-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HbG5B2P8J7Ly4dZ859L/FM/p0daQWwF3ymk7bEI48nc5MwSmqxq7P6Ela/drD0F5 if3b8ia7jpAjxlvTuom9og== 0000950135-96-003640.txt : 19960816 0000950135-96-003640.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950135-96-003640 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER GROUP INC CENTRAL INDEX KEY: 0000733060 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 135657669 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08841 FILM NUMBER: 96613470 BUSINESS ADDRESS: STREET 1: 60 STATE ST CITY: BOSTON STATE: MA ZIP: 02109-1820 BUSINESS PHONE: 8008211239 MAIL ADDRESS: STREET 1: 60 STATE STREET CITY: BOSTON STATE: MA ZIP: 02109-1820 10-Q 1 PIONEER GROUP, INC. FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the six months ended June 30, 1996 Commission File No. 0-8841 The Pioneer Group, Inc. ----------------------- (exact name of registrant as specified in its charter) Delaware 13-5657669 - -------------------------------------------------------------------------------- (State of other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 60 State Street, Boston, Massachusetts 02109 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 742-7825 -------------- - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changes since last report. Indicate by checkmark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days. X Yes No ----- ----- As of June 30, 1996, there were 24,961,333 shares of the Registrant's Common Stock, $.10 par value per share, issued and outstanding. 2 PART I FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS THE PIONEER GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Dollars in Thousands Except Per Share Amounts)
6/30/96 12/31/95 ------- -------- ASSETS (unaudited) CURRENT ASSETS: Cash and cash equivalents, at cost which approximates value ................ $ 31,884 $ 27,809 Investment in marketable securities, at value .............................. 4,821 7,630 Receivables: From securities brokers and dealers for sales of mutual fund shares ..................................... 11,327 12,385 For gold shipments .................................................... 2,292 5,410 Other ................................................................. 35,710 14,085 Mining inventory ........................................................... 20,730 15,605 Other current assets ....................................................... 12,169 8,295 -------- -------- Total current assets ............................................... 118,933 91,219 -------- -------- NONCURRENT ASSETS: Mining operations: Mining equipment and facilities (net of accumulated depreciation of $48,303 in 1996 and $42,631 in 1995) ........... 78,179 46,980 Deferred mining development costs (net of accumulated amortization of $12,333 in 1996 and $11,420 in 1995) ........... 9,460 9,622 Cost of acquisition in excess of net assets (net of accumulated amortization of $7,858 in 1996 and $6,501 in 1995) ................... 23,622 24,784 Long-term venture capital investments, at value (cost $44,750 in 1996 and $38,802 in 1995) ............................ 48,845 44,520 Long-term investments ...................................................... 13,948 16,934 Timber project in development: Timber equipment and facilities ....................................... 16,922 8,130 Deferred timber development costs ..................................... 14,014 19,653 Timber inventory ...................................................... 3,296 1,487 Building in progress ....................................................... 18,637 12,239 Furniture, equipment, and leasehold improvements (net of accumulated depreciation and amortization of $11,927 in 1995 and $10,558 in 1995) . 13,681 13,766 Dealer advances ............................................................ 29,981 17,095 Other noncurrent assets .................................................... 19,284 12,640 -------- -------- Total noncurrent assets ............................................ 289,869 227,850 -------- -------- $408,802 $319,069 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Payable to funds for shares sold ........................................... $ 11,304 $ 12,369 Accrued expenses and accounts payable ...................................... 56,811 28,947 Accrued income taxes ....................................................... -- 1,169 Current portion of notes payable ........................................... 6,871 56,053 -------- -------- Total current liabilities .......................................... 74,986 98,538 -------- -------- NONCURRENT LIABILITIES: Notes payable, net of current portion ...................................... 101,937 11,048 Deferred income taxes, net ................................................. 24,150 14,503 -------- -------- Total noncurrent liabilities ....................................... 126,087 25,551 -------- -------- Total liabilities .................................................. 201,073 124,089 -------- -------- Minority interest .......................................................... 51,848 44,637 -------- -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock, $10 par value; authorized 60,000,000 shares; issued 24,961,333 shares in 1996 and 24,833,508 shares in 1995 ...... 2,496 2,483 Paid-in capital ....................................................... 10,659 7,660 Retained earnings ..................................................... 147,248 143,603 -------- -------- 160,403 153,746 Less - Deferred cost of restricted common stock issued ................ (4,522) (3,403) -------- -------- Total stockholders' equity ......................................... 155,881 150,343 -------- -------- $408,802 $319,069 ======== ========
The Company's Annual Report on Form 10-K should be read in conjunction with these financial statements 3 THE PIONEER GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Revenues and sales: Investment management fees ............................. $24,017 $15,341 $42,865 $30,413 Underwriting commissions and distribution fees ......... 4,330 1,893 8,186 3,675 Shareholder services fees .............................. 6,288 5,561 12,377 11,105 Trustee fees and other income .......................... 6,487 1,678 12,553 3,700 ------- ------- ------- ------- Revenues from financial services businesses .......... 41,122 24,473 75,981 48,893 Gold sales ............................................. 16,522 22,080 37,759 43,339 ------- ------- ------- ------- Total revenues and sales .............................. 57,644 46,553 113,740 92,232 ------- ------- ------- ------- Costs and expenses: Management, distribution, shareholder service and administrative expenses ........................... 33,035 21,752 62,225 42,743 Gold mining operating costs and expenses ............... 17,508 16,242 34,153 30,655 ------- ------- ------- ------- Total costs and expenses .............................. 50,543 37,994 96,378 73,398 ------- ------- ------- ------- Other (income) expense: Unrealized and realized gains on venture capital and marketable securities investments, net ............. (145) (4,148) (362) (4,659) Interest expense ....................................... 738 99 1,158 531 Other, net ............................................. 802 182 1,223 354 ------- ------- ------- ------- Total other (income) expense .......................... 1,395 (3,867) 2,019 (3,774) ------- ------- ------- ------- Income before provision for federal, state and foreign income taxes and minority interest .............. 5,706 12,426 15,343 22,608 ------- ------- ------- ------- Provision for federal, state and foreign income taxes ...... 1,896 4,742 5,808 8,644 ------- ------- ------- ------- Income before minority interest ............................ 3,810 7,684 9,535 13,964 ------- ------- ------- ------- Minority interest .......................................... 290 355 901 838 ------- ------- ------- ------- Net income ................................................. $ 3,520 $ 7,329 $ 8,634 $13,126 ======= ======= ======= ======= Earnings per share ......................................... $ 0.14 $ 0.29 $ 0.34 $ 0.52 ======= ======= ======= ======= Dividends per share ........................................ $ 0.10 $ 0.10 $ 0.20 $ 0.20 ======= ======= ======= ======= Weighted average common and common equivalent shares outstanding ....................... 25,458,000 25,310,000 25,458,000 25,260,000 ========== ========== ========== ==========
The Company's annual report on Form 10-K should be read in conjunction with these financial statements 4 THE PIONEER GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS) SIX MONTHS ENDED (UNAUDITED) JUNE 30, 1996 1995 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ................................................................................... $ 8,634 $ 13,126 -------- -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ............................................................. 13,181 10,851 Unrealized and realized gains on venture capital and marketable securities, net ........... (362) (4,659) Provision on (Equity in earnings of) other investments .................................... 55 (501) Restricted stock plan expense ............................................................. 754 584 Deferred income taxes ..................................................................... 9,647 (4,481) Minority interest ......................................................................... 901 838 Changes in operating assets and liabilities: Receivable from securities brokers and dealers for sales of mutual fund shares ............ 1,058 (10) Receivables for gold shipments ............................................................ 3,118 872 Other receivables ......................................................................... (21,625) 55 Mining inventory .......................................................................... (5,125) (4,894) Other current assets ...................................................................... (3,874) 33 Other assets .............................................................................. (2,727) (745) Payable to funds for shares sold .......................................................... (1,065) 319 Accrued expenses and accounts payable ..................................................... 27,864 5,303 Accrued income taxes ...................................................................... (668) 4,874 -------- -------- TOTAL ADJUSTMENTS ...................................................................... 21,132 8,439 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES .............................................. 29,766 21,565 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of mining equipment and facilities .................................................. (37,211) (7,132) Deferred mining development costs, net ....................................................... (751) (122) Additions to furniture, equipment and leasehold improvements ................................. (2,089) (3,691) Building in progress ......................................................................... (6,398) -- Investments in marketable securities ......................................................... (3,382) (5,179) Proceeds from sale of marketable securities .................................................. 6,292 2,782 Long-term venture capital investments ........................................................ (7,600) (1,662) Proceeds from sale of venture capital investments ............................................ 3,863 3,981 Deferred timber development costs ............................................................ 5,586 (5,851) Timber equipment and facilities .............................................................. (8,792) (3,966) Timber inventory ............................................................................. (1,809) -- Other investments ............................................................................ (3,972) (3,696) Cost of acquisition in excess of net assets .................................................. (194) (96) Long-term investments ........................................................................ (1,880) -- Proceeds from sale of long-term investments .................................................. 4,539 -- Investment in Russian Voucher Fund ........................................................... -- (10,000) Investment in Management Company of Russian Voucher Fund ..................................... -- (2,022) -------- -------- NET CASH USED IN INVESTING ACTIVITIES .................................................. (53,798) (36,654) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid ............................................................................... (4,989) (4,961) Distributions to minority interest holder of gold mining subsidiary .......................... -- (350) Distributions to limited partners of venture capital subsidiary .............................. (23) (12) Exercise of stock options .................................................................... 254 151 Restricted stock plan award .................................................................. 7 12 Employee stock purchase plan ................................................................. 377 -- Dealer advances .............................................................................. (15,559) (5,950) Amounts raised by venture capital investment partnerships .................................... 6,333 -- Borrowings ................................................................................... 119,733 29,751 Repayments of notes payable .................................................................. (78,026) (12,321) -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES .............................................. 28,107 6,320 -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............................................. 4,075 (8,769) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................................................. 27,809 23,118 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ....................................................... $ 31,884 $ 14,349 ======== ========
THE COMPANY'S ANNUAL REPORT ON FORM 10-K SHOULD BE READ IN CONJUNCTION WITH THESE FINANCIAL STATEMENTS 5 THE PIONEER GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 1996 NOTE 1 - NATURE OF OPERATIONS AND ORGANIZATION The Pioneer Group, Inc., and its subsidiaries (collectively, the "Company"), are engaged in financial services businesses in the United States and several foreign countries and in a number of natural resource development projects, including a gold mining venture in the Republic of Ghana and three timber ventures in the Russian Far East. In the United States, the Company conducts four lines of financial services businesses: (i) Pioneering Management Corporation ("PMC") serves as investment manager to the 29 U.S. registered investment companies in the Pioneer Family of Mutual Funds and several institutional accounts, (ii) Pioneer Funds Distributor, Inc. ("PFD") serves as distributor of shares of the Pioneer Family of Mutual Funds, (iii) Pioneer Capital Corporation ("PCC"), and its subsidiaries, engage in venture capital investing and management activities, and (iv) Pioneering Services Corporation serves as shareholder servicing agent for the Pioneer Family of Mutual Funds. The Company's international financial services businesses include investment operations in: (i) Warsaw, Poland, where the Company manages and distributes units of three mutual funds, owns 50% of a unitholder servicing agent and manages an institutional venture capital fund, (ii) Dublin, Ireland, where the Company distributes shares of, manages and services three offshore investment funds, sold primarily in Western Europe, and (iii) Moscow, Russia, where the Company provides financial services, including investment advisory, investment banking and brokerage services, and where the Company owns 51% of the First Voucher Fund, the largest Russian voucher investment fund. In addition, the Company has investment operations in the Czech Republic and has invested in investment management operations in India and Taiwan. The Company's wholly owned subsidiary, Pioneer Goldfields Limited ("PGL"), conducts mining and exploration activities in the Republic of Ghana and exploration activities elsewhere in Africa. PGL's principal asset is its ownership of 90% of the outstanding shares of Teberebie Goldfields Limited ("TGL"), which operates a gold mine in the western region of the Republic of Ghana. The Republic of Ghana owns the remaining 10% of TGL. The Company also participates in several natural resource development ventures in Russia, including a project pursuing the development of timber production in the Russian Far East, in which the Company has a 76% direct interest and a 1.5% indirect interest. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting and reporting policies of The Pioneer Group, Inc. and its subsidiaries (the "Company") conform to generally accepted accounting principles. The Company has not changed any of its principal accounting policies from those stated in the Annual Report on Form 10-K for the year ended December 31, 1995. The footnotes to the financial statements reported in the 1995 Annual Report on Form 10-K are incorporated herein by reference, except to the extent that any such footnote is updated by the following: 6 Certain reclassifications have been made to the accompanying 1995 consolidated financial statements to conform with the 1996 presentation. Income taxes paid were $522,000 and $7,948,000 for the six months ended June 30, 1996, and June 30, 1995, respectively. In addition, interest paid was $3,166,000 for the six months ended June 30, 1996, and $1,089,000 for the six months ended June 30, 1995. Included in these interest paid amounts were $1,491,000 for the six months ended June 30, 1996, that was capitalized related to the development of the Company's building in progress and Russian timber operations. NOTE 3 - MINING INVENTORY Mining inventories consist of the following:
June 30, December 1996 31, 1995 ------- -------- (Dollars in Thousands) Gold-in-process $ 2,100 $ 1,485 Materials and supplies 18,630 14,120 ------- ------- $20,730 $15,605 ======= =======
NOTE 4 - MINING EQUIPMENT
June 30, December 1996 31, 1995 ------- -------- (Dollars in Thousands) Mobile mine equipment $ 49,602 $ 31,482 Crusher 18,995 18,460 Processing plant and laboratory 4,964 4,911 Leach pads and ponds 17,087 15,726 Building and civil works 10,608 10,595 Office furniture and equipment 1,730 1,731 Motor vehicles 2,184 1,756 Construction in progress 19,484 3,161 Other assets 1,828 1,789 -------- -------- 126,482 89,611 Less: accumulated depreciation (48,303) (42,631) -------- -------- Total mining equipment $ 78,179 $ 46,980 ======== ========
NOTE 5 - INCOME TAXES The Company adopted the accounting and disclosure rules specified by Statement of Financial Accounting Standards ("SFAS No. 109") "Accounting for Income Taxes" as of January 1, 1993. Under SFAS No. 109, deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax 7 returns. The amounts of deferred tax assets or liabilities are based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. Deferred tax assets consist principally of deferred interest on debt paid to the Company by TGL and on loans to Forest Starma (the Company's Russian timber venture), non-qualified pension expense, deferred rent expense, and foreign tax credits' temporary differences. Deferred tax liabilities include principally deferred foreign income taxes, dealer advances and cumulative unrealized gains related to the Company's venture capital investment portfolio. NOTE 6 -- STOCK PLANS The Company records stock compensation in accordance with APB 25. The Company has a Restricted Stock Plan (the "1995 Plan") to provide incentives to certain employees who have contributed and are expected to contribute materially to the success of the Company and its subsidiaries. An aggregate total of 600,000 shares of the Company's stock may be awarded to participants under the 1995 Plan at a price to be determined by the Board of Directors, generally $.10 per share. The 1995 Plan expires in January 2000. The Company's 1990 Restricted Stock Plan (the "1990 Plan") expired in January 1995. The 1995 Plan and the 1990 Plan are collectively referred to as the "Plans." The following tables summarize restricted stock plan activity for the Plans during the first six months of 1996. Unvested Shares ---------------
1995 Plan 1990 Plan Total --------- --------- ----- Balance at 12/31/95 600 401,969 402,569 Awarded 74,690 -- 74,690 Vested (3,305) (131,588) (134,893) Forfeited (870) (6,595) (7,465) ------ ------- ------- Balance at 6/30/96 71,115 263,786 334,901 ====== ======= =======
Vested Shares -------------
1995 Plan 1990 Plan Total --------- --------- ----- Balance at 12/31/95 3,337 353,450 356,787 Vested 3,305 131,588 134,893 ----- ------- ------- Balance at 6/30/96 6,642 485,038 491,680 ===== ======= =======
The Company awarded 3,937 shares in 1995 under the 1995 Plan. In addition, the Company awarded 123,400 shares in 1995 and 101,460 shares in 1994 under the 1990 Plan. 8 The participant's right to resell the awarded stock under the Plans, is generally restricted as to 100% of the shares awarded during the first two years following the award, 60% during the third year and 20% less each year thereafter. The Company may repurchase unvested restricted shares at $.10 per share upon termination of employment. Awards under the Plans are compensatory, and, accordingly, the difference between the award price and the market value of the shares under the Plans at the award date, less the applicable tax benefit, is being amortized on a straight-line basis over a five-year period. The Company also maintains the 1988 Stock Option Plan (the "Option Plan"), pursuant to which options on the Company's stock may be granted to key employees of the Company. The Company has reserved an aggregate of 2,400,000 shares for issuance under the Option Plan. Both incentive stock options intended to qualify under Section 422A of the Internal Revenue Code of 1986 and non-statutory options not intended to qualify for incentive stock option treatment ("non-statutory options") may be granted under the Option Plan. The Option Plan is administered by the Board of Directors or a committee of disinterested directors designated by the Board (the "Committee") and unless the Option Plan is earlier terminated, no option may be granted after August 1, 1998. The option price per share is determined by the Board of Directors or the Committee, but (i) in the case of incentive stock options, may not be less than 100% of the fair market value of such shares on the date of option grant, and (ii) in the case of non-statutory options, may not be less than 90% of the fair market value on the date of option grant. Options issuable under the Option Plan become exercisable as determined by the Board of Directors or the Committee not to exceed ten years from the date of grant. Options granted to date vest over five years at an annual rate of 20% on each anniversary date of the date of the grant. The following table summarizes all stock option activity since December 31, 1993.
Number of Exercise shares price per share --------- --------------------- Outstanding at December 31, 1993 1,635,000 $ 4.188 - $12.000 Granted 191,500 15.875 - 21.250 Exercised (32,000) 4.188 --------- ----------------- Outstanding at December 31, 1994 1,794,500 $ 4.188 - $21.250 Granted 207,500 26.500 - 27.500 Exercised (25,000) 6.000 - 6.125 --------- ----------------- Outstanding at December 31, 1995 1,977,000 $ 4.188 - $27.500 Granted 53,000 26.750 - 28.625 Exercised (44,000) 4.188 - 7.063 --------- ----------------- Outstanding at June 30, 1996 1,986,000 $ 4.188 - $28.625 ========= =================
At June 30, 1996, options to purchase 1,326,900 shares of common stock had vested and were unexercised under the Option Plan. On May 4, 1995, the Company adopted the 1995 Employee Stock Purchase Plan (the "1995 Purchase Plan"), which qualifies as an "Employee Stock Purchase Plan" within the meaning of 9 Section 423 of the Internal Revenue Code of 1986. An aggregate total of 500,000 shares of common stock have been authorized for issuance under the 1995 Purchase Plan, to be implemented through one or more offerings, each approximately six months in length beginning on the first business day of each January and July. The price at which shares may be purchased during each offering will be the lower of (i) 85% of the closing price of the common stock as reported on the NASDAQ National Market (the "closing price") on the date that the offering commences or (ii) 85% of the closing price of the common stock on the date the offering terminates. In 1995, the Company issued 18,228 shares under the 1995 Purchase Plan. Through June 30, 1996, the Company issued 16,600 shares under the 1995 Purchase Plan. NOTE 7 - NET CAPITAL As a broker-dealer, Pioneer Funds Distributor, Inc. ("PFD"), is subject to the Securities and Exchange Commission's regulations and operating guidelines which, among other things, require PFD to maintain a specified amount of net capital, as defined, and a ratio of aggregate indebtedness to net capital, as defined, not exceeding 15 to 1. Net capital and the related ratio of aggregate indebtedness to net capital may fluctuate on a daily basis. PFD's net capital, as computed under Rule 15c3-1, was $2,502,074 at June 30, 1996, which exceeded required net capital of $1,062,112 by $1,439,962. The ratio of aggregate indebtedness to net capital at June 30, 1996, was 6.37 to 1. PFD is exempt from the reserve requirements of Rule 15c3-3, since its broker-dealer transactions are limited to the purchase, sale and redemption of redeemable securities of registered investment companies. All customer funds are promptly transmitted and all securities received in connection with activities as a broker-dealer are promptly delivered. PFD does not otherwise hold funds or securities for, or owe money or securities to, customers. NOTE 8 - BENEFIT PLANS The Company and its subsidiaries have two defined contribution benefit plans for eligible employees: a retirement benefit plan and a savings and investment plan ("the Benefit Plans") qualified under section 401 of the Internal Revenue Code of 1986. The Company makes contributions to a trustee, on behalf of eligible employees, to fund both the retirement benefit and the savings and investment plans. The Company's expenses under the Benefit Plans were $1,255,000 for the six months ended June 30, 1996, and $1,015,000 for the six months ended June 30, 1995. Both of the Company's qualified Benefit Plans described above cover all full-time employees who have met certain age and length of service requirements. Regarding the retirement benefit plan, the Company contributes an amount which would purchase a certain targeted monthly pension benefit at the participant's normal retirement date. In connection with the savings and investment plan, participants can voluntarily contribute up to 10% of their compensation to the plan, and the Company will match this contribution up to 2%. NOTE 9 - RELATED PARTY TRANSACTIONS Certain officers and/or directors of the Company and its subsidiaries are officers and/or trustees of the Pioneer mutual funds and the Company's international mutual funds. Investment management fees earned from the mutual funds were approximately $40,387,000 for the six months ended June 30, 1996, and $28,836,000 for the six months ended June 30, 1995. 10 Underwriting commissions and distribution fees earned from the sales of mutual funds shares were approximately $8,186,000 for the six months ended June 30, 1996, and $3,675,000 for the six months ended June 30, 1995, respectively. Shareholder services fees earned from the mutual funds were approximately $12,377,000 for the six months ended June 30, 1996, and $11,105,000 for the six months ended June 30, 1995. Within the Pioneer mutual funds, revenues from Pioneer II were approximately $18,708,000 for the six months ended June 30, 1996, and $15,628,000 for the six months ended June 30, 1995. Revenues from Pioneer Fund were $9,714,000 for the six months ended June 30, 1996, and $7,909,000 for the six months ended June 30, 1995. Certain partners of Hale and Dorr, the Company's legal counsel, are officers and/or directors of the Company and its subsidiaries. Amounts paid to Hale and Dorr for legal services were $795,000 for the six months ended June 30, 1996, and $959,000 for the six months ended June 30, 1995. NOTE 10 - COMMITMENTS AND CONTINGENCIES U.S. rental expense was $1,620,000 for the six months ended June 30, 1996, and $1,591,000 for the six months ended June 30, 1995. Future minimum payments under the leases amount to approximately $1,290,000 for the last six months of 1996, $3,423,000 in 1997, $3,514,000 in 1998, $3,439,000 in 1999, $3,293,000 in 2000, $3,372,000 in 2001 and $3,365,000 thereafter. These future minimum payments include estimated annual operating expenses of approximately $498,000 in the last six months of 1996, and $1,529,000 thereafter. The Company is contingently liable to the Investment Company Institute Mutual Insurance Company for unanticipated expenses or losses in an amount not to exceed $500,000. Two thirds of this amount is secured by an irrevocable standby letter of credit with a bank. In September 1995, the Overseas Private Investment Corporation ("OPIC") executed a commitment letter with TGL and the Company pursuant to which OPIC agreed, subject to the fulfillment of certain conditions, to finance up to $54 million in connection with the Phase III expansion. Such commitment expires on October 31, 1996. As of August 13, 1996, TGL and the Company have not executed definitive loan agreements with respect to such OPIC guaranteed financing and there can be no assurance that such financing will become available, or that it will be available on terms acceptable to TGL and the Company. As a result of delays associated with the OPIC guaranteed financing, TGL has sought and obtained alternative financing sources as described below. Accordingly, TGL has reduced the proposed amount of the OPIC guaranteed financing to $19 million. TGL has received credit approval from Caterpillar Financial Services Corporation, a wholly owned subsidiary of Caterpillar Inc. (collectively, "Caterpillar"), pursuant to which Caterpillar has agreed, subject to the fulfillment of certain conditions, to provide a revolving credit facility of up to $21 million to finance the purchase of Caterpillar and other mining equipment. During the second quarter of 1996, Caterpillar issued disbursements, at TGL's request, for $14.1 million of such facility. TGL is currently negotiating with Caterpillar to obtain an additional $6.4 million disbursement under the credit facility. There can be no assurance that TGL will be able to obtain similar or satisfactory terms for subsequent tranches of the Caterpillar credit facility. On March 6, 1996, TGL executed a loan agreement with Enskilda, a division of Skandinaviska Enskilda Banken, pursuant to which Enskilda has agreed to provide a direct loan of Swedish Krona 94.5 million (approximately $14.0 million) to finance the gyratory crusher and related equipment procured from Svedala Crushing and Screening AB. As of August 2, 1996, SEK 30.9 million was drawn down (approximately $4.6 million). This loan is guaranteed by the Swedish 11 Export Credits Board. The Company is committed to additional capital contributions of $1.8 million to Pioneer Poland U.S. L.P. and $1.8 million to Pioneer Poland U.K. L.P. These contributions are due upon call by Management as prior contributions become 80% invested. At June 30, 1996, the Company was committed to additional capital contributions of $2.2 million to Pioneer Ventures Limited Partnership II, a U.S. venture capital fund. NOTE 11- NOTES PAYABLE Notes payable of the Company consists of the following:
June 30, December 31, 1996 1995 ---- ---- (Dollars in Thousands) Revolving Credit Agreement ............................. $79,000 -- Lines of Credit ........................................ -- $52,000 Preferred shares financing related to the Russian investment operations, principal payable in three annual installments of $2,000,000 through 1998, interest payable at 5% ................................. 4,000 6,000 Small Business Administration ("SBA") financing, notes payable to a bank, interest payable semi-annually at rates ranging from 6.12% to 9.8%, principal due in 1998 through 2003 ..................... 4,950 4,950 Note payable to a bank guaranteed by the Swedish Exports Credits Guarantee Board, principal payable in semi-annual installments of $812,000 through March 31, 1997, interest payable at 5.77%, secured by equipment .............................................. 1,624 2,436 Notes payable to a bank, guaranteed by the Company, principal payable in semi-annual installments, of $214,000 through November 30, 1999, no interest payable, secured by equipment ................................... 1,501 1,715
12 Note payable to a bank, guaranteed by the Swedish Exports Credits Guarantee Board, principal payable in ten semi-annual installments of $364,000 beginning no later than July 31, 1997, interest payable at 6.42% secured by equipment ...................... 3,642 -- Note payable to a supplier, principal payable in quarterly installments of $336,000 through April 15, 2001, interest payable at 7.85%, secured by equipment ............................... 6,713 -- Note payable to a supplier, principal and interest payable in quarterly installments of $102,000 through April 15, 2001, interest payable at 7.85%, secured by equipment ............. 1,680 -- Note payable to a supplier, principal and interest payable in quarterly installments of $285,000 through May 30, 2001, interest payable at 8.00%, secured by equipment ............................... 5,698 -- -------- -------- 108,808 67,101 Less: Current portion .............................. (6,871) (56,053) -------- -------- $101,937 $ 11,048 ======== ========
In June 1996, the Company entered into an agreement with a syndicate of commercial banks for a senior credit facility (the "Credit Facility") in the amount of $115 million. Under the Credit Facility, the Company may borrow up to $35 million (the "B-Share Revolver") to finance dealer advances relating to sales of back-end load shares of the Company's domestic mutual funds. See Note 14 below for further discussion on dealer advances. The B-share Revolver is subject to annual renewal by the Company and the commercial banks. In the event the B-share Revolver is not renewed at maturity, it will automatically convert into a five-year term loan. Advances under the B-share Revolver bear interest, at the Company's option, at (a) the higher of the bank's base lending rate or the federal funds rate plus 0.50% or (b) LIBOR plus 1.25%. The Credit Facility also provides that the Company may borrow up to $80 million for general corporate purposes (the "Corporate Revolver"). The Corporate Revolver is payable in full on June 11, 2001. Advances under the Corporate Revolver bear interest, at the Company's option, at (a) the higher of the bank's base lending rate or the federal funds rate plus 0.50% or (b) LIBOR plus the applicable margin tied to the Company's financial performance, of either 1.25%, 1.50% or 1.75% in the first year of the agreement and 0.75%, 1.25%, 1.50% or 1.75% for the remaining term as defined under the agreement. The Credit Facility provides that the Company must pay additional interest at the rate of 0.375% per annum of the unused portion of the facility and an annual arrangement fee of $35,000. The commitment fees were approximately $0.7 million. At June 30, 1996, the Company had borrowed $51 million under the Corporate Revolver and $28 million under the B-share Revolver. The Company used the proceeds from borrowings under the new credit facility to repay in full amounts previously borrowed under the lines of credit with a commercial bank. For the six months ended June 30, 13 1996, the weighted average interest rate on borrowings under the Credit Facility and lines of credit outstanding was 6.9%. The Credit Facility contains restrictions that limit, among other things, encumbrances on the assets of the Company's domestic mutual fund subsidiaries and certain mergers and sales of assets. Additionally, the Credit Facility requires that the Company meet certain financial covenants including covenants that require the Company to maintain certain minimum ratios with respect to debt to cash flow and interest payments to cash flow and a minimum tangible net worth, all as defined in the Credit Facility. As of June 30, 1996, the Company was in compliance with all applicable covenants of the Credit Facility. Under the Credit Facility, the Company is required to maintain interest rate protection agreements covering at least 60% of the outstanding indebtedness under the B-share Revolver. As of June 30, 1996, the Company entered into two five-year interest rate swap agreements with a member of the Company's banking group which has effectively fixed the interest rate on notional amounts of $40 million and $20 million. Under these agreements, the Company will pay the bank fixed rates of 6.975% and 6.74%, respectively, plus the applicable margin, on the notional principal. The bank will pay the Company interest on the notional principal at the current variable rate stated under the B-share Revolver. The Company had accrued approximately $29,000 of interest expense on the swap agreements at June 30, 1996. The fair value of the these agreements was $786,000 at June 30, 1996, which amount represents the estimated amount the Company would be obligated to pay to terminate the agreements. Maturities of notes payable at June 30, 1996 for each of the next five years and thereafter are as follows (dollars in thousands):
7/1/96-6/30/97 $ 6,871 7/1/97-6/30/98 7,101 7/1/98-6/30/99 3,972 7/1/99-6/30/00 3,785 7/1/00-6/30/01 84,100 Thereafter 2,979 -------- $108,808 ========
NOTE 12 - MAJOR CUSTOMERS AND EXPORT SALES During the six months ended June 30, 1996, gold sales aggregated $37.8 million. During this period, gold shipments from TGL in Ghana to two unaffiliated European refiners accounted for $15.7 million and $22.1 million of total gold sales, respectively, representing 100% of such total gold sales. During the six months ended June 30, 1995, gold sales aggregated $43.3 million. During this period, gold shipments from TGL in Ghana to two unaffiliated European refiners accounted for $24.4 million and $18.9 million of total gold sales, respectively, representing 100% of such total gold sales. NOTE 13 - ACQUISITIONS Cost in excess of net assets acquired, net, as reflected in the accompanying consolidated balance sheets, consists of the following:
June 30, 1996 December 31, 1995 ------------- ----------------- (Dollars in Thousands) Mutual of Omaha Fund $19,709 $20,768 Management Company Russian investment 2,134 2,050 operations Gold mining operations 1,779 1,966 ------- ------- $23,622 $24,784 ------- -------
14 NOTE 14 - DEALER ADVANCES Certain of the Pioneer Family of Mutual Funds maintain a multi-class share structure, whereby the participating funds offer both the traditional front-end load shares (Class A shares) and back-end load shares (Class B and Class C shares). Back-end load shares do not require the investor to pay any sales charge unless there is a redemption before the expiration of the minimum holding period which ranges from three to six years in the case of Class B shares and is one year in the case of C shares. However, the Company pays upfront sales commissions (dealer advances) to broker-dealers ranging from 2% to 4% of the sales transaction amount on Class B shares and 1% on Class C shares. The participating Funds pay the Company distribution fees of 0.75% and service fees of 0.25%, per annum of their net assets invested in Class B and Class C shares, subject to annual renewal by the participating Fund's Board of Trustees. In addition, the Company is paid a contingent deferred sales charge (CDSC) on B and C-shares redeemed within the minimum holding period. The CDSC is paid based on declining rates ranging from 2% to 4% on the purchases of Class B shares and 1% for Class C shares. The Company capitalizes and amortizes B share dealer advances for book purposes over periods which range from three to six years depending on the participating Fund. The Company deducts the dealer advances in full for tax purposes in the year such advances are paid. Distribution and service fees received by the Company from participating Funds are recorded in income as earned. CDSC received by the Company from redeeming shareholders reduce unamortized dealer advances directly. For the six months ended June 30, 1996, and June 30, 1995, the Company paid dealer advances in the amount of $15.6 million and $6.0 million, respectively. NOTE 15 - FINANCIAL INFORMATION BY BUSINESS SEGMENT Total revenues and income (loss) by business segment, excluding intersegment transactions, were as follows: 15 NOTE 15 - FINANCIAL INFORMATION BY BUSINESS SEGMENT (DOLLARS IN THOUSANDS) (UNAUDITED)
MUTUAL FUND INVESTMENT UNDERWRITING VENTURE CAPITAL SHAREHOLDER MANAGEMENT AND OTHER INVESTMENTS SERVICES ---------- --------- ----------- -------- SIX MONTHS - ---------- ENDED 6/30/96 6/30/95 6/30/96 6/30/95 6/30/96 6/30/95 6/30/96 6/30/95 - ----- ------- ------- ------- ------- ------- ------- ------- ------- REVENUES & OTHER INCOME $44,808 $30,467 $ 16,780 $ 6,994 $ 1,767 $ 285 $12,626 $11,147 ======= ======= ======== ======== ======= ======= ======= ======= INCOME (LOSS) BEFORE INCOME TAXES & MINORITY (1) (1) (2) (2) INTEREST $25,194 $19,851 $(11,692) $(12,983) $(1,163) $ 2,651 $ 973 $ 1,272 ======= ======= ======== ======== ======= ======= ======= ======= DEPRECIATION & AMORTIZATION $ 931 $ 519 $ 4,647 $ 2,537 $ 62 $ 53 $ 1,130 $ 775 ======= ======= ======== ======== ======= ======= ======= ======= CAPITAL EXPENDITURES $ 6,814 $ 199 $ 863 $ 1,666 $ 28 $ 35 $ 782 $ 1,791 ======= ======= ======== ======== ======= ======= ======= ======= IDENTIFIABLE ASSETS AT QUARTER END $79,288 $33,483 $104,953 $ 35,222 $63,358 $52,198 $ 8,792 $ 7,665 ======= ======= ======== ======== ======= ======= ======= ======= GOLD MINING OTHER CONSOLIDATED ----------- ----- ------------ SIX MONTHS \ - ---------- ENDED 6/30/96 6/30/95 6/30/96 6/30/95 6/30/96 6/30/95 - ----- ------- ------- ------- ------- ------- ------- REVENUES & OTHER INCOME $ 37,759 $43,339 $ 0 $ 0 $113,740 $ 92,232 ======== ======= ======= ======= ======== ======== INCOME (LOSS) BEFORE INCOME TAXES & MINORITY (3) (3) (4) (4) INTEREST $ 3,254 $12,171 $(1,223) $ (354) $ 15,343 $ 22,608 ======== ======= ======= ======= ======== ======== DEPRECIATION & AMORTIZATION $ 7,112 $ 7,551 $ 53 $ 0 $ 13,935 $ 11,435 ======== ======= ======= ======= ======== ======== CAPITAL EXPENDITURES $ 37,211 $ 7,132 $ 8,792 $ 3,966 $ 54,490 $ 14,789 ======== ======= ======= ======= ======== ======== IDENTIFIABLE ASSETS AT QUARTER END $114,078 $79,168 $38,333 $31,407 $408,802 $239,143 ======== ======= ======= ======= ======== ======== - ---------- (1) Net of interest expense related to third parties of approximately $888 for the six months ended June 30, 1996 and $152 for the six months ended June 30, 1995. (2) Net of interest expense related to third parties of approximately $201 for the six months ended June 30, 1996 and $200 for the six months ended June 30, 1995. (3) Net of interest expense related to third parties of approximately $69 for the six months ended June 30, 1996 and $179 for the six months ended June 30, 1995. (4) Net of expense related to the Company of $325 for the six months ended June 30, 1996 and $0 for the six months ended June 30, 1995. These expenses were related to the Company's Russia natural resources ventures.
16 PART I - FINANCIAL INFORMATION ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SUMMARY OF OPERATIONS The Pioneer Group, Inc. (the "Company") reported second quarter 1996 earnings of 14 cents per share, 15 cents per share lower than earnings in the second quarter of 1995. Second quarter results included earnings of 20 cents per share from the Company's worldwide investment management businesses, up 12 cents per share from the second quarter of 1995. These results included increased earnings of 12 cents per share from the domestic mutual fund operations and 3 cents from the Russian investment operations, partially offset by decreased earnings of 3 cents from the Polish mutual fund operations. The Company's worldwide venture capital operations lost 1 cent per share in the second quarter of 1996 compared to earnings of 8 cents in the second quarter of 1995, as venture capital earnings in the 1995 period included significant portfolio write-ups. The Company's gold mining operations, consisting of its wholly owned subsidiary, Pioneer Goldfields Limited ("PGL"), and PGL's 90% owned subsidiary, Teberebie Goldfields Limited ("TGL"), lost 3 cents per share in the second quarter of 1996 versus earnings of 14 cents per share in the second quarter of 1995. The Company's various other Russian natural resources businesses lost 2 cents per share in the second quarter of 1996 compared to a loss of 1 cent in the second quarter of 1995. Gross revenues in the second quarter of 1996 were $57.6 million, $11.1 million higher than the second quarter of 1995. The Company reported earnings of 34 cents per share for the six months ended June 30, 1996, 18 cents per share lower than earnings for the six months ended June 30, 1995. These results included earnings of 33 cents per share from the Company's worldwide investment management businesses, up 15 cents per share from the first half of 1995. Increased earnings of 15 cents per share from the domestic mutual fund operations and 6 cents from the Russian investment operations more than offset the decreased earnings of 5 cents from the Polish mutual fund operations and corporate costs of 1 cent per share associated with the Company's new mutual fund in the Czech Republic. The Company's worldwide venture capital operations lost 3 cents per share in the first half of 1996 compared to earnings of 6 cents in the first half of 1995. Gold mining operations earned 7 cents per share in the first six months of 1996 compared to earnings of 29 cents per share in the first six months of 1995. The Company's various other Russian natural resources businesses lost 3 cents per share in the first half of 1996 compared to a loss of 1 cent in the first half of 1995. Gross revenues in the first six months of 1996 were $113.7 million, $21.5 million higher than the first six months of 1995. FINANCIAL SERVICES BUSINESSES RESULTS OF OPERATIONS Revenues. The Company's worldwide financial services businesses have three principal sources of revenues: fees derived from managing the 29 U. S. registered investment companies in the Pioneer Family of Mutual Funds and institutional accounts, fees from 17 underwriting and distribution of mutual fund shares, and fees derived from acting as shareholder servicing agent. The Company earns similar revenues from its international investment operations in Poland, Russia, Ireland, the Czech Republic, and from its joint ventures in India and Taiwan. Revenues from the worldwide financial services businesses of $41.1 million and $76 million for the second quarter and six months ended June 30, 1996, were $16.6 million and $27.1 million higher, respectively, than revenues in the comparable 1995 periods as a result of increases in all revenue categories as discussed below. Management fees of $24 million in the second quarter of 1996 were $8.7 million, or 57%, higher than management fees in the second quarter of 1995. Three-fourths of the increase resulted from higher management fees earned from the Company's U.S. registered mutual funds. The shareholders of the Company's two largest U.S. registered mutual funds approved management fee increases effective May 1, 1996. The Company earned an additional $1.6 million of management fees in the second quarter from these funds. The balance of the increase in management fees resulted from an increase in assets in the U.S. registered mutual funds. For the six months ended June 30, 1996, management fees were $42.9 million, $12.5 million, or 41%, higher than management fees for the first six months of 1995, most of which resulted from increased management fees earned from the Company's U.S. registered mutual funds. Assets under management of $15.4 billion at June 30, 1996, increased by $1.6 billion over the 1995 year-end level and by $2.9 billion over the June 30, 1995 level. The $1.6 billion increase in assets under management since year end was principally attributable to strong U.S. registered mutual fund net sales and a higher stock market. The $2.9 billion increase since the second quarter of 1995 was largely attributable to a higher stock market. Since June 30, 1996, (through August 9, 1996), assets under management have declined by approximately $0.3 billion, principally as a result of recent stock market conditions. Underwriting commissions and distribution fees of $4.3 million in the second quarter of 1996 were $2.4 million higher, or more than double, underwriting commissions and distribution fees in the second quarter of 1995. Underwriting commissions earned from sales of U.S. registered mutual funds increased by $0.8 million as a result of the significant increase in the sales of such funds. The Company's U.S. registered mutual fund sales (including reinvested dividends) of $842 million in the second quarter of 1996 were $432 million, or 105%, higher than sales during the prior year's comparable period, while redemptions of $364 million increased by $95 million, or 35%. In the second quarter of 1996, the Company had net sales of $478 million compared to $141 million in the second quarter of 1995. Sales of Polish mutual funds increased from $10 million in the second quarter of 1995 to $55 million in the second quarter of 1996. Underwriting commissions on sales of the Polish mutual funds increased by $0.2 million as a result of 18 the increased sales. Distribution fees increased by $1.4 million as a result of increased average assets under management of the Company's back-end load funds. For the six months ended June 30, 1996, underwriting commissions and distribution fees of $8.2 million were $4.5 million higher, or more than double, underwriting commissions and distribution fees for the first six months of 1995. Underwriting commissions earned from sales of U.S. registered mutual funds increased by $1.3 million as a result of the significant increase in the sales of such funds. U.S. registered mutual fund sales of $1.5 billion for the first half of 1996 were $729 million, or 93%, higher than sales during the prior year's comparable period, while redemptions of $726 million increased by $208 million, or 40%. In the first six months of 1996, the Company had net sales of $786 million compared to $265 million in the first six months of 1995. Sales of Polish mutual funds were $87 million in the first half of 1996 versus $14 million in the first half of 1995. As a result of the increase in sales, underwriting commissions increased by $0.9 million. The Company earned the full broker-dealer commission on approximately 20% such sales. Distribution fees increased by $2.3 million as a result of increased average assets under management of the Company's back-end load funds. Shareholder services fees of $6.3 million and $12.4 million for the second quarter and six months ended June 30, 1996, respectively, increased by $0.7 million, or 13%, and $1.3 million, or 11%, over the respective 1995 periods, as a result of an increase in the number of shareholder accounts and a cost of living fee increase effective January 1, 1996. Trustee fees and all other income of $6.5 million and $12.6 million for the second quarter and six months ended June 30, 1996, respectively, increased by $4.8 million and $8.8 million over the respective 1995 periods, principally from interest and dividend income from the Company's Russian investment management operations. Costs and Expenses. Costs and expenses of the worldwide financial services businesses increased by $11.3 million, or 52%, over 1995's second quarter to $33 million in the second quarter of 1996. Approximately 60% of the increase in expenses resulted from the following accounting conventions or unusual circumstances (i) approximately $5.4 million represents expenses related to the Company's Russian investment operations which were acquired in April 1995 and which are accounted for on the consolidation method, and (ii) approximately $1.0 million related to expenses associated with the amortization of dealer advances resulting from substantial increases in sales of back-end load mutual fund shares. The amortization expenses were more than offset by the increase in distribution fees ($1.4 million) resulting from the increased asset levels. The remaining 40% of the increased expenses resulted from higher payroll costs, higher costs related to additional office space and higher costs related to mutual fund distribution (including printing and mailing of sales literature, paying commissions earned by the sales force and mutual fund advertising and public relations). Costs and expenses of the worldwide financial services businesses increased by 19 $19.5 million, or 48%, over 1995's first six months to $62.2 million in the first six months of 1996. Almost one-half of the increase in expenses resulted from: (i) $7.4 million in expenses related to the Company's Russian investment operations, and (ii) $1.9 million related to expenses associated with the amortization of dealer advances resulting from substantial increases in sales of back-end load mutual fund shares. The amortization expenses were more than offset by the $2.3 million increase in distribution fees. The other half of the increased expenses resulted from higher payroll costs, higher costs related to additional office space and higher costs related to mutual fund distribution. Other Income and Expense. The Company reported net venture capital investment portfolio gains (excluding operating expenses) of $0.5 million and $0.6 million in the second quarter and six months ended June 30, 1996, respectively, compared to $4.1 million and $4.2 million for the respective 1995 periods, from investments in the Company's U.S. venture capital portfolio. The Company's investments in its own mutual funds, principally during their startup phase, had net gains of $0.1 million in both the second quarter and six months ended June 30, 1996. In the second quarter and six months ended June 30, 1995, these investments had net gains of $0.1 million and $0.5 million, respectively. The Company reported net losses of $0.4 million and $0.3 million for the second quarter and six months ended June 30, 1996, from investments held by the First Voucher Fund (the "Voucher Fund"), the Russian investment fund in which the Company owns a 51% interest. The net losses resulted primarily from an unrealized loss on one of the Voucher Fund's investments partially offset by realized gains from several other investments. Interest expense increased by $0.6 million for both the second quarter and six months ended June 30, 1996, resulting from increased borrowings by the Company under its credit facility which is further discussed below. Other expenses, net, increased by $0.6 million and $0.9 million for the second quarter and six months ended June 30, 1996, respectively, principally as the result of expenses incurred by the Company with respect to its various Russian natural resources businesses. Taxes. The Company's effective tax rate for the worldwide financial services businesses was 34% for the second quarter of 1996 and 39% for the six months ended June 30, 1996, compared to 41% and 43% for the respective 1995 periods. The effective rates decreased as the result of tax exempt interest income associated with the Company's Russian investment operations. LIQUIDITY AND CAPITAL RESOURCES IRS regulations require that, in order to serve as trustee, the Company must maintain a net worth of at least 2% of the assets of Individual Retirement Accounts and other qualified retirement plan accounts at year end. At June 30, 1996, the Company served as trustee for $4.7 billion of qualified plan assets and the ratio of net worth to qualified assets was 3.3%. The Company's stockholders' equity of $157 million at June 30, 1996, would permit it to serve as trustee for up $7.8 billion of qualified plan assets. For certain of the Pioneer Family of Mutual Funds, the Company has introduced a multi-class share structure. Under the multi-class share structure, 20 the participating (or "multi-class") funds offer both traditional front-end load shares (Class A shares) and back-end load shares (Class B and C shares). On back-end load shares, the investor does not pay any sales charge unless there is a redemption before the expiration of the minimum holding period which ranges from three to six years in the case of Class B shares and is one year in the case of Class C shares. The Company, however, pays "up-front" commissions to broker-dealers related to sales and service of the back-end load shares ranging from 2% to 4% of the sales transaction amount on Class B shares and of 1% on Class C shares. The multi-class funds pay the Company distribution fees of 0.75%, and service fees of 0.25%, per annum of their respective net assets invested in Class B and Class C shares, subject to annual renewal by the trustees of the funds. Class B shares were introduced in April 1994 and Class C shares were introduced in January 1996. Sales of back-end load shares were $481 million in the first six months of 1996 versus $167 million in the first six months of 1995 and dealer advances totaled $15.6 million in the first six months of 1996 versus $6 million in the first six months of 1995. Dealer advances, net of amortization, were $30 million at June 30, 1996. The Company intends to continue to finance this program, in part, through the senior credit facility described in the section entitled "General." In April 1995, the Company acquired approximately 51% of the shares of the Voucher Fund, the largest voucher investment fund established in Russia in connection with that country's privatization program. The shares were issued by the Voucher Fund to two newly-formed subsidiaries of Pioneer Omega, Inc. ("Pioneer Omega"), a Delaware corporation in which the Company owns 80% of the outstanding securities. In addition to acquiring shares in the Voucher Fund, Pioneer Omega, acting through its subsidiary, Pioneer First Russia, Inc., acquired a Russian company that holds the right to manage the Voucher Fund's investments. Pioneer Omega paid $2.0 million in cash and issued preferred shares (the "Omega shares") valued at $6 million as consideration for the acquisition of the management company and related rights. The holder of the Omega shares has the right to cause the Company to purchase such shares (the "put option") and the Company has a corresponding right to purchase such shares from the holder (the "call option"). The put and call options are each exercisable with respect to one-third of the Omega shares on the first, second and third anniversaries of the closing of the transaction. The put and call option exercise price is $2 million per tranche, plus a 5% per annum premium on the option exercise price. The Company will pay a total of $6.6 million for the Omega shares over a three-year period as the put and/or call options are exercised. In April 1996, the Company exercised its option and purchased the first tranche of Omega shares for $2.1 million. NATURAL RESOURCE DEVELOPMENT BUSINESSES GOLD MINING BUSINESS The gold mining business lost $0.7 million, or 3 cents per share, in the second quarter of 1996, 17 cents per share below earnings of 14 cents per share in the comparable period last year. For the six months ended June 30, 1996, earnings of $1.8 million, or 7 cents per share, were 22 cents per share below last year's first half earnings. 21 Revenues decreased by 25% to $16.5 million in the second quarter of 1996 compared with the second quarter of 1995 as gold sales decreased by 26% to 42,500 ounces while the average realized price of gold increased by 1% to $389 per ounce. Revenues decreased by 13% to $37.8 million during the first half of 1996 compared with the first half of 1995 as gold sales decreased by 16% to 95,800 ounces while the average realized price of gold increased by 3% to $394 per ounce. The decrease in production was largely attributable to equipment availability problems and abnormally heavy rainfall in the second quarter of 1996 resulting in excessive dilution in the production process. While management believes that third quarter production will meet or exceed historical 1995 quarterly gold production levels (approximately 60,000 ounces), this production target is primarily dependent upon the continuing successful phase-in of the new and larger mining equipment and a return to normal rainfall patterns, in addition to the normal uncertainties associated with gold mining. TGL continues to believe that fourth quarter production will be approximately 70,000 ounces. RESULTS OF OPERATIONS The following table compares TGL's production results, cash costs and total costs per ounce for the three and six months ended June 30, 1996 with the same periods in 1995:
Three Months ended June 30, Six Months ended June 30, --------------------------- ------------------------- (Increase)/ (Increase) 1996 1995 Decrease 1996 1995 Decrease ---- ---- -------- ---- ---- -------- Production (ounces) 42,500 57,200 14,700 95,800 113,300 17,500 ======= ======= ======= ======= ======== ======= Cash Costs: Production Costs $ 273 $ 174 $ (99) $ 227 $ 158 $ (69) Royalties 12 12 -- 12 11 (1) General and administrative 46 28 (18) 38 27 (11) ------- ------- ------- ------- -------- ------- CASH COSTS PER OUNCE 331 214 (117) 277 196 (81) ------- ------- ------- ------- -------- ------- Non-Cash Costs: Depreciation and Amortization 80 65 (15) 74 67 (7) Other 2 -0- (2) 2 4 2 ------- ------- ------- ------- -------- ------- COST OF PRODUCTION PER OUNCE 413 279 (134) 353 267 (86) ------- ------- ------- ------- -------- ------- Interest and other costs 11 9 (2) 11 10 (1) ------- ------- ------- ------- -------- ------- TOTAL COSTS PER OUNCE $ 424 $ 288 $ (136) $ 364 $ 277 $ (87) ======= ======= ======= ======= ======== =======
Production Costs. Production costs represent costs attributable to mining ore and waste and processing the ore through crushing and processing facilities. TGL's costs of production are affected by ore grade, gold recovery rates, the waste to ore, or "stripping", ratio, the age of equipment and associated equipment availability, the weather, the availability of labor, haul distances, foreign exchange fluctuations and the inherent lag in gold production from new operations. Production costs during the three and six months ended June 30, 1996, increased by $99 per ounce and $69 per ounce, respectively, over the three and six months ended June 30, 1995. The increase 22 was attributable principally to lower gold production, higher than anticipated mining equipment maintenance costs, an increase in the stripping ratio, and higher labor costs associated with TGL's collective bargaining agreement with the Ghana Mineworker's Union. Compared with the first half of 1995, the stripping ratio increased from 2.58:1 to 3.20:1, essentially in-line with expectations, resulting in an increase in variable costs such as fuel, wear parts, and tires. TGL also experienced increases in processing costs associated with the continued development of a second run-of-mine, or dump leach, pad which was not operational in the first half of 1995. Royalties. Under the Ghanaian Minerals and Mining Law, royalties are levied at rates ranging from 3% to 12% of operating revenues as determined by reference to an operating ratio. Such operating ratio represents the percentage that operating profits, after giving effect to capital allowances and interest expense (as permitted by TGL's Deed of Warranty), bears to gold sales. In the first half of 1995 and 1996, the royalty rate payable by TGL remained at 3% of operating revenue, the minimum permitted by law, principally because of a sustained level of capital expenditures, and associated capital allowances, since the inception of the project. General and Administrative Costs. General and administrative costs consist principally of administrative salaries and related benefits, travel expenses, insurance, utilities, legal costs, employee meals, rents, vehicle expenditures, and customs clearing costs. Since these costs are relatively fixed and unrelated to production levels, the cost per ounce increased by $12 per ounce and $6 per ounce, respectively, during the three and six months ended June 30, 1996 compared with the three and six months ended June 30, 1995, because of production decreases of 26% and 16%, respectively. In addition, the underlying costs during the current periods increased by $6 per ounce and $5 per ounce, respectively, over the three and six months ended June 30, 1995, primarily because of increases in salaries and benefits relating to the 1995 collective bargaining agreement, and in commercial insurance premiums and employee meals. Depreciation and Amortization. Depreciation and amortization is calculated using units-of-production and straight-line methods designed to fully depreciate property, plant and equipment over the lesser of their estimated useful lives and ten years. These costs increased by $15 per ounce and $7 per ounce, respectively, during the three and six months ended June 30, 1996 compared with the three and six months ended June 30, 1995, principally because of increases in the depreciable asset base and the continued use of fully depreciated leach pads by the original East Plant in the second quarter of 1995. Regarding the latter point, the East Plant continued to use pads which were fully depreciated in the first quarter of that year resulting in a decrease in the cost per ounce in the first half of 1995. Capital additions affecting depreciation expense in the first half of 1996 included capitalized rebuilds of mining equipment, which are depreciated rapidly over two years, and the West Plant run-of-mine pad. In addition, the depreciation cost per ounce increased slightly because of the effect of lower production on depreciation calculated on a straight-line basis. 23 Other. Other costs represent a provision for future reclamation costs and costs related to exploration activities conducted by TGL at the Teberebie concessions and in other parts of Ghana. The $2 per ounce decrease in the first half of 1996 was attributable to a decrease in exploration core drilling. Interest and Other Costs. Interest and other costs comprise interest expense, foreign exchange gains and losses, political risk insurance premiums, gold price floor program premiums, goodwill amortization, and interest income. These costs are essentially fixed and, as a result, increased during the three and six months ended June 30, 1996, by $2 per ounce and $1 per ounce, respectively, compared with the three and six months ended June 30, 1995, primarily because of production decreases. Income Taxes. The statutory tax rate for mining companies in Ghana during 1995 and the first half of 1996 was 35%. The effective tax rates during the first half of 1995 and 1996 were 36% and 38%, respectively. LIQUIDITY AND CAPITAL RESOURCES Cash flow. PGL's cash balances decreased by $0.7 million to $1.6 million during the six months ended June 30, 1996. Cash generated from operating activities aggregated $18.1 million while capital expenditures and loan principal payments were $38.1 million and $4.0 million, respectively. Major capital expenditures by TGL during 1996 included $17.8 million for mining equipment, $13.3 million related to TGL's Phase III mine expansion (South Plant) (as further described below), and $2.1 million for leach pad and pond development. During the first half of 1996, PGL received approximately $5.6 million in financing from the Company, including $5.0 million in bridge financing for the Phase III mine expansion, of which $2.0 million was outstanding at June 30, 1996. TGL also received approximately $17.7 million of vendor financing in the first half of 1996. Otherwise, TGL generated sufficient operating cash flow to fund all of its scheduled third-party debt service payments and short-term cash commitments. Third-Party Debt. At the end of the second quarter of 1996, third-party debt aggregated $20.9 million, including $1.5 million which was guaranteed by the Company. Excluding Phase III expansion financing, scheduled third-party debt service for 1996 is expected to aggregate $1.2 million, all of which is expected to be funded by mining operations revenues. Risk Management. In the past, TGL purchased put options to secure a minimum selling price for its gold. All outstanding options expired on March 31, 1996 and TGL currently does not intend to purchase new options unless the price of gold declines to below $375 per ounce. The Company maintains $66.9 million of "political risk" insurance principally from the Overseas Private Investment Corporation ("OPIC") covering 90% of its equity and loan guarantees. This insurance also covers 90% of the Company's proportionate share of TGL's cumulative retained earnings. In addition to other commercial insurance policies, 24 TGL has secured business interruption coverage of up to $19.0 million for losses associated with machinery breakdown and property damage and to defray continuing infrastructure and interest costs. Phase III Mine Expansion. In July 1995, the Board of Directors of TGL approved the Phase III expansion of the Teberebie mine. Phase III will include a further heap leach operation and the construction of a near-pit gyratory crushing facility which will act as the primary crushing facility for both the existing West Plant and the new South Plant. Phase III will also gradually introduce a new and larger mining fleet, with the objective of mining at an annualized rate of approximately 60 million tonnes of material per year (including 12 million tonnes of crushed ore) and raising overall gold production to at least 400,000 ounces per year when Phase III is completed (expected in 1998). Realization of this objective is subject to the uncertainties inherent in any mining and processing operation. The initial work on the project has commenced. The major crushing equipment has been ordered and the initial mining equipment, consisting of six CAT 785 trucks and two CAT 5230 hydraulic shovels, has been delivered to the site and good progress is being made in training operators on the new equipment. Total capital investment planned for 1996 is approximately $68 million, including $46 million in expansion capital. Expansion capital represents approximately $32 million for the purchase of crushing and processing facilities and approximately $14 million for the purchase of mining equipment. Financing Facilities. In September 1995, OPIC executed a commitment letter (which expires October 31, 1996) with TGL and the Company pursuant to which OPIC agreed, subject to the fulfillment of certain conditions, to finance up to $54 million in connection with the Phase III expansion. As of August 13, 1996, TGL and the Company have not executed definitive loan agreements with respect to such OPIC guaranteed financing and there can be no assurance that such financing will become available, or that it will be available on terms acceptable to TGL and the Company. As a result of the delays associated with the OPIC guaranteed financing, TGL has sought and obtained alternative financing sources as described below. Accordingly, TGL has reduced the proposed amount of the OPIC guaranteed financing to $19 million. TGL has received credit approval from Caterpillar Financial Services Corporation, a wholly owned subsidiary of Caterpillar Inc. (collectively, "Caterpillar"), pursuant to which Caterpillar has agreed, subject to the fulfillment of certain conditions, to provide a revolving credit facility of up to $21 million to finance the purchase of Caterpillar and other mining equipment. During the second quarter of 1996, Caterpillar issued disbursements, at TGL's request, for $14.1 million of such facility. TGL is currently negotiating with Caterpillar to obtain an additional $6.4 million disbursement under the credit facility. There can be no assurance that TGL will be able to obtain similar or satisfactory terms for subsequent tranches of the Caterpillar credit facility. On March 6, 1996, TGL executed a loan agreement with Enskilda, a division of Skandinaviska Enskilda Banken, pursuant to which Enskilda has agreed to provide a direct loan of SEK 94.5 million (approximately $14.0 million) to finance the gyratory crusher and related equipment procured from Svedala Crushing and Screening AB. This loan is guaranteed by the Swedish Export Credits Board. As of August 2, 1996, SEK 30.9 million (or approximately $4.6 million) 25 was drawn down. The Company has also provided $5 million in bridge financing to TGL during the first six months of 1996, of which TGL repaid $3 million. The balance of such bridge financing was $7.6 million at August 9, 1996. Reserves. The following table sets forth the proven and probable in situ reserves of TGL at December 31, 1995. The cut-off grades used to delineate the reserves are 0.765 grams per tonne for crushed ore and 0.25 grams per tonne for run-of-mine at a gold price of $385 per ounce.
CRUSHED ORE RUN-OF-MINE ----------- ----------- Grams Grams per per Tonnes Tonnes Ounces Tonnes Tonnes Ounces ------ ------ ------ ------ ------ ------ MINEABLE RESERVES Total Proven 149,236,000 1.46 7,039,000 49,859,000 0.54 865,000 Total Probable 22,740,000 1.41 1,030,000 8,625,000 0.56 154,000 Total Reserves 171,976,000 1.46 8,069,000 58,484,000 0.54 1,019,000 TOTAL RESERVE OUNCES: 9,088,000 =========
TIMBER BUSINESS LIQUIDITY AND CAPITAL RESOURCES The Company's Russian venture, Forest Starma, in which the Company has a 76% direct interest and a 1.5% indirect interest, is pursuing the development of timber production under two long-term leases comprising 88,800 hectares (approximately 219,500 acres) in the aggregate with annual cutting rights of 210,000 cubic meters awarded to the venture in the Khabarovsk Territory of Russia. In June 1996, Forest Starma secured additional cutting rights of 90,000 cubic meters per year. Forest Starma has developed a site, including a jetty, from which it exports timber for markets in the Pacific Rim, primarily Japan. Timber harvesting commenced in the first quarter of 1995 and the first shipments of timber (acquired in the development phase) totaling approximately 30,000 cubic meters occurred in the third and fourth quarters of 1995. In 1996, Forest Starma has shipped approximately 60,800 cubic meters of timber (also acquired in the development phase). The related revenues were used to offset development costs. Capital required by this venture is now projected at approximately $36.2 million through the end of 1996 including $26.9 million in subordinated debt and accrued interest provided by the Company and $9.3 million in third party financing. Forest-Starma completed a $9.3 million project financing, guaranteed by OPIC, in early July 1996. The underlying note is payable in fifteen equal semiannual installments from December 15, 1996 through December 15, 2003 and bears interest at a fixed rate of 7.20%. In addition, a guarantee fee of 2.75% on outstanding borrowings is payable to OPIC prior to project completion, increasing to 5.125% after project completion when the Company ceases to 26 be an obligor in the transaction. As a condition to OPIC's guarantee, the Company was required to execute a Project Completion Agreement pursuant to which the Company would advance funds to Forest-Starma, as necessary, to permit Forest Starma to fulfill all of its financial obligations, including cost overruns related to project development, until such time as Forest Starma satisfies a production test and certain financial and project development benchmarks. During the second half of 1996, Forest Starma will apply for up to $6.5 million in additional OPIC guaranteed financing for an expansion planned in 1997. Investments by the Company in Forest Starma aggregated $30.8 million at June 30, 1996, $8.3 million of which was repaid in July 1996 out of the third party loan proceeds described above. Forest Starma is expected to reach an annualized production level of approximately 180,000 cubic meters per year by the end of 1996. The Company has secured OPIC political risk insurance in amount of up to $47 million which would protect 90% of the Company's equity investment and loans and a proportionate share of cumulative retained earnings. In November 1995, Amgun-Forest and Udinskoye, the Company's other Russian timber ventures, each executed a long-term lease (50 years) relating to timber harvesting. The Amgun-Forest lease covers 264,700 hectares (approximately 654,000 acres) with annual cutting rights of 350,000 cubic meters while the Udinskoye lease covers 156,600 hectares (approximately 387,000 acres) with annual cutting rights of 200,000 cubic meters. The feasibility study on Amgun-Forest is being reviewed, and the Udinskoye feasibility study is in the early stages of development. The studies will form the basis for estimating capital requirements for these projects. Preliminary estimates for these two projects are that, prior to securing third-party financing, the Company will provide funding of approximately $1.3 million in 1996. GENERAL The Company's liquid assets consisting of cash and marketable securities (exclusive of gold mining operations) increased by $2 million in the first half of 1996 to $35 million as cash from operations combined with financing activities slightly exceeded investing activities. The Company entered into an agreement in June 1996 with a syndicate of commercial banks for a senior credit facility (the "Credit Facility") in the amount of $115 million. Under the Credit Facility, the Company may borrow up to $35 million (the "B-share Revolver") to finance dealer advances relating to sales of back-end load shares of the Company's domestic mutual funds. The B-share Revolver is subject to annual renewal by the Company and the commercial banks. In the event the B-share Revolver is not renewed at maturity, it will automatically convert into a five-year term loan. Advances under the B-share Revolver bear interest, at the Company's option, at (a) the higher of the bank's base lending rate or the federal funds rate plus 0.50% or (b) LIBOR plus 1.25%. The Credit Facility also provides that the Company may borrow up to $80 million for general corporate purposes (the "Corporate Revolver"). The Corporate Revolver is 27 payable in full on June 11, 2001. Advances under the Corporate Revolver bear interest, at the Company's option, at (a) the higher of the bank's base lending rate or the federal funds rate plus 0.50% or (b) LIBOR plus the applicable margin, tied to the Company's financial performance, of either 1.25%, 1.50%, or 1.75% in the first year of the agreement and 0.75%, 1.25%, 1.50% or 1.75% for the remaining term as defined under the agreement. At August 9, 1996, the Company had borrowed $28 million under the B-share Revolver and $50 million under the Corporate Revolver. The Credit Facility provides that the Company must pay additional interest at the rate of 0.375% per annum of the unused portion of the facility and an annual arrangement fee of $35,000. The commitment fees were approximately $0.7 million. The Company used the proceeds from borrowings under the new credit facility to repay in full amounts previously borrowed under the lines of credit with a commercial bank. The Credit Facility contains restrictions that limit, among other things, encumbrances on the assets of the Company's domestic mutual fund subsidiaries and certain mergers and sales of assets. Additionally, the Credit Facility requires that the Company meet certain financial covenants including covenants that require the Company to maintain certain minimum ratios with respect to debt to cash flow and interest payments to cash flow and a minimum tangible net worth, all as defined in the Credit Facility. As of June 30, 1996, the Company was in compliance with all applicable covenants of the Credit Facility. Under the Credit Facility, the Company is required to maintain interest rate protection agreements covering at least 60% of the outstanding indebtedness under the B-share Revolver. As of June 30, 1996, the Company entered into two five-year interest rate swap agreements with a member of the Company's banking group which has effectively fixed the interest rate on notional amounts of $40 million and $20 million. Under these agreements, the Company will pay the bank fixed rates of 6.975% and 6.74%, respectively, plus the applicable margin, on the notional principal. The bank will pay the Company interest on the notional principal at the current variable rate stated under the B-share Revolver. The fair value of these swap agreements was $786,000 at June 30, 1996, which amount represents the estimated amount the Company would be obligated to pay to terminate the agreements. FUTURE OPERATING RESULTS Certain of the information contained in this Quarterly Report on Form 10-Q, including information with respect to the Company's plans and strategies for its worldwide financial services and natural resources businesses, consists of forward-looking statements. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects" and similar expressions are intended to identify forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, the following: 28 The Company derives a significant portion of its revenues from investment management fees, underwriting and distribution fees and shareholder services fees. Success in the investment management and mutual fund share distribution businesses is substantially dependent on investment performance. Good performance stimulates sales of shares and tends to keep redemptions low. Sales of shares generate higher management fees and distribution fees (which are both based on assets of the funds). Good performance also attracts institutional accounts. Conversely, relatively poor performance results in decreased sales and increased redemptions and the loss of institutional accounts, with corresponding decreases in revenues to the Company. Investment performance may also be affected by economic or market conditions which are beyond the control of the Company. The mutual fund industry is intensely competitive. Many organizations in this industry are attempting to sell and service the same clients and customers, not only with mutual fund investments but with other financial services products. Some of the Company's competitors have more products and product lines and substantially greater assets under management and financial resources. As described above, the Company offers a multi-class share structure on its domestic mutual funds. Under such structure, the Company pays to dealers a commission on the sale of back-end load shares but the investor does not pay any sales charge unless it redeems before the expiration of the minimum holding period, which ranges from three to six years in the case of Class B Shares and which is one year in the case of Class C Shares. The Company's cash flow and results of operations may be adversely affected by vigorous sales of back-end load shares because its recovery of the cost of commissions paid up front to dealers is spread over a period of years. During this period, the Company bears the costs of financing and the risk of market decline. The businesses of the Company and its financial services subsidiaries are primarily dependent upon their associations with the Pioneer Family of Mutual Funds with which they have contractual relationships. In the event any of the management contracts, underwriting contracts or service agreements were canceled or not renewed pursuant to the terms thereof, the Company may be substantially adversely affected. The Securities and Exchange Commission has jurisdiction over registered investment companies, registered investment advisers, broker-dealers and transfer agents and, in the event of a violation of applicable rules or regulations by the Company or its subsidiaries, may take action which could have a serious effect on the Company. Because a significant portion of the Company's revenues and net income are derived from the mining and sale of gold by TGL, the Company's earnings are directly related to the price of gold. Gold prices have historically fluctuated significantly and are affected by numerous factors, including expectations for inflation, the strength of the U.S. dollar, global and regional demand and political and economic conditions. If, as a result of a decline in gold prices, TGL's revenues from gold sales were to fall below cash costs of production, and to remain below cash costs of production for any substantial period, the Company 29 could determine that it is not economically feasible for TGL to continue commercial production. While an internationally recognized engineering firm audited and verified TGL's gold reserves in August 1995, and indicated that the reserves are estimated in accordance with good engineering practices using current cost estimates, reserve estimates are necessarily imprecise and depend to some extent on statistical inferences drawn from limited drilling which may, on occasion, prove unreliable. Reserve estimates are based upon a number of assumptions, including the price of gold, cut-off grades and operating costs. Increases in operating costs, reduced recovery rates or market price fluctuations of gold may render all or a portion of such reserves uneconomic to mine. TGL has recently discovered clay filled fault zones below and parallel to the lowest ore zone at the Teberebie mine that create areas of slope instability within the pit. This instability may result in failures of sections of the footwall of the mine, especially during the rainy season. TGL has engaged a geotechnical consultant to conduct a study to identify the extent of, and address a solution to, this instability. It is possible that it may be necessary to mine in a manner which results in more footwall waste being removed than presently planned. This may result in an increase in the average stripping ratio. It is not yet possible to determine the impact, if any, of slope instability on operating costs. A significant increase in the average stripping ratio, however, would increase production costs. To attain projected levels of gold production, TGL must successfully complete its Phase III expansion, and the new crushing facility to be constructed in connection with Phase III, the South Plant, must become operational on time. The Company believes that the construction schedule for Phase III is feasible. There can, however, be no assurance that Phase III will in fact be completed or become operational in accordance with TGL's current proposed construction schedule. As a result, future gold production achieved by the Teberebie mine may fail to meet current projections. TGL is dependent upon a number of key supplies for its mining operations, including electricity, explosives, diesel fuel, lubricants, tires and sodium cyanide. There can be no assurance that a disruption in the supplies to TGL of these key materials will not occur and adversely affect the Company's operations. The operations at TGL depend on its ability to recruit, train and retain employees with the requisite skills to operate large-scale mining equipment. Although TGL offers its employees an attractive compensation package, competition for skilled labor is strong among the various mines in Ghana. There can be no assurance that the Company's operations will not be adversely affected by a shortage of skilled laborers or by an increase in the time required to fully train new employees. 30 The Company has incurred considerable expenses in connection with the Forest Starma timber project located in the Russian Far East. Although Forest Starma has commenced harvesting and has made shipments of timber, Forest Starma is still in the development stage. The commercial feasibility of Forest Starma is also dependent upon a number of factors which are not within the control of the Company including the price of timber, the weather and the strength of the Japanese economy, the primary market for Forest Starma's timber. While the Company continues to believe that the project will achieve commercial feasibility, there can be no assurance that it will do so. The Company has a significant number of operations and investments located outside of the U. S., including the gold mining operation at TGL and the timber and investment operations in Russia. Foreign operations and investments may be adversely affected by exchange controls, currency fluctuations, taxation, political instability and laws or policies of the particular countries in which the Company may have operations. There is no assurance that permits, authorizations and agreements to implement plans at the Company's projects can be obtained under conditions or within time frames that make such plans economically feasible, that applicable laws or the governing political authorities will not change or that such changes will not result in the Company's having to incur material additional expenditures. While the Company is currently applying for political risk insurance to cover its Russian investment operations, there can be no assurance that it will be able to obtain such coverage. THE COMPANY BELIEVES THAT IT IS IN SOUND FINANCIAL CONDITION, THAT IT HAS SUFFICIENT LIQUIDITY FROM OPERATIONS AND FINANCING FACILITIES TO COVER SHORT-TERM COMMITMENTS AND CONTINGENCIES AND THAT IT HAS ADEQUATE CAPITAL RESOURCES TO PROVIDE FOR LONG-TERM COMMITMENTS. 31 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Securityholders The 1996 Annual Meeting of Stockholders (the "Annual Meeting") was held on May 15, 1996. At the Annual Meeting, the following persons were elected to serve as directors until the next Annual Meeting of Stockholders and thereafter until their successors are duly elected and qualified: Robert L. Butler, Philip L. Carret, John F. Cogan, Jr., Maurice Engleman, Jaskaran Teja, David D. Tripple and John H. Valentine. At the Annual Meeting, the stockholders also voted to ratify the selection of Arthur Andersen LLP as the Company's independent accountants for the 1996 fiscal year. The following is a summary of the voting at the Annual Meeting: For Withheld Election of Directors --- -------- Robert L. Butler 21,589,071 35,027 Philip L. Carret 21,609,514 14,584 John F. Cogan, Jr. 21,587,499 36,599 Maurice Engleman 21,574,611 49,487 Jaskaran S. Teja 21,586,611 37,487 David D. Tripple 21,605,446 18,652 John H. Valentine 21,586,611 37,487 For Against Abstain --- ------- ------- Ratification of Arthur Andersen 21,591,769 9,196 23,133 LLP as independent accountants for 1996 fiscal year Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits. 10.1 1995 Employee Stock Purchase Plan. 10.2 Loan Agreement dated as of April 23, 1996, by and between Teberebie Goldfields Limited ("TGL") and Caterpillar Financial Services Corporation ("Caterpillar"). 10.3 Chattel Mortgage dated as of April 23, 1996, by and between TGL and Caterpillar. 10.4 Credit Agreement dated as of June 6, 1996, by and among The Pioneer Group, Inc., certain of its subsidiaries, the Lenders and The First National Bank of Boston, as agent for itself and the other Lenders. 10.5 Loan Agreement dated as of May 16, 1996, by and between TGL and Caterpillar. 11 Computation of earnings per share. 27 Financial Data Schedule. (b) Reports filed on form 8-K. None. 32 SIGNATURES ---------- It is the opinion of management that the financial information contained in this report reflects all adjustments necessary to a fair statement of results for the period report, but such results are not necessarily indicative of results to be expected for the year due to the effect that stock market fluctuations may have on assets under management. All accounting policies have been applied consistently with those of prior periods. Such financial information is subject to year-end adjustments and annual audit by independent public accountants. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE PIONEER GROUP, INC. Dated: August 14, 1996 /s/ William H. Keough --------------- William H. Keough Senior Vice President Chief Financial Officer and Treasurer 33 EXHIBIT INDEX ------------- 10.1 1995 Employee Stock Purchase Plan 10.2 Loan Agreement dated as of April 23, 1996, by and between Teberebie Goldfields Limited ("TGL") and Caterpillar Financial Services Corporation ("Caterpillar"). 10.3 Chattel Mortgage dated as of April 23, 1996, by and between TGL and Caterpillar. 10.4 Credit Agreement dated as of June 6, 1996, by and among The Pioneer Group, Inc., certain of its subsidiaries, the Lenders and The First National Bank of Boston, as agent for itself and the other Lenders. 10.5 Loan Agreement dated as of May 16, 1996, by and between TGL and Caterpillar. 11 Computation of earnings per share. 27 Financial Data Schedule. EX-10.1 2 1995 EMPLOYEE STOCK PURCHASE PLAN 1 Exhibit 10.1 THE PIONEER GROUP, INC. 1995 EMPLOYEE STOCK PURCHASE PLAN The purpose of this Plan is to provide eligible employees of The Pioneer Group, Inc. (the "Company") and certain of its subsidiaries with opportunities to purchase shares of the Company's common stock, $.10 par value (the "Common Stock"), commencing on July 3, 1995. Five hundred thousand (500,000) shares of Common Stock in the aggregate have been approved for this purpose. 1. ADMINISTRATION. The Plan will be administered by the Company's Board of Directors (the "Board") or by a Committee appointed by the Board (the "Committee"). The Board or the Committee has authority to make rules and regulations for the administration of the Plan and its interpretation and decisions with regard thereto shall be final and conclusive. 2. ELIGIBILITY. Participation in the Plan will neither be permitted nor denied contrary to the requirements of Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations promulgated thereunder. All employees of the Company, including Directors who are employees, and all employees of any subsidiary of the Company (as defined in Section 424(f) of the Code) designated by the Board or the Committee from time to time (a "Designated Subsidiary"), are eligible to participate in any one or more of the offerings of Options (as defined in Section 9) to purchase Common Stock under the Plan provided that: (a) they are regularly employed by the Company or a Designated Subsidiary for more than 20 hours a week and for more than five months in a calendar year; and (b) they have been employed by the Company or a Designated Subsidiary for at least three (3) months prior to enrolling in the Plan; and (c) they are employees of the Company or a Designated Subsidiary on the first day of the applicable Plan Period (as defined below). No employee may be granted an option hereunder if such employee, immediately after the option is granted, owns 5% or more of the total combined voting power or value of the stock of the Company or any subsidiary. For purposes of the preceding sentence, the attribution rules of Section 424(d) of the Code shall apply in determining the stock ownership of an employee, and 2 all stock which the employee has a contractual right to purchase shall be treated as stock owned by the employee. 3. OFFERINGS. The Company will make one or more offerings ("Offerings") to employees to purchase stock under this Plan. Offerings will begin on each January 1 and July 1, or the first business day thereafter (the "Offering Commencement Dates"), the first such Offering Commencement Date being July 3, 1995. Each Offering Commencement Date will begin a six month period (a "Plan Period") during which payroll deductions will be made and held for the purchase of Common Stock at the end of the Plan Period. The Board or the Committee may, at its discretion, choose a different Plan Period of twelve (12) months or less for subsequent Offerings. 4. PARTICIPATION. An employee eligible on the Offering Commencement Date of any Offering may participate in such Offering by completing and forwarding a payroll deduction authorization form to the employee's appropriate payroll office at least 30 days prior to the applicable Offering Commencement Date. The form will authorize a regular payroll deduction from the Compensation received by the employee during the Plan Period. Unless an employee files a new form or withdraws from the Plan, his deductions and purchases will continue at the same rate for future Offerings under the Plan as long as the Plan remains in effect. The term "Compensation" means the amount of money reportable as base earnings on the employee's Federal Income Tax Withholding Statement, excluding overtime, shift premium, incentive or bonus awards, allowances and reimbursements for expenses such as relocation allowances for travel expenses, income or gains on the exercise of Company stock options or stock appreciation rights, and similar items, whether or not shown on the employee's Federal Income Tax Withholding Statement, but including, in the case of salespersons, sales commissions to the extent determined by the Board or the Committee. 5. DEDUCTIONS. The Company will maintain payroll deduction accounts for all participating employees. With respect to any Offering made under this Plan, an employee may authorize a payroll deduction in any dollar amount up to a maximum of 10% of the Compensation he or she receives during the Plan Period or such shorter period during which deductions from payroll are made. Payroll deductions may be at the rate of 2%, 4%, 6%, 8% or 10% of Compensation with any change in compensation during the Plan Period to result in an automatic corresponding change in the dollar amount withheld. No employee may be granted an Option (as defined in Section 9) which permits his rights to purchase Common Stock under this Plan and any other stock purchase plan of the Company and its subsidiaries, to accrue at a rate which exceeds $25,000 of the -2- 3 fair market value of such Common Stock (determined at the Offering Commencement Date of the Plan Period) for each calendar year in which the Option is outstanding at any time. 6. DEDUCTION CHANGES. An employee may decrease or discontinue his payroll deduction once during any Plan Period, by filing a new payroll deduction authorization form. However, an employee may not increase his payroll deduction during a Plan Period. If an employee elects to discontinue his payroll deductions during a Plan Period, but does not elect to withdraw his funds pursuant to Section 8 hereof, funds deducted prior to his election to discontinue will be applied to the purchase of Common Stock on the Exercise Date (as defined below). 7. INTEREST. Interest will not be paid on any employee accounts, except to the extent that the Board or the Committee, in its sole discretion, elects to credit employee accounts with interest at such per annum rate as it may from time to time determine. 8. WITHDRAWAL OF FUNDS. An employee may at any time prior to the close of business on the last business day in a Plan Period and for any reason permanently draw out the balance accumulated in the employee's account and thereby withdraw from participation in an Offering. Partial withdrawals are not permitted. The employee may not begin participation again during the remainder of the Plan Period. The employee may participate in any subsequent Offering in accordance with terms and conditions established by the Board or the Committee, except that employees who are also directors or officers of the Company within the meaning of Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules promulgated there under may not participate again for a period of at least six months as provided in Rule 16b-3(d)(2)(i) or any successor provision. 9. PURCHASE OF SHARES. On the Offering Commencement Date of each Plan Period, the Company will grant to each eligible employee who is then a participant in the Plan an option ("Option") to purchase on the last business day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter provided for, such number of whole shares of Common Stock of the Company reserved for the purposes of the Plan as does not exceed the number of shares determined by dividing 10% of such employee's annualized Compensation for the immediately prior six-month period by the price determined in accordance with the formula set forth in the following paragraph but using the closing price on the Offering Commencement Date of such Plan Period. The purchase price for each share purchased will be 85% of the closing price of the Common Stock on (i) the first business -3- 4 day of such Plan Period or (ii) the Exercise Date, whichever closing price shall be less. Such closing price shall be (a) the closing price on any national securities exchange on which the Common Stock is listed, (b) the closing price of the Common Stock on the Nasdaq National Market or (c) the average of the closing bid and asked prices in the over-the-counter-market, whichever is applicable, as published in THE WALL STREET JOURNAL. If no sales of Common Stock were made on such a day, the price of the Common Stock for purposes of clauses (a) and (b) above shall be the reported price for the next preceding day on which sales were made. Each employee who continues to be a participant in the Plan on the Exercise Date shall be deemed to have exercised his Option at the Option Price on such date and shall be deemed to have purchased from the Company the number of full shares of Common Stock reserved for the purpose of the Plan that his accumulated payroll deductions on such date will pay for pursuant to the formula set forth above (but not in excess of the maximum number determined in the manner set forth above). Any balance remaining in an employee's payroll deduction account at the end of a Plan Period will be automatically refunded to the employee, except that any balance which is less than the purchase price of one share of Common Stock will be carried forward into the employee's payroll deduction account for the following Offering, unless the employee elects not to participate in the following Offering under the Plan, in which case the balance in the employee's account shall be refunded. 10. ISSUANCE OF CERTIFICATES. Certificates representing shares of Common Stock purchased under the Plan may be issued only in the name of the employee, in the name of the employee and another person of legal age as joint tenants with rights of survivorship, or (in the Company's sole discretion) in the street name of a brokerage firm, bank or other nominee holder designated by the employee. 11. RIGHTS ON RETIREMENT, Death or Termination of Employment. In the event of a participating employee's termination of employment prior to the last business day of a Plan Period, no payroll deduction shall be taken from any pay due and owing to an employee and the balance in the employee's account shall be paid to the employee or, in the event of the employee's death, (a) to a beneficiary previously designated in a revocable notice signed by the employee (with any spousal consent required under state law) or (b) in the absence of such a designated beneficiary, to the executor or administrator of the employee's estate or (c) if no such executor or administrator has been appointed to the knowledge of the Company, to such other person(s) -4- 5 as the Company may, in its discretion, designate. If, prior to the last business day of the Plan Period, the Designated Subsidiary by which an employee is employed shall cease to be a subsidiary of the Company, or if the employee is transferred to a subsidiary of the Company that is not a Designated Subsidiary, the employee shall be deemed to have terminated employment for the purposes of this Plan. 12. OPTIONEES NOT STOCKHOLDERS. Neither the granting of an Option to an employee nor the deductions from his pay shall constitute such employee a stockholder of the shares of Common Stock covered by an Option under this Plan until such shares have been purchased by and issued to him. 13. RIGHTS NOT TRANSFERABLE. Rights under this Plan are not transferable by a participating employee other than by will or the laws of descent and distribution, and are exercisable during the employee's lifetime only by the employee. 14. APPLICATION OF FUNDS. All funds received or held by the Company under this Plan may be combined with other corporate funds and may be used for any corporate purpose. 15. ADJUSTMENT IN CASE OF CHANGES AFFECTING COMMON STOCK. In the event of a subdivision of outstanding shares of Common Stock, or the payment of a dividend in Common Stock, the number of shares approved for this Plan, and the share limitation set forth in Section 9, shall be increased proportionately, and such other adjustment shall be made as may be deemed equitable by the Board or the Committee. In the event of any other change affecting the Common Stock, such adjustment shall be made as may be deemed equitable by the Board or the Committee to give proper effect to such event. 16. MERGER. If the Company shall at any time merge or consolidate with another corporation and the holders of the capital stock of the Company immediately prior to such merger or consolidation continue to hold at least 80% by voting power of the capital stock of the surviving corporation ("Continuity of Control"), the holder of each Option then outstanding will thereafter be entitled to receive at the next Exercise Date upon the exercise of such Option for each share as to which such Option shall be exercised the securities or property which a holder of one share of the Common Stock was entitled to upon and at the time of such merger, and the Committee shall take such steps in connection with such merger as the Committee shall deem necessary to assure that the provisions of Paragraph 15 shall thereafter be applicable, as nearly as reasonably may be, in relation to the said securities or property as to which such holder of such Option might thereafter be entitled to receive thereunder. -5- 6 In the event of a merger or consolidation of the Company with or into another corporation which does not involve Continuity of Control, or of a sale of all or substantially all of the assets of the Company while unexercised Options remain outstanding under the Plan, (a) subject to the provisions of clauses (b) and (c), after the effective date of such transaction, each holder of an outstanding Option shall be entitled, upon exercise of such Option, to receive in lieu of shares of Common Stock, shares of such stock or other securities as the holders of shares of Common Stock received pursuant to the terms of such transaction; or (b) all outstanding Options may be cancelled by the Board or the Committee as of a date prior to the effective date of any such transaction and all payroll deductions shall be paid out to the participating employees; or (c) all outstanding Options may be cancelled by the Board or the Committee as of the effective date of any such transaction, provided that notice of such cancellation shall be given to each holder of an Option, and each holder of an Option shall have the right to exercise such Option in full based on payroll deductions then credited to his account as of a date determined by the Board or the Committee, which date shall not be less than ten (10) days preceding the effective date of such transaction. 17. AMENDMENT OF THE PLAN. The Board may at any time, and from time to time, amend this Plan in any respect, except that (a) if the approval of any such amendment by the shareholders of the Company is required by Section 423 of the Code or by Rule 16b-3 under the Exchange Act, such amendment shall not be effected without such approval, and (b) in no event may any amendment be made which would cause the Plan to fail to comply with Section 16 of the Exchange Act and the rules promulgated thereunder, as in effect from time to time, or Section 423 of the Code. 18. INSUFFICIENT SHARES. In the event that the total number of shares of Common Stock specified in elections to be purchased under any Offering plus the number of shares purchased under previous Offerings under this Plan exceeds the maximum number of shares issuable under this Plan, the Board or the Committee will allot the shares then available on a pro rata basis. 19. TERMINATION OF THE PLAN. This Plan may be terminated at any time by the Board. Upon termination of this Plan all amounts in the accounts of participating employees shall be promptly refunded. 20. GOVERNMENTAL REGULATIONS. The Company's obligation to sell and deliver Common Stock under this Plan is subject to listing on a national stock exchange or quotation on the Nasdaq National Market and the approval of all governmental authorities -6- 7 required in connection with the authorization, issuance or sale of such stock. The Plan shall be governed by Massachusetts law except to the extent that such law is preempted by federal law. The Plan is intended to comply with the provisions of Rule 16b-3 promulgated under the Securities Exchange Act of 1934. Any provision inconsistent with such Rule shall to that extent be inoperative and shall not affect the validity of the Plan. 21. ISSUANCE OF SHARES. Shares may be issued upon exercise of an Option from authorized but unissued Common Stock, from shares held in the treasury of the Company, or from any other proper source. 22. NOTIFICATION UPON SALE OF SHARES. Each employee agrees, by entering the Plan, to promptly give the Company notice of any disposition of shares purchased under the Plan where such disposition occurs within two years after the date of grant of the Option pursuant to which such shares were purchased. 23. EFFECTIVE DATE AND APPROVAL OF SHAREHOLDERS. The Plan shall take effect on July 3, 1995 subject to approval by the shareholders of the Company as required by Rule 16b-3 under the Exchange Act and by Section 423 of the Code, which approval must occur within twelve months of the adoption of the Plan by the Board. Adopted by the Board of Directors on January 26, 1995 -7- EX-10.2 3 LOAN AGREEMENT 1 Exhibit 10.2 LOAN AGREEMENT THIS LOAN AGREEMENT is made this 23rd day of April, 1996, by and between TEBEREBIE GOLDFIELDS LIMITED ("Borrower"), a limited liability company organized and existing under the laws of the Republic of Ghana with its principal place of business located at P.O. Box 6, Tarkwa, Republic of Ghana, West Africa; and CATERPILLAR FINANCIAL SERVICES CORPORATION ("Lender"), a Delaware corporation with its principal place of business located at 3322 West End Avenue, Nashville, Tennessee, U.S.A. 37203. SECTION 1. GENERAL DEFINITIONS 1.1. Defined Terms. When used herein, the following terms shall have the following meanings (terms defined in the singular shall have the same meaning when used in the plural and vice versa): "Affiliate" shall mean any Person: (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Borrower; (ii) which beneficially owns or holds 5% or more of any class of the Voting Stock of the Borrower; or (iii) 5% or more of the voting stock (or in the case of a Person which is not a corporation or a limited liability company, 5% or more of the equity interest) of which is beneficially owned or held by the Borrower or a Subsidiary of the Borrower. For purposes hereof, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting stock, by contract or otherwise. "Agreement" shall mean this Loan Agreement. "Applicable Law(s)" shall mean all laws, rules and regulations applicable to the Person, conduct, transaction, covenant or Loan Documents in question, including, but not limited to, all applicable common law and equitable principles, if applicable; all provisions of all applicable state and federal constitutions, statutes, rules, regulations and orders of governmental bodies; and orders, judgments, decrees and awards of all courts and arbitrators, in any jurisdiction or any political subdivision thereof, and in each case, as amended, modified or replaced. "Bank" shall mean any financial institution with which the Borrower may, from time to time, maintain credit lines for financing its or its Subsidiaries acquisition of Property. "Base Rate" shall mean a fixed rate of interest equal to seven and 85/100ths percent (7.85%) per annum. "Business Day" shall mean a day other than (i) a Saturday or Sunday, or (ii) a day on which banks are authorized by law to be closed in New York, New York, U.S.A. "Caterpillar" shall mean Caterpillar Inc., a Delaware corporation. "Caterpillar Sellers" shall mean Caterpillar, COSA, and each of their respective wholly owned subsidiaries (other than Lender). "Closing Date" shall mean the date on which all of the conditions precedent in Section 6 are satisfied. "Collection Expenses" shall mean all costs and expenses at any time or times incurred by the Lender after the occurrence of an Event of Default in connection with efforts to collect or recover any of the Obligations from the Borrower, including, without limitation, reasonable legal fees, court expenses and costs, transfer fees or taxes, accountants' fees, all fees and expenses payable or reimbursable by the Borrower under Section 9.3 hereof, and all 1 2 other costs and expenses associated with seeking to enforce any of the Loan Documents. "Commitment" shall mean the amount of commitment set forth opposite Lender's name on the signature page hereof, or Lender's commitment to lend such amounts, as the context may determine. "Commitment Letter" means that certain Commitment Letter dated March 14, 1996 between Borrower and Lender. "COSA" shall mean Caterpillar Overseas S.A., a Swiss corporation. "Deed of Warranty" shall mean that certain Deed of Warranty dated December 3, 1987 by and among the Government of the Republic of Ghana, Borrower, Pioneer Group Inc. and Glencar Exploration (UK) Limited. "Default" shall mean an event or condition the occurrence of which would, with proper notice or lapse of time or both, become an Event of Default. "Dollars" and the sign "$" shall mean the currency of the United States of America. "Eligible Equipment" shall mean the equipment described in the Commitment Letter. "Event of Default" shall have the meaning ascribed thereto in Section 7.1. "Export Product Value" means the actual cost in Dollars to the Borrower of each item of Eligible Equipment purchased, FOB port of exit, (INCOTERMS 1990). If actual cost is not denominated in Dollars, it shall be converted at a rate determined by Lender using the guidelines set out in Section 9.7 hereof. "Fiscal Year" shall mean the taxable year of the Borrower. "Forfeiture Law" shall mean any state or federal law, rule or regulation under which any Property of a Person may be seized by a governmental agency or title thereto forfeited by reason of such Person's commission of a crime. "GAAP" shall mean generally accepted accounting principles as in effect in the Republic of Ghana from time to time. "Indebtedness" as applied to a Person shall mean the aggregate of all items which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person as at the date as of which Indebtedness is to be determined, including without limitation, all obligations of other Persons which such Person has guaranteed. "Lender's Bank Account" shall mean Lender's account with Chase Manhattan Bank, New York, New York, account number 910-2-469872, ABA code 021-000-021, or other such account as Lender may designate in writing to Borrower. "Lien" shall mean any mortgage, deed of trust, pledge, security interest, hypothecation, assignment, deposit arrangements, encumbrance, lien (statutory or other), or preference, priority, or other security agreement or preferential arrangement, charge, or encumbrance of any kind or nature whatsoever. "Loan" shall have the meaning ascribed thereto in Section 2.1. "Loan Documents" shall mean this Agreement and the Other Agreements. 2 3 "Material Adverse Effect" shall mean any event or condition which, alone or when taken together with other events or conditions occurring or existing concurrently therewith: (i) has or may be reasonably expected to have a material adverse effect upon the business, operations, Properties or financial condition of the Borrower or any Subsidiary; (ii) has or may be reasonably expected to have any material adverse effect whatsoever upon the validity or enforceability of this Agreement or any of the other Loan Documents; or (iii) materially impairs the ability of the Borrower to perform its obligations under this Agreement or any of the other Loan Documents or of the Lender to enforce or collect the Obligations in accordance with the Loan Documents and Applicable Law. "Maximum Rate" shall mean the maximum rate of interest permitted by Applicable Law that at any time, or from time to time, may be contracted for, taken, reserved, charged or received on the Indebtedness in question or, to the extent permitted by Applicable Law, under such Applicable Laws that may hereafter be in effect and which allow a higher maximum interest rate than Applicable Laws now allow. Notwithstanding any other provision hereof, the Maximum Rate shall be calculated on a daily basis computed on the actual number of days elapsed over a year of 360 days. "Net Worth" shall mean the aggregate of capital stock, earned surplus, and additional paid in capital of the Borrower, less the Borrower's treasury stock, all as determined in accordance with GAAP applied on a basis consistent with the accounting principles applied in the preparation of the financial statements referred to in Sections 4.4 and 5.1(A). "Note" shall mean the promissory note(s) evidencing the Loan made by Lender to Borrower hereunder pursuant to Section 2.1 substantially in the form of Exhibit A. "Obligations" shall mean all Indebtedness, liabilities and obligations (including non-financial obligations and covenants) owing, arising, to be performed, due or payable from the Borrower to, or on behalf of, the Lender of every kind or nature, whether absolute or contingent, due or to become due, joint or several, liquidated or unliquidated, matured or unmatured, primary or secondary, now existing or hereafter incurred or arising under any of the Loan Documents or otherwise, and regardless of the form or purpose of such Indebtedness, liabilities or obligations, including, without limitation, the Loan, any other loans, any Security Agreements, all liabilities of the Borrower to the Lender under any indemnity, reimbursement, letter of credit, guaranty, deposit or other agreement heretofore or hereafter executed by the Borrower with or in favor of the Lender. The term includes, without limitation, all interest, charges, expenses, Taxes, attorneys' fees and other sums chargeable to the Borrower under any of the Loan Documents. "Other Agreements" shall mean any and all agreements, instruments, documents and certificates (other than this Agreement), heretofore, now or hereafter executed by the Borrower and delivered to the Lender in respect to the transactions contemplated by this Agreement, including, without limitation, the Note and any Security Agreement or Lien agreement now existing, concurrently or hereafter executed by the Borrower to secure the Obligations. "Permitted Liens" shall mean any Lien but only to the extent such Lien is contested or disputed in good faith or for which arrangements for deferred payment have been made, provided appropriate reserves are maintained, to the satisfaction of the Lender, for the eventual payment thereof, or such Liens as Lender shall approve in writing. "Person" shall mean an individual, partnership, corporation, joint venture, association, joint stock company, trust, business trust or unincorporated organization, limited liability company, or a government or agency or political subdivision thereof. 3 4 "Projections" shall mean Borrower's forecasted (a) balance sheets, (b) profit and loss statements, and (c) cash flow statements, all prepared on a consistent basis with Borrower's historical financial statements, together with appropriate supporting details and a statement of underlying assumptions. "Property" shall mean any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Remittance Instructions" shall have the meaning given to it in Section 2.2. "Security Agreement" shall mean any instruments and agreements of any kind now or at any time hereafter securing the whole or any part of the Obligations, including but not limited to that certain Chattel Mortgage relating to the Eligible Equipment. "Solvent" shall mean, as to any Person, that such Person: (i) owns Property the fair value of which is greater than the amount required to pay all of such Person's Indebtedness (including contingent liabilities); (ii) is able to pay all of its Indebtedness as such Indebtedness matures; and (iii) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage. "Subsidiary" shall mean any corporation or limited liability company of which the Borrower owns more than 50% of its securities, provided the ownership of such securities, in the absence of contingencies, entitles the Borrower to elect a majority of the directors of such corporation or limited liability company. "Taxes" shall mean any present or future taxes, levies, imposts, duties, fees, assessments, deductions, withholdings or other charges of whatsoever nature (excluding taxes imposed on net income and all income and franchise taxes of the United States and any political subdivisions thereof on Lender), that may now or hereafter be imposed or asserted by any jurisdiction or any political subdivision thereof or any taxing authority therein and all interest, penalties or similar liabilities with respect thereto. 1.2. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP consistent with that applied in preparation of the financial statements referred to in Section 4.4 and 5.1(A), and all financial data pursuant to this Agreement shall be prepared in accordance with such principles consistently applied. 1.3. Certain Matters of Construction. The terms "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision. Any pronoun used shall be deemed to cover all genders. The section titles, table of contents and list of exhibits appear as a matter of convenience only and shall not affect the interpretation of this Agreement. All references to any instruments or agreements, including, without limitation, references to this Agreement and any of the other Loan Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof. SECTION 2. CREDIT COMMITMENT. 2.1. Loan. The Lender agrees, subject to the terms and conditions of this Agreement and the other Loan Documents, to make a Loan to the Borrower, on a date not later than May 1, 1996, in the principal amount not to exceed Eight Million Three Hundred Ninety-Three Thousand Four Hundred Twenty and 20/100ths Dollars ($8,393,420.20). The Loan will not exceed eighty-five percent (85%) of the Eligible Equipment Export Product Value associated with the Loan, and must be secured by a first priority security interest in the Eligible Equipment satisfactory to Lender in its sole discretion. Borrower 4 5 must make a cash payment of not less than fifteen percent (15%) of the Eligible Equipment Export Product value to the equipment seller. The Loan made hereunder shall be solely and exclusively in Dollars. 2.2. Notice and Manner of Borrowing. The Closing shall be on or before May 1, 1996. Not less than ten (10) Business Days (and no later than 10:00 a.m. Central Standard Time on such Business Day) in advance of the date on which the Borrower intends to borrow funds hereunder, the Borrower shall provide the Lender with written notice confirming such intent and specifying the date the Loan is to be made and the amount thereof. Not later than 4:00 p.m. Central Standard Time on the date of such Loan, provided the Borrower is not then in default under any provision of this Agreement (particularly, the conditions precedent set forth in Section 6 of this Agreement), the Lender shall make the amount of such Loan available to the Borrower in immediately available funds in accordance with remittance instructions substantially in the form of Exhibit B hereto (the "Remittance Instructions") signed by Borrower's authorized representative and acceptable to Lender set forth in such notice against receipt from the Borrower of a properly completed and executed Note (as described in Section 2.3 below). Disbursement of the Loan proceeds by the Lender shall be by bank wire transfer to an account or accounts designated in writing by an authorized officer of the Borrower no later than five (5) days before the Closing Date. Lender and Borrower agree that there will be only one borrowing under this Agreement, but such borrowing may be evidenced by two Notes. 2.3. The Note. The Loan and the Borrower's obligation to repay the Loan shall be evidenced by the Note and repayable with interest in accordance with Section 3 of this Agreement and the terms of the Note of the Borrower, payable to the order of the Lender, substantially in the form of Exhibit A hereto. In no case shall the Note be considered to constitute a payment or novation of the Loan. 2.4. Interest. The Borrower shall pay interest on the outstanding amounts loaned to the Borrower hereunder, commencing with the date specified in the Note and until such time as the entire principal balance thereof is fully repaid, at the annual interest rate specified in Section 3.1(A) hereof. 2.5. Payment. Except as the Lender may otherwise direct in writing, the Borrower agrees to make all payments directly to the Lender (or to the holder of the Note from time to time) with funds from Borrower's "external account" (as defined in the Deed of Warranty) by means of wire transfer, net of any wire transfer expenses, into Lender's Bank Account and in accordance with the terms of payment set forth in this Section 2 and the Note. All payments of principal and interest due under the Note and of any other amounts due hereunder shall be made not later than 12:00 Noon Central Standard Time on the due date thereof. Whenever any payment to be made under this Agreement or under the Note shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest. Each payment made shall also reference the Note by Borrower name and date of the Note or by the applicable Note number, if any. 2.6. Application of Payments and Collections. (A) Subject to the provisions of Section 2.6(B) below, Borrower irrevocably waives the right to direct the application of any and all payments and collections at any time or times hereafter received by Lender from or on behalf of Borrower, and Borrower does hereby irrevocably agree that Lender shall have the continuing exclusive right to apply and reapply any and all such payments and collections received at any time or times hereafter by Lender against the Obligations, in such manner as Lender may deem advisable, notwithstanding any entry by Lender upon any of its books and records. 5 6 (B) Upon or after the occurrence of an Event of Default and Lender's acceleration of the maturity of the Loan as a consequence thereof, all payments and collections received by Lender from or on behalf of Borrower for application to the Loan shall be applied in the following order: (a) to the unpaid balance of all Collection Expenses; (b) to the amount of any loss, costs, expenses or damages suffered or incurred by Lender for which Borrower has agreed to indemnify Lender pursuant to the terms of this Agreement or any of the other Loan Documents; (c) to any past due interest on the Loan, (d) to accrued but not past due interest on the Loan, (e) to the principal amount outstanding of the Loan and (f) to the amount of any other Obligations then outstanding to Lender. 2.7. Notations. Borrower hereby irrevocably authorizes Lender to make (or cause to be made) appropriate notations in its records to evidence, inter alia, the date of, the outstanding principal amount of and the interest rate applicable to, the Loan evidenced thereby. The notations in such records indicating the outstanding principal amount of the Loan evidenced thereby shall, in the absence of manifest error, be prima facie evidence of the principal amount thereof owing and unpaid, but the failure to record any such amount in such records or otherwise shall not limit or affect the obligations of Borrower hereunder or under the Note to make payment of principal of or interest on the Loan when due. 2.8. Voluntary Prepayment. The Borrower may prepay without penalty or premium the balance due under any one or more of the Note or Notes evidencing the Loan (on a Note-by-Note basis) in its entirety and not in part at any time thirteen (13) months after the Note date, provided the Borrower (i) shall give the Lender advance written notice of the intended date of prepayment, which date shall be a scheduled payment date (the "Final Payment Date"), not less than thirty (30) days in advance of that Final Payment Date, and (ii) Borrower pays all other Obligations to Lender under the Loan Documents. A notice of prepayment once given by Borrower may only be rescinded if Lender has not, in relying on such notice, undertaken obligations which might cause Lender to incur liabilities should Lender attempt to rescind such obligations. 2.9. Payment "Net Taxes". The Borrower agrees to pay all amounts owing by it under this Agreement, the Notes or the other Loan Documents free and clear of and without deduction for any present or future Taxes, and (A) that if it is prevented by operation of law from paying any Taxes, then the interest rate or fees required to be paid under this Agreement, the Notes or the other Loan Documents shall be increased by the amount necessary to yield to the Lender interest or fees at the rates specified in this Agreement, the Notes, or the Other Loan Documents after provision for the payment of all such Taxes and without taking into account any tax benefits accruing to the Lender from such payment; (B) that it shall at the request of the Lender execute and deliver to the Lender such further instruments as may be necessary or desirable to effect the increase in the interest or fees as provided for in clause (a) immediately above, including new Notes to be issued in exchange for any Notes theretofore issued; (C) that it shall indemnify and hold the Lender harmless from and against any liabilities with respect to any Taxes (whether or not properly or legally asserted); and (D) that it shall provide the Lender with the original or a certified copy of evidence of the payment of any Taxes by it, as the Lender may reasonably request, or, if no Taxes have been paid to provide to Lender, at the Lender's request, with a certificate from the appropriate taxing authority or an opinion of counsel acceptable to the Lender stating that no Taxes are payable. 6 7 If Lender shall receive a refund of any Taxes paid by the Borrower pursuant to this Section 2.9 by reason of the fact that such Taxes were not correctly or legally asserted, Lender shall within 60 days after receipt of such refund pay to the Borrower the amount of such refund, as determined solely by the Lender; provided, however, that in no event shall the amount paid by Lender to the Borrower pursuant to this sentence exceed the amount of Taxes originally paid by the Borrower; and further provided that Lender shall not have any obligation under this Agreement to claim or otherwise seek to obtain any such refund. Notwithstanding the foregoing, Lender agrees to cooperate in good faith with any written request of the Borrower to seek or obtain any such refund relating to this Agreement that cannot be obtained by the Borrower without the assistance, or direct involvement, of Lender, provided no default exits under this Agreement and provided the Borrower has agreed in advance in writing to bear the expenses relating thereto and has agreed in writing (in a form acceptable to Lender) to indemnify Lender against and hold Lender harmless for any loss, cost or expense relating thereto. 2.10. Dollar Payments. All payments required to be made hereunder, the Notes, or any of the Loan Documents shall be payable solely and exclusively in Dollars. 2.11. Obligations Unconditional. The obligations of the Borrower under this Agreement and in respect of the Loan shall be absolute and unconditional under all circumstances and irrespective of any setoff, counterclaim or defense to payment (of any type or description, whether as a result of non-compliance with any of the provisions of this Agreement, any of the agreements referred to herein or otherwise) which the Borrower may have or have had against the Lender or any other Person. 2.12. Termination of Commitment. This Commitment shall terminate on May 1, 1996 if Borrower has not met the conditions precedent to the Loan under Section 6 of this Agreement, except to the extent Lender may in its sole discretion elect to make the Loan prior to the fulfillment of any of the conditions precedent set forth in Section 6. No termination (regardless of cause or procedure) of the Commitment shall in any way affect or impair the rights, powers or privileges of Lender or the obligations, duties or liabilities of Borrower in any way relating to (i) any transaction or event occurring prior to the effective date of such termination or (ii) any of the undertakings, agreements, covenants, indemnifications, warranties or representations of Borrower contained in this Agreement or any of the other Loan Documents. All such undertakings, agreements, covenants, indemnities, warranties and representations of Borrower shall survive such termination and Lender shall retain all of its rights and remedies under this Agreement and the other Loan Documents notwithstanding such termination until all of the Obligations have been paid in full, in immediately available funds. Notwithstanding the foregoing, if no funding is made under this Agreement, Borrower shall not be bound by any of the undertakings, agreements, covenants, indemnifications, warranties or representations of Borrower contained in this Agreement or any of the other Loan Documents except to the extent that such are intended, by their nature, to survive the termination of this Agreement. SECTION 3. INTEREST, FEES AND CHARGES 3.1. Interest, Fees and Charges. (A) Interest Rates. Borrower agrees to pay interest in respect of the unpaid principal amount of the Loan from the respective date the principal amount is advanced until paid (whether at stated maturity, on acceleration, or otherwise) at a rate per annum equal to the Base Rate. Interest shall be computed on the actual number of days elapsed over a year of 360 days, and shall be payable in accordance with the terms of the Note. 7 8 (B) Late Payment Rate. Should the Borrower fail to pay, when due, any installment of principal or interest or any prepayment amount (as described above), or any other obligation as such becomes due hereunder or under the Note, the Borrower shall also pay interest on such amount equal to the Base Rate plus nine percent (9%) per annum; or, if such rate exceeds the Maximum Rate legally allowed, then at such Maximum Rate. In the event that any obligation hereunder or under the Note shall remain unpaid beyond the maturity date of the Note, the Base Rate will continue to adjust for purposes of calculating the above rate as if the maturity date of the Note had been extended. Interest payable at the Late Payment Rate shall be computed on the actual number of days elapsed over a year of 360 days, and shall be payable in accordance with the terms of the Note. (C) Maximum Interest. Regardless of any provision contained in this Agreement or any of the other Loan Documents, in no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder or under the Note and contracted for, charged or collected pursuant to the terms of this Agreement or pursuant to the Note exceed the highest rate permissible under any Applicable Law. No agreements, conditions, provisions or stipulations contained in this Agreement or any of the other Loan Documents or the exercise by Lender of the right to accelerate the payment or the maturity of all or any portion of the Obligations, or the exercise of any option whatsoever contained in any of the Loan Documents, or the prepayment by Borrower of any of the Obligations, or the occurrence of any contingency whatsoever, shall entitle Lender to charge or receive in any event, interest, or any charges, amounts or fees deemed interest by Applicable Law (such interest, charges, amounts and fees referred to herein collectively as "Interest"), exceeding the Maximum Rate and in no event shall Borrower be obligated to pay Interest exceeding such Maximum Rate, and all agreements, conditions or stipulations, if any, which may in any event or contingency whatsoever operate to bind, obligate or compel Borrower to pay Interest exceeding the Maximum Rate, shall be without binding force or effect, at law or in equity, to the extent only of the excess of Interest over such Maximum Rate. If any Interest is charged or received in excess of the Maximum Rate ("Excess"), Borrower acknowledges and stipulates that any such charge or receipt shall be the result of an accident and bona fide error, and such Excess, to the extent received, shall be applied first to reduce the principal then unpaid hereunder; then applied to reduce the other Obligations; and the balance, if any, returned to Borrower, it being the intent of the parties hereto not to enter at any time into a usurious or otherwise illegal relationship. The right to accelerate maturity of any of the Obligations does not include the right to accelerate any interest that has not otherwise accrued on the date of such acceleration, and Lender does not intend to collect any unearned interest in the event of any such acceleration. All monies paid to Lender hereunder or under any of the Loan Documents, whether at maturity or by prepayment, shall be subject to any rebate of unearned interest as and to the extent required by Applicable Law. By the execution of this Agreement, Borrower covenants that (i) the credit or return of any Excess shall constitute the acceptance by Borrower of such Excess, and (ii) Borrower shall not seek or pursue any other remedy, legal or equitable, against Lender, based in whole or in part upon contracting for, charging or receiving any Interest in excess of the Maximum Rate. For the purpose of determining whether or not any Excess has been contracted for, charged or received by Lender, all interest at any time contracted for, charged or received from Borrower in connection with this Agreement shall, to the extent permitted by Applicable Law, be amortized, prorated, allocated and spread in equal parts throughout the full term of the Obligations. Borrower and Lender shall, to the maximum extent permitted under Applicable Law, (i) characterize any non-principal payment as an expense, fee or premium rather than as Interest and (ii) exclude voluntary prepayments and the effects thereof. The provisions of this Section shall be deemed to be incorporated into every Loan Document (whether or not any provision of this Section is referred to therein). All such Loan Documents and communications relating to any Interest owed by Borrower and all figures set forth therein shall, for the sole purpose of 8 9 computing the extent of Obligations, be automatically recomputed by Borrower, and by any court considering the same, to give effect to the adjustments or credits required by this Section. SECTION 4. REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants the following to the Lender as of the date hereof and for the entire term of this Agreement: 4.1. Corporate Existence. The Borrower is a limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of formation, and is duly licensed or qualified to transact business in all jurisdictions where the character of the property owned or leased or the nature of the business transacted by it makes such licensing or qualification necessary. 4.2. Authorization of Borrowing; No Conflict as to Applicable Law or Agreements. The Borrower has the right and power and is duly authorized and empowered to enter into, execute, deliver and perform all of its obligations under this Agreement and each of the other Loan Documents to which it is a party, to conduct its business as presently conducted and to own, operate and lease its Property. The execution, delivery and performance by the Borrower of this Agreement and each of the other Loan Documents and the borrowing hereunder, have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the stockholders of the Borrower, or any authorization, consent or approval by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign (except those set forth in Exhibit C, each of which has been given or obtained and is in full force and effect on the date hereof), (ii) violate any provision of any Applicable Law, rule or regulation or of any order, writ, injunction or decree presently in effect having applicability to the Borrower or of the charter or bylaws of the Borrower, (iii) result in a breach of or constitute a default under any indenture or loan or credit agreement (including, without limitation, any such agreements in effect as of the date hereof between the Borrower and any Bank) or any other material agreement, lease or instrument to which the Borrower is a party or by which it or its Property may be bound or affected (except for those with Persons who have consented thereto), or (iv) result in, or require, the creation or imposition of any Lien (other than the Lien granted to Lender by the Security Agreement) upon or with respect to any of the Properties now owned or hereafter acquired by the Borrower. 4.3. Legal Agreements. This Agreement is, and each of the other Loan Documents when delivered under this Agreement will be, a legal, valid and binding obligation of the Borrower enforceable against it in accordance with their respective terms, except as enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally and by the effect of general principles of equity. 4.4. Financial Condition. The Borrower has heretofore furnished the following financial statements to Lender: The annual audited consolidated financial statements of the Borrower as of the close of the Fiscal Years set forth on Exhibit C, and unaudited interim financial statements (which may, but need not, contain footnotes) for the interim periods set forth on Exhibit C hereto. Such financial statements present fairly in all material respects the financial condition of the Borrower on the dates thereof and the results of its operations for the periods then ended, and were prepared in accordance with GAAP, subject, in the case of interim statements (which may, but need not, contain footnotes), only to changes from audit and year-end adjustments. There are no liabilities of the Borrower or any Subsidiary of the Borrower, fixed or contingent, which are material and are not reflected in the financial statements or the notes thereto, other than liabilities arising in the 9 10 ordinary course of business since the date of the last financial statement referred to hereinabove. 4.5. Accuracy of Information. The financial statements referred to in paragraph 4.4 do not, nor does any other written statement furnished by the Borrower in connection with this Agreement, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained herein or therein not misleading. All information supplied to Lender by or on behalf of the Borrower with respect to the assets or any other Property of the Borrower or its Subsidiaries (whether prior to the date of this Agreement, as part of this Agreement, or after the date of this Agreement) is and shall be true and correct in all material respects. 4.6. Adverse Change. Except as otherwise disclosed to Lender in writing in connection with this Agreement, there has been no change in the business, assets, liabilities, business prospects, Property or condition (financial or otherwise) of the Borrower which could reasonably be expected to have a Material Adverse Effect on the business, Property or financial condition of the Borrower since the date of the latest financial statement referred to in Section 4.4. 4.7. Adverse Fact. Other than general economic conditions, no fact is known to the Borrower, as of the date hereof, which has had or can reasonably be expected in the future to have a Material Adverse Effect which has not been previously disclosed to Lender by the Borrower in writing. 4.8. Solvent Financial Condition. The Borrower is now, and after giving effect to the Loan to be made under this Agreement, will be, Solvent. 4.9. Operation of Business. The Borrower and each Subsidiary and Affiliate of the Borrower possesses all licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights thereto, free from unduly burdensome restrictions and adequate for the conduct in all material respects of their respective businesses substantially as now conducted and as presently proposed to be conducted, and to the best knowledge of the Borrower, the Borrower and each Subsidiary is not in violation of any valid rights of others with respect to any of the foregoing. During the five (5) year period immediately preceding the date of this Agreement, Borrower has had no principal office or principal place of business located in any political or administration region or district other than as set forth in Exhibit D. 4.10. Title to Property. The Borrower has good, valid and marketable title to all its material Property and assets, both real and personal (except for such material property as has been sold or otherwise disposed of in the ordinary course of business since the date hereof), and has appropriate rights to lease any Property leased by it. 4.11. Absence of Liens Other Than Permitted Liens. The Eligible Equipment is not and will not be subject to any Lien or the terms of any security agreement during the term hereof, other than Permitted Liens. 4.12. Subsidiaries, Affiliates, and Ownership of Stock. Set forth in Exhibit E hereto is a complete and accurate list of the Subsidiaries and Affiliates of the Borrower, showing (i) the correct name of each of the Subsidiaries of the Borrower, the jurisdiction of incorporation or formation and the percentage of its voting stock owned by the Borrower; (ii) the name of each of the Borrower's corporate or joint venture Affiliates and the nature of the affiliation; (iii) the number, nature and holder of all outstanding securities of the Borrower and each Subsidiary of the Borrower; and (iv) the number of authorized, issued and treasury shares of the Borrower and each Subsidiary of the Borrower. All of the outstanding capital stock of each Subsidiary has been validly issued, is fully paid and nonassessable. If the Borrower has any Subsidiary or Subsidiaries, the Borrower represents and warrants that it has good title to all of the shares it purports to own of the 10 11 securities of each Subsidiary, free and clear in each case of any Lien other than Liens that have been disclosed to Lender in writing. 4.13. Stamp, Duty, Documentary and Withholding Taxes. Borrower has paid or shall pay when due all stamp, duty or documentary taxes or charges imposed by the government of the Republic of Ghana or any taxing authority thereof or therein that are payable on or in connection with this Agreement, the Notes, the Loan Documents or any related documents. Borrower has paid or shall pay when due all applicable deductions or withholdings for or on account of any Taxes, levies, duties, fees, deductions or withholding, restrictions or conditions of any nature imposed by or on behalf of the government of the Republic of Ghana or any taxing authority whatsoever on the payments by the Borrower to the Lender of the Loan hereunder. 4.14. Corporate Names. During the preceding five (5) years, Borrower has not been known as or used any corporate, fictitious or trade names except as disclosed on Exhibit F hereto. Except as set forth on Exhibit F, Borrower has not, during the preceding five (5) years, been the surviving corporation or limited liability company of a merger or consolidation or acquired all or substantially all of the assets of any Person. 4.15. Business Locations. The principal place of business and main executive office of the Borrower and other current business locations (including leased locations) are set forth on Exhibit D hereto. 4.16. Leases. A complete listing of all leases of the Borrower as "lessee" thereunder in excess of $250,000 is set forth in Exhibit G. 4.17. Debt. Set forth in Exhibit H hereto is a complete, accurate and correct list of all credit agreements, indentures, purchase agreements, guarantees, surety agreements, capitalized leases, and other investments, agreements, and arrangements presently in effect providing for or relating to extensions of credit (including agreements and arrangements for the issuance of letters of credit or for acceptance financing) in respect of which the Borrower or any Subsidiary is in any manner directly or contingently obligated for an amount greater than $1,000,000; provided, however, that the Borrower shall have no obligation to report on Exhibit H purchase agreements regarding the sale of goods produced in the Borrower's operations entered into in the ordinary course of business of the Borrower. The maximum principal or face amounts of the credit in question which are outstanding and which can be outstanding are correctly stated, and all mortgages, deeds of trust, pledges, Liens, security interests, or other charges or encumbrances of any nature given or agreed to be given as security therefor are correctly described or indicated in such exhibit. The Borrower is not obligated as surety or indemnitor under any surety or similar bond or other contract and has not issued or entered into any agreement to assure payment, performance or completion of performance of any undertaking or obligation of any other Person. Borrower has no debt or other lien or obligation in favor of any Affiliated or stockholder of Borrower that has payment rights superior to those of Lender hereunder or under the Note. 4.18. Compliance with Applicable Laws and Regulations; Governmental Consents. The Borrower, in the conduct of all of its business affairs, has complied in all material respects with the requirements of all Applicable Laws and regulations as in effect at the relevant time noncompliance with which would have a Material Adverse Effect. Except as set forth in Exhibit I, there have been no citations, notices or orders of noncompliance (that have not been complied with or withdrawn), issued to the Borrower under any Applicable Law which would have a Material Adverse Effect. Except as set forth in Exhibit I, the Borrower has, and is in good standing with respect to, all governmental consents, approvals, authorizations, permits, certificates, inspections, and franchises necessary to continue and to conduct in all material respects its business as heretofore 11 12 conducted (or proposed to be conducted) by it and to own or lease and operate in all material respects its Properties as now owned or leased by it. 4.19. Taxes. The Borrower and its Subsidiaries each has filed all federal, state and local (or the relevant equivalent) tax returns and other reports it is required by law to file and has paid, or made provision for the payment of, all taxes, assessments, fees and other governmental charges that are reflected on such returns except and to the extent only that such taxes, assessments, fees and charges are being actively contested in good faith and by appropriate proceedings and the Borrower or Subsidiary has established adequate reserves on its books therefor. The provision for taxes on the books of the Borrower and each Subsidiary are, insofar as known to the Borrower, adequate for all years not closed by applicable statutes and for its current fiscal year. Except as disclosed in the financial statements furnished to Lender in accordance with Section 4.4, the Borrower knows of no proposed material tax assessment against it or any of its Subsidiaries and no extension of time for the assessment of federal, state or local taxes of the Borrower or any of its Subsidiaries is in effect or has been required. 4.20. Litigation. Except as set forth in Exhibit J, there are no actions, suits or proceedings pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary or the Property of the Borrower or any Subsidiary before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which, if determined adversely to the Borrower or any Subsidiary (as the case may be), would have a Material Adverse Effect. 4.21. No Defaults on Outstanding Judgments or Orders. The Borrower has satisfied all judgments, and is not in default with respect to any judgment, writ, injunction, decree, rule, or regulation of any court, arbitrator, or federal, state, municipal, or other governmental authority, commission, board, bureau, agency, or instrumentality, domestic or foreign, unless the failure to cure such default would not have a Material Adverse Effect. 4.22. Labor Disputes; Acts of God. Except as set forth in Exhibit K, neither the Borrower nor any of its Subsidiaries is a party to any collective bargaining agreement and there are no material grievances, disputes or controversies with any union or any other organization of the Borrower's employees, or threats of strikes, work stoppages or any asserted pending demands for collective bargaining by any union or organization. Neither the business nor the Property of the Borrower or any Subsidiary are affected by any fire, explosion, accident, drought, storm, hail, earthquake, volcanic eruption, embargo, act of God or of the public enemy, or other casualty (whether or not covered by insurance) which would have a Material Adverse Effect. 4.23. Surety Obligations. Except as set forth in Exhibit H, the Borrower is not obligated as surety or indemnitor under any surety or similar bond or other contract and has not issued or entered into any agreement to assure payment, performance or completion of performance of any undertaking or obligation of any other Person. 4.24. Other Agreements. The Borrower and each Subsidiary of the Borrower is not in default in any material respect under any indenture, loan, or credit agreement, or under any lease or other agreement or instrument to which it is a party, or any term of its charter or bylaws or in the performance, observance, or fulfillment of any of the obligations, covenants, or conditions contained in any agreement or instrument material to its business to which it is a party. No event has occurred and no condition exists which, upon consummation of the transactions contemplated by this Agreement, would constitute a default under any note or other evidence of indebtedness of the Borrower or a Default or an Event of Default. 12 13 4.25. No Exchange Approvals. There are no exchange approvals required for the execution of the Agreement, the Notes, or the Loan Documents and the Borrower will be permitted to purchase sufficient freely transferable Dollars for the payment of all amounts due under such agreements and documents, or to the extent any such approvals are required Borrower has obtained them. 4.26. Civil Acts; No Immunity. The Borrower is subject to civil and commercial law with respect to its obligations under this Agreement. The execution, delivery and performance of this Agreement by the Borrower constitute a commercial act as opposed to a governmental act. The Borrower (and its Property) does not enjoy, in the courts or under the laws of the Republic of Ghana any right of immunity from suit, setoff or attachment or execution on a judgment in respect of the obligations of the Borrower under this Agreement. 4.27. Legal Form of Agreement. The Loan Documents are in proper legal form under the laws of the Republic of Ghana for the enforcement thereof against the Borrower under the laws of the Republic of Ghana; and to ensure the legality, validity, enforceability or admissibility in evidence of the Loan Documents, it is not necessary that any of the Loan Documents be filed or recorded with any court or other authority in the Republic of Ghana, other than the requirement that relevant Loan Documents (including the Security Agreement) be stamped by the appropriate governmental authority and that the Security Agreement be registered with the Registrar of Companies. 4.28. Deed of Warranty. The Deed of Warranty remains in full force and effect and no amendment to or modification thereto has been made. SECTION 5. COVENANTS AND CONTINUING AGREEMENTS 5.1. Affirmative Covenants. The Borrower covenants that from the date hereof, and for so long as any amounts owed by the Borrower to the Lender hereunder or under any of the other Loan Documents shall remain unpaid, and unless otherwise consented to by Lender in writing: (A) Financial Statements; Other Information. The Borrower will deliver to Lender: (i) Annual Statements. As soon as available, and in any event within one hundred twenty (120) days after the end of each Fiscal Year of the Borrower, a copy of the unqualified (except for a qualification for a change in accounting principles with which the independent public accountant concurs) audited financial statements of the Borrower as of the end of such year, certified by a firm of independent certified public accountants of recognized international standing or otherwise acceptable to Lender. (ii) Semi-Annual Statements. As soon as available and in any event within ninety (90) days after the end of each semi-annual period of each Fiscal Year of the Borrower, unaudited interim financial statements of the Borrower as of the end of such semi-annual period and of the portion of the Borrower's Fiscal Year then elapsed, certified by the principal financial officer of the Borrower as prepared consistently with the Borrower's prior practices and fairly presenting, in all material respects, the financial position and results of operations of the Borrower for such period subject only to changes from audit and year-end adjustments and except that such statements need not contain notes. (iii) Generally Accepted Accounting Principles. The annual audit reports and the semi-annual financial statements referred to in (i) and (ii), above, shall be prepared in reasonable detail and in accordance with GAAP applied on a basis consistent with the accounting practices reflected in the annual financial statements referred to in Section 4.4 (subject only, in the case of the semi-annual statements, to changes from audit and year-end adjustments and except that such semi-annual statements need not contain 13 14 notes); and accompanied by a certificate of the chief financial officer of the Borrower stating (i) that such audit report and financial statement have been prepared in accordance with GAAP applied on a basis consistent with the accounting practices reflected in the annual financial statements referred to in Section 4.4, and (ii) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the Borrower is in compliance with the requirements set forth in Section 5.1(L) of this Agreement. (iv) Accountants' Reports. Promptly upon receipt thereof, a copy of the accountants' letter to Borrower's management that is prepared in connection with such financial statements; and, if the shares of Borrower are publicly traded at any time during the term of this Agreement, copies of all such financial statements and reports as the Borrower shall send to its stockholders (as stockholders) and of all registration statements and all regular or periodic reports which the Borrower shall file, or may be required to file, with any national or state securities commission. (v) Projections. As soon as available, and in any event no later than thirty (30) days after the last day of each fiscal year of the Borrower, Projections of the Borrower for the forthcoming fiscal year, month by month. (vi) Notice of Litigation. Promptly after the commencement thereof, notice in writing of all litigation and of all administrative proceedings before any state or federal court or any governmental or regulatory agency, bureau or commission affecting the Borrower or any Subsidiary or any of its Properties or the Property of any Subsidiary, whether or not the claim is considered by the Borrower to be covered by insurance, which may have a Material Adverse Effect or which seek a monetary recovery against the Borrower in excess of $1,000,000, along with, if requested in writing by Lender, an opinion of the Borrower's counsel regarding the circumstances underlying and merit of such litigation or proceedings. (vii) Notice of Change in Ownership. Promptly upon the occurrence thereof, a written notice of a change in ten percent (10%), in one transaction or a series of transactions, in the ownership of the Borrower or any Subsidiary. (viii) Notice of Claimed Default Under Other Agreements. Promptly after learning of any material default by Borrower under any note, indenture, loan agreement, mortgage, lease, deed, guaranty or other similar agreement relating to any Indebtedness of the Borrower with an outstanding principal balance in excess of $1,000,000, a written notice specifying the notice given or action taken by the holder of such Indebtedness, as the case may be, and the nature of the claimed default and what action the Borrower is taking or proposes to take with respect thereto. (ix) Notice of Default by Debtor of the Borrower. Promptly after the occurrence of any default by any obligor under any note or other evidence of Indebtedness payable to the Borrower in an amount exceeding $2,000,000, a written notice thereof to Lender. (x) Notice of Change in Credit Rating. Promptly upon becoming aware thereof, a written notice of any adverse change in, or downgrading of, any credit rating given the Borrower in connection with any outstanding debt obligations of the Borrower. (xi) Notice of Regulatory Action. Promptly upon becoming aware of any action or proceeding instituted by any national, district or other regulatory agency which might materially and adversely affect the ability of the Borrower to perform its obligations under this Agreement or otherwise with respect to the Loan, a written notice describing such action or proceeding and the status thereof. 14 15 (xii) Notice of Labor Dispute. Promptly after Borrower's learning of any labor dispute to which the Borrower may become a party, any strikes or walkouts relating to any of its plants or their facilities, or the expiration of any labor contract to which it is a party or by which it is bound, a written notice describing any such strike, walkout or condition which may have a Material Adverse Effect, and the status thereof. (xiii) Quarterly Covenant Compliance Report. As promptly as practicable (but in any event not later than fifteen (15) Business Days) following the end of each calendar quarter, a Covenant Compliance Report, substantially in the form of Exhibit L, stating: (i) whether the Borrower was in compliance during and at the end of the calendar quarter with respect to each of the covenants of the Borrower specified in this Agreement, (ii) which covenant(s), if any, the Borrower failed to comply with and the period(s) during which the Borrower was not in compliance, and (iii) for any covenant for which the Borrower is not in compliance, the steps being taken to correct such noncompliance (including periodic notice to Lender as to the Borrower's progress in such regard). If the Borrower identifies any covenant for which it is not in compliance, and as the Borrower reports to Lender on the correction of the noncompliance, the Borrower shall also provide Lender with sufficient documentation to permit Lender to understand the nature of the noncompliance and the progress toward correcting same. The Covenant Compliance Report shall be signed by the chief executive officer or chief financial officer of the Borrower. Lender's receipt of any report or other information identifying noncompliance by the Borrower or failure to respond thereto, shall not act as a waiver of Lender's rights under this Agreement or Lender's rights hereunder with respect to such noncompliance or any other event of noncompliance. (xiv) Requested Information. From time to time and promptly upon the request of Lender, such data, certificates, reports, statements, opinions of counsel and other experts, documents or further information or assurances bearing upon or related to this Agreement, or the business, assets, liabilities, financial condition, results of operations, or business prospects of the Borrower as Lender may reasonably request (including, without limitation, federal income tax returns of the Borrower, accounts payable ledgers, and bank statements), in each case in form and substance, and certified in a manner, satisfactory to Lender. (B) Compliance with Applicable Laws and Regulations; Payment of Taxes and Claims. The Borrower shall comply and cause each Subsidiary to comply with all Applicable Laws, rules, regulations and orders including, without limitation, all laws, statutes, regulations and ordinances regarding the collection, payment and deposit of employees' income, unemployment, social security, sales and excise taxes, other Taxes, which failure to comply with might have a Material Adverse Effect, and shall also comply in all material respects with, perform and observe and cause each Subsidiary to comply in all material respects with, perform and observe, all material covenants, provisions and conditions in connection with all other loan or credit agreements to which it or any such Subsidiary is a party. The Borrower shall timely file, and cause each Subsidiary to file, all national, district and local tax returns or extensions and other reports the Borrower or such Subsidiary is required by law to file, and maintain, and cause each Subsidiary to maintain, adequate reserves for the payment of all taxes, assessments, governmental charges, and levies imposed upon it, its income, or its profits, or upon any Property belonging to it. The Borrower shall pay and discharge, and cause each Subsidiary to pay and discharge, all taxes, assessments and governmental charges upon it, its income and Properties as and when such taxes, assessments and charges are due and payable, except and to the extent only that such taxes, assessments and charges are being actively contested in good faith and by appropriate proceedings, the Borrower promptly notifies Lender in writing of such contest, the Borrower (or such Subsidiary) maintains adequate reserves on its books therefor and the nonpayment of such taxes, assessments and charges does not result in a Lien upon any Properties of the 15 16 Borrower (or such Subsidiary) other than a Permitted Lien. The Borrower shall also pay and discharge any lawful claims which, if unpaid, might become a Lien against any of the Eligible Equipment except for Permitted Liens. (C) Responsibility for Loss or Damage and Insurance. The Borrower and each Subsidiary of the Borrower shall obtain and maintain general corporate insurance with insurers believed by the Borrower and each such Subsidiary to be responsible and reputable and reasonably acceptable to Lender, in such amounts and against such risks as is usually carried by companies engaged in similar business and owning similar Property in the same general areas in which the Borrower and each Subsidiary operates or as may be required by any Applicable Laws, orders or regulations or as may reasonably be requested by Lender. Upon the written request of Lender, the Borrower and each Subsidiary shall promptly, and in all events within ten (10) days of the date on which the Borrower receives such request, provide Lender with evidence of the insurance coverage required under this Section. Additionally, the Borrower and each Subsidiary and Affiliate of the Borrower shall provide not less than thirty (30) days advance written notification to Lender in the event of cancellation or material change in the terms of such coverage. Borrower shall be responsible for and bear the risk of any loss or damage to the Eligible Equipment financed howsoever caused. Borrower shall at its expense insure the Eligible Equipment in any Security Agreement against all risks of physical loss for its full insurable value. All such insurance shall be with such insurance companies and under such policies and in such form as are satisfactory to Lender. Such insurance shall be primary, without right of contribution from any insurance carried by Lender, and shall provide that it may not be canceled or altered so as to affect the interest of Lender without at least thirty (30) days prior written notice to Lender. All such insurance covering loss or damage to Eligible Equipment shall name Lender (or its designee) as sole loss payee. Deductibles on such insurance shall not exceed U.S. $50,000 per occurrence. Borrower shall furnish Lender with satisfactory evidence of such insurance. Borrower shall promptly notify Lender of any loss or damage to the Equipment and of any claim relating thereto. Borrower shall not agree to any settlement relating to the Eligible Equipment with insurers without Lender's prior written consent. Borrower hereby irrevocably appoints Lender as Borrower's attorney-in-fact to endorse all drafts or checks payable to Borrower, and to file claims and to take all other actions necessary to collect any proceeds of such insurance. (D) Preservation of Corporate Existence. The Borrower and each Subsidiary shall preserve and maintain its corporate existence and obtain and keep in force any and all rights, privileges, licenses, permits, patents, franchises, or other governmental authorizations necessary to the ownership of its Properties or to the conduct of its business; provided, however, that the Borrower or any Subsidiary shall not be required to preserve any such rights, privileges, licenses, permits, patents, and franchises or, in the case of any Subsidiary, its corporate existence, if (i) its Board of Directors shall determine that the preservation thereof is no longer desirable or necessary in the conduct of the current business of the Borrower or such Subsidiary and (ii) the loss thereof is not disadvantageous in any material respect to the Lender or any subsequent holder of the Loan and would not have a Material Adverse Effect. (E) Inspection. At any reasonable time and from time to time upon prior notice to the Borrower, the Lender or any agents or representatives thereof (at Borrower's expense) shall be allowed to examine and make and prepare copies of and abstracts from the records and books of account of, and visit and inspect the Property of, the Borrower and each Subsidiary and to discuss the affairs, finances and accounts of the Borrower with the Managing Director, Chief Financial Officer or Chairman of the Borrower, and any other officer of the Borrower who shall be designated by Borrower. 16 17 (F) Maintenance of Property, Etc. The Borrower and each Subsidiary shall maintain and preserve all of its Property necessary in the proper conduct of its current business in good working order and condition, ordinary wear and tear excepted. (G) Maintenance of Records and Books of Account. The Borrower shall keep and cause each Subsidiary to keep accurate records and books of account; financial information shall be recorded and maintained in accordance with GAAP consistently applied. (H) Discharge of Indebtedness. The Borrower and each Subsidiary of the Borrower shall promptly pay and discharge any and all Indebtedness and lawful claims which, if unpaid, might become a Lien or charge upon the Eligible Equipment, except Permitted Liens. (I) Application of Proceeds of the Loan. The Borrower shall use the proceeds only as specified in the Remittance Instructions. (J) Uninsured Loss. Borrower shall give Lender written notice of any uninsured loss suffered by the Borrower or any Subsidiary through fire, theft, judgment, liability or property damage in excess of $100,000. (K) Further Assurances. At Lender's request, Borrower shall promptly execute or cause to be executed and deliver to Lender any and all documents, instruments and agreements prepared at Lender's expense and reasonably deemed necessary by Lender to give effect to or carry out the terms or intent of this Agreement or any of the other Loan Documents. (L) Financial Covenants. Following any funding under the Note, and for so long as any amounts owed by the Borrower to the Lender hereunder or under any of the other Loan Documents shall remain unpaid: (i) Borrower shall maintain a ratio of Indebtedness to Net Worth of not more than 1.8 to 1.0; (ii) Borrower shall maintain a current ratio of not less than 1.0; and (iii) Borrower shall maintain a minimum Net Worth of $45,000,000. 5.2. Negative Covenants. The Borrower covenants that from the date hereof, and for so long as any amounts owed by the Borrower to the Lender hereunder or under any of the other Loan Documents shall remain unpaid, and unless otherwise consented to by Lender in writing, the Borrower shall not: (A) Sale or Disposition of Assets. Sell, transfer, convey, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to any Person. (B) Mergers; Consolidations; Acquisitions. Merge or consolidate, or permit any Subsidiary to merge or consolidate, with any Person, or acquire all or any substantial part of the Properties of any Person. (C) Restrictions on Nature of Business. Engage in any line of business materially different from that presently engaged in by the Borrower. (D) Liens and Encumbrances. Create, incur or suffer to exist, or permit any Subsidiary to create, incur or suffer to exist, any Lien upon any of the Eligible Equipment, except Permitted Liens. (E) Loans. Make any loans or other advances of money (other than for salary, travel advances, ordinary moving expenses, housing loans, advances against commissions and other advances to employees in the ordinary course of 17 18 business or as provided for in the Borrower's collective bargaining agreement with, or conditions of service for, its employees or senior officers as such collective bargaining agreement may be amended or modified, and, in the case of senior officers under the conditions of service, consistent with past practice) to any Person, including, without limitation, any of the Borrower's Affiliates, officers or employees. (F) Affiliate Transactions; Affiliate Indebtedness. Except as provided in Section 5.2(E) or 5.2(I) hereof, enter into, or be a party to any transaction with any Affiliate or stockholder, except in the ordinary course of and pursuant to the reasonable requirements of the Borrower's business and upon fair and reasonable terms which are no less favorable to the Borrower than the Borrower could obtain in a comparable arm's length transaction with a Person not an Affiliate or stockholder of the Borrower. Without limiting the generality of the foregoing, Borrower shall not incur any debt or other obligation to any Affiliated or stockholder that ranks in priority above that of Lender evidenced by the Note. (G) Partnerships or Joint Ventures. Become or agree to become a general or limited partner in any general or limited partnership or a joint venturer in any joint venture; provided, however, that the Borrower shall have the right to become a partner or joint venturer (i) in connection with its mining activities and (ii) in connection with the conducting of exploration, development and/or exploitation activities carried on to locate, assess and/or exploit mineral deposits within the Republic of Ghana, so long as, in each such case, the Borrower obtains insurance coverage relating to such partnership or venture of a type and in amounts as described in Section 5.1(C) of this Agreement. (H) Adverse Transactions. Permit or agree to any material extension, compromise or settlement of any Account, loan or other agreement with a principal amount outstanding of $1,000,000.00 or more. (I) Guaranties. Guarantee, assume, endorse or otherwise, in any way, become directly or contingently liable with respect to the Indebtedness of any Person except (i) by endorsement of instruments or items of payment for deposit or collection, (ii) agreements to repurchase accounts or chattel paper that have been discounted, sold or otherwise assigned in the ordinary course of the Borrower's business or (iii) as otherwise approved by Lender. (J) Subsidiaries. Hereafter acquire or create any Subsidiary or divest itself of any material assets by transferring them to any Subsidiary. (K) Business Locations. Transfer its principal place of business or chief executive office except upon at least sixty (60) days prior written notice to Lender. (L) Location of Eligible Equipment. Transfer or remove the Eligible Equipment from the Republic of Ghana. (M) Name of the Borrower. Use any corporate name (other than its own) or any fictitious name or "d/b/a" except for the names disclosed in Exhibit F. (N) Fiscal Year. Change its fiscal year. (O) Tax Consolidation. File or consent to the filing of any consolidated income tax return with any Person other than one or more parent entities of the Borrower. SECTION 6. CONDITIONS PRECEDENT Notwithstanding any other provision of this Agreement or any of the other Loan Documents, and without affecting in any manner the rights of Lender under 18 19 the other Sections of this Agreement, it is understood and agreed that the Commitment shall not be binding upon Lender and Lender shall not be obligated to make a Loan under Section 2 of this Agreement unless and until each of the following conditions has been and continues to be satisfied, all in form and substance satisfactory to Lender and its counsel: 6.1. Documentation. Lender shall have received the following documents, each to be in form and substance satisfactory to Lender and its counsel: (A) Evidence of Borrower's insurance specified in Section 5.1.C; (B) Copies of all filing receipts, registrations or acknowledgments issued by any governmental authority to evidence satisfactorily to Lender any filing or recordation necessary to perfect the Liens of Lender under the Security Agreement and other Loan Documents, and evidence in a form acceptable to Lender that such Liens constitute valid and perfected security interests and Liens, having a first priority in favor of Lender, or the Lien priority specified in such Security Agreement or other Loan Document; (C) A certified copy of the resolutions of the Board of Directors of the Borrower or other equivalent corporate proceedings evidencing approval of this Agreement, the other Loan Documents and all other matters contemplated hereby or related hereto; (D) Copies of the charter and bylaws or similar corporate documents of the Borrower, certified by an authorized officer of the Borrower as being true and correct copies thereof; (E) A certificate of an authorized officer of the Borrower, which shall certify the names of the officers of the Borrower authorized to execute and deliver this Agreement and the other Loan Documents to be delivered pursuant to this Agreement by the Borrower or any of its officers, together with the true signatures of such officers. The Lender may conclusively rely on such certificate until the Lender shall receive a further certificate of an authorized officer of the Borrower canceling or amending the prior certificate and submitting the signatures of the officers named in such further certificate; (F) A Tax Clearance Certificate with respect to the Borrower issued as of a recent date issued by the appropriate taxing authority of the Republic of Ghana; (G) A closing certificate signed by the President and Chief Financial Officer of Borrower dated as of the Closing Date, stating that (i) the representations and warranties set forth in Section 4 hereof are true and correct in all material respects on and as of such date, (ii) Borrower is on such date in compliance in all material respects with all the terms and provisions set forth in this Agreement and (iii) on such date no Default or Event of Default has occurred or is continuing; (H) The Other Agreements, including but not limited to any Security Agreement, duly executed and delivered by Borrower; (I) The favorable, written opinion of counsel to Borrower, as to the transactions contemplated by this Agreement and any of the other Loan Documents, to be in form and scope satisfactory to Lender and its counsel substantially in the form of Exhibit M; (J) Written instructions from Borrower directing the application of proceeds of the Loan made pursuant to this Agreement; (K) The Note, properly executed on behalf of the Borrower and substantially in the form of Exhibit A hereto; 19 20 (L) Lender shall have received from the Borrower satisfactory evidence that it has received the appropriate governmental exchange control authorization for the transactions contemplated hereby or an opinion of the Borrower's counsel that no such authorization is required; (M) Certified copies and certified English translations of all necessary governmental authorizations and approvals with respect to the Loan Documents; (N) Any of the conditions specified in the Commitment Letter which are not expressly listed herein (so long as such conditions are not specifically inconsistent with the requirements of this Agreement, in which case this Agreement shall prevail); (O) Evidence satisfactory to Lender that this Agreement has been registered in accordance with Ghana law; (P) Evidence satisfactory to Lender that Borrower has paid all stamp duty that is payable prior to the registration of this Agreement with the government of the Republic of Ghana; and (Q) Such other documents, instruments and agreements as Lender shall reasonably request in connection with the foregoing matters. 6.2. Other Conditions. The following conditions have been and shall continue to be satisfied up to and through the Closing and any funding hereunder, to the satisfaction of Lender: (A) No Default or Event of Default shall exist; (B) Lender shall have received all fees set forth in the Commitment Letter from Borrower; (C) Each of the conditions precedent set forth in the other Loan Documents shall have been satisfied; (D) Since the date of the last financial statements referred to in Section 4.4, there shall not have occurred any material adverse change in the business, financial condition or results of operations of Borrower, or the existence or value of any collateral, or any event, condition or state of facts which would reasonably be expected to have a Material Adverse Effect; (E) No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain or prohibit, or to obtain damages from any Person in respect of, the consummation of the transactions contemplated hereby or which, in Lender's sole discretion, would make it inadvisable to consummate the transactions contemplated by this Agreement or any of the other Loan Documents; (F) The representations and warranties of Borrower set forth herein and other Loan Documents are and shall remain true, correct and complete in all material respects. SECTION 7. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT 7.1. Events of Default. An "Event of Default" shall exist if any of the following shall occur and be continuing, whatever the reason for such event or condition and whether it shall be voluntary or involuntary, or within or without the control of the Borrower or any Subsidiary, or be effected by operation of law or pursuant to any order or judgment of a court or otherwise: 20 21 (A) the Borrower shall fail to pay any portion of the principal or interest with respect to the Note or of any amount under the Loan Documents or the Obligations when due; or (B) any representation, warranty or other statement made by or on behalf of the Borrower in this Agreement, or by or on behalf of the Borrower in any other Loan Document shall prove false or misleading in any material respect; or (C) the Borrower shall fail or neglect to perform, keep or observe any covenant contained in this Agreement or other Loan Document (other than a covenant a default the performance or observance of which is dealt with specifically elsewhere in this Section 7.1); or (D) there shall occur any default on the part of Borrower (including specifically, but without limitation, due to nonpayment) under any other Loan Document, agreement, document, or instrument to which Borrower and Lender are parties; or (E) the Borrower shall fail to make any payment due on any Indebtedness or other security with a principal amount of $1,000,000 or more or any event shall occur (other than the mere passage of time) or any condition shall exist in respect of any such Indebtedness or other security of the Borrower, or under any agreement securing or relating to such Indebtedness or other security, the effect of which is (i) to cause (or permit any holder of such Indebtedness or other Security or a trustee to cause) such Indebtedness or other Security, or a portion thereof, to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, or (ii) to permit a trustee or the holder of any security (other than common stock of the Borrower) to elect a majority of the directors on the Board of Directors of the Borrower; or (F) a custodian, receiver, liquidator or trustee of the Borrower, or of any of its Property, shall be appointed by court order and such order shall remain in effect for more than ninety (90) days; or an order for relief in respect of the Borrower shall be entered under any bankruptcy laws, as now or hereafter constituted; or any of its Property shall be sequestered by court order and such order shall remain in effect for more than ninety (90) days; or a petition shall be filed against the Borrower under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, and shall not be dismissed within ninety (90) days after such filing; or (G) the Borrower shall file a petition in voluntary bankruptcy or seeking relief under any provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, or shall consent to the filing of any petition against it under any such law; or (H) the Borrower shall make a general assignment for the benefit of its creditors, or shall admit in writing its inability to pay its debts generally as they become due, or shall consent to the appointment of a custodian, receiver, trustee or liquidator of the Borrower or of all or a substantial part of its Property; or (I) an adverse change with respect to the financial condition of the Borrower which results, in the good faith credit judgement of the Lender, in a material impairment of the prospect of repayment of the Loan or in Borrower's performance under the Loan Documents; or (J) the Borrower or any Subsidiary of the Borrower suffers a final judgment against it which, within sixty (60) days from the date such judgment is entered, shall not have been discharged or execution thereof stayed pending appeal unless (i) such judgment in the reasonable opinion of the Lender is 21 22 adequately covered by insurance; or (ii) adequate accruals with respect to such judgment have been established in accordance with GAAP and the aggregate amount of all such judgments at any time during the term hereof, not adequately covered by insurance is not at any time in excess of $200,000; or (K) a sale, hypothecation or other disposition of twenty percent (20%) or more of the beneficial interest in any class of voting stock of the Borrower without the prior written consent of Lender; or (L) there shall occur a cessation of a substantial part of the business of the Borrower for a period which significantly affects the Borrower's capacity to continue its business on a profitable basis; or the Borrower shall suffer the loss or revocation of any license or permit now held or hereafter acquired by the Borrower which is necessary to the continued lawful operation of its business and such loss or revocation shall have a Material Adverse Effect; or the Borrower shall be enjoined, restrained or in any way prevented by court, governmental or administrative order from conducting all or any material part of its business affairs; or any lease or agreement pursuant to which the Borrower leases, uses or occupies any Property shall be canceled or terminated prior to the expiration of its stated term and such termination shall have a Material Adverse Effect; or any material part of the Collateral shall be taken through condemnation or the value of such Property shall be impaired through condemnation; or (M) the Borrower, or any Affiliate of either, shall challenge or contest in any action, suit or proceeding the validity or enforceability of this Agreement or any of the other Loan Documents, the legality or enforceability of any of the Obligations or the perfection or priority of any Lien granted for the benefit of the Lender, if any; or (N) the Borrower shall be criminally indicted or convicted under any Forfeiture Law that results in or could lead to a forfeiture of any Property of the Borrower that is material to its financial condition or business operations; or (O) the Borrower shall be nationalized or confiscated or any government or any agency thereof exercises management control of the Borrower's day-to-day business operations and affairs; or (P) the current government of the Republic of Ghana shall be changed by reason of war (whether or not declared), revolution, riots, insurrections, acts of terrorism, acts of the public enemy, and/or any other event which may adversely affect the Borrower's performance under this Agreement as determined by the Lender in its absolute and sole discretion. 7.2. Acceleration of the Obligations. Without in any way limiting the right of Lender to demand payment of any portion of the Obligations payable on demand in accordance with this Agreement or any of the other Loan Documents, upon or at any time after the occurrence of an Event of Default, and during the continuance thereof, all or any portion of the Obligations due or to become due from Borrower to Lender, whether under this Agreement or any of the other Loan Documents or otherwise, shall, at the option of Lender and without notice to or demand upon Borrower, become at once due and payable and Borrower shall forthwith pay to Lender, in addition to any and all sums and charges due, the entire principal of and accrued and unpaid interest on the Obligations. 7.3. Remedies. Upon or at any time after the occurrence of an Event of Default and during the continuance thereof, Lender may exercise from time to time all of the rights and remedies under Applicable Law, and all other legal and equitable rights to which Lender may be entitled, all of which rights and remedies shall be cumulative, and none of which shall be exclusive, and shall be in addition to any other rights or remedies contained in this Agreement, the Security Agreements, or any of the other Loan Documents. 22 23 7.4. Remedies Cumulative; No Waiver. All covenants, conditions, provisions, warranties, guaranties, indemnities, and other undertakings of Borrower contained in this Agreement and the other Loan Documents, or in any document referred to herein or contained in any agreement supplementary hereto or in any schedule or contained in any other agreement between Lender and Borrower, heretofore, concurrently, or hereafter entered into, shall be deemed cumulative to and not in derogation or substitution of any of the terms, covenants, conditions, or agreements of Borrower herein contained. The failure or delay of Lender to exercise or enforce any rights, Liens, powers, or remedies hereunder or under any of the other Loan Documents shall not operate as a waiver of any of such Liens, rights, powers or remedies, but all such Liens, rights, powers, and remedies shall continue in full force and effect until the Loan and all other Obligations owing or to become owing from Borrower to Lender shall have been indefeasibly paid in full, and all Liens, rights, powers, and remedies provided herein and the other Loan Documents are cumulative and none are exclusive. SECTION 8. BENEFIT OF AGREEMENT 8.1. Successors and Assigns. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns, except that Borrower shall not have the right to assign its rights or obligations under this Agreement or any of the other Loan Documents. Lender shall give written notice to the Borrower within fifteen (15) Business Days of such assignment, provided however, such notice shall be given on a "best efforts" basis and Lender shall not be liable to Borrower for the failure to give such notice, and any such failure shall not affect the validity or effectiveness of such assignment. SECTION 9. GENERAL 9.1. Amendments. The terms of this Agreement may not be amended, waived, modified or terminated except by written instrument signed by the parties hereto. No such amendment or waiver shall extend to or affect any obligation not expressly amended or waived or impair any right consequent thereon. In the event an amendment to any of the Loan Documents or documents for any other of the Obligations is required, in Lender's sole discretion, due to any request, action, or inaction of Borrower, including but not limited to any voluntary or mandatory prepayment of the Obligations, Borrower shall reimburse Lender for all costs and expenses associated with such amendment, including but not limited to the reasonable fees and out-of-pocket expenses of outside counsel for the Lender, the reasonable time of Lender's in house counsel departmental activity billed at Lender's outside counsel rate, and the reasonable travel costs of Lender's in-house counsel with respect thereto. In addition, for any amendment, the Borrower shall pay an administrative fee in an amount the greater of (i) one half percent (.5%) of the financial value of the increase or decrease in principal value of the Obligations associated with the amendment, or (ii) Five Thousand Dollars ($5,000.00). 9.2. Notices. (A) All communications under this Agreement shall be in writing and shall be mailed by first class mail, postage prepaid, or delivered by hand or transmitted by a telecommunications device capable of transmitting or creating a written record (but in all cases of telecommunication notices such notice must be immediately followed by mailing): (i) if to the Lender, at its address at 3322 West End Avenue, Nashville, Tennessee, 37203-09990, Attention: Global Accounts Operations Manager, Telephone No. (615) 386-5943 or Facsimile (615) 386-5950 or at such other address as it may have furnished in writing to the Borrower; or (ii) if to the Borrower, at its address at P. O. Box 6, Tarkwa, Republic of Ghana, West Africa Attention: Mr. Lucien Girard, (233) 362 357 or 23 24 Facsimile (233) 362 273 or at such other address as it may have furnished in writing to the Lender, with copies to (which copies shall not be required to effect notice): The Pioneer Group, Inc. 60 State Street Boston, Massachusetts 02109 Attention: Donald H. Hunter Telephone: (617) 422-4970 Telecopy: (617) 422-4296 and Hale and Dorr 1455 Pennsylvania Avenue, N.W. Washington, D.C. 20004 Telephone: (202) 942-8454 Telecopy: (202) 942-8484 (B) Any notice so addressed and mailed by first class mail shall be deemed to be given when received or if mailed by registered or certified mail, fifteen Business days after being so mailed, and any notice delivered by hand or transmitted by telecommunications device shall be deemed to be given when received by the Borrower or the Lender, as the case may be. 9.3. Costs, Expenses and Indemnification. The Borrower agrees to pay all costs and expenses in connection with the preparation, execution, delivery and enforcement of this Agreement and any other documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Lender and the travel costs of Lender's in-house counsel (excluding any internal allocated charges of the Lender's in-house counsel) with respect thereto and with respect to advising the Lender as to its respective rights and responsibilities under this Agreement and the other Loan Documents. The Borrower also agrees to pay on demand all losses, costs and expenses, if any (including reasonable counsel fees and expenses except for any internal allocated charge of Lender's in-house counsel), incurred in connection with the preservation of, or the enforcement of, or legal advice in respect of, the rights or responsibilities of the Lender under this Agreement or the Loan Documents, including, without limitation, losses, costs and Collection Expenses sustained by the Lender as a result of any failure by the Borrower to perform or observe its obligations contained herein or in any other Loan Document. The Borrower further agrees to indemnify and hold harmless the Lender from and against any and all (i) Taxes or assessments, governmental charges or levies, duties, fees, deductions or withholding, restrictions or conditions of any nature or other amounts imposed by, or behalf of, any government or any taxing authority thereof or therein, including the Republic of Ghana or any subdivision thereof (excluding taxes imposed on net income and all income and franchise taxes of the United States and any political subdivisions thereof on Lender), (ii) stamp, duty or documentary taxes or charges imposed by any government or any taxing authority thereof or therein, including the Republic of Ghana and its subdivisions and (iii) damages, losses, liabilities, costs and expenses resulting from, related to or connected with this Agreement, the Loan or the other Loan Documents or the transactions contemplated hereby, except to the extent resulting from the gross negligence or willful misconduct of the Lender. 9.4. Reproduction of Documents; Confidentiality. This Agreement and all other Loan Documents, including, without limitation, (i) consents, waivers and modifications which may hereafter be executed, (ii) documents delivered at the closing of the Loan, and (iii) financial statements, certificates and other information previously or hereafter furnished, may be reproduced by the Lender by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process and the Lender may destroy any original document so reproduced. The Borrower agrees and stipulates that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in 24 25 existence and whether or not such reproduction was made in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. The Lender shall treat the information contained in the records, documents and other materials received from the Borrower that are both marked "Confidential" and are not otherwise available from another source as confidential information. The Lender shall not disclose such confidential information to any other person except: (a) with the consent of the Borrower (which consent shall not to be unreasonably withheld); (b) if required by law or required by any stock exchange; (c) in connection with legal proceedings (including any alternative dispute resolution proceedings) relating to this Agreement; (d) to an Affiliate, accountant, agent or advisor of the Lender, provided such person or entity undertakes to observe this Section 9.4; (e) to a potential assignee, participant or sub-participant of the Lender's interests under this Agreement and the other Loan Documents provided such person or entity undertakes to observe this Section 9.4 except to the extent limited by Freedom of Information Act as it pertains to U.S. Government and agencies thereof; or (f) to an insurance carrier covering political risk or other risks of the Lender associated with this Agreement. 9.5. Survival. All warranties, representations, agreements and covenants made by the Borrower herein or in any other Loan Document shall be considered to have been relied upon by the Lender and shall survive the making of the Loan regardless of any investigation made by or on behalf of the Lender. 9.6. Submission to Jurisdiction and Service of Process. The Borrower irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement, the Notes or any Loan Document may be instituted in the United Sates of America in any Federal or State court sitting in the State of Tennessee, and the Borrower, in respect of itself and its Properties and revenues, irrevocably submits to the jurisdiction of these courts in any such action or proceeding. The Borrower irrevocably consents to such service upon it by the mailing of copies thereof by U.S. air mail or courier to the Borrower at its address set forth in Section 9.2(A) of this Agreement. The foregoing provisions shall not limit the right of the Lender to bring any such action or proceeding or to obtain execution on any judgment rendered in any such action or proceeding in any other appropriate jurisdiction or in any other manner. The Borrower agrees that final judgement against it in any legal action or proceeding arising out of or relating to this Agreement or the Notes or other Loan Documents shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgement, a certified or exemplified copy of which judgment shall be conclusive evidence thereof and of the amount of its indebtedness, or by such other means provided by law. 9.7. Judgment. If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder or under the Note in Dollars into another currency, the parties hereto agree, to the fullest extent that they effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures Lender could purchase Dollars with such other currency at Nashville, Tennessee on the Business Day preceding that on which final judgment is given. The obligation of the Borrower in respect of any sum due from it to Lender hereunder or under the Note shall, notwithstanding any judgment in a currency other than Dollars, be discharged only to the extent that on the Business Day following receipt by Lender of any sum adjudged to be so due in such other currency Lender may in accordance with normal banking procedures purchase Dollars with such other currency; if the Dollars so purchased are less than the sum originally due to Lender in Dollars, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify Lender against such loss, and if the Dollars so purchased exceed the sum originally due Lender in Dollars, Lender agrees to remit to the Borrower such excess. 25 26 9.8. Waiver of Sovereign Immunity. The Borrower acknowledges and agrees that the activities contemplated by the provisions of this Agreement, the Notes and the other Loan Documents are commercial in nature rather than governmental or public, and therefore acknowledges and agrees that it is not entitled to any right of immunity on the grounds of sovereignty or otherwise with respect to such activities or in any legal action or proceeding arising out of or relating to this Agreement, the Notes or the other Loan Documents, in respect of itself and its properties and revenues, expressly and irrevocably waives any such right of immunity which may now or hereafter exist (including any immunity from any legal process, from the jurisdiction of any court or from any execution or attachment in aid of execution prior to judgment or otherwise) or claim thereto which may now or hereafter exist, and agrees not to assert any such right or claim in any such action or proceeding, whether in the United States, or otherwise. 9.9. Governing Law. THE PARTIES HERETO HAVE EXPRESSLY AGREED THAT THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TENNESSEE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF, PROVIDED, HOWEVER, THAT FOR ANY LEGAL ACTION OR PROCEEDING BROUGHT WITH RESPECT TO THE LOAN AGREEMENT, THE NOTE OR ANY LOAN DOCUMENT IN THE COURTS OF THE REPUBLIC OF GHANA OR ANY POLITICAL SUBDIVISION THEREOF, THE LOAN AGREEMENT, THE NOTE OR ANY LOAN DOCUMENT SHALL BE DEEMED TO BE MADE UNDER THE LAWS OF THE REPUBLIC OF GHANA AND FOR SUCH PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE REPUBLIC OF GHANA. 9.10. Right of Setoff. As collateral security for the repayment of the Borrower's obligations and liabilities under this Agreement, the Borrower hereby grants the Lender and the Lender's successors and assigns (including any affiliate or subsidiary of Lender (including Caterpillar or any other Caterpillar Seller)) the right to apply, at any time and from time to time should an Event of Default exist hereunder, any and all obligations owing from the Lender (or its assignees) to the Borrower toward repayment of any sums owing from the Borrower to the Lender hereunder. 9.11. Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. 9.12. Duplicate Originals. Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. 9.13. Consequential Damages. Notwithstanding any other provision of this agreement, Borrower hereby fully waives any claim or right now or hereafter existing against Lender for any incidental, special, or consequential damages whether based on contract, warranty, tort (including negligence and strict liability), or otherwise. 9.14. Use of English Language. All documents or notices to be delivered pursuant to or in connection with this Agreement shall be in the English language. English shall be the official language for construction and interpretation of this Agreement, the Notes, and all Loan Documents and notices, unless specifically designated otherwise in any such Loan Document. If the original of any such document or notice is not in the English language, an English translation thereof shall be delivered. 9.15. Jury Trial Waiver. THE BORROWER AND THE LENDER EACH WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE NOTES, ANY OF THE LOAN DOCUMENTS, OR THE OBLIGATIONS. THE BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVER IS A MATERIAL INDUCEMENT TO LENDER ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVER IN ITS FUTURE DEALINGS WITH THE BORROWER. THE BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVER WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH SUCH LEGAL COUNSEL. 26 27 IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the day and year first above written. BORROWER: TEBEREBIE GOLDFIELDS LIMITED By: /s/ Lucien Girard ------------------------------- Title: Managing Director ---------------------------- LENDER: Total Commitment: CATERPILLAR FINANCIAL $8,393,420.20 SERVICES CORPORATION By: /s/ Ronald R. Rossmann ------------------------------- Title: Ronald R. Rossmann ---------------------------- Corporate Operations Manager [Exhibits Omitted] 27 EX-10.3 4 CHATTEL MORTGAGE DATED 04/23/96 1 EXHIBIT 10.3 CHATTEL MORTGAGE TEBEREBIE GOLDFIELDS LIMITED ("MORTGAGOR") AND CATERPILLAR FINANCIAL SERVICES CORPORATION ("MORTGAGEE") DATED APRIL 23, 1996 2
TABLE OF CONTENTS Section Page - ------- ---- 1. General Definitions...................................................................... 1 2. Consideration............................................................................ 3 3. Mortgage................................................................................. 3 4. Restrictions on Dealing with Secured Property............................................ 3 5. Insurance Covenants...................................................................... 4 6. Other Covenants by Mortgagor............................................................. 4 7. Mortgagee's Right to Rectify............................................................. 5 8. Mortgagee's Right to Enter............................................................... 5 9. Representations and Warranties........................................................... 5 10. Default.................................................................................. 6 11. Appointment of Receiver.................................................................. 7 12. Powers of Receiver....................................................................... 7 13. Powers of Mortgagee and Exclusion of Statutory Notices................................... 8 14. Costs, Charges, Expenses and Indemnities................................................. 8 15. Application of Money..................................................................... 9 16. Reassignment............................................................................. 10 17. Preservation of Mortgagee's Rights....................................................... 10 18. Power of Attorney........................................................................ 12 19. Notices.................................................................................. 12 20. Liens and Assignment..................................................................... 12 21. Miscellaneous............................................................................ 12 22. Governing Law, Jurisdiction and Services of Process...................................... 14 23. Counterparts............................................................................. 15 Schedule 1........................................................................................ 16 Schedule 2........................................................................................ 17 Execution Page.................................................................................... 18
3 CHATTEL MORTGAGE This deed is made on April 23, 1996, between TEBEREBIE GOLDFIELDS LIMITED having its principal office at P.O. Box 6, Tarkwa - Wassaw, Ghana (West Africa), and CATERPILLAR FINANCIAL SERVICES CORPORATION, a corporation subsisting pursuant to the laws of the State of Delaware, USA with offices located at 3322 West End Avenue, Nashville, Tennessee 37203, USA ("Mortgagee"). 1. GENERAL DEFINITIONS 1.1 DEFINED TERMS. When used herein, the following terms shall have the following meanings (terms defined in the singular shall have the same meaning when used in the plural and vice versa and statute references herein refer to the statutes of the Republic of Ghana unless otherwise stated): ACKNOWLEDGMENT means an acknowledgment in the form of Schedule 2. AFFILIATE means any Person: (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the relevant party; (ii) which beneficially owns or holds 5% or more of any class of the Voting Stock of the relevant party; (iii) 5% or more of the voting stock (or in the case of a Person which is not a corporation or a limited liability company, 5% or more of the equity interest) of which is beneficially owned or held by the relevant party or a Subsidiary of the relevant party, or (iv) another entity which is related to the first within the meaning of the Companies Code 1963 (Act 179). For purposes hereof, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting stock, by contract or otherwise. COLLATERAL SECURITY means a present or future Lien (other than this mortgage) or indemnity given by the Mortgagor or another person to secure or otherwise provide for the payment of the Secured Money including, without limitation, the documents identified in Item 1 of Schedule 1. BUSINESS DAY means a day other than (i) a Saturday or Sunday, or (ii) a day on which banks are authorized by law to be closed in New York, New York, U.S.A. DOLLARS and the sign $ shall mean the currency of the United States of America. EVENT OF DEFAULT has the meaning given to it in Clause 10. FUTURE SECURITY means the chattels in respect of which the Mortgagor deposits Acknowledgments with the Mortgagee after the date of this mortgage. INSOLVENCY EVENT means the happening of any of these events: (a) an application is made to a court for an order or an order is made that a body corporate be wound up, and such application or order is not withdrawn, appealed or dismissed within ninety (90) days of the issuance thereof; (b) an application is made to a court for an order appointing a liquidator or provisional liquidator in respect of a body corporate, or one of them is appointed, whether or not under an order and such application or appointment is not withdrawn or dismissed within ninety (90) days thereof; (c) except to reconstruct or amalgamate while solvent on terms approved by the Mortgagee, a body corporate enters into, or resolves to enter into, a scheme of arrangement, deed of company arrangement or composition with, or assignment for the benefit of, all or any class of its creditors, or it proposes a 4 reorganization, moratorium or other administration involving any of them; (d) a body corporate resolves to wind itself up, or otherwise dissolve itself, or gives notice of intention to do so, except to reconstruct or amalgamate while solvent on terms approved by the Mortgagee or is otherwise wound up or dissolved; (e) a body corporate is or states that it is insolvent; (f) as a result of the operation of The Bodies Corporate (Official Liquidation) Act 1963 (Act 180), a body corporate is taken to have failed to comply with a statutory demand; (g) a body corporate is or makes a statement from which it may be reasonably deduced by the Mortgagee that the body corporate is, the subject of an event described in The Bodies Corporate (Official Liquidation) Act 1963 (Act 180); (h) a body corporate takes any step to obtain protection or is granted protection from its creditors, under any applicable legislation or an administrator is appointed to a body corporate; (i) a person becomes an insolvent under administration as defined in The Bodies Corporate (Official Liquidation) Act 1963 (Act 180) or action is taken which could result in that event; or (j) anything analogous or having a substantially similar effect to any of the events specified above (taking into consideration any cure period described therein) happens under the law of any applicable jurisdiction. LIEN means any mortgage, deed of trust, pledge, security interest, hypothecation, assignment, deposit arrangements, encumbrance, lien (statutory or other), or preference, priority, or other security agreement or preferential arrangement, charge, or encumbrance of any kind or nature whatsoever, or any, lease, license, easement, assignment or right of any agreement to create any of them or allow them, or any of them, to exist. MORTGAGEE means Caterpillar Financial Services Corporation or such other person who is nominated from time to time by Caterpillar Financial Services Corporation by notice to the Mortgagor as "Mortgagee". PERMITTED LIENS means any Lien that is specifically permitted under this mortgage, or, with respect to specific Secured Property, a Lien specifically permitted with regard to that Secured Property by an agreement between Mortgagor and Mortgagee, including without limitation, the agreements or other documents representing the obligations secured thereby. PERSON means an individual, partnership, corporation, joint venture, association, joint stock company, trust, business trust or unincorporated organization, limited liability company, or a government or agency or political subdivision thereof. PRESENT SECURITY means the chattels specified in Item 2 of Schedule 1. RECEIVER means a person or persons appointed under or by virtue of this mortgage as receiver or receiver and manager. SECURED MONEY means monies payable as consideration for the Secured Property together with interest thereon and charges in relation thereto. SECURED PROPERTY means the Present Security and the Future Security. A reference to Secured Property includes any part of it. SUBSIDIARY means any corporation or limited liability company of which the Borrower owns more than 50% of its securities, provided the ownership of such securities, in the absence of contingencies, entitles the Borrower to elect a majority of the directors of such corporation or limited liability company, or another entity which is a subsidiary of the first within the meaning of the Companies Code 1963 (Act 179). TAXES means any present or future taxes, levies, imposts, duties, fees, 2 5 assessments, deductions, withholdings or other charges of whatsoever nature (excluding taxes imposed on net income and all income and franchise taxes of the United States and any political subdivisions thereof on Lender and except an amount payable under a covenant or stipulation which is void under the Income Tax Decree 1975 (SMCD5)), that may now or hereafter be imposed or asserted by any jurisdiction or any political subdivision thereof or any taxing authority therein and all interest, penalties or similar liabilities with respect thereto. 1.2 CERTAIN MATTERS OF CONSTRUCTION. The terms "herein," "hereof" and "hereunder" and other words of similar import refer to this mortgage as a whole and not to any particular section, paragraph or subdivision. Any pronoun used shall be deemed to cover all genders. The section titles, table of contents and list of exhibits appear as a matter of convenience only and shall not affect the interpretation of this Agreement. All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations. All references to any instruments or agreements, including, without limitation, references to this mortgage, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof. A reference to any thing (including, without limitation, the Secured Money, or any other amount and the Secured Property) is a reference to the whole and each part of it and a reference to a group of persons (including, without limitation, the Mortgagor) is a reference to all of them collectively, to any two or more of them collectively and to each of them individually. 2. CONSIDERATION The Mortgagor acknowledges giving this mortgage and incurring obligations and giving rights under this mortgage for valuable consideration received from the Mortgagee. 3. MORTGAGE 3.1 As security for the due repayment of the Secured Money, the Mortgagor as legal and beneficial owner: (a) assigns to the Mortgagee the Present Security by way of legal mortgage; and (b) agrees to assign to the Mortgagee, from the time of a deposit made under Clause 3.2, all of the Future Security the subject of that deposit by way of legal mortgage. 3.2 The Mortgagor agrees that any deposit of an Acknowledgment referred to in the definition of Future Security will, without the necessity for any further act, operate as an assignment to the Mortgagee of the Future Security referred to in the Acknowledgment by way of legal mortgage on the same terms as this mortgage, and that the mortgage will operate as security for the due repayment of the Secured Money. 4. RESTRICTIONS ON DEALING WITH SECURED PROPERTY 4.1 In addition to any provisions of any other agreement between the Mortgagor and the Mortgagee relating to the Secured Property, the Mortgagor may not, without the prior written consent of the Mortgagee: (a) dispose of, or part with possession of, any interest in the Secured Property; (b) create or allow to come into existence any Lien on the Secured Property other than a Permitted Lien; or (c) remove the Secured Property from Ghana. 4.2 If the Mortgagee grants the Mortgagor consent under Clause 4.1, for whatever reason, the Mortgagor acknowledges that such consent shall not operate in any way to release or diminish the Mortgagor's obligations under this Chattel Mortgage in relation to the Secured Property. 3 6 5. INSURANCE COVENANTS 5.1 The Mortgagor agrees to keep the Secured Property insured to the extent required under the note, loan agreement or other similar document or agreement between the Mortgagor and the Mortgagee relating to such Secured Property, and further agrees to not do or suffer to be done anything which could reasonably be expected to prejudice any insurance and immediately rectify anything which might prejudice any insurance and reinstate the insurance if it lapses. 5.2 The Mortgagee may, but the Mortgagor may not without the consent of the Mortgagee, enforce, conduct, settle or compromise claims under any policy of insurance required by, or referenced in, Clause 5.1, to the extent that such policy covers the Secured Property; provided that the Mortgagor may enforce, conduct, settle or compromise claims under any such policy without Mortgagee's consent to the extent that such actions do not affect the coverage on the Secured Property, or any claims or potential claims relating thereto. 6. OTHER COVENANTS BY MORTGAGOR 6.1 AFFIRMATIVE COVENANTS. The Mortgagor agrees to: (a) keep the Secured Property in good working order and condition; (b) protect the Secured Property from theft, loss or damage; (c) comply on time with all its obligations in connection with the Secured Property including, without limitation, laws and requirements and orders of authorities; (d) comply on time with all its obligations in connection with any agreement which imposes an obligation to pay the Secured Money; (e) comply on time with all its obligations in connection with any Lien over the Secured Property other than this mortgage; (f) at the Mortgagee's request, deliver to the Mortgagee receipts for payments referred to in this Clause 6.1; (g) comply on time with terms attaching to any approval or consent given by the Mortgagee in connection with this mortgage; (h) give promptly to the Mortgagee the information and documents which the Mortgagee requests from time to time in connection with this mortgage or the Secured Property; (i) notify the Mortgagee promptly after it occurs of full details of an Event of Default or an event which with the giving of notice, lapse of time or fulfillment of any condition would be likely to become an Event of Default, and the steps taken to remedy it; (j) obtain and renew on time and comply with the terms of each authorization necessary to enter into this mortgage, observe obligations under it and allow it to be enforced; (k) notify the Mortgagee promptly if any representation or warranty made or taken to be made by or on behalf of the Mortgagor in connection with this mortgage is found to be incorrect or misleading when made or taken to be made; (l) execute and deposit with the Mortgagee an Acknowledgment in the form of Schedule 2 herewith upon the Mortgagor taking or being entitled to take legal and beneficial title to any Future Security; and (m) at the request of Mortgagee, deposit with the Mortgagee immediately or as soon as the Mortgagor receives them anything evidencing a Lien on the Secured Property and any document of title given to the Mortgagor to secure the payment of a monetary obligation to the Mortgagor relating to the Secured Property and any documents of title relating to the Secured Property. 6.2 NEGATIVE COVENANTS. The Mortgagor may not: (a) increase or allow to be increased the amount secured by a Lien in the Secured Property other than this mortgage; (b) do or omit to do anything or knowingly permit or cause anything to be done or omitted which could mean in the reasonable opinion of the Mortgagee that the Secured Property, this mortgage or a Collateral Security is or is likely to become materially lessened in value or prejudicially affected, other than the ordinary use of the Secured Property by the Mortgagor and other than relating to such decrease in value or prejudicial 4 7 effect that is reasonably likely to be covered by the insurance provided for herein; or (c) without the Mortgagee's consent, affix the Secured Property to any land. 6.3 FURTHER ASSURANCES. The Mortgagor agrees to: (a) execute in favor of the Mortgagee, or as the Mortgagee directs, and in form stipulated by the Mortgagee, further documents; and (b) take any action and do any thing the Mortgagee requests to enable the Mortgagee to exercise its rights in connection with the Secured Property. The Mortgagee or an authorized officer of the Mortgagee may fill in any blanks in this mortgage and complete in favor of the Mortgagee or anyone purchasing under the powers given by this mortgage any instrument executed by or on behalf of the Mortgagor in blank and deposited with the Mortgagee in connection with this mortgage. 6.4 REGISTRATION. The Mortgagee may register this mortgage at the Mortgagor's expense as a mortgage on any appropriate register. The Mortgagor agrees to procure execution of all documents required by the Mortgagee which are necessary to register this mortgage. 7. MORTGAGEE'S RIGHT TO RECTIFY The Mortgagee may do anything which should have been done by the Mortgagor under this mortgage but which has not been done or which the Mortgagee considers has not been done properly. 8. MORTGAGEE'S RIGHT TO ENTER 8.1 A person authorized by the Mortgagee may enter at all times on land or buildings owned or occupied by the Mortgagor to: (a) inspect the condition of the Secured Property; (b) determine whether the terms of this mortgage are being complied with; (c) inspect and take copies of records relating to the Secured Property; (d) investigate the affairs and financial position of the Mortgagor; (e) exercise the rights of the Mortgagee under Clause 7. 8.2 The Mortgagee agrees to give the Mortgagor reasonable notice of entry. The Mortgagor agrees to give the person authorized to enter reasonable assistance including, without limitation, obtaining any necessary consent. 9. REPRESENTATIONS AND WARRANTIES 9.1 The Mortgagor represents and warrants that: (a) it is the beneficial owner of and has good title to the Secured Property free from any Lien other than Permitted Liens; (b) it has power to enter into and observe its obligations under this mortgage; (c) it has in full force and effect the authorizations necessary to enter into this mortgage, observe obligations under it, and allow it to be enforced; (d) its obligations under this mortgage are valid and binding and are enforceable against it in accordance with its terms; (e) this mortgage and the transactions under it do not contravene its constituent documents (when the Mortgagor is a company) or any law, regulation or official directive or any of its obligations or undertakings by which it or any of its assets are bound or cause a limitation on its powers or, when the Mortgagor is a company, the powers of its directors, to be exceeded; (f) it has fully disclosed in writing to the Mortgagee all facts relating to the Mortgagor, this mortgage, the Secured Property and anything in connection with them which are material to the assessment of the nature and amount of the risk undertaken by the Mortgagee in entering into this mortgage and doing anything in connection with it; (g) no Event of Default or event which with the giving of notice, lapse of time or fulfillment of any condition would be likely to become an Event of Default continues unremedied; (h) it does not hold any interest in the Secured Property as a trustee; and (i) the Secured Property is 5 8 not affixed to any land. 9.2 These representations and warranties are taken to be also made: (a) on each date on which the Mortgagor acquires Secured Property; and (b) on each date on which the Mortgagee provides funds to Mortgagor under a loan agreement or other financial accommodation involving Secured Property. 10. DEFAULT An Event of Default occurs if: (a) the Mortgagor does not pay any of the Secured Money on time and in the manner required under any agreement which imposes the obligation to pay it, or there is any other default constituting an event of default, or which with the passing of time or the giving of notice would become a default or an event of default, or any term or provision is not complied with by Mortgagor, under any such agreement; or (b) the Secured Money becomes prematurely payable or can be rendered prematurely payable by the giving of notice, lapse of time or fulfillment of any condition; or (c) distress is levied or a judgment, order or Lien is enforced, or becomes enforceable against any property of the Mortgagor, or can be rendered enforceable by the giving of notice, lapse of time or fulfillment of any condition; or (d) a representation or warranty made or taken to be made by or on behalf of the Mortgagor in connection with this mortgage is found or is notified by the Mortgagor to be incorrect or misleading in any material respect when made or taken to be made; or (e) the Mortgagor or any of its Subsidiaries takes action to reduce its capital or buy back any of its ordinary shares or passes a resolution referred to in section 75(1) of the Companies Code 1963 (Act 179), in each case without the consent of the Mortgagee; or (f) a person is appointed under legislation to investigate or manage any part of the affairs of the Mortgagor or any of its Subsidiaries; or (g) this mortgage: (i) is or becomes wholly or partly void, voidable or unenforceable, or is claimed to be so; or (ii) loses the priority which it has at or after the date of this mortgage (other than by an act or omission of the Mortgagee) or a claim to that effect is made in either case, by the Mortgagor, any of its Related Entities, anyone on behalf of any of them or anyone who claims to have an interest in the Secured Property; or (h) an undertaking given to the Mortgagee or its solicitors by the Mortgagor or another person in connection with this mortgage or an agreement in connection with the Secured Money is breached or not wholly performed within the period specified in the undertaking or, if no period is specified, within seven days from the date of the undertaking; or (i) in the reasonable opinion of the Mortgagee: (i) the value to the Mortgagee of this mortgage is materially and adversely affected; or (ii) any of the Secured Property is in jeopardy, other than as a result of any act or omission of the Mortgagee, and in each such case, the adverse effect or jeopardy is not reasonably likely to be covered by insurance carried by the Mortgagor as provided for herein; or 6 9 (j) the Mortgagor attempts to create or allows to exist a Lien over the Secured Property (other than a Permitted Lien) or a Lien (other than a Permitted Lien) comes into existence over the Secured Property; or (k) the Mortgagor does not observe any other obligation under this mortgage and, if the non-observance can be remedied, does not remedy the non- observance within seven days. 11. APPOINTMENT OF RECEIVER At any time after and during an Event of Default, the Mortgagee may appoint a person or persons as receiver or receiver and manager of all or part of the Secured Property. The Mortgagee may remove a Receiver so appointed, and, if a Receiver is removed, retires or dies, then the Mortgagee may appoint a new Receiver. A Receiver is the agent of the Mortgagor unless the Mortgagee notifies the Mortgagor that the Receiver is to act as the agent of the Mortgagee. The Mortgagor is solely responsible for anything done or not done by the Receiver, and for the Receiver's remuneration. The Mortgagee may fix the remuneration of a Receiver at an amount or rate of commission agreed between the Mortgagee and the Receiver or, in the absence of agreement, at an amount or rate determined by the Mortgagee. If two or more persons are appointed as Receiver of the same part of the Secured Property, the Mortgagee may provide that their rights, powers and remedies vest in them jointly and severally, or jointly. The power to appoint a Receiver or manager over all of the Secured Property may be exercised whether or not a Receiver has already been appointed over part of it. 12. POWERS OF RECEIVER In addition to powers conferred by other provisions of this mortgage, by statute or by the terms of appointment, the Receiver may do one or more of the following unless they are specifically excluded by the terms and provisions of appointment or statute in the manner and on terms (in addition to any terms expressly specified below) which the Receiver considers necessary (and the Mortgagee may vary these powers at any time by notice given to the Mortgagor and the Receiver): (a) take possession of, have access to and make use of the Secured Property as often as the Receiver deems expedient; (b) receive rents and profits derived from the Secured Property; (c) exercise the rights, powers and remedies of the Mortgagor over, in connection with or comprising part of the Secured Property; (d) subject to obligations imposed by law, sell or agree to sell the Secured Property on any terms, including without limitation, at public or private sale, in lots, otherwise in accordance with Mortgagee's instructions, or any other method permitted by applicable law; (e) obtain the benefit of any agreement, entered into by the Mortgagor and relating to the Secured Property (including without limitation, by specific performance), whether or not the agreement is entered into in the exercise of the rights, powers and remedies conferred by this mortgage; (f) institute, conduct, defend, submit to arbitration, settle, compromise or defer in the name of the Mortgagor or otherwise on any terms, any proceeding, claim, question or dispute in connection with the Secured Property or this mortgage and execute releases or other discharges in connection with them; (g) delegate the Receiver's powers including this power of delegation to any person for any period; (h) alter, improve, provide services to, insure, and maintain the Secured Property; (i) lease or license, end, renew, surrender, or accept the surrender of a lease or license of, the Secured Property, and compromise with or make concessions to lessees or licensees, or agree to do any of these things, for any period and on any terms; (j) give a person an option to purchase, lease or license the Secured Property on any terms; (k) surrender or transfer the Secured Property to any person; (l) do anything which should have been done by the Mortgagor under this mortgage but which has not been done or 7 10 which the Receiver considers has not been done properly; (m) secure money advanced by Mortgagee and relating to the powers hereunder by a Lien over the Secured Property so that the Lien ranks in priority to, equally with, or after this mortgage; (n) employ or engage persons (including, without limitation, employees of the Receiver and consultants and professional advisers) in connection with the powers conferred on the Receiver by this Clause 12; (o) do or cause to be done anything to protect the priority of this mortgage, to protect the Mortgagor's or the Mortgagee's estate or interest in the Secured Property, to enforce this mortgage, to recover the Secured Money or to protect or enhance the Secured Property; (p) expend money or incur liabilities in exercising the powers conferred on the Receiver by this Clause 12. 13. POWERS OF MORTGAGEE AND EXCLUSION OF STATUTORY NOTICES 13.1 At any time after an Event of Default the Mortgagee, in addition to powers conferred by other provisions of this mortgage or by law, may exercise any of the powers set out or referred to in Clause 12 each of which is to be construed as if the reference to the Receiver were a reference to the Mortgagee and whether or not a Receiver has been or could be appointed under this mortgage. 13.2 If either the Mortgagee or a Receiver exercises its rights under this mortgage, exercises its rights conferred by law or takes possession of the Secured Property, then neither of them is liable to account as mortgagee in possession. 13.3 The Mortgagee may give up possession of the Secured Property at any time. 13.4 The Mortgagee or a Receiver need not give notice or a demand to the Mortgagor or allow time to elapse before exercising a right, power or remedy under this mortgage or conferred by law, unless notice or demand or a lapse of time is required by a law which cannot be excluded. If the law requires that a period of notice must be given or a lapse of time must occur or be permitted before a right, power or remedy under this mortgage or conferred by law may be exercised, then: (a) when a period of notice or lapse of time is mandatory, that period of notice must be given or that lapse of time must be permitted by the Mortgagee; or (b) when the law provides that a period of notice or lapse of time may be stipulated or fixed by this mortgage, one day is stipulated and fixed as that period of notice or lapse of time and, without limitation, where applicable, one day is stipulated and fixed as the period of notice or lapse of time during which: (i) default must continue before a notice is given or requirement otherwise made for payment of the Secured Money or the observance of obligations under this mortgage; and (ii) a notice or requirement for payment of the Secured Money or the observance of obligations under this mortgage must remain not complied with before the Mortgagee's rights, powers or remedies may be exercised. 14. COSTS, CHARGES, EXPENSES AND INDEMNITIES 14.1 The Mortgagor agrees to pay or reimburse the Mortgagee on demand for: (a) the costs, charges and expenses of the Mortgagee in connection with any consent, exercise or non-exercise of rights (including, without limitation, in connection with the contemplated or actual enforcement or preservation of any rights under this mortgage), waiver, variation, release, discharge or production of documents in connection with this mortgage or the 8 11 Secured Property; (b) taxes and fees (including, without limitation, registration fees) and fines and penalties in respect of fees, which may be payable or determined to be payable in connection with this mortgage or a payment or receipt or any other transaction contemplated by this mortgage; (c) costs, charges and expenses of the Mortgagee in connection with any inquiry by any authority involving the Mortgagor or any of its Related Entities, including in each case, without limitation, any costs or other charges of any agent of the Mortgagee, any Receiver or any attorney appointed under this mortgage. 14.2 The Mortgagor agrees to pay the Mortgagee an amount equal to any liability, loss, costs, charges or expenses of the kind referred to in this Clause 14 suffered or incurred by any Receiver or other controller (as defined in the Corporate Laws of either the United States of America or the Republic of Ghana) appointed under or by virtue of this mortgage or any attorney appointed under this mortgage, or any employee, officer, agent or contractor of the Mortgagee. 14.3 If a judgment, order or proof of debt in connection with the Secured Money is expressed in a currency other than the currency in which the Secured Money is due, then the Mortgagor indemnifies the Mortgagee against: (a) any difference arising from converting the other currency if the spot rate of exchange for converting the other currency into the due currency available to the Mortgagee when the Mortgagee receives a payment in the other currency is less favorable to the Mortgagee than the rate of exchange used for the purpose of the judgment, order or acceptance of proof of debt; and (b) the costs of conversion. The Mortgagor acknowledges that it may be necessary to convert the other currency through more than one currency to ascertain the spot rate of exchange available to the Mortgagee. 14.4 Anything which the Mortgagor is required to do under this mortgage must be done at the Mortgagor's cost. 15. APPLICATION OF MONEY 15.1 To the extent permitted by law, money received in connection with this mortgage is to be applied (after satisfaction of claims taking priority over this mortgage) as follows: (a) first, towards satisfaction of amounts which become owing or payable under Clause 14 (except the Receiver's remuneration, if any); (b) second, towards satisfaction of the Receiver's remuneration; (c) third, towards satisfaction of the balance of the Secured Money in the manner and order which the Mortgagee determines in its absolute discretion; and (d) fourth, to the extent not otherwise applied, to the Mortgagor or any other person entitled to it. In particular, the Mortgagee may pay the balance of the money to a person with a subsequent Lien in the Secured Property whether registered or not, or may pay it into court by way of interpleader without incurring liability to the Mortgagor. 15.2 Money available for application under Clause 15.1(d) will not bear interest. The Mortgagee may discharge its liability to account for it by crediting it to an account in its books in the name of the person to whom it is payable, or by paying it into court. 15.3 In an application of money under Clause 15.1 the Mortgagor is to be credited only with so much of that money as is actually received by the Mortgagee. The credit dates from the time of receipt. This provision applies even if in exercising a power of sale the Mortgagee or a Receiver transfers the Secured Property and takes a Lien to secure the unpaid balance of purchase money. 9 12 15.4 If during the currency of a notice under Clause 13.4: (a) an installment of principal or interest forming part of the Secured Money falls due for payment by the Mortgagor; and (b) the Mortgagee receives money or allows a credit under this mortgage, then the Mortgagee may apply that money or credit first in satisfaction of the installment, and second toward satisfaction of money specified in the notice. 16. REASSIGNMENT The Mortgagee agrees to execute a reassignment of the Secured Property to the Mortgagor at the request of the Mortgagor on payment of all of the Secured Money. 17. PRESERVATION OF MORTGAGEE'S RIGHTS 17.1 The liabilities under this mortgage of the Mortgagor and the rights under this mortgage of the Mortgagee, a Receiver or an attorney appointed under this mortgage are not affected by anything which might otherwise have that effect at law or in equity including, without limitation, one or more of the following (whether occurring with or without the consent of a person): (a) the Mortgagee or another person granting time or other indulgence (with or without the imposition of an additional burden) to, compounding or compromising with, or wholly or partially releasing the Mortgagor or another person in any way; (b) laches, acquiescence, delay, acts, omissions or mistakes on the part of the Mortgagee or another person or both the Mortgagee and another person; (c) any variation or novation of a right of the Mortgagee or another person, or material alteration of a document, in respect of the Mortgagor or another person including, without limitation, an increase in the limit of or other variation in connection with the Secured Money; (d) the transaction of business, expressly or impliedly, with for or at the request of the Mortgagor or another person; (e) changes which from time to time may take place in the membership, name or business of a firm, partnership, committee or association whether by death, retirement, admission or otherwise whether or not the Mortgagor or another person was a member; (f)the loss or impairment of a Collateral Security or a negotiable instrument; (g) a Lien being void, voidable or unenforceable; (h) a person dealing in any way with a Lien, guarantee, judgment or negotiable instrument (including, without limitation, taking, abandoning or releasing (wholly or partially), realizing, exchanging, varying, abstaining from perfecting or taking advantage of it); (i) the death of any person or an Insolvency Event occurring in respect of any person; (j) a change in the legal capacity, rights or obligations or a person; (k) the fact that a person is a trustee, nominee, joint owner, joint venturer or a member of a partnership, firm or association; (l) a judgment against the Mortgagor or another person; (m) the receipt of a dividend after an Insolvency Event or the payment of a sum or sums into the account of the Mortgagor or another person at any time (whether received or paid jointly, jointly and severally or otherwise); (n) any part of the Secured Money being irrecoverable; (o) an assignment of rights in connection with the Secured Money; (p) the acceptance of repudiation or other termination in connection with the Secured Money; (q) the invalidity or unenforceability of an obligation or liability of a person other than the Mortgagor; (r) invalidity or irregularity in the execution of this mortgage by the Mortgagor or any deficiency in the powers of the Mortgagor to enter into or observe its obligations under this mortgage; (s) the opening of a new account by the Mortgagor with the Mortgagee or another person or the operation of a new account; (t) any obligation of the Mortgagor or any other person being discharged by operation of law or otherwise; or (u) property secured under a Lien being forfeited, extinguished, surrendered, resumed or determined. 10 13 17.2 The Mortgagee's right to payment of the Secured Money arising in any way (including, without limitation, under a negotiable instrument or another contract with the Mortgagor) does not merge with the Mortgagor's undertaking to pay the Secured Money under this mortgage. 17.3 This mortgage does not merge with, postpone, lessen or otherwise prejudicially affect any other Lien to which the Mortgagee is entitled. 17.4 The Mortgagee will hold a judgment or order which the Mortgagee obtains against the Mortgagor in respect of the Secured Money collaterally with this mortgage. This mortgage will not merge in the judgment or order. 17.5 The Mortgagee may demand payment of the Secured Money and exercise its rights, powers and remedies under this mortgage even if a negotiable instrument, security, contract or other obligation relating to the Secured Money is still current or has not fallen due. 17.6 This mortgage is a continuing security despite any intervening payment, settlement of account or other thing until a release has been executed and given to the Mortgagor. 17.7 This mortgage does not affect a Collateral Security or any other right, power or remedy of the Mortgagee at law or in equity. 17.8 Until this mortgage is released in respect of the relevant Secured Property the Mortgagee is entitled to retain all instruments and documents of title deposited under Clause 6.1. 17.9 The Mortgagee need not resort to any other Lien it holds for payment of the Secured Money before it resorts to this mortgage. 17.10 A purchaser from, or other person dealing with, the Mortgagee, or any Receiver, or any attorney appointed under this mortgage or a person to whom is tendered for registration an instrument duly executed by any of them need not inquire: (a) whether the Secured Money is in fact owing or payable; (b) whether default has occurred; (c) whether a right, power or remedy which they have exercised or purported to exercise has been properly exercised; (d) whether a Receiver has been properly appointed; or (e) about any other thing in connection with the exercise or purported exercise of a right, power or remedy. The title of any person relying on this Clause 17.10 is not affected by express or constructive notice of anything in connection with the matters referred to in Clauses 17.10(a) to (e)(inclusive). 17.11 The liability of the Mortgagor under this mortgage is not affected because: (a) any other person who was intended to become a co-surety or co-indemnifier for payment of the Secured Money has not done so or has not done so effectively; or (b) a person who is a co-surety or co-indemnifier for payment of the Secured Money is discharged under an agreement or under statute or a principle of law or equity. 17.12 If a claim is made that all or part of a payment, obligation, settlement, transaction, conveyance or transfer in connection with the Secured Money is void or voidable under law relating to Insolvency Events or the protection of creditors or for any other reason and the claim is upheld, conceded or compromised then: (a) the Mortgagee is entitled immediately as against the Mortgagor to the rights in respect of the Secured Money to which it would have been entitled if all or that part of that payment, obligation, settlement, transaction, conveyance or transfer had not taken place; and (b) promptly on request from the Mortgagee, the Mortgagor agrees to immediately do any act and sign any document to restore to the Mortgagee any Lien or 11 14 guarantee held by it from the Mortgagor immediately before that payment, obligation, settlement, transaction, conveyance or transfer. 18. POWER OF ATTORNEY 18.1 The Mortgagor irrevocably appoints the Mortgagee, each authorized officer of the Mortgagee, and each Receiver severally its attorneys. 18.2 Each attorney may: (a) in the name of the Mortgagor or the attorney do anything which the Mortgagor may lawfully authorize an attorney to do in connection with this mortgage or the Secured Property or which in the attorney's opinion is necessary or expedient to give effect to any right, power or remedy conferred on the Mortgagee or a Receiver by this mortgage, by law or otherwise, (including, without limitation, executing deeds and instituting, conducting and defending legal proceedings); (b) delegate its powers (including, without limitation, this power of delegation) to any person for any period and may revoke a delegation; and (c) exercise or concur in exercising its powers even if the attorney has a conflict of duty in exercising its powers or has a direct or person interest in the means or result of that exercise of powers. 18.3 The Mortgagor agrees to ratify anything done by an attorney or its delegate in accordance with Clause 18.2. 19. NOTICES All communications under this mortgage shall be in writing and shall be mailed by first class mail, postage prepaid, or delivered by hand or transmitted by a telecommunications device capable of transmitting or creating a written record (but in all cases of telecommunication notices such notice must be immediately followed by mailing): (a) if to the Mortgagee, at its address at 3322 West End Avenue, Nashville, Tennessee, 37203-0990, Attention: Global Accounts Operations Manager, Telephone No. (615) 386-5943 or Facsimile (615) 386-5950 or at such other address as it may have furnished in writing to the Mortgagor; or (b) if to the Mortgagor, at its address at P.O. Box 6, Tarkwa, Republic of Ghana, West Africa Attention: Mr. Lucien Girard, (233) 362-357 or Facsimile (233) 362-273 or at such other address as it may have furnished in writing to the Mortgagee. Any notice so addressed and mailed by first class mail shall be deemed to be given when received or if mailed by registered or certified mail, five Business Days after being so mailed, and any notice delivered by hand or transmitted by telecommunications device shall be deemed to be given when received by the Mortgagee or the Mortgagor, as the case may be. 20. LIENS AND ASSIGNMENT The Mortgagor may not, without the consent of the Mortgagee, create or allow to exist a Lien over, or an interest in, this mortgage or assign or otherwise dispose of or deal with its rights under this mortgage. The Mortgagee at any time may do any of those things as the Mortgagee sees fit. 21. MISCELLANEOUS 21.1 CERTIFICATE. A certificate signed by the Mortgagee or its solicitors about a matter or about a sum payable to the Mortgagee in connection with this mortgage is sufficient evidence of the matter or sum 12 15 stated in this certificate unless the matter or sum is proved to be false. 21.2 EXERCISE OF RIGHTS. The Mortgagee, a Receiver or an attorney appointed under this mortgage may exercise a right, power or remedy at its discretion, and separately or concurrently with another right, power or remedy. A single or partial exercise of a right, power or remedy by the person does not prevent a further exercise of that or an exercise of any other right, power or remedy. Failure by the person to exercise or delay in exercising a right, power or remedy does not prevent its exercise. The person with the right, power or remedy is not liable for any loss caused by the exercise or attempted exercise of, failure to exercise or delay in exercising the right, power or remedy, whether or not caused by that person's negligence. 21.3 WAIVER AND VARIATION. A provision of or a right created under this mortgage may not be waived or varied except in writing signed by the party or parties to be bound. 21.4 SUPERVENING LEGISLATION. Any present or future legislation which operates to vary the obligations of the Mortgagor in connection with this mortgage, the Secured Money or the Secured Property with the result that the Mortgagee's rights, powers or remedies are adversely affected (including, without limitation, by way of delay or postponement) is excluded except to the extent that its exclusion is prohibited or rendered ineffective by law. 21.5 APPROVALS AND CONSENT. The Mortgagee, a Receiver or an attorney appointed under this mortgage may give conditionally or unconditionally or withhold its approval or consent in its absolute discretion, unless this mortgage expressly provides otherwise. 21.6 REMEDIES CUMULATIVE. The rights, powers and remedies provided in this mortgage are cumulative with and not exclusive of the rights, powers or remedies provided by law independently of this mortgage. 21.7 SET-OFF. At its sole discretion the Mortgagee may apply (without notice) any credit balance in any currency in any account of the Mortgagor with the Mortgagee towards satisfaction of any amount then payable by the Mortgagor to the Mortgagee under this mortgage. The Mortgagor authorizes the Mortgagee in the name of the Mortgagor or the Mortgagee to do anything (including, without limitation, to execute any document) that is required for that purpose. 21.8 INDEMNITIES. Each indemnity in this mortgage is a continuing obligation, separate and independent from the other obligations of the Mortgagor and survives termination of this mortgage. It is not necessary for the Mortgagee to incur expense or make payment before enforcing a right of indemnity conferred by this mortgage. 21.9 TIME OF THE ESSENCE. Time is of the essence of this mortgage in respect of an obligation of the Mortgagor to pay money or perform any act or thing under this mortgage. 21.10 CONFIDENTIALITY. The Mortgagee shall treat the information contained in the records, documents and other materials received from the Mortgagor that are both marked "Confidential" and are not otherwise available from another source as confidential information. The Mortgagee shall not disclose such confidential information to any other person except: (a) with the consent of the Mortgagor (which consent shall not to be unreasonably withheld); (b) if required by law or required by any stock exchange; (c) in connection with legal proceedings (including any alternative dispute resolution proceedings) relating to this mortgage; (d) to an Affiliate, 13 16 accountant, agent or advisor of the Mortgagee, provided such person or entity undertakes to observe this Clause 21.10; (e) to a potential assignee, participant or sub-participant of the Mortgagee's interests under this mortgage, provided such person or entity undertakes to observe this Section 21.10 except to the extent limited by Freedom of Information Act as it pertains to the U.S. Government and agencies thereof; or (f) to an insurance carrier covering political risk or other risks of the Lender associated with this mortgage. 21.11 RECEIPTS. The receipt of a Receiver or an authorized officer of the Mortgagee releases the person paying money to the Receiver or the Mortgagee in connection with this mortgage from: (a) liability to inquire whether the Secured Money has become payable; (b) liability for the money paid or expressed to be received; and (c) being concerned to see to its application or being answerable or accountable for its loss or misapplication. 22. GOVERNING LAW, JURISDICTION AND SERVICES OF PROCESS 22.1. GOVERNING LAW. THE PARTIES HERETO HAVE EXPRESSLY AGREED THAT THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TENNESSEE, UNITED STATES OF AMERICA, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF, PROVIDED, HOWEVER, THAT FOR ANY LEGAL ACTION OR PROCEEDING BROUGHT WITH RESPECT TO THIS MORTGAGE IN THE COURTS OF THE REPUBLIC OF GHANA OR ANY POLITICAL SUBDIVISION THEREOF, THIS MORTGAGE SHALL BE DEEMED TO BE MADE UNDER THE LAWS OF THE REPUBLIC OF GHANA AND FOR SUCH PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE REPUBLIC OF GHANA. 22.2. SUBMISSION TO JURISDICTION AND SERVICE OF PROCESS. The Mortgagor irrevocably agrees that any legal action or proceeding arising out of or relating to this mortgage may be instituted in the United Sates of America in any Federal or State court sitting in the State of Tennessee, and the Mortgagor irrevocably submits to the jurisdiction of these courts in any such action or proceeding. The Mortgagor irrevocably consents to such service upon it by the mailing of copies thereof by U.S. air mail or courier to the Mortgagor at its address set forth in Clause 19 of this mortgage. The foregoing provisions shall not limit the right of the Mortgagee to bring any such action or proceeding or to obtain execution on any judgment rendered in any such action or proceeding in any other appropriate jurisdiction or in any other manner. The Mortgagor agrees that final judgement against it in any legal action or proceeding arising out of or relating to this mortgage shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgement, a certified or exemplified copy of which judgment shall be conclusive evidence thereof and of the amount of its indebtedness, or by such other means provided by law. 22.3. JURY TRIAL WAIVER. THE MORTGAGOR AND MORTGAGEE EACH WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS MORTGAGE OR THE OBLIGATIONS OF MORTGAGOR RELATING HERETO. MORTGAGOR ACKNOWLEDGES THAT THE FOREGOING WAIVER IS A MATERIAL INDUCEMENT TO MORTGAGEE ENTERING INTO THIS MORTGAGE AND THAT MORTGAGEE IS RELYING UPON THE FOREGOING WAIVER IN ITS FUTURE DEALINGS WITH MORTGAGOR. MORTGAGOR WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVER WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH SUCH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 14 17 23. COUNTERPARTS This mortgage may consist of a number of counterparts and the counterparts taken together constitute one and the same instrument. EXECUTED as a deed. 15 18 SCHEDULE 1 DETAILS ITEM 1 (Clause 1.1 - definition of Collateral Security) SPECIFICALLY IDENTIFIED COLLATERAL SECURITY: No collateral security is specifically identified ITEM 2 (Clause 1.1 - definition of Present Security)
Machine Serial Engine Serial Description of Chattel No. of Chattel No. of Chattel - ---------------------- -------------- -------------- One New Caterpillar 785B Off-Highway Truck 6HK00507 4WJ00670 One New Caterpillar 785B Off-Highway Truck 6HK00508 4WJ00669 One New Caterpillar 785B Off-Highway Truck 6HK00509 4WJ00671 One New Caterpillar 785B Off-Highway Truck 6HK00510 4WJ00672 One New Caterpillar 5230 Hydraulic Excavator 7LL00044 2PK00885 One New Driltech D245S Drill 732098 67U17377 One New Caterpillar 966F II Wheel Loader 9YJ02581 13Z34964 One New Caterpillar 375 Hydraulic Excavator 6NK00131 11N12998 One New Caterpillar D6H II Track-Type Tractor 4LG05680 13Z34680 One New Caterpillar TH63 Telescopic Handler 3NN00442 5HK34629 One Used Caterpillar D400D Articulated Truck 8TF00731 11N06985 One Used Caterpillar D400D Articulated Truck 8TF00741 11N06988 One Used Caterpillar D400D Articulated Truck 8TF00742 11N07063 One Used Caterpillar D400D Articulated Truck 8TF00758 11N01737
16 19 SCHEDULE 2 (Clause 2.1 - definition of Acknowledgment) To: [ ] ("Mortgagee") Date: ACKNOWLEDGMENT Under the mortgage ("Mortgage") dated [ ] between Teberebie Goldfields Limited ("Mortgagor") and Caterpillar Financial Services Corporation ("Mortgagee") the Mortgagor notifies the Mortgagee and represents and warrants that: 1. The following chattels constitute Future Security: DESCRIPTION SERIAL NO. OF CHATTEL LOCATION OF OF CHATTEL (OR OTHER IDENTIFYING CHATTEL NUMBER) 2. The Future Security referred to in this Acknowledgment is fully paid for. 3. The Mortgagor is the legal and beneficial owner of and has good title to the Future Security referred to in this Acknowledgment free from Liens (other than Permitted Liens) other than the security granted in favor of the Mortgagee under the Mortgage. Under Clause 3.2 of the Mortgage, the Mortgagor assigns to the Mortgagee the Future Security referred to in this Acknowledgment by way of legal mortgage. We enclose: (a) the contract documents relating to our purchase of the Future Security referred to in this Acknowledgment; (b) the title documents in respect of the Future Security referred to in this Acknowledgment; (c) a copy of all service and maintenance contracts entered into by the Mortgagor (or the Mortgagor's predecessor in title to the Future Security) in respect of the Future Security referred to in this Acknowledgment. If any of the above are not enclosed we undertake to forward them to you as soon as we obtain possession of them. A term which has a defined meaning in the Mortgage has the same meaning as in the Mortgage when used in this Acknowledgment. - --------------------------------- For: 17 20 Execution Page TEBEREBIE GOLDFIELDS LIMITED BY: /s/ William Allen ------------------------------------- TITLE: Chief Financial Officer ------------------------------------- WITNESS: /s/ ------------------------------------- CATERPILLAR FINANCIAL SERVICES CORPORATION BY: /s/ Ronald R. Rossmann ------------------------------------- TITLE: Corporate Operations Manager ------------------------------------- WITNESS: /s/ ------------------------------------- 18 EX-10.4 5 CREDIT AGREEMENT 1 Exhibit 10.4 ============================================================ THE PIONEER GROUP, INC. CREDIT AGREEMENT Dated as of June 6, 1996 THE FIRST NATIONAL BANK OF BOSTON, Agent ============================================================ 2 TABLE OF CONTENTS
PAGE 1. Definitions; Certain Rules of Construction....................................................................1 2. The Credits..................................................................................................23 2.1. B Share Revolving Credit..........................................................................24 2.1.1. B Share Revolving Loan.................................................................24 2.1.2. Borrowing Requests.....................................................................24 2.1.3. B Share Revolving Notes................................................................24 2.2. B Share Term Credit...............................................................................25 2.2.1. Term Loan..............................................................................25 2.2.2. Term Notes.............................................................................25 2.2.3. Option to Extend Maturities............................................................25 2.3. Revolving Credit Facility.........................................................................25 2.3.1. Revolving Loan.........................................................................25 2.3.2. Borrowing Requests.....................................................................26 2.3.3. Revolving Note.........................................................................26 2.4. Application of Proceeds...........................................................................26 2.4.1. B Share Revolving Loan.................................................................26 2.4.2. B Share Term Loan......................................................................26 2.4.3. Revolving Loan.........................................................................26 2.4.4. Specifically Prohibited Applications...................................................27 2.5. Nature of Obligations of Lenders to Extend Credit.................................................27 3. Interest; Pricing Options; Fees..............................................................................27 3.1. Interest..........................................................................................27 3.2. Pricing Options...................................................................................27 3.2.1. Election of Pricing Options............................................................27 3.2.2. Notice to Lenders and Borrowers........................................................28 3.2.3. Selection of Interest Periods..........................................................28 3.2.4. Additional Interest....................................................................29 3.2.5. Change in Applicable Laws, Regulations, etc............................................29 3.2.6. Taxes..................................................................................29 3.2.7. Funding Procedure......................................................................30 3.3. Commitment Fees...................................................................................30 3.4. Capital Adequacy..................................................................................30 3.5. Computations of Interest and Fees.................................................................31 4. Payment......................................................................................................31 4.1. Payment at Maturity...............................................................................31 4.2. Contingent Required Prepayments...................................................................31
-i- 3 4.2.1. Excess Credit Exposure.................................................................31 4.2.2. Prepayment of B Share Revolving Loan...................................................32 4.3. Mandatory Prepayment of B Share Term Loan.........................................................32 4.4. Voluntary Prepayments.............................................................................32 4.5. Reborrowing; Application of Payments..............................................................32 4.6. Payment with Accrued Interest, etc................................................................33 5. Conditions to Extending Credit...............................................................................33 5.1. Conditions on Initial Closing Date................................................................33 5.1.1. Revolving Notes........................................................................33 5.1.2. Payment of Fees........................................................................33 5.1.3. Guarantors Contribution Agreement......................................................33 5.1.4. Legal Opinions.........................................................................33 5.1.5. Investment Assets Under Management.....................................................34 5.1.6. OPIC Insurance Policies................................................................34 5.2. Conditions on the B Share Conversion Date.........................................................34 5.2.1. B Share Term Notes.....................................................................34 5.3. Conditions to Each Extension of Credit............................................................34 5.3.1. Officer's Certificate..................................................................34 5.3.2. Proper Proceedings.....................................................................34 5.3.3. Legality, etc..........................................................................34 6. Guarantees...................................................................................................35 6.1. Guarantees of Credit Obligations..................................................................35 6.2. Continuing Obligation.............................................................................35 6.3. Waivers with Respect to Credit Obligations........................................................36 6.4. Lenders' Power to Waive, etc......................................................................37 6.5. Information Regarding Obligors, etc...............................................................38 6.6. Certain Guarantor Representations.................................................................38 6.7. No Subrogation....................................................................................39 6.8. Subordination.....................................................................................39 6.9. Future Subsidiaries; Further Assurances...........................................................39 7. General Covenants............................................................................................39 7.1. Taxes and Other Charges; Accounts Payable.........................................................40 7.1.1. Taxes and Other Charges................................................................40 7.1.2. Accounts Payable.......................................................................40 7.2. Conduct of Business, etc..........................................................................40 7.2.1. Types of Business......................................................................40 7.2.2. Maintenance of Properties..............................................................40 7.2.3. Compliance with Material Agreements....................................................41 7.2.4. Statutory Compliance...................................................................41 7.3. Insurance.........................................................................................41
-ii- 4 7.3.1. Business Interruption Insurance........................................................41 7.3.2. Errors and Omissions Insurance.........................................................42 7.3.3. Directors and Officers Insurance.......................................................42 7.3.4. Property Insurance.....................................................................42 7.3.5. Liability Insurance....................................................................42 7.4. Financial Statements and Reports..................................................................42 7.4.1. Annual Reports.........................................................................42 7.4.2. Quarterly Reports......................................................................44 7.4.3. Other Reports..........................................................................45 7.4.4. Notice of Litigation; Notice of Defaults...............................................46 7.4.5. ERISA Reports..........................................................................46 7.4.6. Other Information......................................................................47 7.5. Certain Financial Tests...........................................................................47 7.5.1. Aggregated Total Debt to Combined Mutual Fund Cash Flow................................47 7.5.2. Combined Adjusted Cash Flow to Consolidated Fixed Charges..............................47 7.5.3. Consolidated Tangible Net Worth........................................................48 7.6. Indebtedness......................................................................................48 7.7. Guarantees; Letters of Credit.....................................................................49 7.8. Liens.............................................................................................49 7.9. Investments and Acquisitions......................................................................51 7.10. Distributions....................................................................................51 7.11. Merger, Consolidation and Dispositions of Assets.................................................52 7.12. Issuance of Stock by Subsidiaries; Subsidiary Distributions; Subsidiary Guarantors.....................................................................................53 7.12.1. Issuance of Stock by Subsidiaries.....................................................53 7.12.2. Issuance of Stock by Core Mutual Fund Subsidiaries or Pioneer Goldfields Entity.....................................................................53 7.12.3. No Restrictions on Subsidiary Distributions...........................................53 7.13. ERISA, etc.......................................................................................53 7.14. Transactions with Affiliates.....................................................................53 7.15. Interest Rate Protection.........................................................................54 7.16. Maintenance of Fee Structure.....................................................................54 7.17. Maintenance of Mutual Fund Contracts.............................................................54 8. Representations and Warranties...............................................................................54 8.1. Organization and Business.........................................................................54 8.1.1. Company................................................................................54 8.1.2. Subsidiaries...........................................................................55 8.1.3. Qualification..........................................................................55 8.2. Financial Statements and Other Information; Material Agreements...................................55 8.2.1. Financial Statements and Other Information.............................................55 8.2.2. Material Agreements....................................................................56 8.2.3. Investment Assets Under Management.....................................................57
-iii- 5 8.3. Changes in Condition..............................................................................57 8.4. Agreements Relating to Financing Debt.............................................................57 8.5. Title to Assets...................................................................................57 8.6. Licenses, etc.....................................................................................57 8.7. Litigation........................................................................................58 8.8. Tax Returns.......................................................................................58 8.9. Authorization and Enforceability.................................................................59 8.10. No Legal Obstacle to Agreements..................................................................59 8.11. Defaults.........................................................................................59 8.12. Certain Business Representations.................................................................59 8.12.1. Labor Relations.......................................................................60 8.12.2. Antitrust.............................................................................60 8.12.3. Environmental Compliance..............................................................60 8.12.4. Certain Other Agreements..............................................................60 8.12.5. Certain Laws..........................................................................60 8.12.6. Burdensome Obligations................................................................60 8.13. Pension Plans....................................................................................61 8.14. Foreign Trade Regulations; Government Regulation.................................................61 8.14.1. Foreign Trade Regulations.............................................................61 8.14.2. Government Regulation.................................................................61 8.15. Pioneer Fund Management Omaha....................................................................61 8.16. Disclosure.......................................................................................61 9. Defaults.....................................................................................................61 9.1. Events of Default.................................................................................61 9.2. Certain Actions Following an Event of Default.....................................................65 9.2.1. No Obligation to Extend Credit.........................................................65 9.2.2. Specific Performance; Exercise of Rights...............................................65 9.2.3. Acceleration...........................................................................65 9.2.4. Enforcement of Payment; Credit Security; Setoff........................................66 9.2.5. Cumulative Remedies....................................................................66 9.3. Annulment of Defaults.............................................................................66 9.4. Waivers...........................................................................................66 10. Expenses; Indemnity.........................................................................................67 10.1. Expenses.........................................................................................67 10.2. General Indemnity................................................................................67 11. Operations..............................................................................................68 11.1. Interests in Credits.............................................................................68 11.2. Agent's Authority to Act, etc....................................................................68 11.3. Company to Pay Agent, etc........................................................................68 11.4. Lender Operations for Advances, etc..............................................................68
-iv- 6 11.4.1. Advances..............................................................................68 11.4.2. Agent to Allocate Payments, etc.......................................................69 11.4.3. Delinquent Lenders; Nonperforming Lenders.............................................69 11.5. Sharing of Payments, etc.........................................................................70 11.6. Amendments, Consents, Waivers, etc...............................................................70 11.7. Agent's Resignation..............................................................................71 11.8. Concerning the Agent.............................................................................72 11.8.1. Action in Good Faith, etc.............................................................72 11.8.2. No Implied Duties, etc................................................................72 11.8.3. Validity, etc.........................................................................72 11.8.4. Compliance............................................................................72 11.8.5. Employment of Agents and Counsel......................................................73 11.8.6. Reliance on Documents and Counsel.....................................................73 11.8.7. Agent's Reimbursement.................................................................73 11.8.8. Agent's Fees..........................................................................73 11.9. Rights as a Lender...............................................................................73 11.10. Independent Credit Decision.....................................................................74 11.11. Indemnification.................................................................................74 12. Successors and Assigns; Lender Assignments and Participations...............................................74 12.1. Assignments by Lenders...........................................................................75 12.1.1. Assignees and Assignment Procedures...................................................75 12.1.2. Terms of Assignment and Acceptance....................................................76 12.1.3. Register..............................................................................76 12.1.4. Acceptance of Assignment and Assumption...............................................77 12.1.5. Federal Reserve Bank..................................................................77 12.1.6. Further Assurances....................................................................77 12.2. Credit Participants..............................................................................77 13. Confidentiality.............................................................................................78 14. Foreign Persons.............................................................................................79 15. Notices.....................................................................................................79 16. Course of Dealing; Amendments and Waivers...................................................................80 17. Defeasance..................................................................................................80 18. Venue; Service of Process...................................................................................80 19. WAIVER OF JURY TRIAL........................................................................................81
-v- 7 20. General.....................................................................................................81
-vi- 8 THE PIONEER GROUP, INC. CREDIT AGREEMENT This Credit Agreement, dated as of June 6, 1996, as amended, is among The Pioneer Group, Inc., a Delaware corporation, certain of its subsidiaries listed on the signature pages hereto and other Borrower Subsidiaries (as defined below) who from time to time become party hereto, the Lenders (as defined below) and The First National Bank of Boston, as agent for itself and the other Lenders. The parties agree as follows: 1. Definitions; Certain Rules of Construction. Except as otherwise explicitly specified to the contrary, (a) the capitalized term "Section" refers to sections of this Agreement, (b) the capitalized term "Exhibit" refers to exhibits to this Agreement, (c) references to a particular Section include all subsections thereof, (d) the word "including" shall be construed as "including without limitation," (e) accounting terms not otherwise defined herein shall have the meaning provided under GAAP and (f) terms defined in the UCC and not otherwise defined herein shall have the meaning provided under the UCC. Certain capitalized terms are used in this Agreement as specifically defined as follows: 1.1. "Accumulated Benefit Obligations" means the actuarial present value of the accumulated benefit obligations under any Plan, calculated in a manner consistent with Statement No. 87 of the Financial Accounting Standards Board. 1.2. "Affiliate" means, with respect to the Company (or other specified Person), any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with the Company, and shall include (a) any officer or director of the Company or general partner of such Person and (b) any Person of which the Company or any Affiliate (as defined in clause (a) above) of the Company shall, directly or indirectly, beneficially own either (i) at least 10% of the outstanding equity securities having the general power to vote or (ii) at least 10% of all equity interests. 1.3. "Agent" means Bank of Boston in its capacity as agent for the Lenders hereunder, as well as its successors and assigns in such capacity pursuant to Section 11.7. 1.4. "Applicable Margin" means, (1) with respect to any portion of the Revolving Loan subject to a Pricing Option, (a) on or after the Initial Closing Date but prior to the first anniversary of the Initial Closing Date: (i) on any date that Company Total Debt is less than or equal to 250% of Combined Mutual Fund Cash Flow, 1.25%; 9 (ii) on any date that Company Total Debt is greater than 250% but less than 300% of Combined Mutual Fund Cash Flow, 1.50%; and (iii) on any date that Company Total Debt is equal to or greater than 300% of Combined Mutual Fund Cash Flow, 1.75%. (b) on and after the first anniversary of the Initial Closing Date: (i) on any date that Company Total Debt is less than or equal to 200% of Combined Mutual Fund Cash Flow, 0.75%; (ii) on any date that Company Total Debt is greater than 200% but less than or equal to 250% of Combined Mutual Fund Cash Flow, 1.25%; (iii) on any date that Company Total Debt is greater than 250% but less than 300% of Combined Mutual Fund Cash Flow, 1.50%; and (iv) on any date that Company Total Debt is equal to or greater than 300% of Combined Mutual Fund Cash Flow, 1.75%; and (2) with respect to each other portion of the Revolving Loan, (a) on any date that Company Total Debt is less than 300% of Combined Mutual Fund Cash Flow, 0%; and (b) on any date that Company Total Debt is equal to or greater than 300% of Combined Mutual Fund Cash Flow, 0.25%. For purposes of calculating the Applicable Margin, (1) Company Total Debt shall be determined as of the last day of the most recently ended fiscal quarter for which financial statements have been furnished (or are required to have been furnished) by the Company to the Agent pursuant to Sections 7.4.1 or 7.4.2 and (2) Combined Mutual Fund Cash Flow shall be determined for the period of four consecutive fiscal quarters of the Company then ended. Any adjustment in the Applicable Margin shall take effect upon the earlier of (i) the date upon which the financial statements referred to in the foregoing sentence are furnished or (ii) the date such financial statements are required to be furnished by the Company to the Agent. If for any reason the Company shall not have furnished the financial statements required by Sections 7.4.1 or 7.4.2 upon the expiration of the period specified in Section 9.1.2, then the Applicable Margin shall be deemed to be the highest margin specified by this Section 1.4 1.5. "Applicable Rate" means, at any date, -2- 10 (1) (a) with respect to the B Share Loan, (i) for each portion of the B Share Loan subject to a Pricing Option, the sum of the Eurodollar Rate with respect to such Pricing Option plus 1.25%; and (ii) for each other portion of the B Share Loan, the Base Rate; (b) with respect to the Revolving Loan, (i) for each portion of the Revolving Loan subject to a Pricing Option, the sum of the Eurodollar Rate with respect to such Pricing Option plus the Applicable Margin; and (ii) for each other portion of the Revolving Loan, the Base Rate plus the Applicable Margin; plus (2) in each case, an additional 2% effective on the day the Agent notifies (which notice the Agent shall be required to give upon the written request of the Required Lenders) the Company that the interest rates hereunder are increasing as a result of the occurrence of an Event of Default until the earlier of such time as (i) such Event of Default is no longer continuing or (ii) such Event of Default is deemed no longer to exist, in each case pursuant to Section 9.3. 1.6. "Assignee" is defined in Section 12.1.1. 1.7. "Assignment and Acceptance" is defined in Section 12.1.1. 1.8. "B Share Collection Amount" means, for any period, the sum of Distribution Fees plus Redemption Fees received by the Company or any Subsidiary of the Company during such period. 1.9. "B Share Conversion Date" means the earlier of June 10, 1997, or the date 364 days after the Initial Closing Date, or such later date as determined in accordance with Section 2.2.3. 1.10. "B Share Final Maturity Date" means the fifth anniversary of the B Share Conversion Date. 1.11. "B Share Funds" means the Funds set forth on Exhibit 7.16, with dealer commissions with respect to the sale of B Shares no more favorable to the Brokers and Redemption Fees and Distribution Fees with respect to B Shares no more favorable to the shareholders of such Funds than as specified in Exhibit 7.16. -3- 11 1.12. "B Share Loan" means the B Share Revolving Loan or the B Share Term Loan, as applicable. 1.13. "B Share Notes" means the B Share Revolving Notes or the B Share Term Notes, as applicable. 1.14. "B Share Revolving Loan" is defined in Section 2.1.1. 1.15. "B Share Revolving Note" is defined in Section 2.1.3. 1.16. "B Share Term Loan" is defined in Section 2.2.1. 1.17. "B Share Term Notes" is defined in Section 2.2.2. 1.18. "B Shares" means any shares (or class of shares) of beneficial interest or capital stock of any B Share Fund, upon the redemption of which a Redemption Fee may be payable at any time, and that are set forth on Exhibit 7.16. 1.19. "Bank of Boston" means The First National Bank of Boston and its successors. 1.20. "Banking Day" means any day other than Saturday, Sunday or a day on which banks in Boston, Massachusetts or New York, New York are authorized or required by law or other governmental action to close and, if such term is used with reference to a Pricing Option, any day on which dealings are effected in the Eurodollars in question by first-class banks in the inter-bank Eurodollar markets in New York, New York and at the location of the applicable Eurodollar office. 1.21. "Bankruptcy Code" means Title 11 of the United States Code (or any successor statute) and the rules and regulations thereunder, all as from time to time in effect. 1.22. "Bankruptcy Default" means an Event of Default referred to in Section 9.1.11. 1.23. "Base Rate" means, on any day, the greater of (a) the rate of interest announced by Bank of Boston at the Boston Office as its Base Rate or (b) the sum of 1/2% plus the Federal Funds Rate. 1.24. "Basic Eurodollar Rate" means, as applied to any Interest Period, the rate of interest at which Eurodollar deposits in an amount comparable to the Percentage Interest of Bank of Boston in the portion of the Loan as to which a Pricing Option has been elected and which have a term corresponding to the Interest Period in question are offered to Bank of Boston by first class banks in the inter-bank Eurodollar market for delivery in immediately available funds at a Eurodollar Office on the first day of such Interest Period as determined by -4- 12 the Agent at approximately 10:00 a.m. (Boston time) two Banking Days prior to the date upon which the Interest Period in question is to commence, which determination by the Agent shall, in the absence of manifest error, be conclusive. 1.25. "Borrower" means each of the Company and the Borrower Subsidiaries. 1.26. "Borrower Subsidiary" means initially Pioneering Management Corporation and Pioneer Management (Ireland) Ltd., each of their Wholly Owned Subsidiaries and any other Wholly Owned Subsidiary from time to time designated by the Company and approved by the Required Lenders. 1.27. "Boston Office" means the principal banking office of Bank of Boston in Boston, Massachusetts. 1.28. "Broker" means any broker, dealer, bank or other person or entity (other than any Subsidiary or any director, officer or employee of the Company or any Subsidiary) that sells or arranges for the sale of B Shares and is entitled to receive from the Company or any Subsidiary any commission or other compensation in respect of such sales. 1.29. "By-laws" means all written by-laws of any Person other than an individual or similar governance documents of such Person, all as from time to time in effect. 1.30. "Capitalized Lease" means any lease which is required to be capitalized on the balance sheet of the lessee in accordance with GAAP, including Statement Nos. 13 and 98 of the Financial Accounting Standards Board. 1.31. "Capitalized Lease Obligations" means the amount of the liability reflecting the aggregate discounted amount of future payments under all Capitalized Leases calculated in accordance with GAAP, including Statement Nos. 13 and 98 of the Financial Accounting Standards Board. 1.32. "Cash Equivalents" means: (a) negotiable certificates of deposit, time deposits (including sweep accounts), demand deposits and bankers' acceptances issued by any United States financial institution having capital and surplus and undivided profits aggregating at least $100,000,000 and rated Prime-1 by Moody's Investors Service, Inc. or A-1 by Standard & Poor's Ratings Group (or equivalently rated by any other nationally recognized rating organization) or issued by any Lender; (b) short-term corporate obligations rated Prime-1 by Moody's Investors Service, Inc. or A-1 by Standard & Poor's Ratings Group (or equivalently rated by any other nationally recognized rating organization) or issued by any Lender; -5- 13 (c) any direct obligation of the United States of America or any agency or instrumentality thereof, or of any state or municipality thereof, (i) which has a remaining maturity at the time of purchase of not more than one year or (ii) which is subject to a repurchase agreement with any Lender (or any other financial institution referred to in clause (a) above) exercisable within one year from the time of purchase and (iii) which, in the case of obligations of any state or municipality, is rated AA or better by Moody's Investors Service, Inc. or equivalently rated by any other nationally recognized rating organization; and (d) any mutual fund or other pooled investment vehicle which invests principally in obligations described above and which is rated AA or better by Moody's Investors Service, Inc. or equivalently rated by any other nationally recognized rating organization. 1.33. "Charter" means the articles of organization, certificate of incorporation, joint venture agreement, partnership agreement, trust indenture or other charter document of any Person other than an individual, each as from time to time in effect. 1.34. "Closing Date" means the Initial Closing Date and each subsequent date on which any extension of credit is made pursuant to Section 2. 1.35. "Code" means, collectively, the federal Internal Revenue Code of 1986 (or any successor statute) and the rules and regulations thereunder, all as from time to time in effect. 1.36. "Combined" and "Combining", when used with reference to any term, mean that term as applied to the accounts of the Company (or other specified Person) and such of its Subsidiaries as may be specified (or other specified Persons), combined or combining, as the case may be, in accordance with GAAP and with appropriate deductions for minority interests in Subsidiaries. 1.37. "Combined Adjusted Cash Flow" means, for any period, the total of (a) Combined Mutual Fund Cash Flow plus (b) the B Share Collection Amount during such period. 1.38. "Combined Mutual Fund Cash Flow" means, for any period, the total of: (a) Combined Mutual Fund Net Income; plus (b) all amounts deducted in computing such Combined Mutual Fund Net Income in respect of: (i) interest on Financing Debt; -6- 14 (ii) taxes based upon or measured by income; (iii) depreciation and amortization (including amortization resulting from Contingent Deferred Sales Charges); minus (c) the B Share Collection Amount. 1.39. "Combined Mutual Fund Net Income" means, for any period, the net income (or loss) of the Core Mutual Fund Subsidiaries, determined in accordance with GAAP on a Combined basis; provided, however, that such Combined Mutual Fund Net Income shall not include: (a) the income (or loss) of any Person accrued prior to the date such Person becomes a Core Mutual Fund Subsidiary or is merged into or consolidated with any Core Mutual Fund Subsidiary; (b) the income (or loss) of any Person (other than a Core Mutual Fund Subsidiary) in which the Core Mutual Fund Subsidiary has an ownership interest; provided, however, that (i) Combined Mutual Fund Net Income shall include amounts in respect of the income of such Person when actually received in cash by the Core Mutual Fund Subsidiary in the form of dividends or similar Distributions and (ii) Combined Mutual Fund Net Income shall be reduced by the aggregate amount of all Investments, regardless of the form thereof, made by the Core Mutual Fund Subsidiary in such Person for the purpose of funding any deficit or loss of such Person; (c) all amounts included in computing such net income (or loss) in respect of the write-up of any asset (and any depreciation and amortization charges resulting from any such write-up of assets). (d) the income of any Core Mutual Fund Subsidiary to the extent the payment of such income in the form of a Distribution or repayment of Indebtedness to a Core Mutual Fund Subsidiary is not permitted, whether on account of any Charter or By-law restriction, any agreement, instrument, deed or lease or any law, statute, judgment, decree or governmental order, rule or regulation applicable to such Core Mutual Fund Subsidiary; (e) extraordinary and nonrecurring gains; and (f) any after-tax gains or losses attributable to returned surplus assets of any Plan. 1.40. "Combined Unreimbursed Sales Commissions" means, for any period, (a) for the first such period after the Initial Closing Date, the total of: -7- 15 (i) Prepaid Brokerage Commissions paid by the Company and its Subsidiaries as of the first day of such period (excluding Distribution Fees collected on prior B Share sales, calculated based on the original purchase price amount of such B Shares); minus (ii) the B Share Collection Amount as of the first day of such period; and (b) for each subsequent period, the total of: (i) Combined Unreimbursed Sales Commissions as of the last day of the previous period; plus (ii) Prepaid Brokerage Commissions paid by the Company and its Subsidiaries during such period; plus (iii) accrued but unpaid interest in respect of the B Share Loan; minus (iv) the B Share Collection Amount for such period. 1.41. "Commitment" means, with respect to any Lender, such Lender's Percentage Interest in the obligations to extend the credits contemplated by the Credit Documents. 1.42. "Commodities Act" means, collectively, the federal Commodities Exchange Act (or any successor statute), the rules and regulations thereunder and the rules and regulations of the Commodity Futures Trading Commission (or any successor), all as from time to time in effect. 1.43. "Company" means The Pioneer Group, Inc., a Delaware corporation. 1.44. "Company Total Debt" means, at any date, the total of: (a) Indebtedness in respect of borrowed money; (b) Indebtedness evidenced by notes, debentures or similar instruments; (c) Indebtedness in respect of Capitalized Leases; (d) Indebtedness in respect of the deferred purchase price of assets (other than normal trade accounts payable in the ordinary course of business); (e) Indebtedness in respect of mandatory redemption or dividend rights on capital stock (or other equity); -8- 16 (f) Indebtedness in respect of unfunded pension liabilities; (g) Indebtedness in respect of financial Guarantees and letters of credit; and (h) Indebtedness calculated in accordance with GAAP in respect of tax deficiencies asserted in a notice of deficiency from the IRS issued pursuant to Section 6212 (or similar or successor provisions) of the Code; minus (i) the B-Share Loan. For purposes of this Section 1.44 only, the term "Indebtedness" shall exclude any Consolidated balance sheet obligations of the Company for which the Company is not directly liable or otherwise obligated, including but not limited to Indebtedness of Teberebie Goldfields Ltd. in respect of certain equipment financings. 1.45. "Computation Covenants" means Sections 7.5, 7.8.10, 7.11.1, 7.13 and 7.15. 1.46. "Consolidated" and "Consolidating," when used with reference to any term, mean that term as applied to the accounts of the Company (or other specified Person) and all of its Subsidiaries (or other specified group of Persons), or such of its Subsidiaries as may be specified, consolidated (or combined) or consolidating (or combining), as the case may be, in accordance with GAAP and with appropriate deductions for minority interests in Subsidiaries, as required by GAAP. 1.47. "Consolidated Fixed Charges" means, for any period, the sum of: (a) the aggregate amount of interest, including payments in the nature of interest under Capitalized Leases, accrued by the Company (whether such interest is reflected as an item of expense or capitalized) in accordance with GAAP on a Consolidated basis, plus (b) the aggregate amount of all required or mandatory scheduled payments, prepayments and sinking fund payments with respect to principal paid or accrued by the Company in respect of Financing Debt other than the Loan, plus (c) only for periods after the B Share Conversion Date, the extent to which the prepayments on the B Share Term Loan required by Section 4.3 exceed the B Share Collection Amount. 1.48. "Consolidated Net Income" means, for any period, the net income (or loss) of the Company and its Subsidiaries, determined in accordance with GAAP on a Consolidated basis; provided however, that such Consolidated Net Income shall not include: -9- 17 (a) the income (or loss) of any Person accrued prior to the date such Person becomes a Subsidiary of the Company or is merged into or consolidated with any Subsidiary of the Company; (b) the income (or loss) of any Person (other than a Subsidiary of the Company) in which a Subsidiary of the Company has an ownership interest; provided, however, that (i) Consolidated Net Income shall include amounts in respect of the income of such Person when actually received in cash by such Subsidiary in the form of dividends or similar Distributions and (ii) Consolidated Net Income shall be reduced by the aggregate amount of all Investments, regardless of the form thereof, made by such Subsidiary in such Person for the purpose of funding any deficit or loss of such Person; (c) all amounts included in computing net income (or loss) in respect of the write-up of any asset (and any depreciation and amortization charges resulting from any such write-up of assets); (d) the income of any Subsidiary of the Company to the extent the payment of such income in the form of a Distribution or repayment of Indebtedness to the Company or any Subsidiary of the Company is not permitted, whether on account of any Charter or By-law restriction, any agreement, instrument, deed or lease or any law, statute, judgment, decree or governmental order, rule or regulation applicable to such Subsidiary; (e) extraordinary and non-recurring gains; and (f) any after-tax gains or losses attributable to returned surplus assets of any Plan. 1.49. "Consolidated Tangible Net Worth" means, at any date, the total of: (a) stockholders' equity of the Company and its Subsidiaries (excluding the effect of any foreign currency translation adjustments) determined in accordance with GAAP on a Consolidated basis, minus (b) the amount by which such stockholders' equity has been increased by the write-up of any asset of the Company and its Subsidiaries (excluding any write-ups net of write-downs associated with any venture capital investments of the Company and its Subsidiaries, minus (c) assets of the Company and its Subsidiaries that are considered intangible assets under GAAP (including but not limited to customer lists, goodwill, computer software and capitalized research and development costs other than the capitalized development costs relating to the natural resource business operations of the Company or any of its Subsidiaries). -10- 18 1.50. "Contingent Deferred Sales Charge" means any amount that is or may be payable to the Company or any of its Subsidiaries by any Fund or any shareholder thereof in such capacity upon redemption of all or a portion of shares of beneficial interest or capital stock in the Funds upon redemption of B Shares at rates and on terms no more favorable to such Funds or the shareholders thereof than as specified in the pricing structure set forth in Exhibit 7.16. 1.51. "Core Mutual Fund Subsidiaries" means each of Pioneering Management Corporation, Pioneer Funds Distributor, Inc., Pioneering Services Corporation, Pioneer Management (Ireland) Ltd., and any other Borrower Subsidiary and any other Person which becomes a Subsidiary of the Company after the date of this Agreement if such Person engages in activities similar or related to the business conducted by any Core Mutual Fund Subsidiary and is approved by the Required Lenders. 1.52. "Credit Documents" means: (a) this Agreement and the Notes, each as from time to time in effect; (b) all financial statements, reports, notices and certificates delivered to any of the Lenders by the Company or any Subsidiary in connection herewith or therewith; and (c) any other present or future agreement or instrument from time to time entered into among the Company or any Subsidiary on the one hand, and the Agent or all the Lenders, on the other hand, relating to, amending or modifying this Agreement or any other Credit Document referred to above or which is stated to be a Credit Document (including the separate letter agreement between the Company and the Agent relating to certain fees of the Agent), each as from time to time in effect. 1.53. "Credit Obligations" means all present and future liabilities, obligations and Indebtedness of the Company, any Subsidiary or any of their Affiliates party to a Credit Document owing to any Lender under or in connection with this Agreement or any other Credit Document, including obligations in respect of principal, interest, commitment fees, amounts provided for in Sections 3.2.4, 3.2.6, 3.4 and 10 and other fees, charges, indemnities and expenses from time to time owing hereunder or under any other Credit Document (whether accruing before or after a Bankruptcy Default). 1.54. "Credit Participant" is defined in Section 12.2. 1.55. "Default" means any Event of Default and any event or condition which with the passage of time or giving of notice, or both, would become an Event of Default. 1.56. "Delinquency Period" is defined in Section 11.4.3. -11- 19 1.57. "Delinquent Lender" is defined in Section 11.4.3. 1.58. "Delinquent Payment" is defined in Section 11.4.3. 1.59. "Distribution" means, with respect to the Company (or other specified Person): (a) the declaration or payment of any dividend, including dividends payable in shares of capital stock of the Company, on or in respect of any shares of any class of capital stock of the Company; (b) the purchase, redemption or other retirement of any shares of any class of capital stock of the Company (or of options, warrants or other rights for the purchase of such shares), directly, indirectly through a Subsidiary or otherwise; (c) any other distribution on or in respect of any shares of any class of equity of or beneficial interest in the Company; (d) any payment of principal or interest with respect to, or any purchase, redemption or defeasance of, any Indebtedness of the Company which by its terms or the terms of any agreement is subordinated to the payment of the Credit Obligations; and (e) any payment, loan or advance by the Company to, or any other Investment by the Company in, the holder of any shares of any class of capital stock of or equity or interest in the Company or any Affiliate of such holder; provided, however, that the term "Distribution" shall not include payments in the ordinary course of business in respect of (i) reasonable compensation paid to employees, officers and directors, (ii) advances to employees for travel expenses, drawing accounts and similar expenditures, (iii) rent paid to or accounts payable for services rendered or goods sold by non-Affiliates or (iv) intercompany accounts payable and real property leases to non-Affiliates. 1.60. "Distribution Agreement" means any distribution agreement of which a Distribution Plan is a part. 1.61. "Distribution Fees" means fees paid by the B Share Funds to the Company or any other Subsidiary of the Company (minus any portion of such fees remitted by the Company or any other Subsidiary to a Broker as concessions, trailing compensation or service fees) pursuant to a Distribution Plan. 1.62. "Distribution Plan" means any plan duly adopted by any B Share Fund and validly in effect pursuant to Rule 12b-1 under the Investment Company Act (or similar or -12- 20 successor provisions) pursuant to which such B Share Fund may make payments to the Company or any Subsidiary in connection with the distribution of B Shares. 1.63. "ERISA" means, collectively, the Employee Retirement Income Security Act of 1974 (or any successor statute) and the rules and regulations thereunder, all as from time to time in effect. 1.64. "ERISA Group Person" means the Company, any Subsidiary and any Person which is a member of the controlled group or under common control with the Company or any Subsidiary within the meaning of section 414 of the Code or section 4001(a)(14) of ERISA. 1.65. "Eurodollar Office" means such non-United States office or international banking facility of any Lender as such Lender may from time to time select. 1.66. "Eurodollar Rate" for any Interest Period means the rate, rounded to the nearest 1/100%, obtained by dividing (a) the Basic Eurodollar Rate for such Interest Period by (b) an amount equal to 1 minus the Eurodollar Reserve Rate; provided, however, that if at any time during such Interest Period the Eurodollar Reserve Rate applicable to any outstanding Pricing Option changes, the Eurodollar Rate for such Interest Period shall automatically be adjusted to reflect such change, effective as of the date of such change. 1.67. "Eurodollar Reserve Rate" means the stated maximum rate (expressed as a decimal) of all reserves (including any basic, supplemental, marginal or emergency reserve or any reserve asset), if any, as from time to time in effect, required by any Legal Requirement to be maintained by any Lender against (a) "Eurocurrency liabilities" as specified in Regulation D of the Board of Governors of the Federal Reserve System (or any successor regulation) applicable to a Pricing Option, (b) any other category of liabilities that includes Eurodollar deposits by reference to which the interest rate on portions of the Loan subject to a Pricing Option is determined, (c) the principal amount of or interest on any portion of the Loan subject to a Pricing Option or (d) any other category of extensions of credit, or other assets, that includes portions of the Loan subject to a Pricing Option by a non-United States office of any of the Lenders to United States residents. 1.68. "Eurodollars" means, with respect to any Lender, deposits of United States Funds in a non-United States office or an international banking facility of such Lender. 1.69. "Event of Default" is defined in Section 9.1. 1.70. "Exchange Act" means, collectively, the federal Securities Exchange Act of 1934 (or any successor statute) and the rules and regulations thereunder, all as from time to time in effect. -13- 21 1.71. "Excluded Subsidiary" means any Subsidiary of the Company which (i) is, as of the date hereof, a registered broker/dealer under, and subject to the net capital requirements of, the Exchange Act or (ii) becomes, after the date hereof, a registered broker/dealer under, and subject to the net requirements of, the Exchange Act and is consented to in writing by the Agent, which consent shall not be unreasonably withheld. 1.72. "Executive Officer" means the chief executive officer, chief operating officer or president of the Company (or other specified Person) or any vice president of the Company who is not a Financial Officer. 1.73. "Federal Funds Rate" means, for any day, (a) the rate 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, as such weighted average is published for such day (or, if such day is not a Banking Day, for the immediately preceding Banking Day) by the Federal Reserve Bank of New York or (b) if such rate is not so published for such Banking Day, as determined by the Agent using any reasonable means of determination. Each determination by the Agent of the Federal Funds Rate shall, in the absence of manifest error, be conclusive. 1.74. "Financial Officer" means the chief financial officer, treasurer or assistant treasurer of the Company (or other specified Person) or a vice president whose primary responsibility is for the financial affairs of the Company (or other specified Person). 1.75. "Financing Debt" means: (a) Indebtedness in respect of borrowed money; (b) Indebtedness evidenced by notes, debentures or similar instruments; (c) Indebtedness in respect of Capitalized Leases; (d) Indebtedness in respect of the deferred purchase price of assets (other than normal trade accounts payable in the ordinary course of business); (e) Indebtedness in respect of mandatory redemption or dividend rights on capital stock (or other equity); (f) Indebtedness in respect of unfunded pension liabilities; (g) Indebtedness in respect of financial Guarantees and letters of credit; and -14- 22 (h) Indebtedness calculated in accordance with GAAP in respect of tax deficiencies asserted in a notice of deficiency from the IRS issued pursuant to Section 6212 (or similar or successor provisions) of the Code. 1.76. "Foreign Trade Regulations" means, collectively and as from time to time in effect (including any successor statutes or regulations), (a) any act that prohibits or restricts, or empowers the President or executive agencies of the United States of America to prohibit or restrict, exports to or financial transactions with any foreign country or foreign national, (b) the regulations with respect to certain prohibited foreign trade transactions set forth at 15 C.F.R. Parts 730 et seq., 22 C.F.R. Parts 120-130 and 31 C.F.R. Parts 500 et seq. and (c) any order, regulation, ruling, interpretation, direction, instruction or notice relating to any of the foregoing. 1.77. "Fund" means (a) with respect to any Trust that has more than one portfolio, the individual portfolios, interests in which are represented by series of shares of beneficial interest or capital stock of each Trust having series, for which portfolio the Company or any of its Subsidiaries provides investment advisory services pursuant to Investment Advisory Contracts and (b) with respect to any Trust that does not have more than one portfolio, such Trust. 1.78. "GAAP" means generally accepted accounting principles, as defined by the United States Financial Accounting Standards Board, as from time to time in effect; provided, however, that for purposes of compliance with Section 7 (other than Section 7.4) and the related definitions, "GAAP" means such principles as in effect on December 31, 1995 as applied by the Company and its Subsidiaries in the preparation of the December 31, 1995 financial statements referred to in Section 8.2.1.1, and consistently followed, without giving effect to any subsequent changes therein other than changes consented to in writing by the Required Lenders. 1.79. "Guarantee" means, with respect to the Company (or other specified Person): (a) any guarantee by the Company of the payment or performance of, or any contingent obligation of the Company in respect of, any Indebtedness or other obligation of any other Person; (b) any other arrangement whereby credit is extended to a Person on the basis of any promise or undertaking of the Company (including any "comfort letter" or "keep well agreement" written by the Company to a creditor or prospective creditor of such Person) to (i) pay the Indebtedness of such Person, (ii) purchase an obligation owed by such Person, (iii) pay for the purchase or lease of assets or services regardless of the actual delivery thereof or (iv) maintain the capital, working capital, solvency or general financial condition of such Person, in each case whether or not such arrangement is disclosed in the balance sheet of the Company or referred to in a footnote thereto; -15- 23 (c) any liability of the Company as a general partner of a partnership in respect of Indebtedness or other obligations of such partnership; (d) any liability of the Company as a joint venturer of a joint venture in respect of Indebtedness or other obligations of such joint venture; and (e) reimbursement obligations with respect to letters of credit, surety bonds and other financial guarantees; provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Guarantee and the amount of Indebtedness resulting from such Guarantee shall be the amount which should be carried on the balance sheet of the obligor whose obligations were guaranteed in respect of such obligations (but without giving effect to any limitations on recourse against such obligor), determined in accordance with GAAP. 1.80. "Guarantor" means the Company and each of the Core Mutual Fund Subsidiaries (initially other than the Excluded Subsidiaries) and other Subsidiaries, including the Excluded Subsidiaries, from time to time becoming party to this Agreement as a Guarantor. 1.81. "Guarantors Contribution Agreement" means the Guarantors Contribution Agreement dated the date hereof among the Company and the Guarantors, as from time to time in effect, pursuant to which the Guarantors shall make contributions among themselves with respect to payments made in accordance with their respective guarantees of the Credit Obligations. 1.82. "Inactive Subsidiary" means any Subsidiary that conducts no business and which has total assets with a fair market value (or book value, if greater) of less than $25,000. 1.83. "Indebtedness" means all obligations, contingent or otherwise, which in accordance with GAAP are required to be classified upon the balance sheet of the Company (or other specified Person) as liabilities, but in any event including: (a) liabilities secured by any Lien existing on property owned or acquired by the Company or any Subsidiary, whether or not the liability secured thereby shall have been assumed; (b) Capitalized Lease Obligations; (c) mandatory redemption, repurchase or dividend obligations with respect to capital stock (or other evidence of beneficial interest); and (d) all endorsements in respect of Indebtedness of others. -16- 24 1.84. "Indemnified Party" is defined in Section 10.2. 1.85. "Initial Closing Date" means June 11, 1996 or such other date prior to June 13, 1996 as agreed to by the Company and the Agent as the first Closing Date hereunder. 1.86. "Interest Period" means any period, selected as provided in Sections 3.2.1 and 3.2.3, of one, two, three or six months, commencing on any Banking Day and ending on the corresponding date in the subsequent calendar month so indicated (or, if such subsequent calendar month has no corresponding date, on the last day of such subsequent calendar month); provided, however, that subject to Section 3.2.4, if any Interest Period so selected would otherwise begin or end on a date which is not a Banking Day, such Interest Period shall instead begin or end, as the case may be, on the immediately preceding or succeeding Banking Day as determined by the Agent in accordance with the then current banking practice in the inter-bank Eurodollar market with respect to Eurodollar deposits at the applicable Eurodollar Office, which determination by the Agent shall, in the absence of manifest error, be conclusive. 1.87. "Interest Rate Protection Agreement" means any interest rate swap, interest rate cap or other contractual arrangement protecting a Person against increases in variable interest rates on Financing Debt. 1.88. "Investment" means, with respect to the Company (or other specified Person): (a) any share of capital stock, evidence of Indebtedness or other security issued by any other Person; (b) any loan, advance or extension of credit to, or contribution to the capital of, any other Person; (c) any acquisition of all or any part of the business of any other Person or the assets comprising such business or part thereof; (d) any commitment or option to make any Investment; and (e) any other similar investment. The investments described in the foregoing clauses (a) through (e) shall be included in the term "Investment" whether they are made or acquired by purchase, exchange, issuance of stock or other securities, merger, reorganization or any other method; provided, however, that the term "Investment" shall not include (i) current trade and customer accounts receivable for property leased, goods furnished or services rendered in the ordinary course of business and payable in accordance with customary trade terms, (ii) advances and prepayments to suppliers for property leased, goods furnished and services rendered in the ordinary course of business, -17- 25 (iii) advances to employees for travel expenses, drawing accounts and similar expenditures, (iv) stock or other securities acquired in connection with the satisfaction or enforcement of Indebtedness or claims due to the Company or any Subsidiary or as security for any such Indebtedness or claim or (v) demand deposits in banks or trust companies. In determining the amount of outstanding Investments for purposes of Section 7.9: (1) the amount of any Investment (other than Investments referred to in the following clause (2) or (3)) shall be the cost thereof minus any returns of capital on such Investment (determined in accordance with GAAP without regard to amounts realized as income on such Investment); (2) the amount of any Investment in respect of a commitment or option to make a purchase shall be the amount of any nonrefundable down payment or acquisition price plus the amount of any additional fixed payment obligation; (3) the amount of any Investment in respect of a Guarantee shall be the maximum amount that the guarantor may become obligated to pay in respect of the obligations guaranteed (whether or not such obligations are outstanding at the time of computation); (4) the amount of any Investment in respect of a purchase described in clause (c) above shall be increased by the amount of any Indebtedness assumed in connection with such purchase or secured by any asset acquired in such purchase (whether or not any Indebtedness is assumed) or for which any Person that becomes a Subsidiary is liable on the date on which the securities of such Person are acquired; and (5) no Investment shall be increased as the result of an increase in the undistributed retained earnings of the Person in which the Investment was made or decreased as a result of an equity interest in the losses of such Person. 1.89. "Investment Advisers Act" means, collectively, the federal Investment Advisers Act of 1940 (or any successor statute) and the rules and regulations thereunder, all as from time to time in effect. 1.90. "Investment Advisory Contracts" means binding written contractual agreements under which the Company or any of its Subsidiaries provides investment advisory services to a Fund or Trust under the Investment Company Act or the Investment Advisers Act. 1.91. "Investment Company Act" means, collectively, the federal Investment Company Act of 1940 (or any successor statute) and the rules and regulations thereunder, all as from time to time in effect. -18- 26 1.92. "Legal Requirement" means any requirement imposed upon any of the Lenders by any law of the United States of America or any jurisdiction in which any Eurodollar Office is located or by any regulation, order, interpretation, ruling or official directive of the Board of Governors of the Federal Reserve System or any other board or governmental or administrative agency of the United States of America, of any jurisdiction in which any Eurodollar Office is located, or of any political subdivision of any of the foregoing. Any requirement imposed by any such regulation, order, ruling or official directive not having the force of law shall be deemed to be a Legal Requirement if any of the Lenders reasonably believes that compliance therewith is in the best interest of such Lender. 1.93. "Lenders" means the Persons owning a Percentage Interest in the Credit Obligations or having a Commitment and their respective Assignees permitted by Section 12.1. 1.94. "Lending Officer" means such officers or employees of the Agent as from time to time designated by it in writing to the Company. 1.95. "Lien" means, with respect to the Company (or any other specified Person): (a) Any encumbrance, mortgage, pledge, lien, charge or security interest of any kind upon any property or assets of such Person, whether now owned or hereafter acquired, or upon the income or profits therefrom. (b) Any arrangement or agreement which prohibits such Person from creating encumbrances, mortgages, pledges, liens, charges or security interests. (c) The acquisition of, or the agreement to acquire, any property or asset upon conditional sale or subject to any other title retention agreement, device or arrangement (including a Capitalized Lease). (d) The sale, assignment, pledge or transfer for security of any accounts, general intangibles or chattel paper of such Person, with or without recourse. (e) The transfer of any tangible property or assets for the purpose of subjecting such items to the payment of Indebtedness in priority to payment of the general creditors of the Company. (f) The existence for a period of more than 90 consecutive days of any Indebtedness against the Company which if unpaid would by law or upon a Bankruptcy Default be given any priority over general creditors. 1.96. "Loan" means either the B Share Revolving Loan, the B Share Term Loan or the Revolving Loan, as applicable. -19- 27 1.97. "Margin Stock" means "margin stock" within the meaning of Regulation G, T, U or X (or any successor provisions) of the Board of Governors of the Federal Reserve System, or any regulations, interpretations or rulings thereunder, all as from time to time in effect. 1.98. "Material Adverse Change" means a material adverse change in the business, assets, financial condition, results of operations or prospects of the Company (on an individual basis) or the Company and its Subsidiaries (on a Consolidated basis) (or any other specified Persons), including: (a) general economic conditions affecting the mutual fund industry, (b) fire, flood or other natural calamities, (c) regulatory changes, judicial decisions, war or other governmental action, (d) termination of the Company's or any Subsidiary's status as a registered investment adviser under the Investment Advisers Act or, on an involuntary basis, under the laws of states material to the Company or such Subsidiary's business, (e) involuntary termination of the status of the Company or any Subsidiary as a registered broker/dealer in good standing under the Exchange Act or laws of states material to the Company's or such Subsidiary's business, or as a member of the NASD in good standing, (f) termination of the qualification of any Trust or Fund as a regulated investment company taxed under the rules of subchapter M of the Code (other than as a result of merger or other voluntary termination of any Trust or Fund), (g) the issuance by the Securities and Exchange Commissions of a stop order suspending the effectiveness of a Trust's or Fund's registration statement under the Securities Act, or (h) suspension or termination of the registration or approval of the Company or any Subsidiary under the Commodities Act. 1.99. "Material Agreements" is defined in Section 8.2.2. 1.100. "Maximum Amount of B Share Revolving Credit" means the lesser of: (a) the Stated Maximum Amount of B Share Revolving Credit; -20- 28 (b) Combined Unreimbursed Sales Commissions as reported for the most recent date on which a report is required to be furnished to the Lenders in accordance with Section 7.4.2; and (c) the Total Estimated Collectible Amount as reported for the most recent date on which a report is required to be furnished to the Lenders in accordance with Section 7.4.2. 1.101. "Maximum Amount of Revolving Credit" means the lesser of (i) $80,000,000 or such lesser amount to which the lending commitment of the Lenders may be reduced pursuant to Section 4, and (ii) such amount (in a minimum amount of $10,000,000 and an integral multiple of $5,000,000) less than the Maximum Amount of Revolving Credit then in effect as specified by irrevocable notice from the Company to the Agent. 1.102. "Multiemployer Plan" means any Plan that is a "multiemployer plan" as defined in section 4001(a)(3) of ERISA. 1.103. "NASD" means The National Association of Securities Dealers, Inc. (or any successor self-regulatory organization). 1.104. "Nonperforming Lender" is defined in Section 10.4.3. 1.105. "Notes" means the B Share Notes and the Revolving Notes. 1.106. "Obligors" means the Borrowers and the Guarantors. 1.107. "Payment Date" means the last Banking Day of each February, May, August and November beginning with August 30, 1996. 1.108. "PBGC" means the Pension Benefit Guaranty Corporation or any successor entity. 1.109. "Percentage Interest" is defined in Section 11.1. 1.110. "Performing Lender" is defined in Section 11.4.3. 1.111. "Person" means any present or future natural person or any corporation, association, partnership, joint venture, company, business trust, trust, organization, business or government or any governmental agency or political subdivision thereof. 1.112. "Pioneer Goldfields Entities" means Pioneer Goldfields Holdings, Inc., Pioneer Goldfields Limited and Teberebie Goldfields Ltd. -21- 29 1.113. "Plan" means, at any time, any pension benefit plan subject to Title IV of ERISA maintained, or to which contributions have been made or are required to be made, by any ERISA Group Person within six years prior to such time. 1.114. "Prepaid Brokerage Commissions" means commissions or other selling compensation paid or payable by the Company or any Subsidiary of the Company to Brokers in respect of sales of B Shares at the respective commission rates for each B Share Fund set forth in Exhibit 7.16 without giving effect to any increases permitted as temporary sales promotions under Section 7.16 or otherwise. 1.115. "Pricing Options" means the options granted pursuant to Section 3.2.1 to have the interest on any portion of the Loan computed on the basis of a Eurodollar Rate. 1.116. "Qualified Institutional Buyer" means: (a) a duly authorized domestic bank, savings and loan association, registered investment company, registered investment adviser or registered dealer, acting for its own account or the accounts of other Qualified Institutional Buyers, which in the aggregate owns and invests on a discretionary basis at least $100 million in securities and (if a bank or savings and loan association) which has a net worth of at least $25 million; or (b) a foreign bank or savings and loan association or equivalent institution, acting for its own account or the account of other Qualified Institutional Buyers, which in the aggregate owns and invests on a discretionary basis at least $100 million in securities and has a net worth of at least $25 million; or (c) any other entity which also constitutes a "qualified institutional buyer" as defined in Rule 144A under the Securities Act. 1.117. "Redemption Fee" means any amount that is or may be payable to the Company or any Subsidiary of the Company or to any Fund by any holder of B Shares in such capacity upon redemption of all or a portion of the B Shares. 1.118. "Register" is defined in Section 12.1.3. 1.119. "Required Lenders" means, with respect to any consent or other action to be taken by the Agent or the Lenders under the Credit Documents, such Lenders as own at least the portion of the Percentage Interests required by Section 11.6 with respect to such consent or other action. 1.120. "Revolving Final Maturity Date" means the fifth anniversary of the Initial Closing Date. -22- 30 1.121. "Revolving Loan" is defined in Section 2.3.1. 1.122. "Revolving Notes" is defined in Section 2.3.3. 1.123. "Securities Act" means, collectively, the federal Securities Act of 1933 (or any successor statute) and the rules and regulations thereunder, all as from time to time in effect. 1.124. "Stated Maximum Amount of B Share Revolving Credit" means the lesser of (i) $35,000,000 or such lesser amount to which the lending commitment of the Lenders may be reduced pursuant to Section 4, and (ii) such amount (in a minimum amount of $10,000,000 and an integral multiple of $1,000,000) less than the Maximum Amount of B Share Revolving Credit then in effect as specified by irrevocable notice from the Company to the Agent. 1.125. "Subsidiary" means any Person of which the Company (or other specified Person) shall at the time, directly or indirectly through one or more of its Subsidiaries, (a) own at least 50% of the outstanding capital stock (or other shares of beneficial interest) entitled to vote generally, (b) hold at least 50% of the partnership, joint venture or similar interests or (c) be a general partner or joint venturer. 1.126. "Tax" means any tax, levy, duty, deduction, withholding, or any penalties or interest on such charges, or other charges of whatever nature at any time required by any Legal Requirement (a) to be paid by any Lender or (b) to be withheld or deducted from any payment otherwise required hereby to be made to any Lender, in each case on or with respect to (i) any Eurodollar deposit which was used (or deemed by Section 3.2.6 to have been used) to fund any portion of the Loan subject to a Pricing Option, (ii) any portion of the Loan subject to a Pricing Option funded (or deemed by Section 3.2.6 to have been funded) with the proceeds of any such Eurodollar deposit, (iii) the principal amount of or interest on any portion of the Loan subject to a Pricing Option or (iv) funds transferred from a non-United States office or an international banking facility of such Lender to a United States office of such Lender in order to fund (or deemed by Section 3.2.6 to have funded) a portion of the Loan subject to a Pricing Option; provided, however, that the term "Tax" shall not include (1) taxes imposed upon or measured by the net income of such Lender, (2) taxes which would have been imposed even if no provision for Pricing Options appeared in this Agreement or (3) amounts required to be withheld by such Lender from payments of interest to Persons from whom Eurodollar deposits were purchased by such Lender. 1.127. "Total Estimated Collectible Amount" means the potential future collections of Distribution Fees and Redemption Fees over the remaining life of all outstanding Class B Shares, calculated as of the last day of each fiscal quarter of the Company and utilizing averages of net asset value, number of shares per Fund, redemptions (including dividend reinvest shares) and withdrawals under systematic withdrawal plans experienced by the Company and the Borrower Subsidiaries during the six month period ending on such date, -23- 31 which calculation shall be performed in accordance with the methodology shown on Exhibit 1.126. 1.128. "Trust" means each registered investment company under the Investment Company Act for which the Company or any of its Subsidiaries provides investment advisory services pursuant to Investment Advisory Contracts and for which the Company or any Subsidiary is the principal underwriter. 1.129. "UCC" means the Uniform Commercial Code, as in effect from time to time in The Commonwealth of Massachusetts. 1.130. "Wholly Owned Subsidiary" means any Subsidiary of which all of the outstanding capital stock (or other shares of beneficial interest) entitled to vote generally (other than directors' qualifying shares) is owned by the Company (or other specified Person) directly or indirectly through one or more Wholly Owned Subsidiaries. 2. The Credits. 2.1. B Share Revolving Credit. 2.1.1. B Share Revolving Loan. Subject to all of the terms and conditions of this Agreement and so long as no Default exists, the Lenders, severally in accordance with their respective Percentage Interests, on or after the Initial Closing Date and prior to the B Share Conversion Date as requested by the Borrower Subsidiaries, will make loans to the Borrower Subsidiaries, who shall be jointly and severally liable therefor, in an aggregate principal amount requested in accordance with Section 2.1.2, but not to exceed at any time outstanding the Maximum Amount of B Share Revolving Credit. The aggregate principal amount of the loans made pursuant to this Section 2.1 from time to time outstanding is referred to as the "B Share Revolving Loan." 2.1.2. Borrowing Requests. Loans will be made to the Borrower Subsidiaries by the Lenders under this Section 2.1 on or after the Initial Closing Date and prior to the B Share Conversion Date as requested by the Borrower Subsidiaries. Not later than 12:00 p.m. (Boston time) on the same Banking Day (third Banking Day prior to the requested Closing Date if any portion of such loan will be subject to a Pricing Option on the requested Closing Date) of each requested Closing Date for any such loan, the Borrower Subsidiaries will give the Agent notice of its request for a loan (which may be given by a telephone call received by a Lending Officer and promptly confirmed in writing), specifying (a) the amount of the requested loan (not less than $1,000,000 and an integral multiple of $500,000 for each portion of the B Share Revolving Loan subject to a Pricing Option, and not less than $100,000 and an integral multiple of $100,000 for each other portion of the B Share Revolving Loan) and (b) the requested Closing Date therefor. Each such loan will be made at the Boston Office by depositing -24- 32 the amount thereof to the general account of the Borrower Subsidiaries with the Agent, or as the Borrower Subsidiaries may otherwise direct. In connection with each such loan, the Borrower Subsidiaries shall furnish to the Agent a certificate dated the applicable Closing Date in substantially the form of Exhibit 5.3.1, together with any other documents required by Section 5. 2.1.3. B Share Revolving Notes. The B Share Revolving Loan shall be evidenced by notes in substantially the form of Exhibit 2.1.3 (the "B Share Revolving Notes") payable to each of the Lenders in an amount equal to such Lender's Percentage Interest in the B Share Revolving Loan. Each Lender shall keep a record of the date and amount of (a) each loan made by such Lender pursuant to this Section 2.1 and (b) each payment of principal made to such Lender on the B Share Revolving Loan pursuant to Section 4. Prior to any transfer of any B Share Revolving Note, the Lender holding such B Share Revolving Note shall record on a schedule thereto appropriate notations evidencing such dates and amounts; provided, however, that the failure of any Lender to make any such recordation shall not affect the obligations of the Borrower Subsidiaries under this Agreement, the B Share Revolving Notes or any other Credit Document. 2.2. B Share Term Credit. 2.2.1. Term Loan. Subject to all the terms and conditions hereof and so long as no Default exists, on the B Share Conversion Date the Lenders will lend to the Borrower Subsidiaries as a term loan, in accordance with their respective Percentage Interests, an aggregate amount equal to the principal amount of the B Share Revolving Loan outstanding on such date, which shall not in any event exceed the Maximum Amount of B Share Revolving Credit. The aggregate principal amount of the loans made pursuant to this Section 2.2.1 at any time outstanding is referred to as the "B Share Term Loan." 2.2.2. Term Notes. The B Share Term Loan shall be made at the Boston Office by crediting the amount of such loan to the B Share Revolving Loan against delivery to the Agent of the B Share Term Notes in substantially the form of Exhibit 2.2.2 (the "B Share Term Notes") payable to the respective Lenders. Each B Share Term Note shall be in a principal amount equal to each Lender's respective Percentage Interest in the B Share Term Loan. In connection with the B Share Term Loan, the Borrower Subsidiaries shall furnish to the Agent a certificate in substantially the form of Exhibit 5.3.1, together with any other documents required by Section 5. Upon issuance of the B Share Term Notes in accordance with this Section 2.2, the B Share Revolving Notes shall be deemed to be cancelled. 2.2.3. Option to Extend Maturities. So long as no Default exists, the Borrower Subsidiaries may request by notice to each Lender delivered no later than 120 days -25- 33 prior to the B Share Conversion Date that the B Share Conversion Date be extended for a 364-day period, commencing on the date the Lenders grant such request, and that the B Share Final Maturity Date be extended to the fifth anniversary of the new B Share Conversion Date. The Lenders shall inform the Borrower Subsidiaries by written notice delivered no later than 30 days prior to the B Share Conversion Date whether the Lenders will grant such request. In no event shall the B Share Conversion Date and the B Share Final Maturity Date be extended without the written consent of each Lender in its sole discretion. 2.3. Revolving Credit Facility. 2.3.1. Revolving Loan. Subject to all the terms and conditions of this Agreement and so long as no Default exists, the Lenders, in accordance with their respective Percentage Interests, will make loans to the Company in an aggregate principal amount requested in accordance with Section 2.3.2 from time to time prior to the Revolving Final Maturity Date, but not to exceed at any time outstanding the Maximum Amount of Revolving Credit. The aggregate principal amount of the loans made pursuant to this Section 2.3 from time to time outstanding is referred to as the "Revolving Loan". 2.3.2. Borrowing Requests. Loans will be made to the Company by the Lenders under this Section 2.3 on or after the Initial Closing Date and prior to the Revolving Final Maturity Date. Not later than 12:00 p.m. (Boston time) on the same Banking Day (third Banking Day prior to the requested Closing Date if any portion of such loan will be subject to a Pricing Option on the requested Closing Date) of each requested Closing Date for any such loan, the Company will give the Agent notice of its request for a loan (which may be given by a telephone call received by a Lending Officer and promptly confirmed in writing), specifying (a) the amount of the requested loan (not less than $1,000,000 and an integral multiple of $500,000 for each portion of the Revolving Loan subject to a Pricing Option, and not less than $100,000 and an integral multiple of $100,000 for each other portion of the Loan) and (b) the requested Closing Date therefor. Each such loan will be made at the Boston office by depositing the amount thereof to the general account of the Company with the Agent, or as the Company may otherwise direct. In connection with such loan, the Company will furnish to the Agent a certificate dated the applicable Closing Date in substantially the form of Exhibit 5.3.1, together with any other documents required by Section 5. 2.3.3. Revolving Note. The Revolving Loan shall be evidenced by notes in substantially the form of Exhibit 2.3.3 (the "Revolving Notes") payable to each of the Lenders in an amount equal to such Lender's Percentage Interest in the Revolving Loan. Each Lender shall keep a record of the date and amount of (a) each loan made by such Lender pursuant to Section 2.3 and (b) each payment of principal made to such Lender on the Revolving Loan pursuant to Section 4. Prior to any transfer of any -26- 34 Revolving Note, the Lender holding such Revolving Note shall record on a schedule thereto appropriate notations evidencing such dates and amounts; provided, however, that the failure of any Lender to make, or any error in making, any such recordation shall not affect the obligations of the Company under this Agreement, the Revolving Notes or any other Credit Document. 2.4. Application of Proceeds. 2.4.1. B Share Revolving Loan. Subject to Section 2.4.4, the Borrower Subsidiaries will apply the proceeds of the B Share Revolving Loan only to pay Prepaid Brokerage Commissions. 2.4.2. B Share Term Loan. The Borrower Subsidiaries will apply the proceeds of the B Share Term Loan solely as provided in Section 2.2.2. 2.4.3. Revolving Loan. Subject to Section 2.4.4 and to the extent permitted by this Agreement, the Company will apply the proceeds of the Revolving Loan for the repayment of its existing Financing Debt, for its working capital and for general corporate purposes. 2.4.4. Specifically Prohibited Applications. The Company and the Borrower Subsidiaries will not, directly or indirectly, apply any part of the proceeds of any extension of credit made pursuant to this Agreement to any transaction prohibited by the Foreign Trade Regulations. 2.5. Nature of Obligations of Lenders to Extend Credit. The Lenders' obligations under this Agreement to make the Loan are several and are not joint or joint and several. If any Lender shall fail to perform its obligations to extend any such credit, the amount of the commitment of the Lender so failing to perform may be assumed by the other Lenders, in their sole discretion, in such proportions as such Lenders may agree among themselves and the Percentage Interests of each other Lender shall be appropriately adjusted, but such assumption and adjustment shall not relieve the Lenders from any of their obligations to make any such extension of credit or to repay any Delinquent Payment required by Section 11.4.3. 3. Interest; Pricing Options; Fees. 3.1. Interest. The Loan shall accrue and bear daily interest at a rate per annum which shall at all times equal the Applicable Rate. Prior to any stated or accelerated maturity of the Loan, the Borrower will, on each Payment Date, pay the accrued and unpaid interest on the portion of the Loan which was not subject to a Pricing Option. On the last day of each Interest Period or on any earlier termination of any Pricing Option, the Borrower will pay the accrued and unpaid interest on the portion of the Loan which was subject to the Pricing Option which expired or terminated on such date; provided, however, that in the case of any Interest -27- 35 Period longer than three months, the Borrower will also pay at three-month intervals the accrued and unpaid interest on the portion of the Loan subject to the Pricing Option having such Interest Period, the first such payment to be made on the last Banking Day of the three-month period beginning on the first day of such Interest Period. On any stated or accelerated maturity of the Loan, the Borrower will pay all accrued and unpaid interest on the Loan, including any accrued and unpaid interest on such portion of the Loan which is subject to a Pricing Option. In addition, the Borrower will on demand pay daily interest on any overdue payments of principal and, to the extent not prohibited by applicable law, on any overdue payments of interest and fees owed under any Credit Document at a rate per annum which equals the sum of 2% plus the highest Applicable Rate then in effect. All payments of interest hereunder shall be made to the Agent for the account of each Lender in accordance with the Lenders' respective Percentage Interests. 3.2. Pricing Options. 3.2.1. Election of Pricing Options. Subject to all of the terms and conditions hereof and so long as no Default exists, the Borrower may from time to time, by irrevocable notice to the Agent received not less than three Banking Days prior to the commencement of the Interest Period selected in such notice, elect to have such portion of the Loan as the Borrower may specify in such notice accrue and bear daily interest during the Interest Period so selected at the Applicable Rate computed on the basis of the Eurodollar Rate. No such election shall become effective if, prior to the commencement of any such Interest Period, the Agent determines that (a) the electing or granting of the Pricing Option in question would violate a Legal Requirement or (b) Eurodollar deposits in an amount comparable to the principal amount of the Loan as to which such Pricing Option has been elected and which have a term corresponding to the proposed Interest Period are not readily available in the inter-bank Eurodollar market for delivery at any Eurodollar Office or, by reason of circumstances affecting such market, adequate and reasonable methods do not exist for ascertaining the interest rate applicable to such deposits for the proposed Interest Period. For purposes of determining ready availability of Eurodollar deposits with respect to a proposed Interest Period, such Eurodollar deposits shall not be deemed readily available if any Lender shall have advised the Agent by telephone, confirmed in writing, at or prior to noon (Boston time) on the second Banking Day prior to the commencement of such proposed Interest Period that, based upon the knowledge of such Lender of the Eurodollar market and after reasonable efforts to determine the availability of such Eurodollar deposits, such Lender reasonably anticipates that Eurodollar deposits in an amount equal to the respective Percentage Interest of such Lender in the portion of the Loan as to which such Pricing Option has been elected and which have a term corresponding to the Interest Period in question will not be offered in the Eurodollar market to such Lender at a rate of interest that does not exceed the Basic Eurodollar Rate. -28- 36 3.2.2. Notice to Lenders and Borrowers. The Agent will promptly inform each Lender (by telephone or otherwise) of each notice received by it from the Borrower pursuant to Section 3.2.1 and of the Interest Period specified in such notice. Upon determination by the Agent of the Eurodollar Rate for such Interest Period or in the event that no such election shall become effective, the Agent will promptly notify the Borrower and each Lender (by telephone or otherwise) of the Eurodollar Rate so determined or why such election did not become effective. 3.2.3. Selection of Interest Periods. Interest Periods shall be selected so that: (a) the minimum portion of the Loan subject to any Pricing Option shall be $1,000,000 and an integral multiple of $500,000; (b) no more than six Pricing Options shall be outstanding at any one time; and (c) no Interest Period with respect to any part of the B Share Loan subject to a Pricing Option shall expire later than the B Share Final Maturity Date, and no Interest Period with respect to any part of the Revolving Loan subject to a Pricing Option shall expire later than the Revolving Final Maturity Date. If on the B Share Conversion Date all or any portion of the B Share Revolving Loan is subject to one or more effective Pricing Options, then each such Pricing Option shall apply to an equal amount of the B Share Term Loan until the expiration of the Interest Period for such Pricing Option. 3.2.4. Funding Costs. If any portion of the Loan which is subject to a Pricing Option is repaid, or any Pricing Option is terminated for any reason, on a date which is prior to the last Banking Day of the Interest Period applicable to such Pricing Option, the Borrower will pay to the Agent for the account of each Lender in accordance with the Lenders' respective Percentage Interests, in addition to any amounts of interest otherwise payable hereunder, an amount equal to daily interest for the unexpired portion of such Interest Period on the portion of the Loan so repaid, or as to which a Pricing Option was so terminated, at a per annum rate equal to the excess, if any, of (a) the Applicable Rate calculated on the basis of the rate applicable to such Pricing Option minus (b) the rate of interest obtainable by the Agent upon the purchase of debt securities customarily issued by the Treasury of the United States of America which have a maturity date approximating the last Banking Day of such Interest Period. For purposes of this Section 3.2.4, if any portion of the Loan which was to have been subject to a Pricing Option is not outstanding on the first day of the Interest Period applicable to such Pricing Option other than for reasons described in Section 3.2.1 or the failure to advance funds by a Delinquent Lender, the Borrower shall be deemed to have terminated such Pricing Option. The determination by the Agent of such amount of interest shall, in the absence of manifest error, be conclusive. -29- 37 3.2.5. Change in Applicable Laws, Regulations, etc. If any Legal Requirement shall prevent any Lender from funding through the purchase of deposits any portion of the Loan subject to a Pricing Option or otherwise from giving effect to such Lender's obligations as contemplated hereby, (a) the Agent may by notice to the Borrower terminate all of the affected Pricing Option, (b) the portion of the Loan subject to such terminated Pricing Option shall immediately bear interest thereafter at the Applicable Rate computed on the basis of the Base Rate and (c) the Borrower shall make any payment required by Section 3.2.4. 3.2.6. Taxes. If (a) any Lender shall be subject to any Tax or (b) the Company shall be required to withhold or deduct any Tax, the Borrower will on demand by the Agent or such Lender, accompanied by the certificate referred to below, pay to the Agent for such Lender's account such additional amount as is necessary to enable such Lender to receive net of any Tax the full amount of all payments of principal of, interest on and fees payable pursuant to a Credit Document. Each Lender agrees that if, after the payment by the Borrower of any such additional amount, any amount identifiable as a part of any Tax related thereto is subsequently recovered or used as a credit by such Lender, such Lender shall reimburse the Borrower to the extent of the amount so recovered or used. A certificate of an officer of such Lender setting forth the amount of such Tax or recovery or use and the basis therefor shall, in the absence of manifest error, be conclusive. 3.2.7. Funding Procedure. The Lenders may fund any portion of the Loan subject to a Pricing Option out of any funds available to the Lenders. Regardless of the source of the funds actually used by any of the Lenders to fund any portion of the Loan subject to a Pricing Option, however, all amounts payable hereunder, including the interest rate applicable to any such portion of the Loan and the amounts payable under Sections 3.2.4 and 3.2.6, shall be computed as if each Lender had actually funded such Lender's Percentage Interest in such portion of the Loan through the purchase of deposits in such amount with a maturity the same as the applicable Interest Period relating thereto and through the transfer of such deposits from an office of such Lender having the same location as the applicable Eurodollar Office to one of such Lender's offices in the United States of America. 3.3. Commitment Fees. In consideration of the Lenders' commitments to make extensions of credit provided for in Section 2, the Borrower will pay in arrears to the Agent for the account of the Lenders in accordance with their Percentage Interests the following commitment fees: (a) with respect to the B Share Revolving Loan, on each Payment Date prior to the B Share Conversion Date, and on the B Share Conversion Date, commencing with the first such date after the Initial Closing Date, an amount calculated on a daily -30- 38 basis at a rate of 0.375% per annum on the amount by which (i) the Stated Maximum Amount of B Share Revolving Credit exceeded (ii) the average daily B Share Revolving Loan during such period; (b) with respect to the Revolving Loan, on each Payment Date, and on the Revolving Final Maturity Date, commencing with the first such date after the Initial Closing Date, an amount calculated on a daily basis at a rate of 0.375% per annum on the amount by which (i) the Maximum Amount of Revolving Credit exceeded (ii) the average daily Revolving Loan during such period. 3.4. Capital Adequacy. If any Lender shall have determined that (a) compliance by such Lender with any applicable law, governmental rule, regulation or order regarding capital adequacy of banks or bank holding companies, or any interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender with any request or directive regarding capital adequacy (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's (or any Person controlling such Lender) capital as a consequence of such Lender's obligations hereunder to a level below that which such Lender (or any Person controlling such Lender) could have achieved but for such compliance (taking into consideration such Lender's policies with respect to capital adequacy immediately before such compliance and assuming that such Lender's capital was fully utilized prior to such compliance) by an amount deemed by such Lender to be material, or (b) any change in any Legal Requirement after the date hereof shall directly or indirectly (i) reduce the amount of any sum received or receivable by such Lender with respect to the Loan, (ii) impose a cost on such Lender that is attributable to the making or maintaining of, or such Lender's commitment to make, its portion of the Loan, or (iii) require such Lender to make any payment on or calculated by reference to the gross amount of any amount received by such Lender under any Credit Document, then, in the case of clause (a) or (b), the Borrower will on demand by the Agent, accompanied by the certificate referred to below, pay to the Agent from time to time as specified by such Lenders as are so affected such additional amounts as shall be sufficient to compensate such Lenders (or any Person controlling such Lenders) for such reduced return, reduction, increased cost or payment together with interest on each such amount from five Banking Days after the date demanded until payment in full thereof at the rate of interest on overdue installments of principal provided in Section 3.1. A certificate of an officer of any such Lender setting forth the amount to be paid to it and the basis for computation thereof hereunder shall, in the absence of manifest error, be conclusive. In determining such amount, such Lender may use any reasonable averaging and attribution methods to allocate any increased costs in good faith on a reasonably equitable basis. -31- 39 3.5. Computations of Interest and Fees. For purposes of this Agreement, interest and commitment fees (and any amount expressed as interest or such fees) shall be computed on a daily basis and on the basis of a 360-day year. 4. Payment. 4.1. Payment at Maturity. On the stated or any accelerated maturity of the B Share Loan or the Revolving Loan, as the case may be, the Borrower will pay to the Agent for the account of each Lender for credit to the applicable Notes an amount equal to the Indebtedness evidenced by the applicable Notes then due, together with all accrued and unpaid interest thereon and all other Credit Obligations in respect thereof then outstanding. 4.2. Contingent Required Prepayments. 4.2.1. Excess Credit Exposure. If at any time the B Share Revolving Loan exceeds the Maximum Amount of B Share Revolving Credit, or the Revolving Loan exceeds the Maximum Amount of Revolving Credit, the Borrower will promptly pay the amount of such excess to the Agent for the account of the Lenders without premium (except as provided in Section 3.2.4), for credit to the B Share Revolving Loan or the Revolving Loan, as applicable. 4.2.2. Prepayment of B Share Revolving Loan. At the time of the furnishing of each of the financial statements required by Section 7.4.2, and in any event within 45 days after the end of each fiscal quarter, the Borrower Subsidiaries will, as a mandatory prepayment on account of the B Share Revolving Loan, pay to the Agent for the account of each Lender, without premium (except as provided in Section 3.2.4), an amount equal to the excess, if any, of the B Share Collection Amount over the Prepaid Brokerage Commission during such fiscal quarter, minus any voluntary prepayments made since the beginning of such period but prior to the B Share Conversion Date in accordance with Section 4.4. 4.2.3. Prepayment of Revolving Loan. Within five Banking Days after the consummation of any underwritten public offering or other sale of any equity interest in any of the Pioneer Goldfields Entities pursuant to Section 7.11.5, the Company shall apply fifty percent (50%) of the net cash proceeds received by the Company or any of its Subsidiaries in such offering or sale to the prepayment of the Revolving Loan, and the Maximum Amount of Revolving Credit shall be permanently reduced by such amount. For purposes of this Section 4.2.3, "net cash proceeds" shall reflect the deduction of any federal, state or local tax obligations which the Company or any Subsidiary may have as a result of such public offering or sale. 4.3. Mandatory Prepayment of B Share Term Loan. In addition to any amounts paid in accordance with Section 4.2, the Borrower Subsidiaries will, as a mandatory prepayment of -32- 40 the B Share Term Loan, pay to the Agent for the Lenders' accounts on each Payment Date, commencing on the last Banking Day of the first full calendar quarter after the B Share Conversion Date, an amount equal to the greater of (i) 5% of the B Share Term Loan outstanding on the B Share Conversion Date or (ii) the B Share Collection Amount for the quarter ending on such Payment Date; provided that the amount of any such prepayment shall not exceed the amount of the B Share Term Loan outstanding at the time of such prepayment. 4.4. Voluntary Prepayments. In addition to the prepayments required by Sections 4.2 and 4.3, the Borrower may from time to time prepay all or any portion of the Loan (in integral multiples of $1,000,000), without premium (except as provided in Section 3.2.4 with respect to Pricing Options). After the B Share Conversion Date, such prepayments with respect to the B Share Term Loan shall be applied in the inverse order of maturity thereof. The Borrower shall give the Agent at least five Banking Days' prior notice of its intention to prepay, specifying the date of payment, the total principal amount of the Loan to be paid on such date, the allocation of such prepayment between the B Share Loan and the Revolving Loan and the amount of interest to be paid with such prepayment. 4.5. Reborrowing; Application of Payments. The amounts of the B Share Revolving Loan or the Revolving Loan prepaid pursuant to Sections 4.2.1, 4.2.2 or 4.4 may be reborrowed from time to time (in the case of the B Share Revolving Loan, prior to the B Share Conversion Date) in accordance with Sections 2.1 and 2.3. The amount of the B Share Term Loan prepaid pursuant to either Section 4.3 or 4.4 may not be reborrowed. Any prepayment of the Loan shall be applied first to the portion of the Loan not then subject to Pricing Options, then the balance of any such prepayment shall be applied to the portion of the Loan then subject to Pricing Options, in the chronological order of the respective maturities thereof, together with any payments required by Section 3.2.4. All payments of principal hereunder shall be made to the Agent for the account of each Lender in accordance with the Lenders' respective Percentage Interests. 4.6. Payment with Accrued Interest, etc. Upon all prepayments of the Loan, the Borrower shall pay to the Agent for each Lender's account the principal amount to be prepaid together with unpaid interest in respect thereof accrued to the date of prepayment. Notice of prepayment having been given in accordance with Section 4.4, and whether or not notice is given of prepayments pursuant to Sections 4.2 and 4.3, the amount specified to be prepaid shall become due and payable on the date specified for prepayment. 5. Conditions to Extending Credit. 5.1. Conditions on Initial Closing Date. The obligations of the Lenders to make any extension of credit pursuant to Section 2 shall be subject to the satisfaction, on or before the Initial Closing Date, of the following conditions (in addition to the further conditions in Section 5.3): -33- 41 5.1.1. Revolving Notes. The Borrower shall have executed this Agreement, the B Share Revolving Notes and the Revolving Notes and delivered them to the Agent for each Lender. 5.1.2. Payment of Fees. The Borrower shall have paid to the Agent for the Agent's account the fees as separately agreed between the Borrower and the Agent. 5.1.3. Guarantors Contribution Agreement. Each of the Guarantors shall have entered into a Guarantors Contribution Agreement substantially in the form of Exhibit 5.1.3, pursuant to which the Guarantors will make contributions among themselves with respect to payments made in accordance with their respective guarantees of the Credit Obligations, and shall have delivered it to the Agent. 5.1.4. Legal Opinions. On the Initial Closing Date, the Lenders shall have received from the following counsel their respective opinions with respect to the transactions contemplated by the Credit Documents, which opinions shall be in form and substance satisfactory to the Lenders: (a) Hale and Dorr, special counsel to the Company. (b) Ropes & Gray, special counsel for the Agent. 5.1.5. Investment Assets Under Management. On the Initial Closing Date, the aggregate investment assets under management by the Company and its Subsidiaries shall equal or exceed $11,000,000,000, and the Company shall have furnished to the Agent on such date a certificate to such effect signed by an Executive Officer or a Financial Officer. 5.1.6. OPIC Insurance Policies. The Agent, on behalf of the Lenders, shall be named as the "Loss Payee" on an insurance policy obtained from the Overseas Private Investment Corporation ("OPIC") and/or such other political risk insurance policies as may reasonably be requested by the Agent, which shall be satisfactory to the Agent in its sole discretion. 5.2. Conditions on the B Share Conversion Date. In addition to the conditions specified in Section 5.3, on the B Share Conversion Date: 5.2.1. B Share Term Notes. The Borrower Subsidiaries shall have executed the B Share Term Notes pursuant to Section 2.2 and delivered them to the Agent. 5.3. Conditions to Each Extension of Credit. The obligations of the Lenders to make any extension of credit pursuant to Section 2 shall be subject to the satisfaction, on or before the Closing Date for such extension of credit, of the following conditions: -34- 42 5.3.1. Officer's Certificate. The representations and warranties contained in Sections 6.6 and 8 shall be true and correct on and as of the Closing Date with the same force and effect as though originally made on and as of such date; no Default shall exist on such Closing Date prior to or immediately after giving effect to the requested extension of credit; as of such Closing Date, no Material Adverse Change shall have occurred; and the Company shall have furnished to the Agent on such Closing Date a certificate to these effects (together with a schedule of calculations demonstrating, as of such Closing Date, compliance with the financial tests set forth in Section 7.5), in substantially the form of Exhibit 5.3.1, signed by an Executive Officer or a Financial Officer. 5.3.2. Proper Proceedings. This Agreement, each other Credit Document and the transactions contemplated hereby and thereby shall have been authorized by all necessary proceedings of the Company and any of its Affiliates party thereto. All necessary consents, approvals and authorizations of any governmental or administrative agency or any other Person of any of the transactions contemplated hereby or by any other Credit Document shall have been obtained and shall be in full force and effect in such form as shall be satisfactory to the Required Lenders. 5.3.3. Legality, etc. The making of the requested extension of credit shall not (a) subject any Lender to any penalty or special tax (other than a Tax for which the Borrower has reimbursed the Lenders under Section 3.2.6), (b) be prohibited by any law or governmental order or regulation applicable to any Lender or the Borrower or (c) violate any voluntary credit restraint program of the executive branch of the government of the United States of America, the Board of Governors of the Federal Reserve System or any other governmental or administrative agency so long as any Lender reasonably believes that compliance therewith is in the best interests of such Lender. 6. Guarantees. 6.1. Guarantees of Credit Obligations. Each Guarantor hereby unconditionally guarantees that the Credit Obligations incurred by any other Obligor will be performed and will be paid in full in immediately available funds when due and payable, whether at the stated or accelerated maturity thereof or otherwise, this guarantee being a guarantee of payment and not of collectibility and being absolute and in no way conditional or contingent. In the event any part of the Credit Obligations shall not have been so paid in full when due and payable, such Guarantor will, not later than five days after written notice by the Agent or, without notice, immediately upon the occurrence of a Bankruptcy Default, pay or cause to be paid to the Agent for the Lenders' account the amount of such Credit Obligations which are then due and payable and unpaid. The obligations of each Guarantor hereunder shall not be affected by the invalidity, unenforceability or irrecoverability of any of the Credit Obligations as against -35- 43 any Obligor, any other guarantor thereof or any other Person. For purposes hereof, the Credit Obligations shall be due and payable when and as the same shall be due and payable under the terms of this Agreement or any other Credit Document notwithstanding the fact that the collection or enforcement thereof may be stayed or enjoined under the Bankruptcy Code or other applicable law. 6.2. Continuing Obligation. Each Guarantor acknowledges that the Lenders have entered into this Agreement (and, to the extent that the Lenders may enter into any future Credit Document, will have entered into such agreement) in reliance on this Section 6 being a continuing irrevocable agreement, and such Guarantor agrees that its guarantee may not be revoked in whole or in part. The obligations of the Guarantors hereunder shall terminate when the commitment of the Lenders to extend credit under this Agreement shall have terminated and all of the Credit Obligations have been indefeasibly paid in full in immediately available funds and discharged; provided, however, that (i) if a claim is made upon the Lenders at any time for repayment or recovery of any amounts or any property received by the Lenders from any source on account of any of the Credit Obligations and the Lenders repay or return any amounts or property so received (including interest thereon to the extent required to be paid by the Lenders) or (ii) if the Lenders become liable for any part of such claim by reason of (a) any judgment or order of any court or administrative authority having competent jurisdiction or (b) any settlement or compromise of any such claim, then the Guarantors shall remain liable under this Agreement for the amounts so repaid or returned or the amounts for which the Lenders become liable (such amounts being deemed part of the Credit Obligations) to the same extent as if such amounts had never been received by the Lenders, notwithstanding any termination hereof or the cancellation of any instrument or agreement evidencing any of the Credit Obligations. The Guarantors shall, not later than five days after receipt of notice from the Agent, pay to the Agent an amount equal to the amount of such repayment or return for which the Lenders have so become liable. Payments hereunder by a Guarantor may be required by the Agent or the Required Lenders on any number of occasions. 6.3. Waivers with Respect to Credit Obligations. Except to the extent expressly required by this Agreement or any other Credit Document, each Guarantor hereby waives, to the extent permitted by the provisions of applicable law that may not be waived, all of the following (including all defenses, counterclaims and other rights of any nature based upon any of the following): (i) presentment, demand for payment and protest of nonpayment of any of the Credit Obligations, and notice of protest, dishonor or nonperformance; -36- 44 (ii) notice of acceptance of this guarantee and notice that credit has been extended in reliance on such Guarantor's guarantee of the Credit Obligations; (iii) notice of any Default or of any inability to enforce performance of the obligations of any Obligor or any other Person with respect to any Credit Document, or notice of any acceleration of maturity of any Credit Obligations; (iv) demand for performance or observance of, and any enforcement of any provision of, the Credit Obligations, this Agreement or any other Credit Document or against any Obligor or any other Person in respect of the Credit Obligations or any requirement of diligence or promptness on the part of the Lenders in connection with any of the foregoing; (v) any act or omission on the part of the Lenders which may impair or prejudice the rights of such Guarantor, including subrogation rights or rights to obtain exoneration, contribution, indemnification or any other reimbursement from any Obligor or any other Person; (vi) any act or omission which might vary the risk of such Guarantor or otherwise operate as a deemed release or discharge, and the benefits of any statute that limits the liability of one joint guarantor upon the release of any other joint guarantor; (vii) any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than the obligation of the principal; (viii) the provisions of any "one action" or "anti-deficiency" law which would otherwise prevent the Lenders from bringing any action, including any claim for a deficiency, against such Guarantor before or after the Lenders' commencement or completion of any foreclosure action, whether judicially, by exercise of power of sale or otherwise, or any other law which would otherwise require any election of remedies by the Lenders; (ix) all demands and notices of every kind with respect to the foregoing; and (x) to the extent not referred to above, all defenses which any Obligor may now or hereafter have to the payment of the Credit Obligations, together with all suretyship defenses, which could otherwise be asserted by such Guarantor. No delay or omission on the part of the Lenders in exercising any right under this Agreement or any other Credit Document or under any guarantee of the Credit Obligations shall operate as a waiver or relinquishment of such right. No action which the Lenders or any Obligor may take or refrain from taking with respect to the Credit Obligations, including any -37- 45 amendments thereto or modifications thereof or waivers with respect thereto, shall affect the provisions of this Agreement or the obligations of any Guarantor hereunder. None of the Lenders' rights shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Lenders or any Obligor, or by any noncompliance by any Obligor with the terms, provisions and covenants of this Agreement, regardless of any knowledge thereof which the Lenders may have or otherwise be charged with. To the extent not prohibited by the provisions of applicable law that may not be waived, each Guarantor hereby absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert, any appraisement, valuation, stay, extension, redemption or similar law, now or at any time hereafter in force, which might delay, prevent or otherwise impede the performance or enforcement of this Agreement, any other Credit Document or the Credit Obligations. 6.4. Lenders' Power to Waive, etc. Each Guarantor hereby grants to the Lenders full power in their discretion, without notice to or consent of such Guarantor, such notice and consent being hereby expressly waived to the fullest extent permitted by applicable law, and without in any way affecting the liability of such Guarantor under its guarantee hereunder: (i) to waive compliance with, and any Default under, and to consent to any amendment to or modification or termination of any terms or provisions of, or to give any waiver in respect of, this Agreement, any other Credit Document, the Lender Security, the Credit Obligations or any guarantee thereof (each as from time to time in effect); (ii) to grant any extensions of the Credit Obligations (for any duration), and any other indulgence with respect thereto, and to effect any total or partial release (by operation of law or otherwise), discharge, compromise or settlement with respect to the obligations of the Obligors or any other Person in respect of the Credit Obligations, whether or not rights against such Guarantor under this Agreement are reserved in connection therewith; (iii) to collect or liquidate or realize upon any of the Credit Obligations in any manner or to refrain from collecting or liquidating or realizing upon any of the Credit Obligations; and (iv) to extend credit under this Agreement, any other Credit Document or otherwise in such amount as the Lenders may determine, even though the condition of the Obligors (financial or otherwise on an individual or consolidated basis) may have deteriorated since the date hereof. 6.5. Information Regarding Obligors, etc. Each Guarantor acknowledges and agrees that it has made such investigation as it deems desirable of the risks undertaken by it in entering into this Agreement and is fully satisfied that it understands all such risks. Each Guarantor hereby waives any obligation which may now or hereafter exist on the part of the -38- 46 Lenders to inform it of the risks being undertaken by entering into this Agreement or of any changes in such risks and, from and after the date hereof, each Guarantor undertakes to keep itself informed of such risks and any changes therein. Each Guarantor hereby expressly waives any duty which may now or hereafter exist on the part of the Lenders to disclose to such Guarantor any matter related to the business, operations, character, collateral, credit, condition (financial or otherwise), income or prospects of the Obligors or their Affiliates or their properties or management, whether now or hereafter known by the Lenders. Each Guarantor represents, warrants and agrees that it assumes sole responsibility for obtaining from the Obligors all information concerning this Agreement and all other Credit Documents and all other information as to the Obligors and their Affiliates or their properties or management as such Guarantor deems necessary or desirable. 6.6. Certain Guarantor Representations. Each Guarantor hereby represents that it has determined (i) that it is in its best interest and in pursuit of its corporate purposes as an integral part of the business conducted and proposed to be conducted by the Company and its Subsidiaries (including such Guarantor), and reasonably necessary and convenient in connection with the conduct of the business conducted and proposed to be conducted by such Guarantor, to induce the Lenders to enter into this Agreement and to extend credit to the Company by making the guarantees contemplated by this Section 6, (ii) that the credit available hereunder will directly or indirectly inure to the benefit of such Guarantor and (iii) that by virtue of the foregoing such Guarantor is receiving at least reasonably equivalent consideration from the Lenders for its guarantee. Each Guarantor acknowledges that it has been advised by the Agent that the Lenders are unwilling to enter into this Agreement unless the guarantees contemplated by this Section 6 are given by it. Each Guarantor represents that (a) it will not be rendered insolvent as a result of entering into this Agreement, (b) after giving effect to the transactions contemplated by this Agreement, it will have assets having a fair saleable value in excess of the amount required to pay its probable liability on its existing debts as they have become absolute and matured, (c) it has, and will have, access to adequate capital for the conduct of its business and (d) it has the ability to pay its debts from time to time incurred in connection therewith as such debts mature. 6.7. No Subrogation. Until the Credit Obligations have been indefeasibly paid in full and all commitments to extend further credit under the Credit Documents have been irrevocably terminated, each Guarantor hereby agrees with the Lenders and the Obligors that it waives all rights of reimbursement, subrogation, contribution, offset and other claims against the Obligors arising by contract or operation of law in connection with any payment made or required to be made by such Guarantor under this Agreement, except for contribution rights provided in the Guarantors Contribution Agreement. 6.8. Subordination. Each Guarantor and Excluded Subsidiary hereby covenants and agrees that all Indebtedness, claims and liabilities now or hereafter owing by the Company to such Guarantor or Excluded Subsidiary are hereby subordinated to the prior payment in full of the Credit Obligations and are so subordinated as a claim against the Company or any of its -39- 47 assets, whether such claim be in the ordinary course of business or in the event of voluntary or involuntary liquidation, dissolution, insolvency or bankruptcy, so that no payment with respect to any such Indebtedness, claim or liability will be made or received while any of the Credit Obligations are outstanding; provided, however, that the Company may make payments permitted by Section 7.10. 6.9. Future Subsidiaries; Further Assurances. The Company and each other Guarantor shall from time to time cause each of its present and future Core Mutual Fund Subsidiaries, within 30 days after any such Person becomes a Core Mutual Fund Subsidiary, that is not a Guarantor to join this Agreement as a Guarantor, pursuant to a joinder agreement in form and substance satisfactory to the Agent. Each Excluded Subsidiary shall, upon written request by the Agent, after the occurrence of an Event of Default, join this Agreement as a Guarantor and an Obligor to the maximum extent permitted by the net capital requirements of the Exchange Act, such guarantee to be in effect during the continuance of an Event of Default. Each Guarantor will, promptly upon the request of the Agent from time to time, execute, acknowledge and deliver, and file and record, all such instruments, and take all such action, as the Agent may deem necessary or advisable to carry out the intent and purposes of this Section 6. 7. General Covenants. The Company and the other Obligors covenant that, until all of the Credit Obligations shall have been paid in full and until the Lenders' commitments to extend credit under this Agreement and any other Credit Document shall have been irrevocably terminated, the Company and its Subsidiaries will comply with such of the following provisions as are applicable to the Person in question: 7.1. Taxes and Other Charges; Accounts Payable. 7.1.1. Taxes and Other Charges. Each of the Company and its Subsidiaries will duly pay and discharge, or cause to be paid and discharged, before the same shall become in arrears, all taxes, assessments and other governmental charges imposed upon such Person and its properties, sales or activities, or upon the income or profits therefrom, as well as all claims for labor, materials or supplies which if unpaid might by law become a Lien upon any of its property; provided, however, that any such tax, assessment, charge or claim need not be paid if the validity or amount thereof shall at the time be contested in good faith by appropriate proceedings and if such Person shall, in accordance with GAAP, have set aside on its books adequate reserves with respect thereto; and provided, further, that each of the Company and its Subsidiaries will pay or bond, or cause to be paid or bonded, all such taxes, assessments, charges or other governmental claims immediately upon the commencement of proceedings to foreclose any Lien which may have attached as security therefor (except to the extent such proceedings have been dismissed or stayed). -40- 48 7.1.2. Accounts Payable. Each of the Company and its Subsidiaries will promptly pay when due, or in conformity with customary trade terms, all other Indebtedness incident to the operations of such Person; provided, however, that any such Indebtedness need not be paid if the validity or amount thereof shall at the time be contested in good faith and if such Person shall, in accordance with GAAP, have set aside on its books adequate reserves with respect thereto. 7.2. Conduct of Business, etc. 7.2.1. Types of Business. The Core Mutual Fund Subsidiaries will engage only in the business of providing investment advisory, distribution, portfolio execution, administration and transfer agency services, pricing and bookkeeping services and other services incidental or closely related to the investment advisory and investment company complex business. 7.2.2. Maintenance of Properties. Each of the Company and its Subsidiaries: (a) will keep its properties in such repair, working order and condition, and will from time to time make such repairs, replacements, additions and improvements thereto for the efficient operation of its businesses and will comply at all times in all material respects with all franchises, licenses and leases to which it is party so as to prevent any loss or forfeiture thereof or thereunder, unless compliance is at the time being contested in good faith by appropriate proceedings; and (b) except to the extent permitted under Section 7.11, will do all things necessary to preserve, renew and keep in full force and effect and in good standing its legal existence and authority necessary to continue its business. 7.2.3. Compliance with Material Agreements. Each of the Company and its Subsidiaries will comply in all material respects with the provisions of the Material Agreements (to the extent not inconsistent with this Agreement or any other Credit Document). Without the prior written consent of the Required Lenders, no Material Agreement shall be amended, modified, waived or terminated in any manner that would have in any material respect an adverse effect on the interests of the Lenders. 7.2.4. Statutory Compliance. Each of the Company and its Subsidiaries will comply, and will use reasonable efforts to cause the Trusts and Funds to comply to the extent applicable (subject to the discretion of their trustees and directors and other than a reasonable business decision to merge or terminate any Trust or Fund), in all material respects with the Investment Company Act (including (a) receipt of financial statements accompanied by an auditor's report of Arthur Andersen LLP (or other independent public accountants of nationally recognized standing), (b) maintenance of a fidelity bond to secure the Funds from larceny and embezzlement and (c) continued registration -41- 49 in full force and effect of each Trust as a registered investment company), the Investment Advisers Act, the Exchange Act, the Securities Act (including the continued registration of the shares representing beneficial interests of, or common stock in, each Fund or Trust), the rules and regulations of the NASD, subchapter M of the Code (to the extent of each Fund's or Trust's continued qualification as a regulated investment company thereunder), the Commodities Act, any other law, statute, rule or regulation governing investment advisers, investment companies, broker-dealers, underwriters, custodians or transfer agents, including capital requirements, and all other valid and applicable statutes, ordinances, zoning and building codes and other rules and regulations of the United States of America, of the states and territories thereof and their counties, municipalities and other subdivisions and of any foreign country or other jurisdictions applicable to such Person, except where compliance therewith shall at the time be contested in good faith by appropriate proceedings or where failure so to comply has not resulted, or does not pose a material risk of resulting, in the aggregate in any Material Adverse Change. 7.3. Insurance. 7.3.1. Business Interruption Insurance. Each of the Company and its Subsidiaries will maintain with financially sound and reputable insurers insurance related to interruption of business, either for loss of revenues or for extra expense, in the manner customary for similar businesses similarly situated, including but not limited to OPIC insurance or other political risk insurance policies as may reasonably be requested by the Agent or the Required Lenders. 7.3.2. Errors and Omissions Insurance. Each of the Company and the Core Mutual Fund Subsidiaries (other than Pioneer Management (Ireland) Ltd.) will maintain a joint errors and omissions policy insuring the Company and each Core Mutual Fund Subsidiary for losses arising from any breach of duty, error or omission arising from the performance of transfer agency services in such amounts as are customarily carried by Persons of established reputation engaged in the same or a similar business and similarly situated. 7.3.3. Directors and Officers Insurance. Each of the Company and its Subsidiaries will maintain directors and officers liability insurance insuring the Company and each Subsidiary in such amounts as are customarily carried by Persons of established reputation employed in the same or a similar business and similarly situated, if available on a commercially reasonable basis. 7.3.4. Property Insurance. Each of the Company and its Subsidiaries will keep its assets which are of an insurable character insured by financially sound and reputable insurers against theft and fraud and against loss or damage by fire, explosion or hazards to the extent, in amounts and with deductibles at least as favorable as those -42- 50 generally maintained by businesses of similar size engaged in similar activities. Such insurance shall provide extended coverage in amounts sufficient to prevent such Person from becoming a co-insurer. 7.3.5. Liability Insurance. Each of the Company and its Subsidiaries will maintain with financially sound and reputable insurers insurance against liability for hazards, risks and liability to persons and property, including product liability insurance, to the extent, in amounts and with deductibles at least as favorable as those generally maintained by businesses of similar size engaged in similar activities; provided, however, that it may effect workers' compensation insurance or similar coverage with respect to operations in any particular state or other jurisdiction through an insurance fund operated by such state or jurisdiction or by meeting the self-insurance requirements of such state or jurisdiction. 7.4. Financial Statements and Reports. Each of the Company and its Subsidiaries will maintain a system of accounting in which correct entries will be made of all transactions in relation to their business and affairs in accordance with GAAP. The fiscal year of the Company and its Subsidiaries will end on December 31 in each year. 7.4.1. Annual Reports. The Company will furnish to the Lenders as soon as available, and in any event within 95 days after the end of each fiscal year, (1) the Consolidated balance sheet of the Company and its Subsidiaries as at the end of such fiscal year, (2) the Consolidated statements of income and Consolidated statements of cash flows of the Company and its Subsidiaries for such fiscal year and (3) the Combined and Combining statements of income and Combined and Combining statements of changes in shareholders' equity and of cash flows for each of (A) the Core Mutual Fund Subsidiaries, (B) the Pioneer Goldfields Entities and (C) the other Subsidiaries of the Company for such fiscal year, all in reasonable detail and together, in the case of Consolidated financial statements in paragraphs (1) and (2) of this Section 7.4.1, with comparative figures for the preceding fiscal year or fiscal year end, all accompanied by: (a) Unqualified reports of Arthur Andersen LLP (or, if they cease to be auditors of the Company and its Subsidiaries, other independent certified public accountants of recognized national standing reasonably satisfactory to the Agent) containing no material uncertainty, to the effect that they have audited the Consolidated financial statements in accordance with generally accepted auditing standards in the United States and that the Consolidated financial statements present fairly, in all material respects, the financial position of the Persons covered thereby at the dates thereof and the results of their operations for the periods covered thereby in conformity with GAAP. -43- 51 (b) A report by such accountants that in the course of their annual audit of the Company and its Subsidiaries, nothing came to their attention that caused them to believe that the Company failed to comply with the terms, covenants, provisions and conditions of Section 7.5, as calculated on an annual basis that coincides with the Company's fiscal year end, of this Agreement insofar as they relate to accounting matters. The report is furnished by such accountants with the understanding that their audit was not directed primarily toward obtaining knowledge of such noncompliance. Further, it is understood that the report is intended solely for the information and use of (i) the management of the Company and (ii) the Lenders hereunder, and cannot be used for any other purposes without the prior written consent of such accountants. (c) A certificate of the Company signed by a Financial Officer to the effect that such officer has caused this Agreement to be reviewed and has no knowledge of any Default, or if such officer has such knowledge, specifying such Default and the nature thereof, and what action the Company has taken, is taking or proposes to take with respect thereto. (d) In the event of a change in GAAP after the date hereof, computations by the Company, certified by a Financial Officer, reconciling the financial statements referred to above with financial statements prepared in accordance with GAAP as applied to the other covenants in Section 7 and the related definitions. (e) Computations by the Company demonstrating, as of the end of such fiscal year, (i) compliance with the Computation Covenants, (ii) Combined Unreimbursed Sales Commissions for the previous fiscal quarter then ended and (iii) the Total Estimated Collectible Amount as of the end of such fiscal year. (f) Computations by the Company comparing the financial statements referred to above with the most recent budgets for such fiscal year furnished to the Lenders in accordance with Section 7.4.3(a). (g) Calculations, as at the end of the fiscal year covered by such financial statements, of (i) the Accumulated Benefit Obligations for each Plan covered by Title IV of ERISA (other than Multiemployer Plans) and (ii) the fair market value of the assets of such Plan allocable to such benefits. (h) Supplements to Exhibits 8.1 and 8.4 showing any changes in the information set forth in such Exhibits during the last quarter of such fiscal year, as well as any changes in the Charter, Bylaws or incumbency of officers of the Company and the Subsidiaries from those previously certified to the Agent. -44- 52 (i) Reconciliation of beginning and ending balances of the Funds on an aggregate basis showing sales, redemptions, exchanges and changes in net asset value on a group basis for the following groups: money market, equity, fixed income and other. 7.4.2. Quarterly Reports. The Company will furnish to the Lenders as soon as available and, in any event, within 50 days after the end of each of the first three fiscal quarters of the Company, (1) the internally prepared Consolidated balance sheet of the Company and its Subsidiaries as of the end of such fiscal quarter, (2) the Consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries for such fiscal quarter and for the portion of the fiscal year then ending and (3) the Combined and Combining statements of income and Combined and Combining statements of cash flows for each of (A) the Core Mutual Fund Subsidiaries, (B) the Pioneer Goldfields Entities and (C) the other Subsidiaries of the Company for such fiscal quarter and for the portion of the fiscal year then ending, all in reasonable detail and together, in the case of the Consolidated financial statements, with comparative figures for the same date or period in the preceding fiscal year, all accompanied by: (a) A certificate of the Company signed by a Financial Officer to the effect that such financial statements have been prepared in accordance with GAAP and present fairly, in all material respects, the financial position of the Company and its Subsidiaries covered thereby at the dates thereof and the results of their operations for the periods covered thereby, subject only to normal year-end audit adjustments and the addition of footnotes. (b) In the event of a change in GAAP after the date hereof, computations by the Company, certified by a Financial Officer, reconciling the financial statements referred to above with financial statements prepared in accordance with GAAP as applied to the other covenants in Section 7 and related definitions. (c) Computations by the Company demonstrating, as of the end of such quarter, (i) compliance with the Computation Covenants, (ii) Combined Unreimbursed Sales Commissions for such period, and (iii) the Total Estimated Collectible Amount as of the end of such fiscal quarter. (d) Computations by the Company comparing the financial statements referred to above with the most recent budgets for such fiscal year furnished to the Lenders in accordance with Section 7.4.3(a). (e) Supplements to Exhibits 8.1 and 8.4 showing any changes in the information set forth in such Exhibits during such fiscal quarter, as well as any -45- 53 changes in the Charter, Bylaws or incumbency of officers of the Company and its Subsidiaries from those previously certified to the Agent. (f) A certificate of the Company signed by a Financial Officer to the effect that such officer has caused this Agreement to be reviewed and has no knowledge of any Default, or if such officer has such knowledge, specifying such Default and the nature thereof and what action the Company has taken, is taking or proposes to take with respect thereto. (g) Reconciliation of beginning and ending balances of the Funds on an aggregate basis showing sales, redemptions, exchanges and changes in net asset value on a group basis for the following groups: money market, equity, fixed income and other. 7.4.3. Other Reports. The Company will promptly furnish to the Lenders: (a) As soon as prepared and in any event before February 15 in each year, an annual budget and operating projections for such fiscal year of the Company and its Subsidiaries, prepared in a manner consistent with the manner in which the financial projections described in Section 8.2.1 were prepared. (b) Any material updates of such budget and projections. (c) Any management letters furnished to the Company or any Subsidiary by the Company's auditors. (d) All budgets, projections, Consolidated statements of operations and other reports furnished by the Company or any Subsidiary generally to the shareholders of the Company in such capacity. (e) Such registration statements, proxy statements and reports, including Forms 10-K, 10-Q, 8-K, ADV and BD, as may be filed by the Company or any Subsidiary (but in no event including the Trusts and Funds) with the Securities and Exchange Commission. (f) Any 90-day letter or 30-day letter from the federal Internal Revenue Service asserting tax deficiencies against the Company and its Subsidiaries. (g) Upon the request of the Agent or the Required Lenders, the Trust financial statements and auditor opinions required by Section 7.2.4. 7.4.4. Notice of Litigation; Notice of Defaults. The Company will promptly furnish to the Lenders notice of any litigation or any administrative or arbitration -46- 54 proceeding to which the Company or any Subsidiary may hereafter become a party which poses a material risk of resulting, after giving effect to any applicable insurance, in the payment by the Company and its Subsidiaries of at least $1,000,000 or which seeks to enjoin or questions the validity or enforceability of any Credit Document. Promptly upon acquiring knowledge thereof, the Company will notify the Lenders of the existence of any Default, specifying the nature thereof and what action the Company or any Subsidiary has taken, is taking or proposes to take with respect thereto. 7.4.5. ERISA Reports. The Company will furnish to the Lenders as soon as available the following items with respect to any Plan: (a) any request for a waiver of the funding standards or an extension of the amortization period, (b) any reportable event (as defined in section 4043 of ERISA), unless the notice requirement with respect thereto has been waived by regulation, (c) any notice received by any ERISA Group Person that the PBGC has instituted or intends to institute proceedings to terminate any Plan, or that any Multiemployer Plan is insolvent or in reorganization, (d) notice of the possibility of the termination of any Plan by its administrator pursuant to section 4041 of ERISA, and (e) notice of the intention of any ERISA Group Person to withdraw, in whole or in part, from any Multiemployer Plan. 7.4.6. Other Information. From time to time upon request of any authorized officer of any Lender, each of the Company and its Subsidiaries will furnish to the Lenders such other information regarding the business, assets, financial condition, income or prospects of the Company and its Subsidiaries as such officer may reasonably request, including copies of all tax returns, licenses, agreements, contracts, leases and instruments to which any of the Company or its Subsidiaries is party, including copies of the Investment Advisory Contracts, Distribution Plans or Distribution Agreements, principal underwriting agreements and custodian, registrar, transfer agent and shareholder services contracts of the Company, the Subsidiaries and the Funds. The Lenders' authorized officers and representatives shall have the right during normal business hours upon reasonable notice and at reasonable intervals to examine the books and records of the Company and its Subsidiaries, to make copies, notes and abstracts therefrom and to make an independent examination of their books and records, for the purpose of verifying the accuracy of the reports delivered by any of the Company and its Subsidiaries pursuant to this Section 7.4 or otherwise and -47- 55 ascertaining compliance with or obtaining enforcement of this Agreement or any other Credit Document. 7.5. Certain Financial Tests. 7.5.1. Company Total Debt to Combined Mutual Fund Cash Flow. On the last day of each of the first four fiscal quarters of the Company after the Initial Closing Date, Company Total Debt shall not exceed 325% of Combined Mutual Fund Cash Flow for the four consecutive fiscal quarters of the Company ending on such date, and on the last day of each fiscal quarter of the Company thereafter, Company Total Debt shall not exceed 300% of Combined Mutual Fund Cash Flow for the four consecutive fiscal quarters of the Company then ending. 7.5.2. Combined Adjusted Cash Flow to Consolidated Fixed Charges. On the last day of each fiscal quarter of the Company, Combined Adjusted Cash Flow for the four consecutive fiscal quarters of the Company then ending shall equal or exceed 400% of Consolidated Fixed Charges for such period. 7.5.3. Consolidated Tangible Net Worth. Consolidated Tangible Net Worth shall at all times equal or exceed $114,000,000; provided, however, that on the first day of each fiscal quarter of the Company beginning after the Initial Closing Date, such dollar amount shall be increased by an amount equal to 50% of Consolidated Net Income (only if in excess of zero) for the fiscal quarter then most recently ended. 7.6. Indebtedness. Neither the Company nor any Subsidiary of the Company will create, incur, assume or otherwise become or remain liable with respect to any Indebtedness except the following: 7.6.1. Indebtedness in respect of the Credit Obligations. 7.6.2. Indebtedness of the Company and each Subsidiary of the Company which is not a Core Mutual Fund Subsidiary, provided that immediately before and after giving effect to the incurrence of such Indebtedness, no Default exists. 7.6.3. Current liabilities existing from time to time, other than for borrowed money, incurred in the ordinary course of business. 7.6.4. To the extent that payment thereof shall not at the time be required by Section 7.1, Indebtedness in respect of taxes, assessments, governmental charges and claims for labor, materials and supplies. 7.6.5. Indebtedness secured by Liens of carriers, warehousemen, mechanics and landlords permitted by Sections 7.8.5 and 7.8.6. -48- 56 7.6.6. Indebtedness in respect of judgments or awards (a) which have been in force for less than the applicable appeal period, so long as execution is not levied, or (b) in respect of which the Company or any Subsidiary shall at the time in good faith be prosecuting an appeal or proceedings for review, so long as execution thereof shall have been stayed pending such appeal or review and the Company or such Subsidiary shall have taken appropriate reserves therefor consistent with GAAP. 7.6.7. Indebtedness in respect of deferred taxes arising in the ordinary course of business. 7.6.8. Indebtedness in respect of inter-company loans and advances among the Company and its Subsidiaries which are not prohibited by Section 7.9. 7.6.9. Guarantees permitted by Section 7.7. 7.6.10. Financing Debt outstanding on the date hereof and described on Exhibit 8.4. 7.6.11. Obligations under Interest Rate Protection Agreements permitted by Section 7.15. 7.7. Guarantees; Letters of Credit. Neither the Company nor any Subsidiary of the Company will become or remain liable with respect to any Guarantee, including reimbursement obligations under letters of credit and other financial guarantees by third parties, except the following: 7.7.1. Guarantees of the Credit Obligations. 7.7.2. Guarantees of Indebtedness by the Company and each Subsidiary of the Company which is not a Core Mutual Fund Subsidiary, provided that immediately before and after giving effect to such Guarantee, no Default exists. 7.8. Liens. Neither the Company nor any Subsidiary of the Company, shall create, incur or enter into, or suffer to be created or incurred or to exist, any Lien (including any arrangement or agreement which prohibits it from creating any Lien), except the following: 7.8.1. Restrictions on transfer and Liens contained in the Credit Documents. 7.8.2. Liens to secure taxes, assessments and other governmental charges, to the extent that payment thereof shall not at the time be required by Section 7.1. -49- 57 7.8.3. Deposits or pledges made (a) in connection with, or to secure payment of, workers' compensation, unemployment insurance, old age pensions or other social security, (b) in connection with casualty insurance maintained in accordance with Section 7.3, (c) to secure the performance of bids, tenders, contracts (other than contracts relating to Financing Debt) or leases, (d) to secure statutory obligations or surety or appeal bonds, (e) to secure indemnity, performance or other similar bonds in the ordinary course of business or (f) in connection with contested payments to the extent that payment thereof shall not at that time be required by Section 7.1. 7.8.4. Liens in respect of judgments or awards, to the extent that such judgments or awards are permitted by Section 7.6.6. 7.8.5. Liens of carriers, warehousemen, mechanics and similar Liens, in each case (a) in existence less than 90 days from the date of creation thereof or (b) being contested in good faith by the Company or any Subsidiary in appropriate proceedings (so long as the Company or such Subsidiary shall, in accordance with GAAP, have set aside on its books adequate reserves with respect thereto). 7.8.6. Encumbrances in the nature of (a) zoning restrictions, (b) easements, (c) restrictions of record on the use of real property, (d) landlords' and lessors' Liens on rented premises and (e) restrictions on transfers or assignments of leases, which in each case do not materially detract from the value of the encumbered property or impair the use thereof in the business of the Company or any Subsidiary. 7.8.7. Restrictions under federal and state securities laws on the transfer of securities. 7.8.8. Restrictions under Foreign Trade Regulations on the transfer or licensing of certain assets of the Company and its Subsidiaries. 7.8.9. Set-off rights of depository institutions with which the Company or any Subsidiary maintains deposit accounts. 7.8.10. Liens of the Core Mutual Fund Subsidiaries constituting (a) purchase money security interests (including mortgages, conditional sales, Capitalized Leases and any other title retention or deferred purchase devices) in real property, interests in leases or tangible personal property existing or created on the date on which such property is acquired, and (b) the renewal, extension or refunding of any security interest referred to in the foregoing clause (a) in an amount not to exceed the amount thereof remaining unpaid immediately prior to such renewal, extension or refunding; provided, however, that each such security interest shall attach solely to the particular item of property so acquired, and the principal amount of Indebtedness (including Indebtedness in respect of Capitalized Lease Obligations) secured thereby shall not -50- 58 exceed the cost (including all such Indebtedness secured thereby, whether or not assumed) of such item of property; and provided, further, that the aggregate principal amount of all Indebtedness secured by Liens permitted by this Section 7.8.10 shall not exceed $5,000,000 at any one time. 7.8.11. Any prohibition imposed by applicable law, including Section 15(a) of the Investment Company Act and Section 205 of the Investment Advisers Act, or any regulatory agency, on the creation of Liens and the assignment of contracts. 7.8.12. Liens incurred by the Company and each Subsidiary of the Company which is not a Core Mutual Fund Subsidiary, provided that immediately before and after giving effect to the incurrence of such Lien, no Default exists, and provided further that in no event shall any pledge of stock be permitted with respect to the stock of any of the Core Mutual Fund Subsidiaries or, subject to Section 7.8.13, the stock of any of the Pioneer Goldfields Entities. 7.8.13. Liens with respect to the stock of the Pioneer Goldfields Entities shall be permitted if (i) the Revolving Loan shall have been satisfied and discharged in full and (ii) Combined Mutual Fund Cash Flow exceeds $30,000,000 for the twelve month period ending on the date of the most recently ended fiscal quarter for which financial statements have been furnished (or were required to be furnished) by the Company to the Agent pursuant to Section 7.4.2. 7.9. Investments and Acquisitions. Neither the Company nor any Subsidiary of the Company will have outstanding, acquire, commit itself to acquire or hold any Investment (including any Investment consisting of the acquisition of any business) except for the following: 7.9.1. Investments of the Company and each Subsidiary of the Company which is not a Core Mutual Fund Subsidiary; provided that immediately before and after giving effect to such Investment, no Default exists. 7.9.2. Investments of the Core Mutual Fund Subsidiaries in Wholly Owned Subsidiaries of the Core Mutual Fund Subsidiaries; provided, however, that so long as immediately before and after giving effect thereto no Default exists, Investments in Wholly Owned Subsidiaries may be made only to the extent reasonably necessary for the conduct of the business permitted by Section 7.2.1. 7.9.3. Investments in Cash Equivalents. 7.9.4. Intercompany loans and advances from any Core Mutual Fund Subsidiary to any other Core Mutual Fund Subsidiary or the Company, but only to the -51- 59 extent reasonably necessary for Consolidated tax planning and working capital management. 7.9.5. Prepaid royalties and fees paid in the ordinary course of business. 7.9.6. Investments in investment companies sponsored by the Company for which the Company or any Core Mutual Fund Subsidiary is or will become the investment adviser. 7.9.7. Guarantees permitted by Section 7.7. 7.10. Distributions. Neither the Company nor any Subsidiary of the Company shall make any Distribution except for the following: 7.10.1. The Core Mutual Fund Subsidiaries may make Distributions to the Company or to any other Core Mutual Fund Subsidiary to the extent reasonably necessary for the conduct of the business permitted by Section 7.2.1. 7.10.2. The Company and each Subsidiary of the Company which is not a Core Mutual Fund Subsidiary may make Distributions to its stockholders during any fiscal quarter of the Company; provided that immediately before and after giving effect thereto, no Default exists. 7.10.3. The Company and each Subsidiary of the Company which is not a Core Mutual Fund Subsidiary may make Investments permitted by Section 7.9; provided that immediately before and after giving effect thereto, no Default exists. 7.11. Merger, Consolidation and Dispositions of Assets. Neither the Company nor any Subsidiary of the Company will become party to any merger or consolidation or will sell, lease, sell and lease back, sublease or otherwise dispose of any of its assets, or agree to do any of the foregoing, except the following: 7.11.1. The Core Mutual Fund Subsidiaries and the Pioneer Goldfields Entities may sell or otherwise dispose of (a) inventory in the ordinary course of business, (b) tangible assets to be replaced in the ordinary course of business by other tangible assets of equal or greater value and (c) tangible assets or stock or assets of Inactive Subsidiaries that are no longer used or useful in the business of the Core Mutual Fund Subsidiaries and the Pioneer Goldfields Entities; provided, however, that the aggregate fair market value (or book value if greater) of such assets, rights or stock no longer being used or useful shall not exceed $1,000,000 in any fiscal year. -52- 60 7.11.2. Subject to Section 9.1.13, any Core Mutual Fund Subsidiary may merge or be liquidated into the Company or any other Core Mutual Fund Subsidiary (other than an Excluded Subsidiary). 7.11.3. Subject to Section 9.1.13, any of the Pioneer Goldfields Entities may merge or be liquidated into the Company or any of the other Pioneer Goldfields Entities. 7.11.4. The Company and each Subsidiary of the Company which is not a Core Mutual Fund Subsidiary or a Pioneer Goldfields Entity may enter into a merger, consolidation, sale, lease, sale and leaseback, sublease or other disposition of its assets, provided that immediately before and after giving effect to such transaction, no Default exists; and provided further that any sale of equity interests in any of the Pioneer Goldfields Entities shall be in accordance with Section 7.11.5. 7.11.5. Subject to Section 4.2.3, the Company or Pioneer Goldfields Holdings, Inc. may sell a non-controlling equity interest in Pioneer Goldfields Limited or Teberebie Goldfields Limited. 7.12. Issuance of Stock by Subsidiaries; Subsidiary Distributions; Subsidiary Guarantors. 7.12.1. Issuance of Stock by Subsidiaries. No Subsidiary of the Company which is not a Core Mutual Fund Subsidiary or a Pioneer Goldfields Entity shall issue or sell any shares of its capital stock or other evidence of beneficial ownership to any Person other than the Company or any Wholly Owned Subsidiary of the Company unless, immediately before and after giving effect thereto, no Default exists. 7.12.2. Issuance of Stock by Core Mutual Fund Subsidiaries or Pioneer Goldfields Entity. No Core Mutual Fund Subsidiary or Pioneer Goldfields Entity shall issue or sell any shares of its capital stock or other evidence of beneficial ownership to any Person other than the Company or any Wholly Owned Subsidiary of the Company; provided that, subject to Sections 4.2.3 and 7.11.5, a public offering or other sale with respect to equity interests in the Pioneer Goldfields Entities shall be permitted. 7.12.3. No Restrictions on Subsidiary Distributions. Except for restrictions contained in the Credit Documents, neither the Company nor any Subsidiary will enter into or be bound by any agreement (including covenants requiring the maintenance of specified amounts of net worth or working capital) restricting the right of any Subsidiary to make Distributions or extensions of credit to the Company (directly or indirectly through another Subsidiary). -53- 61 7.13. ERISA, etc. Each of the Company and its Subsidiaries will comply, and will cause all ERISA Group Persons to comply, in all material respects, with the provisions of ERISA and the Code applicable to each Plan. Each of the Company and its Subsidiaries will meet, and will cause all ERISA Group Persons to meet, all minimum funding requirements applicable to them with respect to any Plan pursuant to section 302 of ERISA or section 412 of the Code, without giving effect to any waivers of such requirements or extensions of the related amortization periods which may be granted. At no time shall the Accumulated Benefit Obligations under any Plan that is not a Multiemployer Plan exceed the fair market value of the assets of such Plan allocable to such benefits by more than $1,000,000. The Company and its Subsidiaries will not withdraw, and will cause all other ERISA Group Persons not to withdraw, in whole or in part, from any Multiemployer Plan so as to give rise to withdrawal liability exceeding $1,000,000 in the aggregate. At no time shall the actuarial present value of unfunded liabilities for post-employment health care benefits, whether or not provided under a Plan, calculated in a manner consistent with Statement No. 106 of the Financial Accounting Standards Board, exceed $1,000,000. 7.14. Transactions with Affiliates. Other than the Material Agreements, neither the Company nor any of its Subsidiaries shall effect any transaction with any of their respective Affiliates (except for the Company and its Subsidiaries, except for Investments permitted by Section 7.9.6, and except for certain expense subsidies, consistent with past practice, for Funds for which the Company or any Subsidiary acts as an investment adviser) on a basis less favorable to the Company and its Subsidiaries than would be the case if such transaction had been effected with a non-Affiliate. 7.15. Interest Rate Protection. The Company will obtain, within 60 days after the Initial Closing Date, and thereafter keep in effect one or more Interest Rate Protection Agreements, each in form and substance reasonably satisfactory to the Agent, covering a notional amount of at least 60% of the B Share Loan (calculated as of the later of the Initial Closing Date and the date such Interest Rate Protection Agreements are entered into, and as of the last day of each calendar year thereafter, and giving effect to the required prepayments under Section 4.3). Each Interest Rate Protection Agreement shall have an original maturity of not less than five years. 7.16. Maintenance of Fee Structure. With respect to the B Shares, neither the Company nor any Subsidiary shall cause or permit dealer commissions to be amended to be more favorable to the Brokers or Redemption Fees to be amended to be more favorable to the shareholders of the B Share Funds. The Company and each Subsidiary of the Company, as the case may be, shall continue to receive Distribution Fees at rates no less favorable than the minimum amounts set forth on Exhibit 7.16 and shall continue to act as sole distributor of each Fund and to be the only Person to whom the Funds are permitted to make any payments under the respective Distribution Plan or Distribution Agreement. Exhibit 7.16 may be amended from time to time by the Company upon 60 days prior notice to the Agent, and the Agent shall give prompt notice thereof to the other Lenders, only to add to such Exhibit a Fund with -54- 62 dealer reallowances no more favorable to the Brokers and Redemption Fees and Distribution Fees no more favorable to the shareholders of such Fund than those applicable to the Funds set forth on Exhibit 7.16 on the date hereof. 7.17. Maintenance of Mutual Fund Contracts. The Company and the Core Mutual Fund Subsidiaries shall cause each Investment Advisory Contract, Distribution Plan or Distribution Agreement to which it is a party to be renewed on an annual basis on terms at least as favorable to the Company or the Core Mutual Fund Subsidiary, as the case may be. 8. Representations and Warranties. In order to induce the Lenders to extend credit to the Company hereunder, the Company represents and warrants that: 8.1. Organization and Business. 8.1.1. Company. The Company is a duly organized and validly existing corporation, in good standing under the laws of Delaware, with all power and authority, corporate or otherwise, necessary to (a) enter into and perform this Agreement and each other Credit Document to which it is party and make the borrowings hereunder and (b) own its properties and carry on the business now conducted or proposed to be conducted by it. Certified copies of the Charter and By-laws of the Company have been previously delivered to the Agent and are correct and complete. Exhibit 8.1, as from time to time hereafter supplemented in accordance with Sections 7.4.1 and 7.4.2, sets forth, as of the end of the most recent fiscal year or quarter for which such financial statements are required to be furnished, (i) the jurisdiction of incorporation of the Company, (ii) the address of the Company's principal executive office and chief place of business and (iii) the name under which the Company conducts its business and the jurisdictions in which the name is used. 8.1.2. Subsidiaries. Each Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized, with all power and authority, corporate or otherwise, necessary to (a) enter into and perform this Agreement and each other Credit Document to which it is party and (b) own its properties and carry on the business now conducted or proposed to be conducted by it. Certified copies of the Charter and By-laws of each Subsidiary that is a party to this Agreement have been previously delivered to the Agent and are correct and complete. Exhibit 8.1, as from time to time hereafter supplemented in accordance with Sections 7.4.1 and 7.4.2, sets forth, as of the end of the most recent fiscal year or quarter for which such financial statements are required to be furnished, (i) the name and jurisdiction of organization of each Subsidiary, (ii) the address of the chief executive office and principal place of business of each Subsidiary, (iii) each name under which each Subsidiary conducts its business and the jurisdictions in which each such name is used and (iv) with respect to the Core Mutual Fund Subsidiaries and the Pioneer -55- 63 Goldfields Entities, the number of authorized and issued shares and ownership of each such Subsidiary. 8.1.3. Qualification. Except as set forth on Exhibit 8.1, as from time to time supplemented in accordance with Sections 7.4.1 and 7.4.2, each of the Company and each Subsidiary is duly and legally qualified to do business as a foreign corporation or other entity and is in good standing in each state or jurisdiction in which such qualification is required and is duly authorized, qualified and licensed under all laws, regulations, ordinances or orders of public authorities, or otherwise, to carry on its business in the places and in the manner in which it is conducted, except for failures to be so qualified, authorized or licensed which would not in the aggregate result, or pose a material risk of resulting, in any Material Adverse Change. 8.2. Financial Statements and Other Information; Material Agreements. 8.2.1. Financial Statements and Other Information. The Company has previously furnished to the Lenders copies of the following: 8.2.1.1. The Company's Annual Reports on Form 10-K and its annual reports to stockholders for its fiscal years ended December 31 in each of 1994 and 1995, including the audited Consolidated balance sheet of the Company and its Subsidiaries as at December 31 in each of 1994 and 1995 and audited Consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries for the fiscal years of the Company then ended. 8.2.1.2. The financial and operational projections for the Company and its Subsidiaries included in the Information Memorandum to the Lenders dated April 8, 1996. 8.2.1.3. Calculations demonstrating pro forma compliance with the Computation Covenants as of March 31, 1996. The financial statements referred to in Section 8.2.1.1 (or delivered pursuant to Section 7.4.1 or 7.4.2) were prepared in accordance with GAAP and fairly present the financial position of each of the Company and its Subsidiaries, respectively, covered thereby at the respective dates thereof and the results of their operations for the periods covered thereby. Neither the Company nor any of its Subsidiaries has any known contingent liability material to the Company and its Subsidiaries on a Consolidated basis which is not reflected in the most recent balance sheet referred to in clause (c) above (or delivered pursuant to Section 7.4.1 or 7.4.2) or the notes thereto. -56- 64 The financial statements referred to in Section 8.2.1.2 were prepared in a manner consistent with GAAP and fairly present the financial position of the Persons covered thereby at the respective dates thereof and the results of their operations for the periods covered thereby, subject only to normal year-end audit adjustments and the addition of footnotes. In the Company's judgment, the financial and operational projections referred to in Section 8.2.1.3 constitute a reasonable basis as of the date hereof for the assessment of the future performance of the Company and its Subsidiaries during the periods indicated therein, it being understood that any projected financial information represents an estimate, based on various assumptions, of future results of operations and factors outside of its control which may or may not in fact occur. 8.2.2. Material Agreements. The Company has previously furnished to the Lenders correct and complete copies, including all exhibits, schedules and amendments thereto, of the following agreements (the "Material Agreements"): 8.2.2.1. the form of Distribution Plan or Distribution Agreement. 8.2.2.2. the form of Investment Advisory Contract. 8.2.2.3. the OPIC insurance policy naming the Agent, on behalf of the Lenders, as the "Loss Payee." 8.2.3. Investment Assets Under Management. The aggregate investment assets under management by the Company and its Subsidiaries were at least $11,000,000,000 on March 31, 1996. 8.3. Changes in Condition. No Material Adverse Change has occurred, and since December 31, 1995, neither the Company nor any Subsidiary has entered into any material transaction outside the ordinary course of business except for the transactions contemplated by this Agreement and the Material Agreements or as specifically described to the Lenders in writing. 8.4. Agreements Relating to Financing Debt. Exhibit 8.4, as from time to time hereafter supplemented in accordance with Sections 7.4.1 and 7.4.2, sets forth the amounts (as of the dates indicated in Exhibit 8.4, as so supplemented) of all Financing Debt of the Company and its Subsidiaries with amounts outstanding or commitments to lend of [$2,500,000] or more and all agreements which relate to such Financing Debt, and all Liens with respect to such Financing Debt. The Company has furnished the Agent with correct and complete copies of any agreements related to Exhibit 8.4 requested by the Required Lenders. -57- 65 8.5. Title to Assets. The Company and its Subsidiaries have good and marketable title to or valid leases of all material assets necessary for or used in the operations of their business as now conducted by them and reflected in the most recent balance sheet referred to in Section 8.2.1(i) (or the balance sheet most recently furnished to the Lenders pursuant to Section 7.4.1 or 7.4.2), and to all material assets acquired subsequent to the date of such balance sheet, subject to no Liens except for those permitted by Section 7.8 and except for assets disposed of as permitted by Section 7.11. 8.6. Licenses, etc. (a) Pioneering Management Corporation is a registered investment adviser under the Investment Advisers Act, with similar registrations with state authorities required to conduct its business as currently conducted and proposed to be conducted except to the extent immaterial to the Company's business, assets, financial condition or prospects. Pioneer Funds Distributor, Inc. is a registered broker/dealer in good standing under the Exchange Act and a member in good standing of the NASD, with similar registrations with state authorities required to conduct its business as currently conducted and proposed to be conducted except to the extent immaterial to the Company's business, assets, financial condition or prospects. Each Trust is a registered investment company, which registration is in full force and effect, under the Investment Company Act and each Fund or Trust is qualified to be taxed and has been (except to the extent no material liability applies to the Company or any Subsidiary) and is taxed as a regulated investment company under subchapter M of the Code. Pioneer Funds Distributor, Inc. acts as the principal underwriter for the Funds and is the sole recipient of Distribution Fees under the respective Distribution Plan or Distribution Agreement. Each Fund or Trust which is a commodity pool is registered under, or has obtained an exemption from, the Commodities Act. The shares representing beneficial interests in, or common stock of, each Fund or Trust are registered, which registration is in full force and effect, under the Securities Act and except to the extent immaterial to the Company's business, assets, financial condition or prospects, similar state securities laws. Each Subsidiary required to be a commodity trading advisor under the Commodities Act is so qualified. (b) The Company and its Subsidiaries have all material patents, patent applications, patent rights, service marks, service mark rights, trademarks, trademark rights, trade names, trade name rights, copyrights, licenses, franchises, permits, authorizations, including authorizations under state securities laws, and other material rights as are necessary for the conduct of the business of the Company and its Subsidiaries. All of the foregoing are in full force and effect, and each of the Company and its Subsidiaries is in substantial compliance with the foregoing without any known conflict with the valid rights of others which has resulted, or poses a material risk of resulting, in any Material Adverse Change. No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such license, franchise or other right or affects the rights of any of the Company and its Subsidiaries thereunder so as to result in any Material Adverse Change. No litigation or other proceeding or dispute with respect to the validity or, where applicable, the -58- 66 extension or renewal, of any of the foregoing has resulted, or poses a material risk of resulting, in any Material Adverse Change. 8.7. Litigation. There is no litigation, at law or in equity, including the litigation set forth on Exhibit 8.7, or any proceeding before any court, board or other governmental or administrative agency or any arbitrator which is pending or, to the knowledge of the Company, threatened which involves any material risk of any final judgment, order or liability which, after giving effect to any applicable insurance, has resulted, or poses a material risk of resulting, in any Material Adverse Change or which seeks to enjoin the consummation, or which questions the validity or enforceability, of any of the transactions contemplated by this Agreement or any other Credit Document. No judgment, decree or order of any court, board or other governmental or administrative agency or any arbitrator has been issued against or binds the Company or any Subsidiary which has resulted, or poses a material risk of resulting, in any Material Adverse Change. 8.8. Tax Returns. Each of the Company and its Subsidiaries has filed all material tax and information returns which are required to be filed by it and has paid, or made adequate provision for the payment of, all taxes which have or may become due pursuant to such returns or to any assessment received by it. Neither the Company nor any Subsidiary knows of any material additional assessments or any basis therefor. The Company reasonably believes that the charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes or other governmental charges are adequate. 8.9. Authorization and Enforceability. Each of the Company and any Subsidiary party to the Subsidiary Guarantee has taken all corporate action required to execute, deliver and perform this Agreement and each other Credit Document, including the borrowings, to which it is party. Each of this Agreement and each other Credit Document constitutes the legal, valid and binding obligation of the Company or such Subsidiary party thereto and is enforceable against such Person in accordance with its terms. 8.10. No Legal Obstacle to Agreements. Neither the execution and delivery of this Agreement or any other Credit Document, nor the making of any borrowings hereunder, nor the consummation of any transaction referred to in or contemplated by this Agreement or any other Credit Document, nor the fulfillment of the terms hereof or thereof or of any other agreement, instrument, deed or lease contemplated by this Agreement or any other Credit Document, has constituted or resulted in or will constitute or result in: (a) any breach or termination of the provisions of any agreement, instrument, deed or lease to which the Company or any Subsidiary is a party or by which it is bound, or of the Charter or By-laws of the Company or any Subsidiary; (b) the violation of any law, statute, judgment, decree or governmental order, rule or regulation applicable to the Company or any Subsidiary; -59- 67 (c) the creation under any agreement, instrument, deed or lease of any Lien upon any of the assets of the Company or any Subsidiary; or (d) any redemption, retirement or other repurchase obligation of the Company or any Subsidiary under any Charter, By-law, agreement, instrument, deed or lease. No approval, authorization or other action by, or declaration to or filing with, any governmental or administrative authority or any other Person is required to be obtained or made by the Company or any Subsidiary in connection with the execution, delivery and performance of this Agreement, the Notes or any other Credit Document, the transactions contemplated hereby or thereby or the making of any borrowing hereunder. 8.11. Defaults. Neither the Company nor any Subsidiary is in default under any provision of its Charter or By-laws or of this Agreement or any other Credit Document. Neither the Company nor any Subsidiary is in default under any provision of any agreement, instrument, deed or lease to which it is party or by which it or its property is bound, or has violated any law, judgment, decree or governmental order, rule or regulation, in each case so as to result, or pose a material risk of resulting, in any Material Adverse Change. 8.12. Certain Business Representations. 8.12.1. Labor Relations. No dispute or controversy between the Company or any Subsidiary and any of their respective employees has resulted, or is reasonably likely to result, in any Material Adverse Change, and neither the Company nor any Subsidiary anticipates that its relationships with its unions or employees will result, or are reasonably likely to result, in any Material Adverse Change. The Company and each of the Subsidiaries is in compliance in all material respects with all federal and state laws with respect to (a) non-discrimination in employment with which the failure to comply, in the aggregate, has resulted in, or poses a material risk of resulting in, a Material Adverse Change and (b) the payment of wages. 8.12.2. Antitrust. Each of the Company and its Subsidiaries is in compliance in all material respects with all federal and state antitrust laws relating to its business and the geographic concentration of its business except as has not resulted in, and could not reasonably be expected to result in, a Material Adverse Change. 8.12.3. Environmental Compliance. Each of the Company and its Subsidiaries is in compliance in all material respects with the Clean Air Act, the Federal Water Pollution Control Act, the Marine Protection Research and Sanctuaries Act and all other federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, licenses, agreements or governmental restrictions relating to the disposal or use of acids, chemicals, oils, -60- 68 solvents and other hazardous materials, substances or waste products used or produced by the Company and its respective Subsidiaries in the course of their businesses. 8.12.4. Certain Other Agreements. Each of the Funds has entered into Investment Advisory Contracts and shareholder services agreements, and in the case of B Share Funds, a Distribution Plan or Distribution Agreement with the Company or another Subsidiary of the Company, which agreements are in full force and effect. The Company has furnished to the trustees or directors, as the case may be, of each Fund and Trust such information as may be reasonably necessary to evaluate the terms of each Investment Advisory Contract and Distribution Plan or Distribution Agreement in accordance with sections 15(c) and 12(b) of the Investment Company Act. 8.12.5. Certain Laws. Each of the Company and its Subsidiaries is in compliance with the Investment Company Act, the Investment Advisers Act, the Exchange Act, the Commodities Act and the rules and regulations of the NASD and similar state laws, except to the extent that noncompliance would not result, or pose a material risk of resulting, in any Material Adverse Change. Each Trust and Fund is in compliance with the Investment Company Act and the Securities Act and similar state laws, except to the extent that noncompliance would not result, or pose a material risk of resulting, in any Material Adverse Change. 8.12.6. Burdensome Obligations. Neither the Company nor any Subsidiary is party to or bound by any agreement, instrument, deed or lease or is subject to any Charter, By-law or other restriction or commitment or requirement for future expenditures which, in the opinion of the management of such Person, is so burdensome as in the foreseeable future to result in, or pose a material risk of resulting in, a Material Adverse Change. 8.13. Pension Plans. Neither the Company nor any Subsidiary has any Plan as of the date hereof except for Plans of which the Agent has been notified in writing and are in compliance with Section 7.13. 8.14. Foreign Trade Regulations; Government Regulation. 8.14.1. Foreign Trade Regulations. Neither the execution and delivery of this Agreement or any other Credit Document, nor the making by the Company of any borrowings hereunder has constituted or resulted in or will constitute or result in the violation of any Foreign Trade Regulation. 8.14.2. Government Regulation. Neither the Company nor any Subsidiary, nor any Person controlling the Company or any Subsidiary or under common control with the Company or any Subsidiary is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act -61- 69 or any statute or regulation which regulates the incurring by the Company or any Subsidiary of Financing Debt as contemplated by this Agreement and the other Credit Documents. 8.15. Pioneer Fund Management Omaha Inc. Pioneer Fund Management Omaha Inc. conducts no business and, as of the date of this Agreement, has total assets with a fair market value (or book value, if greater) of less than $5,000, and the Company will cause Pioneer Fund Management Omaha Inc. to be dissolved prior to December 31, 1996. 8.16. Disclosure. Neither this Agreement nor any other Credit Document to be furnished to the Lenders by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated hereby or by such other Credit Document contains any untrue statement of material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. No fact is actually known to the Company or any Subsidiary which has resulted, or in the future (so far as the Company or any Subsidiary can reasonably foresee) will result, or poses a material risk of resulting, in any Material Adverse Change, except to the extent that present or future general economic conditions may result in a Material Adverse Change. 9. Defaults. 9.1. Events of Default. The following events are referred to as "Events of Default": 9.1.1. The Company or any other Obligor shall fail to make any payment in respect of: (a) interest or any fee on or in respect of any of the Credit Obligations as the same shall become due and payable, and such failure shall continue for a period of three Banking Days or (b) principal of any of the Credit Obligations as the same shall become due, whether at maturity or by acceleration or otherwise. 9.1.2. The Company or any of its Subsidiaries shall fail to perform or observe any of the provisions (a) of Section 7.4 and such failure shall continue for a period of five Banking Days or (b) of Sections 7.5 through 7.17. 9.1.3. The Company or any Subsidiary or any of their respective Affiliates party to any Credit Document shall fail to perform or observe any other covenant, agreement or provision to be performed or observed by it under this Agreement or any other Credit Document, and such failure shall not be rectified or cured to the written satisfaction of the Required Lenders within 30 days after notice thereof by the Agent to the Company. 9.1.4. Any representation or warranty of or with respect to the Company, any Subsidiary or any of their respective Affiliates party to any Credit Document made to -62- 70 the Lenders in, pursuant to or in connection with this Agreement or any other Credit Document shall be materially false on the date as of which it was made. 9.1.5. (a) The Company or any Subsidiary shall fail to make any payment when due (after giving effect to any applicable grace periods) in respect of any Financing Debt (other than the Credit Obligations) outstanding in an aggregate amount of principal and accrued interest exceeding $5,000,000; (b) The Company or any Subsidiary shall fail to perform or observe the terms of any agreement relating to such Financing Debt, and such failure shall continue, without having been duly cured, waived or consented to, beyond the period of grace, if any, specified in such agreement, and such failure shall permit the acceleration of such Financing Debt; (c) Any such Financing Debt of the Company or any Subsidiary shall be accelerated or become due or payable prior to its stated maturity for any reason whatsoever (other than voluntary prepayments thereof); or (d) Any Lien on any property of the Company or any Subsidiary securing any such Financing Debt shall be enforced by foreclosure or similar action. 9.1.6. Except as permitted by Section 7.11, the Company, any Core Mutual Fund Subsidiary any Pioneer Goldfields Entity or any other Subsidiary of the Company with aggregate liabilities in excess of $2,500,000 shall initiate any action to dissolve, liquidate or otherwise terminate its existence. 9.1.7. Any Credit Document or Material Agreement shall cease, for any reason (other than the scheduled termination thereof in accordance with its terms), to be in full force and effect; or the Company, any Subsidiary or any of their respective Affiliates party thereto shall so assert in a judicial or similar proceeding. 9.1.8. A final judgment (a) which, with other outstanding final judgments against the Company, the Subsidiaries and any of their Affiliates party to any Credit Document, exceeds an aggregate of $1,000,000 shall be rendered against the Company or any of the Subsidiaries or Affiliates party to any Credit Document, or (b) which grants injunctive relief that results in, or poses a material risk of resulting in, a Material Adverse Change, and if, within 30 days after entry thereof, such judgment shall not have been discharged or execution thereof stayed pending appeal, or if, within 30 days after the expiration of any such stay, such judgment shall not have been discharged. 9.1.9. (a) In any four consecutive fiscal quarters of the Company, Investment Advisory Contracts that account for more than 15% of investment assets under -63- 71 management arising from all Investment Advisory Contracts for the four fiscal quarters of the Company completed immediately prior to the commencement of the four consecutive fiscal quarters in question shall have been terminated during the four fiscal quarters in question and shall not have been extended or replaced (by merger of a Fund or Trust into another Fund or Trust or otherwise) with other Investment Advisory Contracts with terms not materially less favorable to the Company and its Subsidiaries and applicable fee rates not less than the previous terms and applicable fee rates, in each case in the sole discretion of the Required Lenders. (b) Any Distribution Plan or Distribution Agreement shall have been terminated and shall not have been extended or replaced with another Distribution Plan or Distribution Agreement with terms not materially less favorable to the Company and its Subsidiaries and applicable fee rates not less than the terms and fee rates applicable to Distribution Fees of the previous Distribution Plan or Distribution Agreement so terminated, in each case in the sole discretion of the Required Lenders. 9.1.10. ERISA Group Persons shall fail to pay when due amounts (other than amounts being contested in good faith through appropriate proceedings) aggregating in excess of $1,000,000 for all ERISA Group Persons for which they shall have become liable under Title IV of ERISA to pay to the PBGC or to a Plan; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Plan or a proceeding shall be instituted by a fiduciary of any Plan against any ERISA Group Person to enforce section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 30 days thereafter; or a condition shall exist which would require the PBGC to obtain a decree adjudicating that any Plan must be terminated. 9.1.11. The Company, any Subsidiary or any of their respective Affiliates obligated with respect to any Credit Obligation shall: (a) commence a voluntary case under the Bankruptcy Code or authorize, by appropriate proceedings of its board of directors or other governing body, the commencement of such a voluntary case; (b) have filed against it a petition commencing an involuntary case under the Bankruptcy Code which shall not have been dismissed within 60 days after the date on which such petition is filed; or file an answer or other pleading within such 60-day period admitting or failing to deny the material allegations of such a petition or seeking, consenting to or acquiescing in the relief therein provided; (c) have entered against it an order for relief in any involuntary case commenced under the Bankruptcy Code; -64- 72 (d) seek relief as a debtor under any applicable law, other than the Bankruptcy Code, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors, or consent to or acquiesce in such relief; (e) have entered against it an order by a court of competent jurisdiction (i) finding it to be bankrupt or insolvent, (ii) ordering or approving its liquidation, reorganization or any modification or alteration of the rights of its creditors or (iii) assuming custody of, or appointing a receiver or other custodian for, all or a substantial portion of its property; or (f) make an assignment for the benefit of, or enter into a composition with, its creditors, or appoint, or consent to the appointment of, or suffer to exist a receiver or other custodian for, all or a substantial portion of its property. 9.1.12. Any person or group of persons (within the meaning of Section 13 or 14 of the Exchange Act, but excluding any persons who are directors or officers of the Company on the date of this Agreement who continue to be directors and officers) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 20% or more of the outstanding shares of common stock of the Company or the percentage of the voting power required to elect a majority of the board of directors of the Company; or during any period of twelve consecutive calendar months, individuals who were directors of the Company on the first day of such period shall cease to constitute a majority of the board of the directors of the Company; or any three officers of the Company listed on Exhibit 9.1.12 shall cease to be employed by the Company for any reason. 9.1.13. The Company shall at any time cease to beneficially own either (i) a controlling interest in the Pioneer Goldfields Entities or (ii) a beneficial ownership interest in all of the Core Mutual Fund Subsidiaries at least equal to that existing on the date hereof (or at the time such Core Mutual Fund Subsidiary becomes a Subsidiary of the Company). 9.1.14. Any Fund or Trust shall cease to be qualified to be taxed as a regulated investment company under subchapter M of the Code. 9.1.15. Any Material Adverse Change shall have occurred, or any event or events shall have occurred which could reasonably be expected, individually or in the aggregate, to cause a Material Adverse Change. 9.2. Certain Actions Following an Event of Default. If any one or more Events of Default shall occur, then in each and every such case: -65- 73 9.2.1. No Obligation to Extend Credit. The Agent may (and upon written request of the Required Lenders shall) terminate the obligations of the Lenders to make any further extensions of credit under the Credit Documents by furnishing notice thereof to the Company; provided, however, that if a Bankruptcy Default shall have occurred, such obligations shall automatically terminate. 9.2.2. Specific Performance; Exercise of Rights. The Agent may (and upon written request of the Required Lenders shall) proceed to protect and enforce the Lenders' rights by suit in equity, action at law and/or other appropriate proceeding, either for specific performance of any covenant or condition contained in this Agreement or any other Credit Document or in any instrument or assignment delivered to the Lenders pursuant to this Agreement or any other Credit Document, or in aid of the exercise of any power granted in this Agreement or any other Credit Document or any such instrument or assignment. 9.2.3. Acceleration. The Agent on behalf of the Lenders may (and upon written request of the Required Lenders shall) by notice in writing to the Company declare all or any part of the unpaid balance of the Credit Obligations then outstanding to be immediately due and payable, and thereupon such unpaid balance or part thereof shall become so due and payable without presentment, protest or further demand or notice of any kind, all of which are expressly waived; provided, however, that if a Bankruptcy Default shall have occurred, the unpaid balance of the Credit Obligations shall automatically become immediately due and payable without presentment, protest or further demand or notice of any kind, all of which are expressly waived. 9.2.4. Enforcement of Payment; Credit Security; Setoff. The Agent may (and upon written request of the Required Lenders shall) proceed to enforce payment of the Credit Obligations in such manner as it may elect. The Lenders may offset and apply toward the payment of the Credit Obligations (and/or toward the curing of any Event of Default) any Indebtedness from the Lenders to the Company and its Subsidiaries, including any Indebtedness represented by deposits in any account maintained with the Lenders (except with respect to Pioneer Capital Corporation, Pioneer Ventures Limited Partnership and Pioneer Ventures Limited Partnership II to the extent not permitted by any applicable law or regulation, including without limitation any regulation imposed by the Small Business Administration), regardless of the adequacy of any security for the Credit Obligations. The Lenders shall have no duty to determine the adequacy of any such security in connection with any such offset. 9.2.5. Cumulative Remedies. To the extent not prohibited by applicable law which cannot be waived, all of the Lenders' rights hereunder and under each other Credit Document shall be cumulative. -66- 74 9.3. Annulment of Defaults. Any Default or Event of Default shall be deemed to exist and to be continuing for any purpose of this Agreement until the Required Lenders or the Agent (with any consent of the Required Lenders) shall have waived such Default or Event of Default in writing, stated in writing that the same has been cured to such Lenders' reasonable satisfaction or entered into an amendment to this Agreement which by its express terms cures such Default or Event of Default. No such action by the Lenders or the Agent shall extend to or affect any subsequent Default or Event of Default or impair any rights of the Lenders upon the occurrence thereof. The making of any extension of credit during the existence of any Default or Event of Default shall not constitute a waiver thereof. 9.4. Waivers. The Company waives to the extent not prohibited by the provisions of applicable law that cannot be waived: (a) all presentments, demands for performance, notices of nonperformance (except to the extent required by the provisions of this Agreement or any other Credit Document), protests, notices of protest and notices of dishonor; (b) any requirement of diligence or promptness on the part of any Lender in the enforcement of its rights under this Agreement, the Notes or any other Credit Document; (c) any and all notices of every kind and description which may be required to be given by any statute or rule of law; and (d) any defense (other than indefeasible payment in full) which it may now or hereafter have with respect to the Credit Obligations. 10. Expenses; Indemnity. 10.1. Expenses. Whether or not the transactions contemplated hereby shall be consummated, the Company will pay: (a) all reasonable expenses of the Agent (including the out-of-pocket expenses related to forming the group of Lenders and reasonable fees and disbursements of the special counsel to the Agent) in connection with the preparation and duplication of this Agreement and each other Credit Document, examinations by, and reports of, the Agent's commercial financial examiners (limited to not more than one per year prior to the existence of a Default), the transactions contemplated hereby and thereby and operations hereunder and thereunder (other than for assignments pursuant to Section 12.1.1); -67- 75 (b) all recording and filing fees and transfer and documentary stamp and similar taxes at any time payable in respect of this Agreement, any other Credit Document or the incurrence of the Credit Obligations; and (c) to the extent not prohibited by applicable law that cannot be waived, all other reasonable expenses incurred by any Lender or the holder of any Credit Obligation in connection with the enforcement or protection of any rights hereunder or under any other Credit Document, including costs of collection and reasonable attorneys' fees (including a reasonable allowance for the hourly cost of attorneys employed by any Lender on a salaried basis) and expenses. 10.2. General Indemnity. The Company will indemnify each Lender and hold them harmless from any liability, loss or damage resulting from the violation by the Company of Section 2.4. The Company will also indemnify each Lender, each of the Lenders' directors, officers, employees, affiliates, agents and each Person, if any, who controls any Lender (each Lender and each of such directors, officers, employees, affiliates, agents and control Persons is referred to as an "Indemnified Party") and hold each of them harmless from and against any and all losses, claims, damages, liabilities and expenses (including reasonable fees and disbursements of counsel with whom any Indemnified Party may consult in connection therewith and all reasonable expenses of litigation or preparation therefor) which any Indemnified Party may become subject to arising out of or in connection with (a) such Indemnified Party's compliance with or contest of any subpoena or other process issued against it in any proceeding involving the Company or any Subsidiary or their Affiliates arising from this Agreement or any other Credit Document, the transactions contemplated hereby and thereby or the operations hereunder or thereunder or (b) any litigation or investigation involving the Company, any Subsidiaries or their Affiliates, or any officer, director or employee thereof, other than litigation commenced by the Company against any Lender which seeks enforcement of any of the rights of the Company hereunder or under any other Credit Document and is determined adversely to any Lender in a final nonappealable judgment and except to the extent such claims, damages, liabilities and expenses result from the Agent's or a Lender's, as the case may be, gross negligence or willful misconduct. 11. Operations. 11.1. Interests in Credits. The percentage interest of each Lender in the Loan shall be computed based on the maximum principal amount for each Lender as set forth in Exhibit -68- 76 11.1. The foregoing percentage interests, as otherwise adjusted as the Lenders may from time to time agree among themselves, or pursuant to Section 12, are referred to as the "Percentage Interests" with respect to all or any portion of the Loan. References in any Credit Document to the Lenders' respective Percentage Interests are to such interests as from time to time in effect. 11.2. Agent's Authority to Act, etc. Each of the Lenders appoints and authorizes the Agent to act for the Lenders as the Lenders' Agent in connection with the transactions contemplated by this Agreement and the other Credit Documents on the terms set forth herein. In acting hereunder, the Agent is acting for its own account to the extent of its Percentage Interest and for the accounts of each other Lender to the extent of the Lenders' respective Percentage Interests, and all action in connection with the enforcement of, or the exercise of any remedies (other than the Lenders' rights of set-off as provided in Section 9.2.4 or in any Credit Document) in respect of the Credit Obligations and Credit Documents shall be taken by the Agent. 11.3. Company to Pay Agent, etc. The Company shall be fully protected in making all payments in respect of the Credit Obligations to the Agent, in relying upon consents, modifications and amendments executed by the Agent purportedly on the Lenders' behalf, and in dealing with the Agent as herein provided. The Agent shall charge the accounts of the Company, on the dates when the amounts thereof become due and payable, with the amounts of the principal of and interest on the Loan, commitment fees, agent's fees and upon notice to the Company, any other fees and amounts owing under any Credit Document. 11.4. Lender Operations for Advances, etc. 11.4.1. Advances. On each Closing Date, each Lender, upon notice by the Agent, given promptly after its receipt of the borrowing request, shall advance to the Agent in immediately available funds such Lender's Percentage Interest in the portion of the Loan advanced on such Closing Date prior to 1:00 p.m. (Boston time). If such funds are not received at such time, but all the conditions set forth in Section 5 have been satisfied, each Lender hereby authorizes and requests the Agent to advance for such Lender's account, pursuant to the terms hereof, such Lender's respective Percentage Interest in such portion of the Loan and agrees to reimburse the Agent in immediately available funds for the amount thereof prior to 3:00 p.m. (Boston time) on the day such portion of the Loan is advanced hereunder; provided, however, that the Agent is not authorized to make any such advance for the account of any Lender who has previously notified the Agent in writing that such Lender will not be performing its obligations to make further advances hereunder. 11.4.2. Agent to Allocate Payments, etc. All payments of principal and interest in respect of the extensions of credit made pursuant to this Agreement, commitment fees and other fees under this Agreement shall, as a matter of -69- 77 convenience, be made by the Company to the Agent in immediately available funds. The share of each Lender shall be credited to such Lender by the Agent in immediately available funds in such manner that the principal amount of the Credit Obligations to be paid shall be paid proportionately in accordance with the Lenders' respective Percentage Interests in such Credit Obligations. Under no circumstances shall any Lender be required to produce or present its Notes as evidence of its interests in the Credit Obligations in any action or proceeding relating to the Credit Obligations. 11.4.3. Delinquent Lenders; Nonperforming Lenders. In the event that any Lender fails to reimburse the Agent pursuant to Section 11.4.1 for the Percentage Interest of such Lender (a "Delinquent Lender") in any credit advanced by the Agent pursuant hereto, overdue amounts (the "Delinquent Payment") due from the Delinquent Lender to the Agent shall bear interest, payable by the Delinquent Lender on demand, at a per annum rate equal to (a) the Federal Funds Rate for the first three days overdue and (b) the sum of 2% plus the Federal Funds Rate for any longer period. Such interest shall be payable to the Agent for its own account for the period commencing on the date of the Delinquent Payment and ending on the date the Delinquent Lender reimburses the Agent on account of the Delinquent Payment (to the extent not paid by the Company as provided below) and the accrued interest thereon (the "Delinquency Period"), whether pursuant to the assignments referred to below or otherwise. Upon notice by the Agent, the Company will pay to the Agent the principal (but not the interest) portion of the Delinquent Payment. During the Delinquency Period, in order to make reimbursements for the Delinquent Payment and accrued interest thereon, the Delinquent Lender shall be deemed to have assigned to the Agent all payments made by the Company under Section 4 which would have thereafter otherwise been payable under the Credit Documents to the Delinquent Lender. During any other period in which any Lender is not performing its obligations to extend credit under Section 2 (a "Nonperforming Lender"), the Nonperforming Lender shall be deemed to have assigned to each Lender that is not a Nonperforming Lender (a "Performing Lender") all payments made by the Company under Section 4 which would have thereafter otherwise been payable under the Credit Documents to the Nonperforming Lender, and the Agent shall credit a portion of such payments to each Performing Lender in an amount equal to the Percentage Interest of such Performing Lender divided by one minus the Percentage Interest of the Nonperforming Lender until the respective portions of the Loan owed to all the Lenders are the same as the Percentage Interests of the Lenders immediately prior to the failure of the Nonperforming Lender to perform its obligations under Section 2. The foregoing provisions shall be in addition to any other remedies the Agent, the Performing Lenders or the Company may have under law or equity against the Delinquent Lender as a result of the Delinquent -70- 78 Payment or against the Nonperforming Lender as a result of its failure to perform its obligations under Section 2. 11.5. Sharing of Payments, etc. Each Lender agrees that (a) if by exercising any right of set-off or counterclaim or otherwise, it shall receive payment of a proportion of the aggregate amount of principal, interest and fees due with respect to its Percentage Interest in the Loan which is greater than the proportion received by any other Lender in respect of the aggregate amount of principal, interest and fees due with respect to the Percentage Interest of such other Lender and (b) if such inequality shall continue for more than 10 days, the Lender receiving such proportionately greater payment shall purchase participations in the Percentage Interests in the Loan held by the other Lenders, and such other adjustments shall be made from time to time (including rescission of such purchases of participations in the event the unequal payment originally received is recovered from such Lender through bankruptcy proceedings or otherwise), as may be required so that all such payments of principal, interest and fees with respect to the Loan held by the Lenders shall be shared by the Lenders pro rata in accordance with their respective Percentage Interests; provided, however, that this Section 11.5 shall not impair the right of any Lender to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of Indebtedness of the Company other than the Company's Indebtedness with respect to the Loan. The Company agrees, to the fullest extent permitted by applicable law, that any Credit Participant and any Lender purchasing a participation from another Lender pursuant to this Section 11.5 may exercise all rights of payment (including the right of set-off), and shall be obligated to share payments under this Section 11.5, with respect to its participation as fully as if such Credit Participant or such Lender were the direct creditor of the Company and a Lender hereunder in the amount of such participation. 11.6. Amendments, Consents, Waivers, etc. Except as otherwise set forth herein and subject to Section 11.4.2(c), the Agent may (and upon the written request of the Required Lenders described in paragraph (a) or (b) below, the Agent shall) take or refrain from taking any action under this Agreement or any other Credit Document, including giving its written consent to any modification of or amendment to and waiving in writing compliance with any covenant or condition in this Agreement or any other Credit Document or any Default or Event of Default, all of which actions shall be binding upon all of the Lenders; provided, however, that: (a) Except as provided below, without the written consent of Lenders owning at least a majority of the Percentage Interests, no modification of or amendment to, or consent with respect to or waiver of compliance with, any of the Credit Documents or waiver of a Default or Event of Default shall be made. (b) Without the written consent of such Lenders as own 100% of the Percentage Interests (other than Delinquent Lenders during the existence of a -71- 79 Delinquency Period so long as such Delinquent Lender is treated the same as the other Lenders with respect to any actions enumerated below): (i) No reduction in the interest rate on any portion of the Loan or in commitment fees shall be made. (ii) No extension or postponement of the stated time of payment of all or any portion of the Loan or interest thereon or any commitment fees shall be made. (iii) No increase in the amount, or extension of the term, of the Commitments beyond that provided for under Section 2 shall be made. (iv) No amendment to or modification of Section 7.16 (including the pricing structure set forth in Exhibit 7.16 to the extent not amended in accordance with Section 7.16) or this Section 11.6(c) shall be made. (v) No assignment by the Company of its rights or delegation of its duties under any Credit Document shall be made. (vi) No amendment to or modification of this Section 11.6 shall be made. (vii) No modification or release of the obligations of the Guarantors pursuant to Section 6 shall be made. 11.7. Agent's Resignation. The Agent may resign at any time by giving at least 60 days' prior written notice of its intention to do so to each other of the Lenders and upon the appointment by the Required Lenders of a successor Agent satisfactory to the Company. If no successor Agent shall have been so appointed and shall have accepted such appointment within 45 days after the retiring Agent's giving of such notice of resignation, then the retiring Agent may with the consent of the Company, which shall not be unreasonably withheld, appoint a successor Agent which shall be a bank or a trust company having a combined capital, surplus and undivided profit of at least $500,000,000; provided, however, that any successor Agent appointed under this sentence may be removed upon the written request of the Required Lenders, which request shall also appoint a successor Agent satisfactory to the Company. Upon the appointment of a new Agent hereunder, the term "Agent" shall for all purposes of this Agreement thereafter mean such successor. After any retiring Agent's resignation hereunder as Agent, or the removal hereunder of any successor Agent, the provisions of this Agreement shall continue to inure to the benefit of such Agent as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. 11.8. Concerning the Agent. -72- 80 11.8.1. Action in Good Faith, etc. The Agent and its officers, directors, employees and agents shall be under no liability to any of the Lenders or to any future holder of any interest in the Credit Obligations for any action or failure to act taken or suffered in good faith, and any action or failure to act in accordance with an opinion of its counsel shall conclusively be deemed to be in good faith. The Agent shall in all cases be entitled to rely, and shall be fully protected in relying, on instructions given to the Agent by the required holders of Credit Obligations as provided in this Agreement. 11.8.2. No Implied Duties, etc. The Agent shall have and may exercise such powers as are specifically delegated to the Agent under this Agreement or any other Credit Document together with all other powers incidental thereto. The Agent shall have no implied duties to any Person or any obligation to take any action under this Agreement or any other Credit Document except for action specifically provided for in this Agreement or any other Credit Document to be taken by the Agent. Before taking any action under this Agreement or any other Credit Document, the Agent may request an appropriate specific indemnity satisfactory to it from each Lender in addition to the general indemnity provided for in Section 11.11; provided, however, that no such indemnity shall extend to actions or omissions which are taken by the Agent with gross negligence or willful misconduct. Until the Agent has received such specific indemnity, the Agent shall not be obligated to take (although it may in its sole discretion take) any such action under this Agreement or any other Credit Document. Each Lender confirms that the Agent does not have a fiduciary relationship to it under the Credit Documents. The Company confirms that neither the Agent nor any other Lender has a fiduciary relationship to it under the Credit Documents. 11.8.3. Validity, etc. Subject to Section 11.8.1, the Agent shall not be responsible to any Lender or any future holder of any interest in the Credit Obligations (a) for the legality, validity, enforceability or effectiveness of this Agreement or any other Credit Document, (b) for any recitals, reports, representations, warranties or statements contained in or made in connection with this Agreement or any other Credit Document, (c) for the existence or value of any assets included in any security for the Credit Obligations, (d) for the perfection or effectiveness of any Lien purported to be included in such security or (e) for the specification or failure to specify any particular assets to be included in such security. 11.8.4. Compliance. The Agent shall not be obligated to ascertain or inquire as to the performance or observance of any of the terms of this Agreement or any other Credit Document; and in connection with any extension of credit under this Agreement or any other Credit Document, the Agent shall be fully protected in relying on a certificate of the Company as to the fulfillment by the Company of any conditions to such extension of credit. -73- 81 11.8.5. Employment of Agents and Counsel. The Agent may execute any of its duties as Agent under this Agreement or any other Credit Document by or through employees, agents and attorneys-in-fact and shall not be responsible to any of the Lenders, the Company or any Subsidiary (except as to money or securities received by the Agent or the Agent's authorized agents) for the default or misconduct of any such agents or attorneys-in-fact selected by the Agent with reasonable care. The Agent shall be entitled to advice of counsel concerning all matters pertaining to the agency hereby created and its duties hereunder or under any other Credit Document. 11.8.6. Reliance on Documents and Counsel. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any affidavit, certificate, cablegram, consent, instrument, letter, notice, order, document, statement, telecopy, telegram, telex or teletype message or writing reasonably believed in good faith by the Agent to be genuine and correct and to have been signed, sent or made by the Person in question, including any telephonic or oral statement made by such Person, and, with respect to legal matters, upon the opinion of counsel selected by the Agent. 11.8.7. Agent's Reimbursement. Each of the Lenders severally agrees to reimburse the Agent, in the amount of such Lender's Percentage Interest, for any reasonable expenses not reimbursed by the Company (without limiting the obligation of the Company to make such reimbursement): (a) for which the Agent is entitled to reimbursement by the Company under this Agreement or any other Credit Document, and (b) after the occurrence of a Default, for any other reasonable expenses incurred by the Agent on the Lenders' behalf in connection with the enforcement of the Lenders' rights under this Agreement or any other Credit Document. 11.8.8. Agent's Fees. The Company shall pay to the Agent for its own account the amounts on the Initial Closing Date and thereafter as separately agreed between the Company and the Agent. 11.9. Rights as a Lender. With respect to any credit extended by it hereunder, Bank of Boston shall have the same rights, obligations and powers hereunder as any other Lender and may exercise such rights and powers as though it were not the Agent, and unless the context otherwise specifies, Bank of Boston shall be treated in its individual capacity as though it were not the Agent hereunder. Without limiting the generality of the foregoing, the Percentage Interest of Bank of Boston shall be included in any computations of Percentage Interests. Bank of Boston and its Affiliates may accept deposits from, lend money to, act as trustee for and generally engage in any kind of banking or trust business with the Company, any Subsidiary or any Affiliate of any of them and any Person who may do business with or own an equity interest in the Company, any of the Subsidiaries or any Affiliate of any of them, all as if Bank of Boston were not the Agent and without any duty to account therefor to the other Lenders. -74- 82 11.10. Independent Credit Decision. Each of the Lenders acknowledges that it has independently and without reliance upon the Agent, based on the financial statements and other documents referred to in Section 8.2, on the other representations and warranties contained herein and on such other information with respect to the Company and its Subsidiaries as such Lender deemed appropriate, made such Lender's own credit analysis and decision to enter into this Agreement and to make the extensions of credit provided for hereunder. Each Lender represents to the Agent that such Lender will continue to make its own independent credit and other decisions in taking or not taking action under this Agreement or any other Credit Document. Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to such Lender, and no act by the Agent taken under this Agreement or any other Credit Document, including any review of the affairs of the Company and its Subsidiaries, shall be deemed to constitute any representation or warranty by the Agent. Except for notices, reports and other documents expressly required to be furnished to each Lender by the Agent under this Agreement or any other Credit Document, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition, financial or otherwise, or credit worthiness of the Company or any Subsidiary which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 11.11. Indemnification. The holders of the Credit Obligations hereby agree to indemnify the Agent (to the extent not reimbursed by the Company and without limiting the obligation of the Company to do so), pro rata according to their respective Percentage Interests, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time be imposed on, incurred by or asserted against the Agent relating to or arising out of this Agreement, any other Credit Document, the transactions contemplated hereby or thereby, or any action taken or omitted by the Agent in connection with any of the foregoing; provided, however, that the foregoing shall not extend to actions or omissions which are taken by the Agent with gross negligence or willful misconduct. 12. Successors and Assigns; Lender Assignments and Participations. Any reference in this Agreement to any of the parties hereto shall be deemed to include the successors and assigns of such party, and all covenants and agreements by or on behalf of the Company, the Agent or the Lenders that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns; provided, however, that (a) the Company may not assign its rights or obligations under this Agreement, and (b) the Lenders shall be not entitled to assign their respective Percentage Interests in the Loan hereunder except as set forth below in this Section 12. 12.1. Assignments by Lenders. -75- 83 12.1.1. Assignees and Assignment Procedures. Each Lender may with the consent of the Agent and, if no Default exists, the Company (which consent of the Company will not be unreasonably withheld), in compliance with applicable laws in connection with such assignment, assign to one or more commercial banks or other financial institutions (other than mutual funds) (each, an "Assignee") all or a portion of its interests, rights and obligations under this Agreement and the other Credit Documents, including its Percentage Interest in the Loan; provided, however, that: (i) the aggregate amount of the Commitment of the assigning Lender subject to each such assignment to any Assignee other than another Lender (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Agent) shall be not less than $5,000,000 and in increments of $1,000,000; (ii) the parties to each such assignment shall execute and deliver to the Agent an Assignment and Acceptance (the "Assignment and Acceptance") substantially in the form of Exhibit 12.1.1 together with the Note or Notes subject to such assignment and a processing and recordation fee of $3,000 from the Lenders; provided, however, that no such processing and recording fee shall be payable upon an assignment effected pursuant to Section 3.4; and (iii) any assignment of a Percentage Interest in the Loan shall be pro rata between such Lender's Percentage Interest in the B Share Loan and the Revolving Loan. Upon acceptance and recording pursuant to Section 12.1.4, from and after the effective date specified in each Assignment and Acceptance (which effective date shall be at least five Banking Days after the execution thereof unless waived by the Agent): (1) the Assignee shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (2) the assigning Lender shall, to the extent provided in such assignment, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.2.4, 3.2.6, 3.4 and 10, as well as to any fees accrued for its account hereunder and not yet paid). 12.1.2. Terms of Assignment and Acceptance. By executing and delivering an Assignment and Acceptance, the assigning Lender and Assignee shall be deemed to confirm to and agree with each other and the other parties hereto as follows: -76- 84 (a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, any other Credit Document or any other instrument or document furnished pursuant hereto or thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Credit Document or any other instrument or document furnished pursuant hereto or thereto; (b) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company and its Subsidiaries or the performance or observance by the Company or any Subsidiary of any of their obligations under this Agreement, any other Credit Document or any other instrument or document furnished pursuant hereto or thereto; (c) such Assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements delivered pursuant to Section 7.4 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (d) such Assignee will independently and without reliance upon the Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (e) such Assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (f) such Assignee agrees that it will perform in accordance with the terms of this Agreement all the obligations which are required to be performed by it as a Lender, including any requirements under Section 14. 12.1.3. Register. The Agent shall maintain at the Boston Office a register (the "Register") for the recordation of (a) the names and addresses of the Lenders and the Assignees which assume rights and obligations pursuant to an assignment under Section 12.1.1, (b) the Percentage Interest of each such Lender as set forth in Section 11.1 and (c) the amount of the Loan owing to each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Company, the Agent and the Lenders may treat each Person whose name is registered therein for all -77- 85 purposes as a party to this Agreement. The Register shall be available for inspection by the Company or any Lender at any reasonable time and from time to time upon reasonable prior notice. 12.1.4. Acceptance of Assignment and Assumption. Upon its receipt of a completed Assignment and Acceptance executed by an assigning Lender and an Assignee together with the Note or Notes subject to such assignment, and the processing and recordation fee referred to in Section 12.1.1, the Agent shall (a) accept such Assignment and Acceptance, (b) record the information contained therein in the Register and (c) give prompt notice thereof to the Company. Within five Banking Days after receipt of notice, the Company shall execute and deliver to the Agent, in exchange for the surrendered Note or Notes, a new Note or Notes to the order of such Assignee in a principal amount equal to the applicable Commitment and Loan assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment and Loan, a new Note to the order of such assigning Lender in a principal amount equal to the applicable Commitment and Loan retained by it. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, and shall be dated the date of the surrendered Notes which they replace. 12.1.5. Federal Reserve Bank. Notwithstanding the foregoing provisions of this Section 12, any Lender may at any time pledge or assign all or any portion of such Lender's rights under this Agreement and the other Credit Documents to a Federal Reserve Bank; provided, however, that no such pledge or assignment shall release such Lender from such Lender's obligations hereunder or under any other Credit Document. 12.1.6. Further Assurances. The Company and its Subsidiaries shall sign such documents and take such other actions from time to time reasonably requested by an Assignee to enable it to share in the benefits of the rights created by the Credit Documents. 12.2. Credit Participants. Each Lender may, without the consent of the Company or the Agent, in compliance with applicable laws in connection with such participation, sell to one or more Qualified Institutional Buyers (each a "Credit Participant") participations in all or a portion of its interests, rights and obligations under this Agreement and the other Credit Documents (including all or a portion of its Commitment and the Loan owing to it and the Notes held by it); provided, however, that: (a) such Lender's obligations under this Agreement shall remain unchanged; (b) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; -78- 86 (c) the Credit Participant shall be entitled to the benefit of the cost protection provisions contained in Sections 3.2.4, 3.2.6, 3.4 and 10, but shall not be entitled to receive any greater payment thereunder than the selling Lender would have been entitled to receive with respect to the interest so sold if such interest had not been sold; and (d) the Company, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Company relating to the Loan and to approve any amendment, modification or waiver of any provision of this Agreement (except that the consent of the Credit Participant shall be required for any consent pursuant to Section 11.6(b)). Such Lender shall promptly give notice of such participation to the Company and the Agent. 13. Confidentiality. Each Lender agrees that it will make no disclosure of confidential information furnished to it by the Company or any Subsidiary which is identified as confidential unless such information is or shall have become public other than by the actions of such Lender, or was otherwise known to such Lender prior to its disclosure, except: (a) in connection with operations under or the enforcement of this Agreement or any other Credit Document; (b) to the applicable bank regulatory or other governmental agencies relating to such Lender or pursuant to any statutory or regulatory requirement; (c) pursuant to any mandatory court order, subpoena or other legal process of which the Lender will give, if practicable and permissible under applicable law, prompt notice to the Company; (c) to any parent or corporate Affiliate of such Lender or to any Credit Participant, proposed Credit Participant or proposed Assignee; provided, however, that any such Person shall agree to comply with the restrictions set forth in this Section 13 with respect to such information; (d) to its independent counsel, auditors and other professional advisors with an instruction to such Person to keep such information confidential; (e) in connection with any litigation or arbitration proceedings to which any Lender, the Company or any of its Subsidiaries is a party arising out of this Agreement or any other Credit Document; and (f) with the prior written consent of the Company, to any other Person. -79- 87 14. Foreign Persons. If any assignment is made under Section 12.1 to any Person that is not incorporated or organized under the laws of the United States of America or a state thereof, the Lender making such assignment shall cause such Person to agree that, on or prior to the date of such assignment, it will deliver to the Company and the Agent the following: (a) Two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 or successor form, as the case may be, certifying in each case that such Person is entitled to receive payments under this Agreement and the Notes payable to it, without deduction or withholding of any United States federal income taxes. (b) A duly completed Internal Revenue Service Form W-8 or W-9 or successor form, as the case may be, to establish an exemption from United States backup withholding tax. Each such Person that delivers to the Company and the Agent a Form 1001 or 4224 and Form W-8 or W-9 pursuant to this Section 13 further undertakes to deliver to the Company and the Agent two further copies of Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms, or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Company and the Agent. Such Form 1001 or 4224 shall certify that such Person is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes. The foregoing documents need not be delivered in the event any change in treaty, law or regulation or official interpretation thereof has occurred which renders all such forms inapplicable or which would prevent such transferee from delivering any such form with respect to it, or such transferee advises the Company that it is not capable of receiving payments without any deduction or withholding of United States federal income tax, and in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax. Until such time as the Company and the Agent have received such forms indicating that payments hereunder are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, the Company shall withhold taxes from such payments at the applicable statutory rate. 15. Notices. Except as otherwise specified in this Agreement, any notice required to be given pursuant to this Agreement shall be given in writing. Any notice, demand or other communication in connection with this Agreement shall be deemed to be given if given in writing (including telex, telecopy or similar teletransmission) addressed as provided below (or to the addressee at such other address as the addressee shall have specified by notice actually received by the addressor), and if either (a) actually delivered in fully legible form to such address (evidenced in the case of a telex by receipt of the correct answerback) or (b) in the case of a letter, five days shall have elapsed after the same shall have been deposited in the United States mails, with first-class postage prepaid and registered or certified. -80- 88 If to the Company or any Subsidiary, to it at its address set forth in Exhibit 8.1 (as supplemented pursuant to Sections 7.4.1 and 7.4.2), to the attention of the chief financial officer, with a copy to the attention of the chief legal officer. If to the Agent or any Lender, to it at its address set forth on the signature page of this Agreement, to the attention of the account officer specified on the signature page, with a copy to the Agent. 16. Course of Dealing; Amendments and Waivers. No course of dealing between any Lender, on the one hand, and the Company or any Subsidiary or Affiliate of the Company, on the other hand, shall operate as a waiver of any of the Lenders' rights under this Agreement or any other Credit Document or with respect to the Credit Obligations. The Company acknowledges that if the Lenders, without being required to do so by this Agreement or any other Credit Document, give any notice or information to, or obtain any consent from, any of the Company and its Subsidiaries or any of their respective Affiliates, the Lenders shall not by implication have amended, waived or modified any provision of this Agreement or any other Credit Document, or created any duty to give any such notice or information or to obtain any such consent on any future occasion. No delay or omission in exercising any right, or any partial exercise of any right, on the part of any Lender under this Agreement or any other Credit Document or with respect to the Credit Obligations shall operate as a waiver of such right or any other right hereunder or thereunder. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. No waiver, consent or amendment with respect to this Agreement or any other Credit Document shall be binding unless it is in writing and signed by the Agent or the holders of the required Credit Obligations. 17. Defeasance. When all Credit Obligations have been paid, performed and reasonably determined by the Lenders to have been indefeasibly discharged in full, and if at the time no Lender continues to be committed to extend any credit to the Company hereunder or under any other Credit Document, this Agreement shall terminate; provided, however, that Sections 3.2.4, 3.2.6, 3.4, 10, 11.8.7, 11.11, 13, 18 and 19 shall survive the termination of this Agreement. 18. Venue; Service of Process. Each of the Company and the Lenders: (a) Irrevocably submits to the nonexclusive jurisdiction of the state courts of The Commonwealth of Massachusetts and to the nonexclusive jurisdiction of the United States District Court for the District of Massachusetts for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement or any other Credit Document or the subject matter hereof or thereof. (b) Waives to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such proceeding brought in -81- 89 any of the above-named courts, any claim that it is not subject personally to the jurisdiction of such court, that its property is exempt or immune from attachment or execution, that such proceeding is brought in an inconvenient forum, that the venue of such proceeding is improper, or that this Agreement or any other Credit Document, or the subject matter hereof or thereof, may not be enforced in or by such court. Each of the Company and the Lenders consents to service of process in any such proceeding in any manner permitted by Chapter 223A of the General Laws of The Commonwealth of Massachusetts and agrees that service of process by registered or certified mail, return receipt requested, at its address specified in or pursuant to Section 14 is reasonably calculated to give actual notice. 19. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH OF THE COMPANY AND THE LENDERS WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY CREDIT OBLIGATION OR IN ANY WAY CONNECTED WITH THE DEALINGS OF THE LENDERS OR THE COMPANY IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT, TORT OR OTHERWISE. The Company acknowledges that it has been informed by the Lenders that the provisions of this Section 19 constitute a material inducement upon which each of the Lenders has relied and will rely in entering into this Agreement and any other Credit Document, and that it has reviewed the provisions of this Section 18 with its counsel. Any Lender or the Company may file an original counterpart or a copy of this Section 18 with any court as written evidence of the consent of the Company and the Lenders to the waiver of their rights to trial by jury. 20. General. All covenants, agreements, representations and warranties made in this Agreement or any other Credit Document or in certificates delivered pursuant hereto or thereto shall be deemed to have been relied on by each Lender, notwithstanding any investigation made by any Lender on its behalf, and shall survive the execution and delivery to the Lenders hereof and thereof. The invalidity or unenforceability of any provision hereof shall not affect the validity or enforceability of any other provision hereof. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. This Agreement and the other Credit Documents constitute the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior and current understandings and agreements, whether written or oral, with respect to such subject matter. This Agreement may be executed in any number of counterparts which together shall constitute one instrument. This Agreement shall be governed by and construed in accordance with the laws (other than the conflict of laws rules) of The Commonwealth of Massachusetts. -82- 90 Each of the undersigned has caused this Agreement to be executed and delivered by its duly authorized officer as an agreement under seal as of the date first above written. THE PIONEER GROUP, INC. PIONEERING SERVICES CORP. By /s/ William H. Keough By /s/ William H. Keough -------------------------------------- ------------------------------- Title: Senior Vice President, Chief Title: Treasurer Financial Officer and Treasurer 60 State Street 60 State Street Boston, Massachusetts 02109-1820 Boston, Massachusetts 02109-1820 PIONEERING MANAGEMENT ACKNOWLEDGED WITH RESPECT TO SECTIONS CORPORATION 7.8.12 AND 7.8.13: By /s/ William H. Keough PIONEER GOLDFIELDS HOLDINGS, INC. -------------------------------------- Title: Treasurer By /s/ William H. Keough ------------------------------- 60 State Street Title: Assistant Treasurer Boston, Massachusetts 02109-1820 60 State Street PIONEER MANAGEMENT (IRELAND) Boston, Massachusetts 02109-1820 LTD. PIONEER GOLDFIELDS LTD. By /s/ John F. Cogan, Jr. -------------------------------------- By /s/ John F. Cogon, Jr. Title: Chairman ------------------------------- Title: Chairman 60 State Street Boston, Massachusetts 02109-1820 By /s/ John F. Lawlor ------------------------------- PIONEER FUNDS DISTRIBUTOR, INC. Title: Director By /s/ William H. Keough 60 State Street -------------------------------------- Boston, Massachusetts 02109-1820 Title: Treasurer TEBEREBIE GOLDFIELDS LTD. 60 State Street Boston, Massachusetts 02109-1820 By /s/ John F. Cogon, Jr. ------------------------------- Title: Chairman By /s/ John F. Lawlor ------------------------------- Title: Director 60 State Street Boston, Massachusetts 02109-1820
-83- 91 THE FIRST NATIONAL BANK OF BOSTON By /s/ Stewart P. Neff -------------------------------------- Title: Managing Director Financial Institutions Division 100 Federal Street - 15th Floor Boston, Massachusetts 02110 Telecopy: (617) 434-1537 Telex: 940581 THE BANK OF NEW YORK By /s/ Alexander Dunka -------------------------------------- Title: AVP One Wall Street, OWS-1 Securities Industry Division New York, NY 10286 Telecopy: (212) 809-9566 Telex: SOCIETE GENERALE By /s/ D.E. Littlefield -------------------------------------- Title: D.E. Littlefield Vice President 1221 Avenue of the Americas New York, New York 10020 Telecopy: (212) 278-7153 -84- 92 STATE STREET BANK & TRUST COMPANY By: /s/ ---------------------------------------- Title: V.P. 225 Franklin Street, 8th Floor Asset-Based Finance Boston, MA 02110 Telecopy: (617) 338-4041 BANQUE NATIONALE DE PARIS By: /s/ William Shaheen ---------------------------------------- Title: Vice President By: /s/ Laurent Vanderzyppe ---------------------------------------- Title: Assistant Vice President 499 Park Avenue, 3rd Floor New York, 10022 Telecopy: (212) 415-9707 MELLON BANK, N.A. By: /s/ ---------------------------------------- Title: Vice President One Mellon Bank Center Mail Code: 1510370 Pittsburgh, PA 15258 Telecopy: (412) 234-8087 -85- 93 Exhibits Exhibit 1.126 Calculation Formula for Total Estimated Collectible Amount Exhibit 2.1.3 Form of B Share Revolving Note Exhibit 2.2.2 Form of B Share Term Note Exhibit 2.3.3 Form of Revolving Note Exhibit 5.1.3 Guarantors Contribution Agreement Exhibit 5.3.1 Officers's Certificate Exhibit 7.16 Pricing Structure of B Share Funds Exhibit 8.1 The Pioneer Group and its Subsidiaries Exhibit 8.4 Financing Debt Exhibit 8.7 Litigation Exhibit 9.1.12 Officers of the Company Exhibit 11.1 Percentage Interests Exhibit 12.1.1 Assignment and Acceptance 94 EXHIBIT 1.126 QUARTERLY "B" SHARE BORROWING BASE CALCULATION TOTAL ESTIMATED COLLECTIBLE AMOUNT 1. Calculate the Average Asset Under Management (AAUM) by averaging the prior six months daily net asset values by Fund 2. Eight Year Projection of Assets Under Management by Quarterly Bucket a) Calculate the six month average redemption rate by dividing the total dollars redeemed over the prior six months by the AAUM calculated in (1) above b) Reduce the Assets Under Management calculated in (1) by the calculated redemption rate (2.a.) to determine the projected AUM each year 3. Projected Annual Collection of CDSC (back-end sales charge) a) Calculate the historical six month redemptions charged a CDSC and use this to determine the percentage of assets redeemed in (2.b) which are subject to a back-end charge vs those which are not b) Apply the percentage (calculated in 3.a.) to each of the quarterly buckets to determine the total assets redeemed each year c) Apply the applicable CDSC rate (from Pioneer's sales fee schedule) to the redemptions calculated in (3.b.) to determine the total collectible CDSC amount 4. Projected Collection of Asset Based Sales Charges (ABSC) a) Multiply 75 bpts each year to the projected AUM calculated in 2 above 5. Sum Projected CDSC and ABSC collections in 3 & 4 above for the eight year period to determine the total collectible amount 6. Determine the Net Dealer Advances adjusted for ABSCs collected at original cost for sales prior to the loan agreement 7. Compare the total collectible in (5) to the net dealer advances in (6) to determine the coverage ratio 95 Exhibit 2.1.3 FORM OF B SHARE REVOLVING NOTE BRN-__ June __, 1996 FOR VALUE RECEIVED, each of the undersigned, Pioneering Management Corporation and Pioneer Management (Ireland) Ltd., (collectively, the "Borrowers"), jointly and severally, hereby promise to pay to _____________ (the "Payee") or order, on the B Share Conversion Date, the aggregate unpaid principal amount of the B Share Revolving Loan made by the Payee to the Borrowers pursuant to the Credit Agreement referred to below. The Borrowers jointly and severally promise to pay daily interest from the date hereof, computed as provided in such Credit Agreement, on the aggregate principal amount of such B Share Revolving Loan from time to time unpaid at the per annum rate applicable to such unpaid principal amount as provided in such Credit Agreement and to pay interest on overdue principal and, to the extent not prohibited by applicable law, on overdue installments of interest at the rate specified in such Credit Agreement, all such interest being payable at the times specified in such Credit Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof or upon the prepayment in full hereof. Payments hereunder shall be made to The First National Bank of Boston, as agent for the Payee, at 100 Federal Street, Boston, Massachusetts 02110. All advances with respect to the B Share Revolving Loan made by the Payee pursuant to the Credit Agreement referred to below and all repayments of the principal thereof shall be recorded by the Payee and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such B Share Revolving Loan then outstanding shall be endorsed by the Payee on the schedule attached hereto or on a continuation of such schedule attached to and made a part hereof, provided, however, that the failure of the Payee to make any such recordation or endorsement shall not affect the obligations of the Borrowers under this Note, such Credit Agreement or any other Credit Document. This Note evidences borrowings under, and is entitled to the benefits and security of, and is subject to the provisions of, the Credit Agreement dated as of June __, 1996, and from time to time in effect (the "Credit Agreement"), among The Pioneer Group, Inc., a Delaware corporation, certain of its subsidiaries, including the Borrowers, the Payee and certain other parties. The principal of this Note is prepayable in the amounts and under the circumstances set forth in the Credit Agreement, and may be prepaid in whole or from time to time in part, all as set forth in the Credit Agreement. Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings so defined. 96 In case an Event of Default shall occur, the entire principal of this Note may become or be declared due and payable in the manner and with the effect provided in the Credit Agreement. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS RULES OF ANY JURISDICTION. The parties hereto, including the Borrowers and all guarantors and endorsers, hereby waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Credit Agreement, and assent to extensions of time of payment, or forbearance or other indulgence without notice. PIONEERING MANAGEMENT CORPORATION PIONEER MANAGEMENT (IRELAND) LTD. By ------------------------------- Title: -2- 97 LOAN AND PAYMENTS OF PRINCIPAL - -------------------------------------------------------------------------------- Amount Amount of Unpaid of Principal Principal Notation Date Loan Repaid Balance Made By - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- -3- 98 Exhibit 2.2.2 FORM OF B SHARE TERM NOTE TN-__ June __, 1996 FOR VALUE RECEIVED, each of the undersigned Pioneering Management Corporation and Pioneer Management (Ireland) Ltd., (collectively, the "Borrowers"), jointly and severally, hereby promise to pay to _____________ (the "Payee") or order, on the B Share Final Maturity Date (as defined in the Credit Agreement referred to below), the aggregate unpaid principal amount of the B Share Term Loan made by the Payee to the Borrowers pursuant to the Credit Agreement. The Borrowers jointly and severally promise to pay daily interest from the date hereof, computed as provided in such Credit Agreement, on the aggregate principal amount of such B Share Term Loan from time to time unpaid at the per annum rate applicable to such unpaid principal amount as provided in such Credit Agreement and to pay interest on overdue principal and, to the extent not prohibited by applicable law, on overdue installments of interest at the rate specified in such Credit Agreement, all such interest being payable at the times specified in such Credit Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof or upon the prepayment in full hereof. Payments hereunder shall be made to The First National Bank of Boston, as agent for the Payee, at 100 Federal Street, Boston, Massachusetts 02110. All B Share Term Loans made by the Payee pursuant to the Credit Agreement referred to below and all repayments of the principal thereof shall be recorded by the Payee and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such B Share Term Loan then outstanding shall be endorsed by the Payee on the schedule attached hereto or on a continuation of such schedule attached to and made a part hereof; provided, however, that the failure of the Payee to make any such recordation or endorsement shall not affect the obligations of the Borrowers under this Note, such Credit Agreement or any other Credit Document. This Note evidences borrowings under, and is entitled to the benefits and security of, and is subject to the provisions of, the Credit Agreement dated as of June _, 1996, as from time to time in effect, (the "Credit Agreement"), among The Pioneer Group, Inc., a Delaware corporation, certain of its subsidiaries, including the Borrowers, the Payee and certain other parties. The principal of this Note is prepayable in the amounts and under the circumstances set forth in the Credit Agreement, and may be prepaid in whole or from time to time in part, all as set forth in the Credit Agreement. Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings so defined. 99 In case an Event of Default shall occur, the entire principal of this Note may become or be declared due and payable in the manner and with the effect provided in the Credit Agreement. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS RULES OF ANY JURISDICTION. The parties hereto, including the undersigned makers and all guarantors and endorsers, hereby waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Credit Agreement, and assent to extensions of time of payment, or forbearance or other indulgence, without notice. PIONEERING MANAGEMENT CORPORATION PIONEER MANAGEMENT (IRELAND) LTD. By ------------------------------- Title: -2- 100 LOAN AND PAYMENTS OF PRINCIPAL - -------------------------------------------------------------------------------- Amount Amount of Unpaid of Principal Principal Notation Date Loan Repaid Balance Made By - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- -3- 101 Exhibit 2.3.3 FORM OF REVOLVING NOTE RN-__ June __, 1996 FOR VALUE RECEIVED, The Pioneer Group, Inc., a Delaware corporation (the "Company"), hereby promises to pay _____________________ (the "Lender") or order, on the Revolving Final Maturity Date (as defined in the Credit Agreement referred to below), the aggregate unpaid principal amount of the Revolving Loans made by the Lender to the Company pursuant to the Credit Agreement. The Company promises to pay daily interest from the date hereof, computed as provided in such Credit Agreement, on the aggregate principal amount of such Revolving Loans from time to time unpaid at the per annum rate applicable to such unpaid principal amount as provided in such Credit Agreement and to pay interest on overdue principal and, to the extent not prohibited by applicable law, on overdue installments of interest and fees at the rate specified in such Credit Agreement, all such interest being payable at the times specified in such Credit Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof or upon the final prepayment in full hereof. Payments hereunder shall be made to The First National Bank of Boston, as agent for the payee hereof, at 100 Federal Street, Boston, MA 02110. All Revolving Loans made by the Lender pursuant to the Credit Agreement referred to below and all repayments of the principal thereof shall be recorded by the Lender and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such Revolving Loan then outstanding shall be endorsed by the Lender on the schedule attached hereto or on a continuation of such schedule attached to and made a part hereof; provided, however, that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Company under this Note, such Credit Agreement or under any other Credit Document. This Note evidences borrowings under, and is entitled to the benefits of, and is subject to the provisions of, the Credit Agreement dated as of June __, 1996, as from time to time in effect (the "Credit Agreement"), among the Company, the payee hereof and certain other lenders. The principal of this Note is prepayable in the amounts and under the circumstances set forth in the Credit Agreement, and may be prepaid in whole or from time to time in part, all as set forth in the Credit Agreement. Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings so defined. 102 In case an Event of Default shall occur and be continuing, the entire principal of this Note may become or be declared due and payable in the manner and with the effect provided in the Credit Agreement. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS (OTHER THAN THE CONFLICT OF LAWS RULES) OF THE COMMONWEALTH OF MASSACHUSETTS. The parties hereto, including the Company and all guarantors and endorsers, hereby waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Credit Agreement, and assent to extensions of time of payment, or forbearance or other indulgence without notice. THE PIONEER GROUP, INC. By ____________________________ Title: -2- 103 LOAN AND PAYMENTS OF PRINCIPAL - -------------------------------------------------------------------------------- Amount Amount of Unpaid of Principal Principal Notation Date Loan Repaid Balance Made By - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- -3- 104 EXHIBIT 5.1.3 GUARANTORS CONTRIBUTION AGREEMENT This Agreement, dated as of June __, 1996, is among each of The Pioneer Group, Inc., a Delaware corporation, Pioneering Management Corporation and Pioneer Management (Ireland) Ltd., (collectively, the "Borrowers"), and the other guarantors listed on Schedule A hereto (together with the Borrowers, the "Guarantors"), in connection with the Credit Agreement dated as of June __, 1996, as from time to time in effect (the "Credit Agreement"), among the Borrowers, the other Guarantors, and the Lenders, including The First National Bank of Boston as agent for itself and the other Lenders. Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings so defined. The Guarantors agree as follows: 1. Inducement. In order to induce the Lenders to extend credit to the Borrowers pursuant to the Credit Agreement, the Guarantors have guaranteed, to the extent provided in the Credit Documents, the payment and performance of all Credit Obligations. The extensions of credit by the Lenders to the Borrowers under the Credit Agreement will directly or indirectly inure to the benefit of each Guarantor, and the guarantees referred to in the foregoing sentence are in pursuit of the business purposes of the Guarantor that has given such guarantee as an integral part of the business conducted and proposed to be conducted by it and are reasonably necessary and convenient in connection with the conduct of the business conducted and proposed to be conducted by it. By virtue of the foregoing and after giving effect to the probable liability of each Guarantor on its guarantee, each Guarantor is receiving at least fair consideration and reasonably equivalent value from the Lenders for such guarantee. 2. Contribution. The Guarantors agree that, as among themselves in their capacity as guarantors and also with respect to the joint and several nature of borrowings under the Credit Agreement, the ultimate responsibility for repayment of the Credit Obligations, in the event that the Borrowers fail to pay when due their respective Credit Obligations, shall be equitably apportioned, to the extent consistent with the Credit Documents, among the respective Guarantors in the proportion that each, in its capacity as a guarantor or as a joint and several Borrower, has benefited from the extensions of credit to the respective Borrowers by the Lenders under the Credit Agreement, or if such equitable apportionment cannot reasonably be determined or agreed upon among the affected Guarantors, in proportion to their respective net worths determined on or about the date hereof (or such later date as such Guarantor becomes party hereto). In the event that any Guarantor, in its capacity as a guarantor or as a joint and several Borrower, pays an amount with respect to the Credit Obligations in excess of its proportionate share as set forth in this Section 2, each other Guarantor shall, to the extent 105 consistent with the Credit Documents, make a contribution payment to such Guarantor in an amount such that the aggregate amount paid by each Guarantor reflects its proportionate share of the Credit Obligations. In the event of any default by any Guarantor under this Section 2, each other Guarantor will bear, to the extent consistent with the Credit Documents, its proportionate share of the defaulting Guarantor's obligation under this Section 2. 3. Enforcement: Parties. This Agreement is intended to set forth only the rights and obligations of the Guarantors among themselves and shall not in any way affect the obligations of any Guarantor to the Lenders under the Credit Documents (which obligations shall at all times constitute the joint and several obligations of all the Guarantors) and, in furtherance of the foregoing, the provisions of this Agreement shall be carried out in a manner consistent with the requirements contained in Section 6 of the Credit Agreement. The parties agree that, from time to time, additional Affiliates which are included as Guarantors under the Credit Documents may be added as parties hereto (and will also then be added to Schedule A hereto) by executing a counterpart of this Agreement or an agreement by which such Affiliate agrees to be bound hereby, and without further action by any party hereto or thereto. 4. Counterparts. This Agreement may be executed in any number of counterparts, which together shall constitute one instrument. Each of the undersigned has caused this Agreement to be executed and delivered by its duly authorized officer as of the date first above written. THE PIONEER GROUP, INC. By --------------------- Title: PIONEERING MANAGEMENT CORPORATION By --------------------- Title: PIONEER MANAGEMENT (IRELAND) LTD. By --------------------- Title: PIONEERING SERVICES CORP. By --------------------- Title: -2- 106 SCHEDULE A OTHER GUARANTORS Pioneering Services Corporation -3- 107 Exhibit 5.3.1 OFFICER'S CERTIFICATE Pursuant to Section 5.3.1 of the Credit Agreement dated as of June __, 1996, and as now in effect (the "Credit Agreement"), among The Pioneer Group, Inc. (the "Company"), the Borrower Subsidiaries (as defined therein and, collectively with the Company, the "Borrowers"), certain other subsidiaries of the Company signatories thereto, The First National Bank of Boston and certain other Lenders for which it is acting as agent, the Borrowers hereby request that a loan be made on the date specified below (the "Closing Date") in the following amount(s): Closing Date: Total amount of B Share Revolving Loan requested: $ ---------- Total amount of B Share Term Loan Requested: $ ---------- Total amount of Revolving Loan requested: $ ---------- In connection with the foregoing request, each of the Borrowers represents and warrants that the representations and warranties contained in Sections 6.6 and 8 of the Credit Agreement are true and correct on and as of the date hereof with the same force and effect as though made on and as of the date hereof; no Default exists on the date hereof or will exist after giving effect to the extension of credit requested hereby; as of the date hereof, no Material Adverse Change has occurred; and, as of the date hereof, the aggregate investment assets under management by the Company and its Subsidiaries equals or exceeds $11,000,000,000. Attached hereto as Schedule A are calculations demonstrating, as of the last day of the most recently ended fiscal quarter of the Company prior to the Closing Date, the Combined Unreimbursed Sales Commissions. Attached hereto as Schedule B are calculations demonstrating, as of the requested Closing Date, compliance with the financial tests set forth in Section 7.5 of the Credit Agreement. The foregoing representations and warranties shall be deemed made by the Borrowers on the requested Closing Date unless the Borrowers shall have notified the Agent in writing to the contrary no later than one Banking Day prior to such Closing Date. Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings so defined. 108 This certificate has been executed by a duly authorized Executive Officer or Financial Officer this ____ day of ____________, 19__. THE PIONEER GROUP, INC. By_______________________________ Title: PIONEERING MANAGEMENT CORPORATION By_______________________________ Title: PIONEER MANAGEMENT (IRELAND) LTD. By_______________________________ Title: -2- 109 SCHEDULE A COMBINED UNREIMBURSED SALES COMMISSIONS -3- 110 SCHEDULE B SECTION 7.5 COMPLIANCE -4- 111 EXHIBIT 7.16 B-SHARE PRICING STRUCTURE
DEALER CONCESSION EIGHT YEARS SIX YEARS FIVE YEARS - ----------------- ----------- --------- ---------- Dealer Advances 4.0% 3.0% 2.0%
ANNUAL FEES PAID BY THE FUND TO THE FUND DISTRIBUTOR AND QUALIFIED DEALERS ANNUAL TRAIL FEES The 400 basis point dealer concession represent two components: 1) a 25 bpt prepaid trail and 2) a 375 basis point dealer advance. After the thirteenth month annual trail fees are paid quarterly to qualifying dealers at a maximum rate of 0.25% on the net assets of your clients' accounts for all funds with the exception of Pioneer Cash Reserves A Shares, which pays 0.15%. ASSET BASED SALES CHARGE 100 basis points are charged on an annual basis with 25 bpts paid as a trail to qualified dealers and 75 bpts paid to the distributor except in the first year 100 basis points are paid to the distributor (25 bpts to re-pay the prepaid trail fee) B-SHARES - CONTINGENT DEFERRED SALES CHARGE (CDSC)
YEARS SINCE PURCHASED EIGHT YEARS SIX YEARS FIVE YEARS --------- ----------- --------- ---------- First 4.0 3.0 2.0 Second 4.0 3.0 2.0 Third 3.0 2.0 1.0 Fourth 3.0 1.0 0.0 Fifth 2.0 0.0 0.0 Sixth 1.0 0.0 Converts to A Seventh 0.0 Converts to A Eighth 0.0 Ninth Converts to A
PIONEER B-SHARE FUNDS EIGHT YEAR PRICING STRUCTURE --------------------------------- Pioneer II Pioneer Gold Shares Pioneer America Income Trust Pioneer Growth Shares Pioneer Bond Fund Pioneer Income Fund Pioneer Capital Growth Fund Pioneer India Fund Pioneer Cash Reserves Fund Pioneer International Growth Fund Pioneer Emerging Markets Fund Pioneer Mid-Cap Fund Pioneer Equity-Income Fund Pioneer Real Estate Shares Pioneer Europe Fund Pioneer Small Company Fund Pioneer Fund Pioneer Tax Free-Income Fund SIX YEAR PRICING STRUCTURE Pioneer Intermediate Tax-Free Fund FIVE YEAR PRICING STRUCTURE Pioneer Short-Term Income Trust 112 EXHIBIT 8.1
Jurisdiction of Name(1) Incorporation Address Jurisdiction(s) ------- ------------- ------- --------------- Pioneer Group, Inc. Delaware 60 State Street Massachusetts Boston, Massachusetts 02019 Pioneering Management Delaware 60 State Street Massachusetts Corporation(2) Boston, Massachusetts 02109 Pioneer Funds Distributor, Inc.(3) Massachusetts 60 State Sweet Massachusetts Boston, Massachusetts 02109 Pioneering Services Corporation(4) Massachusetts 60 State Sweet Massachusetts Boston, Massachusetts 02109 Pioneer Capital Corporation Massachusetts 60 State Street Massachusetts Boston, Massachusetts 02109 Pioneer SBIC Corporation Massachusetts 60 State Street Massachusetts Boston, Massachusetts 02109 Pioneer Associates, Inc. Massachusetts 60 State Street Massachusetts Boston, Massachusetts 02109 Pioneer Plans Corporation Delaware 60 State Street Massachusetts Boston, Massachusetts 02109 PIOGlobal Corporation Delaware 60 State Street Massachusetts Boston, Massachusetts 02109 Pioneer Metals and Delaware 60 State Street Massachusetts Technology, Inc Boston, Massachusetts 02109 Pioneer Investments Corporation Massachusetts 60 State Street Massachusetts Boston, Massachusetts 02109 Pioneer International Corporation Delaware 60 State Street Massachusetts Boston, Massachusetts 02109 Switzerland Moscow, Russia Pioneer Fund Management Nebraska 60 State Street Massachusetts Company Boston, Massachusetts 02109 Pioneer Ventures Limited Massachusetts 60 State Sweet Massachusetts Partnership Boston, Massachusetts 02109
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Jurisdiction of Name(1) Incorporation Address Jurisdiction(s) ------- ------------- ------- --------------- Pioneer Real Estate Advisors, Inc. Delaware 60 State Street Massachusetts Boston, Massachusetts 02109 Moscow, Russia Pioneer Exploration Limited Delaware 60 State Street Massachusetts Boston, Massachusetts 02109 Pioneer Omega, Inc. Delaware 60 State Street Massachusetts Boston, Massachusetts 02109 Pioneer First Russia, Inc. Delaware 60 State Street Massachusetts Boston, Massachusetts 02109 Luscinia, Inc. Delaware 60 State Street Massachusetts Boston, Massachusetts 02109 Theta Enterprises, Inc. Delaware 60 State Street Massachusetts Boston, Massachusetts 02109 Pioneer Forest, Inc. Delaware 60 State Street Massachusetts Boston, Massachusetts 02109 Pioneer Goldfields Holdings, Inc.(5) Delaware c/o Belfint, Lyons & Shuman Delaware 200 West Ninth Street Plaza Box 2105 Wilmington, Delaware 19899 Pioneer Goldfields Limited(6) Guernsey, 7 New Street Guernsey, Channel Islands St. Peter Port Channel Islands Guernsey GY1 4BZ Channel Islands Pioneer Goldfields Trustees Guernsey, 7 New Street Guernsey, Limited Channel Islands St. Peter Port Channel Islands Guernsey GYI 4BZ Channel Islands Teberebie Goldfields Limited(7) Republic of P.O. Box 6 Republic of Ghana Tarkwa - Wassaw Ghana Ghana, West Africa Lobenguela Exploration and Zimbabwe Chancellor House Zimbabwe Mining Company (Private) Limited 4th Floor Samora Machel Avenue Harare Zimbabwe
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Jurisdiction of Name(1) Incorporation Address Jurisdiction(s) ------- ------------- ------- --------------- PIOGlobal Insurance Bermuda c/o Skandia International Bermuda Company, Ltd. Front Street Hamilton Bermuda Pioneer Funds Marketing GmbH Germany Germany Pioneer Management (Ireland) Ireland 2/4 Ely Place Ireland Limited(8) Dublin 2 Ireland Pioneer First Polish Trust Fund Poland Intraco - 26th Floor Poland Joint-Stock Company, s-a Stawki 2 00-193 Warsaw Poland Pioneer Real Estate Poland Intraco - 26th Floor Poland Advisors Sp z. o. o. Stawki 2 00-193 Warsaw Poland Financial Services Limited Poland Intraco - 26th Floor Poland Stawki 2 00-193 Warsaw Poland Pioneer Investment Poland Intraco - 26th Floor Poland Poland Sp z. o. o. Stawki 2 00-193 Warsaw Poland Pioneer Czech Investment Czech Republic Betlem Palais Czech Republic Company, a.s. Husova ulice 5 110-00 Prague I Czech Republic Pioneer Metals International Russian Vasilevsky Island Russian Federation 21st Line, 8a Federation St. Petersburg 199026 Russian Federation Joint-Stock Company Foresr- Russian Koprovaya Street, 4 Russian Starma Federation Komsomolsk-on-Amur Federation Khabarovsk Territory Russian Federation
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JURISDICTION OF NAME(1) INCORPORATION ADDRESS JURISDICTION(S) ------- ------------- ------- --------------- Joint-Stock Company Amgun- Russian Briakan Village Russian Forest Federation Polina Osipenko Region Federation Khabarovsk Territory 680000 Russian Federation Joint-Stock Company Udinskoye Russian Udinsk Village Russian Federation Polina 0sipenko Region Federation Khabarovsk Territory 692391 Russian Federation Tas-Yurjah Mining Company Russian Lev Tolstoy Street Russian Federation Khabarovsk Territory Federation 680000 Russian Federation Joint-Stock Company Pioneer Russian Repina Street, 6 Russian Starma Equipment Federation Khabarovsk Territory Federation 680003 Russian Federation Joint-Stock Company Pioneer Russian Gazetny per., 5 Russian Investments Federation Building 3 Federation Moscow, 103918 Russian Federation Pioneer Securities Russian Prospect Mira, 150 Russian Federation Suite 04252 Federation Moscow, 129366 Russian Federation Management Company (KUIF) Russian Prospect Mira, 150 Russian Federation Suite 04252 Federation Moscow, 129366 Russian Federation First Voucher Fund Russian Trubnikovsky per., 21/2 Russian Federation Moscow, 121069 Federation Russian Federation First Voucher Bank Russian 2 - Krasnoprudny per., 7 Russian Federation Moscow, 107140 Federation Russian Federation
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JURISDICTION OF NAME(1) INCORPORATION ADDRESS JURISDICTION(S) ------- ------------- ------- --------------- Pioneer Services Russian ul. Smolnaya, 24 Russian Federation Moscow, 125445 Federation Russian Federation Pioneering Management (Jersey) Jersey, c/o Abacus Asset Jersey, Limited Channel Islands Management Ltd. Channel Islands La Motte Chambers St. Helier Jersey JE1 1BJ Channel Islands Pioneer Poland U.S. (Jersey) Jersey, c/o Abacus Asset Jersey, Limited Channel Islands Management Ltd. Channel Islands La Motte Chambers St. Helier Jersey JE1 1BJ Channel Islands Pioneer Poland U.K. Limited United Kingdom Plumtree Court United Kingdom London EC4A 4HT England
- ------------------------------ (1) Unless otherwise noted, each corporation conducts business under its own name. (2) 2,000 shares of Common Stock authorized, 1,999 shares issued and outstanding. All shares issued to The Pioneer Group, Inc. (3) 100,000 shares of Common Stock authorized, 100 shares issued and outstanding. All shares issued to Pioneering Management Corporation. (4) 15,000 shares of Common Stock authorized, 1,000 shares issued and outstanding. All shares issued to The Pioneer Group, Inc. (5) 1,000 shares of Common Stock authorized, issued and outstanding. All shares issued to The Pioneer Group, Inc. (6) 25,000 Ordinary Shares authorized issued and outstanding. 24,993 shares issued to Pioneer Goldfields Holdings, Inc. and 7 shares issued to 7 individual nominees as nominee for Pioneer Goldfields Holdings, Inc. (7) 10,000,000 Ordinary Shares authorized, consisting of 9,000,000 authorized Class 'A' Shares and 1,000,000 authorized Class 'B' Shares. 1,860,000 Class 'A' Shares issued to Pioneer Goldfields Limited and 206,667 Class 'B' Shares issued to the Government of Ghana. (8) 1,000,000 Ordinary Shares authorized, 250,000 shares issued and outstanding. 249,999 shares issued to The Pioneer Group. Inc. and 1 share issued to Frymount Limited as nominee for The Pioneer Group, Inc. 5 117 EXHIBIT 8.4 NOTES PAYABLE Notes payable of the Company consists of the following:
June 7, December 31, 1996 1995 ------- ------------ (Dollars in Thousands) Lines of Credit ............................................................... $ 0 $52,000 Senior Credit Facility: $80,000,000 revolving credit facility, monthly principal payments, interest payable LIBOR plus 1.25% .............................................................. 45,000 0 Senior Credit Facility: $35,000,000 revolver/term loan facility, monthly principal payments, interest payable LIBOR plus 1.25% .............................................................. 30,000 0 Preferred shares financing related to the Russian investment operations, principal payable in two annual installments of $2,000,000 through 1998, interest payable at 5% ........................................................ 4,000 6,000 Small Business Administration ("SBA") financing, notes payable to a bank, interest payable semi-annually at rates ranging from 6.12% to 9.8%, principal due in 1998 through 2003 ............................................ 4,950 4,950 Note payable to a supplier, principal and interest payable in quarterly installments of $336,000 through April 15, 2001 interest payable at 7.85%, secured by equipment ............................... 6,713 0 Note payable to a supplier, principal and interest payable in quarterly installments of $102,000 through May 31, 2001 interest payable at 8.00%, secured by equipment ............................... 5,698 0 Note payable to a supplier, principal and interest payable in quarterly installments of $285,000 through April 15, 2001 interest payable at 7.85%, secured by equipment ............................... 1,680 0 Note payable to a bank guaranteed by the Swedish Exports Credits Guarantee Board, principal payable in ten semi-annual installments of $266,000 beginning no later than July 31, 1997, interest payable at 6.42%, secured by equipment .. 2,663 0
118 Exhibit 8.4: NOTES PAYABLE (con't) Note payable to a bank guaranteed by the Swedish Exports Credits Guarantee Board, principal payable in semi-annual installments of $812,000 through March 31, 1997, interest payable at 5.77%, secured by equipment ..................... 1,624 2,436 Notes payable to a bank, guaranteed by the Company, principal payable in semi-annual installments, of $214,000 through November 30, 1999, no interest payable, secured by equipment ..................................... 1,501 1,715 --------- --------- 103,829 67,101 Less: Current portion ......................................................... (6,825) (56,053) --------- --------- $ 97,004 $ 11,048 ========= =========
Maturates of notes payable at June 7, 1996 for each of the next six years and thereafter are as follows (dollars in thousands): 1996 $ 6,825 1997 6,951 1998 3,777 1999 3,589 2000 79,904 Thereafter 2,783 -------- $103,829 ========
119 EXHIBIT 8.7 The School Board of St. Lucie County, Florida v. Pioneering Management Corporation During the period from February 1994, to October 1994, Pioneering Management Corporation ("PMC") served as investment adviser to the School Board of St. Lucie County, Florida ("St. Lucie"). Under the terms of the management contract between St. Lucie and PMC, PMC was authorized to invest in short-term government securities. In May 1995, St. Lucie commenced a civil action against PMC in the Nineteenth Judicial Circuit in and for St. Lucie County, Florida. In the Civil action, which was subsequently removed by PMC to the United States District Court, Southern District of Florida, St. Lucie alleged that PMC had breached the terms of the management contract and that PMC had acted fraudulently. Although no specific damage claim is alleged in the complaint, St. Lucie did note that it had lost $800,000 as a result of PMC's breach and fraudulent conduct. The case is currently in the discovery stage with trial set for fall 1996. PMC believes that St. Lucie's claims are without merit. PMC's investments on behalf of St. Lucie were in accordance with the investment objective and strategies set forth in the management contract (which was prepared by the Florida School Board Association on St. Lucie's behalf and the Florida statute which lists acceptable investments for entities such as St. Lucie. In addition, PMC personnel, in written correspondence, specifically informed St. Lucie regarding the types of investments that PMC would make on St. Lucie's behalf. Finally, the management contract disclosed in detail the risks relating to investments in government securities, including interest rate risk and the resulting loss of principal. Notwithstanding the merits of St. Lucie's claim. St. Lucie suffered no damages. St. Lucie apparently calculates its damages by adding the losses on individual portfolio securities while failing to account for offsetting gains. During the time in which PMC managed the St. Lucie account, PMC achieved a positive total return. PMC achieved this positive total return on St. Lucie's behalf during a period when, due to action by the Federal Reserve Board, short-term interest rates moved higher at a historic pace. PMC believes that none of the alternative investments available to St. Lucie (under the program administered by the Florida School Board Association) performed materially better than the St. Lucia account managed by PMC; in fact, at least one alternative performed significantly worse. PMC is represented in this matter by Hale and Dorr with Holland & Knight serving as local Florida counsel. PMC has filed a claim with its insurance carrier, ICI Mutual Insurance Company ("ICI Mutual"). While PMC believes that the claim will be covered under its policy, ICI has, in standard fashion, reserved its rights. Kirkpatrick & Lockhart is representing ICI Mutual. The ICI Mutual policy carries a $100,000 deductible. 120 Exhibit 9.1.12 OFFICERS OF THE COMPANY 1. John F. Cogan, Jr. Chairman of the Board, Chief Executive Officer and President of the Company 2. William H. Keough Senior Vice President, Chief Financial Officer and Treasurer of the Company and Subsidiaries 3. David D. Tripple President and Chief Investment Officer of Pioneering Management Corporation 4. William H. Smith, Jr. President and Director of Pioneering Services Corporation S. Lucien Girard, III Managing Director and Chief Executive of Pioneer Goldfields Limited and Managing Director of Teberebie Goldfields Limited 6. Robert L. Butler President of Pioneer Funds Distributor, Inc. 121 Exhibit 11.1 PERCENTAGE INTERESTS
Lender Total Commitment B Share Loan Revolving Loan Percentage Interest - ------ ---------------- -------------- -------------- ------------------- The First National $ 30,000,000.00 $ 9,130,434.78 $20,869,565.22 26.086956522% Bank of Boston Mellon Bank, N.A $ 25,000,000.00 $ 7,608,695.65 $17,391,304.35 21.739130435% State Street Bank & $ 20,000,000.00 $ 6,086,956.52 $13,913,043.48 17.391304348% Trust Company The Bank of New $ 15,000,000.00 $ 4,565,217.39 $10,434,782.61 13.043478261% York Societe Generale $ 15,000,000.00 $ 4,565,217.39 $10,434,782.61 13.043478261% Banque Nationale $ 10,000,000.00 $ 3,043,478.26 $ 6,956,521.74 8.695652174% de Paris TOTAL $115,000,000.00 $35,000,000.00 $80,000,000.00 100.000000000%
122 Exhibit 12.1.1 ASSIGNMENT AND ACCEPTANCE This Agreement, dated as of ________, 19__, is between ________, a Lender under the Credit Agreement referred to below (the "Assignor"), and ________ (the "Assignee"). For valuable consideration, the receipt of which is hereby acknowledged, the Assignor agrees with the Assignee as follows: 8. Reference to Credit Agreement and Definitions. Reference is made to the Credit Agreement dated as of June __, 1996, as from time to time in effect (the, "Credit Agreement"), among The Pioneer Group, Inc., a Delaware corporation (the "Company"), certain of its subsidiaries, the Lenders, and The First National Bank of Boston, as agent (the "Agent") for itself and the other Lenders. Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings so defined. 2. Assignment and Assumption. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, the interest set forth on Schedule A hereto in and to all the Assignor's rights and obligations under the Credit Agreement and the other Credit Documents (other than Interest Rate Protection Agreements) as of the Assignment Date (as defined below), together with such percentage interest in all unpaid interest with respect to the Loan and commitment fees accrued to the Assignment Date. 3. Representations, Warranties, etc. 3.1. Assignor's Representations and Warranties. The Assignor: (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the other Credit Documents or any other instrument or document furnished pursuant thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or the other Credit Documents or any other instrument or document furnished pursuant thereto, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (b) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or any Subsidiary or the performance by the Company or any Subsidiary of its obligations under the Credit Agreement, any 123 of the other Credit Documents or any other instrument or document furnished pursuant thereto; and (c) represents and warrants that after giving effect to the assignment hereunder on the Assignment Date, the Assignor has the interests in the Credit Obligations set forth on Schedule A hereto. 3.2. Assignee's Representation, Warranties and Agreements. The Assignee: (a) represents and warrants that it is legally authorized to enter into this Agreement; (b) confirms that it has received a copy of the Credit Agreement and certain other Credit Documents it has requested, together with copies of the most recent financial statements delivered pursuant to Section 7.4 of the Credit Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement; (c) agrees that it will, independently and without reliance upon the Assignor or any other Person which has become a Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement and the other Credit Documents; (d) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and other Credit Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with their terms all the obligations which by the terms of the Credit Agreement and the other Credit Documents are required to be performed by it as a Lender; and (f) represents and warrants that after giving effect to the assignment hereunder on the Assignment Date, the Assignee has the interests in the Credit Obligations and under the Credit Agreement as set forth on Schedule A hereto. 3.3. Qualified Institutional Buyer. The Assignee represents and warrants that it is a Qualified Institutional Buyer. -2- 124 3.4. US Withholding Tax. The Assignee represents and warrants that (a) it is incorporated or organized under the laws of the United States of America or a state thereof or (b) it will perform all of its obligations relating to United States income tax withholding under Section 14 of the Credit Agreement. 4. Assignment Date. The effective date of this Agreement shall be ______________, 19__ (the "Assignment Date"). 5. Assignee Party to Credit Agreement; Assignor Release of Obligations. From and after the Assignment Date, (a) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Agreement, have the rights and obligations of a Lender thereunder and under the other Credit Documents and (b) the Assignor shall, to the extent provided in this Agreement, relinquish its rights and be released from its obligations under the Credit Agreement and the other Credit Documents. 6. Notices. All notices and other communications required to be given or made to the Assignee under this Agreement, the Credit Agreement or any other Credit Documents shall be given or made at the address of the Assignee set forth on the signature page hereof or at such other address as the Assignee shall have specified to the Assignor, the Agent and the Company in writing. 7. Further Assurances. The parties hereto agree to execute and deliver such other instruments and documents and to take such other actions as any party hereto may reasonably request in connection with the transactions contemplated by this Agreement. 8. General. This Agreement, the Credit Agreement and the other Credit Documents constitute the entire agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all current and prior agreements and understandings, whether written or oral, with respect to such subject matter. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. The invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of any other term or provision hereof. This Agreement may be executed in any number of counterparts, which together shall constitute one instrument, and shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, including as such successors and assigns all holders of any Credit Obligation. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS (OTHER THAN THE CONFLICT OF LAWS RULES) OF THE COMMONWEALTH OF MASSACHUSETTS. -3- 125 Each of the Assignor and the Assignee has caused this Agreement to be executed and delivered by its duly authorized officer under seal as of the date first written above. [ASSIGNOR] By ------------------------------- Title: [ASSIGNEE] By ------------------------------- Title: [Street Address City, State, Zip Code] Telecopy: Telex: The foregoing is hereby approved: THE FIRST NATIONAL BANK OF BOSTON, as Agent By ------------------------------- Title: THE PIONEER GROUP, INC. By ------------------------------- Title: -4- 126 SCHEDULE A Portion Assigned Hereunder Assignee's Percentage Interest and outstanding principal balance in the B Share Loan and Revolving Loan under the Credit Agreement on and after the Assignment Date pursuant to the assignment being made hereunder on the Assignment Date: Percentage Interest: ______________% B Share Loan: $_____________ Revolving Loan: $_____________ Assignor's Interest Assignor's new Percentage Interest and outstanding principal balance in the B Share Loan and Revolving Loan on and after the Assignment Date after giving effect to the other assignments being made on the Assignment Date: Percentage Interest: ______________% B Share Loan: $_____________ Revolving Loan: $_____________ Assignee's Interest Assignee's new Percentage Interest and outstanding principal balance in the B Share Loan and Revolving Loan on and after the Assignment Date after giving effect to the other assignments being made on the Assignment Date: Percentage Interest: ______________% B Share Loan: $_____________ Revolving Loan: $_____________ -5- EX-10.5 6 LOAN AGREEMENT DATED 5/16/96 1 Exhibit 10.5 LOAN AGREEMENT THIS LOAN AGREEMENT is made this 16th day of May, 1996, by and between TEBEREBIE GOLDFIELDS LIMITED ("Borrower"), a limited liability company organized and existing under the laws of the Republic of Ghana with its principal place of business located at P.O. Box 6, Tarkwa, Republic of Ghana, West Africa; and CATERPILLAR FINANCIAL SERVICES CORPORATION ("Lender"), a Delaware corporation with its principal place of business located at 3322 West End Avenue, Nashville, Tennessee, U.S.A. 37203. SECTION 1. GENERAL DEFINITIONS 1.1. Defined Terms. When used herein, the following terms shall have the following meanings (terms defined in the singular shall have the same meaning when used in the plural and vice versa): "Affiliate" shall mean any Person: (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Borrower; (ii) which beneficially owns or holds 5% or more of any class of the Voting Stock of the Borrower; or (iii) 5% or more of the voting stock (or in the case of a Person which is not a corporation or a limited liability company, 5% or more of the equity interest) of which is beneficially owned or held by the Borrower or a Subsidiary of the Borrower. For purposes hereof, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting stock, by contract or otherwise. "Agreement" shall mean this Loan Agreement. "Applicable Law(s)" shall mean all laws, rules and regulations applicable to the Person, conduct, transaction, covenant or Loan Documents in question, including, but not limited to, all applicable common law and equitable principles, if applicable; all provisions of all applicable state and federal constitutions, statutes, rules, regulations and orders of governmental bodies; and orders, judgments, decrees and awards of all courts and arbitrators, in any jurisdiction or any political subdivision thereof, and in each case, as amended, modified or replaced. "Bank" shall mean any financial institution with which the Borrower may, from time to time, maintain credit lines for financing its or its Subsidiaries acquisition of Property. "Base Rate" shall mean a fixed rate of interest equal to eight and No/100ths percent (8.00%) per annum. "Business Day" shall mean a day other than (i) a Saturday or Sunday, or (ii) a day on which banks are authorized by law to be closed in New York, New York, U.S.A. "Caterpillar" shall mean Caterpillar Inc., a Delaware corporation. "Caterpillar Sellers" shall mean Caterpillar, COSA, and each of their respective wholly owned subsidiaries (other than Lender). "Closing Date" shall mean the date on which all of the conditions precedent in Section 6 are satisfied. "Collection Expenses" shall mean all costs and expenses at any time or times incurred by the Lender after the occurrence of an Event of Default in connection with efforts to collect or recover any of the Obligations from the Borrower, including, without limitation, reasonable legal fees, court expenses and costs, transfer fees or taxes, accountants' fees, all fees and expenses payable or reimbursable by the Borrower under Section 9.3 hereof, and all 1 2 other costs and expenses associated with seeking to enforce any of the Loan Documents. "Commitment" shall mean the amount of commitment set forth opposite Lender's name on the signature page hereof, or Lender's commitment to lend such amounts, as the context may determine. "Commitment Letter" means that certain Commitment Letter dated May 6, 1996 between Borrower and Lender. "COSA" shall mean Caterpillar Overseas S.A., a Swiss corporation. "Deed of Warranty" shall mean that certain Deed of Warranty dated December 3, 1987 by and among the Government of the Republic of Ghana, Borrower, Pioneer Group Inc. and Glencar Exploration (UK) Limited. "Default" shall mean an event or condition the occurrence of which would, with proper notice or lapse of time or both, become an Event of Default. "Dollars" and the sign "$" shall mean the currency of the United States of America. "Eligible Equipment" shall mean the equipment described in the Commitment Letter. "Event of Default" shall have the meaning ascribed thereto in Section 7.1. "Export Product Value" means the actual cost in Dollars to the Borrower of each item of Eligible Equipment purchased, FOB port of exit, (INCOTERMS 1990). If actual cost is not denominated in Dollars, it shall be converted at a rate determined by Lender using the guidelines set out in Section 9.7 hereof. "Fiscal Year" shall mean the taxable year of the Borrower. "Forfeiture Law" shall mean any state or federal law, rule or regulation under which any Property of a Person may be seized by a governmental agency or title thereto forfeited by reason of such Person's commission of a crime. "GAAP" shall mean generally accepted accounting principles as in effect in the Republic of Ghana from time to time. "Indebtedness" as applied to a Person shall mean the aggregate of all items which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person as at the date as of which Indebtedness is to be determined, including without limitation, all obligations of other Persons which such Person has guaranteed. "Lender's Bank Account" shall mean Lender's account with Chase Manhattan Bank, New York, New York, account number 910-2-469872, ABA code 021-000-021, or other such account as Lender may designate in writing to Borrower. "Lien" shall mean any mortgage, deed of trust, pledge, security interest, hypothecation, assignment, deposit arrangements, encumbrance, lien (statutory or other), or preference, priority, or other security agreement or preferential arrangement, charge, or encumbrance of any kind or nature whatsoever. "Loan" shall have the meaning ascribed thereto in Section 2.1. "Loan Documents" shall mean this Agreement and the Other Agreements. 2 3 "Material Adverse Effect" shall mean any event or condition which, alone or when taken together with other events or conditions occurring or existing concurrently therewith: (i) has or may be reasonably expected to have a material adverse effect upon the business, operations, Properties or financial condition of the Borrower or any Subsidiary; (ii) has or may be reasonably expected to have any material adverse effect whatsoever upon the validity or enforceability of this Agreement or any of the other Loan Documents; or (iii) materially impairs the ability of the Borrower to perform its obligations under this Agreement or any of the other Loan Documents or of the Lender to enforce or collect the Obligations in accordance with the Loan Documents and Applicable Law. "Maximum Rate" shall mean the maximum rate of interest permitted by Applicable Law that at any time, or from time to time, may be contracted for, taken, reserved, charged or received on the Indebtedness in question or, to the extent permitted by Applicable Law, under such Applicable Laws that may hereafter be in effect and which allow a higher maximum interest rate than Applicable Laws now allow. Notwithstanding any other provision hereof, the Maximum Rate shall be calculated on a daily basis computed on the actual number of days elapsed over a year of 360 days. "Net Worth" shall mean the aggregate of capital stock, earned surplus, and additional paid in capital of the Borrower, less the Borrower's treasury stock, all as determined in accordance with GAAP applied on a basis consistent with the accounting principles applied in the preparation of the financial statements referred to in Sections 4.4 and 5.1(A). "Note" shall mean the promissory note(s) evidencing the Loan made by Lender to Borrower hereunder pursuant to Section 2.1 substantially in the form of Exhibit A. "Obligations" shall mean all Indebtedness, liabilities and obligations (including non-financial obligations and covenants) owing, arising, to be performed, due or payable from the Borrower to, or on behalf of, the Lender of every kind or nature, whether absolute or contingent, due or to become due, joint or several, liquidated or unliquidated, matured or unmatured, primary or secondary, now existing or hereafter incurred or arising under any of the Loan Documents or otherwise, and regardless of the form or purpose of such Indebtedness, liabilities or obligations, including, without limitation, the Loan, any other loans, any Security Agreements, all liabilities of the Borrower to the Lender under any indemnity, reimbursement, letter of credit, guaranty, deposit or other agreement heretofore or hereafter executed by the Borrower with or in favor of the Lender. The term includes, without limitation, all interest, charges, expenses, Taxes, attorneys' fees and other sums chargeable to the Borrower under any of the Loan Documents. "Other Agreements" shall mean any and all agreements, instruments, documents and certificates (other than this Agreement), heretofore, now or hereafter executed by the Borrower and delivered to the Lender in respect to the transactions contemplated by this Agreement, including, without limitation, the Note and any Security Agreement or Lien agreement now existing, concurrently or hereafter executed by the Borrower to secure the Obligations. "Permitted Liens" shall mean any Lien but only to the extent such Lien is contested or disputed in good faith or for which arrangements for deferred payment have been made, provided appropriate reserves are maintained, to the satisfaction of the Lender, for the eventual payment thereof, or such Liens as Lender shall approve in writing. "Person" shall mean an individual, partnership, corporation, joint venture, association, joint stock company, trust, business trust or unincorporated organization, limited liability company, or a government or agency or political subdivision thereof. 3 4 "Projections" shall mean Borrower's forecasted (a) balance sheets, (b) profit and loss statements, and (c) cash flow statements, all prepared on a consistent basis with Borrower's historical financial statements, together with appropriate supporting details and a statement of underlying assumptions. "Property" shall mean any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Remittance Instructions" shall have the meaning given to it in Section 2.2. "Security Agreement" shall mean any instruments and agreements of any kind now or at any time hereafter securing the whole or any part of the Obligations, including but not limited to that certain Chattel Mortgage relating to the Eligible Equipment. "Solvent" shall mean, as to any Person, that such Person: (i) owns Property the fair value of which is greater than the amount required to pay all of such Person's Indebtedness (including contingent liabilities); (ii) is able to pay all of its Indebtedness as such Indebtedness matures; and (iii) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage. "Subsidiary" shall mean any corporation or limited liability company of which the Borrower owns more than 50% of its securities, provided the ownership of such securities, in the absence of contingencies, entitles the Borrower to elect a majority of the directors of such corporation or limited liability company. "Taxes" shall mean any present or future taxes, levies, imposts, duties, fees, assessments, deductions, withholdings or other charges of whatsoever nature (excluding taxes imposed on net income and all income and franchise taxes of the United States and any political subdivisions thereof on Lender), that may now or hereafter be imposed or asserted by any jurisdiction or any political subdivision thereof or any taxing authority therein and all interest, penalties or similar liabilities with respect thereto. 1.2. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP consistent with that applied in preparation of the financial statements referred to in Section 4.4 and 5.1(A), and all financial data pursuant to this Agreement shall be prepared in accordance with such principles consistently applied. 1.3. Certain Matters of Construction. The terms "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision. Any pronoun used shall be deemed to cover all genders. The section titles, table of contents and list of exhibits appear as a matter of convenience only and shall not affect the interpretation of this Agreement. All references to any instruments or agreements, including, without limitation, references to this Agreement and any of the other Loan Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof. SECTION 2. CREDIT COMMITMENT. 2.1. Loan. The Lender agrees, subject to the terms and conditions of this Agreement and the other Loan Documents, to make a Loan to the Borrower, on a date not later than August 31, 1996, in the principal amount not to exceed Five Million Six Hundred Ninety-Seven Thousand Seven Hundred Thirteen and 20/100ths Dollars ($5,697,713.20). The Loan will not exceed eighty-five percent (85%) of the Eligible Equipment Export Product Value associated with the Loan, and must be secured by a first priority security interest in the Eligible Equipment satisfactory to Lender in its sole discretion. Borrower 4 5 must make a cash payment of not less than fifteen percent (15%) of the Eligible Equipment Export Product value to the equipment seller. The Loan made hereunder shall be solely and exclusively in Dollars. 2.2. Notice and Manner of Borrowing. The Closing shall be on or before August 31, 1996. Not less than ten (10) Business Days (and no later than 10:00 a.m. Central Standard Time on such Business Day) in advance of the date on which the Borrower intends to borrow funds hereunder, the Borrower shall provide the Lender with written notice confirming such intent and specifying the date the Loan is to be made and the amount thereof. Not later than 4:00 p.m. Central Standard Time on the date of such Loan, provided the Borrower is not then in default under any provision of this Agreement (particularly, the conditions precedent set forth in Section 6 of this Agreement), the Lender shall make the amount of such Loan available to the Borrower in immediately available funds in accordance with remittance instructions substantially in the form of Exhibit B hereto (the "Remittance Instructions") signed by Borrower's authorized representative and acceptable to Lender set forth in such notice against receipt from the Borrower of a properly completed and executed Note (as described in Section 2.3 below). Disbursement of the Loan proceeds by the Lender shall be by bank wire transfer to an account or accounts designated in writing by an authorized officer of the Borrower no later than five (5) days before the Closing Date. Lender and Borrower agree that there will be only one borrowing under this Agreement, but such borrowing may be evidenced by two Notes. 2.3. The Note. The Loan and the Borrower's obligation to repay the Loan shall be evidenced by the Note and repayable with interest in accordance with Section 3 of this Agreement and the terms of the Note of the Borrower, payable to the order of the Lender, substantially in the form of Exhibit A hereto. In no case shall the Note be considered to constitute a payment or novation of the Loan. 2.4. Interest. The Borrower shall pay interest on the outstanding amounts loaned to the Borrower hereunder, commencing with the date specified in the Note and until such time as the entire principal balance thereof is fully repaid, at the annual interest rate specified in Section 3.1(A) hereof. 2.5. Payment. Except as the Lender may otherwise direct in writing, the Borrower agrees to make all payments directly to the Lender (or to the holder of the Note from time to time) with funds from Borrower's "external account" (as defined in the Deed of Warranty) by means of wire transfer, net of any wire transfer expenses, into Lender's Bank Account and in accordance with the terms of payment set forth in this Section 2 and the Note. All payments of principal and interest due under the Note and of any other amounts due hereunder shall be made not later than 12:00 Noon Central Standard Time on the due date thereof. Whenever any payment to be made under this Agreement or under the Note shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest. Each payment made shall also reference the Note by Borrower name and date of the Note or by the applicable Note number, if any. 2.6. Application of Payments and Collections. (A) Subject to the provisions of Section 2.6(B) below, Borrower irrevocably waives the right to direct the application of any and all payments and collections at any time or times hereafter received by Lender from or on behalf of Borrower, and Borrower does hereby irrevocably agree that Lender shall have the continuing exclusive right to apply and reapply any and all such payments and collections received at any time or times hereafter by Lender against the Obligations, in such manner as Lender may deem advisable, notwithstanding any entry by Lender upon any of its books and records. 5 6 (B) Upon or after the occurrence of an Event of Default and Lender's acceleration of the maturity of the Loan as a consequence thereof, all payments and collections received by Lender from or on behalf of Borrower for application to the Loan shall be applied in the following order: (a) to the unpaid balance of all Collection Expenses; (b) to the amount of any loss, costs, expenses or damages suffered or incurred by Lender for which Borrower has agreed to indemnify Lender pursuant to the terms of this Agreement or any of the other Loan Documents; (c) to any past due interest on the Loan, (d) to accrued but not past due interest on the Loan, (e) to the principal amount outstanding of the Loan and (f) to the amount of any other Obligations then outstanding to Lender. 2.7. Notations. Borrower hereby irrevocably authorizes Lender to make (or cause to be made) appropriate notations in its records to evidence, inter alia, the date of, the outstanding principal amount of and the interest rate applicable to, the Loan evidenced thereby. The notations in such records indicating the outstanding principal amount of the Loan evidenced thereby shall, in the absence of manifest error, be prima facie evidence of the principal amount thereof owing and unpaid, but the failure to record any such amount in such records or otherwise shall not limit or affect the obligations of Borrower hereunder or under the Note to make payment of principal of or interest on the Loan when due. 2.8. Voluntary Prepayment. The Borrower may prepay without penalty or premium the balance due under any one or more of the Note or Notes evidencing the Loan (on a Note-by-Note basis) in its entirety and not in part at any time thirteen (13) months after the Note date, provided the Borrower (i) shall give the Lender advance written notice of the intended date of prepayment, which date shall be a scheduled payment date (the "Final Payment Date"), not less than thirty (30) days in advance of that Final Payment Date, and (ii) Borrower pays all other Obligations to Lender under the Loan Documents. A notice of prepayment once given by Borrower may only be rescinded if Lender has not, in relying on such notice, undertaken obligations which might cause Lender to incur liabilities should Lender attempt to rescind such obligations. 2.9. Payment "Net Taxes". The Borrower agrees to pay all amounts owing by it under this Agreement, the Notes or the other Loan Documents free and clear of and without deduction for any present or future Taxes, and (A) that if it is prevented by operation of law from paying any Taxes, then the interest rate or fees required to be paid under this Agreement, the Notes or the other Loan Documents shall be increased by the amount necessary to yield to the Lender interest or fees at the rates specified in this Agreement, the Notes, or the Other Loan Documents after provision for the payment of all such Taxes and without taking into account any tax benefits accruing to the Lender from such payment; (B) that it shall at the request of the Lender execute and deliver to the Lender such further instruments as may be necessary or desirable to effect the increase in the interest or fees as provided for in clause (a) immediately above, including new Notes to be issued in exchange for any Notes theretofore issued; (C) that it shall indemnify and hold the Lender harmless from and against any liabilities with respect to any Taxes (whether or not properly or legally asserted); and (D) that it shall provide the Lender with the original or a certified copy of evidence of the payment of any Taxes by it, as the Lender may reasonably request, or, if no Taxes have been paid to provide to Lender, at the Lender's request, with a certificate from the appropriate taxing authority or an opinion of counsel acceptable to the Lender stating that no Taxes are payable. 6 7 If Lender shall receive a refund of any Taxes paid by the Borrower pursuant to this Section 2.9 by reason of the fact that such Taxes were not correctly or legally asserted, Lender shall within 60 days after receipt of such refund pay to the Borrower the amount of such refund, as determined solely by the Lender; provided, however, that in no event shall the amount paid by Lender to the Borrower pursuant to this sentence exceed the amount of Taxes originally paid by the Borrower; and further provided that Lender shall not have any obligation under this Agreement to claim or otherwise seek to obtain any such refund. Notwithstanding the foregoing, Lender agrees to cooperate in good faith with any written request of the Borrower to seek or obtain any such refund relating to this Agreement that cannot be obtained by the Borrower without the assistance, or direct involvement, of Lender, provided no default exits under this Agreement and provided the Borrower has agreed in advance in writing to bear the expenses relating thereto and has agreed in writing (in a form acceptable to Lender) to indemnify Lender against and hold Lender harmless for any loss, cost or expense relating thereto. 2.10. Dollar Payments. All payments required to be made hereunder, the Notes, or any of the Loan Documents shall be payable solely and exclusively in Dollars. 2.11. Obligations Unconditional. The obligations of the Borrower under this Agreement and in respect of the Loan shall be absolute and unconditional under all circumstances and irrespective of any setoff, counterclaim or defense to payment (of any type or description, whether as a result of non-compliance with any of the provisions of this Agreement, any of the agreements referred to herein or otherwise) which the Borrower may have or have had against the Lender or any other Person. 2.12. Termination of Commitment. This Commitment shall terminate on May 1, 1996 if Borrower has not met the conditions precedent to the Loan under Section 6 of this Agreement, except to the extent Lender may in its sole discretion elect to make the Loan prior to the fulfillment of any of the conditions precedent set forth in Section 6. No termination (regardless of cause or procedure) of the Commitment shall in any way affect or impair the rights, powers or privileges of Lender or the obligations, duties or liabilities of Borrower in any way relating to (i) any transaction or event occurring prior to the effective date of such termination or (ii) any of the undertakings, agreements, covenants, indemnifications, warranties or representations of Borrower contained in this Agreement or any of the other Loan Documents. All such undertakings, agreements, covenants, indemnities, warranties and representations of Borrower shall survive such termination and Lender shall retain all of its rights and remedies under this Agreement and the other Loan Documents notwithstanding such termination until all of the Obligations have been paid in full, in immediately available funds. Notwithstanding the foregoing, if no funding is made under this Agreement, Borrower shall not be bound by any of the undertakings, agreements, covenants, indemnifications, warranties or representations of Borrower contained in this Agreement or any of the other Loan Documents except to the extent that such are intended, by their nature, to survive the termination of this Agreement. SECTION 3. INTEREST, FEES AND CHARGES 3.1. Interest, Fees and Charges. (A) Interest Rates. Borrower agrees to pay interest in respect of the unpaid principal amount of the Loan from the respective date the principal amount is advanced until paid (whether at stated maturity, on acceleration, or otherwise) at a rate per annum equal to the Base Rate. Interest shall be computed on the actual number of days elapsed over a year of 360 days, and shall be payable in accordance with the terms of the Note. 7 8 (B) Late Payment Rate. Should the Borrower fail to pay, when due, any installment of principal or interest or any prepayment amount (as described above), or any other obligation as such becomes due hereunder or under the Note, the Borrower shall also pay interest on such amount equal to the Base Rate plus nine percent (9%) per annum; or, if such rate exceeds the Maximum Rate legally allowed, then at such Maximum Rate. In the event that any obligation hereunder or under the Note shall remain unpaid beyond the maturity date of the Note, the Base Rate will continue to adjust for purposes of calculating the above rate as if the maturity date of the Note had been extended. Interest payable at the Late Payment Rate shall be computed on the actual number of days elapsed over a year of 360 days, and shall be payable in accordance with the terms of the Note. (C) Maximum Interest. Regardless of any provision contained in this Agreement or any of the other Loan Documents, in no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder or under the Note and contracted for, charged or collected pursuant to the terms of this Agreement or pursuant to the Note exceed the highest rate permissible under any Applicable Law. No agreements, conditions, provisions or stipulations contained in this Agreement or any of the other Loan Documents or the exercise by Lender of the right to accelerate the payment or the maturity of all or any portion of the Obligations, or the exercise of any option whatsoever contained in any of the Loan Documents, or the prepayment by Borrower of any of the Obligations, or the occurrence of any contingency whatsoever, shall entitle Lender to charge or receive in any event, interest, or any charges, amounts or fees deemed interest by Applicable Law (such interest, charges, amounts and fees referred to herein collectively as "Interest"), exceeding the Maximum Rate and in no event shall Borrower be obligated to pay Interest exceeding such Maximum Rate, and all agreements, conditions or stipulations, if any, which may in any event or contingency whatsoever operate to bind, obligate or compel Borrower to pay Interest exceeding the Maximum Rate, shall be without binding force or effect, at law or in equity, to the extent only of the excess of Interest over such Maximum Rate. If any Interest is charged or received in excess of the Maximum Rate ("Excess"), Borrower acknowledges and stipulates that any such charge or receipt shall be the result of an accident and bona fide error, and such Excess, to the extent received, shall be applied first to reduce the principal then unpaid hereunder; then applied to reduce the other Obligations; and the balance, if any, returned to Borrower, it being the intent of the parties hereto not to enter at any time into a usurious or otherwise illegal relationship. The right to accelerate maturity of any of the Obligations does not include the right to accelerate any interest that has not otherwise accrued on the date of such acceleration, and Lender does not intend to collect any unearned interest in the event of any such acceleration. All monies paid to Lender hereunder or under any of the Loan Documents, whether at maturity or by prepayment, shall be subject to any rebate of unearned interest as and to the extent required by Applicable Law. By the execution of this Agreement, Borrower covenants that (i) the credit or return of any Excess shall constitute the acceptance by Borrower of such Excess, and (ii) Borrower shall not seek or pursue any other remedy, legal or equitable, against Lender, based in whole or in part upon contracting for, charging or receiving any Interest in excess of the Maximum Rate. For the purpose of determining whether or not any Excess has been contracted for, charged or received by Lender, all interest at any time contracted for, charged or received from Borrower in connection with this Agreement shall, to the extent permitted by Applicable Law, be amortized, prorated, allocated and spread in equal parts throughout the full term of the Obligations. Borrower and Lender shall, to the maximum extent permitted under Applicable Law, (i) characterize any non-principal payment as an expense, fee or premium rather than as Interest and (ii) exclude voluntary prepayments and the effects thereof. The provisions of this Section shall be deemed to be incorporated into every Loan Document (whether or not any provision of this Section is referred to therein). All such Loan Documents and communications relating to any Interest owed by Borrower and all figures set forth therein shall, for the sole purpose of 8 9 computing the extent of Obligations, be automatically recomputed by Borrower, and by any court considering the same, to give effect to the adjustments or credits required by this Section. SECTION 4. REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants the following to the Lender as of the date hereof and for the entire term of this Agreement: 4.1. Corporate Existence. The Borrower is a limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of formation, and is duly licensed or qualified to transact business in all jurisdictions where the character of the property owned or leased or the nature of the business transacted by it makes such licensing or qualification necessary. 4.2. Authorization of Borrowing; No Conflict as to Applicable Law or Agreements. The Borrower has the right and power and is duly authorized and empowered to enter into, execute, deliver and perform all of its obligations under this Agreement and each of the other Loan Documents to which it is a party, to conduct its business as presently conducted and to own, operate and lease its Property. The execution, delivery and performance by the Borrower of this Agreement and each of the other Loan Documents and the borrowing hereunder, have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the stockholders of the Borrower, or any authorization, consent or approval by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign (except those set forth in Exhibit C, each of which has been given or obtained and is in full force and effect on the date hereof), (ii) violate any provision of any Applicable Law, rule or regulation or of any order, writ, injunction or decree presently in effect having applicability to the Borrower or of the charter or bylaws of the Borrower, (iii) result in a breach of or constitute a default under any indenture or loan or credit agreement (including, without limitation, any such agreements in effect as of the date hereof between the Borrower and any Bank) or any other material agreement, lease or instrument to which the Borrower is a party or by which it or its Property may be bound or affected (except for those with Persons who have consented thereto), or (iv) result in, or require, the creation or imposition of any Lien (other than the Lien granted to Lender by the Security Agreement) upon or with respect to any of the Properties now owned or hereafter acquired by the Borrower. 4.3. Legal Agreements. This Agreement is, and each of the other Loan Documents when delivered under this Agreement will be, a legal, valid and binding obligation of the Borrower enforceable against it in accordance with their respective terms, except as enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally and by the effect of general principles of equity. 4.4. Financial Condition. The Borrower has heretofore furnished the following financial statements to Lender: The annual audited consolidated financial statements of the Borrower as of the close of the Fiscal Years set forth on Exhibit C, and unaudited interim financial statements (which may, but need not, contain footnotes) for the interim periods set forth on Exhibit C hereto. Such financial statements present fairly in all material respects the financial condition of the Borrower on the dates thereof and the results of its operations for the periods then ended, and were prepared in accordance with GAAP, subject, in the case of interim statements (which may, but need not, contain footnotes), only to changes from audit and year-end adjustments. There are no liabilities of the Borrower or any Subsidiary of the Borrower, fixed or contingent, which are material and are not reflected in the financial statements or the notes thereto, other than liabilities arising in the 9 10 ordinary course of business since the date of the last financial statement referred to hereinabove. 4.5. Accuracy of Information. The financial statements referred to in paragraph 4.4 do not, nor does any other written statement furnished by the Borrower in connection with this Agreement, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained herein or therein not misleading. All information supplied to Lender by or on behalf of the Borrower with respect to the assets or any other Property of the Borrower or its Subsidiaries (whether prior to the date of this Agreement, as part of this Agreement, or after the date of this Agreement) is and shall be true and correct in all material respects. 4.6. Adverse Change. Except as otherwise disclosed to Lender in writing in connection with this Agreement, there has been no change in the business, assets, liabilities, business prospects, Property or condition (financial or otherwise) of the Borrower which could reasonably be expected to have a Material Adverse Effect on the business, Property or financial condition of the Borrower since the date of the latest financial statement referred to in Section 4.4. 4.7. Adverse Fact. Other than general economic conditions, no fact is known to the Borrower, as of the date hereof, which has had or can reasonably be expected in the future to have a Material Adverse Effect which has not been previously disclosed to Lender by the Borrower in writing. 4.8. Solvent Financial Condition. The Borrower is now, and after giving effect to the Loan to be made under this Agreement, will be, Solvent. 4.9. Operation of Business. The Borrower and each Subsidiary and Affiliate of the Borrower possesses all licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights thereto, free from unduly burdensome restrictions and adequate for the conduct in all material respects of their respective businesses substantially as now conducted and as presently proposed to be conducted, and to the best knowledge of the Borrower, the Borrower and each Subsidiary is not in violation of any valid rights of others with respect to any of the foregoing. During the five (5) year period immediately preceding the date of this Agreement, Borrower has had no principal office or principal place of business located in any political or administration region or district other than as set forth in Exhibit D. 4.10. Title to Property. The Borrower has good, valid and marketable title to all its material Property and assets, both real and personal (except for such material property as has been sold or otherwise disposed of in the ordinary course of business since the date hereof), and has appropriate rights to lease any Property leased by it. 4.11. Absence of Liens Other Than Permitted Liens. The Eligible Equipment is not and will not be subject to any Lien or the terms of any security agreement during the term hereof, other than Permitted Liens. 4.12. Subsidiaries, Affiliates, and Ownership of Stock. Set forth in Exhibit E hereto is a complete and accurate list of the Subsidiaries and Affiliates of the Borrower, showing (i) the correct name of each of the Subsidiaries of the Borrower, the jurisdiction of incorporation or formation and the percentage of its voting stock owned by the Borrower; (ii) the name of each of the Borrower's corporate or joint venture Affiliates and the nature of the affiliation; (iii) the number, nature and holder of all outstanding securities of the Borrower and each Subsidiary of the Borrower; and (iv) the number of authorized, issued and treasury shares of the Borrower and each Subsidiary of the Borrower. All of the outstanding capital stock of each Subsidiary has been validly issued, is fully paid and nonassessable. If the Borrower has any Subsidiary or Subsidiaries, the Borrower represents and warrants that it has good title to all of the shares it purports to own of the 10 11 securities of each Subsidiary, free and clear in each case of any Lien other than Liens that have been disclosed to Lender in writing. 4.13. Stamp, Duty, Documentary and Withholding Taxes. Borrower has paid or shall pay when due all stamp, duty or documentary taxes or charges imposed by the government of the Republic of Ghana or any taxing authority thereof or therein that are payable on or in connection with this Agreement, the Notes, the Loan Documents or any related documents. Borrower has paid or shall pay when due all applicable deductions or withholdings for or on account of any Taxes, levies, duties, fees, deductions or withholding, restrictions or conditions of any nature imposed by or on behalf of the government of the Republic of Ghana or any taxing authority whatsoever on the payments by the Borrower to the Lender of the Loan hereunder. 4.14. Corporate Names. During the preceding five (5) years, Borrower has not been known as or used any corporate, fictitious or trade names except as disclosed on Exhibit F hereto. Except as set forth on Exhibit F, Borrower has not, during the preceding five (5) years, been the surviving corporation or limited liability company of a merger or consolidation or acquired all or substantially all of the assets of any Person. 4.15. Business Locations. The principal place of business and main executive office of the Borrower and other current business locations (including leased locations) are set forth on Exhibit D hereto. 4.16. Leases. A complete listing of all leases of the Borrower as "lessee" thereunder in excess of $250,000 is set forth in Exhibit G. 4.17. Debt. Set forth in Exhibit H hereto is a complete, accurate and correct list of all credit agreements, indentures, purchase agreements, guarantees, surety agreements, capitalized leases, and other investments, agreements, and arrangements presently in effect providing for or relating to extensions of credit (including agreements and arrangements for the issuance of letters of credit or for acceptance financing) in respect of which the Borrower or any Subsidiary is in any manner directly or contingently obligated for an amount greater than $1,000,000; provided, however, that the Borrower shall have no obligation to report on Exhibit H purchase agreements regarding the sale of goods produced in the Borrower's operations entered into in the ordinary course of business of the Borrower. The maximum principal or face amounts of the credit in question which are outstanding and which can be outstanding are correctly stated, and all mortgages, deeds of trust, pledges, Liens, security interests, or other charges or encumbrances of any nature given or agreed to be given as security therefor are correctly described or indicated in such exhibit. The Borrower is not obligated as surety or indemnitor under any surety or similar bond or other contract and has not issued or entered into any agreement to assure payment, performance or completion of performance of any undertaking or obligation of any other Person. Borrower has no debt or other lien or obligation in favor of any Affiliated or stockholder of Borrower that has payment rights superior to those of Lender hereunder or under the Note. 4.18. Compliance with Applicable Laws and Regulations; Governmental Consents. The Borrower, in the conduct of all of its business affairs, has complied in all material respects with the requirements of all Applicable Laws and regulations as in effect at the relevant time noncompliance with which would have a Material Adverse Effect. Except as set forth in Exhibit I, there have been no citations, notices or orders of noncompliance (that have not been complied with or withdrawn), issued to the Borrower under any Applicable Law which would have a Material Adverse Effect. Except as set forth in Exhibit I, the Borrower has, and is in good standing with respect to, all governmental consents, approvals, authorizations, permits, certificates, inspections, and franchises necessary to continue and to conduct in all material respects its business as heretofore 11 12 conducted (or proposed to be conducted) by it and to own or lease and operate in all material respects its Properties as now owned or leased by it. 4.19. Taxes. The Borrower and its Subsidiaries each has filed all federal, state and local (or the relevant equivalent) tax returns and other reports it is required by law to file and has paid, or made provision for the payment of, all taxes, assessments, fees and other governmental charges that are reflected on such returns except and to the extent only that such taxes, assessments, fees and charges are being actively contested in good faith and by appropriate proceedings and the Borrower or Subsidiary has established adequate reserves on its books therefor. The provision for taxes on the books of the Borrower and each Subsidiary are, insofar as known to the Borrower, adequate for all years not closed by applicable statutes and for its current fiscal year. Except as disclosed in the financial statements furnished to Lender in accordance with Section 4.4, the Borrower knows of no proposed material tax assessment against it or any of its Subsidiaries and no extension of time for the assessment of federal, state or local taxes of the Borrower or any of its Subsidiaries is in effect or has been required. 4.20. Litigation. Except as set forth in Exhibit J, there are no actions, suits or proceedings pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary or the Property of the Borrower or any Subsidiary before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which, if determined adversely to the Borrower or any Subsidiary (as the case may be), would have a Material Adverse Effect. 4.21. No Defaults on Outstanding Judgments or Orders. The Borrower has satisfied all judgments, and is not in default with respect to any judgment, writ, injunction, decree, rule, or regulation of any court, arbitrator, or federal, state, municipal, or other governmental authority, commission, board, bureau, agency, or instrumentality, domestic or foreign, unless the failure to cure such default would not have a Material Adverse Effect. 4.22. Labor Disputes; Acts of God. Except as set forth in Exhibit K, neither the Borrower nor any of its Subsidiaries is a party to any collective bargaining agreement and there are no material grievances, disputes or controversies with any union or any other organization of the Borrower's employees, or threats of strikes, work stoppages or any asserted pending demands for collective bargaining by any union or organization. Neither the business nor the Property of the Borrower or any Subsidiary are affected by any fire, explosion, accident, drought, storm, hail, earthquake, volcanic eruption, embargo, act of God or of the public enemy, or other casualty (whether or not covered by insurance) which would have a Material Adverse Effect. 4.23. Surety Obligations. Except as set forth in Exhibit H, the Borrower is not obligated as surety or indemnitor under any surety or similar bond or other contract and has not issued or entered into any agreement to assure payment, performance or completion of performance of any undertaking or obligation of any other Person. 4.24. Other Agreements. The Borrower and each Subsidiary of the Borrower is not in default in any material respect under any indenture, loan, or credit agreement, or under any lease or other agreement or instrument to which it is a party, or any term of its charter or bylaws or in the performance, observance, or fulfillment of any of the obligations, covenants, or conditions contained in any agreement or instrument material to its business to which it is a party. No event has occurred and no condition exists which, upon consummation of the transactions contemplated by this Agreement, would constitute a default under any note or other evidence of indebtedness of the Borrower or a Default or an Event of Default. 12 13 4.25. No Exchange Approvals. There are no exchange approvals required for the execution of the Agreement, the Notes, or the Loan Documents and the Borrower will be permitted to purchase sufficient freely transferable Dollars for the payment of all amounts due under such agreements and documents, or to the extent any such approvals are required Borrower has obtained them. 4.26. Civil Acts; No Immunity. The Borrower is subject to civil and commercial law with respect to its obligations under this Agreement. The execution, delivery and performance of this Agreement by the Borrower constitute a commercial act as opposed to a governmental act. The Borrower (and its Property) does not enjoy, in the courts or under the laws of the Republic of Ghana any right of immunity from suit, setoff or attachment or execution on a judgment in respect of the obligations of the Borrower under this Agreement. 4.27. Legal Form of Agreement. The Loan Documents are in proper legal form under the laws of the Republic of Ghana for the enforcement thereof against the Borrower under the laws of the Republic of Ghana; and to ensure the legality, validity, enforceability or admissibility in evidence of the Loan Documents, it is not necessary that any of the Loan Documents be filed or recorded with any court or other authority in the Republic of Ghana, other than the requirement that relevant Loan Documents (including the Security Agreement) be stamped by the appropriate governmental authority and that the Security Agreement be registered with the Registrar of Companies. 4.28. Deed of Warranty. The Deed of Warranty remains in full force and effect and no amendment to or modification thereto has been made. SECTION 5. COVENANTS AND CONTINUING AGREEMENTS 5.1. Affirmative Covenants. The Borrower covenants that from the date hereof, and for so long as any amounts owed by the Borrower to the Lender hereunder or under any of the other Loan Documents shall remain unpaid, and unless otherwise consented to by Lender in writing: (A) Financial Statements; Other Information. The Borrower will deliver to Lender: (i) Annual Statements. As soon as available, and in any event within one hundred twenty (120) days after the end of each Fiscal Year of the Borrower, a copy of the unqualified (except for a qualification for a change in accounting principles with which the independent public accountant concurs) audited financial statements of the Borrower as of the end of such year, certified by a firm of independent certified public accountants of recognized international standing or otherwise acceptable to Lender. (ii) Semi-Annual Statements. As soon as available and in any event within ninety (90) days after the end of each semi-annual period of each Fiscal Year of the Borrower, unaudited interim financial statements of the Borrower as of the end of such semi-annual period and of the portion of the Borrower's Fiscal Year then elapsed, certified by the principal financial officer of the Borrower as prepared consistently with the Borrower's prior practices and fairly presenting, in all material respects, the financial position and results of operations of the Borrower for such period subject only to changes from audit and year-end adjustments and except that such statements need not contain notes. (iii) Generally Accepted Accounting Principles. The annual audit reports and the semi-annual financial statements referred to in (i) and (ii), above, shall be prepared in reasonable detail and in accordance with GAAP applied on a basis consistent with the accounting practices reflected in the annual financial statements referred to in Section 4.4 (subject only, in the case of the semi-annual statements, to changes from audit and year-end adjustments and except that such semi-annual statements need not contain 13 14 notes); and accompanied by a certificate of the chief financial officer of the Borrower stating (i) that such audit report and financial statement have been prepared in accordance with GAAP applied on a basis consistent with the accounting practices reflected in the annual financial statements referred to in Section 4.4, and (ii) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the Borrower is in compliance with the requirements set forth in Section 5.1(L) of this Agreement. (iv) Accountants' Reports. Promptly upon receipt thereof, a copy of the accountants' letter to Borrower's management that is prepared in connection with such financial statements; and, if the shares of Borrower are publicly traded at any time during the term of this Agreement, copies of all such financial statements and reports as the Borrower shall send to its stockholders (as stockholders) and of all registration statements and all regular or periodic reports which the Borrower shall file, or may be required to file, with any national or state securities commission. (v) Projections. As soon as available, and in any event no later than thirty (30) days after the last day of each fiscal year of the Borrower, Projections of the Borrower for the forthcoming fiscal year, month by month. (vi) Notice of Litigation. Promptly after the commencement thereof, notice in writing of all litigation and of all administrative proceedings before any state or federal court or any governmental or regulatory agency, bureau or commission affecting the Borrower or any Subsidiary or any of its Properties or the Property of any Subsidiary, whether or not the claim is considered by the Borrower to be covered by insurance, which may have a Material Adverse Effect or which seek a monetary recovery against the Borrower in excess of $1,000,000, along with, if requested in writing by Lender, an opinion of the Borrower's counsel regarding the circumstances underlying and merit of such litigation or proceedings. (vii) Notice of Change in Ownership. Promptly upon the occurrence thereof, a written notice of a change in ten percent (10%), in one transaction or a series of transactions, in the ownership of the Borrower or any Subsidiary. (viii) Notice of Claimed Default Under Other Agreements. Promptly after learning of any material default by Borrower under any note, indenture, loan agreement, mortgage, lease, deed, guaranty or other similar agreement relating to any Indebtedness of the Borrower with an outstanding principal balance in excess of $1,000,000, a written notice specifying the notice given or action taken by the holder of such Indebtedness, as the case may be, and the nature of the claimed default and what action the Borrower is taking or proposes to take with respect thereto. (ix) Notice of Default by Debtor of the Borrower. Promptly after the occurrence of any default by any obligor under any note or other evidence of Indebtedness payable to the Borrower in an amount exceeding $2,000,000, a written notice thereof to Lender. (x) Notice of Change in Credit Rating. Promptly upon becoming aware thereof, a written notice of any adverse change in, or downgrading of, any credit rating given the Borrower in connection with any outstanding debt obligations of the Borrower. (xi) Notice of Regulatory Action. Promptly upon becoming aware of any action or proceeding instituted by any national, district or other regulatory agency which might materially and adversely affect the ability of the Borrower to perform its obligations under this Agreement or otherwise with respect to the Loan, a written notice describing such action or proceeding and the status thereof. 14 15 (xii) Notice of Labor Dispute. Promptly after Borrower's learning of any labor dispute to which the Borrower may become a party, any strikes or walkouts relating to any of its plants or their facilities, or the expiration of any labor contract to which it is a party or by which it is bound, a written notice describing any such strike, walkout or condition which may have a Material Adverse Effect, and the status thereof. (xiii) Quarterly Covenant Compliance Report. As promptly as practicable (but in any event not later than fifteen (15) Business Days) following the end of each calendar quarter, a Covenant Compliance Report, substantially in the form of Exhibit L, stating: (i) whether the Borrower was in compliance during and at the end of the calendar quarter with respect to each of the covenants of the Borrower specified in this Agreement, (ii) which covenant(s), if any, the Borrower failed to comply with and the period(s) during which the Borrower was not in compliance, and (iii) for any covenant for which the Borrower is not in compliance, the steps being taken to correct such noncompliance (including periodic notice to Lender as to the Borrower's progress in such regard). If the Borrower identifies any covenant for which it is not in compliance, and as the Borrower reports to Lender on the correction of the noncompliance, the Borrower shall also provide Lender with sufficient documentation to permit Lender to understand the nature of the noncompliance and the progress toward correcting same. The Covenant Compliance Report shall be signed by the chief executive officer or chief financial officer of the Borrower. Lender's receipt of any report or other information identifying noncompliance by the Borrower or failure to respond thereto, shall not act as a waiver of Lender's rights under this Agreement or Lender's rights hereunder with respect to such noncompliance or any other event of noncompliance. (xiv) Requested Information. From time to time and promptly upon the request of Lender, such data, certificates, reports, statements, opinions of counsel and other experts, documents or further information or assurances bearing upon or related to this Agreement, or the business, assets, liabilities, financial condition, results of operations, or business prospects of the Borrower as Lender may reasonably request (including, without limitation, federal income tax returns of the Borrower, accounts payable ledgers, and bank statements), in each case in form and substance, and certified in a manner, satisfactory to Lender. (B) Compliance with Applicable Laws and Regulations; Payment of Taxes and Claims. The Borrower shall comply and cause each Subsidiary to comply with all Applicable Laws, rules, regulations and orders including, without limitation, all laws, statutes, regulations and ordinances regarding the collection, payment and deposit of employees' income, unemployment, social security, sales and excise taxes, other Taxes, which failure to comply with might have a Material Adverse Effect, and shall also comply in all material respects with, perform and observe and cause each Subsidiary to comply in all material respects with, perform and observe, all material covenants, provisions and conditions in connection with all other loan or credit agreements to which it or any such Subsidiary is a party. The Borrower shall timely file, and cause each Subsidiary to file, all national, district and local tax returns or extensions and other reports the Borrower or such Subsidiary is required by law to file, and maintain, and cause each Subsidiary to maintain, adequate reserves for the payment of all taxes, assessments, governmental charges, and levies imposed upon it, its income, or its profits, or upon any Property belonging to it. The Borrower shall pay and discharge, and cause each Subsidiary to pay and discharge, all taxes, assessments and governmental charges upon it, its income and Properties as and when such taxes, assessments and charges are due and payable, except and to the extent only that such taxes, assessments and charges are being actively contested in good faith and by appropriate proceedings, the Borrower promptly notifies Lender in writing of such contest, the Borrower (or such Subsidiary) maintains adequate reserves on its books therefor and the nonpayment of such taxes, assessments and charges does not result in a Lien upon any Properties of the 15 16 Borrower (or such Subsidiary) other than a Permitted Lien. The Borrower shall also pay and discharge any lawful claims which, if unpaid, might become a Lien against any of the Eligible Equipment except for Permitted Liens. (C) Responsibility for Loss or Damage and Insurance. The Borrower and each Subsidiary of the Borrower shall obtain and maintain general corporate insurance with insurers believed by the Borrower and each such Subsidiary to be responsible and reputable and reasonably acceptable to Lender, in such amounts and against such risks as is usually carried by companies engaged in similar business and owning similar Property in the same general areas in which the Borrower and each Subsidiary operates or as may be required by any Applicable Laws, orders or regulations or as may reasonably be requested by Lender. Upon the written request of Lender, the Borrower and each Subsidiary shall promptly, and in all events within ten (10) days of the date on which the Borrower receives such request, provide Lender with evidence of the insurance coverage required under this Section. Additionally, the Borrower and each Subsidiary and Affiliate of the Borrower shall provide not less than thirty (30) days advance written notification to Lender in the event of cancellation or material change in the terms of such coverage. Borrower shall be responsible for and bear the risk of any loss or damage to the Eligible Equipment financed howsoever caused. Borrower shall at its expense insure the Eligible Equipment in any Security Agreement against all risks of physical loss for its full insurable value. All such insurance shall be with such insurance companies and under such policies and in such form as are satisfactory to Lender. Such insurance shall be primary, without right of contribution from any insurance carried by Lender, and shall provide that it may not be canceled or altered so as to affect the interest of Lender without at least thirty (30) days prior written notice to Lender. All such insurance covering loss or damage to Eligible Equipment shall name Lender (or its designee) as sole loss payee. Deductibles on such insurance shall not exceed U.S. $50,000 per occurrence. Borrower shall furnish Lender with satisfactory evidence of such insurance. Borrower shall promptly notify Lender of any loss or damage to the Equipment and of any claim relating thereto. Borrower shall not agree to any settlement relating to the Eligible Equipment with insurers without Lender's prior written consent. Borrower hereby irrevocably appoints Lender as Borrower's attorney-in-fact to endorse all drafts or checks payable to Borrower, and to file claims and to take all other actions necessary to collect any proceeds of such insurance. (D) Preservation of Corporate Existence. The Borrower and each Subsidiary shall preserve and maintain its corporate existence and obtain and keep in force any and all rights, privileges, licenses, permits, patents, franchises, or other governmental authorizations necessary to the ownership of its Properties or to the conduct of its business; provided, however, that the Borrower or any Subsidiary shall not be required to preserve any such rights, privileges, licenses, permits, patents, and franchises or, in the case of any Subsidiary, its corporate existence, if (i) its Board of Directors shall determine that the preservation thereof is no longer desirable or necessary in the conduct of the current business of the Borrower or such Subsidiary and (ii) the loss thereof is not disadvantageous in any material respect to the Lender or any subsequent holder of the Loan and would not have a Material Adverse Effect. (E) Inspection. At any reasonable time and from time to time upon prior notice to the Borrower, the Lender or any agents or representatives thereof (at Borrower's expense) shall be allowed to examine and make and prepare copies of and abstracts from the records and books of account of, and visit and inspect the Property of, the Borrower and each Subsidiary and to discuss the affairs, finances and accounts of the Borrower with the Managing Director, Chief Financial Officer or Chairman of the Borrower, and any other officer of the Borrower who shall be designated by Borrower. 16 17 (F) Maintenance of Property, Etc. The Borrower and each Subsidiary shall maintain and preserve all of its Property necessary in the proper conduct of its current business in good working order and condition, ordinary wear and tear excepted. (G) Maintenance of Records and Books of Account. The Borrower shall keep and cause each Subsidiary to keep accurate records and books of account; financial information shall be recorded and maintained in accordance with GAAP consistently applied. (H) Discharge of Indebtedness. The Borrower and each Subsidiary of the Borrower shall promptly pay and discharge any and all Indebtedness and lawful claims which, if unpaid, might become a Lien or charge upon the Eligible Equipment, except Permitted Liens. (I) Application of Proceeds of the Loan. The Borrower shall use the proceeds only as specified in the Remittance Instructions. (J) Uninsured Loss. Borrower shall give Lender written notice of any uninsured loss suffered by the Borrower or any Subsidiary through fire, theft, judgment, liability or property damage in excess of $100,000. (K) Further Assurances. At Lender's request, Borrower shall promptly execute or cause to be executed and deliver to Lender any and all documents, instruments and agreements prepared at Lender's expense and reasonably deemed necessary by Lender to give effect to or carry out the terms or intent of this Agreement or any of the other Loan Documents. (L) Financial Covenants. Following any funding under the Note, and for so long as any amounts owed by the Borrower to the Lender hereunder or under any of the other Loan Documents shall remain unpaid: (i) Borrower shall maintain a ratio of Indebtedness to Net Worth of not more than 1.8 to 1.0; (ii) Borrower shall maintain a current ratio of not less than 1.0; and (iii) Borrower shall maintain a minimum Net Worth of $45,000,000. 5.2. Negative Covenants. The Borrower covenants that from the date hereof, and for so long as any amounts owed by the Borrower to the Lender hereunder or under any of the other Loan Documents shall remain unpaid, and unless otherwise consented to by Lender in writing, the Borrower shall not: (A) Sale or Disposition of Assets. Sell, transfer, convey, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to any Person. (B) Mergers; Consolidations; Acquisitions. Merge or consolidate, or permit any Subsidiary to merge or consolidate, with any Person, or acquire all or any substantial part of the Properties of any Person. (C) Restrictions on Nature of Business. Engage in any line of business materially different from that presently engaged in by the Borrower. (D) Liens and Encumbrances. Create, incur or suffer to exist, or permit any Subsidiary to create, incur or suffer to exist, any Lien upon any of the Eligible Equipment, except Permitted Liens. (E) Loans. Make any loans or other advances of money (other than for salary, travel advances, ordinary moving expenses, housing loans, advances against commissions and other advances to employees in the ordinary course of 17 18 business or as provided for in the Borrower's collective bargaining agreement with, or conditions of service for, its employees or senior officers as such collective bargaining agreement may be amended or modified, and, in the case of senior officers under the conditions of service, consistent with past practice) to any Person, including, without limitation, any of the Borrower's Affiliates, officers or employees. (F) Affiliate Transactions; Affiliate Indebtedness. Except as provided in Section 5.2(E) or 5.2(I) hereof, enter into, or be a party to any transaction with any Affiliate or stockholder, except in the ordinary course of and pursuant to the reasonable requirements of the Borrower's business and upon fair and reasonable terms which are no less favorable to the Borrower than the Borrower could obtain in a comparable arm's length transaction with a Person not an Affiliate or stockholder of the Borrower. Without limiting the generality of the foregoing, Borrower shall not incur any debt or other obligation to any Affiliated or stockholder that ranks in priority above that of Lender evidenced by the Note. (G) Partnerships or Joint Ventures. Become or agree to become a general or limited partner in any general or limited partnership or a joint venturer in any joint venture; provided, however, that the Borrower shall have the right to become a partner or joint venturer (i) in connection with its mining activities and (ii) in connection with the conducting of exploration, development and/or exploitation activities carried on to locate, assess and/or exploit mineral deposits within the Republic of Ghana, so long as, in each such case, the Borrower obtains insurance coverage relating to such partnership or venture of a type and in amounts as described in Section 5.1(C) of this Agreement. (H) Adverse Transactions. Permit or agree to any material extension, compromise or settlement of any Account, loan or other agreement with a principal amount outstanding of $1,000,000.00 or more. (I) Guaranties. Guarantee, assume, endorse or otherwise, in any way, become directly or contingently liable with respect to the Indebtedness of any Person except (i) by endorsement of instruments or items of payment for deposit or collection, (ii) agreements to repurchase accounts or chattel paper that have been discounted, sold or otherwise assigned in the ordinary course of the Borrower's business or (iii) as otherwise approved by Lender. (J) Subsidiaries. Hereafter acquire or create any Subsidiary or divest itself of any material assets by transferring them to any Subsidiary. (K) Business Locations. Transfer its principal place of business or chief executive office except upon at least sixty (60) days prior written notice to Lender. (L) Location of Eligible Equipment. Transfer or remove the Eligible Equipment from the Republic of Ghana. (M) Name of the Borrower. Use any corporate name (other than its own) or any fictitious name or "d/b/a" except for the names disclosed in Exhibit F. (N) Fiscal Year. Change its fiscal year. (O) Tax Consolidation. File or consent to the filing of any consolidated income tax return with any Person other than one or more parent entities of the Borrower. SECTION 6. CONDITIONS PRECEDENT Notwithstanding any other provision of this Agreement or any of the other Loan Documents, and without affecting in any manner the rights of Lender under 18 19 the other Sections of this Agreement, it is understood and agreed that the Commitment shall not be binding upon Lender and Lender shall not be obligated to make a Loan under Section 2 of this Agreement unless and until each of the following conditions has been and continues to be satisfied, all in form and substance satisfactory to Lender and its counsel: 6.1. Documentation. Lender shall have received the following documents, each to be in form and substance satisfactory to Lender and its counsel: (A) Evidence of Borrower's insurance specified in Section 5.1.C; (B) Copies of all filing receipts, registrations or acknowledgments issued by any governmental authority to evidence satisfactorily to Lender any filing or recordation necessary to perfect the Liens of Lender under the Security Agreement and other Loan Documents, and evidence in a form acceptable to Lender that such Liens constitute valid and perfected security interests and Liens, having a first priority in favor of Lender, or the Lien priority specified in such Security Agreement or other Loan Document; (C) A certified copy of the resolutions of the Board of Directors of the Borrower or other equivalent corporate proceedings evidencing approval of this Agreement, the other Loan Documents and all other matters contemplated hereby or related hereto; (D) Copies of the charter and bylaws or similar corporate documents of the Borrower, certified by an authorized officer of the Borrower as being true and correct copies thereof; (E) A certificate of an authorized officer of the Borrower, which shall certify the names of the officers of the Borrower authorized to execute and deliver this Agreement and the other Loan Documents to be delivered pursuant to this Agreement by the Borrower or any of its officers, together with the true signatures of such officers. The Lender may conclusively rely on such certificate until the Lender shall receive a further certificate of an authorized officer of the Borrower canceling or amending the prior certificate and submitting the signatures of the officers named in such further certificate; (F) A Tax Clearance Certificate with respect to the Borrower issued as of a recent date issued by the appropriate taxing authority of the Republic of Ghana; (G) A closing certificate signed by the President and Chief Financial Officer of Borrower dated as of the Closing Date, stating that (i) the representations and warranties set forth in Section 4 hereof are true and correct in all material respects on and as of such date, (ii) Borrower is on such date in compliance in all material respects with all the terms and provisions set forth in this Agreement and (iii) on such date no Default or Event of Default has occurred or is continuing; (H) The Other Agreements, including but not limited to any Security Agreement, duly executed and delivered by Borrower; (I) The favorable, written opinion of counsel to Borrower, as to the transactions contemplated by this Agreement and any of the other Loan Documents, to be in form and scope satisfactory to Lender and its counsel substantially in the form of Exhibit M; (J) Written instructions from Borrower directing the application of proceeds of the Loan made pursuant to this Agreement; (K) The Note, properly executed on behalf of the Borrower and substantially in the form of Exhibit A hereto; 19 20 (L) Lender shall have received from the Borrower satisfactory evidence that it has received the appropriate governmental exchange control authorization for the transactions contemplated hereby or an opinion of the Borrower's counsel that no such authorization is required; (M) Certified copies and certified English translations of all necessary governmental authorizations and approvals with respect to the Loan Documents; (N) Any of the conditions specified in the Commitment Letter which are not expressly listed herein (so long as such conditions are not specifically inconsistent with the requirements of this Agreement, in which case this Agreement shall prevail); (O) Evidence satisfactory to Lender that this Agreement has been registered in accordance with Ghana law; (P) Evidence satisfactory to Lender that Borrower has paid all stamp duty that is payable prior to the registration of this Agreement with the government of the Republic of Ghana; and (Q) Such other documents, instruments and agreements as Lender shall reasonably request in connection with the foregoing matters. 6.2. Other Conditions. The following conditions have been and shall continue to be satisfied up to and through the Closing and any funding hereunder, to the satisfaction of Lender: (A) No Default or Event of Default shall exist; (B) Lender shall have received all fees set forth in the Commitment Letter from Borrower; (C) Each of the conditions precedent set forth in the other Loan Documents shall have been satisfied; (D) Since the date of the last financial statements referred to in Section 4.4, there shall not have occurred any material adverse change in the business, financial condition or results of operations of Borrower, or the existence or value of any collateral, or any event, condition or state of facts which would reasonably be expected to have a Material Adverse Effect; (E) No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain or prohibit, or to obtain damages from any Person in respect of, the consummation of the transactions contemplated hereby or which, in Lender's sole discretion, would make it inadvisable to consummate the transactions contemplated by this Agreement or any of the other Loan Documents; (F) The representations and warranties of Borrower set forth herein and other Loan Documents are and shall remain true, correct and complete in all material respects. SECTION 7. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT 7.1. Events of Default. An "Event of Default" shall exist if any of the following shall occur and be continuing, whatever the reason for such event or condition and whether it shall be voluntary or involuntary, or within or without the control of the Borrower or any Subsidiary, or be effected by operation of law or pursuant to any order or judgment of a court or otherwise: 20 21 (A) the Borrower shall fail to pay any portion of the principal or interest with respect to the Note or of any amount under the Loan Documents or the Obligations when due; or (B) any representation, warranty or other statement made by or on behalf of the Borrower in this Agreement, or by or on behalf of the Borrower in any other Loan Document shall prove false or misleading in any material respect; or (C) the Borrower shall fail or neglect to perform, keep or observe any covenant contained in this Agreement or other Loan Document (other than a covenant a default the performance or observance of which is dealt with specifically elsewhere in this Section 7.1); or (D) there shall occur any default on the part of Borrower (including specifically, but without limitation, due to nonpayment) under any other Loan Document, agreement, document, or instrument to which Borrower and Lender are parties; or (E) the Borrower shall fail to make any payment due on any Indebtedness or other security with a principal amount of $1,000,000 or more or any event shall occur (other than the mere passage of time) or any condition shall exist in respect of any such Indebtedness or other security of the Borrower, or under any agreement securing or relating to such Indebtedness or other security, the effect of which is (i) to cause (or permit any holder of such Indebtedness or other Security or a trustee to cause) such Indebtedness or other Security, or a portion thereof, to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, or (ii) to permit a trustee or the holder of any security (other than common stock of the Borrower) to elect a majority of the directors on the Board of Directors of the Borrower; or (F) a custodian, receiver, liquidator or trustee of the Borrower, or of any of its Property, shall be appointed by court order and such order shall remain in effect for more than ninety (90) days; or an order for relief in respect of the Borrower shall be entered under any bankruptcy laws, as now or hereafter constituted; or any of its Property shall be sequestered by court order and such order shall remain in effect for more than ninety (90) days; or a petition shall be filed against the Borrower under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, and shall not be dismissed within ninety (90) days after such filing; or (G) the Borrower shall file a petition in voluntary bankruptcy or seeking relief under any provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, or shall consent to the filing of any petition against it under any such law; or (H) the Borrower shall make a general assignment for the benefit of its creditors, or shall admit in writing its inability to pay its debts generally as they become due, or shall consent to the appointment of a custodian, receiver, trustee or liquidator of the Borrower or of all or a substantial part of its Property; or (I) an adverse change with respect to the financial condition of the Borrower which results, in the good faith credit judgement of the Lender, in a material impairment of the prospect of repayment of the Loan or in Borrower's performance under the Loan Documents; or (J) the Borrower or any Subsidiary of the Borrower suffers a final judgment against it which, within sixty (60) days from the date such judgment is entered, shall not have been discharged or execution thereof stayed pending appeal unless (i) such judgment in the reasonable opinion of the Lender is 21 22 adequately covered by insurance; or (ii) adequate accruals with respect to such judgment have been established in accordance with GAAP and the aggregate amount of all such judgments at any time during the term hereof, not adequately covered by insurance is not at any time in excess of $200,000; or (K) a sale, hypothecation or other disposition of twenty percent (20%) or more of the beneficial interest in any class of voting stock of the Borrower without the prior written consent of Lender; or (L) there shall occur a cessation of a substantial part of the business of the Borrower for a period which significantly affects the Borrower's capacity to continue its business on a profitable basis; or the Borrower shall suffer the loss or revocation of any license or permit now held or hereafter acquired by the Borrower which is necessary to the continued lawful operation of its business and such loss or revocation shall have a Material Adverse Effect; or the Borrower shall be enjoined, restrained or in any way prevented by court, governmental or administrative order from conducting all or any material part of its business affairs; or any lease or agreement pursuant to which the Borrower leases, uses or occupies any Property shall be canceled or terminated prior to the expiration of its stated term and such termination shall have a Material Adverse Effect; or any material part of the Collateral shall be taken through condemnation or the value of such Property shall be impaired through condemnation; or (M) the Borrower, or any Affiliate of either, shall challenge or contest in any action, suit or proceeding the validity or enforceability of this Agreement or any of the other Loan Documents, the legality or enforceability of any of the Obligations or the perfection or priority of any Lien granted for the benefit of the Lender, if any; or (N) the Borrower shall be criminally indicted or convicted under any Forfeiture Law that results in or could lead to a forfeiture of any Property of the Borrower that is material to its financial condition or business operations; or (O) the Borrower shall be nationalized or confiscated or any government or any agency thereof exercises management control of the Borrower's day-to-day business operations and affairs; or (P) the current government of the Republic of Ghana shall be changed by reason of war (whether or not declared), revolution, riots, insurrections, acts of terrorism, acts of the public enemy, and/or any other event which may adversely affect the Borrower's performance under this Agreement as determined by the Lender in its absolute and sole discretion. 7.2. Acceleration of the Obligations. Without in any way limiting the right of Lender to demand payment of any portion of the Obligations payable on demand in accordance with this Agreement or any of the other Loan Documents, upon or at any time after the occurrence of an Event of Default, and during the continuance thereof, all or any portion of the Obligations due or to become due from Borrower to Lender, whether under this Agreement or any of the other Loan Documents or otherwise, shall, at the option of Lender and without notice to or demand upon Borrower, become at once due and payable and Borrower shall forthwith pay to Lender, in addition to any and all sums and charges due, the entire principal of and accrued and unpaid interest on the Obligations. 7.3. Remedies. Upon or at any time after the occurrence of an Event of Default and during the continuance thereof, Lender may exercise from time to time all of the rights and remedies under Applicable Law, and all other legal and equitable rights to which Lender may be entitled, all of which rights and remedies shall be cumulative, and none of which shall be exclusive, and shall be in addition to any other rights or remedies contained in this Agreement, the Security Agreements, or any of the other Loan Documents. 22 23 7.4. Remedies Cumulative; No Waiver. All covenants, conditions, provisions, warranties, guaranties, indemnities, and other undertakings of Borrower contained in this Agreement and the other Loan Documents, or in any document referred to herein or contained in any agreement supplementary hereto or in any schedule or contained in any other agreement between Lender and Borrower, heretofore, concurrently, or hereafter entered into, shall be deemed cumulative to and not in derogation or substitution of any of the terms, covenants, conditions, or agreements of Borrower herein contained. The failure or delay of Lender to exercise or enforce any rights, Liens, powers, or remedies hereunder or under any of the other Loan Documents shall not operate as a waiver of any of such Liens, rights, powers or remedies, but all such Liens, rights, powers, and remedies shall continue in full force and effect until the Loan and all other Obligations owing or to become owing from Borrower to Lender shall have been indefeasibly paid in full, and all Liens, rights, powers, and remedies provided herein and the other Loan Documents are cumulative and none are exclusive. SECTION 8. BENEFIT OF AGREEMENT 8.1. Successors and Assigns. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns, except that Borrower shall not have the right to assign its rights or obligations under this Agreement or any of the other Loan Documents. Lender shall give written notice to the Borrower within fifteen (15) Business Days of such assignment, provided however, such notice shall be given on a "best efforts" basis and Lender shall not be liable to Borrower for the failure to give such notice, and any such failure shall not affect the validity or effectiveness of such assignment. SECTION 9. GENERAL 9.1. Amendments. The terms of this Agreement may not be amended, waived, modified or terminated except by written instrument signed by the parties hereto. No such amendment or waiver shall extend to or affect any obligation not expressly amended or waived or impair any right consequent thereon. In the event an amendment to any of the Loan Documents or documents for any other of the Obligations is required, in Lender's sole discretion, due to any request, action, or inaction of Borrower, including but not limited to any voluntary or mandatory prepayment of the Obligations, Borrower shall reimburse Lender for all costs and expenses associated with such amendment, including but not limited to the reasonable fees and out-of-pocket expenses of outside counsel for the Lender, the reasonable time of Lender's in house counsel departmental activity billed at Lender's outside counsel rate, and the reasonable travel costs of Lender's in-house counsel with respect thereto. In addition, for any amendment, the Borrower shall pay an administrative fee in an amount the greater of (i) one half percent (.5%) of the financial value of the increase or decrease in principal value of the Obligations associated with the amendment, or (ii) Five Thousand Dollars ($5,000.00). 9.2. Notices. (A) All communications under this Agreement shall be in writing and shall be mailed by first class mail, postage prepaid, or delivered by hand or transmitted by a telecommunications device capable of transmitting or creating a written record (but in all cases of telecommunication notices such notice must be immediately followed by mailing): (i) if to the Lender, at its address at 3322 West End Avenue, Nashville, Tennessee, 37203-09990, Attention: Global Accounts Operations Manager, Telephone No. (615) 386-5943 or Facsimile (615) 386-5950 or at such other address as it may have furnished in writing to the Borrower; or (ii) if to the Borrower, at its address at P. O. Box 6, Tarkwa, Republic of Ghana, West Africa Attention: Mr. Lucien Girard, (233) 362 357 or 23 24 Facsimile (233) 362 273 or at such other address as it may have furnished in writing to the Lender, with copies to (which copies shall not be required to effect notice): The Pioneer Group, Inc. 60 State Street Boston, Massachusetts 02109 Attention: Donald H. Hunter Telephone: (617) 422-4970 Telecopy: (617) 422-4296 and Hale and Dorr 1455 Pennsylvania Avenue, N.W. Washington, D.C. 20004 Telephone: (202) 942-8454 Telecopy: (202) 942-8484 (B) Any notice so addressed and mailed by first class mail shall be deemed to be given when received or if mailed by registered or certified mail, fifteen Business days after being so mailed, and any notice delivered by hand or transmitted by telecommunications device shall be deemed to be given when received by the Borrower or the Lender, as the case may be. 9.3. Costs, Expenses and Indemnification. The Borrower agrees to pay all costs and expenses in connection with the preparation, execution, delivery and enforcement of this Agreement and any other documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Lender and the travel costs of Lender's in-house counsel (excluding any internal allocated charges of the Lender's in-house counsel) with respect thereto and with respect to advising the Lender as to its respective rights and responsibilities under this Agreement and the other Loan Documents. The Borrower also agrees to pay on demand all losses, costs and expenses, if any (including reasonable counsel fees and expenses except for any internal allocated charge of Lender's in-house counsel), incurred in connection with the preservation of, or the enforcement of, or legal advice in respect of, the rights or responsibilities of the Lender under this Agreement or the Loan Documents, including, without limitation, losses, costs and Collection Expenses sustained by the Lender as a result of any failure by the Borrower to perform or observe its obligations contained herein or in any other Loan Document. The Borrower further agrees to indemnify and hold harmless the Lender from and against any and all (i) Taxes or assessments, governmental charges or levies, duties, fees, deductions or withholding, restrictions or conditions of any nature or other amounts imposed by, or behalf of, any government or any taxing authority thereof or therein, including the Republic of Ghana or any subdivision thereof (excluding taxes imposed on net income and all income and franchise taxes of the United States and any political subdivisions thereof on Lender), (ii) stamp, duty or documentary taxes or charges imposed by any government or any taxing authority thereof or therein, including the Republic of Ghana and its subdivisions and (iii) damages, losses, liabilities, costs and expenses resulting from, related to or connected with this Agreement, the Loan or the other Loan Documents or the transactions contemplated hereby, except to the extent resulting from the gross negligence or willful misconduct of the Lender. 9.4. Reproduction of Documents; Confidentiality. This Agreement and all other Loan Documents, including, without limitation, (i) consents, waivers and modifications which may hereafter be executed, (ii) documents delivered at the closing of the Loan, and (iii) financial statements, certificates and other information previously or hereafter furnished, may be reproduced by the Lender by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process and the Lender may destroy any original document so reproduced. The Borrower agrees and stipulates that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in 24 25 existence and whether or not such reproduction was made in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. The Lender shall treat the information contained in the records, documents and other materials received from the Borrower that are both marked "Confidential" and are not otherwise available from another source as confidential information. The Lender shall not disclose such confidential information to any other person except: (a) with the consent of the Borrower (which consent shall not to be unreasonably withheld); (b) if required by law or required by any stock exchange; (c) in connection with legal proceedings (including any alternative dispute resolution proceedings) relating to this Agreement; (d) to an Affiliate, accountant, agent or advisor of the Lender, provided such person or entity undertakes to observe this Section 9.4; (e) to a potential assignee, participant or sub-participant of the Lender's interests under this Agreement and the other Loan Documents provided such person or entity undertakes to observe this Section 9.4 except to the extent limited by Freedom of Information Act as it pertains to U.S. Government and agencies thereof; or (f) to an insurance carrier covering political risk or other risks of the Lender associated with this Agreement. 9.5. Survival. All warranties, representations, agreements and covenants made by the Borrower herein or in any other Loan Document shall be considered to have been relied upon by the Lender and shall survive the making of the Loan regardless of any investigation made by or on behalf of the Lender. 9.6. Submission to Jurisdiction and Service of Process. The Borrower irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement, the Notes or any Loan Document may be instituted in the United Sates of America in any Federal or State court sitting in the State of Tennessee, and the Borrower, in respect of itself and its Properties and revenues, irrevocably submits to the jurisdiction of these courts in any such action or proceeding. The Borrower irrevocably consents to such service upon it by the mailing of copies thereof by U.S. air mail or courier to the Borrower at its address set forth in Section 9.2(A) of this Agreement. The foregoing provisions shall not limit the right of the Lender to bring any such action or proceeding or to obtain execution on any judgment rendered in any such action or proceeding in any other appropriate jurisdiction or in any other manner. The Borrower agrees that final judgement against it in any legal action or proceeding arising out of or relating to this Agreement or the Notes or other Loan Documents shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgement, a certified or exemplified copy of which judgment shall be conclusive evidence thereof and of the amount of its indebtedness, or by such other means provided by law. 9.7. Judgment. If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder or under the Note in Dollars into another currency, the parties hereto agree, to the fullest extent that they effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures Lender could purchase Dollars with such other currency at Nashville, Tennessee on the Business Day preceding that on which final judgment is given. The obligation of the Borrower in respect of any sum due from it to Lender hereunder or under the Note shall, notwithstanding any judgment in a currency other than Dollars, be discharged only to the extent that on the Business Day following receipt by Lender of any sum adjudged to be so due in such other currency Lender may in accordance with normal banking procedures purchase Dollars with such other currency; if the Dollars so purchased are less than the sum originally due to Lender in Dollars, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify Lender against such loss, and if the Dollars so purchased exceed the sum originally due Lender in Dollars, Lender agrees to remit to the Borrower such excess. 25 26 9.8. Waiver of Sovereign Immunity. The Borrower acknowledges and agrees that the activities contemplated by the provisions of this Agreement, the Notes and the other Loan Documents are commercial in nature rather than governmental or public, and therefore acknowledges and agrees that it is not entitled to any right of immunity on the grounds of sovereignty or otherwise with respect to such activities or in any legal action or proceeding arising out of or relating to this Agreement, the Notes or the other Loan Documents, in respect of itself and its properties and revenues, expressly and irrevocably waives any such right of immunity which may now or hereafter exist (including any immunity from any legal process, from the jurisdiction of any court or from any execution or attachment in aid of execution prior to judgment or otherwise) or claim thereto which may now or hereafter exist, and agrees not to assert any such right or claim in any such action or proceeding, whether in the United States, or otherwise. 9.9. Governing Law. THE PARTIES HERETO HAVE EXPRESSLY AGREED THAT THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TENNESSEE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF, PROVIDED, HOWEVER, THAT FOR ANY LEGAL ACTION OR PROCEEDING BROUGHT WITH RESPECT TO THE LOAN AGREEMENT, THE NOTE OR ANY LOAN DOCUMENT IN THE COURTS OF THE REPUBLIC OF GHANA OR ANY POLITICAL SUBDIVISION THEREOF, THE LOAN AGREEMENT, THE NOTE OR ANY LOAN DOCUMENT SHALL BE DEEMED TO BE MADE UNDER THE LAWS OF THE REPUBLIC OF GHANA AND FOR SUCH PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE REPUBLIC OF GHANA. 9.10. Right of Setoff. As collateral security for the repayment of the Borrower's obligations and liabilities under this Agreement, the Borrower hereby grants the Lender and the Lender's successors and assigns (including any affiliate or subsidiary of Lender (including Caterpillar or any other Caterpillar Seller)) the right to apply, at any time and from time to time should an Event of Default exist hereunder, any and all obligations owing from the Lender (or its assignees) to the Borrower toward repayment of any sums owing from the Borrower to the Lender hereunder. 9.11. Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. 9.12. Duplicate Originals. Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. 9.13. Consequential Damages. Notwithstanding any other provision of this agreement, Borrower hereby fully waives any claim or right now or hereafter existing against Lender for any incidental, special, or consequential damages whether based on contract, warranty, tort (including negligence and strict liability), or otherwise. 9.14. Use of English Language. All documents or notices to be delivered pursuant to or in connection with this Agreement shall be in the English language. English shall be the official language for construction and interpretation of this Agreement, the Notes, and all Loan Documents and notices, unless specifically designated otherwise in any such Loan Document. If the original of any such document or notice is not in the English language, an English translation thereof shall be delivered. 9.15. Jury Trial Waiver. THE BORROWER AND THE LENDER EACH WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE NOTES, ANY OF THE LOAN DOCUMENTS, OR THE OBLIGATIONS. THE BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVER IS A MATERIAL INDUCEMENT TO LENDER ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVER IN ITS FUTURE DEALINGS WITH THE BORROWER. THE BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVER WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH SUCH LEGAL COUNSEL. 26 27 IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the day and year first above written. BORROWER: TEBEREBIE GOLDFIELDS LIMITED By: /s/ Lucien Girard ------------------------------- Title: Managing Director ---------------------------- LENDER: Total Commitment: CATERPILLAR FINANCIAL $5,697,713.20 SERVICES CORPORATION By: /s/ ------------------------------- Title: ---------------------------- Corporate Operations Manager [Exhibits Omitted] 27 EX-11 7 COMPUTATION OF EARNINGS PER SHARE 1 Exhibit 11 THE PIONEER GROUP, INC. COMPUTATION OF EARNINGS PER SHARE (UNAUDITED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
COMPUTATION FOR CONSOLIDATED STATEMENT OF INCOME THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ------------------- --------------------------- ------------------------- 1996 1995 1996 1995 ---- ---- ---- ---- NET INCOME (1) $ 3,520 $ 7,329 $ 8,634 $ 13,126 ========== ========== ========== ========== SHARES Weighted average number of common shares outstanding (2) 24,944,000 24,805,000 24,934,000 24,798,000 Dilutive effect of stock options and restricted stock proceeds as common stock equivalents computed under the treasury stock method using the average price during the period (2) 514,000 505,000 524,000 462,000 ---------- ---------- ---------- ---------- WEIGHTED AVERAGE NUMBER OF SHARES outstanding as adjusted (1) (2) 25,458,000 25,310,000 25,458,000 25,260,000 ========== ========== ========== ========== EARNINGS PER SHARE (1) (2) $ 0.14 $ 0.29 $ 0.34 $ 0.52 ========== ========== ========== ========== - ---------- (1) These amounts agree with the related amounts in the Consolidated Statement of Income. (2) Adjusted for December 1, 1994, 2-for-1 stock split effected in the form of a 100% stock dividend.
EX-27 8 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 1.00000 31,884 4,821 49,329 0 20,730 118,933 187,649 (60,230) 408,802 74,986 101,937 2,496 0 0 153,385 408,802 0 113,740 0 96,378 1,762 0 1,158 14,442 5,808 0 0 0 0 8,634 0.340 0.340
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