Highland Credit Strategies Fund Floating Rate Series A Senior Unsecured Notes due April 16, 2015 Note Purchase Agreement Dated April 16, 2010
EXHIBIT (k) (9)
Execution Copy
$120,000,000
Floating Rate Series A Senior Unsecured Notes due April 16, 2015
Dated April 16, 2010
Table of Contents
Section
Heading |
Page | |||
Section 1. Authorization of Notes |
1 | |||
Section 2. Sale and Purchase of Notes |
2 | |||
Section 3. Closing |
2 | |||
Section 4. Conditions to Closing |
2 | |||
Section 4.1. Representations and Warranties |
3 | |||
Section 4.2. Performance; No Default |
3 | |||
Section 4.3. Compliance Certificates |
3 | |||
Section 4.4. Opinions of Counsel |
3 | |||
Section 4.5. Purchase Permitted By Applicable Law, Etc. |
3 | |||
Section 4.6. Sale of Other Notes |
4 | |||
Section 4.7. Payment of Special Counsel Fees |
4 | |||
Section 4.8. Private Placement Number |
4 | |||
Section 4.9. Changes in Trust Structure |
4 | |||
Section 4.10. Funding Instructions |
4 | |||
Section 4.11. Ratings of Notes |
4 | |||
Section 4.12. Notice of Floating Interest Rate |
4 | |||
Section 4.12. Proceedings and Documents |
4 | |||
Section 5. Representations and Warranties of The Company |
4 | |||
Section 5.1. Organization; Power and Authority |
5 | |||
Section 5.2. Authorization, Etc. |
5 | |||
Section 5.3. Disclosure |
5 | |||
Section 5.4. No Subsidiaries |
5 | |||
Section 5.5. Financial Statements; Material Liabilities |
5 | |||
Section 5.6. Compliance with Laws, Other Instruments, Etc. |
6 | |||
Section 5.7. Governmental Authorizations, Etc. |
6 | |||
Section 5.8. Litigation; Observance of Statutes and Orders |
6 | |||
Section 5.9. Taxes |
6 | |||
Section 5.10. Title to Property; Leases |
6 | |||
Section 5.11. Licenses, Permits, Etc. |
7 | |||
Section 5.12. Compliance with ERISA |
7 | |||
Section 5.13. Private Offering by the Company |
7 | |||
Section 5.14. Use of Proceeds; Margin Regulations |
7 | |||
Section 5.15. Existing Indebtedness |
7 | |||
Section 5.16. Foreign Assets Control Regulations, Etc. |
8 | |||
Section 5.17. Status under Certain Statutes |
8 |
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Section
Heading |
Page | |||
Section 5.18. Ranking of Obligations |
8 | |||
Section 6. Representations of The Purchasers |
8 | |||
Section 7. Information as to Company |
9 | |||
Section 7.1. Financial and Business Information |
9 | |||
Section 7.2. Officer’s Certificate |
12 | |||
Section 7.3. Visitation |
12 | |||
Section 8. Payment and Prepayment of The Notes |
13 | |||
Section 8.1. Maturity |
13 | |||
Section 8.2. Optional Prepayments with Floating Rate Prepayment Amount |
13 | |||
Section 8.3 Allocation of Partial Prepayments |
13 | |||
Section 8.4. Maturity; Surrender, Status, Etc. |
13 | |||
Section 8.5. Purchase of Notes |
13 | |||
Section 8.6. Floating Rate Prepayment Amount |
14 | |||
Section 9.
Affirmative Covenants |
14 | |||
Section 9.1. Compliance with Law |
14 | |||
Section 9.2. Insurance |
14 | |||
Section 9.3. Maintenance of Properties |
15 | |||
Section 9.4. Payment of Taxes |
15 | |||
Section 9.5. Trust Existence, Etc. |
15 | |||
Section 9.6 Books and Records |
15 | |||
Section 9.7. Asset Coverage |
15 | |||
Section 9.8. Current Rating on the Notes |
15 | |||
Section 9.9. Most Favored Lender Status |
16 | |||
Section 9.10. Ranking of Obligations |
16 | |||
Section 9.11. Maintenance of Status |
16 | |||
Section 10. Negative Covenants |
16 | |||
Section 10.1. Transactions with Affiliates |
16 | |||
Section 10.2. Merger, Consolidation, Etc. |
16 | |||
Section 10.3. Terrorism Sanctions Regulations |
17 | |||
Section 10.4. Certain Other Restrictions |
17 | |||
Section 10.5. No Subsidiaries |
17 | |||
Section 10.6. Secured Debt |
18 | |||
Section 10.7. Company Not Subject to ERISA |
18 | |||
Section 11. Events of Default |
18 | |||
Section 12. Remedies on Default, Etc. |
20 | |||
Section 12.1. Acceleration |
20 |
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Section
Heading |
Page | |||
Section 12.2. Other Remedies |
20 | |||
Section 12.3. Rescission |
21 | |||
Section 12.4. No Waivers or Election of Remedies, Expenses, Etc. |
21 | |||
Section 13. Registration; Exchange; Substitution of Notes |
21 | |||
Section 13.1. Registration of Notes |
21 | |||
Section 13.2. Transfer and Exchange of Notes |
21 | |||
Section 13.3. Replacement of Notes |
22 | |||
Section 14. Payments on Notes |
23 | |||
Section 14.1. Place of Payment |
23 | |||
Section 14.2. Home Office Payment |
23 | |||
Section 15. Expenses, Etc. |
23 | |||
Section 15.1. Transaction Expenses |
23 | |||
Section 15.2. Survival |
24 | |||
Section 16. Survival of Representations and Warranties; Entire
Agreement |
24 | |||
Section 17. Amendment and Waiver |
24 | |||
Section 17.1. Requirements |
24 | |||
Section 17.2. Solicitation of Holders of Notes |
24 | |||
Section 17.3. Binding Effect, Etc. |
25 | |||
Section 17.4. Notes Held by Company, Etc. |
25 | |||
Section 18. Notices |
25 | |||
Section 19. Reproduction of Documents |
26 | |||
Section 20.
Confidential information |
26 | |||
Section 21. Substitution of Purchaser |
27 | |||
Section 22. Miscellaneous |
28 | |||
Section 22.1. Successors and Assigns |
28 | |||
Section 22.2. Payments Due on Non-Business Days |
28 | |||
Section 22.3. Accounting Terms |
28 | |||
Section 22.4. Severability |
28 | |||
Section 22.5. Construction, Etc. |
28 | |||
Section 22.6. Counterparts |
29 | |||
Section 22.7. Governing Law |
29 |
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Section
Heading |
Page | |||
Section 22.8. Jurisdiction and Process; Waiver of Jury Trial |
29 |
Schedule A
|
— | Information Relating to Purchasers | ||
Schedule B
|
— | Defined Terms | ||
Schedule 5.3
|
— | Disclosure Materials | ||
Schedule 5.5
|
— | Financial Statements | ||
Schedule 5.15
|
— | Existing Indebtedness | ||
Exhibit 1-A
|
— | Form of Floating Rate Series A Senior Unsecured Note due April 16, 2015 | ||
Exhibit 4.4(a)
|
— | Form of Opinion of Special Counsel to the Company | ||
Exhibit 4.4(b)
|
— | Form of Opinion of Special Counsel to the Purchasers |
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Floating Rate Series A Senior Unsecured Notes due April 16, 2015
April 16, 2010
To
Each of The Purchasers Listed in
Schedule A Hereto:
Ladies and Gentlemen:
Highland Credit Strategies Fund, a Delaware statutory trust (the “Company”), agrees with each of
the purchasers whose names appear at the end hereof (each, a “Purchaser” and, collectively, the
“Purchasers”) as follows:
The Company will authorize the issue and sale of $120,000,000 aggregate principal amount of
Floating Rate Series A Senior Unsecured Notes due April 16, 2015 (the “Notes,” such term to include
any such notes issued in substitution therefor pursuant to Section 13).
The Notes shall be substantially in the form set out in Exhibit 1-A. Certain capitalized and other
terms used in this Agreement are defined in Schedule B; and references to a “Schedule” or an
“Exhibit” are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement.
The Notes shall bear interest from the date of issue at a floating rate equal to the Adjusted LIBOR
Rate from time to time, payable quarterly on the 16th day of each January, April, July and October
in each year (commencing July 16, 2010) and at maturity (each such date being referred to as an
“Floating Rate Interest Payment Date”) and to bear interest on overdue principal (including any
overdue required or optional prepayment of principal), LIBOR Breakage Amount, if any, and Floating
Rate Prepayment Amount, if any, and (to the extent legally enforceable) on any overdue installment
of interest at the Default Rate until paid. Interest shall be subject to adjustment in accordance
with Section 9.8(b).
Interest on the Notes shall be computed for the actual number of days elapsed on the basis of a
year consisting of 360 days.
The Adjusted LIBOR Rate for the Notes shall be determined by or on behalf of the Company, and
notice thereof shall be given by or on behalf of the Company to the holders of such Notes, together
with such information as the Required Holders may reasonably request for verification (including in
all events, a facsimile transmission of the relevant screen and
calculations), on the second Business Day preceding each Floating Rate Interest Period (which, in
the case of the first Floating Rate Interest Period, shall be the third Business Day prior to the
Closing). In the event that the Required Holders do not concur with such determination by the
Company, as evidenced by notice to the Company by such holders within five (5) Business Days after
receipt by such holders of the notice delivered by or on behalf of the Company pursuant to the
previous sentence, the determination of Adjusted LIBOR Rate shall be made by the such holders in
accordance with the provisions of this Agreement, which determination shall be conclusive and
binding absent manifest error.
Subject to the terms and conditions of this Agreement, the Company will issue and sell to each
Purchaser and each Purchaser will purchase from the Company, at the Closing provided for in Section
3, Notes in the principal amount specified opposite such Purchaser’s name in Schedule A at the
purchase price of 100% of the principal amount thereof. The Purchasers’ obligations hereunder are
several and not joint obligations and no Purchaser shall have any liability to any Person for the
performance or non-performance of any obligation by any other Purchaser hereunder.
The sale and purchase of the Notes to be purchased by each Purchaser shall occur at the offices of
Xxxxxxx and Xxxxxx LLP, 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000-0000, at 10:00 a.m.,
Chicago time, at a closing (the “Closing”) on April 16, 2010 or on such other Business Day
thereafter on or prior to April 19, 2010 as may be agreed upon by the Company and the Purchasers.
At the Closing the Company will deliver or cause to be delivered to each Purchaser the Notes to be
purchased by such Purchaser in the form of a single Note (or such greater number of Notes in
denominations of at least $500,000 as such Purchaser may request) dated the date of the Closing and
registered in such Purchaser’s name (or in the name of its nominee), against delivery by such
Purchaser to the Company of immediately available funds in the amount of the purchase price
therefor by wire transfer of immediately available funds for the account of the Company to account
number xxxxxxx160; FFC: A/C xxxxxxxxx888 at PNC Bank, N.A., 0000 Xxxxxxx Xxxxxxxxx, Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000, XXX 000000000. If at the Closing the Company shall fail to tender such Notes to
any Purchaser as provided above in this Section 3, or any of the conditions specified in Section 4
shall not have been fulfilled to such Purchaser’s satisfaction, such Purchaser shall, at its
election, be relieved of all further obligations under this Agreement, without thereby waiving any
rights such Purchaser may have by reason of such failure or such nonfulfillment.
Each Purchaser’s obligation to purchase and pay for the Notes to be sold to such Purchaser at the
Closing is subject to the fulfillment to such Purchaser’s satisfaction, prior to or at the Closing,
of the following conditions:
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Section 4.1. Representations and Warranties. The representations and warranties of the Company in
this Agreement shall be correct when made and at the time of the Closing.
Section 4.2. Performance; No Default. The Company shall have performed and complied with all
agreements and conditions contained in this Agreement required to be performed or complied with by
it prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the
application of the proceeds thereof as contemplated by Section 5.14) no Default or Event of Default
shall have occurred and be continuing.
(a) Officer’s Certificate. The Company shall have delivered to such Purchaser an Officer’s
Certificate, dated the date of the Closing, certifying that the conditions specified in Sections
4.1, 4.2 and 4.9 have been fulfilled.
(b) Secretary’s Certificate. The Company shall have delivered to such Purchaser a certificate of
its Secretary or Assistant Secretary, dated the date of Closing, certifying as to the resolutions
attached thereto and other trust proceedings relating to the authorization, execution and delivery
of the Notes and this Agreement.
Section 4.4. Opinions of Counsel. Such Purchaser shall have received opinions in form and
substance satisfactory to such Purchaser, dated the date of the Closing (a) from Ropes & Gray LLP,
New York and Delaware, counsel for the Company, covering the matters set forth in Exhibit 4.4(a)
and covering such other matters incident to the transactions contemplated hereby as such Purchaser
or its counsel may reasonably request (and the Company hereby instructs its counsel to deliver such
opinion to the Purchasers) and (b) from Xxxxxxx and Xxxxxx LLP, the Purchasers’ special counsel in
connection with such transactions, substantially in the form set forth in Exhibit 4.4(b) and
covering such other matters incident to such transactions as such Purchaser may reasonably request.
Section 4.5. Purchase Permitted By Applicable Law, Etc. On the date of the Closing such
Purchaser’s purchase of Notes shall (a) be permitted by the laws and regulations of each
jurisdiction to which such Purchaser is subject, without recourse to provisions (such as section
1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (b) not violate any
applicable law or regulation (including, without limitation, Regulation T, U or X of the Board of
Governors of the Federal Reserve System) assuming the required preparation, execution, delivery and
filing of the applicable Federal Reserve Board forms (such as Forms
U-1 and G-l through 4) and (c)
not subject such Purchaser to any tax, penalty or liability under or pursuant to any applicable law
or regulation, which law or regulation was not in effect on the date hereof. If requested by such
Purchaser, such Purchaser shall have received an Officer’s Certificate certifying as to such
matters of fact as such Purchaser may reasonably specify to enable such Purchaser to determine
whether such purchase is so permitted.
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Section 4.6. Sale of Other Notes. Contemporaneously with the Closing, the Company shall sell
to each other Purchaser and each other Purchaser shall purchase the Notes to be purchased by it at
the Closing as specified in Schedule A.
Section 4.7. Payment of Special Counsel Fees. Without limiting the provisions of Section 15.1,
the Company shall have paid on or before the Closing the reasonable fees, charges and disbursements
of the Purchasers’ special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day prior to the Closing.
Section 4.8. Private Placement Number. A private placement number issued by Standard & Poor’s
CUSIP Service Bureau (in cooperation with the SVO) shall have been obtained for the Notes.
Section 4.9. Changes in Trust Structure. The Company shall not have changed its jurisdiction
of formation, or been a party to any merger or consolidation or succeeded to all or any substantial
part of the liabilities of any other entity, at any time following the date of the most recent
financial statements referred to in Schedule 5.5.
Section 4.10. Funding Instructions. At least three Business Days prior to the date of the
Closing, each Purchaser shall have received written instructions signed by a Responsible Officer on
letterhead of the Company confirming the information specified in Section 3 including (i) the name
and address of the transferee bank, (ii) such transferee bank’s ABA number and (iii) the account
name and number into which the purchase price for the Notes is to be deposited.
Section 4.11. Ratings of Notes. The Notes shall have been given a rating of not less than AAA
by Fitch prior to the date of issuance thereof.
The Company represents and warrants to each Purchaser that:
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Section 5.1. Organization; Power and Authority. The Company is a statutory trust duly
organized, validly existing and in good standing under the laws of its jurisdiction of formation,
and is duly qualified as a foreign statutory trust and is in good standing in each jurisdiction in
which such qualification is required by law, other than those jurisdictions as to which the failure
to be so qualified or in good standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company has the trust power and authority to own or
hold under lease the properties it purports to own or hold under lease, to transact the business it
transacts and proposes to transact, to execute and deliver this Agreement and the Notes and to
perform the provisions hereof and thereof. The Company is and will continue to be registered as a
non-diversified, closed-end management investment company as such term is used in the 1940 Act.
Section 5.2. Authorization, Etc. This Agreement and the Notes have been duly authorized by all
necessary trust action on the part of the Company, and this Agreement constitutes, and upon
execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in a proceeding in
equity or at law).
Section 5.3. Disclosure. The Company has delivered to each Purchaser a copy of various
disclosure materials relating to the transactions contemplated hereby. This Agreement, and the
documents, certificates or other writings delivered to the Purchasers by or on behalf of the
Company in connection with the transactions contemplated hereby and identified in Schedule 5.3, and
the financial statements listed in Schedule 5.5 delivered to each Purchaser on or prior to March
11,2010 shall be referred to, collectively, as the “Disclosure Documents” and, taken as a whole, do
not contain any untrue statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under which they were
made. Except as disclosed in the Disclosure Documents, since December 31, 2009, there has been no
change in the financial condition, operations, business or properties of the Company except changes
that individually or in the aggregate would not reasonably be expected to have a Material Adverse
Effect.
Section 5.4. No Subsidiaries. The Company has no Subsidiaries as of the date of Closing.
Section 5.5. Financial Statements; Material Liabilities. The Company has delivered to each
Purchaser copies of the financial statements of the Company listed on Schedule 5.5
All of said financial statements (including in each case the related schedules and notes) fairly
present in all material respects the financial position of the Company as of the respective dates
specified in such Schedule and the results of its operations and cash flows for the respective
periods so specified and have been prepared in accordance with GAAP consistently applied throughout
the periods involved except as set forth in the notes thereto (subject, in the case of any interim
financial statements, to normal year-end adjustments). The Company does not have any Material
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liabilities that are not disclosed on such financial statements or otherwise disclosed in the
Disclosure Documents.
Section 5.6. Compliance with Laws, Other Instruments, Etc. The execution, delivery and
performance by the Company of this Agreement and the Notes will not (i) contravene, result in any
breach of, or constitute a default under, or result in the creation of any Lien in respect of any
property of the Company under, any indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, trust charter or by-laws, or any other Material agreement or instrument to which
the Company is bound or by which the Company or any of its properties may be bound or affected,
(ii) conflict with or result in a breach of any of the terms, conditions or provisions of any
order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to
the Company or (iii) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company, including, without limitation, the Securities Act
and the 1940 Act.
Section 5.7. Governmental Authorizations, Etc. No consent, approval or authorization of, or
registration, filing or declaration with, any Governmental Authority is required in connection with
the execution, delivery or performance by the Company of this Agreement or the Notes.
Section 5.8. Litigation; Observance of Statutes and Orders. (a) There are no actions, suits,
investigations or proceedings pending or, to the knowledge of the Company, threatened against or
affecting the Company or any property of the Company in any court or before any arbitrator of any
kind or before or by any Governmental Authority that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
(b) The Company is not in default under any order, judgment, decree or ruling of any court,
arbitrator or Governmental Authority and is not in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws or the USA Patriot Act) of any
Governmental Authority, which default or violation, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
Section 5.9. Taxes. The Company has filed all income tax returns that are required to have
been filed in any jurisdiction, and has paid all taxes shown to be due and payable on such returns
and all other taxes and assessments payable by them, to the extent such taxes and assessments have
become due and payable and before they have become delinquent, except for any taxes and assessments
(i) the amount of which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company, as the case may be, has established adequate
reserves in accordance with GAAP. The Federal income tax liabilities of the Company has been
finally determined (whether by reason of completed audits or the statute of limitations having run)
for all fiscal years up to and including the fiscal year ended
December 31, 2008.
Section 5.10. Title to Property; Leases. The Company has good and sufficient title to its
Material properties, including all such properties reflected in the most recent audited balance
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sheet referred to in Section 5.5 or purported to have been acquired by the Company after said date
(except as sold or otherwise disposed of in the ordinary course of business), in each case free and
clear of Liens prohibited by this Agreement, except for those defects in title and Liens that,
individually or in the aggregate, would not have a Material Adverse Effect. All Material leases are
valid and subsisting and are in full force and effect in all material respects.
Section 5.11. Licenses, Permits, Etc. The Company owns or possesses all licenses, permits,
franchises, authorizations, patents, copyrights, proprietary software, service marks, trademarks
and trade names, or rights thereto, that are Material, without known conflict with the rights of
others, except for those conflicts that, individually or in the aggregate, would not have a
Material Adverse Effect.
Section 5.12. Compliance with ERISA. Neither the Company nor any ERISA Affiliate maintains,
contributes to or is obligated to maintain or contribute to, or has, at any time in the past six
years, maintained, contributed to or been obligated to maintain or contribute to, any employee
benefit plan which is subject to Title I or Title IV of ERISA or Section 4975 of the Code. Neither
the Company nor any ERISA Affiliate is, or has ever been at any time within the past six years, a
“party in interest” (as defined in section 3(14) of ERISA) or a “disqualified person” (as defined
in Section 4975 of the Code) with respect to any such plan.
Section 5.13. Private Offering by the Company. Neither the Company nor anyone acting on its
behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof with, any person
other than the Purchasers, which investors have been offered the Notes or similar securities at a
private sale for investment. Neither the Company nor anyone acting on its behalf has taken, or will
take, any action that would subject the issuance or sale of the Notes to the registration
requirements of Section 5 of the Securities Act or to the registration requirements of any
securities or blue sky laws of any applicable jurisdiction.
Section 5.14. Use of Proceeds; Margin Regulations. The Company will apply the proceeds of the
sale of the Notes as permitted under the 1940 Act including for the refinancing of existing
Indebtedness and for general corporate purposes. Assuming the required preparation, execution,
delivery and filing of the applicable Federal Reserve Board forms by the Purchasers (such as Forms
U-1 and G-1 through 4, as applicable), each Purchaser’s purchase of the Notes specified under this
Agreement will not cause a violation of Regulation U of the Board of Governors of the Federal
Reserve System (12 CFR 221), Regulation X of said Board (12 CFR 224) or Regulation T of said Board
(12 CFR 220).
Section 5.15. Existing Indebtedness. (a) Except as described therein, Schedule 5.15 sets forth
a complete and correct list of all outstanding Indebtedness of the Company as of March 31, 2010
(including a description of the obligors and obligees, principal amount outstanding and collateral
therefor, if any, and Guaranty thereof, if any), since which date there has been no Material change
in the amounts, interest rates, sinking funds, installment payments or maturities of the
Indebtedness of the Company (other than the issuance of the Notes pursuant to this Agreement). The
Company is not in default and no waiver of default is currently in effect, in the payment of any
principal or interest on any Indebtedness of the Company and no event or
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condition exists with respect to any Indebtedness of the Company the outstanding principal amount
of which exceeds $5,000,000 that would permit (or that with notice or the lapse of time, or both,
would permit) one or more Persons to cause such Indebtedness to become due and payable before its
stated maturity or before its regularly scheduled dates of payment.
(b) The Company is not a party to, or otherwise subject to any provision contained in, any
instrument evidencing Indebtedness of the Company, any agreement relating thereto or any other
agreement (including, but not limited to, its charter or other organizational document) which
limits the amount of, or otherwise imposes restrictions on the incurring of, Indebtedness of the
Company, except for the 1940 Act or as specifically indicated in Schedule 5.15.
Section 5.16. Foreign Assets Control Regulations, Etc. (a) Neither the sale of the Notes by
the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy
Act, as amended, or any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto.
(b) The Company (i) is not a Person described or designated in the Specially Designated
Nationals and Blocked Persons List of the Office of Foreign Assets Control or in Section 1 of the
Anti-Terrorism Order and (ii) does not engage in any dealings or transactions with any such Person.
The Company is in compliance, in all material respects, with the USA Patriot Act.
(c) No part of the proceeds from the sale of the Notes hereunder will be used, directly or
indirectly, for any payments to any governmental official or employee, political party, official of
a political party, candidate for political office, or anyone else acting in an official capacity,
in order to obtain, retain or direct business or obtain any improper advantage, in violation of the
United States Foreign Corrupt Practices Act of 1977, as amended, assuming in all cases that such
Act applies to the Company.
Section 5.17. Status under Certain Statutes. The Company is subject to regulation under the
1940 Act. The Company is, and immediately after giving effect to the issuance of the Notes will be,
in compliance with the 1940 Act, including, but not limited to, all leverage provisions specified
in the 1940 Act.
Section 5.18. Ranking of Obligations. The Company’s payment obligations under this Agreement
and the Notes will, upon issuance of the Notes, rank pari passu, without preference or priority,
with all other unsecured and unsubordinated Indebtedness of the Company.
(a) Each Purchaser severally represents that it is purchasing the Notes for its own account or
for one or more separate accounts maintained by such Purchaser or for the account of one or more
pension or trust funds and not with a view to the distribution thereof, provided that the
disposition of such Purchaser’s or their property shall at all times be within such Purchaser’s or
their control. Each Purchaser understands that the Notes have not been registered under the
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Highland Credit Strategies Fund | Note Purchase Agreement |
Securities Act and may be resold only if registered pursuant to the provisions of the Securities
Act or if an exemption from registration is available, except under circumstances where neither
such registration nor such an exemption is required by law, and that the Company is not required to
register the Notes.
(b) Each Purchaser is duly authorized to enter into this Agreement, and the person signing
this Agreement on behalf of the Purchaser is authorized to do so, under all applicable governing
documents (e.g., partnership agreement, trust instrument, pension plan, certificate of
incorporation, bylaws, or operating agreement). This Agreement constitutes a legal, valid and
binding agreement of the Purchaser enforceable against the Purchaser in accordance with its terms,
except as such enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights
generally and (ii) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(c) Each Purchaser is an “accredited investor” as defined in Rule 501(a) promulgated under the
Securities Act.
Section 7. Information as to Company
Section 7.1. Financial and Business Information. The Company shall deliver or cause to be
delivered to each holder of Notes that is an Institutional Investor:
(a)Semi-Annual
Statements — within 60 days (or such shorter period as is 15 days after
the mailing of the Company’s Semi-Annual Report to its stockholders) after the end of the
first semi-annual accounting period in each fiscal year of the Company, duplicate copies
of,
(i) an unaudited statement of assets and liabilities of the Company, as at the
end of such period, and
(ii) unaudited schedule of investments and statements of operations and
changes in net assets of the Company, for the portion of the fiscal year ending
with such period,
all in reasonable detail, prepared in accordance with regulatory requirements and GAAP, and
certified by a Senior Financial Officer as fairly presenting, in all material respects, the
financial position of the companies being reported on and their results of operations and
cash flows, subject to changes resulting from year-end adjustments, provided that the
Company shall be deemed to have made such delivery of such semi-annual financial statements
if it shall have timely made such semi-annual financial statements available on its home
page on the worldwide web (at the date of this Agreement located at xxx.xxxxx.xxx) and
shall have given such holder prior notice of such availability on its home page in
connection with each delivery (such availability and notice thereof being referred to as
“Electronic Delivery”) provided, further, that the Company agrees also to deliver hard
copies of such financial statements to any holder of Notes who has requested
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such delivery in writing within the time period required above, unless such written request
was made within the last 10 days of the end of such time period, in which case, the Company
will deliver such financial statements no later than 10 days after the conclusion of the
time period required above;
(b) Annual Statements — within 105 days (or such shorter period as is 15 days greater
than the period applicable to the filing of the Company’s Annual Report on Form N-CSR (the
“Form N-CSR”) with the SEC regardless of whether the Company is subject to the filing
requirements thereof) after the end of each fiscal year of the Company, duplicate copies of,
(i) a statement of assets and liabilities and schedule of investments of the
Company, as at the end of such year, and
(ii) schedule of investments and statements of operations and changes in net
assets of the Company, for such year,
all in reasonable detail, prepared in accordance with GAAP, and accompanied by an opinion
thereon of independent public accountants of recognized national standing, which opinion
shall state that such financial statements present fairly, in all material respects, the
financial position of the companies being reported upon and their results of operations and
have been prepared in conformity with GAAP, and that the examination of such accountants in
connection with such financial statements has been made in accordance with generally
accepted auditing standards, and that such audit provides a reasonable basis for such
opinion in the circumstances, provided that the delivery within the time period specified
above of the Company’s Form N-CSR for such fiscal year prepared in accordance with the
requirements therefor and filed with the SEC shall be deemed to satisfy the requirements of
this Section 7.1(b), and provided, further, that the Company shall be deemed to have made
such delivery of such Form N-CSR if it shall have timely made Electronic Delivery thereof
provided, further, that the Company agrees also to deliver hard copies of such financial
statements to any holder of Notes who has requested such delivery in writing within the
time period required above, unless such written request was made within the last 10 days of
the end of such time period, in which case, the Company will deliver such financial
statements no later than 10 days after the conclusion of the time period required above;
(c) SEC and Other Reports — promptly upon their becoming available:
(i) one copy of each quarterly schedule of portfolio holdings, each
semi-annual or annual financial statement, each regular or periodic report sent to
the Company’s stockholders, each notice sent to the Company’s stockholders, each
proxy statement and similar document filed with the SEC, each registration
statement that shall have become effective (without exhibits except as expressly
requested by such holder) and each final prospectus and all amendments thereto
filed by the Company with the SEC, and
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(ii) if requested by a holder of Notes, each financial statement, report or
notice sent by the Company to its principal lending banks, if any, as a whole
(excluding information sent to such banks in the ordinary course of administration
of a bank facility, such as information relating to pricing and borrowing
availability) or to any NRSRO.
(d) Notice of Default or Event of Default — promptly, and in any event within five
Business Days after a Responsible Officer becoming aware of the existence of any Default or
Event of Default, a written notice specifying the nature and period of existence thereof
and what action the Company is taking or proposes to take with respect thereto;
(e) ERISA Matters — promptly, and in any event within five Business Days after a
Responsible Officer becoming aware of any of the following, a written notice setting forth
the nature thereof and the action, if any, that the Company or an XXXXX Xxxxxxxxx proposes
to take with respect thereto:
(i) with respect to any Plan, any reportable event, as defined in section
4043(c) of ERISA and the regulations thereunder, for which notice thereof has not
been waived pursuant to such regulations as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the threatening by the
PBGC of the institution of, proceedings under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan
that such action has been taken by the PBGC with respect to such Multiemployer
Plan; or
(iii) any event, transaction or condition that could result in the incurrence
of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans, or in the imposition of any Lien on any of the rights, properties or
assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or
such penalty or excise tax provisions, if such liability or Lien, taken together
with any other such liabilities or Liens then existing, would reasonably be
expected to have a Material Adverse Effect; and
(f) Requested Information — with reasonable promptness, such other data and
information relating to the business, operations, affairs, financial condition, assets or
properties of the Company (including, without limitation, actual copies of the quarterly
and annual reports of the Company) or relating to the ability of the Company to perform its
obligations under this Agreement and under the Notes as from time to time may be reasonably
requested by such holder of Notes (including any such information as may be reasonably
necessary to complete any Holder Forms).
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Section 7.2. Officer’s Certificate. Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a certificate of a Senior
Financial Officer setting forth (which, in the case of Electronic Delivery of any such financial
statements, shall be by separate concurrent delivery of such certificate to each holder of Notes):
(a)
Covenant Compliance — the information (including detailed calculations) required in order
to establish whether the Company was in compliance with the requirements of Sections 9.7, 10.4(b),
10.4(c) and 10.6 and any Additional Covenant incorporated herein pursuant to Section 9.9 during the
quarterly or annual period covered by the statements then being furnished (including with respect
to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or
percentage, as the case may be, permissible under the terms of such Sections, and the calculation
of the amount, ratio or percentage then in existence); and
(b)
Event of Default — a statement that such Senior Financial Officer has reviewed the relevant
terms hereof and has made, or caused to be made, under his or her supervision, a review of the
transactions and conditions of the Company from the beginning of the quarterly or annual period
covered by the statements then being furnished to the date of the certificate and that such review
shall not have disclosed the existence during such period of any condition or event that
constitutes a Default or an Event of Default or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action the Company shall have taken
or proposes to take with respect thereto.
Section 7.3. Visitation. The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:
(a) No Default — if no Default or Event of Default then exists, at the expense of such holder
and upon reasonable prior notice to the Company, to visit the principal executive office of the
Company, to discuss the affairs, finances and accounts of the Company with the Company’s officers,
and, with the consent of the Company (which consent will not be unreasonably withheld) to visit the
other offices and properties of the Company, not more than twice each calendar year; and
(b) Default — if a Default or Event of Default then exists, at the expense of the Company to
visit and inspect any of the offices or properties of the Company, to examine all their respective
books of account, records, reports and other papers, to make copies and extracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision the Company authorizes said accountants to
discuss the affairs, finances and accounts of the Company), all at such times and as often as may
be reasonably requested.
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Section 8. Payment and Prepayment of the Notes
Section 8.1. Maturity and Payment. As provided therein, the entire unpaid principal balance of
the Notes shall be due and payable on the stated maturity date thereof.
Section 8.2. Optional Prepayments with Floating Rate Prepayment Amount. The Company may, at
its option, and to the extent prepayment of the Notes (specifically including the applicable
Floating Rate Prepayment Amount, the LIBOR Breakage Amount and accrued interest on the Notes) in
accordance with the provisions of this Section 8.2 is permitted under the 1940 Act and Delaware
law, upon notice as provided below, prepay at any time all or any part of the Notes in an aggregate
principal amount of not less than $1,000,000, in the case of a partial prepayment, at 100% of the
principal amount so prepaid together with accrued interest thereon to the date of such prepayment
and the Floating Rate Prepayment Amount, if any, and any LIBOR Breakage Amount (unless the date
specified for prepayment is a Floating Rate Interest Payment Date) determined for the prepayment
date with respect to such principal amount. The Company will give each holder of the Notes written
notice of each optional prepayment under this Section 8.2 not less than 14 days (or 7 days in the
case of any notice of prepayment in connection with a prepayment to cure any default under Sections
9.7(a) or 9.7(b), or both) and not more than 60 days prior to the date fixed for such prepayment.
Each such notice shall specify such date, the aggregate principal amount of the Notes to be prepaid
on such date, the principal amount of each Note held by such holder to be prepaid (determined in
accordance with Section 8.3), the interest to be paid on the prepayment date with respect to such
principal amount being prepaid, and shall also contain a certificate of a Senior Financial Officer
as to the Floating Rate Prepayment Amount due in connection with such prepayment (calculated as if
the date of such notice were the date of prepayment) and requesting any LIBOR Breakage Amount from
the holder of Notes if the specified prepayment is not on a Floating Rate Interest Payment Date.
Section 8.3 Allocation of Partial Prepayments. In the case of each partial prepayment of the
Notes, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at
the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal
amounts thereof not theretofore called for prepayment.
Section 8.4. Maturity; Surrender, Status, Etc. In the case of each prepayment of Notes
pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become
due and payable on the date fixed for such prepayment (which shall be a Business Day), together
with interest on such principal amount accrued to such date and the applicable Floating Rate
Prepayment Amount and any LIBOR Breakage Amount. From and after such date, unless the Company shall
fail to pay such principal amount when so due and payable, together with the interest and Floating
Rate Prepayment Amount and any LIBOR Breakage Amount, interest on such principal amount shall cease
to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and
shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any
Note.
Section 8.5. Purchase of Notes. The Company will not and will not permit any Affiliate to
purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes
except (a) upon the payment or prepayment of the Notes in accordance with the terms of
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this Agreement and the Notes or (b) pursuant to an offer to purchase made by the Company or an
Affiliate pro rata to the holders of all of the Notes at the time outstanding upon the same terms
and conditions. Any such offer shall provide each holder with sufficient information to enable it
to make an informed decision with respect to such offer, and shall remain open for at least 20
Business Days. If the holders of more than 50% of the principal amount of the Notes, then
outstanding accept such offer, the Company shall promptly notify the remaining holders of such fact
and the expiration date for the acceptance by holders of Notes of such offer shall be extended by
the number of days necessary to give each such remaining holder at least 10 Business Days from its
receipt of such notice to accept such offer. The Company will promptly cancel all Notes acquired by
it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any
provision of this Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
Section 8.6. Floating Rate Prepayment Amount.
“Floating Rate Prepayment Amount” means, with respect to any prepayment pursuant to Section
8.2 or in connection with any declaration pursuant to Section 12.1, with respect to the Notes: (A)
in the case of any such prepayment or declaration on or prior to April 16, 2012, 2.00% of the
principal amount so prepaid, and (B) in the case of any such prepayment or declaration after April
16, 2012 and on or prior to April 16, 2013, 1.00% of the principal amount so prepaid and (C) in the
case of any prepayment or declaration after April 16, 2013, 0% of the principal amount so prepaid.
The Company covenants that so long as any of the Notes are outstanding:
Section 9.1. Compliance with Law. Without limiting Section 10.4, the Company will comply with
all laws, ordinances or governmental rules or regulations to which it is subject, including,
without limitation, ERISA, the USA Patriot Act and Environmental Laws, and will obtain and maintain
in effect all licenses, certificates, permits, franchises and other governmental authorizations
necessary to the ownership of its properties or to the conduct of its businesses, in each case to
the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules
or regulations or failures to obtain or maintain in effect such licenses, certificates, permits,
franchises and other governmental authorizations would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect. Without limiting the foregoing, the Company
shall remain in material compliance, at all times with the 1940 Act, including, but not limited to,
all leverage provisions specified in the 1940 Act.
Section 9.2. Insurance. The Company will maintain, with financially sound and reputable
insurers, insurance with respect to its properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is
customary in the case of entities of established reputations engaged in the same or a similar
business and similarly situated.
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Section 9.3. Maintenance of Properties. The Company will maintain and keep, or cause to be
maintained and kept, its properties in good repair, working order and condition (other than
ordinary wear and tear), so that the business carried on in connection therewith may be properly
conducted at all times, provided that this Section shall not prevent the Company from discontinuing
the operation and the maintenance of any of its properties if such discontinuance is desirable in
the conduct of its business and the Company has concluded that such discontinuance would not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 9.4. Payment of Taxes. The Company will file all income tax or similar tax returns
required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and
payable on such returns and all other taxes, assessments, governmental charges, or levies payable
by it, to the extent the same have become due and payable and before they have become delinquent,
provided that the Company need not pay any such tax, assessment, charge or levy if (i) the amount,
applicability or validity thereof is contested by the Company on a timely basis in good faith and
in appropriate proceedings, and the Company has established adequate reserves therefor in
accordance with GAAP on the books of the Company or (ii) the nonpayment of all such taxes,
assessments, charges and levies in the aggregate would not reasonably be expected to have a
Material Adverse Effect.
Section 9.5. Trust Existence, Etc. Subject to Section 10.2, the Company will at all times
preserve and keep in full force and effect its trust existence as a Delaware statutory trust.
Subject to Section 10.2, the Company will at all times preserve and keep in full force and effect
all rights and franchises of the Company unless, in the good faith judgment of the Company, the
termination of or failure to preserve and keep in full force and effect such corporate existence,
right or franchise would not, individually or in the aggregate, have a Material Adverse Effect.
Section 9.6. Books and Records. The Company will maintain proper books of record and account
in conformity with GAAP and all applicable requirements of any Governmental Authority having legal
or regulatory jurisdiction over the Company, as the case may be.
Section 9.7. Asset Coverage. (a) The Company shall maintain, as of the last day of each month,
the 1940 Act Asset Coverage.
(b) The Company shall satisfy, as of each Valuation Date, the Basic Maintenance Test.
Section 9.8. Current Rating on the Notes. (a) The Company shall at all times maintain a
current rating given by a NRSRO of at least Investment Grade with respect to the Notes and shall
not at any time have any rating given by a NRSRO of less than Investment Grade with respect to the
Notes.
(b) Without limiting the provisions of Section 9.8(a), in addition to all other amounts due
and payable hereunder and under the Notes, the interest rate applicable to each Series of Notes
(including any Default Rate applicable thereto) shall be increased by an amount equal to 1.00% per
annum during any Adjustment Period.
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Section 9.9. Most Favored Lender Status. In the event that the Company shall at any time after
the date of Closing enter into, assume or otherwise become bound by or obligated under any
agreement creating or evidencing Indebtedness of the Company in excess of $10,000,000 (other than
Indebtedness permitted by Section 10.6) containing one or more Additional Covenants, the terms of
this Agreement shall, without any further action on the part of the Company or any of the holders
of the Notes, be deemed to be amended automatically to include each Additional Covenant contained
in such agreement. The Company further covenants to promptly execute and deliver at its expense
(including, without limitation, the fees and expenses of counsel for the holders of the Notes) an
amendment to this Agreement in form and substance satisfactory to the Required Holders evidencing
the amendment of this Agreement to include such Additional Covenants, provided that the execution
and delivery of such amendment shall not be a precondition to the effectiveness of such amendment
as provided for in this Section 9.9, but shall merely be for the convenience of the parties hereto.
Section 9.10. Ranking of Obligations. The Company’s payment obligations under this Agreement
and the Notes shall at all times rank pari passu, without preference or priority, with all other
unsecured and unsubordinated Indebtedness of the Company.
Section 9.11. Maintenance of Status. The Company will remain a non-diversified, closed-end
company registered with the SEC under the 1940 Act. The Company will also maintain its policy to
invest at least 80% of the Company’s assets in one or more of the following categories of
securities and instruments of corporations and other business entities: (i) secured and unsecured
floating and fixed rate loans; (ii) bonds and other debt obligations; (iii) debt obligations of
stressed, distressed and bankrupt issuers; (iv) structured products, including but not limited to,
mortgage-backed and other asset-backed securities and collateralized debt obligations; (v) equities
and (vi) cash.
The Company covenants that so long as any of the Notes are outstanding:
Section 10.1. Transactions with Affiliates. The Company will comply with the 1940 Act
provisions, rules and regulations relating to transactions (including without limitation the
purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with
any Affiliate and such transactions shall be pursuant to the reasonable requirements of the
Company’s business and upon terms fair and reasonable to the Company.
Section 10.2. Merger, Consolidation, Etc. The Company will not consolidate with or merge with
any other Person or convey, transfer or lease all or substantially all of its assets in a single
transaction or series of transactions to any Person unless:
(a) the successor formed by such consolidation or the survivor of such merger or the Person
that acquires by conveyance, transfer or lease all or substantially all of the assets of the
Company as an entirety, as the case may be, shall be a solvent corporation or limited liability
company or business trust organized and existing under the laws of the United States or any State
thereof (including the District of Columbia), and, if the
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Company is not such corporation or limited liability company or business trust, such corporation or
limited liability company shall have executed and delivered to each holder of any Notes its
assumption of the due and punctual performance and observance of each covenant and condition of
this Agreement and the Notes; and
(b) immediately before and immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing.
No such conveyance, transfer or lease of substantially all of the assets of the Company shall have
the effect of releasing the Company or any successor corporation or limited liability company or
business trust that shall theretofore have become such in the manner prescribed in this Section
10.2 from its liability under this Agreement or the Notes.
Section 10.3. Terrorism Sanctions Regulations. The Company will not (a) become a Person
described or designated in the Specially Designated Nationals and Blocked Persons List of the
Office of Foreign Assets Control or in Section 1 of the Anti-Terrorism Order or (b) engage in any
dealings or transactions with any such Person.
Section 10.4. Certain Other Restrictions. (a) The Company will not engage in proscribed
transactions set forth in the Rating Agency Guidelines under “Certain Other Restrictions,” unless
it has received written confirmation from each such Rating Agency that proscribes the applicable
transaction in its Rating Agency Guidelines that any such action would not impair the rating then
assigned by such Rating Agency to a Senior Security.
(b) The Company will not declare, pay or set apart for payment any dividend or other distribution
(other than a dividend or distribution paid in shares of, or options, warrants or rights to
subscribe for or purchase, common shares or other shares of capital stock of the Company) upon any
class of shares of capital stock of the Company or redeem, purchase or otherwise acquire any
capital stock of the Company, unless, in every such case, immediately after such transaction, the
1940 Act Asset Coverage would be achieved after deducting the amount of such dividend,
distribution, redemption price or purchase price, as the case may be;
provided, however, that
dividends may be declared upon and the Company may redeem, purchase or otherwise acquire any
Preferred Stock of the Company if the Notes and any other Senior Securities have an asset coverage
(as determined in accordance with Section 18(h) of the 1940 Act as in effect on the date of
Closing) of at least 200% at the time of declaration of dividends or the date of redemption or
purchase, after deducting the amount of such dividend, redemption price or purchase price.
(c) A declaration of a dividend or other distribution on or purchase or redemption of any common or
preferred shares of capital stock of the Company is prohibited (i) at any time that an Event of
Default has occurred and is continuing or (ii) if after giving effect to such declaration, the
Company would not satisfy the Basic Maintenance Test.
Section 10.5. No Subsidiaries. The Company will not at any time have any Subsidiaries other than:
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(i) entities from time to time that may represent portfolio investments consistent with the
Company’s investment objective and strategies (such entities being referred to as “Controlled
Portfolio Entities”), which Controlled Portfolio Entities shall not be consolidated with the
Company for the purposes of any covenants, agreements or other determinations hereunder, and
(ii) a Subsidiary formed as part of an integrated transaction (for purposes of completing a merger,
acquisition of assets or other similar transaction) in which such Subsidiary is promptly merged
with the Company; provided that (A) any Subsidiary pursuant to subsection (ii) shall not be
existence for more than 10 days, (B) no Subsidiary pursuant to subsection (ii) shall incur or
otherwise be liable for any Indebtedness at any time and (C) for purposes of determining compliance
with Sections 9, 10 and 11 of this Agreement, each reference to the Company in these Sections and
the related definitions shall be deemed to include the Company and any Subsidiaries of the Company.
Section 10.6. Secured Debt. The Company will not at any time permit the aggregate unpaid principal
amount of all Indebtedness of the Company secured by Liens on any
assets of the Company (“Secured
Indebtedness”) to be outstanding for more than 60 days at a time without re-payment thereof and, in
addition, will not permit Secured Indebtedness to exceed 5% of the Total Assets at the time of
incurrence of any such Indebtedness, provided for purposes of this section, short sales, futures
transactions and swap transactions effected in accordance with the 1940 Act and applicable
interpretive guidance issued by the SEC will not be prohibited or restricted by this covenant.
Section 10.7. Company Not Subject to ERISA. The Company will not and will not permit any ERISA
Affiliate at any time to maintain or be obligated in respect of any employee benefit plan subject
to Title I or Title IV of ERISA or section 4975 of the Code.
An “Event of Default” shall exist if any of the following conditions or events shall occur and be
continuing:
(a) the Company defaults in the payment of any principal, Floating Rate Prepayment Amount, if any,
or LIBOR Breakage Amount, if any, on any Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note for more than five Business
Days after the same becomes due and payable; or
(c) the Company defaults in the performance of or compliance with any term contained in Sections
7.1(d), 9.7, 9.8, 10.4(b), 10.4(c), 10.6 and any Additional Covenant incorporated herein pursuant
to Section 9.9, and such default is not remedied within
20 days, provided, that in the case of any
such default under Section 9.7, such 20-day period (the
“Initial 20-Day Period”) shall be extended
by an additional 5-day period if the
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Company shall have given notice prior to the end of such Initial 20-Day Period of an optional
prepayment of such principal amount of Notes pursuant to Section 8.2, which, when consummated,
shall be sufficient to cure such default); or
(d) the Company defaults in the performance of or compliance with any term contained herein (other
than those referred to in Sections 11(a), (b) and (c)) and such default is not remedied within 30
days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and
(ii) the Company receiving written notice of such default from any holder of a Note (any such
written notice to be identified as a “notice of default” and to refer specifically to this Section
11(d)); or
(e) any representation or warranty made in writing by or on behalf of the Company or by any officer
of the Company in this Agreement or in any writing furnished in connection with the transactions
contemplated hereby proves to have been false or incorrect in any material respect on the date as
of which made; or
(f) (i) the Company is in default (as principal or as guarantor or other surety) in the payment of
any principal of or premium or make-whole amount or interest on any Indebtedness that is
outstanding in an aggregate principal amount of at least $10,000,000 beyond any period of grace
provided with respect thereto, or (ii) the Company is in default in the performance of or
compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal
amount of at least $10,000,000 or of any mortgage, indenture or other agreement relating thereto or
any other condition exists, and as a consequence of such default or condition such Indebtedness has
become, or has been declared (or one or more Persons are entitled to declare such Indebtedness to
be) due and payable before its stated maturity or before its regularly scheduled dates of payment;
or
(g) the Company (i) is generally not paying, or admits in writing its inability to pay, its debts
as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other
similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv)
consents to the appointment of a custodian, receiver, trustee or other officer with similar powers
with respect to it or with respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes trust action for the purpose of any of the foregoing;
or
(h) a court or Governmental Authority of competent jurisdiction enters an order appointing, without
consent by the Company, a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, or constituting an order for
relief or approving a petition for relief or reorganization or any other petition in bankruptcy or
for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of the Company, or any such petition shall be
filed against the Company and such petition shall not be dismissed within 90 days; or
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(i) a final judgment or judgments for the payment of money aggregating in excess of $10,000,000 are
rendered against the Company and which judgments are not, within 90 days after entry thereof,
bonded, discharged or stayed pending appeal, or are not discharged within 90 days after the
expiration of such stay; or
(j) Highland Capital Management, L.P. or one of its Affiliates is no longer the advisor of the
Company; or
(k) if, pursuant to Section 18(a)(1)(c)(ii) of the 1940 Act, on the last day of each of twenty-four
consecutive calendar months the Notes shall have an asset coverage of less than 100%.
Section 12.1. Acceleration. (a) If an Event of Default with respect to the Company described in
Section 11(g) or (h) (other than an Event of Default described in clause (i) of Section 11(g) or
described in clause (vi) of Section 11(g) by virtue of the fact that such clause encompasses clause
(i) of Section 11(g)) has occurred, all the Notes then outstanding shall automatically become
immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, the Required Holders may at any
time at its or their option, by notice or notices to the Company, declare all the Notes then
outstanding to be immediately due and payable.
(c) If any Event of Default described in Section 11(a) or (b) has occurred and is continuing, any
holder or holders of Notes at the time outstanding affected by such Event of Default may at any
time, at its or their option, by notice or notices to the Company, declare all the Notes held by it
or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by
declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes,
plus (x) all accrued and unpaid interest thereon (including, but not limited to, interest accrued
thereon at the Default Rate) and (y) the Floating Rate Prepayment Amount determined in respect of
such principal amount (to the full extent permitted by applicable law) and the LIBOR Breakage
Amount, if any, shall all be immediately due and payable, in each and every case without
presentment, demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain
its investment in the Notes free from repayment by the Company (except as herein specifically
provided for) and that the provision for payment of the Floating Rate Prepayment Amount and the
LIBOR Breakage Amount, if any, in the event that the Notes are prepaid or are accelerated as a
result of an Event of Default, is intended to provide compensation for the deprivation of such
right under such circumstances.
Section 12.2. Other Remedies. If any Default or Event of Default has occurred and is continuing,
and irrespective of whether any Notes have become or have been declared immediately due and payable
under Section 12.1, the holder of any Note at the time outstanding
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may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or
other appropriate proceeding, whether for the specific performance of any agreement contained
herein or in any Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.
Section 12.3. Rescission. At any time after any Notes have been declared due and payable pursuant
to Section 12.1(b) or (c), the Required Holders, by written notice to the Company, may rescind and
annul any such declaration and its consequences if (a) the Company has paid all overdue interest on
the Notes, all principal of and the Floating Rate Prepayment Amount, if any, and the LIBOR Breakage
Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such
declaration, and all interest on such overdue principal and Floating Rate Prepayment Amount, if
any, and the LIBOR Breakage Amount, if any, and (to the extent permitted by applicable law) any
overdue interest in respect of the Notes, at the Default Rate, (b) neither the Company nor any
other Person shall have paid any amounts which have become due solely by reason of such
declaration, (c) all Events of Default and Defaults, other than non-payment of amounts that have
become due solely by reason of such declaration, have been cured or have been waived pursuant to
Section 17, and (d) no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to
or affect any subsequent Event of Default or Default or impair any right consequent thereon.
Section 12.4. No Waivers or Election of Remedies, Expenses, Etc. No course of dealing and no delay
on the part of any holder of any Note in exercising any right, power or remedy shall operate as a
waiver thereof or otherwise prejudice such holder’s rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any
other right, power or remedy referred to herein or therein or now or hereafter available at law, in
equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15,
the Company will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection
under this Section 12, including, without limitation, reasonable attorneys’ fees, expenses and
disbursements.
Section 13.1. Registration of Notes. The Company shall keep at its principal executive office a
register for the registration and registration of transfers of Notes. The name and address of each
holder of one or more Notes, each transfer thereof and the name and address of each transferee of
one or more Notes shall be registered in such register. Prior to due presentment for registration
of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as
the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and correct copy of the names and
addresses of all registered holders of Notes.
Section 13.2. Transfer and Exchange of Notes. (a) Upon surrender of any Note to the Company or its
agent at the address and to the attention of the designated officer (all as specified
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in Section 18(iii)), for registration of transfer or exchange (and in the case of a surrender for
registration of transfer accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or such holder’s attorney duly authorized in writing and accompanied
by the relevant name, address and other information for notices of each transferee of such Note or
part thereof), within ten Business Days thereafter, the Company shall execute and deliver, at the
Company’s expense (except as provided below), one or more new Notes of the same Series (as
requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to
the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such
Person as such holder may request and shall be substantially in the form of Exhibit 1-A. Each such
new Note shall be dated and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid
thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in
denominations of less than $500,000, provided that if necessary to enable the registration of
transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than
$500,000.
(b) No holder shall transfer its Notes or any of its rights or obligations under this Agreement
without the prior written consent of the Company, which consent shall not be unreasonably withheld
or delayed. Notwithstanding the foregoing, consent shall not be required if (i) a Default or Event
of Default has occurred and is continuing or (ii) the transferee is an insurance company or a
broker or dealer; provided such transfer to a broker or dealer is solely for the purpose of
facilitating a transfer to an insurance company.
Section 13.3. Replacement of Notes. Upon receipt by the Company at the address and to the attention
of the designated officer (all as specified in Section 18(iii)) of evidence reasonably satisfactory
to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which
evidence shall be, in the case of an Institutional Investor, notice from such Institutional
Investor of such ownership and such loss, theft, destruction or mutilation), and
(a)
in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided
that if the holder of such Note is, or is a nominee for, an original Purchaser or another holder of
a Note with a minimum net worth of at least $50,000,000 or a Qualified Institutional Buyer, such
Person’s own unsecured agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation thereof,
within ten Business Days thereafter, the Company at its own expense shall execute and deliver,
in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have
been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen,
destroyed or mutilated Note if no interest shall have been paid thereon.
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Highland Credit Strategies Fund | Note Purchase Agreement |
Section 14. Payments on Notes.
Section 14.1. Place of Payment. Subject to Section 14.2, payments of principal, Floating Rate
Prepayment Amount, if any, and LIBOR Breakage Amount, if any, and interest becoming due and payable
on the Notes shall be made in New York, New York at the principal office of Bank of New York. The
Company may at any time, by notice to each holder of a Note, change the place of payment of the
Notes so long as such place of payment shall be either the principal office of the Company in such
jurisdiction or the principal office of a bank or trust company in such jurisdiction.
Section 14.2. Home Office Payment. So long as any Purchaser or its nominee shall be the holder
of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal, Floating Rate
Prepayment Amount and LIBOR Breakage Amount, if any, and interest by the method and at the address
specified for such purpose below such Purchaser’s name in Schedule A, or by such other method or at
such other address as such Purchaser shall have from time to time specified to the Company in
writing for such purpose, without the presentation or surrender of such Note or the making of any
notation thereon, except that upon written request of the Company made concurrently with or
reasonably promptly after payment or prepayment in full of any Note, such Purchaser shall surrender
such Note for cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated by the Company
pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by a Purchaser or
its nominee, such Purchaser will, at its election, either endorse thereon the amount of principal
paid thereon and the last date to which interest has been paid thereon or surrender such Note to
the Company in exchange for a new Note or Notes pursuant to Section 13.2. The Company will afford
the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect
transferee of any Note purchased by a Purchaser under this Agreement and that has made the same
agreement relating to such Note as the Purchasers have made in this Section 14.2.
Section 15.1. Transaction Expenses. Whether or not the transactions contemplated hereby are
consummated, the Company will pay all costs and expenses (including reasonable attorneys’ fees of a
special counsel and, if reasonably required by the Required Holders, local or other counsel)
incurred by the Purchasers and each other holder of a Note in connection with such transactions and
in connection with any amendments, waivers or consents under or in respect of this Agreement or the
Notes (whether or not such amendment, waiver or consent becomes effective), including, without
limitation: (a) the reasonable costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this Agreement or the Notes or in
responding to any subpoena or other legal process or informal investigative demand issued in
connection with this Agreement or the Notes, or by reason of being a holder of any Note, (b) the
reasonable costs and expenses, including financial advisors’ fees, incurred in connection with the
insolvency or bankruptcy of the Company or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes and (c) the costs and expenses incurred in
connection with the initial filing of this Agreement and all
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Highland Credit Strategies Fund | Note Purchase Agreement |
related documents and financial information with the SVO, provided that such costs and expenses
under this clause (c) shall not exceed $3,000. The Company will pay, and will save each Purchaser
and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses
if any, of brokers and finders (other than those, if any, retained by a Purchaser or other holder
in connection with its purchase of the Notes).
Section 15.2. Survival. The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this
Agreement or the Notes, and the termination of this Agreement.
All representations and warranties contained herein shall survive the execution and delivery of
this Agreement and the Notes, the purchase or transfer by any Purchaser of any Note or portion
thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent
holder of a Note. All statements contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties
of the Company under this Agreement. Subject to the preceding sentence, this Agreement and the
Notes embody the entire agreement and understanding between each Purchaser and the Company and
supersede all prior agreements and understandings relating to the subject matter hereof.
Section 17.1. Requirements. This Agreement and the Notes may be amended, and the observance of
any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and
only with) the written consent of the Company and the Required Holders, except that (a) no
amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any
defined term (as it is used therein), will be effective as to any Purchaser unless consented to by
such Purchaser in writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of
Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or
payment of principal of, or reduce the rate or change the time of payment or method of computation
of interest or of the Floating Rate Prepayment Amount and the LIBOR Breakage Amount on, the Notes,
(ii) change the percentage of the principal amount of the Notes the holders of which are required
to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17
or 20.
Section
17.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes (irrespective of the amount of
Notes then owned by it) with sufficient information, sufficiently far in advance of the date a
decision is required, to enable such holder to make an informed and considered decision with
respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or
of the Notes. The Company will deliver executed or true and correct copies of each amendment,
waiver or consent effected pursuant to the provisions of this Section 17 to
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Highland Credit Strategies Fund | Note Purchase Agreement |
each holder of outstanding Notes promptly following the date on which it is executed and delivered
by, or receives the consent or approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration,
whether by way of supplemental or additional interest, fee or otherwise, or grant any security or
provide other credit support, to any holder of Notes as consideration for or as an inducement to
the entering into by any holder of Notes or any waiver or amendment of any of the terms and
provisions hereof unless such remuneration is concurrently paid, or security is concurrently
granted or other credit support concurrently provided, on the same terms, ratably to each holder of
Notes then outstanding even if such holder did not consent to such waiver or amendment.
(c) Consent in Contemplation of Transfer. Any consent made pursuant to this Section 17.2 by the
holder of any Note that has transferred or has agreed to transfer such Note to the Company or any
Affiliate of the Company and has provided or has agreed to provide such written consent as a
condition to such transfer shall be void and of no force or effect except solely as to such holder,
and any amendments effected or waivers granted or to be effected or granted that would not have
been or would not be so effected or granted but for such consent (and the consents of all other
holders of Notes that were acquired under the same or similar conditions) shall be void and of no
force or effect except solely as to such transferring holder.
Section 17.3 Binding Effect, Etc. Any amendment or waiver consented to as provided in this
Section 17 applies equally to all holders of Notes and is binding upon them and upon each future
holder of any Note and upon the Company without regard to whether such Note has been marked to
indicate such amendment or waiver. No such amendment or waiver will extend to or affect any
obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or
impair any right consequent thereon. No course of dealing between the Company and the holder of any
Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver
of any rights of any holder of such Note. As used herein, the term “this Agreement” and references
thereto shall mean this Agreement as it may from time to time be amended or supplemented.
Section 17.4. Notes Held by Company, Etc. Solely for the purpose of determining whether the
holders of the requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this Agreement or the
Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon
the direction of the holders of a specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall
be deemed not to be outstanding.
All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy
if the sender on the same day sends a confirming copy of such notice by a recognized overnight
delivery service (charges prepaid), or (b) by registered or certified mail
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Highland Credit Strategies Fund | Note Purchase Agreement |
with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to any Purchaser or its nominee, to such Purchaser or nominee at the address specified for
such communications in Schedule A, or at such other address as such Purchaser or nominee shall have
specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such address as such other holder shall
have specified to the Company in writing, or
(iii) if to the Company, to the Company at its address set forth at the beginning hereof to the
attention of the Chief Executive Officer, or at such other address as the Company shall have
specified to the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
This Agreement and all documents relating thereto, including, without limitation, (a) consents,
waivers and modifications that may hereafter be executed, (b) documents received by any Purchaser
at the Closing (except the Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to any Purchaser, may be reproduced by such Purchaser
by any photographic, photostatic, electronic, digital, or other similar process and such Purchaser
may destroy any original document so reproduced. The Company agrees and stipulates that, to the
extent permitted by applicable law, 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
existence and whether or not such reproduction was made by such Purchaser in the regular course of
business) and any enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other
holder of Notes from contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction.
For the purposes of this Section 20, “Confidential Information” means information delivered to any
Purchaser by or on behalf of the Company in connection with the transactions contemplated by or
otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or
labeled or otherwise adequately identified when received by such Purchaser as being confidential
information of the Company, provided that such term does not include information that (a) was
publicly known or otherwise known to such Purchaser prior to the time of such disclosure, (b)
subsequently becomes publicly known through no act or omission by such Purchaser or any person
acting on such Purchaser’s behalf, (c) otherwise becomes known to such Purchaser other than through
disclosure by the Company or (d) constitutes financial statements delivered to such Purchaser under
Section 7.1 that are otherwise publicly available. Each Purchaser will maintain the confidentiality
of such
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Highland Credit Strategies Fund | Note Purchase Agreement |
Confidential Information in accordance with procedures adopted by such Purchaser in good faith to
protect confidential information of third parties delivered to such Purchaser, provided that such
Purchaser may deliver or disclose Confidential Information to (i) its directors, trustees,
officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably
relates to the administration of the investment represented by its Notes), (ii) its financial
advisors and other professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this Section 20, (iii) any other holder
of any Note, (iv) any Institutional Investor to which it sells or offers to sell such Note or any
part thereof or any participation therein (if such Person has agreed in writing prior to its
receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any
Person from which it offers to purchase any security of the Company (if such Person has agreed in
writing prior to its receipt of such Confidential Information to be bound by the provisions of this
Section 20), (vi) any federal or state regulatory authority having jurisdiction over such
Purchaser, (vii) the NAIC or the SVO or, in each case, any similar organization, or any nationally
recognized rating agency that requires access to information about such Purchaser’s investment
portfolio, or (viii) any other Person to which such delivery or disclosure may be necessary or
appropriate (w) to effect compliance with any law, rule, regulation or order applicable to such
Purchaser, (x) in response to any subpoena or other legal process, (y) in connection with any
litigation to which such Purchaser is a party or (z) if an Event of Default has occurred and is
continuing, to the extent such Purchaser may reasonably determine such delivery and disclosure to
be necessary or appropriate in the enforcement or for the protection of the rights and remedies
under such Purchaser’s Notes and this Agreement. Each holder of a Note, by its acceptance of a
Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this
Section 20 as though it were a party to this Agreement. On reasonable request by the Company in
connection with the delivery to any holder of a Note of information required to be delivered to
such holder under this Agreement or requested by such holder (other than a holder that is a party
to this Agreement or its nominee), such holder will enter into an agreement with the Company
embodying the provisions of this Section 20. A holder of a Note, by receipt of Confidential
Information, xxxxxx also agrees, not to directly or indirectly trade the Company’s common stock in
violation of applicable law, rule or regulation.
Each Purchaser shall have the right to substitute any one of its Affiliates as the purchaser of the
Notes that it has agreed to purchase hereunder, by written notice to the Company, which notice
shall be signed by both such Purchaser and such Affiliate, shall contain such Affiliate’s agreement
to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt of such notice, any
reference to such Purchaser in this Agreement (other than in this Section 21), shall be deemed to
refer to such Affiliate in lieu of such original Purchaser. In the event that such Affiliate is so
substituted as a Purchaser hereunder and such Affiliate thereafter transfers to such original
Purchaser all of the Notes then held by such Affiliate, upon receipt by the Company of notice of
such transfer, any reference to such Affiliate as a “Purchaser” in this Agreement (other than in
this Section 21), shall no longer be deemed to refer to such Affiliate, but shall refer to such
original Purchaser, and such original Purchaser shall again have all the rights of an original
holder of the Notes under this Agreement.
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Highland Credit Strategies Fund | Note Purchase Agreement |
Section 22.1. Successors and Assigns. All covenants and other agreements contained in this
Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent holder of a Note)
whether so expressed or not.
Section 22.2. Payments Due on Non-Business Days. Anything in this Agreement or the Notes to
the contrary notwithstanding (but without limiting the requirement in Section 8.4 that the notice
of any optional prepayment specify a Business Day as the date fixed for such prepayment), any
payment of principal of or the Floating Rate Prepayment Amount, the LIBOR Breakage Amount or
interest on any Note that is due on a date other than a Business Day shall be made on the next
succeeding Business Day without including the additional days elapsed in the computation of the
interest payable on such next succeeding Business Day; provided that if the maturity date of any
Note is a date other than a Business Day, the payment otherwise due on such maturity date shall be
made on the next succeeding Business Day and shall include the additional days elapsed in the
computation of interest payable on such next succeeding Business Day.
Section 22.3. Accounting Terms. All accounting terms used herein which are not expressly
defined in this Agreement have the meanings respectively given to them in accordance with GAAP.
Except as otherwise specifically provided herein, (i) all computations made pursuant to this
Agreement shall be made in accordance with GAAP, and (ii) all financial statements shall be
prepared in accordance with GAAP. For purposes of determining compliance with the financial
covenants contained in this Agreement, any election by the Company to measure an item of
Indebtedness using fair value (as permitted by Statement of Financial Accounting Standards No. 159
or any similar accounting standard) shall be disregarded and such determination shall be made as if
such election had not been made.
Section 22.4. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by
law) not invalidate or render unenforceable such provision in any other jurisdiction.
Section 22.5. Construction, Etc. Each covenant contained herein shall be construed (absent
express provision to the contrary) as being independent of each other covenant contained herein, so
that compliance with any one covenant shall not (absent such an express contrary provision) be
deemed to excuse compliance with any other covenant. Where any provision herein refers to action to
be taken by any Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
For the avoidance of doubt, all Schedules and Exhibits attached to this Agreement and all
Additional Covenants incorporated herein pursuant to Section 9.9 shall be deemed to be a part
hereof.
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Highland Credit Strategies Fund | Note Purchase Agreement |
Section 22.6. Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be an original but all of which together shall constitute one instrument. Each
counterpart may consist of a number of copies hereof, each signed by less than all, but together
signed by all, of the parties hereto.
Section 22.7. Governing Law. This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the law of the State of New York
excluding choice-of-law principles of the law of such State that would permit the application of
the laws of a jurisdiction other than such State.
Section 22.8. Jurisdiction and Process; Waiver of Jury Trial. (a) The Company irrevocably
submits to the non-exclusive jurisdiction of any New York state or federal court sitting in the
Borough of Manhattan, The City of New York, over any suit, action or proceeding arising out of or
relating to this Agreement or the Notes. To the fullest extent permitted by applicable law, the
Company irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise,
any claim that it is not subject to the jurisdiction of any such court, any objection that it may
now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in
any such court and any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
(b) The Company consents to process being served by or on behalf of any holder of Notes in any
suit, action or proceeding of the nature referred to in
Section 22.8(a) by mailing a copy thereof
by registered or certified mail (or any substantially similar form of mail), postage prepaid,
return receipt requested, to it at its address specified in Section 18 or at such other address of
which such holder shall then have been notified pursuant to said Section. The Company agrees that
such service upon receipt (i) shall be deemed in every respect effective service of process upon it
in any such suit, action or proceeding and (ii) shall, to the fullest extent permitted by
applicable law, be taken and held to be valid personal service upon and personal delivery to it.
Notices hereunder shall be conclusively presumed received as evidenced by a delivery receipt
furnished by the United States Postal Service or any reputable commercial delivery service.
(c) Nothing in this Section 22.8 shall affect the right of any holder of a Note to serve process in
any manner permitted by law, or limit any right that the holders of any of the Notes may have to
bring proceedings against the Company in the courts of any appropriate jurisdiction or to enforce
in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
(d) The parties hereto hereby waive trial by jury in any action brought on or with respect to this
Agreement, the Notes or any other document executed in connection
herewith or therewith.
* * * * *
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Highland Credit Strategies Fund | Note Purchase Agreement |
If you are in agreement with the foregoing, please sign the form of agreement on a counterpart of
this Agreement and return it to the Company, whereupon this Agreement shall become a binding
agreement between you and the Company.
Very truly yours, Highland Credit Strategies Fund |
||||
By | /s/ X. Xxxxxx Xxxxxxxxx | |||
Name: | X. Xxxxxx Xxxxxxxxx | |||
Title: | Chief Executive Officer and President |
Highland Credit Strategies Fund | Note Purchase Agreement |
This Agreement is hereby accepted and agreed to as of the date thereof
Metropolitan
Life Insurance Company |
||||
By | /s/ X. Xxxxx Xxxxxx | |||
Name: | X. Xxxxx Xxxxxx | |||
Title: | Managing Director | |||
MetLife
Reinsurance Company of Charleston RetLife Reinsurance Company of Vermont By Metropolitan Life Insurance Company, its Investment Manager |
||||
By | /s/ X. Xxxxx Xxxxxx | |||
Name: | X. Xxxxx Xxxxxx | |||
Title: | Managing Director | |||
Defined Terms
As used herein, the following terms have the respective meanings set forth below or set forth in
the Section hereof following such term:
“Additional Covenant” shall mean any covenant in respect of the financial condition or financial
position of the Company, including, but not limited to, covenants that specify or require the
maintenance of certain financial ratios applicable to the Company, and the default provision
related thereto (regardless of whether such provision is labeled or otherwise characterized as a
covenant or a default).
“Adjusted LIBOR Rate” shall mean, for any Floating Rate Interest Period, LIBOR for such Floating
Rate Interest Period plus 1.70% (170 basis points).
“Adjustment Period” shall mean, with respect to any calculation of the applicable interest rate in
respect of the Notes, any period of time during which any Series of Notes has a current rating of
less than “A” by Fitch or less than its equivalent by any other NRSRO.
“Affiliate” means, at any time, and with respect to any Person, any other Person that at such time
directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is
under common Control with, such first Person. As used in this definition, “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 securities, by contract or
otherwise. Unless the context otherwise clearly requires, any
reference to an “Affiliate” is a
reference to an Affiliate of the Company.
“Agency Discounted Value” means the quotient of the Market Value of an Eligible Asset divided by
the applicable Rating Agency Discount Factor, provided that with respect to an Eligible Asset that
is currently callable, Agency Discounted Value will be equal to the quotient as calculated above or
the call price, whichever is lower, and that with respect to an Eligible Asset that is prepayable,
Agency Discounted Value will be equal to the quotient as calculated above or the par value,
whichever is lower.
“Anti-Terrorism Order” means Executive Order No. 13224 of September 24, 2001, Blocking Property and
Prohibiting Transactions with Persons Who Commit, Threaten to Commit or Support Terrorism, 66 U.S.
Fed. Reg. 49,079 (2001), as amended.
“Basic Maintenance Test” as of any Valuation Date is the requirement to maintain Eligible Assets
with an aggregate Agency Discounted Value equal to at least the basic maintenance amount required
by each Rating Agency under its respective Rating Agency Guidelines, separately determined.
“Business Day” means (a) for the purposes of Section 8.6 only, any day other than a Saturday, a
Sunday or a day on which commercial banks in New York City are required or authorized to be closed,
and (b) for the purposes of any other provision of this Agreement, any
Schedule B
(to Note Purchase Agreement)
(to Note Purchase Agreement)
day other than a Saturday, a Sunday or a day on which commercial banks in New York, New York, or
Dallas, Texas are required or authorized to be closed.
“Capital Lease” means, at any time, a lease with respect to which the lessee is required
concurrently to recognize the acquisition of an asset and the incurrence of a liability in
accordance with GAAP.
“Closing” is defined in Section 3.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time.
“Company” means Highland Credit Strategies Fund, a Delaware statutory trust corporation or any
successor that becomes such in the manner prescribed in Section 10.2.
“Company Valuation” means any asset valuation to determine asset coverage which is calculated by
the Company for which, in the judgment of the Company’s investment adviser, reliable market
quotations are not readily available, a pricing service does not provide a valuation, or provides a
valuation that in the judgment of that investment adviser is stale or does not represent fair value
and accordingly the Company determines the fair value of such asset under the procedures adopted by
the Board of Trustees of the Company.
“Confidential Information” is defined in Section 20.
“Default” means an event or condition the occurrence or existence of which would, with the lapse of
time or the giving of notice or both, become an Event of Default.
“Default Rate” means that rate of interest that is 2.00% per annum plus the Adjusted LIBOR Rate.
The Default Rate shall be subject to Section 9.8(b).
“Disclosure Documents” is defined in Section 5.3.
“Electronic Delivery” is defined in Section 7.1(a).
“Eligible Assets” means Xxxxx’x Eligible Assets or Fitch Eligible Assets (if Xxxxx’x or Fitch are
then rating the Senior Securities) and/or Other Rating Agency Eligible Assets, whichever is
applicable.
“Environmental Laws” means any and all Federal, state, local, and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions relating to pollution and the
protection of the environment or the release of any materials into the environment, including but
not limited to those related to Hazardous Materials.
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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in effect.
“ERISA Affiliate” means any trade or business (whether or not incorporated) that is treated as a
single employer together with the Company under section 414 of the Code.
“Event of Default” is defined in Section 11.
“Fitch” means Fitch Ratings and its successors at law.
“Fitch Discount Factor” means the discount factors set forth in the Fitch Guidelines for use in
calculating the Agency Discounted Value of the Company’s assets in connection with Fitch’s ratings
of Senior Securities.
“Fitch Eligible Asset” means assets of the Company set forth in the Fitch Guidelines as eligible
for inclusion in calculating the Agency Discounted Value of the Company’s assets in connection with
Fitch’s ratings of Senior Securities.
“Fitch Guidelines” mean the guidelines provided by Fitch, as may be amended from time to time, in
connection with Fitch’s ratings of Senior Securities.
“Floating Rate Interest Payment Date” is defined in Section 1 of the Agreement.
“Floating Rate Interest Period” shall mean each period commencing on the date of the Closing and,
thereafter, commencing on an Floating Rate Interest Payment Date and continuing up to, but not
including, the next Floating Rate Interest Payment Date.
“Floating Rate Prepayment Amount” is defined in Section 8.6.
“GAAP” means generally accepted accounting principles as in effect from time to time in the United
States of America.
“Governmental Authority” means
(a) the government of
(i) the United States of America or any State or other political subdivision thereof, or
(ii) any other jurisdiction in which the Company conducts all or any part of its business, or which
asserts jurisdiction over any properties of the Company, or
(b) any entity exercising executive, legislative, judicial, regulatory or administrative functions
of, or pertaining to, any such government.
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“Guaranty” means, with respect to any Person, any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection) of such Person
guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other
Person in any manner, whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation,
or (ii) to maintain any working capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available funds for the purchase or
payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services primarily for the purpose of assuring
the owner of such indebtedness or obligation of the ability of any other Person to make payment of
the indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation against loss in respect
thereof.
In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the
indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be
direct obligations of such obligor.
“Hazardous Material” means any and all pollutants, toxic or hazardous wastes or other substances
that might pose a hazard to health and safety, the removal of which may be required or the
generation, manufacture, refining, production, processing, treatment, storage, handling,
transportation, transfer, use, disposal, release, discharge, spillage, seepage or filtration of
which is or shall be restricted, prohibited or penalized by any applicable law including, but not
limited to, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum,
petroleum products, lead based paint, radon gas or similar restricted, prohibited or penalized
substances.
“holder” means, with respect to any Note, the Person in whose name such Note is registered in the
register maintained by the Company pursuant to Section 13.1.
“Holder Forms” means any forms required to be filed by a holder of Notes pursuant to the 1940 Act
or as required by the Federal Reserve Board.
“Indebtedness” with respect to any Person means, at any time, without duplication,
(a) its liabilities for borrowed money and its redemption obligations in respect of mandatorily
redeemable Preferred Stock;
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(b) its liabilities for the deferred purchase price of property acquired by such Person (excluding
accounts payable arising in the ordinary course of business but including all liabilities created
or arising under any conditional sale or other title retention agreement with respect to any such
property);
(c) all liabilities appearing on its balance sheet in accordance with GAAP in respect of Capital
Leases;
(d) all liabilities for borrowed money secured by any Lien with respect to any property owned by
such Person (whether or not it has assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or instruments serving a similar function
issued or accepted for its account by banks and other financial institutions (whether or not
representing obligations for borrowed money);
(f) the aggregate Swap Termination Value of all Swap Contracts of such Person;
(g) all obligations of such Person upon which interest charges are customarily paid;
(h) all obligations of such Person under reverse repurchase agreements; and
(i) any Guaranty of such Person with respect to liabilities of a type described in any of clauses
(a) through (h) hereof.
“Institutional Investor” means (a)any Purchaser of a Note, (b)any holder of a Note holding
(together with one or more of its affiliates) more than 5% of the aggregate principal amount of the
Notes then outstanding, (c)any bank, trust company, savings and loan association or other financial
institution, any pension plan, any investment company, any insurance company, any broker or dealer,
or any other similar financial institution or entity, regardless of legal form, and (d)any Related
Fund of any holder of any Note.
“Investment Grade” shall mean a rating of at least “BBB-” or higher by Fitch or its equivalent by
any other NRSRO.
“LIBOR” shall mean, for any Floating Rate Interest Period, the greater of (i)1% or (ii)the rate per
annum (rounded upwards, if necessary, to the next higher one hundred-thousandth of a percentage
point) for deposits in U.S.Dollars for a three month period which appears on the Bloomberg
Financial Markets Service Page BBAM-1 (or if such page is not available, the Reuters Screen LIBO
Page) as of 11:00a.m. (London, England time) on the date two (2)Business Days before the
commencement of such Floating Rate Interest Period (or three (3)Business Days prior to the
beginning of the first Floating Rate Interest Period). “Reuters Screen LIBO Page” means the display
designated as the “LIBO” page on the Reuters Monitory Money Rates Service (or such other page as
may replace the LIBO page on that service or such other service as may be
B-5
nominated by the British Bankers’ Association as the information vendor for the purpose of
displaying British Banker’s Association Interest Settlement Rates for U.S.Dollar deposits).
“LIBOR Breakage Amount” means any loss, cost or expense actually incurred by any holder of a Note
as a result of any payment or prepayment of any Note on a day other than a regularly scheduled
Floating Rate Interest Payment Date for such Note or at the scheduled maturity (whether voluntary,
mandatory, automatic, by reason of acceleration or otherwise), and any loss or expense arising from
the liquidation or reemployment of funds obtained by it or from fees payable to terminate the
deposits from which such funds were obtained. Each holder shall determine the LIBOR Breakage Amount
with respect to the principal amount of its Notes then being paid or prepaid (or required to be
paid or prepaid) by written notice to the Company setting forth such determination in reasonable
detail not less than two (2) Business Days prior to the date of prepayment in the case of any
prepayment pursuant to Section 8.2 and not less than one (1) Business Day in the case of any
payment required by Section 12.1. Each such determination shall be presumptively correct absent
manifest error.
“Lien” means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or
other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to
or of such Person under any conditional sale or other title retention agreement or Capital Lease,
upon or with respect to any property or asset of such Person (including in the case of stock,
stockholder agreements, voting trust agreements and all similar arrangements).
“Market Value” means the market value of an asset of the Company determined as follows: Readily
marketable portfolio securities listed on any exchange other than the NASDAQ are valued, except as
indicated below, at the last sale price on the Business Day as of which such value is being
determined. If there has been no sale on such day, the securities are valued at the mean of the
most recent bid and asked prices on such day. Securities admitted to trade on the NASDAQ are valued
at the NASDAQ official closing price. Portfolio securities traded on more than one securities
exchange are valued at the last sale price on the Business Day as of which such value is being
determined at the close of the exchange representing the principal market for such securities.
Equity securities traded in the over-the-counter market, but excluding securities admitted to
trading on the NASDAQ, are valued at the closing bid prices. Fixed income securities with a
remaining maturity of 60 days or more are valued by using a pricing service. When price quotations
are not available, fair market value will be based on prices of comparable securities. Fixed income
securities maturing within 60 days are valued on an amortized cost basis. For securities that are
privately issued or illiquid, as well as any other portfolio security held by the Company for
which, in the judgment of the Company’s investment adviser, reliable market quotations are not
readily available, the pricing service does not provide a valuation, or provides a valuation that
in the judgment of that investment adviser is stale or does not represent fair value, valuations
will be determined in a manner that most fairly reflects fair value of the security on the
valuation date under procedures adopted by the Board of Trustees of the Company.
“Material” means material in relation to the business, operations, affairs, financial condition,
assets or properties of the Company.
B-6
“Material Adverse Effect” means a material adverse effect on (a) the business, operations, affairs,
financial condition, assets or properties of the Company taken as a whole, (b)the ability of the
Company to perform its obligations under this Agreement and the Notes or (c)the validity or
enforceability of this Agreement or the Notes.
“Moody’s” means Xxxxx’x Investors Service, Inc., a Delaware corporation, and its successors at law.
“Moody’s Discount Factor” means the discount factors set forth in the Moody’s Guidelines for use in
calculating the Agency Discounted Value of the Company’s assets in connection with Moody’s ratings
of Senior Securities.
“Moody’s Eligible Assets” means assets of the Company set forth in the Moody’s Guidelines as
eligible for inclusion in calculating the Agency Discounted Value of the Company’s assets in
connection with Moody’s ratings of Senior Securities.
“Moody’s Guidelines” mean the guidelines provided by Moody’s, as may be amended from time to time,
in connection with Moody’s ratings of Senior Securities.
“Multiemployer Plan” means any Plan that is a “multiemployer plan” (as such term is defined in
section 4001(a)(3) of ERISA).
“NAIC” means the National Association of Insurance Commissioners or any successor thereto.
“1940 Act” means the Investment Company Act of 1940, and the rules and regulations promulgated
thereunder and all exemptive relief, if any, obtained by the Company thereunder, as the same may be
amended from time to time.
“1940 Act Asset Coverage” means asset coverage required by the 1940 Act Senior Notes Asset Coverage
and by the 1940 Act Total Leverage Asset Coverage.
“1940 Act Senior Notes Asset Coverage” means, asset coverage as defined by Section 18(h) of the
1940 Act as in effect on the date of Closing of at least 300% with respect to Senior Securities,
determined on the basis of values calculated as of a time within 48 hours next preceding that of
such determination. Notwithstanding anything in the 1940 Act, any Company Valuation shall be
calculated at 50% of the fair market value of such Company Valuation for purposes of determining
compliance with this definition.
“1940 Act Total Leverage Asset Coverage” means, asset coverage as defined by Section 18(h) of the
1940 Act as in effect on the date of Closing of at least 200% with respect to Senior Securities and
Preferred Stock, determined on the basis of values calculated as of a time within 48 hours next
preceding the time of such determination. Notwithstanding anything in the 1940 Act, any Company
Valuation shall be calculated at 50% of the fair market value of such Company Valuation for
purposes of determining compliance with this definition.
B-7
“Notes” is defined in Section 1.
“NRSRO” means a nationally recognized statistical ratings organization.
“Officer’s Certificate” means a certificate of a Senior Financial Officer or of any other officer
of the Company whose responsibilities extend to the subject matter of such certificate.
“Other Rating Agency” means each NRSRO, if any, other than Xxxxx’x or Fitch then providing a rating
for the Senior Securities.
“Other Rating Agency Discount Factor” means the discount factors set forth in the Other Rating
Agency Guidelines of each Other Rating Agency for use in calculating the Agency Discounted Value of
the Company’s assets in connection with the Other Rating Agency’s rating of Senior Securities.
“Other Rating Agency Eligible Assets” means assets of the Company set forth in the Other Rating
Agency Guidelines of each Other Rating Agency as eligible for inclusion in calculating the Agency
Discounted Value of the Company’s assets in connection with the Other Rating Agency’s rating of
Senior Securities.
“Other Rating Agency Guidelines” mean the guidelines provided by each Other Rating Agency, as may
be amended from time to time, in connection with the Other Rating Agency’s rating of Senior
Securities.
“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any
successor thereto.
“Person” means an individual, partnership, corporation, limited liability company, association,
trust, unincorporated organization, business entity or Governmental Authority.
“Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA) subject to Title I of
ERISA that is or, within the preceding five years, has been established or maintained, or to which
contributions are or, within the preceding five years, have been made or required to be made, by
the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may
have any liability.
“Preferred Stock” means any class of capital stock of a Person that is preferred over any other
class of capital stock (or similar equity interests) of such Person as to the payment of dividends
or the payment of any amount upon liquidation or dissolution of such Person.
“property” or “properties” means, unless otherwise specifically limited, real or personal property
of any kind, tangible or intangible, xxxxxx or inchoate.
“Purchaser” is defined in the first paragraph of this Agreement.
B-8
“Qualified Institutional Buyer” means any Person who is a “qualified institutional buyer” within
the meaning of such term as set forth in Rule 144A(a)(1) under the Securities Act.
“Rating Agency” means each of Fitch (if Fitch is then rating Senior Securities), Xxxxx’x (if
Xxxxx’x is then rating Senior Securities) and any Other Rating Agency.
“Rating Agency Discount Factor” means the Xxxxx’x Discount Factor (if Xxxxx’x is then rating the
Senior Securities), Fitch Discount Factor (if Fitch is then rating Senior Securities) or an Other
Rating Agency Rating Agency Discount Factor, whichever is applicable.
“Rating Agency Guidelines” mean Fitch Guidelines (if Fitch is then rating Senior Securities),
Xxxxx’x Guidelines (if Xxxxx’x is then rating Senior Securities) and any Other Rating Agency
Guidelines.
“Related Fund” means, with respect to any holder of any Note, any fund or entity that (i)invests in
securities or bank loans, and (ii)is advised or managed by such holder, the same investment advisor
as such holder or by an affiliate of such holder or such investment advisor.
“Required Holders” means, at any time, the holders of more than 50% in principal amount of the
Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its
Affiliates).
“Responsible Officer” means any Senior Financial Officer and any other officer of the Company with
responsibility for the administration of the relevant portion of this Agreement.
“SEC” shall mean the Securities and Exchange Commission of the United States, or any successor
thereto.
“securities” or “security” shall have the meaning specified in Section 2(1) of the Securities Act.
“Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time in effect.
“Senior Financial Officer” means the chief financial officer, principal accounting officer,
treasurer or comptroller of the Company.
“Senior Securities” means Indebtedness (excluding redemption obligations in respect of mandatorily
redeemable Preferred Stock) of the Company including, without limitation, the Notes, bank
borrowings and (without duplication) indebtedness of the Company within the meaning of Section 18
of the 1940 Act.
“Series” shall refer to any series of Notes issued under this Agreement.
“Subsidiary” means, as to any Person, any other Person in which such first Person or one or more of
its Subsidiaries or such first Person and one or more of its Subsidiaries owns
B-9
sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence
of contingencies, to elect a majority of the directors (or Persons performing similar functions) of
such second Person, and any partnership or joint venture if more than a 50% interest in the profits
or capital thereof is owned by such first Person or one or more of its Subsidiaries or such first
Person and one or more of its Subsidiaries (unless such partnership or joint venture can and does
ordinarily take major business actions without the prior approval of such Person or one or more of
its Subsidiaries). Unless the context otherwise clearly requires, any reference to a “Subsidiary”
is a reference to a Subsidiary of the Company.
“SVO” means the Securities Valuation Office of the NAIC or any successor to such Office.
“Swap Contract” means (a)any and all interest rate swap transactions, basis swap transactions,
basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity
options, forward commodity contracts, equity or equity index swaps or options, bond or bond price
or bond index swaps or options or forward foreign exchange transactions, cap transactions, floor
transactions, currency options, spot contracts or any other similar transactions or any of the
foregoing (including, but without limitation, any options to enter into any of the foregoing), and
(b)any and all transactions of any kind, and the related confirmations, which are subject to the
terms and conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master
Agreement.
“Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into
account the effect of any legally enforceable netting agreement relating to such Swap Contracts,
(a)for any date on or after the date such Swap Contracts have been closed out and termination
value(s) determined in accordance therewith, such termination value(s), and (b)for any date prior
to the date referenced in clause (a), the amounts(s) determined as the mark-to-market values(s) for
such Swap Contracts, as determined based upon one or more mid-market or other readily available
quotations provided by any recognized dealer in such Swap Contracts.
“Total Assets” shall mean the aggregate amount of all assets of the Company determined in
accordance with GAAP applicable to the Company.
“USA Patriot Act” means United States Public Law 107-56, Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of
2001, as amended from time to time, and the rules and regulations promulgated thereunder from time
to time in effect.
“Valuation Date” means every Friday, or, if such day is not a Business Day, the next preceding
Business Day; provided, however, that the first Valuation Date may occur on any other date
established by the Company; provided, further,
however, that such first Valuation Date shall be not
more than one week from the date on which Notes initially are issued.
B-10