CREDIT AGREEMENT
dated as of
April 30, 1998
among
Prospect Street High Income Portfolio Inc.
and
BankBoston, N.A.
and
BankBoston, N.A.,
as Agent
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions...............................................1
1.02 Accounting Terms and Determinations.......................6
ARTICLE II
THE CREDIT
SECTION 2.01 Commitments to Lend.......................................6
2.02 Notice of Borrowings......................................7
2.03 Notice to Banks; Funding of Loans.........................7
2.04 Notes .................................................8
2.05 Optional Termination or Reduction8
of Commitments..........................................8
2.06 Extension of Commitment Termination Date;
Mandatory Termination of Commitments....................9
2.07 Optional Prepayments......................................9
2.08 Mandatory Payments........................................9
2.09 Interest Rates............................................10
2.10 Fees .................................................11
2.11 General Provisions as to Payments.........................11
2.12 Computation of Interest and Fees..........................12
2.13 Funding Losses............................................12
2.14 Withholding Tax Exemption.................................12
ARTICLE III
CONDITIONS
SECTION 3.01 Effectiveness.............................................13
3.02 All Borrowings............................................14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Existence and Power; Investment Company...................14
4.02 Authorization; No Contravention...........................15
4.03 Binding Effect............................................15
4.04 Compliance with Margin Rules..............................15
4.05 Non-Affiliation with Banks................................15
4.06 Subsidiaries..............................................15
4.07 Financial Information.....................................15
4.08 Litigation................................................15
4.09 ERISA .................................................16
4.10 Taxes .................................................16
4.11 Compliance................................................16
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Page
4.12 Full Disclosure.......................................... 16
4.13 Margin Stock............................................. 16
4.14 Senior Debt.............................................. 16
ARTICLE V
COVENANTS
SECTION 5.01 Information.............................................. 17
5.02 Payment of Obligations................................... 18
5.03 Maintenance of Insurance................................. 18
5.04 Conduct of Business and
Maintenance of Existence............................... 18
5.05 Compliance with Laws..................................... 18
5.06 Inspection of Property, Books and Records................ 18
5.07 Debt ................................................ 18
5.08 Negative Pledge.......................................... 19
5.09 Consolidations, Mergers and Sales of Assets.............. 19
5.10 Use of Proceeds.......................................... 19
5.11 Ratio of Liabilities to Assets........................... 19
5.12 Compliance with Prospectus............................... 19
5.13 Non-Affiliation with Banks............................... 19
5.14 Deposit Account.......................................... 19
5.15 Regulated Investment Company............................. 19
5.16 No Subsidiary............................................ 20
5.17 ERISA ................................................ 20
5.18 Distributions............................................ 20
5.19 Margin Stock............................................. 20
5.20 Capitalization........................................... 20
5.21 Fixed Rate Loans......................................... 20
ARTICLE VI
DEFAULTS
SECTION 6.01 Events of Default........................................ 20
6.02 Notice of Default........................................ 22
ARTICLE VII
THE AGENT
SECTION 7.01 Appointment and Authorization............................ 22
7.02 Action by Agent.......................................... 22
7.03 Consultation with Experts................................ 22
7.04 Liability of Agent....................................... 22
7.05 Indemnification.......................................... 22
7.06 Credit Decision.......................................... 22
7.07 Successor Agent.......................................... 23
7.08 Agent as Bank............................................ 23
7.09 Distribution by Agent.................................... 23
7.10 Delinquent Banks......................................... 23
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Page
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01 Basis for Determining Interest Rate
Inadequate or Unfair................................... 24
8.02 Illegality............................................... 24
8.03 Increased Cost and Reduced Return........................ 25
8.04 Base Rate Loans Substituted for Affected
LIBOR Loans............................................ 26
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Notices.................................................. 26
9.02 No Waivers............................................... 26
9.03 Expenses; Documentary Taxes;
Indemnification........................................ 26
9.04 Set-Off ................................................ 27
9.05 Amendments and Waivers................................... 27
9.06 Successors and Assigns................................... 27
9.07 Governing Law; Submission to
Jurisdiction........................................... 29
9.08 Counterparts; Integration................................ 29
9.09 Waiver Of Jury Trial..................................... 29
9.10 Confidentiality.......................................... 29
Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Conversion
Exhibit D-1 - Form of Opinion of Olshan Grundman Frome & Rosenzweig LLP
Exhibit D-2 - Form of Opinion of Piper & Marbury L.L.P.
Exhibit E - Form of Compliance Certificate
Exhibit F - Form of Assignment and Acceptance
Schedule 1 - Addresses for Notices, Commitment Amounts and Lending Offices
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CREDIT AGREEMENT
CREDIT AGREEMENT dated as of April 30, 1998, by and among
Prospect Street High Income Portfolio Inc., a Maryland corporation (the
"Borrower"), the lending institutions listed on the signature pages hereof and
BankBoston, N.A., as agent for itself and such other lending institutions.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used
herein, have the following meanings:
"Affiliate" has the meaning ascribed to the term "Affiliated
Person" in the Investment Company Act and the rules and regulations thereunder.
"Affiliated Person" has the meaning ascribed to that term in
the Investment Company Act and the rules and regulations thereunder.
"Agent" means BankBoston acting as Agent for the Banks.
"Applicable Lending Office" means, with respect to any Bank,
(a) in the case of its Base Rate Loans, its Domestic Lending Office, and (b) in
the case of its LIBOR Loans, its LIBOR Lending Office.
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means BankBoston, each lender named on the signature
pages hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c),
and their respective successors.
"BankBoston" means BankBoston, N.A., a national banking
association.
"Base Rate" means the higher of (a) the annual rate of
interest announced from time to time by BankBoston at its head office in Boston,
Massachusetts as its "base rate" and (b) one-half of one percent (1/2%) above
the Federal Funds Rate as in effect from time to time.
"Base Rate Loans" means Loans bearing interest calculated by
reference to the Base Rate.
"Benefit Arrangement" means at any time an employee benefit
plan within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" has the meaning set forth in the preamble.
"Borrowing" means the aggregation of Loans of the Banks to be
made to the Borrower pursuant to Article II hereof on a single date.
"Borrowing Date" means the Domestic or LIBOR Business Day on
which Loans are advanced hereunder as specified in a Notice of Borrowing
delivered pursuant to Section 2.02(a) hereof.
"Commitment" means the agreement of each Bank, subject to the
terms and conditions of this Agreement, to make Loans to the Borrower hereunder.
"Commitment Amount" means, with respect to each Bank, the
amount set forth opposite the name of such Bank on Schedule 1 attached hereto,
as such amount may be reduced from time to time pursuant to Sections 2.05 or
9.06(c) or increased from time to time pursuant to Section 9.06(c); and
"Commitment Amounts" means, as of any date, the aggregate of all such amounts on
such date. On the Effective Date the aggregate Commitment Amounts equal
$30,000,000.
"Commitment Percentage" means, with respect to each Bank, the
percentage set forth opposite the name of such Bank on Schedule 1 attached
hereto as such Bank's percentage of the aggregate Commitment Amounts of all of
the Banks.
"Commitment Termination Date" means April 30, 2001, provided
that the Commitment Termination Date (and each Bank's Commitment to make Loans
hereunder) may be extended in accordance with Section 2.06(a) hereof.
"Custodian" means the entity which, on the Effective Date,
acts as the Borrower's custodian for purposes of Section 17(f) of the Investment
Company Act.
"Debt" of any Person means at any date, without duplication,
(a) all obligations of such Person for borrowed money or extensions of credit,
(b) all obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, (c) all obligations of such Person to pay the
deferred purchase price of property or services, except trade accounts payable
arising in the ordinary course of business, (d) all obligations of such Person
as lessee which are or should be capitalized in accordance with generally
accepted accounting principles, (e) all Debt of others secured by a Lien on any
asset of such Person, whether or not such Debt is assumed by such Person, (f)
all obligations of such Person under Guarantees, all obligations to reimburse
the issuer in respect of letters of credit or under performance or surety bonds,
or other similar obligations, (g) all obligations of such Person in respect of
judgments, (h) all obligations of such Person in respect of banker's acceptances
and under reverse repurchase agreements, and (i) all obligations of such Person
in respect of futures contracts, swaps and other obligations that are, or would
be but for the segregation of assets therefor, senior securities for purposes of
the Investment Company Act.
"Default" means any condition or event which with the giving
of notice or lapse of time or both would, unless cured or waived, become an
Event of Default.
"Delinquent Bank" has the meaning set forth in Section
7.10(a).
"Distribution" means the declaration or payment of any
dividend on or in respect of any shares of any class of capital stock of the
Borrower, other than dividends payable solely in shares of common stock of the
Borrower; the purchase, redemption, or other retirement of any shares of any
class of capital stock of the Borrower, directly or indirectly; the return of
capital by the Borrower to its shareholders as such; or any other distribution
on or in respect of any shares of any class of capital stock of the Borrower.
"Domestic Business Day" means any day on which commercial
banks are open for the purpose of transacting business in Boston, Massachusetts.
"Domestic Lending Office" means, initially, the office of each
Bank designated as such on Schedule 1 attached hereto; and thereafter such other
office of such Bank, if any, located in the United States that shall be making
or maintaining Base Rate Loans.
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"Effective Date" means the date this Agreement becomes
effective in accordance with Section 3.01.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA Group" means the Borrower and 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 Internal Revenue Code.
"Event of Default" has the meaning set forth in Section 6.01.
"Extension Date" means that date which occurs two years prior
to the Commitment Termination Date then in effect.
"Failure" has the meaning set forth in Section 7.10(b).
"Federal Funds 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
Domestic Business Day, for the immediately preceding Domestic Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Domestic Business Day, the average of the quotations for such
day on such transactions received by the Agent from three Federal funds brokers
of recognized standing selected by the Agent in its sole discretion.
"Fixed Rate Notes" means the promissory notes of the Borrower
issued pursuant to the Note Purchase Agreement.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (a) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or in
part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Interest Period" means, with respect to each LIBOR Borrowing,
initially the period commencing on the date of such Borrowing and ending 30, 60,
90, 120 or 180 days thereafter, as the Borrower may elect in the applicable
Notice of Borrowing, and thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such Borrowing and ending on
the last day of one of the periods set forth above, as the Borrower may elect in
the applicable Notice of Conversion, provided that:
(a) any Interest Period which would otherwise end on a day
which is not a LIBOR Business Day shall be extended to the next
succeeding LIBOR Business Day unless such LIBOR Business Day falls in
another calendar month, in which case such Interest Period shall end on
the next preceding LIBOR Business Day;
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(b) any Interest Period which begins on the last LIBOR
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last LIBOR Business Day of a calendar
month;
(c) any Interest Period which would otherwise end after the
Commitment Termination Date shall end on the Commitment Termination
Date;
(d) if the Borrower fails to give notice as provided in
Section 2.02(b) it shall be deemed to have requested a conversion of
the affected LIBOR Loan to a Base Rate Loan; and
(e) all LIBOR Loans outstanding at any time shall end on no
more than six different dates.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, or any successor statute.
"Investment Adviser" means Prospect Street Investment
Management Company, Inc.
"Investment Company Act" means the Investment Company Act of
1940, as amended.
"LIBOR Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London or such other eurodollar interbank market as may be
selected by the Agent in its sole discretion acting in good faith.
"LIBOR Lending Office" means, initially, the office of each
Bank designated as such in Schedule 1 hereto; and thereafter such other office
of such Bank, if any, that shall be making or maintaining LIBOR Loans.
"LIBOR Loans" means Loans bearing interest calculated by
reference to the LIBOR Offered Rate.
"LIBOR Margin" has the meaning set forth in Section 2.09(b).
"LIBOR Offered Rate" has the meaning set forth in Section
2.09(b).
"LIBOR Reserve Percentage" has the meaning set forth in
Section 2.09(b).
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, including any agreement preventing a Person from encumbering such asset.
"Loan Documents" means, collectively, this Agreement, the
Notes and any and all other documents and instruments required to be delivered
pursuant to this Agreement, in each case as amended and in effect from time to
time.
"Loans" means the revolving credit loans made or to be made to
the Borrower by the Banks pursuant to Section 2.01.
"Maximum Amount" has the meaning set forth in Section 2.01(a).
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any
member of the ERISA Group is then making or
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accruing an obligation to make contributions or has within the preceding five
plan years made contributions, including for these purposes any Person which
ceased to be a member of the ERISA Group during such five year period.
"Note Purchase Agreement" means that certain Amended and
Restated Note Purchase Agreement, dated as of December 16, 1993, between the
Borrower and Pacific Mutual Life Insurance Company, a California corporation.
"Notes" means promissory notes of the Borrower, substantially
in the form of Exhibit A attached hereto, and "Note" means any one of such
promissory notes issued hereunder.
"Notice of Borrowing" has the meaning set forth in Section
2.02(a).
"Notice of Conversion" has the meaning set forth in Section
2.02(b).
"Obligations" means all indebtedness, obligations and
liabilities of the Borrower to any of the Banks and the Agent, existing on the
date of this Agreement or arising thereafter, direct or indirect, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, arising or
incurred under this Agreement or any of the other Loan Documents or in respect
of any of the Loans to the Borrower or any of the Notes or other instruments at
any time evidencing any thereof.
"Participant" has the meaning set forth in Section 9.06(b).
"Person" means an individual, a corporation (or series
thereof), a partnership, an association, a trust (or series thereof) or any
other entity or organization, including a government or political subdivision or
an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan
(other than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards of Section 302 or Section 412 of the
Internal Revenue Code and either (i) is maintained, or contributed to, by any
member of the ERISA Group for employees of any member of the ERISA Group or (ii)
has at any time within the preceding five years been maintained, or contributed
to, by any Person which was at such time a member of the ERISA Group for
employees of any Person which was at such time a member of the ERISA Group.
"Preferred Stock" means the Taxable Auction Rate Preferred
Stock, no par value per share and liquidation preference of $100.00 per share,
of the Borrower outstanding on the Effective Date.
"Prospectus" means the Borrower's most recent effective
prospectus under the Securities Act of 1933, as amended, and the Investment
Company Act.
"Proxy Statement" means the Borrower's proxy statement dated
January 7, 1998 relating to the annual meeting of the Borrower's Stockholders
held on March 11, 1998.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks holding at least 51%
of the outstanding principal amount of the Notes at such time and, if no such
principal amount is outstanding, Banks whose aggregate Commitments Amounts
constitute at least 51% of the aggregate Commitment Amounts of all Banks at such
time.
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"Revolving Credit Period" means the period from and including
the Effective Date to but excluding the then applicable Commitment Termination
Date.
"Subsidiary" of the Borrower means any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the Borrower.
"Total Assets" means, at any date, all assets of the Borrower
which in accordance with generally accepted accounting principles would be
classified as assets upon a balance sheet of the Borrower prepared as of such
date.
"Total Liabilities" means, at any date, all liabilities of the
Borrower which in accordance with generally accepted accounting principles would
be classified as liabilities upon a balance sheet of the Borrower prepared as of
such date.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time in the United States of America, applied on a basis consistent (except
for changes concurred in by the Borrower's independent public accountants) with
the most recent audited financial statements of the Borrower delivered to the
Banks hereunder.
ARTICLE II
THE CREDIT
SECTION 2.01. Commitments to Lend. Subject to the terms and
conditions set forth in this Agreement, each of the Banks severally agrees to
lend to the Borrower, and the Borrower may borrow, repay and reborrow from time
to time during the Revolving Credit Period, upon notice by the Borrower to the
Agent and the Banks given in accordance with Section 2.02 hereof, such sums as
are requested by the Borrower up to a maximum aggregate amount outstanding
(after giving effect to all amounts requested) at any one time equal to such
Bank's Commitment Amount, provided that the aggregate principal amount of all
Loans outstanding (after giving effect to all amounts requested) shall not
exceed at any time the lesser of (x) the aggregate Commitment Amounts of all of
the Banks or (y) the maximum amount (the "Maximum Amount") the Borrower is
permitted to borrow at such time under applicable laws and regulations, the
provisions of Sections 5.07 and 5.11 hereof, the limitations on borrowing
adopted by the Borrower in its Prospectus or elsewhere, and any agreements with
federal, state, local or foreign governmental authorities or regulators, in each
case as in effect from time to time. Each Borrowing under this Section shall be
in an aggregate principal amount of not less than $1,000,000 or a larger whole
multiple of $1,000,000 and shall be made from the several Banks pro rata in
accordance with each Bank's Commitment Percentage.
SECTION 2.02. Notice of Borrowings. (a) The Borrower shall
give the Agent a notice substantially in the form of Exhibit B attached hereto
(a "Notice of Borrowing") of each Loan requested hereunder not later than 10:00
a.m. (Boston time) (or telephonic notice not later than 10:00 a.m. (Boston time)
confirmed in a writing substantially in the form of Exhibit B attached hereto
not later than 1:00 p.m. (Boston time)) on (i) the Domestic Business Day of each
proposed Borrowing of a Base Rate Loan, and (ii) the third LIBOR Business Day
before each proposed Borrowing of a LIBOR Loan, appropriately completed
concerning the Borrowing. Each Notice of Borrowing or oral request shall
constitute a representation and
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warranty by the Borrower that the conditions set forth in Section 3.02 (and, in
the case of the initial Loan to be made hereunder, Section 3.01) have been
satisfied on the date of such notice and will be satisfied on the Borrowing
Date.
(b) The Borrower may elect from time to time to convert any
outstanding Base Rate Loan or LIBOR Loan to a Loan of the other type, or to roll
over any outstanding LIBOR Loan upon the expiration of an Interest Period with
respect thereto, by giving a notice to the Agent substantially in the form of
Exhibit C attached hereto (a "Notice of Conversion") (or telephonic notice
confirmed in a writing substantially in the form of Exhibit C attached hereto),
provided that (i) with respect to any conversion into or rollover of a LIBOR
Loan, the Notice of Conversion shall be given within the time period for the
giving of a Notice of Borrowing for a LIBOR Loan as set forth in Section
2.02(a), (ii) no Loan may be converted into or rolled over as a LIBOR Loan (x)
if the Interest Period therefor would extend beyond the Commitment Termination
Date or (y) if a Default or Event of Default has occurred and is continuing (in
which case such Loan shall automatically become a Base Rate Loan on the last day
of the first Interest Period relating thereto ending during the continuance of
any Default or Event of Default of which the Agent has actual knowledge), (iii)
a LIBOR Loan may be converted into another type of Loan only on the last day of
the Interest Period applicable thereto, and (iv) if the Borrower fails to give a
Notice of Conversion for a LIBOR Loan the Borrower shall be deemed to have
elected to convert such Loan to a Base Rate Loan on the last day of the Interest
Period applicable thereto. Conversions to and from LIBOR Loans shall be in such
amounts and pursuant to such elections so that, after giving effect thereto, the
aggregate principal amount of all LIBOR Loans having the same Interest Period
shall not be less than $500,000 or a larger integral multiple of $100,000.
SECTION 2.03. Notice to Banks; Funding of Loans. (a) Upon
receipt of a Notice of Borrowing or an oral request for a Borrowing in
accordance with Section 2.02(a), the Agent shall promptly notify each Bank of
the contents thereof and of such Bank's ratable share, if any, of such
Borrowing. Such Notice of Borrowing or oral request shall not thereafter be
revocable by the Borrower and shall obligate the Borrower to accept the Loans
requested from the Banks on the Borrowing Date.
(b) Not later than 2:00 p.m. (Boston time) on the Borrowing
Date of each Borrowing, each Bank shall make available its share, if any, of
such Borrowing, in Federal or other funds immediately available in Boston, to
the Agent at its address referred to in Section 9.01. Unless the Agent
determines that any applicable condition specified in Article III has not been
satisfied, the Agent will make BankBoston's share of such Borrowing and the
funds so received from the other Banks available to the Borrower by wiring such
funds to the Borrower's Custodian, in accordance with the instructions in the
Notice of Borrowing, on the Borrowing Date. The failure or refusal of any Bank
to make available to the Agent as provided herein its share of any Borrowing
shall not relieve any other Bank from its several obligations hereunder.
(c) Unless the Agent shall have received notice from a Bank
prior to any Borrowing Date that such Bank will not make available to the Agent
such Bank's share of such Borrowing, the Agent may assume that such Bank has
made such share available to the Agent on such Borrowing Date in accordance with
subsection (b) of this Section and the Agent may (but it shall not be required
to), in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Bank shall not have
so made such share available to the Agent, such Bank and the Borrower severally
agree to repay to the Agent, within three days after demand by the Agent, such
amount together with interest thereon, for each day from the date such amount is
made available to the Borrower until the date such amount is repaid to the
Agent, at (i) in the case of the Borrower, a rate per annum equal to the
interest rate applicable thereto pursuant to Section 2.10 and (ii) in the case
of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such
amount, such amount so repaid shall constitute such Bank's Loan included in such
Borrowing for purposes of this Agreement. If the Borrower
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shall repay to the Agent such amount, such payment shall not relieve such Bank
of any obligation to the Borrower hereunder.
(d) The failure of any Bank to make a Loan to be made by it as
a part of a Borrowing shall not relieve any other Bank of its obligation, if
any, to make its Loan on the date of such Borrowing, but no Bank shall be
responsible for the failure of any other Bank to make the Loan to be made by
such Bank on the date of such Borrowing.
SECTION 2.04. Notes. (a) The Loans of each Bank shall be
evidenced by a single Note payable to the order of such Bank in an amount equal
to such Bank's Commitment Amount or, if less, the aggregate unpaid principal
amount of such Bank's Loans, plus interest thereon as provided below.
(b) Each Bank may, by notice to the Borrower and the Agent,
request that its Loans of a particular type be evidenced by a separate Note in
an amount equal to the aggregate unpaid principal amount of such Loans. Each
such Note shall be in substantially the form of Exhibit A attached hereto with
appropriate modifications to reflect the fact that it evidences solely Loans of
the relevant type. Each reference in this Agreement to the "Note" of such Bank
shall be deemed to refer to and include any or all of such Notes, as the context
may require.
(c) Upon receipt of each Bank's Note pursuant to Section
3.01(b), the Agent shall deliver such Note to such Bank. Each Bank shall record
on its Note the date, type and amount of each Loan made by it and the date and
amount of each payment of principal made with respect thereto, and prior to any
transfer of its Note in accordance with this Agreement shall endorse on the
schedule forming a part thereof appropriate notations to evidence the foregoing
information with respect to each such Loan then outstanding; provided that the
failure of any Bank to make, or any error by any Bank in making, any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Note. Each Bank is hereby irrevocably authorized by the
Borrower so to endorse its Note and to attach to and make a part of its Note a
continuation of any such schedule as and when required.
SECTION 2.05. Optional Termination or Reduction of
Commitments. (a) The Borrower shall have the right at any time prior to the
Commitment Termination Date and from time to time prior to the Commitment
Termination Date upon seven (7) Domestic Business Days' prior written notice to
the Agent to reduce by $1,000,000 or a larger integral multiple of $1,000,000
the unborrowed portion of the aggregate Commitment Amounts of the Banks or
terminate entirely each Bank's Commitment, whereupon the Commitment Amounts of
each of the Banks shall be reduced pro rata in accordance with their Commitment
Percentages of the amount specified in such notice or, as the case may be, each
Bank's Commitment shall be terminated. Promptly after receiving any notice of
the Borrower delivered pursuant to this Section, the Agent will notify the Banks
of the substance thereof. Upon the effective date of any such reduction or
termination, the Borrower shall pay to the Agent for the respective accounts of
the Banks the full amount of any commitment fee then accrued on the amount of
the reduction. No reduction in the Commitment Amounts or termination of the
Commitments may be reinstated.
(b) On any date on which the Loans outstanding exceed the
aggregate Commitment Amounts or the Commitment of any Bank, the Borrower shall
immediately prepay such principal amount of one or more Loans (together in each
case with accrued interest thereon and the amount, if any, payable pursuant to
Section 2.13), as may be necessary to eliminate such excess.
SECTION 2.06. Extension of Commitment Termination Date;
Mandatory Termination of Commitments. (a) So long as no Default or Event of
Default has occurred and is continuing, the Borrower may request by notice
delivered to each Bank no later than 90 days prior to the Extension Date
applicable to the Commitment Termination Date then in effect that such
Commitment Termination Date be extended
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for 364 days. The Banks shall inform the Borrower by written notice delivered no
later than 45 days prior to the then applicable Extension Date whether the Banks
will grant such request. In no event shall the Commitment Termination Date be
extended without the written consent of each Bank in its sole discretion.
(b) On the Commitment Termination Date, each Bank's Commitment
Amount permanently shall reduce to $0 and each Bank's Commitment shall
terminate.
SECTION 2.07. Optional Prepayments. (a) The Borrower may, upon
at least one Domestic Business Day's notice to the Agent in the case of Base
Rate Loans and upon at least three LIBOR Business Days' notice to the Agent in
the case of LIBOR Loans (which notice shall not thereafter be revocable by the
Borrower), prepay any Loans in whole at any time, or from time to time in part
in an aggregate principal amount not less than $1,000,000 and in larger integral
multiples of $500,000 or the entire outstanding amount of such Loans, by paying
the principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Each such optional prepayment shall be applied to prepay
ratably the Loans of the several Banks included in such Borrowing.
(b) If the Borrower prepays all or any portion of the
principal amount of any LIBOR Loan on any day other than the last day of the
Interest Period relating thereto, such prepayment shall include the amounts, if
any, payable pursuant to Section 2.13.
(c) Upon receipt of a notice of prepayment pursuant to
subsection (a), the Agent shall promptly notify each Bank of the contents
thereof and of such Bank's ratable share of such prepayment.
(d) Subject to the satisfaction of the conditions set forth in
Section 3.02, Loans prepaid prior to the Commitment Termination Date may be
reborrowed prior to the Commitment Termination Date.
SECTION 2.08. Mandatory Payments. (a) If at any time the Loans
outstanding to the Borrower (i) exceed the Maximum Amount or (ii) would cause
the Borrower to be in violation of Section 5.07 or Section 5.11, the Borrower
immediately shall prepay such principal amount of one or more Loans (together
with accrued interest thereon and the amount, if any, payable pursuant to
Section 2.13), as may be necessary so that after such prepayment (x) the Loans
outstanding shall not exceed the Maximum Amount and (y) the Borrower shall not
be in violation of any of the provisions of Section 5.07 or Section 5.11.
(b) On any date on which the Loans outstanding exceed the
aggregate Commitment Amounts or the Commitment of any Bank, the Borrower shall
immediately prepay such principal amount of one or more Loans (together in each
case with accrued interest thereon and the amount, if any, payable pursuant to
Section 2.13), as may be necessary to eliminate such excess.
(c) The Borrower promises to pay on the then applicable
Commitment Termination Date, and there shall become absolutely due and payable
on such Commitment Termination Date, all of the Loans outstanding on such date,
together with all accrued and unpaid interest thereon and all other amounts
payable hereunder, including, without limitation, the amounts, if any, payable
pursuant to Section 2.13.
SECTION 2.09. Interest Rates. (a) Subject to Section 2.09(c),
each Base Rate Loan shall bear interest on the outstanding principal amount
thereof, for the period commencing with the date such Base Rate Loan is made up
to but not including the date such Base Rate Loan is repaid in full, at a rate
per annum equal to the Base Rate as in effect from time to time. Interest on
each Base Rate Loan shall be
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payable on the last Domestic Business Day of each calendar month and on the
Commitment Termination Date.
(b) Subject to Section 2.09(c), each LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the period commencing
with the date such LIBOR Loan is made or continued through and including the
last day of the Interest Period applicable thereto, at a rate per annum equal to
the sum of the LIBOR Margin plus the applicable Adjusted LIBOR Offered Rate.
Interest on each LIBOR Loan shall be payable on the last day of the Interest
Period in effect with respect thereto and on the Commitment Termination Date,
provided that (i) if the Interest Period in effect for such LIBOR Loan is 60,
90, 120 or 180 days, interest on such LIBOR Loan shall be payable every 30 days
(commencing on the 30th day after the first date of such Interest Period) and
(ii) if the Interest Period in effect for such LIBOR Loan is 180 days, interest
on such LIBOR Loan shall also be payable on each date which is 30, 60, 90, 120
and 150 days from the first date of such Interest Period.
"LIBOR Margin" means 0.55%.
The "Adjusted LIBOR Offered Rate" applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable LIBOR
Offered Rate by (ii) 1.00 minus the LIBOR Reserve Percentage.
The "LIBOR Offered Rate" applicable to any Interest Period
means the rate per annum of interest determined by the Agent at which deposits
in dollars are offered to the Agent's LIBOR Lending Office in the interbank
eurodollar market where the eurodollar and foreign currency and exchange
operations of such LIBOR Lending Office are customarily conducted at
approximately 12:00 noon (Boston time) two LIBOR Business Days before the first
day of such Interest Period, for delivery on the first day of such Interest
Period in an amount approximately equal to the principal amount of the LIBOR
Loan to which such Interest Period is to apply and for a period of time
comparable to such Interest Period.
"LIBOR Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, at which any lender
subject thereto would be required to maintain reserves under Regulation D of the
Board of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Adjusted LIBOR Offered Rate shall be adjusted automatically on
and as of the effective date of any change in the LIBOR Reserve Percentage.
(c) Any overdue principal of (whether at stated maturity, by
acceleration or otherwise) and (to the extent permitted by applicable law)
interest on the Loans and all other overdue amounts payable hereunder shall bear
interest, payable on demand, for each day from and including the date payment
thereof was due (whether at stated maturity, by acceleration or otherwise)
through and including the date of actual payment, at a rate per annum equal to
the sum of two percent (2%) above the Base Rate until such amount shall be paid
in full (after as well as before judgment). During the continuance a Default or
an Event of Default the principal of the Loans not overdue shall, until such
Default or Event of Default has been cured or remedied or such Default or Event
of Default has been waived by the Required Banks pursuant to Section 9.05, bear
interest at a rate per annum equal to the greater of (i) two percent (2%) above
the rate of interest otherwise applicable to such Loans pursuant to this Section
2.10(a) and (b) and (ii) the rate of interest applicable to overdue principal.
SECTION 2.10. Fees. (a) During the Revolving Credit Period,
the Borrower shall pay to the Agent for the account of each Bank a commitment
fee at the rate of 0.09% per annum on the daily amount by which the aggregate
amount of such Bank's Commitment Amount exceeded the aggregate outstanding
principal amount of the Loans made by such Bank.
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(b) The commitment fee shall accrue from and including the
Effective Date to but excluding the Commitment Termination Date. Accrued
commitment fees payable hereunder shall be payable quarterly in arrears on the
last day of each March, June, September and December, commencing on the first
such day after the Effective Date, and on the Commitment Termination Date.
(c) The Borrower shall pay to the Agent for its own account,
annually in advance on the Effective Date and on each anniversary thereof during
the term of this Agreement, a non-refundable agent's fee as agreed upon
separately by the Borrower and the Agent.
SECTION 2.11. General Provisions as to Payments. (a) Payment
of principal of and interest on the Loans and of fees and all other amounts due
hereunder shall be made not later than 2:00 p.m. (Boston time) on the date when
due, in Federal or other funds immediately available in Boston, to the Agent at
its address referred to in Section 9.01. The Agent will promptly distribute to
each Bank its ratable share of each such payment received by the Agent for the
account of the Banks. Whenever any payment of principal of, or interest on, the
Base Rate Loans or of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Except as otherwise provided in the definition
of Interest Period, whenever any payment of principal of, or interest on, LIBOR
Loans shall be due on a day which is not a LIBOR Business Day, the date for
payment thereof shall be extended to the next succeeding LIBOR Business Day
unless such LIBOR Business Day falls in another calendar month, in which case
the date for payment thereof shall be the next preceding LIBOR Business Day. If
the date for any payment of principal is extended by operation of law or
otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Banks hereunder
that the Borrower will not make such payment in full, the Agent may assume that
the Borrower has made such payment in full to the Agent on such date and the
Agent may (but it shall not be required to), in reliance upon such assumption,
cause to be distributed to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent that the Borrower shall not have
so made such payment, each Bank shall repay to the Agent forthwith on demand
such amount distributed to such Bank together with interest thereon, for each
day from the date such amount is distributed to such Bank until the date such
Bank repays such amount to the Agent, at the Federal Funds Rate.
(c) The Borrower agrees that payments by the Borrower
hereunder and under any of the other Loan Documents shall be made without setoff
or counterclaim and free and clear of and without deduction for any taxes,
levies, imposts, duties, charges, fees, deductions, withholdings, compulsory
loans, restrictions or conditions of any nature now or hereafter imposed or
levied by any jurisdiction or any political subdivision thereof or taxing or
other authority therein unless the Borrower is compelled by law to make such
deduction or withholding. If any such obligation (other than one arising with
respect to taxes based on or measured by the income or profits of any of the
Banks or the Agent) is imposed upon the Borrower with respect to any amount
payable by it hereunder or under any of the other Loan Documents, the Borrower
will pay to the Agent, for the account of the Banks or (as the case may be) the
Agent, on the date on which such amount is due and payable hereunder or under
such other Loan Document, such additional amount in U.S. dollars as shall be
necessary to enable the Banks or the Agent to receive the same net amount which
the Banks or the Agent would have received on such due date had no such
obligation been imposed upon the Borrower. The Borrower will deliver promptly to
the Agent certificates or other valid vouchers for all taxes or other charges
deducted from or paid with respect to payments made by the Borrower hereunder or
under such other Loan Document.
SECTION 2.12. Computation of Interest and Fees. All interest
and fees hereunder shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed.
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SECTION 2.13. Funding Losses. If the Borrower makes any
payment of principal with respect to any LIBOR Loan (pursuant to Sections 2.08,
2.09 or Article VI or VIII or otherwise) on any day other than the last day of
the Interest Period applicable thereto or defaults in payment of any such
principal or any interest thereon, or if the Borrower fails to borrow or
continue any LIBOR Loans after notice has been given to any Bank in accordance
with Section 2.02, the Borrower shall reimburse each Bank upon demand (with a
copy to the Agent) for any resulting loss or expense incurred by it as a result
of such payment, default in payment or failure (or by an existing or prospective
Participant in the related Loan), including (without limitation) any loss or
expense incurred in obtaining, liquidating or employing deposits from third
parties. Any such demand shall be accompanied by a certificate of the applicable
Bank setting forth in reasonable detail the amounts of such losses and expenses
payable to it by the Borrower under this Section, which statement shall be
conclusive in the absence of manifest error.
SECTION 2.14. Withholding Tax Exemption. At least five
Domestic Business Days prior to the first date on which interest or fees are
payable hereunder for the account of any Bank, each Bank that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to 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 Bank is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United States
federal income taxes. Each Bank which so delivers a Form 1001 or 4224 further
undertakes to deliver to the Borrower and the Agent two additional copies of
such form (or a successor form) on or before the date that such form expires or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent form 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 Bank is entitled to receive payments under
this Agreement and the Notes without deduction or withholding of any United
States federal income taxes, unless an event (including without limitation any
change in treaty, law or regulation) 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 Bank from duly completing and
delivering any such form with respect to it and such Bank 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.
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement shall become
effective on the date that each of the following conditions shall have been
satisfied (or waived in accordance with Section 9.05):
(a) receipt by the Agent of counterparts hereof signed by each
of the parties hereto;
(b) receipt by the Agent for the account of each Bank of a
duly executed Note dated on or before the Effective Date complying with the
provisions of Section 2.04;
(c) receipt by each of the Banks of (i) an opinion of Olshan
Grundman Frome & Rosenzweig LLP, counsel to the Borrower, substantially in the
form of Exhibit D-1 attached hereto and satisfactory to the Agent in all
respects and (ii) an opinion of Piper & Marbury L.L.P., Maryland counsel to the
Borrower, substantially in the form of Exhibit D-2 attached hereto and
satisfactory to the Agent in all respects;
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(d) receipt by each of the Banks of a certificate manually
signed by the treasurer or vice president of the Borrower to the effect set
forth in clauses (b) (if a Borrowing will occur on the Effective Date), (c) and
(d) of Section 3.02, such certificate to be dated the Effective Date and to be
in form and substance satisfactory to the Agent;
(e) receipt by each of the Banks of a manually signed
certificate from the Secretary of the Borrower, in form and substance
satisfactory to the Agent and dated the Effective Date, as to the incumbency of,
and bearing manual specimen signatures of, the officers of the Borrower who are
authorized to execute and take actions under the Loan Documents, as to the
Custodian and Investment Adviser of the Borrower, and certifying and attaching
copies of (i) the Borrower's by-laws as then in effect, (ii) duly authorized
resolutions of the Borrower's board of directors authorizing the transactions
contemplated hereby, (iii) the current Prospectus for the Borrower, and (iv) the
Annual Reports and SemiAnnual Reports to the Borrower's shareholders for the two
most recently ended fiscal years;
(f) receipt by each of the Banks of a certificate manually
signed by the treasurer or vice president of the Borrower evidencing compliance
by the Borrower with Section 18 of the Investment Company Act after giving
effect to the borrowing of Loans in an aggregate principal amount equal to the
aggregate Commitment Amounts as senior securities representing indebtedness
under Section 18(a) and not loans for temporary purposes under Section 18(g);
(g) satisfactory completion by the Banks of due diligence with
respect to the Borrower;
(h) the Banks being satisfied in their sole discretion that
there has been no material adverse change in the business, assets, financial
condition or prospects of the Borrower since the date of the most recent
financial statements of the Borrower referred to in Section 4.07;
(i) receipt by the Agent of all documents, opinions and
instruments it may reasonably request prior to the execution of this Agreement
relating to compliance with applicable rules and regulations promulgated by the
Federal Reserve Board and other governmental and regulatory authorities, the
existence of the Borrower, the authority for and the validity and enforceability
of this Agreement and the Notes, and any other matters relevant hereto, all in
form and substance satisfactory to the Agent;
(j) receipt by the Agent of evidence which is satisfactory to
the Agent in all respects that (i) all amounts outstanding under that certain
Demand Promissory Note, dated February 20, 1998, and delivered by the Borrower
to BankBoston have been or will be on the Effective Date, with the proceeds of
the initial Loan to be made hereunder, repaid in full; and (ii) the Borrower has
redeemed and cancelled all of the Preferred Stock or will redeem and cancel all
of the Preferred Stock on or before May 15, 1998 with the proceeds of a Loan to
be made hereunder; and
(k) receipt by the Agent of payment of all fees and expenses
(including fees and disbursements of special counsel for the Agent ) then
payable hereunder and under the other Loan Documents;
provided that this Agreement shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied not later than
May 15, 1998. The Agent shall promptly notify the Borrower and the Banks of the
Effective Date and such notice shall be conclusive and binding on all parties
hereto.
SECTION 3.02. All Borrowings. The obligation of any Bank to
make a Loan on the occasion of any Borrowing is subject to the satisfaction of
the following conditions:
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(a) receipt by the Agent and the Banks of a Notice of
Borrowing (or a telephonic notice of borrowing) as required by Section 2.02
which is completed in a manner which is reasonably satisfactory to the Agent in
all respects;
(b) immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans to the Borrower will not exceed the
lesser of (i) the Maximum Amount, or (ii) the aggregate Commitment Amounts;
(c) immediately before and after such Borrowing, no Default or
Event of Default shall have occurred and be continuing; and
(d) the representations and warranties contained in this
Agreement shall be true on and as of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty on
the date of such Borrowing as to the facts specified in clauses (b), (c) and (d)
of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants that:
SECTION 4.01. Existence and Power; Investment Company. (a) It
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland, is duly qualified and in good standing in every
other jurisdiction where it is doing business, and has all corporate powers and
all authorizations and approvals required to carry on its business as now
conducted.
(b) It is a closed-end, diversified management investment
company registered under the Investment Company Act, and its outstanding
interests (i) have been duly issued and are fully paid and non-assessable, (ii)
have been duly registered under the Securities Act of 1933, as amended, and
(iii) have been registered or are exempt from registration under all applicable
state securities or so-called "Blue Sky" laws.
(c) Its shares of Common Stock are traded on the New York
Stock Exchange.
SECTION 4.02. Authorization; No Contravention. The execution,
delivery and performance by the Borrower of this Agreement, the Notes and each
of the other Loan Documents to which it is a party are within its corporate
powers, have been duly authorized by all necessary corporate action, require no
authorization or action by or in respect of, or filing with, any governmental
body, agency or official or any shareholder in or creditor of the Borrower, and
do not contravene, or constitute a default under, any provision of applicable
law or regulation, the Articles of Incorporation or by-laws of the Borrower, any
agreement, judgment, injunction, order, decree or other instrument binding upon
it or its most recent Prospectus, or result in the creation or imposition of any
Lien on any of its assets.
SECTION 4.03. Binding Effect. Each of the Loan Documents has
been duly executed and delivered by the Borrower. This Agreement constitutes a
valid and binding agreement of the Borrower and the Notes constitute valid and
binding obligations of the Borrower, in each case enforceable in accordance with
their terms, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights.
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SECTION 4.04. Compliance with Margin Rules. The execution,
delivery and performance by the Borrower of this Agreement, the Notes and the
other Loan Documents and the transactions contemplated hereunder and thereunder
will not violate Regulation U or Regulation X of the Board of Governors of the
Federal Reserve System.
SECTION 4.05. Non-Affiliation with Banks. So far as appears
from the records of the Borrower, neither any Bank nor any Affiliate of any Bank
known to the Borrower is an Affiliated Person of the Borrower and none of the
Borrower or any Affiliate of the Borrower is an Affiliated Person of any Bank or
of any Affiliate of any Bank known to the Borrower.
SECTION 4.06. Subsidiaries. The Borrower has no Subsidiaries.
SECTION 4.07. Financial Information.
(a) The statement of assets and liabilities of the Borrower as
of the last day of the Borrower's fiscal year most recently ended prior to the
Effective Date, and the related Statements of Operations and Changes in Net
Assets for the fiscal year ended on such date, reported on by Arthur Andersen
LLP and set forth in the Annual Report to the Borrower's shareholders for the
fiscal year ended on such date, together with the notes and schedules thereto,
present fairly, in all material respects, in conformity with generally accepted
accounting principles, the financial position of the Borrower as of such date.
(b) Since the last day of the Borrower's fiscal year most
recently ended prior to the Effective Date, there has been no material adverse
change in the business, financial position, results of operations or prospects
of the Borrower.
SECTION 4.08. Litigation. There is no action, suit or
proceeding pending against, or, to the knowledge of the Borrower, threatened
against or affecting, the Borrower or, to the knowledge of the Borrower, any
Person with whom it has entered into a material contract or agreement before any
court or arbitrator or any governmental body, agency or official in which there
is a reasonable possibility of an adverse decision which could materially
adversely affect the business, financial position or results of operations of
the Borrower or which in any manner draws into question the validity or
enforceability of this Agreement, the Notes or any of the other Loan Documents
or any such material contract or agreement.
SECTION 4.09. ERISA. (a) The Borrower is not a member of an
ERISA Group and has no liability in respect of any Benefit Arrangement, Plan or
Multiemployer Plan.
(b) No Loan will constitute a "prohibited transaction" within
the meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code
for which an exemption is not available.
SECTION 4.10. Taxes. The Borrower qualifies as a "regulated
investment company" within the meaning of the Internal Revenue Code. The
Borrower has timely filed in correct form all United States Federal income tax
returns and all other material tax returns which are required to be filed by it
and has paid all taxes due pursuant to such returns or pursuant to any
assessment received by it. The charges, accruals and reserves on the books of
the Borrower in respect of taxes or other governmental charges are, in the
opinion of the Borrower, adequate.
SECTION 4.11. Compliance. (a) The Loans are a "senior security
representing indebtedness" for purposes of and as defined in Section 18 of the
Investment Company Act. The Borrower is in compliance with Section 18 of the
Investment Company Act. The Borrower is also in compliance with all other
applicable laws and regulations (including, without limitation, all other
provisions of the
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Investment Company Act and all rules and regulations thereunder), all applicable
ordinances, decrees, requirements, orders and judgments of, and all of the terms
of any applicable licenses and permits issued by, any governmental body, agency
or official, or the exchange on which its shares are traded, and all agreements
and instruments to which it may be subject or any of its properties may be
bound, in each case where the violation thereof may have a material adverse
effect on its business, operations, properties, assets or condition (financial
or otherwise). The Borrower is in compliance with all investment policies and
restrictions set forth (or incorporated by reference) in its most recent
Prospectus.
(b) No Default or Event of Default has occurred and is
continuing.
SECTION 4.12. Full Disclosure. All information heretofore
furnished by the Borrower to the Banks for purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Borrower to the Banks will be, true and
accurate in all material respects on the date as of which such information is
stated or certified. The Borrower has disclosed to the Banks in writing all
facts which, to its knowledge after reasonable inquiry, materially and adversely
affect or may affect (to the extent it can now reasonably foresee), the
business, operations or financial condition of the Borrower or the ability of
the Borrower to perform its obligations under the Loan Documents.
SECTION 4.13. Margin Stock. Not more than 25% of the value (as
determined by any reasonable method) of the Borrower's assets are represented by
"margin stock" (as defined under Regulation U).
SECTION 4.14. Senior Debt. None of the Obligations are
subordinated or junior to the payment and performance of other Debt of the
Borrower.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any
Commitment hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each
of the Banks:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower, (i) a statement of the Borrowers
assets and liabilities, including the portfolio of investments, as of the end of
such fiscal year and the related statements of operations and changes in net
assets for such fiscal year, or (ii) if different from the foregoing, the
statements which the Borrower is required to prepare under applicable laws and
regulations as of the end of such period, all reported in a manner acceptable to
the Securities and Exchange Commission, together with an audit report thereon
issued by Arthur Andersen LLP or other independent public accountants of
nationally recognized standing;
(b) as soon as available and in any event within 90 days after
the end of the first semi-annual period of each fiscal year of the Borrower, (i)
a statement of the Borrowers assets and liabilities, including the portfolio of
investments, as of the end of such period, (ii) if different from the foregoing,
the statements which the Borrower is required to prepare under applicable laws
and regulations as of the end of such period, all certified (subject to normal
year-end adjustments) as to fairness of presentation,
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generally accepted accounting principles and consistency by the treasurer or
vice president of the Borrower or accompanied by an audit report thereon issued
by Arthur Andersen LLP or other independent public accountants of nationally
recognized standing;
(c) as soon as available and in any event on each Wednesday, a
listing of the Borrower's investments as of the immediately preceding Friday,
certified by the treasurer or vice president of the Borrower;
(d) simultaneously with the delivery of each set of financial
statements referred to in clauses (a), (b) and (c) above, a compliance
certificate substantially in the form of Exhibit E attached hereto and not later
than 12:00 noon (Boston time) on each Domestic Business Day or LIBOR Business
Day on which a Loan is made pursuant to Section 2.01 or converted pursuant to
Section 2.02(b), a Notice of Borrowing or Notice of Conversion, as appropriate;
(e) promptly after the Borrower obtains knowledge of any
Default or Event of Default, a certificate of the chief financial officer or the
chief accounting officer of the Borrower setting forth the details thereof and
the action which the Borrower is taking or proposes to take with respect
thereto;
(f) promptly upon the filing thereof with the Securities and
Exchange Commission or the mailing thereof to its shareholders, copies of all
reports to shareholders, amendments and supplements to its Prospectus, proxy
statements and other materials of a financial or otherwise material nature;
(g) promptly after the sending thereof, copies of any notices
of redemption sent to the holders of the Fixed Rate Notes; and
(h) from time to time such additional information regarding
the financial position or business of the Borrower as the Agent, at the request
of any Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. The Borrower will duly
and punctually pay or cause to be paid the principal and interest on the Loans
and all other amounts payable by it provided for in this Agreement and the other
Loan Documents. The Borrower will pay and discharge, at or before maturity, all
of its material obligations and liabilities, including, without limitation, tax
liabilities, except where the same may be contested in good faith by appropriate
proceedings, and will maintain, in accordance with generally accepted accounting
principles, appropriate reserves for the accrual of any of the same.
SECTION 5.03. Maintenance of Insurance. The Borrower will
maintain with financially sound and reputable insurance companies, policies with
respect to its property and business against at least such risks (and with no
greater risk retentions) and in at least such amounts as are customary in the
case of registered closed-end investment companies engaged in similar securities
activities of comparable size and financial strength; and will furnish upon
request to the Banks, information presented in reasonable detail as to the
insurance so carried.
SECTION 5.04. Conduct of Business and Maintenance of
Existence. The Borrower will continue to engage in business of the same general
type as now conducted by it, will preserve, renew and keep in full force and
effect its existence as a Maryland corporation and its rights, privileges and
franchises necessary in the normal conduct of its business, including its status
as a registered investment company.
SECTION 5.05. Compliance with Laws. The Borrower will comply
in all material respects with all applicable laws, ordinances, rules,
regulations and requirements of governmental authorities (including, without
limitation, ERISA and the Investment Company Act and the rules and
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regulations thereunder) and the exchange on which its shares are traded, except
where the necessity of compliance therewith is contested in good faith by
appropriate proceedings or exemptive relief has been obtained therefrom and
remains in effect. The Borrower will file all federal and other tax returns,
reports and declarations required by all relevant jurisdictions on or before the
due dates for such returns, reports and declarations and will pay all taxes and
other governmental assessments and charges as and when they become due (except
those that are being contested in good faith by the Borrower and as to which the
Borrower has established appropriate reserves on its books and records).
SECTION 5.06. Inspection of Property, Books and Records. The
Borrower will keep proper books of record and account in which full, true and
correct entries shall be made of all dealings and transactions in relation to
its business and activities; and will permit representatives of any Bank, at
such Bank's expense, to visit and inspect any of its offices, to examine and
make abstracts from any of its books and records and to discuss its affairs,
finances and accounts with its officers, employees and independent public
accountants, all at such reasonable times and as often as may reasonably be
desired.
SECTION 5.07. Debt. The Borrower will not create, assume or
suffer to exist any Debt other than (a) Debt arising under this Agreement and
the Notes, (b) Debt in favor of the Borrower's Custodian consisting of overnight
loans to cover failed securities trades, provided that the aggregate amount of
such Debt does not at any time exceed 5% of the Total Assets of the Borrower,
(c) Debt evidenced by the Fixed Rate Notes or otherwise incurred pursuant to the
Note Purchase Agreement, and (d) Debt arising in connection with any other
transaction permissible under the Investment Company Act and the Borrower's
investment objectives and fundamental and operating investment restrictions,
provided that in no event shall the Borrower (i) enter into reverse repurchase
agreements, (ii) borrow money under any arrangement other than (x) from the
Banks hereunder, (y) on an overnight basis from the Borrower's Custodian to the
extent provided in clause (b) hereof, or (z) pursuant to the Fixed Rate Notes,
or (iii) issue or be or remain liable for or have outstanding any "senior
security" (as defined in the Investment Company Act), except that the Borrower
may borrow from the Banks hereunder and the Fixed Rate Notes may remain
outstanding.
SECTION 5.08. Negative Pledge. The Borrower will not create,
assume or suffer to exist any Lien on any of its assets, whether now owned or
hereafter acquired, or on the income or profits therefrom, except (a) Liens for
taxes, assessments or governmental charges or levies the payment of which is not
at the time required, (b) the agreements of the Borrower limiting its ability to
encumber its assets as set forth in the Note Purchase Agreement and, with
respect to the Preferred Stock, in the Borrower's Articles of Incorporation, in
each case as in effect on the date hereof, and (c) encumbrances created in
connection with the Borrower's portfolio investments (and not for the primary
purpose of borrowing money) to the extent permitted by the provisions of the
Borrower's Prospectus and Section 5.07 hereof, provided that the aggregate
amount of such encumbered assets of the Borrower pursuant to this clause (c)
does not at any time exceed 5% of the Total Assets of the Borrower.
SECTION 5.09. Consolidations, Mergers and Sales of Assets. The
Borrower will not consolidate or merge with or into any other Person or
reorganize its assets into series of a series corporation or entity, nor will
the Borrower sell, lease or otherwise transfer, directly or indirectly, all or
any substantial part of its assets to any other Person except that the Borrower
may sell its assets in the ordinary course of business as described in its
Prospectus. The Borrower will not invest all of its investable assets in any
other management investment company or otherwise employ a master-feeder or fund
of funds investment structure.
SECTION 5.10. Use of Proceeds. The proceeds of the Loans made
under this Agreement to the Borrower will be used by the Borrower solely to (a)
refinance the Borrower's obligations to the Bank
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under that certain Demand Promissory Note referred to in Section 3.01(j), (b)
redeem and cancel all of the Preferred Stock, and (c) finance the purchase of
securities for its investment portfolio.
SECTION 5.11. Ratio of Liabilities to Assets. The Borrower
will not permit, at any time, the sum of its Total Liabilities plus, without
duplication, the aggregate amount of its Debt, to exceed 25% of its Total
Assets.
SECTION 5.12. Compliance with Prospectus. The Borrower will at
all times comply in all material respects with the investment objectives,
limitations and policies set forth (or incorporated by reference) in its
Prospectus, as such objectives, limitations and policies were modified as
described in the Proxy Statement. The Borrower will not permit its investment
objective or any fundamental policy or its diversified status to be changed from
those in effect on the Effective Date and reflected in the Prospectus delivered
to the Banks on the Effective Date.
SECTION 5.13. Non-Affiliation with Banks. The Borrower will
not at any time become an Affiliated Person of any Bank or any Affiliate of any
Bank known to the Borrower and the Borrower will use its best efforts to ensure
that none of its Affiliates is or becomes an Affiliated Person of any Bank or
any Affiliate of any Bank known to the Borrower.
SECTION 5.14. Deposit Account. The Borrower shall specify a
deposit account with its Custodian in which Loans shall be deposited.
SECTION 5.15. Regulated Investment Company. The Borrower will
maintain its status as a "regulated investment company" under the Internal
Revenue Code at all times and will make sufficient distributions to qualify as a
"regulated investment company" pursuant to subchapter M of the Internal Revenue
Code.
SECTION 5.16. No Subsidiary. The Borrower will not have at any
time any Subsidiary.
SECTION 5.17. ERISA. The Borrower will not become a member of
any ERISA Group and will not incur any liability in respect of any Benefit
Arrangement, Plan or Multiemployer Plan, including without limitation for
benefits thereunder.
SECTION 5.18. Distributions. The Borrower will not make any
Distribution to any of its shareholders if a Default or Event of Default has
occurred and is continuing or will result from such Distribution, provided that
the Borrower shall at all times be permitted to make Distributions that are
required to enable it to maintain its status as a "regulated investment company"
under subchapter M of the Internal Revenue Code.
SECTION 5.19. Margin Stock. The Borrower will not permit more
than 25% of the value (as determined by any reasonable method) of its assets to
be represented by "margin stock" (as defined under Regulation U) at any time.
SECTION 5.20. Capitalization. The Borrower will not designate,
establish or create any new or additional series of capital stock, effect or
permit any change in or amendment to its charter documents or any other document
or instrument pertaining to the terms of the capital stock of the Borrower or
issue any additional shares of the Preferred Stock. The Borrower shall, on or
before May 15, 1998, redeem and cancel all of its Preferred Stock.
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SECTION 5.21. Fixed Rate Notes. (a) The Borrower will not
effect or permit any change in or amendment to the Note Purchase Agreement, the
Fixed Rate Notes, or any document or instrument pertaining thereto without the
prior written consent of the Required Banks.
(b) The Borrower will not directly or indirectly make any
payment of principal of or interest on or in redemption, retirement or
repurchase of any of the Fixed Rate Notes if any Default or Event of Default has
occurred and is continuing or will result from such payment, provided that the
Borrower may make the regularly scheduled payments of principal and interest on
the Fixed Rate Notes.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall (i) fail to pay when due any principal
of any Loan, or (ii) fail to pay any interest on any Loan, or any fees or any
other amount payable by the Borrower hereunder within five days after the same
shall become due and payable;
(b) the Borrower shall fail to observe or perform any covenant
contained in Article V;
(c) the Borrower shall fail to observe or perform any covenant
or agreement contained in this Agreement or in any other Loan Document (other
than those covered by clause (a) or (b) above) for ten (10) Domestic Business
Days after written notice thereof has been given to the Borrower by the Agent at
the request of any Bank;
(d) any representation, warranty, certification or statement
made (or deemed made) by the Borrower in this Agreement or in any certificate,
financial statement or other document delivered pursuant to this Agreement shall
prove to have been incorrect in any material respect when made (or deemed made);
(e) the Borrower shall fail to pay, when due or within any
applicable grace period, any Debt of the Borrower in an aggregate principal
amount in excess of $500,000;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Debt of the Borrower in an aggregate
principal amount in excess of $500,000 or enables (or, with the giving of notice
or lapse of time or both, would enable) the holder of such Debt or any Person
acting on such holder's behalf to accelerate the maturity thereof;
(g) the Borrower shall seek the appointment of a trustee,
receiver, liquidator, custodian or other similar official for it or any
substantial part of its property, or shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator or other similar official for it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it or the Borrower shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any action to authorize any of the foregoing;
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(h) an involuntary case or other proceeding shall be commenced
against the Borrower seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it and such involuntary case
or other proceeding shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered against the Borrower or under the
federal bankruptcy laws as now or hereafter in effect;
(i) a judgment or order for the payment of money in excess of
$500,000 shall be rendered against the Borrower and such judgment or order shall
continue unsatisfied and unstayed for a period of 10 days;
(j) the investment advisory agreement which is in effect on
the Effective Date for the Borrower shall terminate, or the Investment Adviser
shall cease to be the investment adviser to the Borrower; or
(k) the Custodian of the Borrower shall cease to be its
Custodian;
then, and in every such event, the Agent shall (i) if requested by Banks
constituting Required Banks, by notice to the Borrower terminate the
Commitments, and they shall thereupon terminate, and (ii) if requested by Banks
constituting Required Banks, by notice to the Borrower declare the Loans
(together with accrued interest thereon) to be, and the Loans (together with
accrued interest thereon) shall thereupon become, immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower; provided that in the case of any of the
Events of Default specified in clause (g) or (h) above, automatically without
any notice to the Borrower or any other act by the Agent or the Banks, the
Commitments shall thereupon terminate and the Loans (together with accrued
interest thereon) shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice
to the Borrower under Section 6.01(c) promptly upon being requested to do so by
any Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. Subject to
Section 7.07 hereof, each Bank irrevocably appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement, the Notes and the other Loan Documents as are delegated to the Agent
by the terms hereof or thereof, together with all such powers as are reasonably
incidental thereto.
SECTION 7.02. Action by Agent. The duties and responsibilities
of the Agent hereunder are only those expressly set forth herein. The
relationship between the Agent and the Banks is and shall be that of agent and
principal only, and nothing contained in this Agreement or any of the other
Loans Documents shall be construed to constitute the Agent as a trustee for any
Bank. Without limiting the generality of the foregoing, the Agent shall not be
required to take any action with respect to any Default or Event of Default,
except as expressly provided in Article VI.
SECTION 7.03. Consultation with Experts. The Agent may consult
with legal counsel, independent public accountants and other experts selected by
it and shall not be liable for any action
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taken or omitted to be taken by it in good faith in accordance with the advice
of such counsel, accountants or experts.
SECTION 7.04. Liability of Agent. Neither the Agent nor any of
its directors, officers, agents or employees shall be liable for any action
taken or not taken by it in connection herewith (a) with the consent or at the
request of the Required Banks or (b) in the absence of its own gross negligence
or willful misconduct. 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 (i) any statement, warranty or representation made by any
other Person in connection with this Agreement or any borrowing hereunder; (ii)
the performance or observance of any of the covenants or agreements of the
Borrower; (iii) the satisfaction of any condition specified in Article III,
except receipt of items required to be delivered to it; or (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement (except as to its
own execution of this Agreement), the Notes, the other Loan Documents or any
other instrument or writing furnished in connection herewith or therewith. The
Agent shall not incur any liability by acting in reliance upon any notice,
consent, certificate, statement or other writing (which may be a bank wire,
telex or similar writing) reasonably believed by it to be genuine or to be
signed by the proper party or parties.
SECTION 7.05. Indemnification. The Banks hereby ratably agree
to indemnify the Agent (to the extent not reimbursed by the Borrower) against
any cost, expense (including counsel fees and disbursements), claim, demand,
action, loss or liability (except such as directly result from the Agent's gross
negligence or willful misconduct) that the Agent may suffer or incur in
connection with this Agreement or any of the other Loan Documents or any action
taken or omitted by the Agent hereunder or thereunder.
SECTION 7.06. Credit Decision. Each Bank acknowledges that it
has, independently and without reliance upon either the Agent or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each Bank
also acknowledges that it will, independently and without reliance upon either
the Agent or any other Bank, 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 any action under this Agreement.
SECTION 7.07. Successor Agent. The Agent may resign at any
time by giving written notice thereof to the Banks and the Borrower. Upon any
such resignation, the Required Banks shall have the right to appoint a successor
Agent with the prior written consent of the Borrower, which consent shall not be
unreasonably withheld or delayed. If no successor Agent shall have been so
appointed by the Required Banks within 30 days after the retiring Agent gives
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a commercial bank organized or
licensed under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $50,000,000. Upon the
acceptance of its appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the rights
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent.
SECTION 7.08. Agent as Bank. In its individual capacity,
BankBoston and any other Bank that serves as a successor Agent hereunder shall
have the same obligations and the same rights, powers and privileges in respect
of its Commitment and the Loans made by it as it would have were it not also the
Agent.
SECTION 7.09. Distribution by Agent. If in the opinion of the
Agent the distribution of any amount received by it in such capacity hereunder,
under the Notes or under any of the other Loan Documents might involve it in
liability, it may refrain from making such distribution until its right to make
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distribution shall have been adjudicated by a court of competent jurisdiction.
If a court of competent jurisdiction shall adjudge that any amount received and
distributed by the Agent is to be repaid, each Person to whom any such
distribution shall have been made shall either repay to the Agent its
proportionate share of the amount so adjudged to be repaid or shall pay over the
same in such manner and to such Persons as shall be determined by such court.
SECTION 7.10. Delinquent Banks. (a) Notwithstanding anything
to the contrary contained in this Agreement or any of the other Loan Documents,
any Bank that (i) willfully does not or (ii) does not as a result of a Failure
(as defined below) (A) make available to the Agent its pro rata share of any
Loan, or (B) comply with the provisions of Section 9.04 with respect to making
dispositions and arrangements with the other Banks, where such Bank's share of
any payment received, whether by setoff or otherwise, is in excess of its pro
rata share of such payments due and to payable to all of the Banks, in each case
as, when and to the full extent required by the provisions of this Agreement,
shall be deemed delinquent (a "Delinquent Bank") and shall be deemed a
Delinquent Bank until such time as such delinquency is satisfied. A Delinquent
Bank shall be deemed to have assigned any and all payments due to it from the
Borrower, whether on account of outstanding Loans, interest, fees or otherwise,
to the remaining nondelinquent Banks for application to, and reduction of, their
respective pro rata shares of all outstanding Loans. The Delinquent Bank hereby
authorizes the Agent to distribute such payments to the nondelinquent Banks in
proportion to their respective pro rata shares of all outstanding Loans. A
Delinquent Bank shall be deemed to have satisfied in full a delinquency when and
if, as a result of application of the assigned payments to all outstanding Loans
of the nondelinquent Banks, the Banks' respective pro rata shares of all
outstanding Loans have been returned to those in effect immediately prior to
such delinquency and without giving effect to the nonpayment causing such
delinquency.
(b) For purposes of this Section 7.10, a Failure of a Bank
shall mean (i) it shall seek the appointment of a trustee, receiver, liquidator,
custodian or other similar official for it or any substantial part of its
property, or shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator or other similar
official for it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or (ii) it
makes a general assignment for the benefit of creditors, or shall fail generally
to pay its debts as they become due, or shall take any corporate action to
authorize any of the foregoing, or (iii) an involuntary case or other proceeding
shall be commenced against it seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it, or (iv) an
order for relief shall be entered against it under the federal bankruptcy laws
as now or hereafter in effect.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate
or Unfair. If on or prior to the first day of any Interest Period for any
Borrowing of LIBOR Loans:
(a) the Agent determines that deposits in dollars (in the
applicable amounts) are not being offered to the Agent in the relevant
market for such Interest Period, or
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(b) the Required Banks advise the Agent that the Adjusted
LIBOR Offered Rate as determined by the Agent will not adequately and
fairly reflect the cost to such Banks of funding their LIBOR Loans for
such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make
LIBOR Loans shall be suspended. Unless the Borrower notifies the Agent at least
two Domestic Business Days before the date of any Borrowing of LIBOR Loans or
any rollover date for which a Notice of Borrowing or Notice of Conversion has
previously been given that it elect not to borrow or roll over on such date,
such Borrowing of LIBOR Loans or outstanding LIBOR Loan shall instead be made as
a Borrowing of a Base Rate Loan.
SECTION 8.02. Illegality. If any present or future applicable
law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its LIBOR Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for any Bank (or its LIBOR Lending Office) to make, maintain or fund
its LIBOR Loans and such Bank shall so notify the Agent, the Agent shall
forthwith give notice thereof to the other Banks and the Borrower, whereupon
until such Bank notifies the Borrower and the Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Bank to
make LIBOR Loans shall be suspended. Before giving any notice to the Agent
pursuant to this Section, such Bank shall designate a different LIBOR Lending
Office if such designation will avoid the need for giving such notice and will
not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If
such Bank shall determine that it may not lawfully continue to maintain and fund
any of its outstanding LIBOR Loans to maturity and shall so specify in such
notice, the Borrower shall immediately prepay in full the then outstanding
principal amount of each such LIBOR Loan, together with accrued interest thereon
and any amount payable by the Borrower pursuant to Section 2.14. Concurrently
with prepaying each such LIBOR Loan, the Borrower shall borrow a Base Rate Loan
in an equal principal amount from such Bank (on which interest and principal
shall be payable contemporaneously with the related LIBOR Loans of the other
Banks), and such Bank shall make such a Base Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If (i)
the introduction of any new law, rule or regulation, or (ii) any change in the
interpretation or administration of any applicable law, rule or regulation by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency in
connection therewith:
(i) shall subject any Bank (or its Applicable Lending Office) to any
new tax, duty or other charge with respect to its Loans, its Note or its
Commitment, or shall change the basis of taxation of payments to any Bank (or
its Applicable Lending Office) of the principal of or interest on its Loans or
any other amounts due under this Agreement or its Commitment, in each case
except for any tax on, or changes in the rate of tax on the overall net income
of such Bank or its Applicable Lending Office imposed by the jurisdiction in
which such Bank's principal executive office or Applicable Lending Office is
located; or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any such requirement imposed by the Board of Governors of
the Federal Reserve System), special deposit, insurance assessment or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Bank (or its Applicable Lending Office) or shall impose on any
Bank (or its Applicable Lending Office) any other condition affecting its Loans,
its Notes or its Commitment;
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and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making or maintaining any Loan, or to reduce
the amount of any sum received or receivable by such Bank (or its Applicable
Lending Office) under this Agreement or under its Notes with respect thereto, by
an amount deemed by such Bank to be material, then, upon demand by such Bank and
delivery to the Borrower of the certificate required by clause (c) hereof (with
a copy to the Agent), the Borrower shall pay to such Bank such additional amount
or amounts as will compensate such Bank for such increased cost or reduction.
(b) If any Bank shall determine that any change in any
existing applicable law, rule or regulation or any new law, rule or regulation,
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any new request or directive of general applicability regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on capital of such Bank (or its parent corporation) as a
consequence of such Bank's obligations hereunder to a level below that which
such Bank (or its parent corporation) could have achieved but for such law,
change, request or directive (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by such Bank to be material,
then from time to time, upon demand by such Bank (with a copy to the Agent), the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank (or its parent corporation) for such reduction.
(c) Each Bank will promptly notify the Borrower and the Agent
of any event of which it has knowledge, occurring after the date hereof, which
will entitle such Bank to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate
of any Bank claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder and the calculations
used in determining such additional amount or amounts shall be conclusive in the
absence of manifest error. In determining such amount, such Bank may use any
reasonable averaging and attribution methods.
SECTION 8.04. Base Rate Loans Substituted for Affected LIBOR
Loans. If (a) the obligation of any Bank to make LIBOR Loans has been suspended
pursuant to Section 8.02 or (b) any Bank has demanded compensation under Section
8.03(a) with respect to LIBOR Loans and the Borrower shall, by at least two
LIBOR Business Days' prior notice to such Bank through the Agent, have elected
that the provisions of this Section shall apply to such Bank, then, unless and
until such Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer apply:
(a) all Loans which would otherwise be made by such Bank as
LIBOR Loans shall be made instead as Base Loans, and
(b) after each of its LIBOR Loans has been repaid, all
payments of principal which would otherwise be applied to repay such
LIBOR Loans shall be applied to repay its Base Rate Loans instead.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests, consents and
other communications to any party hereunder shall be in writing (including bank
wire, facsimile transmission or similar writing) and
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shall be given to such party at its address or facsimile number set forth on
Schedule 1 attached hereto. Each such notice, request, consent or other
communication shall be effective (a) if given by facsimile, when such facsimile
is transmitted to the facsimile number specified in this Section and the
appropriate confirmation is received, (b) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (c) if given by any other means, when delivered at the
address specified in this Section; provided that notices to the Agent under
Article II or Article VIII shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or
any Bank in exercising any right, power or privilege hereunder or under any Note
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes; Indemnification.
(a) The Borrower agrees to pay (i) all reasonable out-of-pocket expenses of the
Agent, including the fees and disbursements of special counsel for the Agent, in
connection with the preparation, negotiation and closing of this Agreement and
the other Loan Documents, any waiver or consent hereunder or any amendment
hereof, any waiver of any Default or Event of Default or alleged Default or
Event of Default hereunder, and any termination hereof, and (ii) if a Default or
an Event of Default occurs, all reasonable out-of-pocket expenses incurred by
the Agent, its Affiliates and each Bank, including fees and disbursements of
counsel (including reasonable allocated costs of in-house counsel), in
connection with such Default or Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting therefrom. The Borrower
agrees to indemnify each Bank against any transfer taxes, documentary taxes,
assessments or similar charges made by any governmental authority by reason of
the execution and delivery of this Agreement or the Notes.
(b) The Borrower agrees to indemnify the Agent, its Affiliates
and each Bank and hold the Agent, its Affiliates and each Bank harmless from and
against any and all liabilities, losses, damages, costs and expenses of any
kind, including, without limitation, the reasonable fees and disbursements of
counsel, which may be incurred by the Agent, any of its Affiliates or any Bank
in connection with any investigative, administrative or judicial proceeding
(whether or not the Agent, its Affiliate or any Bank shall be designated a party
thereto) relating to or arising out of this Agreement or the other Loan
Documents or any actual or proposed use of proceeds of Loans, provided that the
Agent, its Affiliates and the Banks shall not have the right to be indemnified
hereunder for their own gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
SECTION 9.04. Set Off. Regardless of the adequacy of any
collateral, during the continuance of any Event of Default, any deposits or
other sums credited by or due from any of the Banks to the Borrower, and any
securities or other property of the Borrower in the possession of such Bank may
be applied to or set off by such Bank against the payment of the Obligations and
any and all other liabilities, direct, or indirect, absolute or contingent, due
or to become due, now existing or hereafter arising, of the Borrower to such
Bank. Each of the Banks agrees with each other Bank that (a) if an amount to be
set off is to be applied to Debt of the Borrower to such Bank, other than Debt
evidenced by the Note held by such Bank, such amount shall be applied ratably to
such other Debt and to the Debt evidenced by the Note held by such Bank, and (b)
if such Bank shall receive from the Borrower whether by voluntary payment,
exercise of the right of set off, counterclaim, cross action, or enforcement of
the claim evidenced by the Note held by such Bank by proceedings against the
Borrower at law or in equity or by proof thereof in bankruptcy, reorganization,
liquidation, receivership or similar proceedings, or otherwise, and shall retain
and apply to the payment of the Note held by such Bank any amount in excess of
its ratable portion of the payments received by all of the Banks with respect to
the Notes held by all of the Banks, such Bank
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will make such disposition and arrangements with the other Banks with respect to
such excess, either by way of distribution, pro tanto assignment of claims,
subrogation or otherwise as shall result in each Bank receiving in respect of
the Note held by it its proportionate payment as contemplated by this Agreement;
provided that if all or any part of such excess payment is thereafter recovered
from such Bank, such disposition and arrangements shall be rescinded and the
amount restored to the extent of such recovery, but without interest.
SECTION 9.05. Amendments and Waivers. Any provision of this
Agreement or the Notes or any of the other Loan Documents may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
the Borrower and the Required Banks (and, if the rights or duties of the Agent
are affected thereby, by the Agent); provided that no such amendment or waiver
shall, unless signed by all the Banks (a) increase or decrease the Commitment
Amount of any Bank (except as provided in Section 9.06(c)) or subject any Bank
to any additional obligation, (b) reduce or forgive the principal of or rate of
interest on any Loan or any fees to the Banks hereunder, (c) postpone the date
fixed for any payment of principal of or interest on any Loan or any fees to the
Banks hereunder or for the termination of the Commitments, (d) change the
percentage of the Commitment Amounts or of the aggregate unpaid principal amount
of the Notes, or the number of Banks, which shall be required for the Banks or
any of them to take any action under this Section or any other provision of this
Agreement, or (e) permit the Borrower to change its investment objective or any
fundamental policy.
SECTION 9.06. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the Borrower may
not assign or otherwise transfer any of its rights under this Agreement without
the prior written consent of all of the Banks.
(b) Any Bank may at any time grant to one or more banks or
other institutions (each a "Participant") participating interests in its
Commitment or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Agent, such Bank shall remain responsible for the performance
of its obligations hereunder, and the Borrower and the Agent shall continue to
deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement. Any agreement pursuant to which any Bank
may grant such a participating interest shall provide that such Bank shall
retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder, including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such participation agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement described in clause (a),
(b), (c), (d) or (e) of Section 9.05 without the consent of the Participant. The
Borrower agrees that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article VIII with
respect to its participating interest. An assignment or other transfer which is
not permitted by clause (c) or (d) below shall be given effect for purposes of
this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or
other financial institutions (each an "Assignee") all or a minimum of $5,000,000
or an integral multiple of $1,000,000 in excess of $5,000,000 of its rights and
obligations under this Agreement and the Notes, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Acceptance in
substantially the form of Exhibit F attached hereto executed by such Assignee
and such transferor Bank, with, if no Default or Event of Default has occurred
and is continuing, the written consent of the Borrower, which consent shall not
be unreasonably withheld or delayed, and of the Agent, which consent shall not
be unreasonably withheld or delayed. Upon execution and delivery of such
instrument and payment by such Assignee to such transferor Bank of an amount
equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and
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obligations of a Bank with Commitment Amounts as set forth in such instrument of
assumption, and the transferor Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by any
party shall be required. Upon the consummation of any assignment pursuant to
this clause (c), the transferor Bank, the Agent and the Borrower shall make
appropriate arrangements so that, if required, new Notes are issued to the
Assignee, and the Agent shall be authorized to revise Schedule 1 to reflect such
assignment and to circulate such revised schedule to the Banks and the Borrower.
In connection with any such assignment, the transferor Bank shall pay to the
Agent an administrative fee for processing such assignment in the amount of
$3,500. If the Assignee is not incorporated under the laws of the United States
of America or a state thereof, it shall, prior to the first date on which
interest or fees are payable hereunder for its account, deliver to the Borrower
and the Agent certification as to exemption from deduction or withholding of any
United States federal income taxes in accordance with Section 2.14.
(d) Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.01 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent.
SECTION 9.07. Governing Law; Submission to Jurisdiction. THIS
AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF
THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER
AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS
OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE EXCLUSIVE JURISDICTION
OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE
BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 9.01. THE BORROWER HEREBY
WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
SECTION 9.08. Counterparts; Integration. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement and each of the other Loan Documents constitute the
entire agreement and understanding among the parties hereto and supersede any
and all prior agreements and understandings, oral or written, relating to the
subject matter hereof. The provisions of this Agreement are severable and if any
one clause or provision hereof shall be held invalid or unenforceable in whole
or in part in any jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision, or part thereof, in such jurisdiction, and
shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Agreement in any
jurisdiction.
SECTION 9.09. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
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SECTION 9.10. Confidentiality. (a) Each of the Banks and the
Agent agrees, on behalf of itself and each of its affiliates, directors,
officers, employees and representatives, to use reasonable precautions to keep
confidential, in accordance with their customary procedures for handling
confidential information of the same nature and in accordance with safe and
sound banking practices, any non-public information supplied to it by the
Borrower pursuant to this Agreement that is identified by the Borrower as being
confidential at the time the same is delivered to the Banks or the Agent,
provided that nothing herein shall limit the disclosure of any such information
(i) after such information shall have become public other than through a
violation of this Section 9.10, (ii) to the extent required by statute, rule,
regulation or judicial process, (iii) to counsel for any of the Banks or the
Agent, (iv) to bank examiners or any other regulatory authority having
jurisdiction over any Bank or the Agent, or to auditors or accountants, (v) to
the Agent or any Bank, (vi) in connection with any litigation to which any one
or more of the Banks or the Agent is a party, or in connection with the
enforcement of rights or remedies hereunder or under any other Loan Document,
(vii) to a subsidiary or Affiliate of any Bank or (viii) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant agrees to be bound by the provisions of this Section 9.10.
(b) Unless specifically prohibited by applicable law or court
order, each of the Banks and the Agent shall, prior to disclosure thereof,
notify the Borrower of any request for disclosure of any such non-public
information by any governmental agency or representative thereof (other than any
such request in connection with an examination of the financial condition of
such Bank by such governmental agency) or pursuant to legal process.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as an agreement under seal by their respective authorized officers
as of the day and year first above written.
PROSPECT STREET HIGH INCOME PORTFOLIO INC.
By: /s/ John A. Frabotta
-------------------------------------
John A. Frabotta, Vice President and
Chief Financial Offier
BANKBOSTON, N.A., Individually and as Agent
By: /s/ Carol A. Clark
-------------------------------------
Carol A. Clark, Managing Director
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Schedule 1
COMMITMENT COMMITMENT
BANKS AMOUNT PERCENTAGE
BANKBOSTON, N.A.
Domestic Lending Office:
100 Federal Street - 01-15-02 $30,000,000 100%
Boston, Massachusetts 02110
Telecopy Number: (617) 434-3751
Attention: Carol Clark
LIBOR Lending Office:
100 Federal Street - 01-15-02
Boston, Massachusetts 02110
Telecopy Number: (617) 434-3751
Attention: Carol Clark
BORROWER:
PROSPECT STREET HIGH INCOME
PORTFOLIO INC.
60 State Street
Suite 3750
Boston, Massachusetts 02019
Attention: John Frabotta, C.F.O.
Telecopy Number: (617) 742-8591