Exhibit (k)(1)
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$30,000,000
CREDIT AGREEMENT
AMONG
CNA INCOME SHARES, INC.
as Borrower,
THE LENDERS NAMED HEREIN
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
DATED AS OF
June 2, 1997
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS .............................................. 1
ARTICLE II THE CREDITS ............................................. 9
2.1. Term Loans .............................................. 9
2.2. Types and Minimum Amount of Advances .................... 9
2.3. Amortization ............................................ 9
2.4. Optional Principal Payments ............................. 9
2.5. Conversion and Continuation of Outstanding Advances...... 10
2.6. Changes in Interest Rate, etc ........................... 10
2.7. Rates Applicable After Default .......................... 10
2.8. Method of Payment ....................................... 11
2.9. Notes; Notices .......................................... 11
2.10. Interest Payment Dates; Interest and Fee Basis .......... 11
2.11. Notification of Interest Rates .......................... 12
2.12. Lending Installations ................................... 12
2.13. Non-Receipt of Funds by the Agent ....................... 12
2.14. Taxes ................................................... 12
2.15. Agent's Fees ............................................ 13
ARTICLE III CHANGE IN CIRCUMSTANCES ................................ 13
3.1. Yield Protection ........................................ 13
3.2. Changes in Capital Adequacy Regulations ................. 14
3.3. Availability of Types of Advances ....................... 15
3.4. Funding Indemnification ................................. 15
3.5. Lender Statements; Survival of Indemnity ................ 15
3.6. Right to Substitute Lender .............................. 15
ARTICLE IV CONDITIONS PRECEDENT .................................... 16
4.1. The Loans ............................................... 16
ARTICLE V REPRESENTATIONS AND WARRANTIES ........................... 17
5.1. Corporate Existence and Standing ........................ 17
5.2. Authorization and Validity .............................. 17
5.3. Compliance with Laws and Contracts ...................... 18
5.4. Governmental Consents ................................... 18
5.5. Financial Statements .................................... 18
5.6. Material Adverse Change ................................. 18
5.7. Taxes ................................................... 18
5.8. Litigation .............................................. 19
5.9. Subsidiaries ............................................ 19
5.10. ERISA ................................................... 19
5.11. Default ................................................. 19
5.12. Federal Reserve Regulations ............................. 19
5.13. Investment Company ...................................... 19
5.14. Holding Company ......................................... 19
5.15. Investment Policies ..................................... 19
5.16. Disclosure .............................................. 20
ARTICLE VI COVENANTS ............................................... 20
6.1. Financial Reporting ..................................... 20
6.2. Use of Proceeds ......................................... 21
6.3. Notice of Default ....................................... 21
6.4. Conduct of Business ..................................... 21
6.5. Taxes ................................................... 21
6.6. Insurance ............................................... 22
6.7. Compliance with Laws .................................... 22
6.8. Maintenance of Properties ............................... 22
6.9. Inspection .............................................. 22
6.10. Indebtedness ............................................ 22
6.11. Merger .................................................. 22
6.12. Sale of Assets .......................................... 23
6.13. Investments and Purchases ............................... 23
6.14. Contingent Obligation ................................... 23
6.15. Liens ................................................... 23
6.16. Affiliates .............................................. 23
6.17. Asset Coverage Ratio .................................... 23
6.18. Plans ................................................... 23
ARTICLE VII DEFAULTS ............................................... 24
ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES......... 25
8.1. Acceleration ............................................ 25
8.2. Amendments .............................................. 25
8.3. Preservation of Rights .................................. 26
ARTICLE IX GENERAL PROVISIONS ...................................... 26
9.1. Survival of Representations ............................. 26
9.2. Governmental Regulation ................................. 26
9.3. Taxes ................................................... 26
9.4. Headings ................................................ 26
9.5. Entire Agreement ........................................ 27
9.6. Several Obligations; Benefits of this Agreement ......... 27
9.7. Expenses; Indemnification ............................... 27
9.8. Numbers of Documents .................................... 27
9.9. Accounting .............................................. 27
9.10. Severability of Provisions .............................. 27
9.11. Nonliability of Lenders ................................ 28
9.12. CHOICE OF LAW .......................................... 28
9.13. CONSENT TO JURISDICTION ................................ 28
9.14. WAIVER OF JURY TRIAL ................................... 28
9.15. Disclosure ............................................. 28
9.16. Confidentiality ........................................ 29
9.17. Counterparts ........................................... 29
ARTICLE X THE AGENT ............................................... 29
10.1. Appointment ........................................... 29
10.2. Powers ................................................ 29
10.3. General Immunity ...................................... 29
10.4. No Responsibility for Loans, Recitals, etc............. 29
10.5. Action on Instructions of Lenders ..................... 30
10.6. Employment of Agents and Counsel ...................... 30
10.7. Reliance on Documents; Counsel ........................ 30
10.8. Agent's Reimbursement and Indemnification ............. 30
10.9. Notice of Default ..................................... 31
10.10. Rights as a Lender .................................... 31
10.11. Lender Credit Decision ................................ 31
10.12. Successor Agent ....................................... 31
ARTICLE XI SETOFF; RATABLE PAYMENTS ............................... 32
11.1. Setoff ................................................ 32
11.2. Ratable Payments ...................................... 32
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS...... 32
12.1. Successors and Assigns ................................ 32
12.2. Participations ........................................ 33
12.2.1. Permitted Participants; Effect ................ 33
12.2.2. Voting Rights ................................. 33
12.2.3. Benefit of Setoff ............................. 33
12.3. Assignments ........................................... 33
12.3.1. Permitted Assignments ......................... 33
12.3.2. Effect; Effective Date ........................ 34
12.4. Dissemination of Information .......................... 34
12.5. Tax Treatment ......................................... 34
ARTICLE XIII NOTICES .............................................. 34
13.1. Giving Notice ......................................... 34
13.2. Change of Address ..................................... 35
EXHIBITS
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Exhibit A (Article 1) Note
Exhibit B (Section 6.1(c)) Compliance Certificate
Exhibit C (Section 12.3.1) Assignment Agreement
SCHEDULES
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SCHEDULE 1.1 - Investment Policies
SCHEDULE 6.10 - Indebtedness
CREDIT AGREEMENT
This Credit Agreement, dated as of June 2, 1997, is among CNA INCOME
SHARES, INC., a Maryland corporation, the Lenders and THE FIRST NATIONAL BANK
OF CHICAGO, individually and as Agent.
RECITALS:
A. The Borrower has requested the Lenders to make term loans to it in the
aggregate principal amount of $30,000,000, the proceeds of which the Borrower
will use (a) for the general corporate needs of the Borrower and (b) to repay
certain Indebtedness of the Borrower; and
B. The Lenders are willing to extend such term loans on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the
Agent hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Advance" means a portion of the outstanding Term Loan, the interest rate
for which is of the same Type and, in the case of Eurodollar Advances, for the
same Interest Period.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
"Agent" means First Chicago in its capacity as agent for the Lenders
pursuant to Article X, and not in its individual capacity as a Lender, and any
successor Agent appointed pursuant to Article X.
"Aggregate Commitment" means the aggregate of the Commitments of all the
Lenders hereunder.
"Agreement" means this Credit Agreement, as it may be amended, modified or
restated and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time, applied in a manner consistent with
those used in preparing the financial statements referred to in Section 5.5;
provided, however, that for purposes of all computations required to be made
with respect to compliance by the Borrower with Section 6.17, such term shall
mean generally accepted accounting principles as in effect on the date hereof,
applied in a manner consistent with those used in preparing the financial
statements referred to in Section 5.5.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (a) the Corporate Base Rate for such day, and (b) the sum
of the Federal Funds Effective Rate for such day plus l/2% per annum.
"Alternate Base Rate Advance" means an Advance which bears interest at the
Alternate Base Rate.
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Asset Coverage Ratio" means, at any time, the ratio at such time of (a)
Total Assets less Total Liabilities (excluding the aggregate outstanding
principal amount of Senior Securities) at such time to (b) the aggregate
outstanding principal amount of Senior Securities at such time.
"Authorized Officer" means any of the president, treasurer or vice
presidents of the Borrower, acting singly.
"Bankruptcy Code" means Xxxxx 00, Xxxxxx Xxxxxx Code, sections 1 et seq.,
as the same may be amended from time to time, and any successor thereto or
replacement therefor which may be hereafter enacted.
"Borrower" means CNA Income Shares, Inc., a Maryland corporation, and its
successors and assigns.
"Business Day" means (a) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago and New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market, and (b)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago for the conduct of substantially all of their
commercial lending activities.
"Capitalized Lease" of a Person means any lease of Property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"Change" is defined in Section 3.2.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" means, for each Lender, the obligation of such Lender to make
a single Loan not exceeding the amount set forth opposite its signature below.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement or take-or-pay contract or application for a Letter of Credit.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower, are treated as a single employer under
Section 414 of the Code.
"Conversion/Continuation Notice" is defined in Section 2.5.
"Corporate Base Rate" means a rate per annum equal to the corporate base
rate of interest announced by First Chicago from time to time, changing when and
as said corporate base rate changes. The Corporate Base Rate is a reference rate
and does not necessarily represent the lowest or best rate of interest actually
charged to any customer. First Chicago may make commercial loans or other loans
at rates of interest at, above or below the Corporate Base Rate.
"Default" means an event described in Article VII.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Advance" means an Advance which bears interest at the
Eurodollar Rate.
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the rate determined by the Agent to be the rate at
which deposits in U.S. dollars are offered by First Chicago to first-class banks
in the London interbank market at approximately 11 a.m. (London time) two
Business Days prior to the first day of such Interest Period, in the approximate
amount of First Chicago's portion of such Eurodollar Advance and having a
maturity approximately equal to such Interest Period.
"Eurodollar Loan" means a Loan or portion thereof which bears interest at
the Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (a) the quotient of (i) the Eurodollar Base
Rate applicable to such Interest Period (rounded to the next higher multiple of
l/l6 of 1% if the Eurodollar Base Rate is not such a multiple), divided by (ii)
one minus the Reserve Requirement (expressed as a decimal) applicable to such
Interest Period, plus (b) four/tenths percent (.40%) per annum.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
finds brokers of recognized standing selected by the Agent in its sole
discretion.
"Financial Statements" is defined in Section 5.5.
"First Chicago" means The First National Bank of Chicago in its individual
capacity, and its successors.
"Fiscal Quarter" means one of the four three-month accounting periods
comprising a Fiscal Year.
"Fiscal Year" means the twelve-month accounting period ending December 31
of each year.
"Governmental Authority" means any government (foreign or domestic) or any
state or other political subdivision thereof or any governmental body, agency,
authority, department or commission (including without limitation any taxing
authority or political subdivision) or any instrumentality or officer thereof
(including without limitation any court or tribunal) exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any corporation, partnership or other entity directly or
indirectly owned or controlled by or subject to the control of any of the
foregoing.
"Indebtedness" of a Person means such Person's (a) obligations for borrowed
money, (b) obligations representing the deferred purchase price of Property or
services (other than accounts payable arising in the ordinary course of such
Person's business payable on terms customary in the trade), (c) obligations,
whether or not assumed, secured by Liens or payable out of the proceeds or
production from Property now or hereafter owned or acquired by such Person, (d)
obligations which are evidenced by notes, acceptances, or similar instruments,
(e) Capitalized Lease Obligations, (f) Rate Hedging Obligations, (g) Contingent
Obligations, (h) obligations for which such Person is obligated pursuant to or
in respect of a Letter of Credit and (i) repurchase obligations or liabilities
of such Person with respect to accounts or notes receivable sold by such Person.
"Interest Period" means, with respect to a Eurodollar Advance, a period of
one, two, three or six months commencing on a Business Day selected by the
Borrower pursuant to this Agreement. Such Interest Period shall end on (but
exclude) the day which corresponds numerically to such date one, two, three or
six months thereafter; provided, however, that if there is no such numerically
corresponding day in such next, second, third or sixth succeeding month, such
Interest Period shall end on the last Business Day of such next, second, third
or sixth succeeding month. If an Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day; provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end on
the immediately preceding Business Day.
"Investment" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable arising
in the ordinary course of business on terms customary in the trade), deposit
account or contribution of capital by such Person to any other Person or any
investment in, or purchase or other acquisition of, the stock, partnership
interests, notes, debentures or other securities of any other Person made by
such Person.
"Investment Policies" means those investment objectives and policies of the
Borrower set forth in the Borrower's 1996 Annual Report and attached hereto as
Schedule 1.1, as the same may be from time to time modified in accordance with
the terms hereof.
"Lenders" means the lending institutions listed on the signature pages of
this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
"Loan" means, with respect to a Lender, such Lender's term loan made
pursuant to Section 2.1 and "Loans" means, with respect to the Lenders, the
aggregate of all such term loans.
"Loan Documents" means this Agreement, the Notes and the other documents
and agreements contemplated hereby and executed by the Borrower in favor of the
Agent or any Lender.
"Margin Stock" has the meaning assigned to that term under Regulation U.
"Material Adverse Effect" means a material adverse effect on (a) the
business, Property, condition (financial or other), performance, results of
operations, or prospects of the Borrower taken as a whole, (b) the ability of
the Borrower to perform its obligations under the Loan Documents, or (c) the
validity or enforceability of any of the Loan Documents or the rights or
remedies of the Agent or the Lenders thereunder.
"Maturity Date" means June 3, 2002.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"1933 Act" means the Securities Act of 1933, as amended, reformed or
otherwise modified from time to time, together with all rules and regulations
issued at any time in connection therewith.
"1934 Act" means the Securities Exchange Act of 1934, as amended, reformed
or otherwise modified from time to time, together with all rules and regulations
issued at any time in connection therewith.
"1940 Act" means the Investment Company Act of 1940, as amended, reformed
or otherwise modified from time to time, together with all rules and regulations
issued at any time in connection therewith.
"Note" means a promissory note, in substantially the form of Exhibit A
hereto, with appropriate insertions, duly executed and delivered to the Agent by
the Borrower and payable to the order of a Lender in the amount of such Lender's
Loan, including any amendment, modification, renewal or replacement of such
promissory note.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid interest
on the Notes, all accrued and unpaid fees and all expenses, reimbursements,
indemnities and other obligations of the Borrower to the Lenders or to any
Lender, the Agent or any indemnified party hereunder arising under any of the
Loan Documents.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last day of each March, June, September and
December.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, limited liability company, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan, as defined in Section 3(2)
of ERISA, as to which the Borrower or any member of the Controlled Group may
have any liability.
"Property" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.
"pro-rata" means, when used with respect to a Lender, and any described
aggregate or total amount, an amount equal to such Lender's pro-rata share or
portion based on its percentage of the aggregate principal amount of outstanding
Loans.
"Purchase" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Borrower (a)
acquires any going business or all or substantially all of the assets of any
firm, corporation or division or line of business thereof, whether through
purchase of assets, merger or otherwise, or (b) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the outstanding
partnership interests of a partnership.
"Purchasers" is defined in Section 12.3.1.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (b) any and all
cancellations, buybacks, reversals, terminations or assignments of any of the
foregoing.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to depositary institutions.
"Regulation G" means Regulation G of the Board of Governors of the Federal
Reserve System as from time to time in effect and shall include any successor or
other regulation or official interpretation of said Board of Governors relating
to the extension of credit by Persons other than banks, brokers and dealers for
the purpose of purchasing or carrying margin stocks applicable to such Persons.
"Regulation T" means Regulation T of the Board of Governors of the Federal
Reserve System as from time to time in effect and shall include any successor or
other regulation or official interpretation of such Board of Governors relating
to the extension of credit by securities brokers and dealers for the purpose of
purchasing or carrying margin stocks applicable to such Persons.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to such Persons.
"Regulation X" means Regulation X of the Board of Governors of the Federal
Reserve System as from time to time in effect and shall include any successor or
other regulation or official interpretation of said Board of Governors relating
to the extension of credit by the specified lenders for the purpose of
purchasing or carrying margin stocks applicable to such Persons.
"Required Lenders" means Lenders in the aggregate having at least 66-2/3%
of the aggregate unpaid principal amount of the outstanding Loans.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.
"Risk-Based Capital Guidelines" is defined in Section 3.2.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Senior Securities" means any bond, debenture, note or similar obligation
or instrument constituting a security (other than stock) and evidencing
Indebtedness.
"Single Employer Plan" means a Plan subject to Title IV of ERISA maintained
by the Borrower or any member of the Controlled Group for employees of the
Borrower or any member of the Controlled Group, other than a Multiemployer Plan.
"Subsidiary" of a Person means (a) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(b) any partnership, association, joint venture, limited liability company or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Borrower.
"Term Loan" means, collectively, all of the Loans.
"Total Assets" means all assets of the Borrower which would be reflected on
a balance sheet of the Borrower prepared in accordance with Agreement Accounting
Principles.
"Total Liabilities" means all liabilities of the Borrower which would be
reflected on a balance sheet of the Borrower prepared in accordance with
Agreement Accounting Principles.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a Alternate Base
Rate Advance or Eurodollar Advance.
"Unfunded Liability" means the amount (if any) by which the present value
of all vested and unvested accrued benefits under a Single Employer Plan exceeds
the fair market value of assets allocable to such benefits, all determined as of
the then most recent valuation date for such Plans using PBGC actuarial
assumptions for single employer plan terminations.
"Unmatured Default" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
ARTICLE II
THE CREDITS
2.1. Term Loans. Each Lender severally (and not jointly) agrees, on the
terms and conditions set forth in this Agreement, to make a Loan to the Borrower
on the date hereof in the amount of its respective Commitment. No amount of any
Loan which is repaid or prepaid by the Borrower may be reborrowed hereunder. Not
later than noon Chicago time on the date hereof, each Lender shall make
available funds equal to its Commitment in immediately available funds in
Chicago, to the Agent at its address specified pursuant to Article XIII. The
Agent shall promptly make the funds so received from the Lenders available
to the Borrower by wire transfer to such account as the Borrower may designate.
2.2. Types and Minimum Amount of Advances. The Term Loan may from time to
time be an Alternate Base Rate Advance or a Eurodollar Advance, or a combination
thereof, selected by the Borrower in accordance with Section 2.5. Until
converted or continued pursuant to Section 2.5 the Term Loan shall be a
Eurodollar Advance with a six month Interest Period. Each Eurodollar Advance
shall be in the minimum amount of $l,000,000 (and in multiples of $l,000,000 if
in excess thereof); provided, however, that in no event shall more than three
(3) Eurodollar Advances be permitted to be outstanding at any time.
2.3. Amortization. The Term Loan shall be payable in full on the Maturity
Date.
2.4. Optional Principal Payments. Subject to Section 3.4, the Borrower may
from time to time pay, without penalty or premium, all outstanding Loans, or, in
a minimum aggregate amount of $1,000,000 or any integral multiple of $1,000,000
in excess thereof, any portion of the outstanding Loans upon two (2) Business
Days' prior notice to the Agent in the case of Eurodollar Advances and upon
notice not later than 12:00 noon (Chicago time) on the proposed payment date in
the case of Alternate Base Rate Advances. Promptly after receipt thereof, the
Agent will notify each Lender of the contents of each repayment notice received
by it hereunder.
2.5. Conversion and Continuation of Outstanding Advances. Alternate Base
Rate Advances shall continue as Alternate Base Rate Advances unless and until
such Alternate Base Rate Advances are converted into Eurodollar Advances. Each
Eurodollar Advance shall continue as a Eurodollar Advance until the end of the
then applicable Interest Period therefor, at which time such Eurodollar Advance
shall be automatically continued as a Eurodollar Advance with a six month
Interest Period unless the Borrower shall have given the Agent a
Conversion/Continuation Notice requesting that, at the end of such Interest
Period, such Eurodollar Advance continue as a Eurodollar Advance for another
Interest Period or be converted into an Alternate Base Rate Advance. Subject to
the terms of Section 2.2, the Borrower may elect from time to time to convert
all or any part of an Advance of any Type into any other Type of Advance;
provided, however, that any conversion of any Eurodollar Advance shall be made
on, and only on, the last day of the Interest Period applicable thereto. The
Borrower shall give the Agent irrevocable notice (a "Conversion/Continuation
Notice") of each conversion of an Alternate Base Rate Advance into a Eurodollar
Advance, conversion of a Eurodollar Advance into an Alternate Base Rate Advance
or continuation of a Eurodollar Advance as a Eurodollar Advance with an Interest
Period of other than six months not later than 10:00 a.m. (Chicago time) at
least three (3) Business Days prior to the date of the requested conversion or
continuation, specifying:
(a) the requested date of such conversion or continuation, which shall
be a Business Day;
(b) the aggregate amount and Type of the Advance which is to be
converted or continued; and
(c) the amount and Type(s) of Advance(s) into which such Advance is to
be converted or continued and, in the case of a conversion into or continuation
of a Eurodollar Advance, the duration of the Interest Period applicable thereto,
which shall end on or prior to the Maturity Date.
2.6. Changes in Interest Rate, etc. Each Alternate Base Rate Advance shall
bear interest at the Alternate Base Rate from and including the date of such
Advance or the date on which such Advance was converted into an Alternate Base
Rate Advance to (but not including) the date on which such Alternate Base Rate
Advance is paid or converted to a Eurodollar Advance. Changes in the rate of
interest on that portion of any Advance maintained as an Alternate Base Rate
Advance will take effect simultaneously with each change in the Alternate Base
Rate. Each Eurodollar Advance shall bear interest from and including the first
day of the Interest Period applicable thereto to, but not including, the last
day of such Interest Period at the interest rate determined as applicable to
such Eurodollar Advance. No Interest Period may end after the Maturity Date.
2.7. Rates Applicable After Default. Notwithstanding anything to the
contrary contained in Section 2.5, no Advance may be converted into or continued
as a Eurodollar Advance (except with the consent of the Agent and the Required
Lenders) when any Default or Unmatured Default has occurred and is continuing.
During the continuance of a Default the Required Lenders may, at their option,
by notice to the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 8.2 requiring
unanimous consent of the Lenders to changes in interest rates), declare that
each Eurodollar Advance and Alternate Base Rate Advance shall bear interest (for
the remainder of the applicable Interest Period in the case of Eurodollar
Advances) at a rate per annum equal to the rate otherwise applicable plus two
percent (2%) per annum; provided, however, that such increased rate shall
automatically and without action of any kind by the Lenders become and remain
applicable until revoked by the Required Lenders in the event of a Default
described in Section 7.6 or 7.7.
2.8. Method of Payment. All payments of the Obligations hereunder shall be
made, without setoff, deduction or counterclaim, in immediately available funds
to the Agent at the Agent's address specified pursuant to Article XIII, or at
any other Lending Installation of the Agent specified in writing by the Agent to
the Borrower, by noon (Chicago time) on the date when due and shall be applied
by the Agent on a pro rata basis among the Lenders. Each payment delivered to
the Agent for the account of any Lender shall be delivered promptly by the Agent
to such Lender in the same type of funds that the Agent received at its address
specified pursuant to Article XIII or at any Lending Installation specified in a
notice received by the Agent from such Lender. The Agent is hereby authorized to
charge any account of the Borrower maintained with First Chicago for each
payment of principal, interest and fees as it becomes due hereunder.
2.9. Notes; Notices. The obligation of the Borrower to repay the Loans
shall be evidenced by the Notes. Each Lender is hereby authorized to record the
principal amount of each of its Loans and each repayment on the schedule
attached to its Note; provided, however, that neither the failure to so record
nor any error in such recordation shall affect the Borrower's obligations under
such Note. The Borrower hereby authorizes the Lenders and the Agent to extend,
convert or continue Advances, effect selections of Types of Advances and to
transfer funds based on written notices signed by any two persons the Agent or
any Lender in good faith believes to be Authorized Officers.
2.10. Interest Payment Dates; Interest and Fee Basis. Interest accrued on
each Alternate Base Rate Advance shall be payable on each Payment Date,
commencing with the first such date to occur after the date hereof, on any date
on which an Alternate Base Rate Advance is prepaid, whether due to acceleration
or otherwise, and at maturity. Interest accrued on each Eurodollar Advance shall
be payable on the last day of its applicable Interest Period, on any date on
which the Eurodollar Advance is prepaid, whether by acceleration or otherwise,
and at maturity. Interest accrued on each Eurodollar Advance having an Interest
Period longer than three months shall also be payable on the last day of each
three-month interval during such Interest Period. Interest shall be calculated
for actual days elapsed on the basis of a 360-day year. Interest shall be
payable for the day an Advance is made but not for the day of any payment on the
amount paid if payment is received prior to noon (Chicago time) at the place of
payment. If any payment of principal of or interest on an Advance shall become
due on a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and, in the case of a principal payment, such extension
of time shall be included in computing interest in connection with such payment.
2.11. Notification of Interest Rates. Promptly after receipt thereof, the
Agent will notify each Lender of the contents of each Conversion/Continuation
Notice received by it hereunder. The Agent will notify each Lender of the
interest rate applicable to each Eurodollar Advance promptly upon determination
of such interest rate and will give each Lender prompt notice of each change in
the Alternate Base Rate.
2.12. Lending Installations. Each Lender may book its Loan at any Lending
Installation selected by such Lender and may change its Lending Installation
from time to time. All terms of this Agreement shall apply to any such Lending
Installation and its Note shall be deemed held by each Lender for the benefit of
such Lending Installation. Each Lender may, by written or telecopy notice to the
Agent and the Borrower, designate a Lending Installation for whose account Loan
payments are to be made.
2.13. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender,
as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (a) in the case of a Lender, the
proceeds of a Loan, or (b) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
the Borrower has not in fact made such payment to the Agent, the Lenders shall,
on demand by the Agent, repay to the Agent the amount so made available together
with interest thereon in respect of each day during the period commencing on the
date such amount was so made available by the Agent until the date the Agent
recovers such amount at a rate per annum equal to the Federal Funds Effective
Rate for such day. If any Lender has not in fact made such payment to the Agent,
such Lender or the Borrower shall, on demand by the Agent, repay to the Agent
the amount so made available together with interest thereon in respect of each
day during the period commencing on the date such amount was so made available
by the Agent until the date the Agent recovers such amount at a rate per annum
equal to (a) in the case of payment by a Lender, the Federal Funds Effective
Rate for such day, or (b) in the case of payment by the Borrower, the interest
rate applicable to the Loans.
2.14. Taxes. (a) Any payments made by the Borrower under this Agreement
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority, excluding
taxes upon the overall net income of any Lender or applicable Lending
Installation imposed by the jurisdiction in which such Lender or Lending
Installation is incorporated or has its principal place of business. If any such
non-excluded taxes, levies, imposts, duties, charges, fees deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts
payable to the Agent or any Lender hereunder, the amounts so payable to the
Agent or such Lender shall be increased to the extent necessary to yield to the
Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any
such other amounts payable hereunder at the rates or in the amounts specified in
or pursuant to this Agreement; provided, however, that the Borrower shall not be
required to increase any such amounts payable to any Lender that is not
organized under the laws of the U.S. or a state thereof if such Lender fails to
comply with the requirements of paragraph (b) of this Section 2.14. Whenever any
Non-Excluded Taxes are payable by the Borrower, as promptly as practicable
thereafter the Borrower shall send to the Agent for its own account or for the
account of such Lender, as the case may be, a certified copy of an original
official receipt received by the Borrower showing payment thereof. If the
Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fails to remit to the Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Agent and the Lenders for
any incremental taxes, interest or penalties that may become payable by any
Agent or any Lender as a result of any such failure. The agreements in this
Section 2.14 shall survive the termination of this Agreement and the payment of
all other amounts payable hereunder.
(b) At least five Business Days prior to the first date on which
interest or fees are payable hereunder for the account of any Lender, each
Lender that is not organized under the laws of the United States of America, or
a state thereof, agrees that it will deliver to each of the Borrower and the
Agent two duly completed copies of United States Internal Revenue Service Form
1001 or 4224, certifying in either case that such Lender is entitled to receive
payments under this Agreement and the Notes without deduction or withholding of
any United States federal income taxes. Each Lender which so delivers a Form
1001 or 4224 further undertakes to deliver to each of the Borrower and the Agent
two additional copies of such form (or a successor form) on or before the date
that such form expires (currently, three successive calendar years for Form 1001
and one calendar year for Form 4224) or becomes obsolete or after the occurrence
of any event requiring a change in the most recent forms so delivered by it, and
such amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Agent, in each case certifying that such Lender
is entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes, unless any
change in treaty, law or regulation (and not a change in the Lender's business,
operations or place of business or incorporation) has occurred prior to the date
on which any such delivery would otherwise be required which renders all such
forms inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender advises the Borrower
and the Agent that it is not capable of receiving payments without any deduction
or withholding of United States federal income tax.
2.15. Agent's Fees. The Borrower shall pay to the Agent those fees, in
addition to any other payments called for hereby, in the amounts and at the
times separately agreed to between the Agent and the Borrower.
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. Yield Protection. If, after the date hereof, the adoption of or any
change in any law or any governmental or quasi-governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law), or any
change in the interpretation or administration thereof, or the compliance of any
Lender therewith,
(a) subjects any Lender or any applicable Lending Installation to any
tax, duty, charge or withholding on or from payments due the Borrower (excluding
taxation of the overall net income of any Lender or applicable Lending
Installation imposed by the jurisdiction in which (such Lender or Lending
Installation is incorporated or has its principal place of business), or changes
the basis of taxation of principal, interest or any other payments to any Lender
or Lending Installation in respect of its Eurodollar Loans or other amounts due
it hereunder with respect to its Eurodollar Loans, or
(b) with respect to Eurodollar Loans, imposes or increases or deems
applicable any reserve, assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender or any applicable Lending Installation (other than
reserves and assessments taken into account in determining the interest rate
applicable to Eurodollar Advances), or
(c) imposes any other condition the result of which is to increase the
cost to any Lender or any applicable Lending Installation of making, funding or
maintaining Eurodollar Loans or reduces any amount receivable by any Lender or
any applicable Lending Installation in connection with Eurodollar Loans, or
requires any Lender or any applicable Lending Installation to make any payment
calculated by reference to the amount of Eurodollar Loans held or interest
received by it in respect thereof,
and, in the case of any of Section 3.1 (a), (b) or (c), the Lender shall in good
faith determine the amount of such increased expense incurred or reduction in
amount received to be material, then, within 15 days of demand by such Lender,
the Borrower shall pay such Lender that portion of such increased expense
incurred or reduction in an amount received (other than any such expense or
reduction for which the Lenders are also entitled to compensation pursuant to
Section 2.14(a)) which such Lender reasonably determines is attributable to
making, funding and maintaining its Loans and its Commitment.
3.2. Chances in Capital Adequacy Regulations. If a Lender determines in
good faith that the amount of capital required or expected to be maintained by
such Lender, any Lending Installation of such Lender or any corporation
controlling such Lender is increased by an amount deemed material by such Lender
as a result of a Change, then, within 15 days of demand by such Lender, the
Borrower shall pay such Lender the amount necessary to compensate for any
shortfall in the rate of return on the portion of such increased capital which
such Lender reasonably determines is attributable to this Agreement, its Loans
or its obligation to make Loans hereunder (after taking into account such
Lender's policies as to capital adequacy). "Change" means (a) any change after
the date of this Agreement in the Risk-Based Capital Guidelines, or (b) any
adoption of or change in any other law, governmental or quasi-governmental rule,
regulation, policy, guideline, interpretation, or directive (whether or not
having the force of law) after the date of this Agreement which affects the
amount of capital required or expected to be maintained by any Lender or any
Lending Installation or any corporation controlling any Lender. "Risk-Based
Capital Guidelines" means (a) the risk-based capital guidelines in effect in the
United States on the date of this Agreement, and (b) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisors Practices entitled "International Convergence of Capital
Measurements and Capital Standards" and any amendments to such regulations
adopted prior to the date of this Agreement.
3.3. Availability of Types of Advances. If any Lender determines in good
faith that maintenance of any of its Eurodollar Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation or directive,
whether or not having the force of law, the Agent shall suspend the availability
of the affected Type of Advance and require any Eurodollar Advances to be repaid
or converted into an Alternate Base Rate Advance within five days after
Borrower's receipt of notice by such Lender. If the Required Lenders reasonably
determine that (a) deposits of a type or maturity appropriate to match fund
Eurodollar Advances are not available, or (b) the interest rate applicable to a
Type of Advance does not accurately or fairly reflect the cost of making or
maintaining such Advance, then the Agent shall suspend the availability of the
affected Type of Advance and require any Eurodollar Advances of the affected
Type to be repaid.
3.4. Funding Indemnification. If any payment of a Eurodollar Advance occurs
on a date which is not the last day of the applicable Eurodollar Interest
Period, whether because of acceleration, prepayment or otherwise, or a
Eurodollar Advance is not made, continued or converted on the date specified by
the Borrower for any reason other than default by the Lenders, the Borrower will
indemnify each Lender for any loss or cost incurred by it resulting therefrom,
including, without limitation, any loss or cost in liquidating or employing
deposits acquired to fund or maintain the Eurodollar Advance.
3.5. Lender Statements; Survival of Indemnity. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Loans to reduce any liability of the Borrower to such
Lender under Sections 3.1 and 3.2 or to avoid the unavailability of a Type of
Advance under Section 3.3, so long as such designation is not disadvantageous to
such Lender. Each Lender shall deliver a written statement of such Lender to the
Borrower (with a copy to the Agent) as to the amount due, if any, under Sections
3.1, 3.2 or 3.4. Such written statement shall set forth in reasonable detail the
calculations upon which such Lender determined such amount and shall be final,
conclusive and binding on the Borrower in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a
Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar
Loan through the purchase of a deposit of the type and maturity corresponding to
the deposit used as a reference in determining the Eurodollar Rate applicable to
such Loan, whether in fact that is the case or not. Unless otherwise provided
herein, the amount specified in the written statement of any Lender shall be
payable on demand after receipt by the Borrower of the written statement. The
obligations of the Borrower under Sections 3.1, 3.2 and 3.4 shall survive
payment of the Obligations and termination of this Agreement.
3.6. Right to Substitute Lender. Any Lender claiming any additional amounts
payable pursuant to Section 3.1 or 3.2 or unable to make a Type of Advance
available in accordance with Section 3.3, shall so long as no Default or
Unmatured Default has occurred and is continuing, upon the written request of
the Borrower delivered to such Lender and the Agent, assign, pursuant to and in
accordance with the provisions of Section 12.3, all of its rights and
obligations under this Agreement and under the Loan Documents to another Lender
or to a commercial bank, other financial institution, commercial finance company
or other business lender selected by the Borrower and reasonably acceptable to
the Agent that has agreed not to claim any additional amounts under Section 3.1
or 3.2 with respect to some or all of the taxes or regulatory changes that gave
rise to such assigning Lender's claim for such compensation, or that has agreed
to make the Type of Advance available that was not made available from such
assigning Lender, in consideration for (a) the payment by such assignee to such
assigning Lender of the principal of, and interest accrued and unpaid to the
date of such assignment on, the Notes held by such assigning Lender, (b) the
payment by the Borrower to such assigning Lender of any and all other amounts
owing to such assigning Lender under any provision of this Agreement accrued and
unpaid to the date of such assignment and (c) the Borrower's release of such
assigning Lender from any further obligation or liability under this Agreement
and the Loan Documents.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. The Loans. The Lenders shall not be required to make the Loans unless
the Borrower has furnished the following to the Agent with sufficient copies for
the Lenders and the other conditions set forth below have-been satisfied on the
date hereof:
(a) Charter Documents; Good Standing Certificates. Copies of the
certificate of incorporation of the Borrower, together with all amendments
thereto, both certified by the appropriate governmental officer in its
jurisdiction of incorporation, together with a good standing certificate issued
by the Secretary of State of the jurisdiction of its incorporation and such
other jurisdictions as shall be requested by the Agent.
(b) By-Laws and Resolutions. Copies, certified by the Secretary or
Assistant Secretary of the Borrower, of its by-laws and of its Board of
Directors' resolutions authorizing the execution, delivery and performance of
the Loan Documents to which the Borrower is a party.
(c) Secretary's Certificate. An incumbency certificate, executed by
the Secretary or Assistant Secretary of the Borrower, which shall identify by
name and title and bear the signature of the officers of the Borrower authorized
to sign the Loan Documents and to make borrowings hereunder, upon which
certificate the Agent and the Lenders shall be entitled to rely until informed
of any change in writing by the Borrower.
(d) Officer's Certificate. A certificate, dated the date hereof,
signed by an Authorized Officer of the Borrower, in form and substance
satisfactory to the Agent, to the effect that: (i) on such date (both before and
after giving effect to the making of the Loans hereunder) no Default or
Unmatured Default has occurred and is continuing; (ii) no injunction or
temporary restraining order which would prohibit the making of the Loans, or
other litigation which could reasonably be expected to have a Material Adverse
Effect is pending or, to the best of such Person's knowledge, threatened; (iii)
each of the representations and warranties set forth in Article V of this
Agreement is true and correct on and as of the date hereof; and (iv) since
December 31, 1996 no event or change has occurred that has caused or evidences a
Material Adverse Effect.
(e) Legal Opinions. A written opinion of Xxxxx Xxxxxxxxx, counsel to
the Borrower, addressed to the Agent and the Lenders in form and substance
acceptable to the Agent and its counsel.
(f) Notes. Notes payable to the order of each of the Lenders duly
executed by the Borrower.
(g) Payoff. Evidence satisfactory to the Agent that substantially
contemporaneously with the making of the Term Loan the Borrower's $28,050,000 of
convertible, extendible notes are being paid in full.
(h) Legal and Regulatory Matters. All legal and regulatory matters
pertaining to the Loans shall be satisfactory to the Agent.
(i) Other. Such other documents as the Agent, any Lender or their
counsel may have reasonably requested.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that, both before and
after giving effect to the Loans:
5.1. Corporate Existence and Standing. The Borrower is a corporation duly
incorporated, validly existing and in good standing (if applicable) under the
laws of its jurisdiction of incorporation and is duly qualified and in good
standing as a foreign corporation and is duly authorized to conduct its business
in each jurisdiction in which its business is conducted and in which the failure
to be so qualified or authorized may reasonably be expected to have a Material
Adverse Effect.
5.2. Authorization and Validity. The Borrower has all requisite power and
authority (corporate and otherwise) and legal right to execute and deliver each
of the Loan Documents and to perform its obligations thereunder. The execution
and delivery by the Borrower of the Loan Documents and the performance of its
obligations thereunder have been duly authorized by proper corporate proceedings
and the Loan Documents constitute legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their terms, except
as enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
5.3. Compliance with Laws and Contracts. The Borrower has complied with all
applicable statutes, rules, regulations, orders, judgments, decrees and
restrictions, including without limitation the 1940 Act and all environmental
laws, of any Governmental Authority having jurisdiction over the conduct of its
business or the ownership of its Properties, except where the failure to so
comply could not reasonably be expected to have a Material Adverse Effect.
Neither the execution and delivery by the Borrower of the Loan Documents, the
consummation of the Loans or the application of the proceeds of the Loans, nor
compliance with the provisions of the Loan Documents will, or at the relevant
time did, (a) violate any law, rule, regulation (including Regulations G, U or
X), order, writ, judgment, injunction, decree or award binding on the Borrower
or the Borrower's charter, articles or certificate of incorporation or by-laws,
(b) violate the Investment Policies, (c) violate the provisions of or require
the approval or consent of any party to any indenture, instrument or agreement
to which the Borrower is a party or is subject, or by which it or its Property
is bound, or conflict with or constitute a default thereunder, or result in the
creation or imposition of any Lien (other than Liens permitted by, the Loan
Documents) in, of or on the Property of the Borrower pursuant to the terms of
any such indenture, instrument or agreement, or (d) require any consent of the
stockholders of any Person, and except for any violation of, or failure to
obtain an approval or consent required under, any such indenture, instrument or
agreement which could not reasonably be expected to have a Material Adverse
Effect.
5.4. Governmental Consents. Except for any of the following which have been
entered, taken, obtained, filed or made and which remain in full force and
effect or which if not entered, taken, obtained or filed could not reasonably be
expected to have a Material Adverse Effect, no order, consent, approval,
qualification, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, or other action in respect of, any court,
Governmental Authority, any securities exchange or other Person is or at the
relevant time was required to authorize, or is or at the relevant time was
required in connection with the execution, delivery, consummation or performance
of, or the legality, validity, binding effect or enforceability of, any of the
Loan Documents or the consummation of the Loans or the application of the
proceeds of the Loans.
5.5. Financial Statements. The Borrower has heretofore furnished to each of
the Lenders the December 31, 1995 and December 31, 1996 audited financial
statements of the Borrower (collectively, the "Financial Statements"). Each of
the Financial Statements were prepared in accordance with Agreement Accounting
Principles and fairly present the financial condition and operations of the
Borrower at such dates and the results of its operations for the respective
periods then ended.
5.6. Material Adverse Change. No material adverse change in the business,
condition (financial or otherwise), operations, performance or Properties of the
Borrower has occurred since December 31, 1996.
5.7. Taxes. The Borrower has filed or caused to be filed or properly filed
for extensions on a timely basis and in correct form all United States federal
and applicable material foreign, state and local tax returns and all other
material tax returns which are required to be filed and have paid all material
taxes due pursuant to said returns or pursuant to any assessment received by the
Borrower, except such material taxes, if any, as are being contested in good
faith and as to which adequate reserves have been provided in accordance with
Agreement Accounting Principles, and as to which no Lien exists. As of the date
hereof, the United States income tax returns of the Borrower on a consolidated
basis have never been audited by the Internal Revenue Service. There are no
pending audits or, to the best of the Borrower's knowledge, investigations
regarding the Borrower's federal, foreign, state or local tax returns which may
reasonably be expected to have Material Adverse Effect. No claims are being
asserted with respect to any such taxes which could reasonably be expected to
have a Material Adverse Effect. The charges, accruals and reserves on the books
of the Borrower in respect of any taxes or other governmental charges are in
accordance with Agreement Accounting Principles. The Borrower has taken all
steps necessary to maintain its tax-exempt status under the Code with respect to
net investment income and net capital gains.
5.8. Litigation. There is no litigation, arbitration, proceeding, inquiry
or governmental investigation (including, without limitation, by any insurance
regulatory authority) pending or, to the knowledge of any of their officers,
threatened against or affecting the Borrower or any of its properties which
could reasonably be expected to have a Material Adverse Effect or which seeks to
prevent, enjoin or unduly delay the making of the Loans under this Agreement.
The Borrower has no material contingent obligations not disclosed in the
Financial Statements.
5.9. Subsidiaries. The Borrower has no Subsidiaries.
5.10. ERISA. Neither the Borrower nor any other member of the Controlled
Group maintains, or is obligated to contribute to, any Multiemployer Plan or has
incurred, or is reasonably expected to incur, any withdrawal liability to any
Multiemployer Plan. The Borrower neither maintains nor is obligated in respect
of any Plan.
5.11. Default. No Default or Unmatured Default has occurred and is
continuing.
5.12. Federal Reserve Regulations. The Borrower is not engaged, directly or
indirectly, principally, or as one of its important activities, in the business
of extending, or arranging for the extension of, credit for the purpose of
purchasing or carrying Margin Stock. Neither the making of any Loan hereunder
nor the use of the proceeds thereof will violate or be inconsistent with the
provisions of Regulation G, Regulation T, Regulation U or Regulation X.
5.13. Investment Company. The Borrower is registered under the 1940 Act as
a closed-end, diversified management investment company. The Borrower has
registered the sale of its common stock under the 1933 Act and the 1940 Act
pursuant to one or more registration statements.
5.14. Holding Company. The Borrower is not, and after giving effect to the
Term Loan will not be, a "holding company", 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.
5.15. Investment Policies. The Borrower is in compliance with the
Investment Policies.
5.16. Disclosure. None of the (a) information, exhibits or reports
furnished or to be furnished by the Borrower to the Agent or to any Lender in
connection with the negotiation of the Loan Documents, or (b) representations or
warranties of the Borrower contained in this Agreement, the other Loan Documents
or any other document, certificate or written statement furnished to the Agent
or the Lenders by or on behalf of the Borrower for use in connection with the
transactions contemplated by this Agreement, as the case may be, contained,
contains or will contain any untrue statement of a material fact or omitted,
omits or will omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made. There is no fact known to the
Borrower (other than matters of a general economic nature) that has had or could
reasonably be expected to have a Material Adverse Effect and that has not been
disclosed herein or in such other documents, certificates and statements
furnished to the Lenders for use in connection with the transactions
contemplated by this Agreement.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
6.1. Financial Reporting. The Borrower will maintain a system of accounting
established and administered in accordance with generally accepted accounting
principles, consistently applied, and will furnish to the Lenders:
(a) As soon as practicable and in any event within 90 days after the
close of each of its Fiscal Years, an unqualified audit report with respect to
the Borrower certified by independent certified public accountants, acceptable
to the Lenders, prepared in accordance with Agreement Accounting Principles,
including balance sheets as of the end of such period and related statements of
income, retained earnings and cash flows accompanied by (i) any management
letter prepared by said accountants and (ii) a certificate of said accountants
that, in the course of the examination necessary for their certification of the
foregoing, they have obtained no knowledge of any Default or Unmatured Default,
or if in the opinion of such accountants, any Default or Unmatured Default shall
exist, stating the nature and status thereof.
(b) As soon as practicable and in any event within 45 days after the
close of the first three Fiscal Quarters of each of its Fiscal Years, a balance
sheet of the Borrower as at the close of each such period and statements of
income, retained earnings and cash flows of the Borrower for the period from the
beginning of such Fiscal Year to the end of such quarter, all certified by its
Treasurer or any Vice President.
(c) Together with the financial statements required by clauses (a) and
(b) above, a compliance certificate in substantially the form of Exhibit B
hereto signed by its Treasurer or Assistant Treasurer showing the calculations
necessary to determine compliance with this Agreement and stating that no
Default or Unmatured Default exists, or if any Default or Unmatured Default
exists, stating the nature and status thereof.
(d) As soon as possible and in any event within 10 days after the
Borrower learns thereof, notice of the assertion or commencement of any
claims, action, suit or proceeding against or affecting the Company which may
reasonably be expected to have a Material Adverse Effect.
(e) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports which the
Borrower files with the Securities and Exchange Commission.
(f) Promptly after the entering into thereof, copies of all amendments
to all investment advisory contracts (including all sub-advisory or similar
contracts), and of all new investment advisory contracts (including all
sub-advisory or similar contracts) entered into after the date hereof.
(g) Such other information (including non-financial information) as
the Agent or any Lender may from time to time reasonable request.
6.2. Use of Proceeds. The Borrower will use the proceeds of the Term Loan
to meet the general corporate needs of the Borrower, including the repayment of
the Indebtedness described in Section 4.1(g). The Borrower will not use any of
the proceeds of the Loans to purchase or carry any "margin stock" (as defined in
Regulation U) in violation of Regulation G, Regulation T, Regulation U or
Regulation X.
6.3. Notice of Default. The Borrower will give prompt notice in writing to
the Lenders of the occurrence of (a) any Default or Unmatured Default and (b)
any other event or development, financial or other relating specifically to the
Borrower (and not of a general economic or political nature) which could
reasonably be expected to have a Material Adverse Effect.
6.4. Conduct of Business. The Borrower will carry on and conduct its
business in substantially the same manner and in substantially the same fields
of enterprise as it is presently conducted and to do all things necessary to
remain duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted except where such failure to remain in good standing or to maintain
such authority may not reasonably be expected to have a Material Adverse Effect.
The Borrower will not become an open-end management investment company under the
1940 Act without the prior written consent of the Lenders.
6.5. Taxes. The Borrower will timely file complete and correct United
States federal and applicable foreign, state and local tax returns required by
applicable law and pay when due all taxes, assessments and governmental charges
and levies upon it or its income, profits or Property, except those which are
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves have been set aside. The Borrower will at all times
maintain its status as a "regulated investment company" under the Code and will
timely distribute its income (including capital gains) so that it will not be
subject to tax (including corporate tax) under the Code.
6.6. Insurance. The Borrower will maintain or cause to be maintained with
responsible insurance companies (a) insurance with respect to its properties and
business to the extent required under applicable law, including such fidelity
bond coverage as shall be required by Rule 17-g-1 promulgated under the 1940 Act
or any successor provision, (b) errors and omissions, and director and officer
liability insurance, and (c) other insurance against such casualties and
contingencies, and, with respect to clauses (b) and (c) hereof, of such types
and in such amounts as are customarily carried by similarly situated businesses.
6.7. Compliance with Laws. The Borrower will comply with the 1940 Act, the
1933 Act, the 1934 Act and all other laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject, the
failure to comply with which could reasonably be expected to have a Material
Adverse Effect.
6.8. Maintenance of Properties. The Borrower will do all things necessary
to maintain, preserve, protect and keep its Property in good repair, working
order and condition, and make all necessary and proper repairs, renewals and
replacements so that its business carried on in connection therewith may be
properly conducted at all times, except where the failure to so maintain,
preserve, protect and repair could not reasonably be expected to have a Material
Adverse Effect.
6.9. Inspection. The Borrower will permit the Agent and the Lenders, by
their respective representatives and agents, to inspect any of the Property,
corporate books and financial records of the Borrower, to examine and make
copies of the books of accounts and other financial records of the Borrower and
to discuss the affairs, finances and accounts of the Borrower with, and to be
advised as to the same by, its officers at such reasonable times and intervals
as the Lenders may designate.
6.10. Indebtedness. The Borrower will not create, incur or suffer to exist
any Indebtedness, except:
(a) the Loans;
(b) Indebtedness existing on the date hereof and described in Schedule
6.10 hereto; and
(c) Rate Hedging Obligations related to the Loans or incurred in the
ordinary course of business in compliance with the Investment Policies.
6.11. Merger. The Borrower will not merge or consolidate with or into any
other Person, except that the Borrower may merge or consolidate with any other
Person so long as the Borrower is the continuing or surviving corporation and,
prior to and after giving effect to such merger or consolidation, no Default or
Unmatured Default shall exist.
6.12. Sale of Assets. The Borrower will not lease, sell, transfer or
otherwise dispose of its Property, to any other Person except for sales in the
ordinary course of business (which the Lenders acknowledge includes the sale of
Investments from time to time).
6.13. Investments and Purchases. The Borrower will not make or suffer to
exist any Investments, or commitments therefor, or to create any Subsidiary or
to become or remain a partner in any partnership or joint venture, or to make
any Purchases, except Investments permitted by the Investment Policies; provided
that the Borrower will not have or acquire any Subsidiary. The Borrower will not
violate the Investment Policies or amend, rescind or modify the Investment
Policies in any material respect without the consent of the Required Lenders.
6.14. Contingent Obligations. The Borrower will not make or suffer to exist
any Contingent Obligation, except by endorsement of instruments for deposit or
collection in the ordinary course of business.
6.15. Liens. The Borrower will not create, incur, or suffer to exist any
Lien in, of or on the Property of the Borrower, except:
(a) Liens for taxes, assessments or governmental charges or levies on
its Property if the same shall not at the time be delinquent or thereafter can
be paid without penalty, or are being contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with generally
accepted principles of accounting shall have been set aside on its books;
(b) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other social
security or retirement benefits, or similar legislation; and
(c) Liens in favor of the Borrower's investments custodian arising
pursuant to customary custodial contract terms.
6.16. Affiliates. The Borrower will not enter into any transaction
(including, without limitation, the purchase or sale of any Property or service)
with, or make any payment or transfer to, any Affiliate except in the ordinary
course of business and pursuant to the reasonable requirements of the Borrower's
business and upon fair and reasonable terms no less favorable to the Borrower
than the Borrower would obtain in a comparable arms-length transaction. At any
time that a Default or Unmatured Default shall have occurred and be continuing,
the Borrower shall not pay, or cause or permit to be paid, any management or
advisory fees of any type to any investment adviser, whether pursuant to the
terms of an investment advisory agreement or not.
6.17. Asset Coverage Ratio. The Borrower shall at all times on and after
the date hereof maintain an Asset Coverage Ratio of at least 3:1.
6.18. Plans. The Borrower shall not incur any liability or obligation with
respect to any Plan.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall constitute
a Default:
7.1. Any representation or warranty made or deemed made by or on behalf of
the Borrower to the Lenders or the Agent under or in connection with this
Agreement, any other Loan Document, any Loan, or any certificate or information
delivered in connection with this Agreement or any other Loan Document shall be
false in any material respect on the date as of which made or deemed made.
7.2. Nonpayment of (a) any principal of any Note when due, or (b) any
interest upon any Note or any other fee or obligations under any of the Loan
Documents within five days after the same becomes due.
7.3. The breach by the Borrower of any of the terms or provisions of
Section 6.2 or 6.3(a) or Sections 6.10 through 6.18.
7.4. The breach by the Borrower (other than a breach which constitutes a
Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of
this Agreement which is not remedied); within thirty (30) days after written
notice from the Agent or any Lender.
7.5. Failure of the Borrower to pay any Indebtedness aggregating in excess
of $1,000,000 when due; or the default by the Borrower in the performance of any
term, provision or condition contained in any agreement or agreements under
which any such Indebtedness was created or is governed, or the occurrence of
any other event or existence of any other condition, the effect of any of which
is to cause, or to permit the holder or holders of such Indebtedness to cause,
such Indebtedness to become due prior to its stated maturity; or any such
Indebtedness of the Borrower shall be declared to be due and payable or required
to be prepaid (other than by a regularly scheduled payment) prior to the stated
maturity thereof.
7.6. The Borrower shall (a) have an order for relief entered with respect
to it under the Federal bankruptcy laws as now or hereafter in effect, (b) make
an assignment for the benefit of creditors, (c) apply for, seek, consent to, or
acquiesce in, the appointment of a receiver, custodian, trustee, examiner,
liquidator or similar official for it or any Substantial Portion of its
Property, (d) institute any proceeding seeking an order for relief under the
Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate
it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors or fail to file an answer or other pleading denying the material
allegations of any such proceeding filed against it, (e) take any corporate
action to authorize or effect any of the foregoing actions set forth in this
Section 7.6, (f) fail to contest in good faith any appointment or proceeding
described in Section 7.7 or (g) become unable to pay, not pay, or admit in
writing its inability to pay, its debts generally as they become due.
7.7. Without the application, approval or consent of the Borrower, a
receiver, trustee, examiner, liquidator or similar official shall be appointed
for the Borrower or any substantial portion of its Property, or a proceeding
described in Section 7.6(d) shall be instituted against the Borrower and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of thirty consecutive days.
7.8. The Borrower shall fail within thirty days to pay, bond or otherwise
discharge any judgment or order for the payment of money in excess of $500,000
(or multiple judgments or orders for the payment of an aggregate amount in
excess of $1,000,000), which is not stayed on appeal or otherwise being
appropriately contested in good faith and as to which no enforcement actions
have been commenced.
7.9. Continental Assurance Company shall cease to be the Borrower's
exclusive investment advisor.
7.10. Nonpayment by the Borrower of any Rate Hedging Obligation relating to
the Term Loan or any portion thereof or the breach by the Borrower of any term,
provision or condition contained in any agreement, device or arrangement giving
rise to any such Rate Hedging Obligation, which non-payment or breach is not
remedied within five (5) days after the Borrower's receipt of notice thereof.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration. If any Default described in Section 7.6 or 7.7 occurs
with respect to the Borrower, the Obligations shall immediately become due and
payable without any election or action on the part of the Agent or any Lender.
If any other Default occurs, the Required Lenders (or the Agent with the consent
of the Required Lenders) may declare the Obligations to be due and payable
whereupon the Obligations shall become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which the Borrower
hereby expressly waives.
8.2. Amendments. Subject to the provisions of this Article VIII, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; provided, however, that no such supplemental agreement shall,
without the consent of each Lender:
(a) Extend the Maturity Date;
(b) Reduce the principal amount of any Loan or reduce the rate or
extend the time of payment of interest or fees thereon;
(c) Reduce the percentage specified in the definition of Required
Lenders;
(d) Amend this Section 8.2; or
(e) Permit any assignment by the Borrower of its Obligations or its
rights hereunder.
No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent. The Agent may waive payment
of the fee required under Section 12.3.2 without obtaining the consent of any
other party to this Agreement.
8.3. Preservation of Rights. No delay or omission of the Lenders or the
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.2, and then only
to the extent in such writing specifically set forth. All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all shall be
available to the Agent and the Lenders until the Obligations have been paid in
full.
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations. All representations and warranties of the
Borrower contained in this Agreement or of the Borrower contained in any Loan
Document shall survive delivery of the Notes and the making of the Loans herein
contemplated.
9.2. Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, no Lender shall be obligated to extend credit to the
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
9.3. Taxes. Any stamp, documentary or similar taxes, assessments or charges
payable or ruled payable by any governmental authority in respect of the
Loan Documents shall be paid by the Borrower, together with interest and
penalties, if any.
9.4. Headings. Section headings in the Loan Documents are for convenience
of reference only, and shall not govern the interpretation of any of the
provisions of the Loan Documents.
9.5. Entire Agreement. The Loan Documents embody the entire agreement and
understanding among the Borrower, the Agent and the Lenders and supersede all
prior agreements and understandings among the Borrower, the Agent and the
Lenders relating to the subject matter thereof other than the fee letter dated
March 18, 1997 in favor of First Chicago.
9.6. Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any of
its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns.
9.7. Expenses; Indemnification. The Borrower shall reimburse the Agent for
any costs, internal charges and out-of-pocket expenses (including reasonable
attorneys' fees and time charges of attorneys for the Agent, which attorneys may
be employees of the Agent) paid or incurred by the Agent in connection with the
preparation, negotiation, execution, delivery, review, syndication, amendment,
modification, and administration of the Loan Documents. The Borrower also agrees
to reimburse the Agent and the Lenders for any costs, internal charges and
out-of-pocket expenses (including reasonable attorneys' fees and time charges of
attorneys for the Agent and the Lenders, which attorneys may be employees of the
Agent or the Lenders) paid or incurred by the Agent or any Lender in connection
with the collection and enforcement of the Loan Documents. The Borrower further
agrees to indemnify the Agent and each Lender, its directors, officers and
employees against all losses, claims, damages, penalties, judgments, liabilities
and expenses (including, without limitation, all expenses of litigation or
preparation therefor whether or not the (Agent or any Lender is a party thereto)
which any of them may pay or incur arising out of or relating to this
Agreement, the other Loan Documents, the transactions contemplated hereby or
thereby or the direct or indirect application or proposed application of the
proceeds of any Loan hereunder except to the extent that they arise out of the
gross negligence or willful misconduct of the party seeking indemnification. The
obligations of the Borrower under this Section shall survive the termination of
this Agreement.
9.8. Numbers of Documents. All statements, notices, closing documents, and
requests hereunder shall be furnished to the Agent with sufficient counterparts
so that the Agent may furnish one to each of the Lenders.
9.9. Accounting. Except as provided to the contrary herein, all accounting
terms used herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with Agreement Accounting Principles.
9.10. Severability of Provisions. Any provision in any Loan Document that
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the (operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
9.11. Nonliability of Lenders. The relationship between the Borrower and
the Lenders and the Agent shall be solely that of borrower and lender. Neither
the Agent nor any Lender shall have any fiduciary responsibilities to the
Borrower. Neither the Agent nor any Lender undertakes any responsibility to the
Borrower to review or inform the Borrower of any matter in connection with any
phase of the Borrower's business or operations.
9.12. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS, WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS, OF THE STATE
OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
9.13. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF
ANY OTHER JURISDICTION IN WHICH THE BORROWER OWNS ASSETS OR CONDUCTS BUSINESS.
ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY
AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
9.14. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER HEREBY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
9.15. Disclosure. Each Lender hereby (a) acknowledges and agrees that First
Chicago and/or its Affiliates from time to time may hold other investments in,
make other loans to or have other relationships with the Borrower, including,
without limitation, in connection with any interest rate hedging instruments or
agreements or swap transactions, and (b) to the extent any such liability would
not exist but for First Chicago's status as Agent hereunder, waives any
liability of First Chicago or such affiliate to any Lender arising out of or
resulting from such investments, loans or relationships other than liabilities
arising out of the gross negligence or willful misconduct of First Chicago or
its Affiliates.
9.16. Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from the Borrower pursuant to this Agreement in
confidence and for use in connection with this Agreement, including without
limitation, for use in connection with its rights and remedies hereunder, except
for disclosure (a) to other Lenders and their respective affiliates, (b) to
legal counsel, accountants, and other professional advisors to that Lender, (c)
to regulatory officials, (d) as requested pursuant to or as required by law,
regulation, or legal process, (e) in connection with any legal proceeding to
which that Lender is a party, and (f) permitted by Section 12.4.
9.17. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart. This Agreement shall be effective when it has been executed by the
Borrower, the Agent and the Lenders and each party has notified the Agent that
it has taken such action.
ARTICLE X
THE AGENT
10.1. Appointment. First Chicago is hereby appointed Agent hereunder and
under each other Loan Document, and each of the Lenders authorizes the Agent to
act as the agent of such Lender. The Agent agrees to act as such upon the
express conditions contained in this Article X. The Agent shall not have a
fiduciary relationship in respect of the Borrower or any Lender by reason of
this Agreement, any Loan Document or any transaction contemplated hereby or
thereby.
10.2. Powers. The Agent shall have and may exercise such powers under the
Loan Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder, except any action specifically provided
by the Loan Documents to be taken by the Agent.
10.3. General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower or any Lender for
any action taken or omitted to be taken by it or them hereunder or under any
other Loan Document or in connection herewith or therewith except for its or
their own gross negligence or willful misconduct.
10.4. No Responsibility for Loans, Recitals etc. Neither the Agent nor any
of its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into, or verify (a) any statement, warranty or
representation made in connection with any Loan Document or any borrowing
hereunder, (b) the performance or observance of any of the covenants or
agreements of any obliger. under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (c) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered to the Agent and not waived at
closing, or (d) the validity, effectiveness, sufficiency, enforceability or
genuineness of any Loan Document or any other instrument or writing furnished in
connection therewith. The Agent shall have no duty to disclose to the Lenders
information that is not required to be furnished by the Borrower to the Agent at
such time, but is voluntarily furnished by the Borrower to the Agent (either in
its capacity as Agent or in its individual capacity).
10.5. Action on Instructions of Lenders. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders (or, to the extent required by Section 8.2, all Lenders), and
such instructions and any action taken or failure to act pursuant thereto shall
be binding on all of the Lenders and on all holders of Notes. The Agent shall be
fully justified in failing or refusing to take any action hereunder and under
any other Loan Document unless it shall first be indemnified to its satisfaction
by the Lenders pro rata against any and all liability, cost and expense that it
may incur by reason of taking or continuing to take any such action.
10.6. Employment of Agents and Counsel. The Agent may execute any of its
duties as Agent hereunder and under any other Loan Document by or through
employees, agents and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.
10.7. Reliance on Documents; Counsel. The Agent shall be entitled to rely
upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
10.8. Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to their
Commitments immediately prior to such termination) (a) for any amounts not
reimbursed by the Borrower for which the Agent is entitled to reimbursement by
the Borrower under the Loan Documents, (b) for any other expenses incurred by
the Agent on behalf of the Lenders, in connection with the preparation,
execution, delivery, administration and enforcement of the Loan Documents, and
(c) for any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of the Loan Documents or any other document
delivered in connection therewith or the transactions contemplated thereby, or
the enforcement of any of the terms thereof or of any such other documents;
provided, that no Lender shall be liable for any of the foregoing to the extent
they arise from the gross negligence or willful misconduct of the Agent. The
obligations of the Lenders under this Section 10.8 shall survive payment of the
Obligations and termination of this Agreement.
10.9. Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Unmatured Default hereunder unless
the Agent has received written notice from a Lender or the Borrower referring to
this Agreement describing such Default or Unmatured Default and stating that
such notice is a "notice of default". In the event that the Agent receives such
a notice, the Agent shall give prompt notice thereof to the Lenders.
10.10. Rights as a Lender. In the event the Agent is a Lender, the Agent
shall have the same rights and powers hereunder and under any other Loan
Document as any Lender and may exercise the same as though it were not the
Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a
Lender, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower in which the Borrower is not restricted hereby from engaging
with any other Person. The Agent, in its individual capacity, is not obligated
to remain a Lender.
10.11. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements prepared by the Borrower and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Loan Documents. Each Lender
also acknowledges that it will, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents.
10.12. Successor Agent. The Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower, such resignation to be effective
upon the appointment of a successor Agent or, if no successor Agent has been
appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. Upon any such resignation, the Required Lenders shall have
the right to appoint, on behalf of the Lenders, a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders and shall
have accepted such appointment within thirty days after the resigning Agent's
giving notice of its intention to resign, then the resigning Agent may appoint,
on behalf of the Borrower and the Lenders, a successor Agent. If the Agent has
resigned and no successor Agent has been appointed, the Lenders may perform all
the duties of the Agent hereunder and the Borrower shall make all payments in
respect of the Obligations to the applicable Lender(s) and for all other
purposes shall deal directly with the Lenders. No successor Agent shall be
deemed to be appointed hereunder until such successor Agent has accepted the
appointment. Any such successor Agent shall be a commercial bank having capital
and retained earnings of at least $500,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the resigning Agent. Upon the effectiveness of the resignation of
the Agent, the resigning Agent shall be discharged from its duties and
obligations hereunder and under the Loan Documents. After the effectiveness of
the resignation of an Agent, the provisions of this Article X shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as the Agent hereunder and under the other Loan
Documents.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation of, any rights of the
Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default occurs, any and all deposits (including all account
balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender to
or for the credit or account of the Borrower may be offset and applied toward
the payment of the Obligations owing to such Lender, whether or not the
Obligations, or any part hereof, shall then be due.
11.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has
payment made to it upon its Loan (other than payments received pursuant to
Section 3.1, 3.2 or 3.4) in a greater proportion than its pro-rata share of the
Loans, such Lender agrees, promptly upon demand, to purchase a portion of the
Loans held by the other Lenders so that after such purchase each Lender will
hold its ratable proportion of Loans. If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligations or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such collateral ratably
in proportion to their Loans. In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made. If an
amount to be setoff is to be applied to Indebtedness of the Borrower to a
Lender, other than Indebtedness evidenced by any of the Notes held by such
Lender, such amount shall be applied ratably to such other Indebtedness and to
the Indebtedness evidenced by such Notes.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lenders and their respective successors and assigns, except that (a) the
Borrower shall not have the right to assign its rights or obligations under the
Loan Documents, and (b) any assignment by any Lender must be made in compliance
with Section 12.3. Notwithstanding clause (b) of this Section, any Lender may at
any time, without the consent of the Borrower or the Agent, assign all or any
portion of its rights under this Agreement and its Notes to a Federal Reserve
Bank; provided, however, that no such assignment to a Federal Reserve Bank shall
release the transferor Lender from its obligations hereunder. The Agent may
treat the payee of any Note as the owner thereof for all purposes hereof unless
and until such payee complies with Section 12.3 in the case of an assignment
thereof or, in the case of any other transfer, a written notice of the transfer
is filed with the Agent. Any assignee or transferee of a Note agrees by
acceptance thereof to be bound by all the terms and provisions of the Loan
Documents. Any request, authority or consent of any Person, who at the time of
making such request or giving such authority or consent is the holder of any
Note, shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
12.2. Participations.
12.2.1. Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable law, at any
time sell to one or more banks or other entities ("Participants") participating
interests in any Loan owing to such Lender, any Note held by such Lender, any
Commitment of such Lender or any other interest of such Lender under the Loan
Documents. In the event of any such sale by a Lender of participating interests
to a Participant, such Lender's obligations under the Loan Documents shall
remain unchanged, such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, such Lender shall remain
the holder of any such Note for all purposes under the Loan Documents, all
amounts payable by the Borrower under this Agreement shall be determined as if
such Lender had not sold such participating interests, and the Borrower and the
Agent shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under the Loan Documents.
12.2.2. Voting Rights. Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment, modification or
waiver of any provision of the Loan Documents other than any amendment,
modification or waiver which effects any of the modifications referenced in
clauses (a) through (e) of Section 8.2.
12.2.3. Benefit of Setoff. The Borrower agrees that each Participant
shall be deemed to have the right of setoff provided in Section 11.1 in respect
of its participating interest in amounts owing under the Loan Documents to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under the Loan Documents; provided, that each Lender shall
retain the right of setoff provided in Section 11.1 with respect to the amount
of participating interests sold to each Participant. The Lenders agree to share
with each Participant, and each Participant, by exercising the right of setoff
provided in Section 11.1, agrees to share with each Lender, any amount received
pursuant to the exercise of its right of setoff, such amounts to be shared in
accordance with Section 11.2 as if each Participant were a Lender.
12.3. Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the ordinary course
of its business and in accordance with applicable law, at any time assign to one
or more banks or other entities ("Purchasers") all or any part of its rights and
obligations under the Loan Documents provided, however, that in the case of an
assignment to an entity which is not a Lender or an Affiliate of a Lender, such
assignment shall be in a minimum amount of $7,500,000. Such assignment shall be
substantially in the form of Exhibit C hereto or in such other form as may be
agreed to by the parties thereto. The consent of the Agent and, so long as no
Default is continuing, the Borrower shall be required prior to an assignment
becoming effective with respect to a Purchaser which is not a Lender or an
Affiliate thereof. Such consent shall not be unreasonably withheld.
12.3.2. Effect; Effective Date. Upon (a) delivery to the Agent of a
notice of assignment, substantially in the form attached as Exhibit I to Exhibit
C hereto (a "Notice of Assignment"), together with any consents required by
Section 12.3.1, and (b) payment of a $3,500 fee to the Agent by the transferror
Lender for processing such assignment, such assignment shall become effective on
the effective date specified in such Notice of Assignment. On and after the
effective date of such assignment, (a) such Purchaser shall for all purposes be
a Lender party to this Agreement and any other Loan Document executed by the
Lenders and shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party hereto, and (b)
the transferor Lender shall be released with respect to the percentage of the
Aggregate Commitment and Loans assigned to such Purchaser without any further
consent or action by the Borrower, the Lenders or the Agent. Upon the
consummation of any assignment to a Purchaser pursuant to this Section 12.3.2,
the transferor Lender, the Agent and the Borrower shall make appropriate
arrangements so that replacement Notes are issued to such transferor Lender and
new Notes or, as appropriate, replacement Notes, are issued to such Purchaser,
in each case in principal amounts reflecting the amount of such assignment.
12.4. Dissemination of Information. The Borrower authorizes each
Lender to disclose to any Participant or Purchaser or any other Person acquiring
an interest in the Loan Documents by operation of law (each a "Transferee") and
any prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Borrower; provided that each Transferee
and prospective Transferee agrees to be bound by Section 9.16.
12.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 2.14.
ARTICLE XIII
NOTICES
13.1. Giving Notice. All notices and other communications provided to any
party hereto under this Agreement or any other Loan Document shall be in
writing, by facsimile, first class U.S. mail or overnight courier and addressed
or delivered to such party at its address set forth below its signature hereto
or at such other address as may be designated by such party in a notice to the
other parties. Any notice, if mailed and properly addressed with first class
postage prepaid, return receipt requested, shall be deemed given three (3)
Business Days after deposit in the U.S. mail; any notice, if transmitted by
facsimile, shall be deemed given when transmitted; and any notice given by
overnight courier shall be deemed given when received by the addressee.
13.2. Change of Address. The Borrower, the Agent and any Lender may each
change the address for service of notice upon it by a notice in writing to the
other parties hereto.
[signature pages to follow]
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed
this Agreement as of the date first above written.
CNA INCOME SHARES, INC.
By: /s/ XXXXXXX X. XXXXXXXX
---------------------------------
Print Name: Xxxxxxx X. Xxxxxxxx
-------------------------
Title: Vice President
------------------------------
Address: XXX Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
Commitments
-----------
Commitment $30,000,000 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /s/ XXXXXXX X. XXXXXX
---------------------------------
Print Name: Xxxxxxx X. Xxxxxx
-------------------------
Title: Vice President
------------------------------
Address: One First Xxxxxxxx Xxxxx
00xx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
Aggregate Commitment: $30,000,000
---------------------
EXHIBIT A
TERM NOTE
$___________ June 2, 1997
CNA Income Shares, Inc., a Maryland corporation (the "Borrower"), promises
to pay to the order of (the "Lender") the lesser of the principal sum of $______
(________ Million) Dollars or the aggregate unpaid principal amount of all Loans
made by the Lender to the Borrower pursuant to Section 2.1 of the Agreement (as
hereinafter defined), in immediately available funds at the main office of The
First National Bank of Chicago in Chicago, Illinois, as Agent, together with
interest on the unpaid principal amount hereof at the rates and on the dates
set forth in the Agreement. The Borrower shall pay the principal of and accrued
and unpaid interest on the Loan evidenced hereby in full on the Maturity Date.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date, amount, applicable interest rate or margin and Interest Period, if
applicable, of each Loan and the date and amount of each principal payment
hereunder; provided, however, that neither the failure to so record nor any
error in this recordation shall affect the Borrower's obligations under this
Note.
This Note is one of the Notes issued pursuant to, and is entitled to the
benefits of, the Credit Agreement dated as of June 2, 1997 (as the same may be
amended or modified and in effect from time to time, the "Agreement"), among the
Borrower, the lenders named therein, including the Lender and The First National
Bank of Chicago, as Agent, to which Agreement reference is hereby made for a
statement of the terms and conditions governing this Note, including the terms
and conditions under which this Note may be prepaid or its maturity date
accelerated. Capitalized terms used herein and not otherwise defined herein are
used with the meanings attributed to them in the Agreement.
CNA INCOME SHARES, INC.
By:
-----------------------------
Title:
--------------------------
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF CNA INCOME SHARES, INC.,
DATED JUNE 2, 1997
Principal
Amount of Interest Rate Principal Unpaid
Date Loan (or Margin) Amount Paid Balance
---- --------- ------------- ----------- -------
EXHIBIT B
COMPLIANCE CERTIFICATE
I, __________ certify that I am the __________ of CNA Income Shares, Inc.
(the "Borrower"), and that as such I am authorized to execute this Compliance
Certificate on behalf of the Borrower, and DO HEREBY FURTHER CERTIFY on behalf
of the Borrower that:
1. I have reviewed the terms of that certain Credit Agreement, dated as of
June 2, 1997, among the Borrower, the financial institutions named therein (the
"Lenders") and The First National Bank of Chicago, as agent (the "Agent") (as
amended, supplemented or modified from time to time, the "Credit Agreement") and
I have made, or have caused to be made by employees or agents under my
supervision, a detailed review of the transactions and conditions of the
Borrower during the accounting period covered by the attached financial
statements. Terms used but not otherwise defined herein have the meaning
ascribed to them by the Credit Agreement.
2. The examinations described in paragraph 1 did not disclose, and I have
no knowledge of, the existence of any condition or event which constitutes a
Default or Unmatured Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Compliance Certificate, except as set forth below.
3. Schedule I attached hereto sets forth financial data and computations
evidencing compliance with the covenants set forth in Section 6.17 of the Credit
Agreement, all of which data and computations are true, complete and correct.
Described below are the exceptions, if any, to paragraph 2 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Compliance
Certificate in support hereof, are made and delivered this ___________ day of
_______________, 19__.
CNA INCOME SHARES, INC.
By:
---------------------------------
Title:
------------------------------
SCHEDULE I
SECTION 6.17 -- ASSETS COVERAGE RATIO*
(a) Total Assets $
------------
(b) Total Liabilities $
------------
(c) Aggregate outstanding principal
amount of Senior Securities $
------------
(d) (b) minus (c) $
------------
(e) (a) minus (d) $
------------
(f) Ratio of (e) to (c) :1
------
MINIMUM PERMITTED RATIO 3:1
*All figures as of [insert date of end of applicable Fiscal Quarter].
EXHIBIT C
FORM OF
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
_________________________ (the "Assignor") and _________________________________
(the "Assignee") is dated as of ______________________, 19__. The parties hereto
agree as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit Agreement
(which, as it may be amended, supplemented, modified, renewed or extended from
time to time is herein called the "Credit Agreement") described in Item 1 of
Schedule 1 attached hereto. Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed thereto in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3 of Schedule 1 of all outstanding rights and obligations
under the Credit Agreement relating to the Loans and the other Loan Documents.
The aggregate Commitment (or Loans, if the applicable Commitment has been
terminated) purchased by the Assignee hereunder is set forth in Item 4 of
Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
"Effective Date") shall be the later of the date specified in Item 5 of Schedule
1 or two Business Days (or such shorter period agreed to by the Agent) after a
Notice of Assignment substantially in the form of Exhibit I attached hereto has
been delivered to the Agent. Such Notice of Assignment must include any
consents required to be delivered to the Agent pursuant to Section 12.3.1 of the
Credit Agreement. In no event will the Effective Date occur if the payments
required to be made by the Assignee to the Assignor on the Effective Date under
Section 4 hereof are not made on the proposed Effective Date. The Assignor will
notify the Assignee of the proposed Effective Date no later than the Business
Day prior to the proposed Effective Date. As of the Effective Date, (a) the
Assignee shall have the rights and obligations of a Lender under the Loan
Documents with respect to the rights and obligations assigned to the Assignee
hereunder, and (b) the Assignor shall relinquish its rights and be released from
its corresponding obligations under the Loan Documents with respect to the
rights and obligations assigned to the Assignee hereunder.
4. PAYMENT OBLIGATIONS. On and after the Effective Date, the Assignee shall
be entitled to receive from the Agent all payments of principal, interest and
fees with respect to the interest assigned hereby. The Assignee shall advance
funds directly to the Agent with respect to all Loans and reimbursement payments
made on or after the Effective Date with respect to the interest assigned
hereby. [In consideration for the sale and assignment of Loans hereunder, (a)
the Assignee shall pay the Assignor, on the Effective Date, an amount equal to
the principal amount of the portion of all Alternate Base Rate Loans assigned to
the Assignee hereunder, and (b) with respect to each Eurodollar Loan made by the
Assignor and assigned to the Assignee hereunder which is outstanding on the
Effective Date, (i) on the last day of the Interest Period therefor, (ii) on
such earlier date agreed to by the Assignor and the Assignee, or (iii) on the
date on which any such Eurodollar Loan either becomes due (by acceleration or
otherwise) or is prepaid (the date as described in the foregoing clauses (i),
(ii) or (iii) being hereinafter referred to as the "Payment Date"), the Assignee
shall pay the Assignor an amount equal to the principal amount of the portion of
such Eurodollar Loan assigned to the Assignee which is outstanding on the
Payment Date. If the Assignor and the Assignee agree that the Payment Date for
such Eurodollar Loan shall be the Effective Date, they shall agree to the
interest rate applicable to the portion of such Loan assigned hereunder for the
period from the Effective Date to the end of the existing Interest Period
applicable to such Eurodollar Loan (the "Agreed Interest Rate") and any interest
received by the Assignee in excess of the Agreed Interest Rate shall be remitted
to the Assignor. In the event interest for the period from the Effective Date to
but not including the Payment Date is not paid by the Borrower with respect to
any Eurodollar Loan sold by the Assignor to the Assignee hereunder, the Assignee
shall pay to the Assignor interest for such period on the portion of such
Eurodollar Loan sold by the Assignor to the Assignee hereunder at the applicable
rate provided by the Credit Agreement. In the event a prepayment of any
Eurodollar Loan which is existing on the Payment Date and assigned by the
Assignor to the Assignee hereunder occurs after the Payment Date but before the
end of the Interest Period applicable to such Eurodollar Loan, the Assignee
shall remit to the Assignor the excess of the prepayment penalty paid with
respect to the portion of such Eurodollar Loan assigned to the Assignee
hereunder over the amount which would have been paid if such prepayment penalty
was calculated based on the Agreed Interest Rate. The Assignee will also
promptly remit to the Assignor (x) any principal payments received from the
Agent with respect to Eurodollar Loans prior to the Payment Date, and (y) any
amounts of interest on Loans and fees received from the Agent which relate to
the portion of the Loans assigned to the Assignee hereunder for periods prior to
the Effective Date, in the case of Alternate Base Rate Loans, or the Payment
Date, in the case of Eurodollar Loans, and not previously paid by the Assignee
to the Assignor.] In the event that either pars hereto receives any payment to
which the other party hereto is entitled under this Assignment Agreement, then
the party receiving such amount shall promptly remit it to the other party
hereto.
* Each Assignor may insert its standard payment provisions in lieu of the
payment terms included in this Exhibit.
5. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor nor
any of its officers, directors, employees, agents or attorneys shall be
responsible for (a) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectibility of any Loan Document, including,
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of any Borrower or any guarantor, (b) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (c) the financial condition or creditworthiness of any Borrower
or any guarantor, (d) the performance of or compliance with any of the terms or
provisions of any of the Loan Documents, (e) inspecting any of the Property,
books or records of any Borrower, (f) the validity, enforceability, perfection,
priority, condition, value or sufficiency of any collateral securing or
purporting to secure the Loans, or (g) any mistake, error of judgment, or action
taken or omitted to be taken in connection with the Loans or the Loan Documents.
6. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (a) confirms that it has
received a copy of the Credit Agreement, together with copies of the financial
statements requested by the Assignee and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment Agreement, (b) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Documents, (c) appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under the Loan Documents as are
delegated to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto, (d) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Loan Documents
are required to be performed by it as a Lender, (e) agrees that its payment
instructions and notice instructions are as set forth in the attachment to
Schedule 1, (f) confirms that none of the funds, monies, assets or other
consideration being used to make the purchase and assumption hereunder are "plan
assets" as defined under ERISA and that its rights, benefits and interests in
and under the Loan Documents will not be "plan assets" under ERISA, [and (g)
attaches the forms prescribed by the Internal Revenue Service of the United
States certifying that the Assignee is entitled to receive payments under the
Loan Documents without deduction or withholding of any United States federal
income taxes].*
* to be inserted if the Assignee is not incorporated under the laws of the
United States, or a state thereof.
7. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor
in connection with or arising in any manner from the Assignee's non-performance
of the obligations assumed under this Assignment Agreement. The obligations of
the Assignee under this Section 7 shall survive the payment of all amounts
hereunder and the termination of this Agreement.
8. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall
have the right pursuant to and in accordance with Section 12.3 of the Credit
Agreement to assign the rights which are assigned to the Assignee hereunder to
any entity or person; provided, that (a) any such subsequent assignment does not
violate any of the terms and conditions of the Loan Documents or any law, rule,
regulation, order, writ, judgment, injunction or decree and that any consent
required under the terms of the Loan Documents has been obtained, and (b) unless
the prior written consent of the Assignor is obtained, the Assignee is not
thereby released from its obligations to the Assignor hereunder, if any remain
unsatisfied, including, without limitation, its obligations under Sections 4, 6
and 7 hereof.
9. ENTIRE AGREEMENT. This Assignment Agreement and the attached
Notice of Assignment embody the entire agreement and understanding between the
parties hereto and supersede all prior agreements and understandings between the
parties hereto relating to the subject matter hereof.
10. GOVERNING LAW. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY THE
INTERNAL LAWS, WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS, OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
11. NOTICES. Notices shall be given under this Assignment Agreement in
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth in the attachment to Schedule 1.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR]
By:
--------------------------------
Title:
-----------------------------
-----------------------------
-----------------------------
[NAME OF ASSIGNEE]
By:
--------------------------------
Title:
-----------------------------
-----------------------------
-----------------------------
SCHEDULE 1
TO ASSIGNMENT AGREEMENT
1. Description and Date of Credit Agreement:
That certain Credit Agreement dated as of June 2, 1997 among CNA
Income Shares, Inc., the financial institutions named therein and
The First National Bank of Chicago, as agent.
2. Date of Assignment Agreement:___________, 19__
3. Amounts (As of Date of Item 2 above):
(a) Total of Loans*
under Credit Agreement $_____________
(b) Assignee's percentage of the
Loans* purchased under the
Assignment Agreement** _____________%
4. Assignee's aggregate Loan amount*
purchased hereunder: $_____________
5. Proposed Effective Date: ______________
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
----------------------------- --------------------------------
Title: Title:
-------------------------- -----------------------------
* If a Commitment has been terminated, insert outstanding Loans in place
of Commitment
** Percentage taken to 10 decimal places
ATTACHMENT TO SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which must
include notice address for the Assignor and the Assignee
EXHIBIT I
TO ASSIGNMENT AGREEMENT
NOTICE OF ASSIGNMENT
____________ __, 19__
To: CNA Income Shares, Inc.
XXX Xxxxx
Xxxxxxx, Xxxxxxxx 00000
The First National Bank of Chicago
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to the Credit Agreement (the "Credit Agreement") described in
Item 1 of Schedule 1 attached hereto. Capitalized terms used herein and not
otherwise defined herein or in such consent shall have the meanings attributed
to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered to the
Borrower and the Agent pursuant to Section 12.3.2 of the Credit Agreement.
3. The Assignor and the Assignee have entered into an Assignment Agreement,
dated as of June 2, 1997 (the "Assignment"), pursuant to which, among other
things, the Assignor has sold, assigned, delegated and transferred to the
Assignee, and the Assignee has purchased, accepted and assumed from the Assignor
the percentage interest specified in Item 3 of Schedule 1 of all outstandings,
rights and obligations under the Credit Agreement relating to the facilities
listed in Item 3 of Schedule 1, including, without limitation, such interest in
the Assignor's Commitment (if applicable) and the Loans owing to the Assignor
relating to such facilities. The effective date of the Assignment (the
"Effective Date") shall be the later of the date specified in Item 5 of Schedule
1 or two Business Days (or such shorter period as agreed to by the Agent) after
this Notice of Assignment and any consents and fees required by Sections 12.3.1
and 12.3.2 of the Credit Agreement have been delivered to the Agent; provided,
that the Effective Date shall not occur if any (condition precedent agreed to by
the Assignor and the Assignee has not been satisfied.
4. The Assignor and the Assignee hereby give to the Borrower and the Agent
notice of the assignment and delegation referred to herein. The Assignor will
confer with the Agent before the date specified in Item 5 of Schedule I to
determine if the Assignment Agreement will become effective on such date
pursuant to Section 3 hereof and will confer with the Agent to determine the
Effective Date pursuant to Section 3 hereof if it occurs thereafter. The
Assignor shall notify the Agent if the Assignment does not become effective on
any proposed Effective Date as a result of
the failure to satisfy the conditions precedent agreed to by the Assignor and
the Assignee. At the request of the Agent, the Assignor will give the Agent
written confirmation of the satisfaction of the conditions precedent.
5. The Assignor or the Assignee shall pay to the Agent on or before the
Effective Date the processing fee of $3,500 required by Section 12.3.2 of the
Credit Agreement.
6. If Notes are outstanding on the Effective Date, the Assignor and the
Assignee request and direct that the Agent prepare and cause the Borrower to
execute and deliver new Notes or, as appropriate, replacement Notes, to the
Assignor and the Assignee. The Assignor and, if applicable, the Assignee each
agree to deliver to the Agent the original Notes received by it from the
Borrower upon its receipt of new Notes in the appropriate amount.
7. The Assignee advises the Agent that notice and payment instructions are
set forth in the attachment to Schedule 1.
8. Each party consenting to the Assignment in the space indicated below
hereby releases the Assignor from any obligations to it which have been assigned
to the Assignee. The Assignee hereby represents and warrants that none of the
funds, monies, assets or other consideration being used to make the purchase
pursuant to the Assignment are "plan assets" as defined under ERISA and that its
rights, benefits and interests in and under the Loan Documents will not be "plan
assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent under the Loan
Documents in accordance with the terms thereof The Assignee acknowledges that
the Agent has no duty to supply information with respect to the Borrower or the
Loan Documents to the Assignee until the Assignee becomes a party to the Credit
Agreement.
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
----------------------------- --------------------------------
Title: Title:
-------------------------- -----------------------------
ACKNOWLEDGED AND CONSENTED TO [ACKNOWLEDGED AND CONSENTED
BY THE FIRST NATIONAL BANK OF TO BY BORROWER]
CHICAGO, as agent
By: By:
----------------------------- --------------------------------
Title: Title:
-------------------------- -----------------------------
[Attach photocopy of Schedule 1 to Assignment]
SCHEDULE 1.1: INVESTMENT POLICIES
The primary investment objective of the Company is to provide a high level of
current income, with capital appreciation as a secondary objective. In seeking
to achieve its objectives, the Company must invest its assets in the following
manner:
A. At least 50% of the value of the Company's total assets must be invested in:
(1) Straight debt securities or debt securities which are convertible into
or exchangeable for, or which carry warrants to purchase common stock
or other interests, which are rated at the time of purchase within the
four highest classifications assigned by Xxxxx'x Investors Service,
Inc. (Aaa, Aa, A or Baa), Standard & Poor's Corporation (AAA, AA, A or
BBB), or Duff & Xxxxxx Inc. (AAA, AA, A or BBB). Any subclassifications
of the ratings indicated shall not be deemed to be separate
classifications for purposes of the Company's investment objectives and
policies and investment restrictions (e.g., Moody's Aal, Aa2 and Aa3
subclassifications shall be included within its Aa classification);
(2) Securities issued or guaranteed by the United States Government, its
agencies or instrumentalities;
(3) Securities (payable in U.S. dollars) of, or guaranteed by, the
Government of Canada or a Province of Canada or any instrumentality or
political subdivision thereof;
(4) Obligations of, or guaranteed by, national or state banks or bank
holding companies whose primary assets are banks, and which
obligations, although not rated as a matter of policy by either Xxxxx'x
Investors Service, Inc., Standard & Poor's Corporation or Duff & Xxxxxx
Inc. are considered by management to have investment quality comparable
to securities which may be purchased under item 1 above;
(5) Commercial paper; and
(6) Cash or cash equivalents, such as U.S. Treasury Bills.
B. Up to 25% of the value of the Company's total assets may consist of:
(l) Debt securities not included in item A above;
(2) Securities not included in item A above which may be convertible into
or exchangeable for, or carry warrants to purchase, common stock or
other interests;
(3) Preferred stocks; and
(4) Common stocks.
C. Up to 25% of the value of the Company's total assets may consist of straight
debt securities not included in item A or item B above.
In seeking to achieve its objectives, the Company invests and has invested
primarily in debt securities rated in the four highest rating categories
assigned by nationally recognized rating agencies but, as set forth above, may
also invest in other securities such as United States and Canadian Government
securities, obligations of or guaranteed by banks, commercial paper and cash
equivalents or in debt securities rated below the four highest rating
categories, including the lowest rating category, which is reserved for
securities in default. The lower the rating category of a debt security, the
higher the degree of speculation of an investment in such security, with
increased risk of loss of principal and interest and, generally, a volatility of
market price which is greater than the average for higher rated securities. The
Company's operating policy, however, is generally not to purchase rated debt
securities which, at the time of purchase, are rated lower than B- by Standard &
Poor's Corporation or Duff & Xxxxxx Inc., or B3 by Xxxxx'x Investors Services,
Inc. These debt securities are regarded as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with their
terms. If the rating of a debt security in the Company's portfolio is reduced
below B- or B3, as the case may be, after purchase, the Company may either sell
the debt security or continue to hold it, depending upon market characteristics.
The Company is permitted to buy debt securities which have not been rated by a
nationally recognized rating agency if, in the opinion of the Adviser, such
unrated debt securities are of comparable quality to the rated debt securities
in which the Company may invest.
In making purchases within the policies listed above, the Company will not
invest more than 25% of the value of its total assets in restricted securities,
which are securities acquired in private placement transactions. Also, the
Company will invest at least 80% of the value of its total assets in income
producing securities. No assurance can be given that the Company will achieve
its investment objectives.
By virtue of items A. (1) or A. (2), the Company is permitted to buy certain
debt securities, known as "interest only" mortgage-backed securities, in which
the issuer is only obligated to pay a fixed rate of interest based on a stated
principal amount, but does not make any principal payments. Each month the
stated principal amount is adjusted to reflect both scheduled payments and
prepayments of principal on the underlying mortgages. For example, the Company
may buy certain debt securities issued by the Federal National Mortgage
Association (FNMA), a United States government agency, which carry an additional
risk not associated with other FNMA issues. The holder purchases the security at
a price which is lower than the holder's expectations of payments of interest
from the issuer. If payments of principal on the underlying mortgages are
different than the holder's expectation of principal paydowns, then the actual
payments of interest by the issuer could be more or less than the holder's
expectation of interest payments.
By virtue of items A. (1) or A. (2), the Company is also permitted to buy
certain debt securities, known as inverse interest rate floaters. These
securities do not carry a fixed rate of interest, but instead pay interest based
on a formula which varies inversely with the then current market interest rate
(the "formula interest rate"), as reflected by a referenced interest rate on a
specific date near the interest payment date (the "interest calculation date").
For example, if the referenced interest rate on the prior interest calculation
date, then the formula interest rate will increase on that interest calculation
date versus the prior interest calculation date. If the referenced rate of
interest on the current interest calculation date is different than such rate
was on the interest calculation date prior to purchase, then the interest
payments received by the holder may be more or less than the holder expected to
receive based on the referenced rate in effect on the date of purchase.
The foregoing percentage limitations apply at the time of purchase of
securities. The Company may exercise conversion rights, warrants or other
similar rights, and securities thereby received or remaining upon the breakup of
units or detachment of warrants may be retained to permit advantageous
disposition, in each case without regard to the foregoing limitations.
INVESTMENT RESTRICTIONS
The following investment restrictions are deemed fundamental policies and may be
changed only by the vote of a "majority" of the Company's outstanding voting
securities, which means the lesser of (1) 67% of the Company's outstanding
voting securities present in person or by proxy at a meeting of the security
holders if more than 50% of the outstanding voting securities are present in
person or by proxy or (2) more than 50% of the Company's outstanding voting
securities.
The Company will not:
(1) Issue any senior securities as defined in the Investment Company Act of
1940 (the "1940 Act"), except in connection with borrowing permitted in
item 2 below or to the extent investments in interest rate futures
contracts or fixed income options permitted in item 20 below are
considered to result in the issuance of senior securities.
(2) Borrow money, except for investment leverage.
(3) Mortgage, pledge or hypothecate its assets, except in connection with
borrowing money as mentioned in item 2 above. This provision shall not
apply to deposits, or similar arrangements, made in connection with the
entering into or holding of interest rate futures contracts or purchasing,
selling, holding or writing fixed income options.
(4) Act as underwriter, except to the extent that, in connection with the
disposition of restricted portfolio securities, the Company may be deemed
to be an underwriter under applicable laws.
(5) Purchase or sell real estate or interests in real estate, except that the
Company may invest in securities secured by real estate or interests
therein or issued by companies, including real estate investment trusts,
which deal in real estate or interests therein.
(6) Purchase or sell commodities or commodity contracts, except that the
Company may enter into interest rate futures contracts or fixed income
options and make deposits or have similar arrangements in connection
therewith.
(7) Invest more than 5% of the value of its total assets to the securities of
any one issuer (other than cash items and securities of the United States
Government or its agencies or instrumentalities), or purchase more than
10% of any class of the outstanding voting securities of any one issuer.
(8) Invest more than 25% of the value of its total assets in restricted
securities, which are securities acquired in private placement
transactions.
(9) Invest more than 25% of the value of its total assets in securities of
issuers in any one industry (gas, electric and telephone companies will be
considered to be in separate industries, as will banks, finance companies,
savings and loan associations, insurance companies and other credit
institutions) except that at times when a significant portion of the
market for corporate debt securities is composed of issues in the electric
utility industry or the telephone utility industry, as the case may be,
the Company may invest up to 35% of its assets in the issues of such
industry if the Company has cash for such investment and if, in the
judgment of management, the return available from such securities and the
marketability, quality and availability thereof justify such concentration
in light of the Company's investment objectives. The market for corporate
debt securities will be considered to be composed of a significant portion
of debt securities of either, the electric utility industry or the
telephone utility industry, as the case may be, at any time that, to the
best of the Company's knowledge, 10% or more of the principal amounts of
all new issue offerings of corporate debt securities in principal amounts
of $25,000,000 or more and within the four highest grades assigned by
Xxxxx'x Investors Service, Inc., Standard & Poor's Corporation, or Duff &
Xxxxxx Inc., offered within the prior 60-day period or scheduled to be
offered during the subsequent 30-day period consists of such issues in
such industry.
(10) Purchase or retain the securities of any issuer, if, to the Company's
knowledge, those officers or directors of the Company or of the Adviser
who individually own beneficially more than 0.5% of the outstanding
securities of such issuer, together own beneficially more than 5% of such
outstanding securities.
(11) Make loans to other persons, except for the purchase of debt securities
in private placement transactions or public offerings in accordance with
the Company's investment objectives and policies and for loans of
portfolio securities as described above.
(12) Purchase securities on margin, except that the Company may obtain such
short-term credits as may be necessary for the clearance of purchases or
sales of securities, and except that the Company may enter into and hold
interest rate futures contracts and purchase, sell,
hold or write fixed income options and may make deposits or make similar
arrangements in connection therewith.
(13) Participate on a joint or joint and several basis in any securities
trading account. The "bunching" of orders for the sale or purchase of
marketable portfolio securities and other accounts under the management
of the Adviser or affiliates to save commissions or to average prices
among them is not deemed to result in a securities trading account.
(14) Purchase interests in oil, gas, or other mineral exploration programs;
however, this limitation will not prohibit the acquisition of securities
of companies engaged in the production of or transmission of oil, gas or
other materials.
(15) Invest in puts, calls or combinations thereof except fixed income
options.
(16) Make short sales, except sales "against the box."
(17) Purchase the securities of other investment companies.
(18) Invest for the purposes of exercising control or management.
(19) Purchase securities issued by CNA Financial Corporation or its
subsidiaries.
(20) Enter into any interest rate futures contract or write any fixed income
option if, immediately thereafter, the sum of (a) the then aggregate
futures and option market prices of financial instruments and fixed
income options required to be delivered under open futures contract sales
of the Company and open fixed income call options written by the Company
and (b) the aggregate purchase price under open futures contract
purchases of the Company and open fixed income put options written by the
Company, would exceed, in the aggregate, an amount equal to the lesser of
(i) five percent of the Company's net asset value or (ii) one-third of
the total assets of the Company less all liabilities not related to fixed
income options written by the Company and interest rate futures
contracts.
Notwithstanding item 6, the Company is permitted to buy certain debt securities,
known as Principal Exchange Rate Linked Securities (PERLS), in which the
interest or principal component is determined by calculating with reference to a
formula based on one or more commodities, including currencies, so long as the
security does not constitute a commodity or commodity contract. For example, the
Company may buy certain debt securities issued by the Federal National Mortgage
Association ("FNMA") a United States government agency, which carry an
additional risk not associated with other FNMA issues. They pay interest based
upon a specified interest rate and a principal amount denominated in United
States dollars. At maturity, the principal is paid in United States dollars, but
the amount of principal that will be paid is calculated according to a
predetermined formula involving the value of one or more foreign currencies on a
particular date near the maturity date (the "principal payment formula"). This
kind of security is subject to the risk that the currency that is part of the
principal payment formula may be valued at an amount which could cause the
principal paid at maturity to be greater or less than the amount of principal
upon which the, interest rate is calculated.
By virtue of item 8, it would be possible for the Company to invest up to 25% of
its assets in restricted securities, which are securities acquired in private
placement transactions. Such securities generally may not be resold without
registration under the Securities Act of 1933 except in transactions exempt from
the registration requirements of such Act. This limitation on resale can have an
adverse effect on the price obtainable for such securities. Also, if in order to
permit resale, the securities are registered under the Securities Act of 1933 at
the Company's expense, the Company's expenses would be increased.
By virtue of item 9, it would be possible for the Company to invest up to 70% of
its assets in securities of the electric utility and telephone utility
industries (up to 35% in each of such industries) if the Company had cash for
such investment and if, in the Company's judgment, the return available from
such industry, and the marketability, quality and availability of the debt
securities of such industry, justified such concentration in light of the
Company's investment objectives. However, if sufficient cash was not available
or if the securities available did not meet the above-mentioned tests of return,
marketability, quality and availability, such concentration would not occur.
Also, the Company would not be required to sell portfolio securities in order to
make cash available for such concentration, although the Company would not be
prohibited from doing so. Furthermore, the Company's ability to so concentrate
its assets would always be contingent upon compliance with other applicable
investment restrictions. Concentration of the Company's assets in either the
electric utility or the telephone utility industries could result in increased
risks. Risks of investments in either industry may arise from difficulties in
obtaining an adequate return on capital because of financing costs and
construction programs and the fact that regulatory authorities might not approve
rate increases sufficient to offset increases in operating expenses. In
addition, risks of investments in the electric utility industry may arise from
environmental conditions, fuel shortages and government-mandated energy
conservation programs.
By virtue of item 20, the Company has a limited ability to enter into interest
rate futures contracts and to write fixed income options. Interest rate futures
contracts and fixed income options create an obligation by the Company to
purchase or to sell a specific financial instrument at a specified future time
at a specified price. The principal risk of interest rate futures contracts and
fixed income options is that unexpected changes in the general level of interest
rates could adversely affect the value of the investment. The Company has not
written fixed income options for several years and has never entered into
interest rate futures contracts.
SCHEDULE 6.10: INDEBTEDNESS
As of June 2, 1997, CNA Income Shares, Inc. (the "Borrower") has no existing
Indebtedness other than the Indebtedness evidenced by the Agreement dated as of
June 2, 1997 between Borrower, the Lenders named therein, and First National
Bank of Chicago, as Agent.
