans (each, a "Swing Line Loan" and, collectively, the Swing Line Loans")
from the Swing Line Lender at its sole discretion to the Borrowers on a
revolving basis at any time and from time to time from the Closing Date to
the Transformation Date, subject to the terms and conditions of this
Agreement, during which period the Borrowers may borrow, repay and reborrow
in accordance with the provisions hereof; PROVIDED, that no Swing Line Loan
will be made in any amount which, after giving effect thereto, would cause
the Total Revolving Outstandings to exceed the Aggregate Revolving
Commitment Amount.
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2.1(d) CONVERSION TO TERM LOAN B. 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 (each a "Term Loan B"
and collectively the "Term Loans B") from each Bank on the terms and
subject to the conditions set forth herein. The Term Loans B 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 Revolving
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 11:00 a.m. (Minneapolis time) two Eurodollar Business Days
prior to the requested Revolving Loan Date if the Revolving Loans are
requested as Eurodollar Rate Advances and not later than 11:00 a.m.
(Minneapolis time) one Business Day prior to the requested Revolving Loan
Date if the Revolving Loans are requested as Reference Rate Advances. 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 $1,000,000
or, if more, an integral multiple thereof, (iii) whether such Revolving
Loans are to be funded as Reference Rate Advances or Eurodollar Rate
Advances (and, if such Revolving Loans are to be made with more than one
applicable interest rate choice, specifying the amount to which each
interest rate choice is applicable), and (iv) in the case of Eurodollar
Rate Advances, the duration of the initial Interest Period applicable
thereto. 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 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.
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Unless the Agent determines that any applicable condition specified in
Article III has not been satisfied, the Agent will make available to the
Borrowers 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 Borrowers 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 Borrowers, without prejudice to the Agent's and such 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 TERM LOANS A. Not later than 11:00 a.m.
(Minneapolis time) two Eurodollar Business Days prior to the Closing Date
if the Term Loans A are requested as Eurodollar Rate Advances and not later
than 11:00 a.m. (Minneapolis time) one Business Day prior to the Closing
Date if the Term Loans A are requested as Reference Rate Advances, PACC, on
behalf of the Borrowers shall deliver to the Agent a written notice of
borrowing. Such notice of borrowing shall be irrevocable and shall be
deemed a representation by the Borrowers that on the Closing Date and after
giving effect to the Term Loans A the applicable conditions specified in
Article III have been and will be satisfied. Such notice of borrowing shall
specify (i) the Closing Date and (ii) whether such Term Loans A are to be
funded as Eurodollar Rate Advances or Reference Rate Advances (and, if such
Revolving Loans are to be made with more than one applicable interest rate
choice, specifying the amount to which each interest rate choice is
applicable) and (iii) in the case of Eurodollar Rate Advances, the duration
of the initial Interest Period applicable thereto. The Agent shall promptly
notify each Bank of the receipt of such notice and the matters specified
therein. On the requested Closing Date, each Bank shall provide to the
Agent the amount of such Bank's Term Loan A in Immediately Available Funds
not later than 11:00 a.m. (Minneapolis time). Unless the Agent determines
that any applicable condition specified in Article III has not been
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satisfied, the Agent will make the proceeds of the Term Loans A available
to the Borrower at the Agent's main office in Minneapolis, Minnesota, on
the requested date.
2.2(c) PROCEDURE FOR SWING LINE LOANS. Any request by the Borrowers
for Swing Line Loans hereunder shall be in writing or by telephone and must
be given so as to be received by the Swing Line Lender not later than 1:00
p.m. (Minneapolis time) on the requested Swing Line Loan Date. Each request
for Swing Line Loans hereunder shall be irrevocable and shall be deemed a
representation by the Borrowers that on the requested Swing Line Loan Date
and after giving effect to the requested Swing Line Loans the applicable
conditions specified in Article III have been and will be satisfied. Each
request for Swing Line Loans hereunder shall specify (i) the requested
Swing Line Loan Date and (ii) the aggregate amount of Swing Line Loans to
be made on such date which shall be in a minimum amount of $250,000 or
integral multiples of $50,000 in excess thereof. The Swing Line Lender may
rely on any telephone request for Swing Line Loans hereunder which it
believes in good faith to be genuine; and the Borrowers hereby waive the
right to dispute the Swing Line Lender's record of the terms of such
telephone request. On the date of the requested Swing Line Loans, unless
the Agent determines that any applicable condition specified in Article III
has not been satisfied and has communicated the same to the Swing Line
Lender, the Swing Line Lender will make available to the Borrowers at the
Swing Line Lender's office in Minneapolis, Minnesota, in Immediately
Available Funds no later than 4:00 p.m. (Minneapolis time) on the requested
Swing Line Loan Date the amount of the requested Swing Line Loans.
2.2(d) PROCEDURE FOR CONVERSION TO TERM LOAN B. Not later than 11:00
a.m. (Minneapolis time) two Business Days prior to the Transformation Date,
the Borrowers shall deliver to the Agent a written notice electing whether
the Term Loans B are to be funded as Eurodollar Rate Advances or Reference
Rate Advances.
SECTION 2.3 NOTES. The Revolving Loans and Term Loan B of each Bank shall
be evidenced by a single Revolving Note payable to the order of such Bank in a
principal amount equal to such Bank's Revolving Commitment Amount originally in
effect. The Term Loan A of each Bank shall be evidenced by a Term Note payable
to the order of such Bank in the principal amount equal to such Bank's Term Loan
A Commitment Amount. The Swing Line Loans shall be evidenced by a Swing Line
Note payable to the order of the Swing Line Lender in the principal amount of
the Swing Line Commitment. Upon receipt of each Bank's Notes from the Borrowers,
the Agent shall deliver such Notes to such Bank by registered mail/overnight
courier. Each Bank shall enter in its ledgers and records the amount of its Term
Loan A and each Revolving Loan, the various Advances made, converted or
continued and the payments made thereon, and each Bank is authorized by the
Borrowers to enter on a schedule attached to its Term Note or Revolving Note, as
appropriate, a record of such Term Loan A, Revolving Loans, Advances and
payments; provided, however that the failure by any Bank to make any such entry
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or any error in making such entry shall not limit or otherwise affect the
obligation of the Borrowers hereunder and on the Notes, and, in all events, the
principal amounts owing by the Borrowers in respect of the Revolving Notes shall
be the aggregate amount of all Revolving Loans made by the Banks less all
payments of principal thereof made by the Borrower and the principal amount
owing by the Borrowers in respect of the Term Notes shall be the amount of the
Term Loans A made by the Banks less all payments of principal thereof made by
the Borrowers.
SECTION 2.4 CONVERSIONS AND CONTINUATIONS. On the terms and subject to the
limitations hereof, the Borrowers shall have the option at any time and from
time to time to convert all or any portion of the Advances into Reference Rate
Advances or Eurodollar Rate Advances, or to continue a Eurodollar Rate Advance
as such; provided, however that a Eurodollar Rate Advance may be converted or
continued only on the last day of the Interest Period applicable thereto and no
Advance may be converted to or continued as 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 requested as, converted to, or
continued as, Eurodollar Rate Advances only in integral multiples, as to the
aggregate amount of the Advances of all Banks so converted or continued, of
$1,000,000. The Borrowers shall give the Agent written notice of any
continuation or conversion of any Advances and such notice must be given so as
to be received by the Agent not later than 11:00 a.m. (Minneapolis time) two
Eurodollar Business Days prior to the requested date of conversion or
continuation in the case of the continuation of, or conversion to, Eurodollar
Rate Advances and on the date of the requested conversion to Reference Rate
Advances. Each such notice shall specify (a) the amount to be continued or
converted, (b) the date for the continuation or conversion (which must be (i)
the last day of the preceding Interest Period for any continuation or conversion
of Eurodollar Rate Advances, and (ii) a Eurodollar Business Day in the case of
continuations as or conversions to Eurodollar Rate Advances and a Business Day
in the case of conversions to Reference Rate Advances), and (c) in the case of
conversions to or continuations as Eurodollar Rate Advances, the Interest Period
applicable thereto. Any notice given by the Borrowers under this SECTION shall
be irrevocable. If the Borrowers shall fail to notify the Agent of the
continuation of any Eurodollar Rate Advances within the time required by this
Section, such Advances shall, on the last day of the Interest Period applicable
thereto, automatically be converted into Reference Rate Advances of the same
principal amount. All conversions and continuation of Advances must be made
uniformly and ratably among the Banks (e.g., when continuing a 60 day Eurodollar
Rate Advance of one Bank to a 90 day Eurodollar Rate Advance, the Borrower must
simultaneously continue all 60 day Eurodollar Rate Advances of all Banks having
Interest Periods ending on the date of continuation as 90 day Eurodollar Rate
Advances.)
SECTION 2.5 INTEREST RATES, DEFAULT INTEREST AND PAYMENTS.
2.5(a) REVOLVING LOANS AND TERM LOANS. Interest shall accrue and be
payable on the Revolving Loans (other than Swing Line Loans) and Term Loans
as follows:
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(i) Each Eurodollar Rate Advance shall bear interest on the
unpaid principal amount thereof during the Interest Period applicable
thereto at a rate per annum equal to the sum of (A) the Adjusted
Eurodollar Rate for such Interest Period, PLUS (B) the Applicable
Margin;
(ii) Each Reference Rate Advance shall bear interest on the
unpaid principal amount thereof during the Interest Period applicable
thereto at a rate per annum equal to the sum of (A) the Reference
Rate, plus (B) the Applicable Margin;
(iii) 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) during the balance
of any Interest Period applicable to a Eurodollar Advance a rate per
annum equal to the sum of (1) the rate applicable to such Advance
during such Interest Period, plus (2) 2.0%, and (b) otherwise, a rate
per annum equal to the sum of (i) the Reference Rate, (2) the
Applicable Margin for Reference Rate Advances, plus (3) 2%;
(iv) Interest shall be payable (A) with respect to each
Eurodollar Rate Advance having an Interest Period of 90 days or less,
on the last day of the Interest Period applicable thereto; (B) with
respect to any Reference Rate Advance, on the last day of each month;
[(C) with respect to all Advances, upon any permitted prepayment (on
the amount prepaid);] and (D) with respect to all Revolving Advances,
on the Transformation Date; provided that interest under Section
2.5(a)(iii) shall be payable on demand; and
(v) Interest accrued under the Existing Credit Agreement through
the Closing Date shall be payable on the first Quarterly Payment Date
after the Closing Date.
2.5(b) SWING LINE LOANS. Interest shall accrue and be payable on the
Swing Line Loans as follows:
(i) Each Swing Line Loan 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;
(ii) Upon the occurrence of any Event of Default each Swing Line
Loan shall, at the option of the Agent, bear interest until paid in
full at the "Default Rate," which shall be (A) during the balance of
any Interest Period applicable to a Eurodollar Advance a rate per
annum equal to the sum of (1) the rate applicable to such Advance
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during such Interest Period, plus (2) 2.0%, and (b) otherwise a rate
per annum equal to the sum of (i) the Reference Rate, (2) the
Applicable Margin for Reference Rate Advances, plus (3) 2%;
(iii) Interest shall be payable (A) on the last day of each
month; [(B) upon any permitted prepayment (on the amount prepaid); and
(C) on each principal payment date of the Swing Line Loans;] provided
that interest under SECTION 2.5(b)(ii) shall be payable on demand.
SECTION 2.6 REFINANCING OF SWING-LINE LOANS.
(a) PERMISSIVE FINANCINGS OF SWING-LINE LOANS. The Swing Line Lender,
at any time in its sole and absolute discretion, may notify the Agent, not
later than 11:00 a.m. (Minneapolis time) on any Business Day, that it
desires to have any portion of the outstanding Swing-Line Loans refunded
with Revolving Loans (which shall not be considered Swing-Line Loans) made
by the Banks under SECTION 2.1(b), whereupon the Agent shall promptly
request that each Bank (including the Swing Loan Lender) make a Revolving
Loan in an amount equal to its ratable share of the Revolving Loans to be
made to repay to the Swing Loan Lender the portion of the aggregate unpaid
principal amount of the Swing-Line Loans specified in such notice. The
Agent shall promptly notify the Borrowers of its receipt of any such notice
from the Swing Line Lender.
(b) MANDATORY REFINANCINGS OF SWING-LINE LOANS. On the second Business
Day of each week if the outstanding principal balance of the Swing Line
facility is greater than or equal to $1,000,000, and on the Transformation
Date, the Agent shall notify each Bank of the aggregate amount of
Swing-Line Loans outstanding as of the end of the previous day and the
amount of Revolving Loans (which shall not be considered Swing-Line Loans)
required to be made by each Bank to refinance such outstanding Swing-Line
Loans (which shall be in the amount of each Lender's ratable share of such
outstanding Swing-Line Loans).
(c) LENDERS' OBLIGATION TO FUND REFINANCINGS OF SWING-LINE LOANS. Upon
its receipt of a request from the Agent under SECTION 2.6(a) or a notice
from the Agent under SECTION 2.6(b), each Bank (including the Swing Loan
Lender) shall make a Revolving Loan (which shall not be considered a
Swing-Line Loan) in an amount equal to its ratable share of the aggregate
principal amount of Swing-Line Loans to be refinanced, and make the
proceeds of such Revolving Loans available to the Swing Line Lender, in
Immediately Available Funds, at the main office of the Agent in Minneapolis
not later than 3:00 p.m. (Minneapolis time) on the date such notice was
received; PROVIDED, HOWEVER, that a Bank shall not be obligated to make any
such Revolving Loan unless (A) the Swing Loan Lender believed in good faith
that all conditions to making the subject Swing-Line Loan were satisfied at
the time such Swing-Line Loan was made, or (B) such Bank had actual
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knowledge, by receipt of the statements furnished to it pursuant to Section
5.1 or otherwise, that any such condition had not been satisfied and failed
to notify the Swing Loan Lender in a writing received by such Swing Loan
Lender prior to the time it made such Swing- Line Loan that the Swing Loan
Lender was not authorized to make a Swing-Line Loan until such condition
has been satisfied, or (C) the satisfaction of any such condition that was
not satisfied had been waived in a writing by the requisite Banks in
accordance with the provisions of this Agreement. The proceeds of Revolving
Loans made pursuant to the preceding sentence shall be delivered to the
Swing Loan Lender (and not to the Borrowers) and applied to the outstanding
Swing-Line Loans, and the Borrowers authorize the Agent to charge any
account maintained by it with the Agent in order to immediately pay the
Swing Loan Lender the amount of such Swing-Line Loans to the extent amounts
received from the other Banks are not sufficient to repay in full the
outstanding Swing-Line Loans requested or required to be refinanced. Upon
the making of a Revolving Loan by a Bank pursuant to this SECTION 2.6(c),
the amount so funded shall become an Obligation evidenced by such Lender's
Revolving Note and shall no longer be an Obligation evidenced by the
Swing-Line Note. If for any reason any Bank is unable to make a Loan to the
Borrowers to refinance a Swing- Line Loan hereunder, then such Bank shall
immediately purchase from the Swing Loan Lender a participation interest in
such Swing-Line Loan, at par, in an amount equal to such Bank's ratable
share of such Swing-Line Loan, which participation interest shall, for all
purposes hereunder except SECTION 2.1 be deemed a Revolving Loan made by
such Bank hereunder. If any portion of any such amount paid to the Swing
Loan Lender should be recovered by or on behalf of the Borrowers from the
Swing Loan Lender in bankruptcy or otherwise, the loss of the amount so
recovered shall be ratably shared among all the Banks in accordance with
their respective ratable shares. Each Bank's obligation to make Revolving
Loans referred to in this SECTION 2.6(c) shall, subject to the proviso to
the first sentence of this SECTION 2.6(c), be absolute and unconditional
and shall not be affected by any circumstance, including, without
limitation, (i) any setoff, counterclaim, recoupment, defense or other
right which such Bank may have against the Swing Loan Lender, the Borrowers
or anyone else for any reason whatsoever; (ii) the occurrence or
continuance of an Event of Default or Unmatured Event of Default; (iii) any
adverse change in the condition (financial or otherwise) of the Borrowers;
(iv) any breach of this Agreement by the Borrowers, the Agent or any Bank;
or (v) any other circumstance, happening or event whatsoever, whether or
not similar to any of the foregoing; PROVIDED, that in no event shall a
Bank be obligated to make a Revolving Loan if, after giving effect thereto,
the outstanding principal amount of such Bank's Revolving Note plus such
Bank's ratable share of the remaining principal balance of the Swing-Line
Note (after giving effect to the repayment thereof to be funded with such
Revolving Loan and Revolving Loans made the same day by the other Banks)
would exceed such Bank's Revolving Commitment Amount.
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SECTION 2.7 REPAYMENT.
2.7(a) REVOLVING LOANS. The unpaid principal balance of all Revolving
Loans, together with all accrued and unpaid interest thereon, shall be due
and payable on the Transformation Date (subject to conversion thereof in
accordance with SECTION 2.1(d)).
2.7(b) TERM LOANS A. The remaining principal balance of the Term Loans
A shall be payable as follows:
(i) on each of June 30, 1999, September 30, 1999, December 31,
1999 and March 31, 2000, $937,500.00;
(ii) on each of June 30, 2000, September 29, 2000, December 29,
2000, and March 30, 2001, $1,562,500.00;
(iii) on each of June 29, 2001, September 28, 2001, December 28,
2001, and March 29, 2002, $1,875,000.00;
(iv) on each of June 28, 2002, September 25, 2002 and December
27, 2002, $1,875,000.00; and
(v) on March 31, 2003 any other amount then remaining unpaid with
respect to the Term A Loans;
PROVIDED, HOWEVER that if the aggregate principal amount outstanding
under Term Loan A as of the date any principal payment is due is less
than the amount specified for such date in the table above, then the
remaining principal shall be payable at such time. All such payments
of the Term Loans A shall be applied ratably among the Banks.
2.7(c) SWING LINE LOANS. The unpaid principal balance of the Swing
Line Loans on the Transformation Date shall be refinanced pursuant to
SECTION 2.6(b).
2.7(d) TERM LOAN B. The Total Revolving Outstandings on the
Transformation Date shall be reduced in twelve quarterly installments, each
in an amount equal to one-twelveth of the Total Revolving 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 B on each Quarterly Payment date in an
amount equal to the required reduction.
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SECTION 2.8 PREPAYMENTS.
2.8(a) MANDATORY PREPAYMENTS. If at any time Total Revolving
Outstandings exceed the Aggregate Revolving Commitment Amounts, the
Borrowers shall immediately repay to the Agent for the account of the Banks
the amount of such excess. Any such payments shall be applied first against
Swing Line Loans, then against Reference Rate Advances and then against
Eurodollar Rate Advances in order starting with the Eurodollar Rate
Advances having the shortest time to the end of the applicable Interest
Period.
2.8(b) OPTIONAL PREPAYMENTS. The Borrowers may prepay Swing Line Loans
and Reference Rate Advances, in whole or in part, at any time, without
premium or penalty. Any such prepayment must be accompanied by accrued and
unpaid interest on the amount prepaid. Each partial prepayment of the Swing
Line Loans shall be in an amount of $250,000 or an integral multiple
thereof. Each partial prepayment of the Revolving Loans or Term Loans shall
be in an amount of $1,000,000 or an integral multiple thereof. Except upon
an acceleration following an Event of Default or upon termination of the
Revolving Commitment in whole, the Borrower may pay Eurodollar Rate
Advances only on the last day of the Interest Period applicable thereto.
Amounts paid (unless following an acceleration or upon termination of the
Revolving Commitment in whole) or prepaid on Revolving Loans under this
paragraph (b) may be reborrowed upon the terms and subject to the
conditions and limitations of this Agreement. Amounts prepaid on the Term
Loans may not be reborrowed.
2.8(c) APPLICATION OF PREPAYMENTS. All principal paid or prepaid under
SECTION 2.7 or this SECTION 2.8 on the Revolving Loans and Swing Line Loans
shall be applied first, to the outstanding principal balance of the Swing
Line Loans and thereafter to the outstanding principal balance of the
Revolving Loans in proportion to each Bank's share of such outstanding
Loans. All principal paid or prepaid under SECTION 2.7 or this SECTION 2.8
on the Term Loans shall be applied to the installments due on the Term
Loans in the inverse order of their maturities.
PART B -- GENERAL
SECTION 2.9 OPTIONAL REDUCTION OF AGGREGATE REVOLVING COMMITMENT AMOUNTS OR
TERMINATION OF REVOLVING COMMITMENT. The Borrowers may, at any time, upon not
less than thirty days prior written notice to the Agent, reduce the Aggregate
Revolving 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 Revolving Commitment Amounts below the Total Revolving Outstandings.
The Borrowers may, upon not less than thirty days prior written notice to the
Agent, terminate the Revolving Commitments in their entirety.
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SECTION 2.10 FEES.
2.10(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 concerning such Fees.
2.10(b) REVOLVING COMMITMENT FEE. The Borrowers shall pay to the
Agent, for the account of each Bank, fees (the "Revolving Commitment Fees")
in an amount determined by applying a rate per annum equal to the
Applicable Fee Percentage to the average daily Unused Revolving Commitment
of such Bank for the period from the Closing Date to the Transformation
Date. Such Revolving Commitment Fees are payable in arrears on each
Quarterly Payment Date and on the Transformation Date.
2.10(c) CLOSING FEES. On the Closing Date the Borrowers shall pay the
Agent for the account of each Bank closing fees in the amount determined by
applying a rate equal to 0.125% of the sum of the Revolving Commitment
Amount and Term Loan A Commitment Amount of each Bank.
SECTION 2.11 COMPUTATION. Revolving Commitment Fees and interest on
Revolving Loans, Term Loans and Swing Line Loans shall be computed on the basis
of actual days elapsed and a year of 360 days.
SECTION 2.12 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 and Revolving Commitment 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.
SECTION 2.13 USE OF LOAN PROCEEDS. The Revolving Loans and Swing Line Loan
shall be used by the Borrowers and the Subsidiaries for their general business
purposes, including, without limitation, acquisition of Advisory Contracts and
related rights, CLO Management Contracts, Restricted Payments (to the extent
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permitted herein), CLO Investments, and financing 12b-1 Fees, in a manner not in
conflict with any of the Borrowers' covenants in this Agreement. The proceeds of
the Term Loan A shall be used in connection with the Acquisition (NACM).
SECTION 2.14 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 2.15 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 2.15 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 2.16 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 2.17 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
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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 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 2.17 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 2.18 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
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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 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 2.18(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 2.18, 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 2.18(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 2.18 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 2.18(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.
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SECTION 2.19 FUNDING LOSSES; EURODOLLAR RATE ADVANCES. The Borrowers shall
compensate each Bank, upon its written request, for all losses, expenses and
liabilities (including any interest paid by such Bank to lenders of funds
borrowed by it to make or carry Eurodollar Rate Advances to the extent not
recovered by such Bank in connection with the re-employment of such funds and
including loss of anticipated profits) which such Bank may sustain: (i) if for
any reason, other than a default by such Bank, a funding of a Eurodollar Rate
Advance does not occur on the date specified therefor in the Borrower's request
or notice as to such Advance under SECTION 2.2 or 2.4, or (ii) if, for whatever
reason (including, but not limited to, acceleration of the maturity of Advances
following an Event of Default), any repayment of a Eurodollar Rate Advance, or a
conversion pursuant to SECTION 2.16, occurs on any day other than the last day
of the Interest Period applicable thereto. A Bank's request for compensation
shall set forth the calculation of the amount requested and shall be final,
conclusive and binding, absent error.
SECTION 2.20 EXTENSION OF TRANSFORMATION DATE. The Borrowers may, upon
written notice to the Agent not less than thirty (30) days and not more than
ninety (90) days prior to the Transformation Date, request the Majority Banks
extend the Transformation Date; PROVIDED, HOWEVER, that any such agreement on
the part of the Majority Banks must be in writing, and PROVIDED, FURTHER, that
if one or more Banks does not approve the extension of the Transformation Date,
the Borrowers may at any time 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 Commitments shall be payable as provided in SECTION 2.7(d). On such
date, the Aggregate Revolving Commitment Amounts shall be reduced to reflect the
termination of such Banks' Revolving Commitments. The Borrowers may make no more
than three (3) such requests to extend the Transformation Date.
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ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.1 CONDITIONS PRECEDENT TO THE TRANSACTION. The making of the Term
Loan A, the Revolving Loans and the initial Swing Line Loan 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 Revolving Note and a Term Note A drawn to the order of each
Bank, and a Swing Line Note drawn to the order of the Swing Line
Lender, each executed by the Borrowers and dated the date of this
Agreement.
(ii) Acknowledgments with respect to the Security Agreements in
the forms of Exhibits G, H and I executed by PGI, PII and PSI,
respectively.
(iii) Acknowledgments with respect to the Pledge Agreements, in
the forms of Exhibits J and K, executed by the Borrowers.
(iv) An Acknowledgment with respect to the Guaranty in the form
of Exhibit L, executed by PII.
(v) An Amendment to the Trademark Assignment, in the form of
Exhibit M, executed by PGI.
(vi) Copies of the corporate resolutions of PGI, PII, PSI 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
PGI, PII, PSI and PACC.
(vii) Copies of the corporate resolutions of each of PACC,
authorizing the execution, delivery and performance of the Acquisition
Documents (NACM) to which it is a party, certified as of the Closing
Date by the Secretary or an Assistant Secretary of PACC.
(viii) Incumbency certificates showing the names and titles and
bearing the signatures of the officers of PGI, PII, PSI 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 PGI, PII, PSI and PACC.
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(ix) A certificate of the Secretary or Assistant Secretary of
each of PGI, PACC, PII and PSI certifying their respective
Certificates of Incorporation and Bylaws.
(x) Long-form certificates of good standing for PGI, PII, PSI and
PACC in the respective jurisdictions of their incorporation, and
certificates of good standing 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.
(xi) The Agent shall have received from PACC copies of all
agreements and documents related to the Acquisition Documents (NACM),
including all amendments thereof and supplements thereto, all of which
shall be in form and substance satisfactory to the Banks, together
with a certificate of an officer of PACC certifying that: (A) such
copies are true and correct, (B) such documents in the respective
forms certified to the Banks, remain in full force and effect without
supplement, amendment or other modification, (C) The Acquisition
Documents (NACM) in the form delivered to the Agent, remains in full
force and effect, without modification or amendment and embodies the
entire agreement and understanding between the parties thereto with
respect to the matters therein, and (D) All conditions to the closing
of the Acquisition (NACM) are satisfied or waived.
(xiii) A letter from the Borrowers directing the Agent as to the
disbursement of the Term Loans A and any Revolving Loans to be used to
finance the Acquisition (NACM).
(xiv) 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 Loans, no Event of Default or Default shall have occurred
or will exist.
(xv) Evidence of compliance with the insurance requirements of
SECTION 5.3.
(xvi) Tax, lien and judgment searches.
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(xvii) A written opinion of Bryan Cave LLP, counsel to the
Borrowers, PII and PSI, addressed to the Agent and dated the Closing
Date, covering the matters set forth in Exhibit N hereto.
3.1(b) ADDITIONAL CONDITIONS. The following conditions shall exist:
(i) The Borrowers shall have performed and complied with all
agreements, terms and conditions contained in this Agreement required
to be performed or complied with by the Borrowers prior to or
simultaneously with the Closing Date.
(ii) The 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.
(iii) The Acquisition (NACM) shall have been consummated, and the
Agent and its counsel shall have received satisfactory evidence
thereof.
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. The obligation of the Banks
to make any Loans or the Swing Line Lender to make any Swing Line Loan 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 Swing Line 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.
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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 Swing Line Lender to make Swing Line Loans
hereunder, 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. PSI 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. PSI 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 PSI regularly
supervise its activities and the activities of employees of PSI to reasonably
ensure that PSI 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.
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SECTION 4.3 NO CONFLICT; NO DEFAULT. The execution, delivery and
performance by the Borrowers and each Subsidiary of the Loan Documents to which
each of them is a party 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 PSI
in accordance with the undertaking outlined in paragraph 2 of the letter dated
March 2, 1995 from PSI 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 or the
Acquisition Documents (NACM), 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, 1998], and
the unaudited financial statements of each of the Borrowers as at [March 31,
1999], 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
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reflected in such financial statements or in the notes thereto. Since [September
30, 1998], there has been no material adverse change in the business,
operations, property, assets or condition, financial or otherwise, of either
Borrower and its Subsidiaries taken as a whole.
SECTION 4.6 LITIGATION. Except as described on Schedule 4.6, there are no
actions, suits or proceedings pending or, to the knowledge of the Borrowers,
threatened against or affecting the Borrowers or any Subsidiary, or any of their
properties before any court or arbitrator, or any governmental department,
board, agency or other instrumentality which, if determined adversely to the
Borrowers or any Subsidiary, would have a material adverse effect on the
business, operations, property or condition (financial or otherwise) of the
Borrowers and the Subsidiaries taken as a whole or on the ability of 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
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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 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.
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SECTION 4.17 SUBSIDIARIES. Schedule 4.17 sets forth as of the date of this
Agreement a list of all Subsidiaries and the number and percentage of the shares
of each class of capital stock owned beneficially or of record by the Borrowers
or any Subsidiary therein, and the jurisdiction of incorporation of each
Subsidiary.
SECTION 4.18 FUND AGREEMENTS. Schedule 4.18 sets forth as of the date of
this agreement, a list of all Funds for which PII acts as investment adviser or
PSI acts as principal distributor, a list of all related Fund Agreements, and a
list of all issuers of Collateralized Loan Obligations for which PII 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 SOLVENCY. As of the Closing Date, after giving effect to the
Acquisition (NACM) and the making of the Term Loans A and any Revolving Loans to
be made on such date, the Borrowers and their Subsidiaries have capital
sufficient to carry on their business and transactions and all businesses and
transactions in which they are about to engage and are solvent and able to pay
their debts as they mature, and the Borrowers and their Subsidiaries own
property the fair saleable value of which (on a going concern basis) is greater
than the amount required to pay their Indebtedness. No transfer of property is
being made and no Indebtedness is being incurred in connection with the
transactions contemplated by this Agreement or the Acquisition (NACM) with the
intent to hinder, delay or defraud either present or future creditors of either
Borrower, any Subsidiary or any Affiliate.
SECTION 4.21 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.
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ARTICLE V
AFFIRMATIVE COVENANTS
Until any obligation of the Banks hereunder to make the Term Loans A,
Revolving Loans and of the Swing Line Lender to make the Swing Line Loans shall
have expired or been terminated and the Notes 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 (90) ninety days
after the end of each fiscal year of the Borrowers, the consolidated
financial statements of each of the Borrowers and its respective
Subsidiaries consisting of at least statements of income, cash flow and
changes in stockholders' equity, and a consolidated balance sheet as at the
end of such year, setting forth in each case in comparative form
corresponding figures from the previous annual audit, certified without
qualification by KPMG Peat Marwick or other independent certified public
accountants of recognized national standing selected by the Borrowers and
acceptable to the 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 (45) 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.
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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.
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
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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.
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
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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 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,
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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 PII, 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:
(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, CLO Management Contracts, assets
necessary to the performance by such Advisory Subsidiary of its obligations
under such Advisory Contracts and CLO Investments, 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 (y) Advisory Contracts and
CLO Management Contracts and (z) other agreements necessary to the
performance by such Advisory Subsidiary of its obligations under agreements
described in clause (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
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statute, or the Investment Advisers Act or any state law applicable to
investment advisers, to PGI by means of a deposit into an account of PGI
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);
(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
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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 shall have
expired or been terminated and the Notes and all of the 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
PGI, 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 PGI, and any Subsidiary of PACC that is not PGI or a Subsidiary
of PGI may be merged with or liquidated into any other wholly-owned Subsidiary
of PACC that is not PGI or a Subsidiary of PGI (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;
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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; and
6.2(e) the sale of not more than two CLO Investments, provided the
aggregate book value thereof does not exceed $9,000,000.
SECTION 6.3 PLANS. The Borrowers will not permit, and will not allow their
Subsidiaries to permit, any event to occur or condition to exist which would
permit any Plan to terminate under any circumstances which would cause the Lien
provided for in SECTION 4068 of ERISA to attach to any assets of the Borrowers
or any Subsidiary; and the Borrower will not permit, as of the most recent
valuation date for any Plan subject to Title IV of ERISA, the present value
(determined on the basis of reasonable assumptions employed by the independent
actuary for such Plan and previously furnished in writing to the 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
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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. The Borrowers will not make Restricted
Payments, other than (a) Restricted Payments in an amount not to exceed
$20,000,000 in the aggregate, and (b) additional Restricted Payments if the Cash
Flow Leverage Ratio as of the last day of the most recently completed fiscal
quarter, adjusted to account for any Indebtedness incurred to finance such
Restricted Payment (if it had been outstanding on such date), is less than or
equal to 2.0:1.
SECTION 6.8 TRANSACTIONS WITH AFFILIATES. The Borrowers will not, and will
not permit their Subsidiaries to, enter into any transaction with any Affiliate
of the Borrowers, except upon fair and reasonable terms no less favorable to the
Borrowers or such Subsidiaries than would obtain in a comparable arm's-length
transaction with a Person not an Affiliate.
SECTION 6.9 ACCOUNTING CHANGES. The Borrowers will not, and will not permit
their Subsidiaries to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change their fiscal year.
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.
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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 PGI 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
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.
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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.
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.
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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) eighty-five percent (85%) of the Net Asset Value of all Advisory
Funds at the Closing Date (after giving effect to the Acquisition (NACM)) or (b)
ninety percent (90%) of the sum of such Net Asset Values at the end of the most
recently completed fiscal quarter (or, in the case of a measurement at the end
of any fiscal quarter, the preceding fiscal quarter).
SECTION 6.17 EBITDA. The Borrower will not permit the EBITDA Margin, as the
last day of any month, for the Measurement Period ending on that date, to be
less than 25.0%.
SECTION 6.18 LOAN PROCEEDS. The Borrowers will not use any part of the
proceeds of the Loans directly or indirectly, and whether immediately,
incidentally or ultimately, (a) to purchase or carry margin stock (as defined in
Regulation U of the Board), 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.
SECTION 6.19 CORPORATE DOCUMENTS; CERTAIN MATERIAL CONTRACTS. The Borrowers
will not, and will not permit any Subsidiary of the Borrowers to, amend or
modify any of the NACM Acquisition Documents in any way that materially
adversely affects the Banks.
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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 or to the Swing Line Lender 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 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.
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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 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.
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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
, the Banks or the Swing Line Lender 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) PGI 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) PSI 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 PGI or any
Subsidiary are in need of protection under SIPA.
7.1(r) Any Change of Control shall occur.
SECTION 7.2 REMEDIES. If (a) any Event of Default described in Sections
7.1(e), (f), (g) or (q) shall occur with respect to either Borrower, the
Revolving Commitment and Swing Line 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
Revolving Commitments terminated, whereupon the Revolving Commitments shall
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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 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.
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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 Commitments 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 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.
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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 Revolving 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 Borrower on the Term Notes shall be
distributed forthwith by the Agent among the Banks, in like currency and funds
as received, ratably according to each Bank's Term Loan Percentage. All funds
received by the Agent in respect of any payments made by the Borrower on the
Revolving Notes, or Revolving Commitment Fees shall be distributed forthwith by
the Agent among the Banks, in like currency and funds as received, ratably
according to each Bank's Revolving Percentage. After any Event of Default has
occurred, all funds received by the Agent, whether as payments by the Borrower
or as realization on Collateral or on any Guaranties, 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 Swing Line Lender in an amount not to exceed the aggregate amount
remaining to satisfy any requirement that the Borrowers make payments to the
Swing Line Lender for application on the Swing Line Note, (c) next to the Agent
for the account of the Banks (in accordance with their respective Total
Percentages) for application on the Notes; (d) next to the Agent for the account
of the Banks (in accordance with their respective Revolving Percentages) for any
unpaid Revolving Commitment Fees owing by the Borrowers hereunder; and (e) last,
any remaining amounts to the Borrower or to such Person as a court of competent
jurisdiction may otherwise direct.
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
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
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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, 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 any of the
Commitments 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;
9.1(h) Amend any provision of this Agreement relating to the Swing
Line Lender, in its capacity as Swing Line Lender or the making of Swing
Line Loans without the consent of the Swing Line Lender; or
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
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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
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
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<PAGE>
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 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
2.15, 2.16, 2.17, 2.18, 2.19, 2.20 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, together with equivalent proportions of the Revolving Loans and
obligation to purchase risk participations in Swing Line Loans and an
equivalent proportion of its Term Loans (but not less than $5,000,000 in
the aggregate to any Bank) then held by that Bank. Each such assignment
shall be pursuant to an agreement in substantially the form of Exhibit O,
which agreement shall specify in each instance the portion of the
Obligations evidenced by the Revolving Notes and Term Notes which is to be
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<PAGE>
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
aggregate amount of the Revolving Commitment Amount or outstanding Term
Loan 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 Revolving Commitment Amount or outstanding Term Loan 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 Commitments and Loans in full, and PROVIDED, that following
any such assignment, the transferring Bank shall (i) continue to hold a
Revolving Commitment Amount and a Term Loan in an aggregate amount not less
than $5,000,000. 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
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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 information, such Bank shall first
obtain the written 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.
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<PAGE>
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 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
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<PAGE>
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
(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
Maturity 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.
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<PAGE>
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 ACKNOWLEDGMENTS. 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 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 the Obligations arising in connection with Loans made to 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 (the "Guaranteed Obligations"), each Borrower hereby agrees to the
terms set forth on Exhibit P hereto with respect to the Guaranteed Obligations.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE>
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
Facsimile: (602) 417-8327
PILGRIM GROUP, INC.
By
-----------------------------
Title
---------------------------
Address for Borrower:
Two Renaissance Square, Ste. 1200
40 North Central Avenue
Phoenix, AZ 85004-4424
Attention: James M. Hennessy
Facsimile: (602) 417-8301
[SIGNATURE PAGE TO FOURTH AMENDED
AND RESTATED CREDIT AGREEMENT]
S-69
<PAGE>
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
Facsimile: (612) 973-0832
BANK ONE ARIZONA, NA
By
-----------------------------
Title
---------------------------
Address:
201 North Central Avenue
21st Floor AZ1-1178
Phoenix, AZ 85004
Attention: Michael McCann
Facsimile: (602) 221-1259
[SIGNATURE PAGE TO FOURTH AMENDED
AND RESTATED CREDIT AGREEMENT]
S-70
<PAGE>
STATE STREET BANK AND
TRUST COMPANY
By
------------------------------
Its
-----------------------------
Address:
1776 Heritage Drive
JAB4SW
North Quincy, MA 02171
Attention: Edward A. Siegel
Facsimile: (617) 662-2325
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION
By
-----------------------------
Title
---------------------------
Address:
231 South LaSalle Street
Chicago, IL 60697
Attention: John Hayes
Facsimile: (312) 987-0889
[SIGNATURE PAGE TO FOURTH AMENDED
AND RESTATED CREDIT AGREEMENT]
S-71
<PAGE>
COMMERZBANK AG
By
-----------------------------
Title
---------------------------
Address:
Two World Financial Center
225 Liberty Street
New York, NY 10281
Attention: Joseph Hayes
Facsimile: (212) 266-7629
<PAGE>
EXHIBITS
A - Guaranty
B - Revolving Note
C - PGI Security Agreement
D - Other Subsidiary Security Agreement
E - Swing Line Note
F - Term Note
G - Reaffirmation of PGI Security Agreement
H - Reaffirmation of PII Security Agreement
I - Reaffirmation of PSI Security Agreement
J - Reaffirmation of PGI Pledge Agreement
K - Reaffirmation of PACC Pledge Agreement
L - Reaffirmation of Guaranty
M - Amendment to Collateral Assignment (Trademarks)
N - Matters to be Covered by Opinion of Counsel to the Borrowers
O - Form of Assignment Agreement
P - Terms With Respect to Guaranteed Obligations
SCHEDULES
---------
1.1(a) - NACM Funds
1.1(b) - List of Commitment Amounts
4.6 - Litigation
4.17 - Subsidiaries
4.18 - Funds
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 882860
<NAME> PILGRIM AMERICA CAPITAL CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 3,564
<SECURITIES> 20,422
<RECEIVABLES> 2,291
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,277
<PP&E> 1,925
<DEPRECIATION> 618
<TOTAL-ASSETS> 89,429
<CURRENT-LIABILITIES> 42,480
<BONDS> 0
0
0
<COMMON> 81
<OTHER-SE> 46,949
<TOTAL-LIABILITY-AND-EQUITY> 89,429
<SALES> 0
<TOTAL-REVENUES> 38,683
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 21,196
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 647
<INCOME-PRETAX> 16,840
<INCOME-TAX> 6,918
<INCOME-CONTINUING> 9,922
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,922
<EPS-BASIC> 1.88
<EPS-DILUTED> 1.64
</TABLE>
