EXHIBIT 25.2(a)(2)
OPERATING AGREEMENT
OF
YORK ENHANCED STRATEGIES FUND, LLC
A Delaware Limited Liability Company
Dated as of November 3, 2005
TABLE OF CONTENTS
Page
SECTION 1. DEFINED TERMS............................................1
SECTION 2. LIMITED LIABILITY COMPANY FORMATION AND
IDENTIFICATION...........................................7
2.1 Formation....................................................7
2.2 Name and Place of Business...................................7
2.3 Records of Members...........................................7
2.4 Limited Liability Company....................................7
2.5 Tax Treatment................................................8
SECTION 3. PURPOSE, NATURE OF BUSINESS AND POWERS...................8
SECTION 4. TERM.....................................................8
SECTION 5. SHARES OF MEMBERSHIP INTEREST............................9
5.1 Beneficial Interest..........................................9
5.2 Classes and Series...........................................9
5.3 Issuance of Shares...........................................9
5.4 Rights of Members............................................9
SECTION 6. REGISTERED OFFICE AND AGENT FOR SERVICE OF
PROCESS.................................................10
SECTION 7. CAPITAL CONTRIBUTIONS...................................10
7.1 Capital Contributions of Members............................10
7.2 Contribution of the Special Member..........................14
7.3 Withdrawal of Capital.......................................14
SECTION 8. DISTRIBUTIONS...........................................14
8.1 Distributions...............................................14
SECTION 9. MANAGEMENT AND BOARD OF DIRECTORS.......................16
9.1 Management Generally........................................16
9.2 Board of Directors..........................................16
9.3 Expenses of the Company.....................................19
9.4 Members' Consent............................................20
9.5 Exculpation.................................................20
9.6 Indemnification; No Duty of Investigation; Reliance
on Experts..................................................21
9.7 Director Limited Liability..................................23
9.8 Certain Other Activities....................................23
SECTION 10. MEMBERS.................................................24
10.1 Identity, Contributions and Common Share Commitments........24
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10.2 No Management Power or Liability............................24
10.3 Amendments..................................................24
10.4 Merger, Consolidation or Sale of Assets.....................26
10.5 List of Members.............................................26
10.6 Limitations.................................................26
10.7 Meetings....................................................27
10.8 Action Without a Meeting....................................27
10.9 Procedures..................................................27
10.10 Voting......................................................28
SECTION 11. ADMISSION OF ADDITIONAL MEMBERS; ASSIGNMENTS OR
TRANSFERS OF SHARES.....................................29
11.1 Admission of Additional Members.............................29
11.2 Assignments or Transfers of Shares..........................30
11.3 Mandatory Transfers of Shares...............................31
SECTION 12. POWER OF ATTORNEY.......................................32
12.1 Appointment of Investment Manager...........................32
12.2 Nature of Special Power.....................................33
SECTION 13. BOOKS, RECORDS AND REPORTS..............................33
13.1 Books.......................................................33
13.2 Reports.....................................................34
SECTION 14. VALUATION OF INTERESTS..................................35
SECTION 15. BANK ACCOUNTS; CUSTODIAN................................35
15.1 Bank Accounts Generally.....................................35
15.2 Custodian...................................................36
SECTION 16. DISSOLUTION AND TERMINATION OF THE COMPANY..............36
16.1 Dissolution Generally.......................................36
16.2 Continuation of Company.....................................36
16.3 Events Causing Dissolution..................................36
16.4 Distribution of Assets on Liquidation.......................37
16.5 Liquidation Statement.......................................37
16.6 Director's Liability Upon Dissolution or Removal............37
16.7 Restriction on Liquidation..................................38
SECTION 17. GENERAL PROVISIONS......................................38
17.1 Notices and Distributions...................................38
17.2 Survival of Rights..........................................38
17.3 Construction................................................38
17.4 Section Headings............................................39
17.5 Agreement in Counterparts...................................39
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17.6 Governing Law...............................................39
17.7 Additional Documents........................................39
17.8 Severability................................................39
17.9 Pronouns....................................................39
17.10 Entire Agreement............................................40
17.11 Arbitration.................................................40
17.12 Waiver of Partition.........................................40
17.13 Non-Petition Covenant.......................................40
17.14 Filing......................................................40
Appendix A Statement of Preferences of Series A-1 Floating Rate
Term Preferred Shares......................................A-1
Appendix B Statement of Preferences of Series A-2 Preferred
Share......................................................B-1
Appendix C Form of Notice of Transfer.................................C-1
Appendix D Subscription Agreement.....................................D-1
Appendix E Schedule of Members........................................E-1
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YORK ENHANCED STRATEGIES FUND, LLC
A Delaware Limited Liability Company
OPERATING AGREEMENT
This Operating Agreement, dated as of November 3, 2005 (this
"Agreement"), has been approved by the sole member of the Board of Directors of
the Company and the sole Initial Member of the Company.
Upon the terms and subject to the conditions described below,
the parties to this Agreement, which shall include all Persons becoming Members
at any time, as a condition of becoming and for so long as they remain Members,
agree as follows:
SECTION 1.
DEFINED TERMS
The terms set forth below shall have the indicated meanings.
"Advisers Act" means the Investment Advisers Act of 1940, as
amended, and the rules and regulations promulgated thereunder and applicable
exemptions granted therefrom, as amended from time to time.
"Advisory Fee" means the Management Fee payable to the
Investment Manager under the Investment Management Agreement.
"Affiliated Person" has the meaning set forth in the
Investment Company Act.
"Aggregate Capital Contributions" means, with respect to any
Member as of any date, the aggregate amount of all Capital Contributions made by
such Member on or prior to such date.
"Agreement" or "Operating Agreement" means this Operating
Agreement, as originally executed and as amended from time to time.
"Assets" means all cash, Cash Equivalents, securities,
investments and other property and assets of any type of the Company.
"Base Rate" means, on any date, a variable rate per annum
equal to the rate of interest published by The Wall Street Journal as the "prime
rate" at large U.S. money center banks at such date.
"Board of Directors" means the board of directors of the
Company.
"Business Day" means any day other than a Saturday, Sunday or
any other day on which banks in New York, New York are required by law to be
closed. All references to Business Day herein shall be based on the time in New
York, New York.
"By-Laws" has the meaning set forth in Section 9.2(h).
"Capital Contribution" means a contribution to the Company in
cash by a Member or by any predecessor holder of the Shares held by such Member.
"Cash Equivalents" has the meaning assigned to such term in
the Indenture; provided that if the Indenture is terminated without replacement,
such term shall have the meaning assigned to it in the relevant Statement of
Preferences (or if the Statement of Preferences has been terminated, those
provisions in effect on the date of such termination).
"Certificate" means the Certificate of Formation of the
Company, filed with the Secretary of State on April 25, 2005, and any and all
amendments thereto and restatements thereof filed with the Secretary of State.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
"Commitment" means a Common Share Commitment or a Preferred
Share Commitment.
"Common Member" means a Member holding Common Shares of the
Company.
"Common Share Commitment" means an amount committed by a
Common Member or prospective Common Member for investment in the Common Shares
of the Company pursuant to (a) a Subscription Agreement or (b) an assumption by
such Member of any Common Share Commitment of a Defaulting Member pursuant to
Section 7.1(d) or of a transferring Member.
"Common Shares" means the common Shares of membership
interests of the Company having the rights and other terms set forth in this
Agreement.
"Company" means York Enhanced Strategies Fund, LLC, a Delaware
limited liability company.
"Consent Dividend" shall have the meaning assigned to such
term in Section 8.1(g).
"Custodial Account" means one or more segregated trust
accounts to be maintained pursuant to the requirements of the Investment Company
Act and other applicable law to hold the Assets.
"Custodian" means an entity which maintains the Custodial
Account.
"Defaulting Member" shall have the meaning assigned to such
term in Section 7.1(d).
"Delaware Act" means the Delaware Limited Liability Company
Act (6 Del.C. ss. 18-101, et seq.), as amended from time to time and any
successor thereto.
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"Director" means each director of the Company who at the time
in question has been duly elected or appointed and has qualified as a director
in accordance with the provisions hereof and is then in office.
"Disabling Conduct" shall have the meaning set forth in
Section 9.5.
"Disinterested Non-Party Directors" shall have the meaning set
forth in Section 9.6(a).
"Distribution Restrictions" means, with respect to any
intended or contemplated dividend, that none of the following shall have
occurred and be continuing immediately prior to, or would occur immediately
upon, the payment of such dividend: (i) a violation of any Over
Collateralization Test (without giving effect to the grace period provided
therefor) under the Indenture, (ii) a Default or Event of Default under the
Indenture, (iii) a Default or Event of Default under the Insurance Agreement,
(iv) the violation of any restriction on the payment of dividends set forth in
the Statement of Preferences for the Term Preferred Shares, (v) the failure of
any representation or warranty made by the Company in any Transaction Document
or the Insurance Agreement to be true and correct in all material respect, (vi)
Company Equity being less than (A) Adjusted Contributed Company Capital or (B)
in the case of Company Tax Distributions, Adjusted Contributed Company Capital
minus $35,000,000 or (vii) a violation of any applicable asset coverage
requirement under the Investment Company Act. Terms used in this definition and
not defined herein shall have the meanings given to such terms in the Indenture.
"Drawdown Date" means each date that the Company draws down
Common Share Commitments.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Fiscal Quarter" means a three calendar month period ending
March 31, June 30, September 30 or December 31 of a Fiscal Year.
"Fiscal Year" means the Company's fiscal year, which shall end
on each December 31 unless otherwise determined by the Board of Directors.
"Incapacity" or "Incapacitated" means, as to any Person, the
bankruptcy, insolvency, death, disability, adjudication of incompetence or
insanity, dissolution or termination, as the case may be, of such Person.
"Indemnified Person" shall have the meaning assigned to such
term in Section 9.5.
"Indenture" means that certain Indenture, dated as of November
17, 2005, by and between the Company and JPMorgan Chase Bank, NA, a national
banking association, as trustee, as such may be amended, modified or
supplemented from time to time.
"Independent Director" means a Director that is not an
Interested Person.
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"Initial Drawdown Date" means the date on which the first
Capital Contributions in respect of the Common Share Commitments are made with
respect to the Common Shares.
"Initial Member" means York Enhanced Strategies Management,
LLC, a New York limited liability company, in its capacity as Initial Member of
the Company.
"Insurance Agreement" means the Insurance and Indemnity
Agreement between the Company and Ambac Assurance Corporation in connection with
the Preferred Shares Policy.
"Interested Person" has the meaning given to such term in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of
1940, as amended, and the rules and regulations promulgated thereunder and
applicable exemptions granted therefrom, as amended from time to time.
"Investment Management Agreement" means the Investment
Management Agreement between the Company and the Investment Manager, dated on or
about the Initial Drawdown Date, as such agreement may be amended, modified,
revised or restated, from time to time, in accordance with the terms hereof and
thereof, and any substantially similar agreement with a successor Investment
Manager permitted by the terms hereof and thereof.
"Investment Manager" means York Enhanced Strategies
Management, LLC, a New York limited liability company, in its capacity as
investment manager to the Company, and any successor thereto selected in
accordance with the Investment Management Agreement and the Investment Company
Act.
"Investment Period" means the period commencing on the Initial
Drawdown Date and ending on November 15, 2015.
"Manager Affiliate" shall have the meaning set forth in
Section 9.8.
"Member" means any Person that is admitted as a Common Member,
Preferred Member or Special Member of the Company in accordance with the terms
of this Agreement at the time of reference thereto.
"Net Asset Value" means the value of the Assets less the
liabilities of the Company, calculated pursuant to Section 14 in accordance with
generally accepted accounting principles and in compliance with the Investment
Company Act.
"Notes" means the notes issued pursuant to the Indenture.
"Offering Memorandum" means the final Private Placement
Memorandum, dated November 2, 2005, relating to the Common Shares, as amended or
supplemented from time to time.
"Other Accounts" shall have the meaning set forth in Section
9.8.
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"Person" means any human being, partnership, limited liability
company, corporation, trust or other entity.
"Placement Agents" means, collectively, Xxxxxx Xxxxxxx & Co.
Incorporated, Xxxxxx Xxxxxxx Xxxx Xxxxxx, Inc., Xxxxxx Xxxxxxx & Co.
International Limited and such other placement agents as may be designated by
the Investment Manager and approved by the Board of Directors.
"Portfolio Company" means any Person that has issued any
securities or incurred any obligations that are then owned, or that previously
were owned, by the Company.
"Preferred Member" means a Member holding Preferred Shares of
the Company.
"Preferred Share Commitment" means an amount committed by a
Preferred Member or prospective Preferred Member for investment in the Term
Preferred Shares of the Company pursuant to (a) a Subscription Agreement or (b)
an assumption by such Member of any Preferred Share Commitment by a Defaulting
Member pursuant to Section 7.1(d) or of a Transferring Member.
"Preferred Shares" means the preferred Shares of membership
interests of the Company having the rights and other terms set forth in the
Statement of Preferences for the applicable series thereof, including, without
limitation, any Term Preferred Shares and any Series A-2 Preferred Share.
"Preferred Shares Policy" means the Ambac Assurance
Corporation Financial Guaranty Insurance Policy.
"Qualified Investor" shall have the meaning set forth in
Section 7.1(a).
"Secretary of State" means the Secretary of State of the State
of Delaware.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder and applicable exemptions
granted therefrom, as amended from time to time.
"Shares" means the units of beneficial interest into which the
membership interests of the Company shall be divided from time to time and
includes fractions of Shares as well as whole Shares.
"Special Member" means York Enhanced Strategies Management,
LLC, a New York limited liability company, in its capacity as the Special Member
of the Company, or any successor thereto in accordance with this Agreement.
"Special Share" means the Series A-2 Preferred Share of the
Company, the Statement of Preferences of which is attached hereto as Appendix B.
"Statement of Preferences" means any statement of preferences
setting forth the rights and other terms of any Preferred Shares issued by the
Company.
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"Subscription Agreement" means each subscription agreement,
any related supplemental subscription agreement and any Preferred Shares
purchase agreement executed by any existing or prospective Member relating to
such Member's investment in the Company.
"Subscription Period" means the period commencing on the
Initial Drawdown Date and ending on or prior to June 30, 2007.
"Subsequent Drawdown Date" has the meaning assigned to such
term in Section 7.1(b).
"Substituted Member" means any Person admitted as a Member
pursuant to Section 11.2(b).
"Substituted Special Member" means any Person admitted as the
Special Member pursuant to Section 11.2(b).
"Term Preferred Shares" means the Series A-1 Preferred Shares
of the Company, the Statement of Preferences of which is attached hereto as
Appendix A.
"Transaction Documents" has the meaning assigned to such term
in the Indenture.
"Transfer" or "Transferred" means, with respect to any legal
or beneficial interest in the Company, a direct or indirect sale, transfer,
assignment, gift, pledge, hypothecation or other disposition or encumbrance of
any nature of or on such interest, whether by operation of law or otherwise
(including a transfer as a result of a merger or consolidation involving a
Member where the Member is not the surviving Person or a sale of all or
substantially all of a Member's assets).
"Transferee" means, with respect to any legal or beneficial
interest in the Company, the Person to whom the Transferor of such interest
desires to Transfer or has Transferred such interest.
"Transferor" means, with respect to any legal or beneficial
interest in the Company, the Member or other Person desiring to Transfer such
interest.
"Treasury Regulations" means the United States Treasury
regulations promulgated under the Code.
"Unfunded Commitment" means, with respect to any Member as of
any date, the amount of such Member's Commitment minus such Member's Aggregate
Capital Contributions previously made.
"Valuation Date" means (i) the last Business Day of each
Fiscal Quarter, (ii) a date selected by the Company within 48 hours prior to
each issuance (exclusive of Sundays and holidays) of Common Shares by the
Company, (iii) each distribution declaration date (after giving effect to the
relevant declaration), (iv) the date on which the Company terminates, and (v)
such other dates as determined by the Board of Directors, in accordance with the
valuation policies and guidelines approved from time to time by the Board of
Directors.
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SECTION 2.
LIMITED LIABILITY COMPANY FORMATION AND IDENTIFICATION
2.1 Formation
The Company has been formed as a limited liability company
pursuant to the Delaware Act by the filing of the Certificate with the Secretary
of State, Division of Corporations, in accordance with the Delaware Act on April
25, 2005. The Company is hereby continued under, and its business and affairs
shall be conducted in accordance with, the Delaware Act, and this Agreement
shall be governed by the laws of the State of Delaware. Upon its execution of
this Agreement in its capacity as the Special Member, York Enhanced Strategies
Management, LLC shall be admitted as the Special Member of the Company. Common
Members shall be admitted as Members of the Company upon the Investment
Manager's execution of this Agreement as the attorney-in-fact for such Common
Members. Preferred Members shall be admitted as Members of the Company pursuant
to the provisions of the applicable Statement of Preferences. In addition, any
Member will be admitted as a Member of the Company upon the execution of a
counterpart of this Agreement by such Member.
2.2 Name and Place of Business
The name of the Company shall be "York Enhanced Strategies
Fund, LLC" or such other name or names as may be selected by the Investment
Manager from time to time with written notice given to the Members of such
change, provided, however, that if York Enhanced Strategies Management, LLC, or
any affiliate thereof, no longer serves as the Investment Manager, then the
Company shall change its name so as to remove the word York within thirty (30)
Business Days of such occurrence. The principal office of the Company shall
initially be at the principal place of business of the Investment Manager at 000
Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or other or additional
places of business as may be selected from time to time by the Company.
2.3 Records of Members
The addresses and schedules of capital accounts and other
matters related to the Members shall be those set forth in the Company records.
A Member may change its address by written notice to the Company, in care of the
Investment Manager, at the address set forth in Section 2.2.
2.4 Limited Liability Company
The Company has been formed as a limited liability company
under and pursuant to the Delaware Act. The Board of Directors and the Members
specifically intend and agree that the Company shall, for purposes of the Code
and state tax laws, be classified as a regulated investment company and none of
them shall make any election or take any other action that would cause their
relationship under this Agreement to be excluded from the application of all or
any part of Subchapter M of the Code (or any successor provisions). The Members
specifically intend and agree that the Company shall not be a partnership
(including, but not necessarily
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limited to, a limited partnership) or any other venture, but a limited liability
company under and pursuant to the Delaware Act. No Member shall be construed to
be a partner of the Company or a partner of any Member or other Person of the
Company, and the Certificate, this Agreement and the relationships created
thereby and arising therefrom shall not be construed to suggest otherwise. The
Members hereby acknowledge and agree that the Investment Manager and any persons
that may be appointed as such by the Board of Directors or the Investment
Manager are "authorized persons" within the meaning of Section 18-204 of the
Delaware Act.
2.5 Tax Treatment
The Company will make both (1) the election to be treated as a
corporation under Treasury Regulations Section 1.7701-3 and (2) the election to
be treated as a regulated investment company under Section 851 of the Code. Each
Member agrees to the making of such elections and that it will make no elections
inconsistent therewith.
SECTION 3.
PURPOSE, NATURE OF BUSINESS AND POWERS
(a) The purposes of the Company and the business to be
carried on by it, subject to the limitations contained elsewhere in this
Agreement, are to engage in any business lawful for a corporation or partnership
formed under the laws of the State of Delaware, including to act as an
investment company.
(b) The Company shall have the power to do any and all
acts necessary, appropriate, proper, advisable, incidental or convenient to or
for the furtherance of the purposes and business described herein and for the
protection and benefit of the Company, and shall have, without limitation, any
and all of the powers of a corporation or partnership organized under the laws
of the State of Delaware.
(c) All property owned by the Company, real or personal,
tangible or intangible, shall be deemed to be owned by the Company as an entity,
and no Member or Director, individually, shall have any ownership of such
property.
SECTION 4.
TERM
The existence of the Company commenced on the date the
Certificate was filed in the Office of the Secretary of State and shall continue
in full force and effect until the end of the Investment Period, and for up to
two one-year extensions if requested by the Investment Manager and approved by a
majority of the outstanding Shares.
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SECTION 5.
SHARES OF MEMBERSHIP INTEREST
5.1 Beneficial Interest
The interest of the Members in the Company hereunder shall be
divided into an unlimited number of shares of membership interest, par value
$0.01 per share. All Shares issued in accordance with the terms hereof,
including, without limitation, Shares issued in connection with a dividend in
Shares or a split of Shares, shall be fully paid and nonassessable when the
consideration determined by the Company (if any) therefor shall have been
received by the Company.
5.2 Classes and Series
The Directors shall have the authority, without the approval
of any Members of the Company, to classify and reclassify issued and unissued
Shares into one or more classes and one or more series of any or all of such
classes, each of which classes and series thereof shall have such designations,
powers, preferences, voting, conversion and other rights, limitations,
qualifications and terms and conditions as the Directors shall determine from
time to time with respect to each such class or series; provided, however, that
no reclassification of any issued and outstanding Shares and no modifications of
any of the designations, powers, preferences, voting, conversion or other
rights, limitations, qualifications and terms and conditions of any issued and
outstanding Shares may be made by the Directors without the affirmative vote of
the Shares specified in Section 10.3 to the extent required thereby and the
satisfaction of any conditions to such reclassification as set forth in the
applicable Statement of Preferences.
5.3 Issuance of Shares
The Directors, in their discretion, may from time to time
without vote of the Members issue Shares of any class or any series of any such
class to such Person or Persons and for such amount and type of consideration,
including cash or property, at such time or times, and on such terms as the
Directors may determine, and may in such manner acquire other assets (including
the acquisition of assets subject to, and in connection with the assumption of,
liabilities) and businesses. The Directors may from time to time divide or
combine the Shares of any class or any series of any such class into a greater
or lesser number without thereby changing the proportionate beneficial interest
in such Shares. Issuances and repurchases of Shares may be made in whole Shares
and/or fractions as the Directors may determine.
5.4 Rights of Members
The Shares shall be personal property giving only the rights
in this Agreement specifically set forth. The ownership of the Assets of every
description is vested in the Company. The right to conduct and supervise the
conduct of the business of the Company is vested exclusively in the Directors
(subject to the right of the Board of Directors to delegate all or any part of
authority to any person or group of persons, including, without limitation, the
Investment Manager), and the Members shall have no interest therein other than
the beneficial
9
interest conferred by their Shares, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the
Company nor can they be called upon to share or assume any losses of the Company
or suffer an assessment of any kind by virtue of their ownership of Shares. No
Shares of any class or series shall entitle the holder to preference,
preemptive, appraisal, conversion or exchange rights (except as otherwise
specified in this Agreement or as specified by the Directors in the designation
or redesignation of any such class or series).
SECTION 6.
REGISTERED OFFICE AND AGENT FOR SERVICE OF PROCESS
The Corporation Trust Company is hereby designated, subject to
change by the Investment Manager, in its sole and absolute discretion, as the
registered office of the Company and as the agent upon whom process issued by
authority of or under any law of the State of Delaware may be served.
SECTION 7.
CAPITAL CONTRIBUTIONS
7.1 Capital Contributions of Members
(a) Each prospective initial Common Member, to be
admitted as a Member of the Company at the Initial Drawdown Date, must deliver
to the Investment Manager a completed, executed Subscription Agreement, which
must be satisfactory to the Company and the Investment Manager, and in which,
among other things, such prospective Common Member represents that it is an
"accredited investor" as defined in Rule 501(a) under the Securities Act, a
"qualified client" within the meaning under Rule 205-3 of the Advisers Act and a
"qualified purchaser" under Section 2(a)(51)(A) of the Investment Company Act
and the regulations promulgated thereunder (an accredited investor, qualified
client and qualified purchaser, collectively a "Qualified Investor"). The
minimum Common Share Commitment to which a Common Member may subscribe shall be
$10,000,000; provided, however, that the Investment Manager may, in its sole and
absolute discretion, waive this requirement. On the Initial Drawdown Date, each
initial prospective Common Member shall contribute to the Company 50% of its
Common Share Commitment or such other proportion as the Board of Directors shall
have determined. On the date of issuance of each series of Preferred Shares,
each Person who is admitted as a Member holding Preferred Shares of such series
in accordance with the applicable Statement of Preferences shall, in connection
therewith, contribute to the Company an amount in cash equal to the purchase
price for such Preferred Shares.
(b) Subsequent to the Initial Drawdown Date, the Company
will draw down Common Share Commitments on up to two additional Drawdown Dates
(each, a "Subsequent Drawdown Date") during the Subscription Period. On each
Subsequent Drawdown Date, the Company will issue Common Shares at Net Asset
Value per Common Share as calculated within
10
48 hours (exclusive of Sundays and holidays) prior to issuance in an aggregate
amount equal to the percentage of the Common Share Commitments drawn down.
(c) Unfunded Commitments may be called by the Company at
any time during the Subscription Period in any amount on not less than 15 days
prior written notice to the Members; provided, however, that (i) all Capital
Contributions for Common Shares shall be on a pro rata basis in proportion to
each Common Member's respective Unfunded Commitment, (ii) the aggregate amount
of Capital Contributions required on each Subsequent Drawdown Date shall be at
least 25% of the aggregate Common Share Commitments (or, with respect to the
last Subsequent Drawdown Date, any amount left undrawn), and (iii) all calls for
Capital Contributions shall be made so that they are required to be funded on
or prior to the end of the Subscription Period.
(d) If any Member fails to be or remain a Qualified
Investor or make full payment of any portion of its Share Commitment or any
other payment required hereunder when due (collectively, a "Defaulting Member"),
the Company shall give such Defaulting Member written notice of its failure to
be a Qualified Investor or default in payment and in the event such failure or
default shall continue beyond the tenth calendar day following such notice, the
Company may, in its sole discretion, take any one or more of the following
actions:
(i) The Company may assist the Defaulting Member
in finding a buyer for the Defaulting Member's Shares which buyer will
assume the Defaulting Member's obligations hereunder, subject to the
restrictions on transfer contained in Section 11.2 (in which case such
Person shall, as a condition of purchasing such Shares, become a party
to this Agreement and assume such Defaulting Member's obligation to
make both defaulted and future Capital Contributions).
(ii) The Company may pursue and enforce all
rights and remedies the Company may have against the Defaulting Member,
including a lawsuit to collect the overdue amount, if applicable, with
interest calculated thereon at a rate equal to the Base Rate plus six
percent (6%) per annum or, if greater, the annualized rate of total
return per Common Share over the prior four fiscal quarters (or since
commencement of operations if less than four fiscal quarters) (but not
in excess of the highest rate per annum permitted by applicable law).
(iii) The Company may offer a Defaulting Member's
Common Shares to the Common Members (other than any Defaulting Member),
which offer shall be made pro rata in accordance with the
non-defaulting Members' respective Common Share Commitments, at a
discount to the Net Asset Value of such Common Shares. The purchase
price for such Common Shares will be determined in the sole discretion
of a majority of the Independent Directors; provided, however, that
such Defaulting Member shall receive not less than 66 2/3% of the most
recently determined Net Asset Value of such Common Shares. If a
non-defaulting Member elects not to purchase all of the Common Shares
offered to it, such unpurchased Common Shares shall be reoffered pro
rata to the non-defaulting Members who have purchased all of the Common
Shares offered to them until either all of such Common Shares are
acquired or no non-defaulting Member wishes to make a further
investment. At the closing of such purchase (on a date
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and at a place designated by the Company), each purchasing Member
shall, as payment in full for the Defaulting Member's Common Shares
being purchased, (A) deliver a non-interest bearing, non-recourse
promissory note (in a form approved by the Company) payable upon the
earlier to occur of ten years after delivery of the note or liquidation
of the Company, secured only by the Defaulting Member's Common Shares
being purchased by such Member (excluding the portion of such Common
Shares represented by contributions made by such purchaser with respect
to such Common Shares), payable to the Defaulting Member in an amount
equal to the purchase price of the portion of the Defaulting Member's
Common Shares being purchased by such Member, and (B) assume the
portion of the Defaulting Member's obligation to make both defaulted
and future Capital Contributions and other payments pursuant to its
Common Share Commitment and this Agreement which are commensurate with
the portion of the Defaulting Member's Common Shares being purchased by
such Member. Upon the closing of such purchase, each purchasing Member
shall make a Capital Contribution in an aggregate amount equal to that
portion of the assumed Common Share Commitment representing the
defaulted Common Share Commitment, if any, of the Defaulting Member,
and the balance of the assumed Common Share Commitment shall be added
to such purchasing Member's Common Share Commitment for all purposes
under this Agreement. The Company shall specify the procedures for
making and accepting the offers contemplated by this subparagraph and
shall, in its discretion, set time limits for acceptance. All Capital
Contributions made by the purchasing Members shall be "Capital
Contributions" made under this Agreement and Common Shares shall be
issued to such Members accordingly. If all of the Defaulting Member's
Common Shares are not purchased pursuant to the immediately preceding
provisions, the Company may offer any remaining Common Shares to any
other Person on the same terms as originally offered to the Members
pursuant to such provisions, subject to the restrictions on transfer
contained in Section 11.2 (in which case such Person shall, as a
condition of purchasing such Common Shares, become a Member party to
this Agreement and assume such Defaulting Member's obligation to make
both defaulted and future Capital Contributions) or take any other
action in relation to such remaining Common Shares as may be permitted
pursuant to any other subparagraphs of this Section 7.1(d).
(iv) The Company may repurchase, retire and
cancel such Defaulting Member's Shares at a discount to the Net Asset
Value of such Shares. The consideration to be paid to such Defaulting
Member upon any repurchase, retirement or cancellation of such Shares
will be determined in the sole discretion of a majority of the
Independent Directors; provided, however, that such Defaulting Member
shall receive not less than 66 2/3% of the Net Asset Value of such
Shares.
(v) The Company may offer to the Common Members
(other than such Defaulting Member) for assumption by the
non-defaulting Members such Defaulting Member's Common Share Commitment
to make its Capital Contribution which was not made ("Defaulted
Commitment"), which offer shall be made pro rata in accordance with the
non-defaulting Members' respective Common Shares. If a non-defaulting
Member elects not to assume the entire portion of the Defaulted
12
Commitment offered to it, such unassumed Defaulted Commitment shall be
reoffered pro rata to the non-defaulting Members who have elected to
assume the entire portion of the Defaulted Commitment offered to them
until either all of such Defaulted Commitment is assumed or no
non-defaulting Member wishes to make a further assumption of the
Defaulted Commitment. At the closing of such offer (on a date and at a
place designated by the Company), each assuming Member shall make a
Capital Contribution in an amount equal to that portion of the
Defaulted Commitment assumed by it in accordance with the provisions of
this subparagraph which is then due or past due. The Investment Manager
shall specify the procedures for making and accepting the offers
contemplated by this subparagraph and shall, in its discretion, set
time limits for acceptance. If the entire Defaulted Commitment is not
assumed pursuant to the preceding provisions, the Company may offer to
any other Person for assumption any remaining portion of the Defaulted
Commitment, subject to the restrictions on transfer contained in
Section 11.2 (in which case such third party or parties shall become a
party to this Agreement). All Capital Contributions made by the
non-defaulting Members and other Persons pursuant to this subparagraph
(v) shall be "Capital Contributions" made under this Agreement, and the
Common Shares of each of such Members and other Persons shall be
adjusted accordingly. Such Defaulting Member's Common Share Commitment
shall be reduced by the aggregate amount of Defaulted Commitment, if
any, assumed by the non-defaulting Members and such other Persons and
for which payments have been actually received by the Company.
(vi) The Company may reduce (effective on the
date of the default) the Defaulting Member's Common Share Commitment
(to the extent it has not been assumed by another Member or Person) to
the amount of Capital Contributions actually made by such Defaulting
Member (net of distributions pursuant to Section 8.1), and the
aggregate Common Share Commitment of such Defaulting Member shall be
commensurately reduced; provided, however, that the Common Share
Commitments of the non-defaulting Members shall not be reduced.
(vii) If the Defaulting Member is an entity formed
for the purpose of investing in the Company and such Defaulting Member
has failed to make any portion of a Capital Contribution when required
and such failure is caused by the failure of one or more of such
Defaulting Member's investors to either (i) make an equity contribution
or (ii) deliver payment in exchange for any notes issued to such
investor, to such Defaulting Member, the Company may, in its sole
discretion, apply the provisions of this Section 7.1(d) to such
Defaulting Member's Common Shares and/or Common Share Commitments on a
pro rata basis to appropriately reflect the effect of the failure of
such Defaulting Member's defaulting equity investors in a manner which
is equitable to such Defaulting Member's non-defaulting equity
investors.
(e) No consent of any Member shall be required as a
condition precedent to any transfer, assignment, assumption or other disposition
of a Defaulting Member's Common Shares or Common Share Commitment, as the case
may be, pursuant to Section 7.1(d). If all of the Defaulting Member's Common
Shares and its Common Share Commitments are purchased in the manner set forth in
Section 7.1(d), such Defaulting Member shall cease to be a Common Member in the
Company and shall cease to have the power to exercise any rights or powers of a
Common Member.
13
7.2 Contribution of the Special Member
The Special Member shall receive the Special Share in exchange
for its contribution of $1,000.00 on the Initial Drawdown Date. The Special
Share shall have the designations, powers, preferences, voting and other rights,
limitations, qualifications and terms and conditions set forth in the Statement
of Preferences therefor attached hereto as Appendix B.
7.3 Withdrawal of Capital
No Member shall have any right to withdraw from the Company
except in connection with the admission of one or more Transferees of all of
such Member's Shares in the Company. No Member shall have any right to require
the Company to repurchase or redeem all or any portion of its Shares except as
provided in or pursuant to any Statement of Preferences. Further, no Common
Member shall have any right to withdraw its Common Share Commitment.
SECTION 8.
DISTRIBUTIONS
8.1 Distributions
(a) The Company shall from time to time distribute among
the Shares (or one or more classes or series thereof) such portion of the net
profits, surplus (including paid-in surplus), capital, or assets held by the
Company as the Directors may deem proper or as may otherwise be determined
pursuant to this Agreement or the Statement of Preferences therefor, which need
not be ratable with respect to distributions in respect of Shares of any other
class or series thereof of the Company, but must be ratable within each class or
series of Shares. The Preferred Shares shall not be entitled to receive, and the
Directors shall be prohibited from declaring or distributing in respect of any
of the Preferred Shares, any amount in excess of the distributions specified for
such Preferred Shares in the applicable Statement of Preferences therefor. Such
distributions may be made in cash or property (including without limitation any
type of obligations of the Company or any assets thereof) or any combination
thereof.
(b) Distributions may be made to the holders of record of
the Shares entitled to such distribution at the time such distribution is
declared or at such later date as shall be determined by the Company prior to
the date of payment.
(c) The Directors may always retain from any source such
amount as they may deem necessary to pay the debts or expenses of the Company or
to meet obligations of the Company, or as they otherwise may deem desirable to
use in the conduct of its affairs or to retain for future requirements or
extensions of the business of the Company.
(d) Any distribution by the Company pursuant to the terms
of this Section 8.1 or Section 16 to the Person shown on the Company's records
as a Member or to its legal representatives, or to the assignee of the right to
receive such distributions as provided in Section 11, shall relieve the Company,
the Directors and the Investment Manager of all liability to any other Person
who may be interested in such distribution by reason of any Transfer of any
interest
14
in any of such Member's Shares (including a Transfer thereof by operation of law
or by reason of death, incompetence, bankruptcy or liquidation of such Member,
as the case may be).
(e) Notwithstanding any provision to the contrary
contained in this Agreement, neither the Company, the Directors nor the
Investment Manager on behalf of the Company shall make any distribution to a
Member on account of its Shares if such distribution would violate Section
18-607 of the Delaware Act or other applicable law.
(f) Notwithstanding any other provision of this
Agreement, the Company may set aside reasonable reserves for anticipated
liabilities, obligations or commitments of the Company which it determines to be
reasonably necessary or desirable, in its sole judgment.
(g) The Company intends to pay dividends to the Members
in each taxable year equal to at least ninety percent (90%) of each of (i) the
Company's investment company taxable income (as determined for purposes of
Section 852 of the Code) and (ii) the amount described in Section 852(a)(1)(B)
of the Code, but it may be prevented from so doing by Distribution Restrictions.
Each Common Member agrees, within ten (10) calendar days following the receipt
of each written request from the Company, in the event that Distribution
Restrictions shall prevent the Company from making distributions to the Common
Members such that its deduction for dividends paid during the taxable year does
not equal at least ninety percent (90%) of each of (i) and (ii) in the previous
sentence, to execute and deliver to the Company, or an agent of the Company
specified by the Company, with respect to any such taxable year, a consent in
accordance with Section 565 of the Code and the Treasury Regulations promulgated
thereunder, and any successor provision, in the manner specified by the Company,
including, without limitation, a Form 972, to treat the amount specified by the
Company in such request as a dividend (the "Consent Dividend") for United States
federal income tax purposes for the taxable year indicated by the Company.
(h) In the case that a Common Member reasonably believes
that there may be a withholding tax imposed on a Consent Dividend under the laws
of the United States or any political subdivision thereof, upon the written
request of such Common Member given to the Company within five (5) Business Days
of the written request by the Company for the Consent Dividend forms and
documentation described in Section 8.1(g) hereof, such Common Member shall not
be required to execute or deliver such Consent Dividend forms unless the Company
has delivered to such Common Member a certificate signed by an authorized
officer of the Company stating that the Company has sufficient funds available
for required withholding tax and shall make such payments; provided that such
Common Member shall execute and deliver to the Company such Consent Dividend
forms and documentation within five (5) Business Days of the receipt of such
certificate.
(i) If it is determined by the Board of Directors that
the requisite consents for a Consent Dividend have not been obtained from the
Common Members, after taking such actions, if any, as the Board of Directors
deems appropriate to enforce the provisions of Section 8.1(g) hereof, but a
dividend payment or distribution would otherwise be required to be made on the
Common Shares in order to preserve the U.S. federal income tax status of the
Company as a regulated investment company or to avoid the imposition of the
excise tax under Section 4982 of the Code, such payment or distribution shall be
distributed for the benefit of the Common
15
Members and deposited into one or more escrow accounts. If any amounts deposited
in the escrow accounts are paid over to the secured creditors of the Company,
the Common Members will have an unsecured, recourse claim against the Company
for any such amounts paid to such senior secured creditors. For United States
federal, state and local tax purposes, each Common Member agrees to treat its
share of any amount so deposited as a dividend received by such Common Member at
the time of such deposit.
SECTION 9.
MANAGEMENT AND BOARD OF DIRECTORS
9.1 Management Generally
(a) Subject to the voting rights of the Shares, the
management of the Company shall be vested exclusively in the Board of Directors,
which shall have all of the power and authority of, and each Director, for the
purposes of the Delaware Act, is hereby named, a "manager" of the Company within
the meaning of the Delaware Act, including the authority to appoint officers and
to authorize Persons to act on behalf of the Company and engage third parties to
provide services to the Company and to perform any permissible activity and is
further authorized to delegate such power and authority to such officers or
authorized Persons as it determines to be appropriate, subject to the
requirements of the Investment Company Act. The Board of Directors may designate
one or more committees each of which shall have all or such lesser portion of
the power and authority of the entire Board of Directors as the Directors shall
determine from time to time, except to the extent that action by the entire
Board of Directors or particular Directors is required by the Investment Company
Act.
(b) Except as expressly set forth herein, the Members, in
their capacity as such, shall have no part in the management of the Company, and
shall have no authority or right to act on behalf of the Company in connection
with any matter. Employees, officers, authorized Persons and agents of the
Company shall have authority to act on behalf and in the name of the Company to
the extent authorized by the Board of Directors or pursuant to authority granted
by it. It is contemplated that the Board of Directors will delegate
substantially all of its power and authority with respect to the operations of
the Company to the Investment Manager and other authorized Persons.
9.2 Board of Directors
(a) Subject to the terms of each Statement of
Preferences, the Indenture and the provisions of the Investment Company Act, the
number of Directors shall be such number, not less than four, as shall be
approved from time to time by a majority of Directors then in office. No
reduction in the number of Directors shall have the effect of removing any
Director from office prior to the expiration of his or her term. An individual
nominated as a Director shall be at least 21 years of age and shall not be under
legal disability due to mental impairment. Directors need not own Shares and may
succeed themselves in office. The names and addresses of the Directors shall be
set forth in the records of the Company.
16
(b) The initial Director shall be Xxxxxxx X. Xxxxx. The
initial Director shall fill any initial vacancies in the Board of Directors by
appointing individuals having the qualifications described in this Agreement.
(c) Any Director may resign as a Director (without need
for prior or subsequent accounting) by an instrument in writing signed by him
and delivered or mailed to the Chairman, if any, the President or the Secretary
and such resignation shall be effective upon such delivery, or at a later date
provided in such instrument. Subject to the Investment Company Act, the
Indenture and the rights of the Preferred Shares with respect to the election of
Directors, any Director may be removed (provided that the aggregate number of
Directors after such removal shall not be less than the minimum number required
pursuant to Section 9.2(a) hereof) for cause at any time by the act of a
majority of the remaining Directors, specifying the date when such removal shall
become effective.
(d) The term of office of a Director shall terminate and
a vacancy shall occur in the event of the removal, resignation, incompetence or
other incapacity to perform the duties of the office, or death, of a Director.
Subject to the Investment Company Act, the Indenture and the rights of the
Preferred Shares with respect to the election of Directors, whenever a vacancy
in the Board of Directors shall occur, the remaining Directors may fill such
vacancy by appointing an individual having the qualifications described in this
Agreement by a written instrument signed or adopted by a majority of the
Directors then in office or by election of the holders of Shares, or may leave
such vacancy unfilled, or may reduce the number of Directors (provided that the
aggregate number of Directors after such removal shall not be less than the
minimum number specified in Section 9.2(a) hereof). Any vacancy created by an
increase in Directors may be filled by the appointment of an individual having
the qualifications described in this Agreement by a majority of the Directors
then in office or by election of the holders of Shares. No vacancy shall operate
to annul this Agreement or to revoke any existing agency created pursuant to the
terms of this Agreement. Whenever a vacancy in the number of Directors shall
occur, until such vacancy is filled as provided herein, the Directors in office,
regardless of their number, shall have all the powers granted to the Directors
and shall discharge all the duties imposed upon the Directors by this Agreement.
(e) Meetings of the Directors shall be held from time to
time upon the call of the Chairman, if any, the President, the Secretary or any
two Directors. Regular meetings of the Directors may be held without call or
notice at a time and place fixed by resolution of the Directors. Notice of any
other meeting shall be mailed via overnight courier not less than 48 hours
before the meeting or otherwise actually delivered orally or in writing not less
than 24 hours before the meeting, but may be waived in writing by any Director
either before or after such meeting. The attendance of a Director at a meeting
shall constitute a waiver of notice of such meeting except where a Director
attends a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting has not been lawfully called or
convened. The Directors may act with or without a meeting. A quorum for all
meetings of the Directors shall be one-third of the Directors then in office.
Unless provided otherwise in this Agreement, any action of the Directors may be
taken at a meeting by vote of a majority of the Directors present (a quorum
being present) or without a meeting by written consent of a majority of the
Directors or such other proportion as shall be specified herein for action at a
meeting at which all Directors then in office are present.
17
(i) Any committee of the Directors may act with
or without a meeting. A quorum for all meetings of any such committee
shall be one-third of the members thereof. Unless provided otherwise in
this Agreement, any action of any such committee may be taken at a
meeting by vote of a majority of the members of such committee present
(a quorum being present) or without a meeting by written consent of a
majority of the members of such committee or such other proportion as
shall be specified herein for action at a meeting at which all
committee members are present.
(ii) With respect to actions of the Directors and
any committee of the Directors, Directors who are Interested Persons in
any action to be taken may be counted for quorum purposes under this
Section and shall be entitled to vote to the extent not prohibited by
the Investment Company Act.
(iii) All or any one or more Directors may
participate in a meeting of the Directors or any committee thereof by
means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each
other; participation in a meeting pursuant to any such communications
system shall constitute presence in person at such meeting except as
otherwise provided by the Investment Company Act.
(iv) The Directors may, but shall not be required
to, elect a Chairman of the Board of Directors, who shall not, in his
or her capacity as such, be an officer of the Company and who shall
serve at the pleasure of the Board of Directors. Any Chairman of the
Board of Directors elected by the Directors need not be an Independent
Director, unless otherwise required by applicable law.
(f) The Directors shall elect a Chief Executive Officer,
a President, a Secretary and a Chief Financial Officer and any other authorized
persons who shall serve at the pleasure of the Board of Directors or until their
successors are elected. The Directors may elect or appoint or may authorize the
Chairman, if any, or Chief Executive Officer to appoint such other officers or
agents or other authorized persons with such other titles and powers as the
Board of Directors may deem to be advisable. Any Chairman shall, and the Chief
Executive Officer, President, Secretary and Chief Financial Officer may, but
need not, be a Director.
(g) The Directors and officers shall owe to the Company
and the holders of Shares the same fiduciary duties as owed by directors and
officers of corporations to such corporations and their stockholders under the
Delaware General Corporation Law. Directors elected by the holders of any class
or series of the Company's securities shall have no special duties to the
holders of such class or series of securities. The Directors shall have
exclusive and absolute control over the Assets and over the business of the
Company to the same extent as if the Directors were the sole owners of the
property and business in their own right, but with such powers of delegation as
may be permitted by this Agreement. The Directors shall have power to engage in
any activity not prohibited by Delaware law. The enumeration of any specific
power herein shall not be construed as limiting the aforesaid power. The
Directors may perform such acts as in their sole discretion are proper for
conducting the business of the Company. The powers of the Directors may be
exercised without order of or resort to any court. No Director
18
shall be obligated to give any bond or other security for the performance of any
of his duties or powers hereunder.
(h) The Board of Directors may adopt and from time to
time amend or repeal By-Laws ("By-Laws") for the conduct of the business of the
Company. Such By-Laws shall be binding on the Company and the Members unless
inconsistent with the provisions of this Agreement. The Members shall not have
authority to adopt, amend or repeal By-Laws.
(i) Any determination as to what is in the interests of
the Company made by the Directors in good faith shall be conclusive. In
construing the provisions of this Agreement, the presumption shall be in favor
of a grant of power to the Directors.
(j) The Directors shall have the power, without any
amendment to this Agreement or any Statement of Preferences adopted hereunder,
to impose restrictions on the activities of Members with respect to the Company
or any Portfolio Company. Such restrictions and limitations shall be binding
upon all Members.
9.3 Expenses of the Company
(a) The Company shall have power to incur and pay out of
the Assets or income of the Company any expenses necessary or appropriate to
carry out any of the purposes of this Agreement and the business of the Company.
The Directors may pay themselves such compensation as they in good faith may
deem reasonable and may be reimbursed for expenses reasonably incurred by
themselves on behalf of the Company.
(b) The Company shall pay all, and shall reimburse the
Placement Agents, the Investment Manager and their respective Affiliates for any
costs and expenses that, in the good faith judgment of the Board of Directors,
are incurred in the organization, offering, capitalization, operation or
administration of the Company and any Investments, including, without
limitation, the Advisory Fee and other costs and expenses specified herein or in
the Investment Management Agreement to be paid by the Company; fees of the
Placement Agents and any other placement agents; organizational and offering
fees and expenses relating to the Common Shares, the Term Preferred Shares, and
the Notes and enhancing or assuring the credit quality thereof; fees and
expenses relating to short-term investments of cash and investments in Portfolio
Companies including the structuring, negotiation, acquisition, syndication,
holding, restructuring, recapitalization, management and disposition thereof or
relating to proposed portfolio investments which are not consummated; marketing
and travel expenses; dividends on the Preferred Shares (including the Special
Share); due diligence and negotiation expenses; research expenses; reasonable
premiums for insurance protecting the Company, the Investment Manager, any of
their respective Affiliates and any of their respective employees and agents;
insurance, including periodic premiums and certain fees payable under the
insurance policy for the benefit of the holders of the Term Preferred Shares;
fees and expenses of custodians, administrators, transfer and distribution
agents, trustees and collateral agents; brokerage fees and commissions; dealer
spreads; legal fees and expenses of the Company and the Investment Manager
incurred in connection with matters relating to or for the Company, including
costs and expenses incurred in connection with any actual or threatened
litigation, and any judgments or settlements paid in connection with litigation,
involving the Company, a Portfolio Company or a
19
Person entitled to indemnification from the Company; indemnification fees and
expenses; compliance expenses; accounting expenses; auditing expenses; proxy
expenses, costs and expenses of filings and registrations; rating agency fees
and expenses; appraisal expenses; expenses relating to organizing companies
through or in which investments in Portfolio Companies will be made; expenses
incurred in maintaining the places of business of the Company; costs and
expenses of preparing and maintaining the books and records of the Company and
entities through which it invests; costs and expenses that are classified as
extraordinary expenses under generally accepted accounting principles; taxes or
other governmental charges payable by the Company; interest; expenses (including
legal fees and expenses) incurred in connection with the bankruptcy or
reorganization of any Portfolio Company; costs of communications to the Members,
creditors and regulatory authorities; costs of responding to regulatory
inquiries and reporting to regulatory authorities; costs of Member meetings and
the solicitation of Member consents; costs incurred in valuing assets; costs of
winding up and liquidating the Company; expenses incurred in connection with a
Member that defaults in respect of a Capital Contribution or any payment due to
the Company; and interest, distributions and fees under the Indenture, other
indebtedness incurred by the Company and the Shares.
(c) The Company shall pay all legal, tax, accounting and
other expenses (including organizational expenses) incurred in connection with
the Indenture, the Preferred Shares and the formation of the Company and related
entities, and all fees payable to the Placement Agents in connection with, among
other things, subscriptions for the Shares and to any other agents, lenders,
arrangers or other Persons in connection with the Indenture and the placement
and sale of the Preferred Shares.
9.4 Members' Consent
To the fullest extent permitted by law, each Member hereby
consents to the exercise by the Board of Directors and the Investment Manager of
the powers conferred on them by this Agreement and the Investment Management
Agreement.
9.5 Exculpation
Except as otherwise required by law, no Member shall be
subject in such capacity to any personal liability whatsoever to any Person in
connection with the Assets or the acts, obligations or affairs of the Company.
Members shall have the same limitation of personal liability as is extended to
stockholders of a private corporation for profit incorporated under the general
corporation law of the State of Delaware. Except as otherwise required by law,
the Directors and the officers of the Company (each an "Indemnified Person," and
collectively, the "Indemnified Persons") shall not be liable, responsible or
accountable in damages or otherwise to the Company, any Member or any other
Person for any loss, liability, damage, settlement, cost, or other expense
(including reasonable attorneys' fees) incurred by reason of any act or omission
or any alleged act or omission performed or omitted by such Indemnified Person
(other than solely in such Indemnified Person's capacity as a Member, if
applicable) in connection with the establishment, management or operations of
the Company or the management of the Assets (including in connection with
serving on any creditors' committee or board of directors for any Portfolio
Company ), except that an Indemnified Person shall be liable to the Company or
any
20
Member, as the case may be, if such act or failure to act arises out of the
bad faith, willful misfeasance, gross negligence or reckless disregard of such
Person's duty to the Company or such Member, as the case may be (such conduct,
"Disabling Conduct"). Subject to the foregoing, all such Persons shall look
solely to the Assets (including, without limitation, the Unfunded Commitments)
for satisfaction of claims of any nature arising in connection with the affairs
of the Company. If any Indemnified Person is made a party to any claim, action,
arbitration, suit or proceeding (each, a "Claim") to enforce any such liability,
subject to the foregoing exception in the case of Disabling Conduct, such
Indemnified Person shall not, on account thereof, be held to any personal
liability. Nothing contained herein shall restrict the Company in any way from
exculpating the Investment Manager, the Placement Agent and their respective
Affiliated Persons or any distributor of Shares, officer, director, member,
manager, employee, stockholder, assigns, representative or agent of any such
Person from liability or indemnifying any of such Persons as the Company may
agree in writing with such Persons.
9.6 Indemnification; No Duty of Investigation; Reliance on Experts
(a) To the fullest extent permitted by applicable law,
each of the Indemnified Persons shall be held harmless and indemnified by the
Company (out of the Assets (including, without limitation, the Unfunded
Commitments) and not out of the separate assets of any Member) against any
damages, loss, liabilities, costs and expenses, including amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and
attorney's and accountant's fees and expenses reasonably incurred by such
Indemnified Person in connection with the defense or disposition of any Claim,
whether civil or criminal, before any court or administrative or investigative
body in which such Indemnified Person may be or may have been involved as a
party or otherwise or with which such Indemnified Person may be or may have been
threatened, while acting in such Person's capacity as an Indemnified Person,
except with respect to any matter as to which such Indemnified Person shall not
have acted in good faith in the reasonable belief that such Person's action was
in the best interest of the Company or, in the case of any criminal proceeding,
as to which such Indemnified Person shall have had reasonable cause to believe
that the conduct was unlawful, provided, however, that an Indemnified Person
shall only be indemnified hereunder if such Indemnified Person's activities do
not constitute Disabling Conduct. The Indemnified Person shall not be
indemnified hereunder if such Indemnified Person's activities constitute
Disabling Conduct and there has been (a) a final decision on the merits by a
court or other body of competent jurisdiction before whom the issue of
entitlement to indemnification was brought that such Indemnified Person is not
entitled to indemnification, or (b) in the absence of such a decision, (1) by a
majority vote of a quorum of those Directors who are not "interested persons"
(as defined in Section 2(a)(19) of the Investment Company Act) of the
Indemnified Person, that the Indemnified Person is not entitled to
indemnification (the "Disinterested Non-Party Directors"), or (2) if such quorum
is not obtainable (or even if obtainable, if such majority so directs), upon
receipt by the Company of a written opinion of independent legal counsel that
concludes that the Indemnified Person should not be entitled to indemnification.
Notwithstanding the foregoing, with respect to any Claim voluntarily prosecuted
by any Indemnified Person as plaintiff, indemnification shall be mandatory only
if the prosecution of such action, suit or other proceeding by such Indemnified
Person was authorized by a majority of the Directors. All determinations to make
advance payments in connection with the expense of defending any proceeding
shall be authorized and made in accordance with the immediately succeeding
paragraph (b) below.
21
(b) The Company shall make advance payments in connection
with the expenses of defending any Claim with respect to which indemnification
might be sought hereunder if the Company receives a written affirmation by the
Indemnified Person of the Indemnified Person's good faith belief that the
standards of conduct necessary for indemnification have been met and a written
undertaking to reimburse the Company if a final decision on the merits by a
court or other body of competent jurisdiction before whom the issue of
entitlement to indemnification is subsequently brought determines that such
Indemnified Person is not entitled to indemnification. In addition, at least one
of the following conditions must be met: (1) the Indemnified Person shall
provide adequate security for his undertaking, (2) the Company shall be insured
against losses arising by reason of any lawful advances, or (3) a majority of a
quorum of the Disinterested Non-Party Directors, or if a majority vote of such
quorum so directs, independent legal counsel in a written opinion, shall have
concluded, based on a review of readily available facts, that there is
substantial reason to believe that the Indemnified Person ultimately will be
found entitled to indemnification.
(c) The rights accruing to any Indemnified Person under
these provisions shall not exclude any other right to which he may be lawfully
entitled.
(d) Notwithstanding the foregoing, subject to any
limitations provided by the Investment Company Act and this Agreement, the
Company shall have the power and authority to indemnify Persons and provide for
the advance payment of expenses to Directors, officers, employees, agents and
other persons providing services to the Company or serving in any capacity at
the request of the Company to the fullest extent permitted by law as if the
Company were a corporation organized under the Delaware General Corporation Law
provided that such indemnification has been approved by a majority of the
Directors or, with respect to agreements to which the Investment Manager is not
a party, by the Investment Manager.
(e) No purchaser, lender, transfer agent or other person
dealing with the Directors or with any officer, employee or agent of the Company
shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Directors or by said officer, employee or agent or
be liable for the application of money or property paid, loaned, or delivered to
or on the order of the Directors or of such officer, employee or agent. Every
obligation, contract, undertaking, instrument, certificate, Share and other
security of the Company, and every other act or thing whatsoever executed in
connection with the Company shall be conclusively taken to have been executed or
done by the executors thereof only in their capacity as Directors under this
Agreement or in their capacity as officers, employees or agents of the Company.
The Company may maintain insurance for the protection of the Assets, its
Members, Directors, officers, employees or agents in such amounts as the
Directors shall deem adequate to cover possible liability, and such other
insurance as the Directors in their sole judgment shall deem advisable or is
required by the Investment Company Act.
(f) Each Indemnified Person shall, in the performance of
its duties, be fully and completely justified and protected with regard to any
act or any failure to act resulting from reliance in good faith upon the books
of account or other records of the Company, upon an opinion of counsel, or upon
reports made to the Company by any of the Company's officers or employees or by
any advisor, administrator, manager, distributor, selected dealer, accountant,
appraiser or other expert or consultant selected with reasonable care by the
Directors, officers or
22
employees of the Company, regardless of whether such counsel or other person may
also be a Director.
9.7 Director Limited Liability
Except as otherwise provided by law, the Directors shall not
be obligated personally for any debt, obligation or liability of the Company
solely by reason of being a Director or manager of the Company, and the debt,
obligations and liabilities of the Company, whether arising in contract, tort or
otherwise, shall be solely the debts, obligations and liabilities of the
Company.
9.8 Certain Other Activities
The Investment Manager and its Affiliated Persons, employees
and associates (collectively, the "Manager Affiliates") may manage funds and
accounts other than the Assets ("Other Accounts") that invest in assets eligible
for purchase by the Company. Subject to the requirements of the Investment
Company Act and the Advisers Act, the Manager Affiliates are in no way
prohibited from spending, and may spend, substantial business time in connection
with other businesses or activities, including, but not limited to, managing
Other Accounts, managing investments, advising or managing entities whose
investment objectives are the same as or overlap with those of the Company,
participating in actual or potential investments of the Company or any Member,
providing consulting, merger and acquisition, structuring or financial advisory
services, including with respect to actual, contemplated or potential
investments of the Company, or acting as a director, officer, manager, member or
creditors' committee member of, or adviser to, or participant in, any
corporation, company, limited liability company, trust or other Person. Subject
to the requirements of the Investment Company Act and the Advisers Act, the
Manager Affiliates are in no way prohibited from receiving, and may receive,
fees or other compensation from third parties for any of these activities, which
fees will be for their own account and not for the account of the Company. Such
fees may relate to actual, contemplated or potential investments of the Company
and may be payable by entities in which the Company directly or indirectly has
invested or contemplates investing. Neither the Company nor any Member shall, by
virtue of this Agreement, have any right, title or interest in or to the
businesses or activities permitted by this Section 9.8 or in or to any fees or
consideration derived therefrom. Allocation of investments or opportunities
among the Company and Other Accounts will be made as described in the Offering
Memorandum or as otherwise approved by the Board of Directors in accordance with
the Investment Company Act and the Advisers Act, except to the extent permitted
by any exemptive order obtained from the U.S. Securities and Exchange
Commission.
23
SECTION 10.
MEMBERS
10.1 Identity, Contributions and Common Share Commitments
The names and addresses of the Members, the Shares owned by
each Member and the Capital Contributions, Common Share Commitments and Unfunded
Commitments of each will be set forth in the Company's records.
10.2 No Management Power or Liability
Subject to the requirements of the Investment Company Act,
except as otherwise provided herein, the Members as such shall have no right or
power to, and shall not, take part in the management of or transact any business
for the Company, including but not limited to, any acts or decisions relating to
investment activities of the Company, and shall have no power to sign for or
bind the Company. Except as otherwise required by law, no Member, in its
capacity as such, shall be personally liable for any debt, loss, obligation or
liability of the Company in excess of its Unfunded Commitment (if applicable).
Except to the extent expressly provided in the preceding sentence, the Company
shall indemnify and hold harmless each Member (in its capacity as such) in the
event such Member becomes liable for any debt, loss, obligation or liability of
the Company unless such Member has engaged in fraud, willful misconduct, gross
negligence or criminal conduct constituting a felony with respect to such debt,
loss, obligation or liability.
10.3 Amendments
(a) If a vote of the holders of Shares is required by
applicable law or this Agreement to amend this Agreement, or if the Directors
determine to submit an amendment to a vote of the holders of Shares, then, other
than with respect to Sections of this Agreement where a different affirmative
vote is specifically required, this Agreement may be amended, after a majority
of the Directors then in office have approved a resolution therefor, by the
affirmative vote set forth in Section 10.10. Section 10.10 may only be amended,
after a majority of Directors then in office have approved a resolution
therefor, by the affirmative vote of the holders of not less than 75% of the
affected Shares then outstanding. Notwithstanding the foregoing, without the
unanimous approval of all of the Members affected thereby, no such amendment
may:
(i) require any Common Member to make Capital
Contributions in excess of its Common Share Commitment, require any
Member that is not a Common Member to make additional Capital
Contributions in excess of its contractual commitment or otherwise
increase the liability of any Member hereunder; or
(ii) adversely affect distributions to such
Member; or
(iii) modify this Section 10.3(a).
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(b) Subject to the requirements of the Investment Company
Act and other applicable law, notwithstanding the foregoing provisions of this
Section 10.3, the Board of Directors may amend this Agreement, without the
consent of any Member:
(i) to change the name of the Company or any
class or series of Shares;
(ii) to make any change that does not adversely
affect the relative rights or preferences of any class or series of
Shares;
(iii) to conform this Agreement to the
requirements of the Investment Company Act or any other applicable law;
(iv) in connection with qualifying the Company as
a limited liability company under the laws of any state;
(v) to prevent any material and adverse effect
to any Member or the Company arising from the application of legal
restrictions to any Member, the Investment Manager or the Company,
subject to the requirement that the Members not be materially and
adversely affected;
(vi) to maintain the Company's status as a
regulated investment company under the code or secure any tax benefit
relating to such status;
(vii) to prevent the Company's assets from being
deemed "plan assets" under ERISA or Section 4975 of the Code with
respect to any holder of the Company's securities that is an employee
benefit plan investor subject to Title I of ERISA and/or a benefit plan
investor within the meaning of U.S. Department of Labor Regulation
Section 2510.3-101(f)(2), subject to the requirement that the Members
not be materially and adversely affected.
(viii) to make any change that is necessary or
desirable to cure any ambiguity or inconsistency, subject to the
requirement that the Members not be materially and adversely affected;
or
(ix) to make any other changes similar to the
foregoing, subject to the requirement that the Members not be
materially and adversely affected.
provided that the Board of Directors shall not be liable for failing to do so.
Prior to entering into any amendment pursuant to this Section 10.3(b), the Board
of Directors shall notify the Members in writing of the material terms of such
amendment. The Board of Directors may reflect in its records changes made in the
composition of the Members and their respective Capital Contributions and Shares
in accordance with the provisions of this Agreement without the consent of the
Members.
(c) After any amendment to this Agreement becomes
effective, the Company shall send to the Members a copy of such amendment.
25
(d) Nothing contained in this Agreement shall permit the
amendment of this Agreement to impair the exemption from personal liability of
the Members, Directors, officers, employees and agents of the Company and their
respective Affiliates, to permit assessments upon Members in excess of their
Unfunded Commitments or to permit the Company to be converted at any time from a
"closed-end investment company" to an "open-end investment company" as those
terms are defined by the Investment Company Act or a company obligated to
repurchase shares under Rule 23c-3 of the Investment Company Act.
(e) An amendment duly adopted by the requisite vote of
the Board of Directors and, if required, Members as aforesaid, shall become
effective at the time of such adoption or at such other time as may be
designated by the Board of Directors or Members, as the case may be. A
certification signed by a majority of the Directors or the Secretary setting
forth an amendment and reciting that it was duly adopted by the Directors and,
if required, Members as aforesaid, or a copy of the Agreement, as amended, and
executed by a majority of the Directors or the Secretary, shall be conclusive
evidence of such amendment when lodged among the records of the Company or at
such other time designated by the Directors.
(f) Notwithstanding any other provision hereof, until
such time as Shares are issued and outstanding, this Agreement may be terminated
or amended in any respect by the affirmative vote of a majority of the Directors
or by an instrument signed by a majority of the Directors then in office.
(g) Notwithstanding anything to the contrary contained
herein, no holder of Shares of any class or series, other than to the extent
expressly determined by the Directors with respect to Shares qualifying as
preferred stock pursuant to Section 18(a) of the Investment Company Act, shall
have any right to require the Company or any person controlled by the Company to
purchase any of such holder's Shares.
10.4 Merger, Consolidation or Sale of Assets
Subject to the provisions of the Investment Company Act and
other applicable law, the Company may merge or consolidate with any other
entity, or sell, lease or exchange all or substantially all of the Assets upon
approval by two-thirds of the Directors then in office and the affirmative vote
of not less than 67% of the outstanding Shares.
10.5 List of Members
Upon reasonable demand for any purpose reasonably related to
the Member's interest as a Member of the Company, a list of the names and
addresses of all Members (to the extent known to the Company) shall be made
available to any Member or its representative for inspection and, at the
Member's cost, copying upon written request and at reasonable times.
10.6 Limitations
No Member shall have the right or power to (i) bring an action
for partition against the Company; (ii) cause the termination or dissolution of
the Company, except as expressly set forth in this Agreement; or (iii) demand
property other than cash with respect to any distribution. For the avoidance of
doubt, Members shall not have the power provided for in
26
Section 18-801(a)(3) of the Delaware Act, and the Company may only be dissolved
pursuant to the terms of this Agreement. Except to the extent required for a
Delaware corporation, the Members shall have no power to vote as to whether or
not a court action, legal proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Company or the
Members.
10.7 Meetings.
(a) Subject to the provisions of Section 9.2, the Company
may, but shall not be required to, hold annual meetings of the holders of any
class or series of Shares following the initial meeting of the Directors. An
annual or special meeting of Members may be called at any time only by the
Directors or by Members in accordance with the requirements of the Investment
Company Act. Any meeting of Members shall be held within or without the State of
Delaware on such day and at such time as the Directors shall designate.
(b) Notice of all meetings of Members, stating the time,
place and purposes of the meeting, shall be given by the Directors by mail to
each Member of record entitled to vote thereat at its registered address, mailed
at least 10 days before the meeting or otherwise in compliance with applicable
law. Except with respect to an annual meeting, at which any business required by
the Investment Company Act may be conducted, only the business stated in the
notice of the meeting shall be considered at such meeting. Any adjourned meeting
may be held as adjourned one or more times without further notice not later than
130 days after the record date. For the purposes of determining the Members who
are entitled to notice of and to vote at any meeting the Directors may, without
closing the transfer books, fix a date not more than 100 days prior to the date
of such meeting of Members as a record date for the determination of the Persons
to be treated as Members of record for such purposes.
10.8 Action Without a Meeting
Any action that may be taken at a meeting of the Members may
be taken without a meeting if a consent in writing setting forth the action to
be taken is signed by Members owning not less than the minimum percentage of the
Shares of the Members that would be necessary to authorize or take such action
at a meeting at which all the Members were present and voted, and notice of the
action taken is provided to each Member. Any such written consent must be filed
with the records of the meetings of the Members.
10.9 Procedures
A Member shall be entitled to cast votes: (i) at a meeting, in
person, by written proxy or by a signed writing directing the manner in which
its vote is to be cast, which writing must be received by the Company at or
prior to the commencement of the meeting, or (ii) without a meeting, by a signed
writing directing the manner in which its vote is to be cast, which writing must
be received by the Company at or prior to the time and date on which the votes
are to be counted. Except as otherwise herein specifically provided, all
procedural matters relating to the holding of meetings of Members or taking
action by written consent, whether noticed or solicited by the Company or
others, including, without limitation, matters relating to the date for the
meeting or the counting of votes by written consent, the time period during
which written
27
consents may be solicited, minimum or maximum notice periods, record dates,
proxy requirements and rules relating to the conduct of meetings or the
tabulation of votes, shall be as reasonably established by the Directors. To the
extent not otherwise provided by the Board of Directors pursuant to Section
10.10 or otherwise, the laws of the State of Delaware pertaining to the validity
and use of proxies regarding the shares of business corporations shall govern
the validity and use of proxies given by Members.
10.10 Voting
(a) Members shall have no power to vote on any matter
except matters on which a vote of Shares is required by or pursuant to the
Investment Company Act, a Statement of Preferences, this Agreement, the By-Laws
or any resolution of the Directors. Any matter required to be submitted for
approval of any of the Shares and affecting one or more classes or series shall
require approval by the required vote of Shares of the affected class or classes
and series voting together as a single class and, if such matter affects one or
more classes or series thereof differently from one or more other classes or
series thereof or from one or more series of the same class, approval by the
required vote of Shares of such other class or classes or series or series
voting as a separate class shall be required in order to be approved with
respect to such other class or classes or series or series; provided, however,
that except to the extent required by the Investment Company Act, the Indenture
or any Statement of Preferences, there shall be no separate class votes on the
election or removal of Directors or the selection of auditors for the Company.
Members of a particular class or series thereof shall not be entitled to vote on
any matter that affects the rights or interests of only one or more other
classes or series of such other class or classes or only one or more other
series of the same class. There shall be no cumulative voting in the election or
removal of Directors.
(b) The holders of one-third of the outstanding Shares of
the Company on the record date present in person or by proxy shall constitute a
quorum at any meeting of the holders for purposes of conducting business on
which a vote of all Members of the Company is being taken. The holders of
one-third of the outstanding Shares of a class or classes on the record date
present in person or by proxy shall constitute a quorum at any meeting of the
holders of such class or classes for purposes of conducting business on which a
vote of holders of such class or classes is being taken. The holders of
one-third of the outstanding Shares of a series or multiple series on the record
date present in person or by proxy shall constitute a quorum at any meeting of
the holders of such series or multiple series for purposes of conducting
business on which a vote of holders of such series or multiple series is being
taken. Shares underlying a proxy as to which a broker or other intermediary
states its absence of authority to vote with respect to one or more matters
shall be treated as present for purposes of establishing a quorum for taking
action on any such matter only to the extent so determined by the Directors at
or prior to the meeting of holders of Shares at which such matter is to be
considered and shall not be treated as present for purposes of voting or any
other purpose except as determined by the Directors.
(c) Subject to any provision of the Investment Company
Act, any Statement of Preferences or this Agreement specifying or requiring a
greater or lesser vote requirement for the transaction of any matter of business
at any meeting of Members or, in the absence of any such provision of the
Investment Company Act, any Statement of Preferences or this Agreement, subject
to any provision of the By-Laws or resolution of the Directors specifying or
requiring a
28
greater or lesser vote requirement, the affirmative vote of (i) a plurality (or
if provided by the By-Laws, a majority) of the Shares present in person or
represented by proxy and entitled to vote for the election of any Director or
Directors shall be the act of such Members with respect to the election of such
Director or Directors, (ii) a majority of the outstanding Shares, or (iii) where
a separate vote of one or more classes or series is required on any matter, the
affirmative vote of a majority of the outstanding Shares of such class or
classes or series or series shall be the act of the Members of such class or
classes or series or multiple series, as the case may be, with respect to such
matter. A majority of outstanding Shares means the lesser of (A) 67% or more of
such Shares present at a meeting if the Holders of more than 50% of such Shares
are present in person or represented by proxy and entitled to vote on such
matter or (B) more than 50% of such Shares who vote on such matter.
(d) At any meeting of Members, any holder of Shares
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Company as the Secretary
may direct, for verification prior to the time at which such vote shall be
taken. Pursuant to a resolution of a majority of the Directors, proxies may be
solicited in the name of one or more Directors or one or more of the officers or
employees of the Company. Only Members of record shall be entitled to vote. Each
full Share shall be entitled to one vote and each fractional Share shall be
entitled to a vote equal to its fraction of a full Share. When any Share is held
jointly by several persons, any one of them may vote at any meeting in person or
by proxy in respect of such Share, but if more than one of them shall be present
at such meeting in person or by proxy, and such joint owners or their proxies so
present disagree as to any vote to be cast, such vote shall not be received in
respect of such Share. A proxy purporting to be given by or on behalf of a
Member of record on the record date for a meeting shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. If the holder of any such Share is a minor or a
person of unsound mind, and subject to guardianship or to the legal control of
any other person as regards the charge or management of such Share, he may vote
by his guardian or such other person appointed or having such control, and such
vote may be given in person or by proxy. The Directors shall have the authority
to make and modify from time to time regulations regarding the validity of
proxies. In addition to signed proxies, such regulations may authorize
facsimile, telephonic, Internet and other methods of appointing a proxy that are
subject to such supervision by or under the direction of the Directors as the
Directors shall determine.
SECTION 11.
ADMISSION OF ADDITIONAL MEMBERS;
ASSIGNMENTS OR TRANSFERS OF SHARES
11.1 Admission of Additional Members
No additional Members will be admitted after the Initial
Drawdown Date, except as provided in Sections 7.1 and 11.2.
29
11.2 Assignments or Transfers of Shares
(a) In no event shall all or any part of a Member's
Preferred Shares be Transferred, and any purported Transfer shall be void and
shall not be recognized by the Company, unless all of the conditions set forth
in the applicable Statement of Preferences or Subscription Agreement with
respect thereto have been satisfied. In no event shall all or any part of a
Member's Common Shares or Common Share Commitments be Transferred, and any such
purported Transfer shall be void and shall not be recognized by the Company or
the Members, unless all of the following conditions are satisfied:
(i) The Transferor, if requested by the Company
in its sole and absolute discretion, has delivered to the Company an
opinion of counsel reasonably acceptable to the Company that such
Transfer would not violate the Securities Act or any state blue sky
laws (including any investor suitability standards);
(ii) The Transferor has demonstrated to the
reasonable satisfaction of the Company that the Transferee is a
Qualified Investor and that such transfer would not result in the
breach of any agreement to which the Company is a party or by which it
or any of the Assets is bound;
(iii) The Company has received a notice of
Transfer signed by both the Transferor and Transferee, such notice to
be substantially in the form of Appendix C attached hereto (or such
other document specified in the applicable Statement of Preferences);
and
(iv) the Company consents in writing to such
Transfer (which consent may be withheld in the Company's discretion).
(b) Provided the foregoing conditions are met, the
Transferee may become a Substituted Member or a Substituted Special Member if
and only if, with respect to Preferred Shares, any requirements set forth in the
relevant Statement of Preferences are satisfied and, with respect to Common
Shares, each of the following conditions is satisfied:
(i) The Company has consented in writing to the
substitution (which consent may be withheld in the Company's discretion
with respect to any Transfer of Commitments and may not be unreasonably
withheld with respect to any Transfer of Common Shares;
(ii) The Transferor and Transferee execute,
acknowledge and deliver such instruments as the Company deems
necessary, appropriate or desirable to effect such substitution,
including the written acceptance and adoption by the Transferee of this
Agreement and the execution, acknowledgment and delivery to the Company
of a power of attorney, the substance of which shall be consistent with
Section 12; and
(iii) The Transferee agrees to bear all of the
Company's expenses and costs incurred in connection with the Transfer
and substitution, including legal fees and filing fees.
30
Upon the satisfaction of the conditions set forth in this
Section 11.2(b), the Company shall record on the books and records of the
Company the Substituted Member as a Member, or the Substituted Special Member as
the Special Member, of the Company.
(c) A Transferee, legal representative or successor in
interest of a Member shall be subject to all of the restrictions upon a Member
provided in this Agreement.
(d) A Transferee of Shares or Commitments who desires to
make a further Transfer shall be subject to all of the provisions of this
Section 11 to the same extent and in the same manner as a Member making the
initial Transfer.
(e) Notwithstanding anything to the contrary in this
Agreement, the Company may elect (in the Company's sole discretion) to treat a
Transferee who has not become a Substituted Member as a Member or the
Substituted Special Member as the Special Member in the place of the Transferor
should it determine such treatment to be in the best interests of the Company.
(f) Upon the Incapacity of an individual Member, such
Member's personal representative or other successor in interest shall have such
rights as the Incapacitated Member possessed to constitute a successor as a
Transferee of its Shares or Commitment and to join with such Transferee in
making application to substitute such Transferee as a Member, all as provided in
Sections 11.2(a) and (b).
(g) Upon the Incapacity of a Member other than an
individual, the authorized representative of such entity shall have such rights
as such entity possessed to constitute a successor as a Transferee of its Shares
or Commitment and to join with such Transferee in making application to
substitute such Transferee as a Member, all as provided in Sections 11.2(a) and
(b).
(h) The Transfer to a Person who acquires Shares or
Commitments but is not admitted to the Company as a Substituted Member or
Substituted Special Member pursuant to Section 11.2(b) shall be void and shall
not be recorded on the books of the Company and such Person shall have no right
to any information or accounting of the affairs of the Company and shall not
have any voting or other rights of a Member under this Agreement or relevant
Statement of Preferences. A Substituted Member or Substituted Special Member
shall succeed to all the rights and be subject to all the obligations of the
Transferor Member in respect of the Shares or Commitment as to which it was
substituted.
11.3 Mandatory Transfers of Shares
(a) The Company may, in its sole discretion, upon five
Business Days' notice cause any Member to effect the mandatory transfer of all
or a portion of the Shares held by such Member to any Qualified Investor
selected by the Company at a price determined in accordance with Section 7
hereof in order that (i) the Assets will not be deemed to be "plan assets" for
purposes of ERISA and (ii) each of the Company and the Investment Manager will
be in compliance with all laws, regulations and guidelines applicable to them,
and the relevant Member will be obligated to take all necessary steps and sign
all necessary documents to effect such transfer in accordance with this
Agreement.
31
(b) Any amount payable to a Member in connection with a
Transfer of Shares under Section 11.3 shall be paid to such Member at such time
as the Investment Manager reasonably determines. If all Shares held by such
Member are Transferred, such person shall cease to be a Member and shall cease
to have the power to exercise any rights of a Member.
SECTION 12.
POWER OF ATTORNEY
12.1 Appointment of Investment Manager
Each Member, by becoming a Member, makes, constitutes and
appoints the Investment Manager as its true and lawful attorney-in-fact, in its
name, place and stead, with full power to do any of the following:
(a) Execute on its behalf, file and record this Agreement
and all amendments to this Agreement made and otherwise approved in accordance
with Section 10.3 or otherwise made in accordance with the terms of this
Agreement;
(b) Prepare, execute on its behalf, verify, file and
record amendments to this Agreement made in accordance with the terms of this
Agreement or to the books and records of the Company reflecting (i) a change of
the name or location of the principal place of business of the Company, (ii) a
change of the name or address of any Member, (iii) the addition of Members,
(iv) the disposal by a Member of its Shares or Common Share Commitment in any
manner, (v) a Person becoming or ceasing to be a Member of the Company, (vi) the
exercise by any Person of any right or rights hereunder, (vii) the correction of
typographical or similar errors, (viii) any amendments made in accordance with
Section 10.3, and (ix) any amendment and restatement of this Agreement
reflecting such amendments;
(c) Prepare, execute on its behalf and record any
amendments to the Certificate that the Investment Manager may deem advisable or
necessary;
(d) Prepare, execute on its behalf, file and record any
other agreements, certificates, instruments and other documents required to
continue the Company, to admit Substituted Members or a Substituted Special
Member, to liquidate and dissolve the Company in accordance with Section 16, to
comply with applicable law, and to carry out the purposes of clauses (a) and (b)
above, to the extent consistent with this Agreement; and
(e) Take any further action that the Investment Manager
shall consider advisable in connection with the exercise of the authority
granted in this Section 12.1.
32
12.2 Nature of Special Power
The power of attorney granted under this Section 12 is a
special power of attorney coupled with an interest, is irrevocable and may be
exercised by the Investment Manager by listing all of the Members executing any
agreement, certificate, instrument or document with a single signature of such
attorney-in-fact acting as attorney-in-fact for all of them. The power of
attorney shall survive and not be affected by the Incapacity of a Member and
shall survive and not be affected by the Transfer by a Member of the whole or a
portion of its Shares or Common Share Commitment, as the case may be, except
where the Transfer is of all of the Shares or Common Share Commitment and the
Transferee thereof with the consent of the Company is admitted as a Substituted
Member or Substituted Special Member; provided, however, that this power of
attorney shall survive such Transfer for the sole purpose of enabling any such
attorney-in-fact to effect such substitution. This power of attorney does not
supersede any part of this Agreement, nor is it to be used to deprive any Member
of its rights hereunder. It is intended only to facilitate the execution of
documents and the carrying out of other procedural or ministerial functions.
SECTION 13.
BOOKS, RECORDS AND REPORTS
13.1 Books
(a) The Company shall maintain books and records required
by law for the Company at its principal office, which shall be in the United
States, and each Member shall have the right to inspect, examine and copy such
books and records at reasonable times and upon reasonable notice to the extent
required by the Investment Company Act or the Delaware Act relating to trusts or
as authorized by the Directors or their delegate. All such books and records may
be in electronic format, including the register of Members and all capital
account and accounting records. Upon the request of a Member, the Company shall
promptly deliver to the requesting Member, at the expense of the Company, a copy
of any information which the Company is required by law to so provide in paper
or electronic format. Notwithstanding the foregoing inspection rights or any
other provision of this Section 13, the Company shall be entitled to keep
confidential from the Members certain information as and to the extent permitted
by Section 18-305(c) of the Delaware Act and the Investment Company Act.
(b) A register shall be kept at the Company or any
transfer agent duly appointed by or under the direction of the Directors which
shall contain the names and addresses of the Members and the number of Shares
held by them respectively and a record of all transfers thereof. Separate
registers shall be established and maintained for each class and each series of
each class. Each such register shall be conclusive as to who are the holders of
the Shares of the applicable class and series and who shall be entitled to
receive dividends or distributions or otherwise to exercise or enjoy the rights
of Members. No Member shall be entitled to receive payment of any dividend or
distribution, nor to have notice given to him as herein provided, until he has
given his address to a transfer agent or such other officer or agent of the
Directors as shall keep the register for entry thereon. Except as otherwise
provided in any Statement of
33
Preferences, it is not contemplated that certificates will be issued for the
Shares; however, the Company may authorize the issuance of share certificates
and promulgate appropriate fees therefore and rules and regulations as to their
use.
(c) The Company shall have power to employ a transfer
agent or transfer agents, and a registrar or registrars, with respect to the
Shares. The transfer agent or transfer agents may keep the applicable register
and record therein, the original issues and transfers, if any, of the said
Shares.
(d) Shares transferable pursuant to Section 11 of this
Agreement shall be transferable on the records of the Company only by the record
holder thereof or by its agent duly authorized in writing, upon delivery to the
Company or a transfer agent of the Company of a duly executed instrument of
transfer, together with such evidence of the genuineness of each such execution
and authorization and of other matters as may reasonably be required. Upon such
delivery the transfer shall be recorded on the applicable register of the
Company. Until such record is made, the Member of record shall be deemed to be
the holder of such Shares for all purposes hereof and neither the Company nor
the Directors nor any transfer agent or registrar nor any officer, employee or
agent of the Company shall be affected by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of
the death, bankruptcy or incompetence of any Member, or otherwise by operation
of law, shall be recorded on the applicable register of Shares as the holder of
such Shares upon production of the proper evidence thereof to the Directors or a
transfer agent of the Company, but until such record is made, the Member of
record shall be deemed to be the holder of such for all purposes hereof, and
neither the Directors nor any transfer agent or registrar nor any officer or
agent of the Company shall be affected by any notice of such death, bankruptcy
or incompetence, or other operation of law.
13.2 Reports
(a) The Company shall prepare and send to Members to the
extent and in the form required by the Investment Company Act and other
applicable law, a report of operations containing financial statements of the
Company prepared in conformity with generally accepted accounting principles and
applicable law and a schedule setting forth the investments of the Company.
Common Members shall receive quarterly reports of operations. To the extent any
securities of the Company are listed on the Official List of the Irish Stock
Exchange, the report of operations shall also contain (i) details of the most
recent Net Asset Value, and (ii) notice of any breach of the investment
restrictions to which the Company would then be subject pursuant to the listing
rules of the Irish Stock Exchange to the extent any such breach continues beyond
a three-month period from the date of identification of any such breach,
including any recommendations proposed by the Company to remedy such breach.
Members shall receive quarterly reports of operations.
(b) Within 60 days after the end of each Fiscal Year, the
Company shall communicate in writing to each Member (i) such information as is
necessary to complete such
34
Member's United States federal and state income tax or information returns
and (ii) annual financial statements audited by an accounting firm of national
reputation.
(c) Further, the Directors may, in their sole and
absolute discretion, cause to be prepared (i) such reports or other information
as may be necessary with respect to any Member's qualification for the benefit
of any income tax treaty or provision of law reducing or eliminating any
withholding or other tax or governmental charge with respect to any Assets and
(ii) such other reports and financial statements of the Company as the Directors
deem appropriate for informing the Members about the operations of the Company.
The Company shall promptly distribute to the Members notice of
the occurrence of any Default or Event of Default (as defined in the Indenture)
under the Indenture.
(d) To the extent that the Company has access thereto and
in recognition of the various Members' obligations to comply with certain
regulatory requirements, the Company will also provide to each Member, with
reasonable promptness, such other data and information concerning the Company or
Company activities in response to a request by any applicable governmental or
regulatory agency as from time to time a Member may reasonably request. If the
Company is bound by confidentiality obligations with respect to any information
so requested, then the Company shall not be obligated to provide such
information. A Member shall, at the request of the Company, enter into a
confidentiality agreement relating to any such confidential information.
SECTION 14.
VALUATION OF INTERESTS.
The value of the Assets of the Company, the amount of
liabilities of the Company, the Net Asset Value, and the Net Asset Value of each
outstanding Common Share of the Company shall be determined on each Valuation
Date in accordance with generally accepted accounting principles and the
Investment Company Act. The method of determination of Net Asset Value shall be
determined by or under the supervision of the Board of Directors. The making of
Net Asset Value determinations and calculations may be delegated by the Board of
Directors.
SECTION 15.
BANK ACCOUNTS; CUSTODIAN
15.1 Bank Accounts Generally
Subject to the requirements of the Investment Company Act, all
funds received by the Company may be deposited in one or more Custodial Accounts
in the name of the Company at the Custodian. Subject to Section 15.2,
disbursements therefrom may be made by the Company in conformity with the
purposes of this Agreement and the requirements of the Investment Company Act.
The Company may designate from time to time those Persons authorized to execute
checks and other items on the Company bank accounts. The funds of the Company
shall not be commingled with the funds of any other Person.
35
15.2 Custodian
(a) The Company shall appoint one or more Custodians to
hold the Assets of the Company in one or more separately identified Custodial
Accounts or multiparty arrangements in accordance with the Investment Management
Agreement, the Indenture, any Statement of Preferences, the Custodial Agreement
and the Pledge Agreement (each as defined in the Indenture to the extent not
defined herein) and in compliance with the requirements of the Investment
Company Act and other applicable law. The Custodian shall at all times be
responsible for the physical custody of the Assets of the Company and for the
collection of interest, dividends and other income attributable to the Assets of
the Company. The Company will direct the Custodian to accept settlement
instructions issued by the Investment Manager and authorized Persons.
(b) Nothing contained in this Agreement or the Investment
Management Agreement shall be construed to authorize or require the Board of
Directors or the Investment Manager to take or receive physical possession of
any Asset of the Company or to take any action in violation of law, it being
understood that the Custodian shall solely be responsible for the safekeeping of
the Assets and the consummation of all such purchases, sales and deliveries of
the Assets in accordance with this Agreement the Investment Management
Agreement, the Indenture, any Statement of Preferences, the Custodial Agreement
and the Pledge Agreement and in compliance with the requirements of the
Investment Company Act and other applicable law.
SECTION 16.
DISSOLUTION AND TERMINATION OF THE COMPANY
16.1 Dissolution Generally
Except as expressly provided in this Agreement, no Member
shall have the right to cause any dissolution of the Company before the
expiration of its term.
16.2 Continuation of Company
The Company shall not be dissolved or terminated by the
Incapacity of any Member, the Transfer by any Member of its Shares or Common
Share Commitment or the admission of a new or substituted Director or Member,
and the existence and business of the Company shall be continued notwithstanding
the occurrence of any such event.
16.3 Events Causing Dissolution
Subject to the restriction on liquidation set forth in Section
16.7, the Company may be dissolved prior to the time set forth in Article 4
after two-thirds of the Directors then in office have approved a resolution
therefor, upon approval by Shares having at least 75% of the votes of all of the
Shares outstanding on the record date for such meeting, voting as a single class
except to the extent required by the Investment Company Act.
36
16.4 Distribution of Assets on Liquidation
(a) In liquidating the Company, the Company will make
distributions in cash, in kind, or partly in cash and partly in kind as the
Investment Manager, under the supervision of the Board of Directors, may, in its
sole discretion, determine; provided, however, that any distribution made partly
in cash and partly in kind shall be pro rata among the Members in proportion to
their interests to the extent reasonably practicable and if not reasonably
practicable, in such non-pro rata manner as is determined by the Investment
Manager, under the supervision of the Board of Directors, to be fair and
equitable; provided, further, that the Investment Manager will use reasonable
efforts to make all distributions in kind, if any, in the form of freely
tradable securities. The Investment Manager need not distribute all of the
Assets at once, but may make partial distributions and shall not be required to
redeem the Preferred Shares prior to making any liquidating distribution in
respect of the Common Shares so long as the Company has set aside liquid assets
in excess of liabilities sufficient to pay the liquidation preference and all
accumulated and unpaid distributions of the Preferred Shares.
(b) In connection with the liquidation of the Company,
the Assets (after paying or otherwise providing for the claims of creditors of
the Company, including without limitation, holders of the Notes, the Advisory
Fees, claims by the Board of Directors, the Investment Manager or their
respective Affiliated Persons for expenses of the Company paid by any of them,
any other liabilities of the Company and reasonable reserves for any anticipated
or contingent liabilities or obligations and all accumulated and unpaid
distributions on Preferred Shares) shall be distributed to the Members in
accordance with Section 8.1.
16.5 Liquidation Statement
(a) Upon compliance by the Company with all applicable requirements for
dissolution, the Members shall cease to be such and the Company shall execute,
acknowledge and cause to be filed a Certificate of Cancellation of the Company
or other appropriate documents evidencing its dissolution and winding up.
(b) Notwithstanding anything to the contrary contained herein, if the Board of
Directors has been removed and the Company has been dissolved, any Member or
other Person appointed by the Members may act as liquidating trustee for the
Company during the winding up period, and receive reasonable compensation for
such activity, all as approved by the Members holding Shares that represent a
majority of the outstanding Shares (which in this case shall exclude any Shares
held by the Investment Manager).
16.6 Director's Liability Upon Dissolution or Removal
None of the Directors shall be personally liable for the
return of all or any part of the contributions of the Members to the Company or
for any other distributions to be made by the Company. Any such return or
distributions shall be made solely from the Assets.
37
16.7 Restriction on Liquidation
Notwithstanding anything to the contrary contained herein, for
so long as any Term Preferred Shares and the Special Share are outstanding and
insured by Ambac Assurance Corporation under the Preferred Shares Policy, the
Company shall not liquidate prior to November 15, 2015, unless all shares of the
Term Preferred Shares and the Special Share have been redeemed in full.
SECTION 17.
GENERAL PROVISIONS
17.1 Notices and Distributions
Except as otherwise provided herein, any notice, distribution,
offer or other communication which may be given to any Member in connection with
the Company or this Agreement shall be duly given if reduced to writing and:
(a) if to any Member, when personally delivered, or if
sent by mail, postage prepaid, overnight courier or facsimile transmission, when
actually received at the last address furnished by such Member pursuant to
Section 2.3 for notice purposes at the time of such mailing, overnight courier
or facsimile transmission; and
(b) if to the Company or the Board of Directors, sent to
000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxx X.
Xxxxxx with a copy to the Investment Manager, 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxx X. Xxxxxx, personally delivered or if sent
by mail, overnight courier or facsimile transmission when actually received at
the address of the Company or the Board of Directors, respectively, set forth
above or at such other address as the Company or the Board of Directors,
respectively, may then have specified pursuant to the terms of this Agreement.
All distributions to the Members shall be made by wire
transfer to the accounts specified by the Members, which accounts may be changed
from time to time by written notice to the Company.
17.2 Survival of Rights
This Agreement shall be binding upon and inure to the benefit
of the Members and the Company and their respective heirs, legatees, legal
representatives, permitted successors, permitted Transferees and permitted
assigns, in all cases whether by the laws of descent and distribution, merger,
consolidation, sale of assets, operation of law, or otherwise.
17.3 Construction
The language in all parts of this Agreement shall be in all
cases construed simply according to its fair meaning and not strictly for or
against any Person.
38
17.4 Section Headings
The captions of the sections in this Agreement are for
convenience only and shall not be used in construing or interpreting this
Agreement.
17.5 Agreement in Counterparts
This Agreement and any amendments hereto may be executed and
delivered by facsimile and in multiple counterparts, each of which shall be
deemed an original agreement and all of which shall constitute one and the same
agreement, notwithstanding the fact that all Members are not signatories to the
original or the same counterpart.
17.6 Governing Law
This Agreement has been executed by or on authority of a
majority of the Directors and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the internal laws, and not the laws pertaining to choice or
conflict of laws, of the State of Delaware, and reference shall be specifically
made to the general corporation law of the State of Delaware as to the
construction of matters not specifically covered herein or as to which an
ambiguity exists, although such law shall not be viewed as limiting the powers
otherwise granted to the Directors hereunder and any ambiguity shall be viewed
in favor of such powers.
17.7 Additional Documents
Each Member, upon the request of the Company, agrees to
perform all further acts and execute, acknowledge and deliver all further
documents which may be reasonably necessary, appropriate or desirable to carry
out the provisions of this Agreement, including but not limited to,
acknowledging before a Notary Public any signature heretofore or hereafter made
by a Member.
17.8 Severability
Should any portion or provision of this Agreement be declared
illegal, invalid or unenforceable in any jurisdiction, then such portion or
provision shall be deemed to be severable from this Agreement to the extent
practicable while preserving the economic intention of the parties and, in any
event, such illegality, invalidity or unenforceability shall not affect the
remainder hereof.
17.9 Pronouns
All pronouns and defined terms and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the Persons referred to may require.
39
17.10 Entire Agreement
This Agreement, the Statement of Preferences adopted pursuant
hereto and the Subscription Agreements executed and delivered by the Members (i)
constitute the entire Agreement of the Members with respect to the Company and
(ii) supersede all prior or contemporaneous written or oral agreements,
understandings or negotiations with respect to the Company. The parties hereto
acknowledge that the ability of the Members and of the Company to take certain
of the actions contemplated hereby may be limited by the terms of the Indenture
and the Statement of Preferences to the extent provided therein.
17.11 Arbitration
To the extent permitted by law, any dispute relating to this
Agreement or the Company which cannot be amicably resolved among the parties to
such dispute shall be resolved by binding arbitration conducted in New York, New
York in accordance with the rules of the American Arbitration Association then
prevailing, and the decisions of the arbitrators shall be final and binding on
all the parties. The costs of the arbitration (other than fees and expenses of
counsel, which shall be the responsibility of the parties retaining such
counsel) shall be allocated among the parties as determined by the arbitrator.
17.12 Waiver of Partition
Each Member hereby irrevocably waives and forfeits any and all
rights that it may have, whether arising under contract or statute or by
operation of law, to maintain an action for partition of the Company or any of
the Assets.
17.13 Non-Petition Covenant
Each Member hereby agrees not to cause the filing of a
petition in bankruptcy against the Company for any reason until at least 367
days (or, if longer, the preference period then in effect under applicable
federal and state law) after the termination of the Indenture (without any
replacement thereof).
17.14 Filing
This Agreement and any amendment (including any supplement)
hereto shall be filed in such places as may be required or as the Company deem
appropriate. Each amendment shall be accompanied by a certificate signed and
acknowledged by an authorized Person stating that such action was duly taken in
a manner provided herein, and shall, upon insertion in the Company's minute
book, be conclusive evidence of all amendments contained therein. A restated
Agreement, containing the original Agreement as amended by all amendments
theretofore made, may be executed from time to time by an authorized Person and
shall, upon insertion in the Company's minute book, be conclusive evidence of
all amendments contained therein and may thereafter be referred to in lieu of
the original Agreement and the various amendments thereto.
40
IN WITNESS WHEREOF, the Secretary of the Company has hereunto
set his hands as of the date first written above.
THE SPECIAL MEMBER:
YORK ENHANCED STRATEGIES
MANAGEMENT, LLC
By: ________________________________
Name:
Title:
COMMON MEMBERS:
Those Persons subscribing for
Common Shares and admitted as
Members by the Investment Manager:
By: York Enhanced Strategies Management, LLC
By: ________________________________
Name:
Title:
41
APPENDIX A
Statement of Preferences of Series A-1 Floating Rate Term Preferred Shares
EXECUTION COPY
YORK ENHANCED STRATEGIES FUND, LLC
STATEMENT OF PREFERENCES OF
SERIES A-1 FLOATING RATE TERM PREFERRED SHARES
TABLE OF CONTENTS
Page
PART I
1. Number of Authorized Shares; Restrictions on Issuance............7
2. Dividends........................................................8
3. Voting Rights...................................................10
4. Investment Company Act Preferred Shares Asset Coverage..........15
5. Restrictions on Dividends and Other Distributions...............15
6. Rating Agency Restrictions......................................17
7. Redemption......................................................17
8. Liquidation Rights..............................................21
9. Over-Collateralization Test Maintenance.........................23
10. Miscellaneous...................................................24
PART II 25
1. Transfer of Preferred Shares....................................25
2. Global Certificate..............................................25
3. Force Majeure...................................................27
4. Preferred Member of the Fund....................................28
-i-
YORK ENHANCED STRATEGIES FUND, LLC, a Delaware limited liability
company (the "Fund"), certifies that:
First: Pursuant to authority expressly vested in the Board of
Directors of the Fund by Section 5.2 and Section 5.3 of the Fund's Operating
Agreement (which, as hereafter restated or amended from time to time is,
together with this Statement, herein called the "Operating Agreement"), the
Board of Directors has, by resolution, authorized the issuance of Series A-1
Floating Rate Term Preferred Shares having such designation or designations
as are set forth in Article I of Appendix A hereto.
Second: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the
shares of each such series of preferred shares now or hereinafter described
in Appendix A hereto are as follows (each such series being referred to
herein as a series of Preferred Shares, and the shares of all such series
described in Appendix A hereto, as it may be subsequently amended from time
to time, being referred to collectively as "Preferred Shares").
DEFINITIONS
As used in this Statement of Preferences (including the Appendices
hereto) (the "Statement") the following terms shall have the following
meanings (with terms defined in the singular having comparable meanings when
used in the plural and vice versa) , unless the context otherwise requires.
Terms used in this Statement that are not defined herein shall have the
meanings given to such terms in the Xxxxx'x Collateral Valuation Schedule and
the S&P Collateral Valuation Schedule, as applicable:
"Affected Series" shall have the meaning specified in Section 3(c)(4)
of Part I of this Statement.
"Affiliate" shall mean, for purposes of the definition of "outstanding"
in Section 3(h) of Part I of this Statement, any Person known to the
Depositary to be controlled by, in control of or under common control with
the Fund; provided, however, that no entity, or any Person controlled by, in
control of or under common control with such entity, one of the directors or
executive officers of which is a director of the Fund, shall be deemed to be
an Affiliate solely because such director or executive officer is also a
director of the Fund.
"Annual Valuation Date" shall have the meaning specified in Section
9(a) of Part I of this Statement.
"Applicable Rate" shall have the meaning specified in Section 2(e)(1)
of Part I of this Statement.
"Auditor's Confirmation" has the meaning specified in Section 9(b) of
Part I of this Statement.
"Board of Directors" shall mean the Board of Directors of the Fund or
any duly authorized committee thereof.
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"Business Day" Any day other than (a) Saturday or Sunday or (b) a day
on which commercial banks in New York, New York, Los Angeles, California or
the city in which the Corporate Trust Office (as such term is defined in the
Indenture) is located are authorized or required by applicable law to close.
"Calculation Agent" shall mean JPMorgan Chase Bank, N.A.
"Collateral Maintenance Report" shall mean the Preferred Shares Basic
Maintenance Report required by the Preferred Shares Insurance Agreement to be
provided from time to time to the Credit Enhancer.
"Common Shares" shall mean the common membership interests of the Fund.
"Credit Enhancer" shall mean Ambac Assurance Corporation. References
herein to the Credit Enhancer shall be given effect only for so long as the
Preferred Shares Insurance Policy or the Preferred Shares Insurance Agreement
is in effect and the Credit Enhancer shall have no rights hereunder if and
when the Preferred Shares Insurance Policy and the Preferred Shares Insurance
Agreement no longer are in effect.
"Cure Date" shall mean the date of any cure under the Indenture of any
failure to comply with Section 7.7 of the Indenture requiring redemption of
the Preferred Shares or the Investment Company Act Cure Date, as applicable.
"Date of Original Issue," with respect to shares of a series of
Preferred Shares, shall mean the date on which the Fund initially issues such
shares.
"Depositary" shall mean JPMorgan Chase Bank, National Association and
any successor thereto.
"Dividend Payment Date," with respect to shares of a series of
Preferred Shares, shall mean any date on which dividends are payable on
shares of such series pursuant to the provisions of Section 2(d) of Part I of
this Statement.
"Excess Amount" shall exist if on any Business Day there is a Senior
Excess Amount or Total Excess Amount.
"Failure To Deposit," with respect to shares of a series of Preferred
Shares, shall mean a failure by the Fund to pay or cause to be paid to the
Depositary, not later than 12:00 noon, New York City time, (A) on the
Business Day immediately preceding any Dividend Payment Date for shares of
such series, in funds available on such Dividend Payment Date, the full
amount of any dividend (whether or not earned or declared) to be paid on such
Dividend Payment Date on any share of such series or (B) on the Business Day
next preceding any redemption date in funds available on such redemption date
for shares of such series, the Redemption Price to be paid on such redemption
date for any share of such series after notice of redemption is mailed
pursuant to Section 7(c) of Part I of this Statement; provided, however, that
the foregoing clause (B) shall not apply to the Fund's failure to pay the
Redemption Price in respect of Preferred Shares when the related Notice of
Redemption provides that redemption of such shares is subject to one or more
conditions precedent until any such condition precedent shall not have been
satisfied at the
-2-
time or times and in the manner specified in such Notice of Redemption.
Notwithstanding the foregoing, but only for the purpose of determining the
Applicable Rate, no Failure to Deposit shall be deemed to have occurred if the
Credit Enhancer pays to the Depositary, in accordance with the Preferred Shares
Insurance Policy, the full amounts due as described in clauses (A) and (B) above
and such payments are made when due thereunder.
"Final Redemption Date" means November 15, 2013, unless extended for up
to two one-year periods as provided in Section 3(c)(2) of Part I of this
Statement.
"Fund" shall mean the entity named on the first page of this statement,
which is the issuer of the Preferred Shares.
"Holder," with respect to shares of a series of Preferred Shares, shall
mean the registered holder of such shares as the same appears on the share
register of the Fund maintained by the Depositary.
"Indenture" means that certain Indenture, dated as of November 17,
2005, by and between the Fund and JPMorgan Chase Bank, National Association,
as trustee.
"Independent Accountant" means a nationally recognized accountant, or
firm of accountants, that is, with respect to the Fund, an independent public
accountant or firm of independent public accountants under the Securities Act.
"Initial Rate Period," with respect to shares of a series of Preferred
Shares, shall have the meaning specified with respect to shares of such
series in Section 3 of Appendix A hereto.
"Investment Company Act" shall mean the Investment Company Act of 1940,
as amended.
"Investment Company Act Cure Date," with respect to any failure by the
Fund to maintain the Investment Company Act Preferred Shares Asset Coverage
on any particular date as required by Section 4 of Part I of this Statement,
shall mean the day that is 30 calendar days after the date of such failure
(not including the date of such failure).
"Investment Company Act Preferred Shares Asset Coverage" shall mean
asset coverage, as defined in Section 18(h) of the Investment Company Act, of
the preferred shares of at least 200% with respect to all outstanding Senior
Obligations of the Fund (or such other asset coverage as may in the future be
specified in or under the Investment Company Act as the minimum asset
coverage for senior securities which are shares of a closed-end investment
company as a condition of declaring dividends on its common shares).
"Investment Manager" means York Enhanced Strategies Management, LLC, or
its duly appointed successor.
"Late Charge" shall mean, with respect to a Failure to Deposit for the
failure to pay or cause to be paid to the Depositary the full amount of
dividends with respect to any Rate Period of the shares of such series or the
Redemption Price of the shares, if any, of such series for which Notice of
Redemption has been mailed by the Fund pursuant to Section 7(c) of Part I of
this
-3-
Statement, a late charge equal to (x) the Applicable Rate for the Rate Period
during which such Failure to Deposit occurs, multiplied by (y) a fraction, the
numerator of which shall be the number of days for which such Failure to Deposit
has not been cured in accordance with Section 2(f) of Part I of this Statement
(including the day such Failure to Deposit occurs and excluding the day such
Failure to Deposit is cured) and the denominator of which shall be 360, times
(z) the amount of the shortfall in the payment by the Fund to the Depositary.
"LIBOR" shall mean, as determined by the Calculation Agent in
accordance with the following provisions (in each case rounded to the nearest
0.00001%), for any Rate Period:
(a) the London interbank offer rate, as obtained by the Calculation
Agent from Bloomberg Financial Markets Commodities News, for Eurodollar
deposits of the applicable Index Maturity that appears on Dow Xxxxx
Telerate Page 3750 (as defined in the International Swaps and Derivatives
Association, Inc. 1991 Interest Rate and Currency Exchange Definitions),
or such other page as may replace such Page 3750, as of 11:00 a.m. (London
time) on the second LIBOR Business Day (as defined below) prior to the
commencement of such Rate Period (each such day, a "LIBOR Determination
Date"); provided, that if a rate for the applicable Index Maturity does
not appear thereon, it shall be determined by the Calculation Agent by
using Linear Interpolation (as defined in the International Swaps and
Derivatives Association, Inc. 2000 ISDA Definitions and substituting the
term "Index Maturity" for the term "Designated Maturity" in such
definition).
(b) If, on any LIBOR Determination Date, such rate does not appear
on Dow Xxxxx Telerate Page 3750 or such other page as may replace such
Page 3750, the Calculation Agent shall determine the arithmetic mean of
the offered quotations of the Reference Banks (as defined below) to
leading banks in the London interbank market for Eurodollar deposits of
the Index Maturity in an amount determined by the Calculation Agent by
reference to requests for quotations as of approximately 11:00 a.m.
(London time) on the LIBOR Determination Date made by the Calculation
Agent to the Reference Banks. If, on any LIBOR Determination Date, at
least two of the Reference Banks provide such quotations, LIBOR shall
equal such arithmetic mean of such quotations. If, on any LIBOR
Determination Date, only one or none of the Reference Banks provide such
quotations, LIBOR shall be deemed to be the arithmetic mean of the offered
quotations that leading banks in the City of New York selected by the
Calculation Agent and approved by the Credit Enhancer are quoting on the
relevant LIBOR Determination Date for Eurodollar deposits of the Index
Maturity in an amount determined by the Calculation Agent by reference to
the principal London offices of leading banks in the London interbank
market; provided, however, that if the Calculation Agent is required but
is unable to determine a rate in accordance with at least one of the
procedures provided above, LIBOR shall be LIBOR as determined on the
previous LIBOR Determination Date.
(c) As used in this definition:
(1) "Index Maturity" means (A) for an Initial Rate Period, a
length of time equal to the number of Rate Period Days in such
Initial Rate Period, and (B) for any Subsequent Rate Period, three
months;
-4-
(2) "LIBOR Business Day" means a day on which commercial banks
are open for business (including dealings in foreign exchange and
foreign currency deposits) in London; and
(3) "Reference Banks" means four major banks in the London
interbank market selected by the Calculation Agent and approved by
the Credit Enhancer.
"Liquidation Preference," with respect to a given number of Preferred
Shares that have been drawn, shall mean the Per Share Liquidation Preference
times that number.
"Xxxxx'x" shall mean Xxxxx'x Investors Service, Inc., a Delaware
corporation, and its successors.
"Xxxxx'x Collateral Valuation Schedule" shall mean those procedures
attached hereto as Appendix B.
"Notes" shall mean the senior revolving notes issued under the
Indenture.
"Notice of Redemption" shall mean any notice with respect to the
redemption of Preferred Shares pursuant to Section 7(c) of Part I of this
Statement.
"Operating Agreement" shall have the meaning specified in the first
recital at the opening of this Statement.
"Outstanding Principal Amount" shall mean, as of any particular date,
the aggregate principal amount of all of the outstanding Notes theretofore
authenticated and delivered under the Indenture except (a) Notes theretofore
canceled by the security registrar under the Indenture or delivered to such
security registrar for cancellation, (b) Notes or portions thereof for whose
payment funds in the necessary amount have been theretofore irrevocably
deposited with the trustee or any paying agent under the Indenture in trust
for the holders of such Notes, (c) Notes in exchange for or in lieu of which
other Notes have been authenticated and delivered pursuant to the Indenture,
unless proof satisfactory to the trustee is presented that any such Notes are
held by a holder in due course, and (d) Notes alleged to have been mutilated,
destroyed, lost or stolen for which replacement securities have been issued
as provided under the terms of the Indenture.
"Over-Collateralization Test" means either the Senior
Over-Collateralization Test or the Total Over-Collateralization Test.
"Per Share Liquidation Preference," for any series of Preferred Shares,
shall be as such amount is set forth in Section 1 of the applicable Article
of Appendix A.
"Person" shall mean and include an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or other
entity or a government or any agency or political subdivision thereof.
"Placement Agent" shall mean Xxxxxx Xxxxxxx & Co. Incorporated and
Xxxxxx Xxxxxxx & Co. International Limited.
-5-
"Preferred Shares" shall have the meaning set forth in the second
recital at the opening of this Statement.
"Preferred Shares Insurance Agreement" means the Insurance and
Indemnity Agreement, dated as of November 17, 2005, between the Fund and the
Credit Enhancer, as amended or supplemented in accordance with the provisions
thereof, relating to the Preferred Shares.
"Preferred Shares Insurance Policy" means the Financial Guaranty
Insurance Policy No. AB0940BE issued by the Credit Enhancer with respect to
the Preferred Shares pursuant to the Preferred Shares Insurance Agreement,
including any endorsement or amendment thereto.
"Qualified Reorganization" shall have the meaning set forth in Section
3(c)(1) of Part I of this Statement.
"Rate Period," with respect to shares of a series of Preferred Shares,
shall mean the Initial Rate Period of shares of such series and any
Subsequent Rate Period of shares of such series.
"Rate Period Days," for any Rate Period, means the number of days that
would constitute such Rate Period but for the application of Section 2(d) of
Part I of this Statement.
"Rating Agency" shall mean, initially, Moody's and S&P and their
respective successor entities and/or, if applicable, any Substitute Rating
Agency.
"Redemption Price" shall mean, for any series of Preferred Shares, such
amount as set forth in Section 5 of the applicable Article of Appendix A.
"S&P" shall mean Standard & Poor's Ratings Services, a division of the
XxXxxx-Xxxx Companies, and its successors.
"S&P Collateral Valuation Schedule" shall mean those procedures
attached hereto as Appendix C.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Depository" shall mean The Depository Trust Company and
Clearstream and their respective successors and assigns or any other
securities depository selected by the Fund which agrees to follow the
procedures required to be followed by such securities depositories in
connection with the Preferred Shares.
"Senior Advance Amount" shall mean at any time of determination,
subject to Section 10(h)(1) of Part I of this Statement, the lower of (a) the
Moody's Senior Advance Amount and (b) the S&P Senior Advance Amount.
"Senior Excess Amount" shall mean as of any Business Day, the amount,
if any, by which the Outstanding Principal Amount of the Notes as of the
close of business of such Business Day exceeds the Senior Advance Amount as
of such close of business.
-6-
"Senior Obligations" shall mean the Notes and the preferred shares,
collectively.
"Senior Over-Collateralization Test" is a test that is satisfied as of
any Business Day if the Outstanding Principal Amount of the Notes as of such
Business Day is less than or equal to the Senior Advance Amount.
"Series A-2 Preferred Share" shall mean the preferred share issued to
the Investment Manager.
"Statement" has the meaning set forth in the preamble of the
Definitions section.
"Subsequent Rate Period," with respect to shares of a series of
Preferred Shares, shall mean the period from and including the first day
following the Initial Rate Period of shares of such series to but excluding
the next Dividend Payment Date for shares of such series and any period
thereafter from and including one Dividend Payment Date for shares of such
series to but excluding the next succeeding Dividend Payment Date for shares
of such series.
"Substitute Rating Agency" means any rating agency selected by the Fund
to rate the Preferred Shares in lieu of or in addition to Moody's and/or S&P.
"Total Advance Amount" means at any time of determination, subject to
Section 10(h)(1) of Part I of this Statement, the lower of (a) the Moody's
Total Advance Amount and (b) the S&P Total Advance Amount.
"Total Excess Amount" means as of any Business Day, the amount, if any,
by which the sum of the Outstanding Principal Amount of the Notes and the
aggregate Liquidation Preference of the outstanding Preferred Shares as of
the close of business of such Business Day exceeds the Total Advance Amount
as of such close of business.
"Total Over-Collateralization Test" is a test that is satisfied as of
any Business Day if the Outstanding Principal Amount of the Notes and the
aggregate Liquidation Preference of the outstanding Preferred Shares, as of
such Business Day, is less than or equal to the Total Advance Amount.
"Valuation Date" shall have the meaning ascribed thereto in Section 4
of Part I of this Statement.
"Voting Period" shall have the meaning specified in Section 3(b)(1) of
Part I of this Statement.
PART I
1. Number of Authorized Shares; Restrictions on Issuance.
The number of authorized shares constituting each series of the
Preferred Shares shall be as set forth with respect to such series in Section
2 of the applicable article of Appendix A
-7-
hereto. The Fund shall not issue any Preferred Shares if, immediately after
giving effect to such issuance, the Total Over-Collateralization Test would not
be satisfied.
2. Dividends.
(a) Ranking. Except as otherwise provided in Section 1 of the
applicable Article of Appendix A hereto, the shares of a series of the
Preferred Shares shall rank on a parity with each other and with shares of
any other series of preferred shares as to the payment of dividends by the
Fund. The Preferred Shares will rank senior to the Common Shares as to
payment of dividends.
(b) Cumulative Cash Dividends. The Holders of any series of
Preferred Shares shall be entitled to receive, when, as and if declared by
the Board of Directors or by any Person or Persons designated by the Board
of Directors, out of funds legally available therefor in accordance with
the Operating Agreement and applicable law, cumulative cash dividends at
the Applicable Rate for shares of such series, determined as set forth in
Section 2(e) of Part I of this Statement, and no more, payable on the
Dividend Payment Dates with respect to shares of such series determined
pursuant to Section 2(d) of Part I of this Statement. Holders of Preferred
Shares shall not be entitled to any dividend, whether payable in cash,
property or shares, in excess of full cumulative dividends and any Late
Charges, as herein provided, on Preferred Shares. No interest, or sum of
money in lieu of interest, shall be payable in respect of any dividend
payment or payments on Preferred Shares which may be in arrears, and,
except to the extent set forth in Section 2(e)(2) of Part I of this
Statement, no additional sum of money shall be payable in respect of any
such arrearage. Accumulated dividends (whether or not declared) paid by
the Credit Enhancer shall not be payable by the Fund.
(c) Dividends Cumulative From Date of Original Issue. Dividends on
any series of Preferred Shares shall accumulate at the Applicable Rate in
effect from time to time for shares of such series from the Date of
Original Issue thereof.
(d) Dividend Payment Dates and Adjustment Thereof. The Dividend
Payment Dates with respect to shares of a series of Preferred Shares shall
be as set forth with respect to shares of such series in Section 4 of the
applicable Article of Appendix A hereto; provided, however, that if the
day on which dividends would otherwise be payable on shares of such series
is not a Business Day, then such dividends shall be payable on such shares
on the first Business Day that falls after such day.
(e) Dividend Rates and Calculation of Dividends; Effect of Failure
to Deposit.
(1) Dividend Rates and Amounts. Except as otherwise provided
in Section 2(e)(2) of this Part I below, the dividend rate on
Preferred Shares of any series during any Rate Period (the
"Applicable Rate") shall be equal to the rate per annum set forth
with respect to shares of such series under "Designation as to
Series" in Section 1 of the applicable Article of Appendix A hereto
and shall be calculated in the manner set forth in such Section of
such Article of Appendix A.
-8-
(2) Effect of Failure to Deposit. If any Failure to Deposit
shall have occurred with respect to shares of such series during any
Rate Period thereof, then:
(A) no new issuance of shares of such series may be made
until such Failure to Deposit has been cured in accordance
with Section 2(f) of this Part I and the Fund has paid, or
cause to be paid, to the Depositary for the benefit of the
holders of such shares the applicable Late Charge; and
(B) if, by 12:00 Noon, New York City time, on the third
Business Day next succeeding the date on which such Failure to
Deposit occurred, either (A) such Failure to Deposit shall not
have been cured in accordance with Section 2(f) of this Part
I, or (B) the Fund has not yet paid or caused to be paid to
the Depositary for the benefit of the holders of such shares
the applicable Late Charge, then the dividend rate for shares
of such series for the Rate Period in which the Failure to
Deposit occurred and for each subsequent Rate Period in which
on any Business Day either (x) such Failure to Deposit shall
not have been cured in accordance with Section 2(f) of this
Part I or (y) the Fund has not yet paid or caused to be paid
to the Depositary for the benefit of the holders of such
shares the applicable Late Charge, will be equal to the
Applicable Rate plus 1%.
(f) Curing a Failure to Deposit. A Failure to Deposit with respect
to shares of a series of Preferred Shares shall have been cured (if such
Failure to Deposit is not solely due to the willful failure of the Fund to
make or cause to be made the required payment to the Depositary) with
respect to any Rate Period of shares of such series if, within the time
period described in Section 2(e)(2)(B) of Part I of this Statement, the
Fund has paid, or cause to be paid, to the Depositary (i) all accumulated
and unpaid dividends on shares of such series and (ii) without
duplication, the Redemption Price for shares, if any, of such series for
which Notice of Redemption has been mailed by the Fund pursuant to Section
7(c) of Part I of this Statement; provided, however, that the foregoing
clause (ii) shall not apply to the Fund's or the Credit Enhancer's failure
to pay the Redemption Price in respect of Preferred Shares when the
related Redemption Notice provides that redemption of such shares is
subject to one or more conditions precedent until any such condition
precedent(s) shall have been satisfied at the time or times and in the
manner specified in such Notice of Redemption.
(g) Dividend Payments by Fund to Depositary. The Fund shall pay to
the Depositary, not later than 10:00 a.m., New York City time, on the
third Business Day preceding each Dividend Payment Date for shares of a
series of Preferred Shares, an aggregate amount of same day funds, equal
to the dividends to be paid to all Holders of shares of such series on
such Dividend Payment Date.
(h) Depositary for Dividend Payments by the Fund. All moneys paid to
the Depositary for the payment of dividends (or for the payment of any
Late Charge) shall be held by the Depositary for the payment of such
dividends (and any such Late Charge) by the Depositary for the benefit of
the Holders specified in Section 2(i) of Part I of this Statement. Any
moneys paid to the Depositary by the Fund in accordance with the foregoing
but not applied by the Depositary to the payment of dividends (and any
such Late Charge) will, to the extent permitted by law and upon written
request, be repaid to the Fund at the end of 30 days following the date on
which such moneys were so to have been applied.
-9-
(i) Dividends Paid to Holders. Each dividend on Preferred Shares
shall be paid on the Dividend Payment Date therefor to the Holders thereof
as their names appear on the record books of the Fund on the Business Day
next preceding such Dividend Payment Date. Each Late Charge paid on
Preferred Shares shall be paid to the Holders thereof in proportion to the
number of Preferred Shares owned thereby in the names thereof that appear
on the record books of the Fund as soon as practicable following the
payment of the Late Charge by the Fund to the Depositary.
(j) Dividends Credited Against Earliest Accumulated but Unpaid
Dividends. Any dividend payment made on Preferred Shares shall first be
credited against the earliest accumulated but unpaid dividends due with
respect to such shares. Dividends in arrears for any past Rate Period may
be declared and paid at any time, without reference to any regular
Dividend Payment Date, to the Holders as their names appear on the record
books of the Fund on such date, not exceeding 15 days preceding the
payment date thereof, as may be fixed by the Board of Directors or the
Person or Persons designated by the Board.
3. Voting Rights.
(a) One Vote Per Share of Preferred Shares. Except as otherwise
provided in the Operating Agreement or as otherwise required by law, (i)
each Holder of Preferred Shares shall be entitled to one vote for each
share of Preferred Shares held by such Holder on each matter affecting
such Preferred Shares submitted to a vote of the members of the Fund, and
(ii) the outstanding preferred shares, including each outstanding share of
the Preferred Shares, and the Common Shares shall vote together as a
single class; provided, however, that, at any meeting of the members of
the Fund held for the election of directors, the holders of outstanding
preferred shares, including the Preferred Shares, represented in person or
by proxy at said meeting, shall be entitled, as a class, to the exclusion
of the holders of all other securities and classes of shares of membership
interest in the Fund, to elect two directors of the Fund, each of the
Preferred Shares entitling the holder thereof to one vote. Subject to
Section 3(b) of Part I of this Statement, the holders of outstanding
Common Shares and preferred shares voting together as a single class,
shall elect the balance of the directors. If, however, the Credit Enhancer
makes a payment under the Preferred Shares Insurance Policy, the Credit
Enhancer will be entitled to voting rights in respect of the Preferred
Shares, which the Credit Enhancer will vote in its own interests even if
contrary to the interests of the holders of the Preferred Shares;
provided, however, that the Credit Enhancer may not vote in a manner that
would adversely affect the right of the Holders of the Preferred Shares to
receive any payments such Holders of Preferred Shares are entitled to.
(b) Voting For Additional Directors.
(1) Voting Period. Except as otherwise provided in the
Operating Agreement or as otherwise required by law, during any
period in which any one or more of the conditions described in
subparagraphs (A), (B) or (C) below shall exist (such period being
referred to herein as a "Voting Period"), the number of directors
constituting the Board of Directors shall be automatically increased
by the smallest number that, when added to the two directors elected
exclusively by the holders of preferred shares of the Fund,
including the Preferred Shares, would constitute a majority of the
Board of Directors as so increased by such
-10-
smallest number, and the holders of preferred shares, including the
Preferred Shares, shall be entitled, voting their shares as a class
on a one-vote-per-share basis (to the exclusion of the holders of
all other securities and classes of shares of membership interest in
the Fund), to elect such smallest number of additional directors,
together with the two directors that such holders are in any event
entitled to elect. A Voting Period shall commence if:
(A) at the close of business on any Dividend Payment
Date accumulated dividends (whether or not earned or declared)
on any outstanding Preferred Shares, equal to at least six
full months' dividends shall be due and unpaid and sufficient
cash or specified securities shall not have been deposited
with the Depositary for the payment of such accumulated
dividends; or
(B) the Fund shall have failed to comply fully with its
obligations pursuant to Section 7(b) of Part I of this
Statement for a continuous period of at least six full months;
or
(C) at any time holders of any preferred shares are
entitled to elect a majority of the directors of the Fund
under the Investment Company Act or the Statement of
Preferences creating any other preferred shares.
A Voting Period shall terminate when none of the conditions in clauses
(A), (B) or (C) are continuing. Upon the termination of a Voting Period, the
voting rights described in this Section 3(b)(1) shall cease, subject always,
however, to the reverting of such voting rights in the Holders upon the further
occurrence of any of the events described in this Section 3(b)(1).
(2) Notice of Special Meeting. As soon as practicable after
the accrual of any right of the holders of preferred shares,
including the Preferred Shares, to elect additional directors as
described in Section 3(b)(1) of Part I of this Statement, the Board
of Directors of the Fund shall call a special meeting of such
holders, by mailing a notice of such special meeting to such
holders, such meeting to be held not less than 10 nor more than 45
days after the date of mailing of such notice. If the Board of
Directors does not call such a special meeting, it may be called by
any such holder on like notice. The record date for determining the
holders entitled to notice of and to vote at such special meeting
shall be the close of business on the fifth Business Day preceding
the day on which such notice is mailed. At any such special meeting
and at each meeting of holders of preferred shares, including the
Preferred Shares, held during a Voting Period at which directors are
to be elected, such holders, voting together as a class (to the
exclusion of the holders of all other securities and classes of
shares of membership interest of the Fund), shall be entitled to
elect the number of directors prescribed in Section 3(b)(1) of Part
I of this Statement on a one-vote-per-share basis. At any such
meeting, or adjournment thereof in the absence of a quorum, a
majority of such holders present in person or by proxy shall have
the power to adjourn the meeting without notice, other than by an
announcement at the meeting, to a date not more than 120 days after
the original record date.
(3) Terms of Office of Existing Directors. The terms of office
of all persons who are directors of the Fund at the time of a
special meeting of Holders and holders of other preferred shares to
elect directors shall continue, notwithstanding the election at such
meeting by the Holders and such other holders of the number of
directors that they are entitled to
-11-
elect, and the persons so elected by the Holders and such other
holders, together with the two incumbent directors elected by the
Holders and such other holders of preferred shares and the remaining
incumbent directors elected by the holders of the Common Shares and
preferred shares, shall constitute the duly elected directors of the
Fund.
(4) Terms of Office of Certain Directors to Terminate Upon
Termination of Voting Period. Simultaneously with the termination of
a Voting Period, the terms of office of the additional directors
elected by the Holders and holders of other preferred shares
pursuant to Section 3(b)(1) of Part I of this Statement shall
terminate, the remaining directors shall constitute the directors of
the Fund and the voting rights of the Holders and such other holders
to elect additional directors pursuant to Section 3(b)(1) of Part I
of this Statement shall cease, subject to the provisions of the last
sentence of Section 3(b)(1) of Part I of this Statement. Upon the
expiration of the terms of the Directors elected by the holders of
preferred shares pursuant to Section 3(b)(1) of Part I of this
Statement, the number of Directors shall be automatically reduced to
the number of Directors on the Board of Directors immediately
preceding such Voting Period.
(c) Holders of Preferred Shares to Vote on Certain Other Matters.
(1) Changes in Capitalization Structure. So long as any
Preferred Shares are outstanding, the Fund shall not, without (i)
the affirmative vote or consent of the Holders of at least a
majority of the Preferred Shares outstanding at the time and voting
on such matter, in person or by proxy, either in writing or at a
meeting, voting as a separate class, and (ii) the written consent of
the Credit Enhancer:
(A) authorize, create or issue any class or series of
shares (other than the Series A-2 Preferred Share) ranking
senior to or on a parity with the Preferred Shares with
respect to the payment of dividends or the distribution of
assets upon dissolution, liquidation or winding up of the
affairs of the Fund, or authorize, create or issue additional
shares of any series of Preferred Shares except that,
notwithstanding the foregoing, but subject to the provisions
of Section 6(a) of this Part I, the Board of Directors,
without the vote or consent of the Holders of Preferred Shares
or the Credit Enhancer, may from time to time authorize and
create, and the Fund may from time to time issue, additional
shares of any series of Preferred Shares or classes or series
of other preferred shares ranking on a parity with Preferred
Shares with respect to the payment of dividends and the
distribution of assets upon dissolution, liquidation or
winding up of the affairs of the Fund and having such other
terms, designations and preferences as may be set forth in the
statement of preferences of such other preferred shares or in
this Statement and an amended and restated Appendix A hereto,
in the case of Preferred Shares, if the Fund obtains
confirmation from S&P (if S&P is then rating the Preferred
Shares at the request of the Fund), Xxxxx'x (if Xxxxx'x is
then rating the Preferred Shares at the request of the Fund)
and any Substitute Rating Agency (if any such Substitute
Rating Agency is then rating the Preferred Shares at the
request of the Fund) that the issuance of such class or series
would not cause such Rating Agency to reduce, at that time,
the rating then assigned by such Rating Agency to the Senior
Obligations (without giving effect to the Preferred Shares
Insurance Policy) and the issuance of any such class or series
would not cause the Fund to violate or breach any provision of
the Indenture or the Preferred Shares Insurance Agreement); or
-12-
(B) amend, alter or repeal the provisions of the
Operating Agreement or this Statement, whether by merger,
consolidation or otherwise, so as to materially and adversely
affect in the aggregate the preferences, rights or powers of
such Preferred Shares; provided, however, that (I) none of the
actions permitted by the exception to (A) above will be deemed
to affect such preferences, rights or powers, (II) a division
of Preferred Shares will not be deemed to affect such
preferences, rights or powers, (III) the authorization,
creation and issuance of classes or series of shares ranking
junior to the Preferred Shares with respect to the payment of
dividends and the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Fund will not
be deemed to affect such preferences, rights or powers unless
such issuance would, at the time thereof, cause the Fund not
to satisfy the Investment Company Act Preferred Shares Asset
Coverage, either Over-Collateralization Test or any other
provision of the Indenture or the Preferred Shares Insurance
Agreement, and (IV) a reorganization of the Fund so that it
conducts all or substantially all of its business through a
wholly-owned subsidiary (except that such subsidiary may issue
an interest economically similar to the Series A-2 Preferred
Share to the Investment Manager), will be deemed not to affect
such preferences, rights or powers, provided that such
reorganization does not adversely affect the rating of the
Senior Obligations (without giving effect to the Preferred
Shares Insurance Policy) at that time by any Rating Agency
then rating the Preferred Shares at the request of the Fund (a
"Qualified Reorganization").
(2) Final Redemption Date. Provided that any Preferred Shares
are outstanding, the Holders of at least 75% of the Preferred Shares
then outstanding, voting as a separate class, in person or by proxy,
either in writing or at a meeting, may elect to extend the Final
Redemption Date from November 15, 2013 to November 15, 2014,
provided that the Credit Enhancer consents in writing to such
extension. If the Final Redemption Date is so extended by one year,
the Holders of at least 75% of the Preferred Shares then
outstanding, voting as a separate class, in person or by proxy,
either in writing or at a meeting, may elect to further extend the
Final Redemption Date to November 15, 2015, provided that the Credit
Enhancer consents in writing to such extension.
(3) Events of Bankruptcy. So long as any shares of the
Preferred Shares are outstanding, the Fund shall not, without the
affirmative vote or consent of the Holders of at least 66 2/3% of
the Preferred Shares outstanding at the time, in person or by proxy,
either in writing or at a meeting, voting as a separate class, file
a voluntary application for relief under Federal bankruptcy law or
any similar application under state law for so long as the Fund is
solvent and does not foresee becoming insolvent.
(4) Disproportionate Effect. If any action set forth in clause
(1) or (2) above would in the aggregate adversely affect the rights
of one or more series (the "Affected Series") of Preferred Shares in
a manner different from any other series of Preferred Shares, the
Fund will not effect any such action without the affirmative vote or
consent of the Holders of at least a majority of the shares of each
such Affected Series outstanding at the time, in person or by proxy,
either in writing or at a meeting (each such Affected Series voting
as a separate class). Nothing in this Statement shall prohibit or
require approval by any of the Preferred Shares of any
authorization, issuance, terms or repurchase of any senior
securities constituting indebtedness.
-13-
(5) Investment Company Act Matters. Unless a higher percentage
is provided for in the Operating Agreement, (A) the affirmative vote
of the holders of at least a "majority of the outstanding preferred
shares," including the Preferred Shares, voting as a separate class,
and the prior written approval of the Credit Enhancer, shall be
required to approve any conversion of the Fund from a closed-end to
an open-end investment company and (B) the affirmative vote of the
holders of a "majority of the outstanding preferred shares,"
including the Preferred Shares, voting as a separate class, and the
prior written approval of the Credit Enhancer, shall be required to
approve any plan of reorganization (as such term is used in the
Investment Company Act) adversely affecting such shares, provided
that a Qualified Reorganization will be deemed not to adversely
affect any such shares. The affirmative vote of the holders of a
"majority of the outstanding preferred shares," voting as a separate
class, and the prior written approval of the Credit Enhancer, shall
be required to approve any action not described in the first
sentence of this Section 3(c)(5) requiring a vote of security
holders of the Fund under Section 13(a) of the Investment Company
Act. For purposes of the foregoing, "majority of the outstanding
preferred shares" means the lesser of (A) 67% or more of such shares
present at a meeting, if the holders of more than 50% of such shares
are present in person or represented by proxy and entitled to vote
on such matter, or (B) more than 50% of the shares entitled to vote
on such matter. In the event a vote of holders of preferred shares
is required pursuant to the provisions of Section 13(a) of the
Investment Company Act, the Fund shall, not later than ten Business
Days prior to the date on which such vote is to be taken, notify the
Credit Enhancer, Xxxxx'x (if Xxxxx'x is then rating the Preferred
Shares at the request of the Fund), S&P (if S&P is then rating the
Preferred Shares at the request of the Fund) and any Substitute
Rating Agency (if any such Substitute Rating Agency is then rating
the Preferred Shares at the request of the Fund) that such vote is
to be taken and the nature of the action with respect to which such
vote is to be taken. The Fund shall, not later than ten Business
Days after the date on which such vote is taken, notify the Credit
Enhancer, Xxxxx'x (if Xxxxx'x is then rating the Preferred Shares at
the request of the Fund), S&P (if S&P is then rating the Preferred
Shares at the request of the Fund) and any Substitute Rating Agency
(if any such Substitute Rating Agency is then rating the Preferred
Shares at the request of the Fund) of the results of such vote. The
class vote of holders of preferred shares described above will in
each case be in addition to a separate vote of the requisite
percentage of Common Shares and preferred shares, including the
Preferred Shares, voting together as a single class, necessary to
authorize the action in question.
(d) Board May Take Certain Actions Without Shareholder Approval. The
Board of Directors, without the vote or consent of the shareholders of the
Fund including the Holders of the Preferred Shares, may from time to time
amend, alter or repeal any provisions of this Statement, including,
without limitation, any of the definitions appearing herein and any
provisions that have been adopted by the Fund pursuant to the guidelines
of any Rating Agency or the Credit Enhancer, if the prior written consent
of the Credit Enhancer has been received, and the Board of Directors
determines that such amendments, alterations or repeals (i) will not in
the aggregate materially and adversely affect the preferences, rights or
powers of any series of the Preferred Shares or (ii) are necessary to (A)
prevent a reduction in, or the withdrawal of, a rating of the Senior
Obligations, (B) comply with a reasonable request of the Credit Enhancer,
or (C) conform the provisions of this Statement to the applicable
provisions of the Indenture or any amendment thereto or refinancing
thereof and, in each case, do not adversely affect the dividend rate or
rights, liquidation preference, voting rights or redemption rights, of
such Preferred Shares; provided, however, that the Board of Directors
receives confirmation from each Rating Agency
-14-
then rating the Preferred Shares at the request of the Fund (such
confirmation in no event being required to be obtained from Moody's in the
case of the definitions contained in Appendix B hereto and in no event
being required to be obtained from S&P in the case of the definitions
contained in Appendix C attached hereto) that any such amendment,
alteration or repeal would not at that time impair the ratings (without
giving effect to the Preferred Shares Insurance Policy) then assigned by
Moody's or S&P to the Senior Obligations.
(e) Voting Rights Set Forth Herein Are Sole Voting Rights. Unless
otherwise required by law or the Operating Agreement, the Holders of
Preferred Shares shall not have any relative preferences, rights or powers
or other special rights (including voting rights) other than those
specifically set forth herein.
(f) No Preemptive Rights Or Cumulative Voting. The Holders of
Preferred Shares shall have no preemptive rights or rights to cumulative
voting.
(g) Voting For Directors Sole Remedy For Fund's Failure To Pay
Dividends. In the event that the Fund fails to pay any dividends on the
Preferred Shares, the exclusive remedy of the Holders shall be the right
to vote for directors pursuant to the provisions of this Section 3.
(h) Holders Entitled To Vote. For purposes of determining any rights
of the Holders to vote on any matter, whether such right is created by
this Statement, by the other provisions of the Operating Agreement, by
statute or otherwise, no Holder shall be entitled to vote any Preferred
Share and no Preferred Share shall be deemed to be "outstanding" for the
purpose of voting or determining the number of shares required to
constitute a quorum if, prior to or concurrently with the time of
determination of shares entitled to vote or shares deemed outstanding for
quorum purposes, as the case may be, the requisite Notice of Redemption
with respect to such shares shall have been mailed as provided in Section
7(c) of this Part I and the Redemption Price for the redemption of such
shares shall have been deposited in trust with the Depositary for that
purpose. No Preferred Share held by the Fund or any Affiliate of the Fund
shall have any voting rights or be deemed to be outstanding for voting or
other purposes.
4. Investment Company Act Preferred Shares Asset Coverage.
The Fund shall maintain the Investment Company Act Preferred Shares Asset
Coverage as of (1) the last Business Day of each month in which any Preferred
Shares are outstanding, (2) any day on which the Fund pays any dividend on any
of its outstanding common shares (unless such dividend is payable solely in
shares of common stock), and (3) any day on which the Fund repurchases or
otherwise redeems any of its outstanding shares of common stock (each such date,
a "Valuation Date").
5. Restrictions on Dividends and Other Distributions.
(a) Dividends on Shares Other than the Preferred Shares. Except as
set forth in the next sentence, no dividends shall be declared or paid or
set apart for payment on the shares of any class or series of shares of
membership interest in the Fund ranking, as to the payment of dividends,
on a parity with the Preferred Shares for any period unless full
cumulative dividends have been or contemporaneously are declared and paid
on the shares of each series of the
-15-
Preferred Shares through its most recent Dividend Payment Date. When
dividends are not paid in full upon the shares of each series of the
Preferred Shares through its most recent Dividend Payment Date or upon the
shares of any other class or series of shares of interest in the Fund
ranking on a parity as to the payment of dividends with the Preferred
Shares through their most recent respective Dividend Payment Dates, all
dividends declared upon the Preferred Shares and any other such class or
series of shares ranking on a parity as to the payment of dividends with
Preferred Shares shall be declared pro rata based on amounts due so that
the amount of dividends declared per share on Preferred Shares and such
other class or series of shares shall in all cases bear to each other the
same ratio that accumulated dividends per share on the Preferred Shares
and such other class or series of shares of membership interest bear to
each other (for purposes of this sentence, the amount of dividends
declared per share of Preferred Shares shall be based on the Applicable
Rate for such share for the Rate Periods during which dividends were not
paid in full).
(b) Dividends and Other Distributions with Respect to Common Shares
Under the Investment Company Act. The Fund shall not declare any dividend
(except a dividend payable in Common Shares), or declare any other
distribution, upon the Common Shares, or purchase Common Shares, unless in
every such case the preferred shares have, at the time of any such
declaration or purchase, an asset coverage (as defined in and determined
pursuant to the Investment Company Act) of at least 200% (or such other
asset coverage as may in the future be specified in or under the
Investment Company Act as the minimum asset coverage for senior securities
which are shares or stock of a closed-end investment company as a
condition of declaring dividends on its common shares or stock) after
deducting the amount of such dividend, distribution or purchase price, as
the case may be.
(c) Other Restrictions on Dividends and Other Distributions. For so
long as any Preferred Shares are outstanding, and except as set forth in
Section 5(a) and Section 8(c) of this Part I:
(1) the Fund shall not declare, pay or set apart for payment
any dividend or other distribution (other than a dividend or
distribution paid in shares of, or in options, warrants or rights to
subscribe for or purchase, Common Shares or other shares, if any,
ranking junior to the Preferred Shares as to the payment of
dividends and the distribution of assets upon dissolution,
liquidation or winding up) in respect of the Common Shares or any
other shares of the Fund ranking junior to the Preferred Shares as
to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up, or call for redemption,
redeem, purchase or otherwise acquire for consideration any Common
Shares or any other such junior shares (except by conversion into or
exchange for shares of the Fund ranking junior to the Preferred
Shares as to the payment of dividends and the distribution of assets
upon dissolution, liquidation or winding up), unless
(A) full cumulative dividends on shares of each series
of Preferred Shares through its most recently ended Rate
Period shall have been paid or shall have been declared and
sufficient funds for the payment thereof deposited with the
Depositary, and
(B) the Fund has redeemed the full number of Preferred
Shares required to be redeemed by any provision for mandatory
redemption pertaining thereto, and
-16-
(C) such dividend or other distribution shall not be
restricted under the Preferred Shares Insurance Agreement or
the Credit Enhancer shall have waived any applicable
restrictions under the Preferred Shares Insurance Agreement;
and
(2) the Fund shall not declare, pay or set apart for payment
any dividend or other distribution (other than a dividend or
distribution paid in shares of, or in options, warrants or rights to
subscribe for or purchase, Common Shares or other shares, if any,
ranking junior to Preferred Shares as to the payment of dividends
and the distribution of assets upon dissolution, liquidation or
winding up) in respect of Common Shares or any other shares of the
Fund ranking junior to Preferred Shares as to the payment of
dividends or the distribution of assets upon dissolution,
liquidation or winding up, or call for redemption, redeem, purchase
or otherwise acquire for consideration any Common Shares or any
other such junior shares (except by conversion into or exchange for
shares of the Fund ranking junior to Preferred Shares as to the
payment of dividends and the distribution of assets upon
dissolution, liquidation or winding up), unless immediately after
such transaction both Over-Collateralization Tests are satisfied.
6. Rating Agency Restrictions.
Except as otherwise permitted by the then-current guidelines of Xxxxx'x
(if Xxxxx'x is then rating the Preferred Shares at the request of the Fund) and
S&P (if S&P is then rating the Preferred Shares at the request of the Fund) as
set forth herein and in the Indenture or other pertinent written guidelines
published by the applicable Rating Agency, for so long as any Preferred Shares
are outstanding and Moody's or S&P or both is rating such shares at the request
of the Fund, the Fund will not, unless it has received the prior written consent
of the Credit Enhancer and written confirmation from Moody's or S&P, or both, as
applicable, that any such action would not at that time impair the rating then
assigned by such Rating Agency to the Senior Obligations (without giving effect
to the Preferred Shares Insurance Policy), engage in any one or more of the
following transactions:
(a) permit more than 136,000 Preferred Shares to be outstanding at
any one time or issue any class or series of shares ranking on a parity
with Preferred Shares with respect to the payment of dividends or the
distribution of assets upon dissolution, liquidation or winding up of the
Fund other than one Series A-2 Preferred Share;
(b) merge or consolidate into or with any other entity; or
(c) if the Preferred Shares are rated by S&P at the request of the
Fund, engage in interest rate swaps, caps and floors, except that the Fund
may, without obtaining the written consent of S&P described above, engage
in swaps, caps and floors if: (i) the counterparty to the swap transaction
or its credit support provider has a short-term rating of "A-l" or better
from S&P at the time the transaction is entered into or, if the
counterparty does not have a short-term rating, the counterparty's senior
unsecured long-term debt rating from S&P is "A+" or higher at the time of
the transaction, and (ii) the interest rate swap transaction will be
marked-to-market weekly.
-17-
In the event any Preferred Shares are outstanding and a Substitute
Rating Agency is rating such shares in addition to or in lieu of Moody's or
S&P, the Fund shall comply with any restrictions imposed by such Substitute
Rating Agency, which restrictions may be more restrictive than those imposed
by Moody's or S&P.
7. Redemption.
(a) Optional and Special Redemptions.
(1) Subject to the provisions of this Section 7 of Part I of
this Statement and the terms of the Indenture, Preferred Shares of
any series may be redeemed, in the sole and absolute discretion of
the Fund, as a whole or from time to time in part, at any point on
or after the five year anniversary of the initial issuance of such
Preferred Shares, out of funds legally available therefor, at the
Redemption Price; provided, however, that shares of a series of
Preferred Shares may not be redeemed in part if after such partial
redemption fewer than 13,600 shares of such series remain
outstanding.
(2) Notwithstanding any other provisions of this Section 7 of
Part I of this Statement but subject to compliance with applicable
law and the terms of the Indenture, in the event that the Total
Advance Amount is less than 105% of the sum of the Outstanding
Principal Amount of the Notes and the aggregate Liquidation
Preference of the outstanding Preferred Shares, the Preferred Shares
of any series may be redeemed, at the option of the Fund, in full or
from time to time in part, at the Redemption Price; provided,
however, that the Fund may not redeem Preferred Shares pursuant to
this subparagraph (2) if, after giving effect to such redemption,
the Total Advance Amount would be in excess of 105% of the sum of
the Outstanding Principal Amount of the Notes and the aggregate
Liquidation Preference of the outstanding Preferred Shares.
(3) If fewer than all of the outstanding shares of a series of
Preferred Shares are to be redeemed pursuant to subparagraphs (1) or
(2) of this paragraph (a), the number of shares of such series to be
redeemed shall be determined by the Board of Directors or its
designee in accordance with the provisions of this Statement and
such shares shall be redeemed pro rata from the Holders of shares of
such series in proportion to the number of shares of such series
held by such Holders.
(4) The Fund may not on any date mail a Notice of Redemption
pursuant to Section 7(c) of Part I of this Statement in respect of a
redemption contemplated to be effected pursuant to this paragraph
unless (a) on such date the Fund has available liquid securities
having a value not less than the amount (including any applicable
premium) due to Holders of Preferred Shares by reason of redemption
of such shares or such redemption date, (b) both
Over-Collateralization Tests would be satisfied immediately
subsequent to such redemption if such redemption were to occur on
such date and any Preferred Shares remained outstanding after such
redemption, and (c) such redemption would be in compliance with all
other applicable law.
(b) Mandatory Redemption.
-18-
(1) The Fund shall redeem, at the Redemption Price, certain of
the Preferred Shares, and/or, at the Fund's option, repay
indebtedness, including indebtedness under the Indenture, if, at any
time, the Fund (i) fails to maintain the Investment Company Act
Preferred Shares Asset Coverage on a Valuation Date, or (ii) elects
to do so to satisfy its obligations under Section 7.7 of the
Indenture (as relates to the Over-Collateralization Tests) or the
Preferred Shares Insurance Agreement, as applicable, and such
failure is not cured on or before the Investment Company Act Cure
Date or cured in accordance with the terms of the Indenture or the
Preferred Shares Insurance Agreement, as the case may be.
(2) The number of Preferred Shares to be redeemed shall be
equal to the lesser of:
(A) the minimum number of Preferred Shares, together
with all other preferred shares subject to redemption or
retirement, the redemption of which, if deemed to have
occurred immediately prior to the opening of business on the
Cure Date, would have resulted in the Fund's maintaining the
Investment Company Act Preferred Shares Asset Coverage or
satisfying the terms of Section 7.7 of the Indenture (as
relates to the Over-Collateralization Tests), as the case may
be, on such Cure Date (provided, however, that if there is no
such minimum number of Preferred Shares and other preferred
shares the redemption or retirement of which would have had
such result, all Preferred Shares and other preferred shares
then outstanding shall be redeemed), and
(B) the maximum number of Preferred Shares, together
with all other preferred shares subject to redemption or
retirement, that can be redeemed out of funds expected to be
legally available therefor in accordance with the Operating
Agreement, the Indenture and the Preferred Shares Insurance
Agreement, as applicable, and applicable law.
(3) In determining the Preferred Shares required to be
redeemed in accordance with the foregoing, the Fund shall allocate
the number required to be redeemed to satisfy the Investment Company
Act Preferred Shares Asset Coverage or the requirements of the
Indenture (including without limitation Section 7.7 thereof) or the
Preferred Shares Insurance Agreement, as the case may be, pro rata
among Preferred Shares and other preferred shares, except for the
Series A-2 Preferred Share (and, then, pro rata among each series of
Preferred Shares), selected by the Fund in its discretion for
redemption or retirement. The Fund shall effect such redemption on
the date fixed by the Fund therefor, which date shall not be earlier
than 20 days nor later than 30 days after such Cure Date, except
that if the Fund does not have funds legally available for the
redemption of all of the required number of the Preferred Shares and
other preferred shares, except for the Series A-2 Preferred Share,
which are subject to redemption or retirement or the Fund otherwise
is unable to effect such redemption on or prior to 30 days after
such Cure Date, then the Fund shall redeem those Preferred Shares
and other preferred shares, except for the Series A-2 Preferred
Share, which it was unable to redeem on the earliest practicable
date on which it is able to effect such redemption. If fewer than
all of the outstanding shares of a series of Preferred Shares are to
be redeemed pursuant to this paragraph (b), then the number of
shares of such series to be redeemed shall be redeemed pro rata from
the Holders of shares of such series in proportion to the number of
shares of such series held by such Holders. Notwithstanding anything
to the contrary contained in this Statement, each series of the
-19-
Preferred Shares will be redeemed on the Final Redemption Date
pursuant to procedures established by the Board of Directors.
(c) Notice of Redemption. If the Fund shall determine or be required
to redeem shares of a series of Preferred Shares pursuant to paragraph (a)
or (b) of this Section 7, it shall mail a Notice of Redemption with
respect to such redemption by nationally recognized overnight delivery
service, postage prepaid, to (i) each Holder of the shares of such series
to be redeemed, at such Holder's address as the same appears on the record
books of the Fund on the record date established by the Board of
Directors, (ii) to S&P, if S&P is then rating the Preferred Shares at the
request of the Fund, to Xxxxx'x if Xxxxx'x is then rating the Preferred
Shares at the request of the Fund and any Substitute Rating Agency, and
(iii) to the Credit Enhancer, the Depositary and the Investment Manager.
Such Notice of Redemption shall be so mailed not less than 5 nor more than
45 calendar days prior to the date fixed for redemption. Each such Notice
of Redemption shall state: (i) the redemption date; (ii) the aggregate
number of Preferred Shares to be redeemed and the series thereof; (iii)
the CUSIP number for shares of such series; (iv) the Redemption Price; (v)
the place or places where the certificate(s) for such shares (properly
endorsed or assigned for transfer, if the Board of Directors or its
designee shall so require and the Notice of Redemption shall so state) are
to be surrendered for payment of the Redemption Price; (vi) that dividends
on the shares to be redeemed will cease to accumulate on such redemption
date; and (vii) the provisions of this Section 7 under which such
redemption is made. If fewer than all shares of a series of Preferred
Shares held by any Holder are to be redeemed, the Notice of Redemption
mailed to such Holder shall also specify the number of shares of such
series to be redeemed from such Holder. The Fund may provide in any Notice
of Redemption relating to a redemption contemplated to be effected
pursuant to paragraph (a) of this Section 7 that such redemption is
subject to one or more conditions precedent and that the Fund shall not be
required to effect such redemption unless each such condition shall have
been satisfied at the time or times and in the manner specified in such
Notice of Redemption.
(d) No Redemption Under Certain Circumstances. Notwithstanding the
provisions of paragraph (a) or (b) of this Section 7 and except in order
to satisfy the Preferred Shares Asset Coverage Ratio under the Investment
Company Act, (i) if any dividends on shares of a series of Preferred
Shares (whether or not earned or declared) are in arrears, no shares of
such series shall be redeemed unless all outstanding shares of such series
are simultaneously redeemed, and the Fund shall not purchase or otherwise
acquire any shares of such series; provided, however, that the foregoing
shall not prevent the purchase or acquisition of all outstanding shares of
such series pursuant to the successful completion of an otherwise lawful
purchase or exchange offer made on the same terms to Holders of all
outstanding shares of such series and (ii) no shares of any series of
Preferred Shares shall be redeemed unless such redemption is permitted by
the Indenture.
(e) Absence of Funds Available for Redemption. To the extent that
any redemption for which Notice of Redemption has been mailed is not made
by reason of the absence of legally available funds therefor in accordance
with the Operating Agreement and applicable law, such redemption shall be
made as soon as practicable to the extent such funds become available.
Failure to redeem Preferred Shares shall be deemed to exist at any time
after the date specified for redemption in a Notice of Redemption when the
Fund shall have failed, for any reason whatsoever, to deposit in trust
with the Depositary the Redemption Price with respect
-20-
to any shares for which such Notice of Redemption has been mailed;
provided, however, that the foregoing shall not apply in the case of the
Fund's failure to deposit in trust with the Depositary the Redemption
Price with respect to any shares where (1) the Notice of Redemption
relating to such redemption provided that such redemption was subject to
one or more conditions precedent and (2) any such condition precedent
shall not have been satisfied at the time or times and in the manner
specified in such Notice of Redemption. Notwithstanding the fact that the
Fund may not have redeemed Preferred Shares for which a Notice of
Redemption has been mailed, dividends may be declared and paid on
Preferred Shares and shall include those Preferred Shares for which a
Notice of Redemption has been mailed.
(f) Depositary for Redemption Payments by Fund. All moneys paid to
the Depositary for payment of the Redemption Price of Preferred Shares
called for redemption shall be held by the Depositary for the benefit of
Holders of shares so to be redeemed.
(g) Shares for Which Notice of Redemption Has Been Given Are No
Longer Outstanding. Provided a Notice of Redemption has been mailed
pursuant to Section 7(c) of Part I of this Statement, upon the deposit
with the Depositary (on the Business Day next preceding the date fixed for
redemption thereby, in funds available on the next Business Day) of funds
sufficient to redeem the Preferred Shares that are the subject of such
notice, dividends on such shares shall cease to accumulate and such shares
shall no longer be deemed to be outstanding for any purpose, and all
rights of the Holders of the shares so called for redemption shall cease
and terminate, except the right of such Holders to receive the Redemption
Price, without any interest or other additional amount, except as provided
in Section 2(e)(2)(B) of this Part I. Upon surrender in accordance with
the Notice of Redemption of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board of Directors
shall so require and the Notice of Redemption shall so state), the
Redemption Price shall be paid by the Depositary to the Holders of
Preferred Shares subject to redemption. In the case that fewer than all of
the shares represented by any such certificate are redeemed, a new
certificate shall be issued, representing the unredeemed shares, without
cost to the Holder thereof. The Fund shall be entitled to receive from the
Depositary, promptly after the date fixed for redemption, any cash
deposited with the Depositary in excess of (i) the aggregate Redemption
Price of the Preferred Shares called for redemption on such date and (ii)
all other amounts to which Holders of Preferred Shares called for
redemption may be entitled. Any funds so deposited that are unclaimed at
the end of 90 days from such redemption date shall, to the extent
permitted by law, be repaid to the Fund, after which time the Holders of
Preferred Shares so called for redemption may look only to the Fund for
payment of the Redemption Price and all other amounts to which they may be
entitled.
(h) Compliance with Applicable Law. In effecting any redemption
pursuant to this Section 7, the Fund shall use its reasonable best efforts
to comply with all applicable conditions precedent to effecting such
redemption under the Investment Company Act, any Delaware law and other
United States federal securities law but shall effect no redemption except
in accordance with the Investment Company Act, Delaware law and United
States federal securities law.
(i) Only Whole Preferred Shares May Be Redeemed. In the case of any
redemption pursuant to this Section 7, only whole Preferred Shares shall
be redeemed, and in the
-21-
event that any provision of the Operating Agreement would require
redemption of a fractional share, the Depositary shall be authorized to
round upwards so that only whole shares are redeemed.
8. Liquidation Rights.
(a) Ranking. The shares of a series of Preferred Shares shall rank
senior to the Common Shares as to the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the Fund, shall
rank on a parity with each other, with shares of any other series of
preferred shares and with shares of any other series of Preferred Shares
as to the distribution of assets upon dissolution, liquidation or winding
up of the affairs of the Fund and shall rank junior to any debt of the
Fund, including indebtedness outstanding under the Indenture to the extent
set forth therein.
(b) Distributions Upon Liquidation. Upon the dissolution,
liquidation or winding up of the affairs of the Fund, whether voluntary or
involuntary, the Holders of Preferred Shares then outstanding shall be
entitled to receive and to be paid (or have set aside for payment) out of
the assets of the Fund available for distribution to its shareholders,
before any payment or distribution shall be made on the Common Shares or
on any other class of shares of the Fund ranking junior to the Preferred
Shares upon dissolution, liquidation or winding up, an amount equal to the
Liquidation Preference with respect to such shares plus an amount equal to
all dividends thereon (whether or not earned or declared) accumulated but
unpaid to (but not including) the date of final distribution in same day
funds in connection with the liquidation of the Fund. After the payment to
the Holders of the Preferred Shares of the full preferential amounts
provided for in this paragraph (b), the Holders of Preferred Shares as
such shall have no right or claim to any of the remaining assets of the
Fund.
(c) Pro Rata Distributions. In the event the assets of the Fund
available for distribution to the Holders of Preferred Shares upon any
dissolution, liquidation, or winding up of the affairs of the Fund,
whether voluntary or involuntary, shall be insufficient to pay in full all
amounts to which such Holders are entitled pursuant to Section 8(b) of
Part I of this Statement, no such distribution shall be made on account of
any shares of any other class or series of preferred shares ranking on a
parity with the Preferred Shares with respect to the distribution of
assets upon such dissolution, liquidation or winding up, unless
proportionate distributive amounts shall be paid on account of the
Preferred Shares, ratably, in proportion to the full distributable amounts
for which holders of all such parity shares are respectively entitled upon
such dissolution, liquidation or winding up.
(d) Rights of Junior Shares. Subject to the rights of the holders of
shares of any series or class or classes of shares ranking on a parity
with the Preferred Shares with respect to the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the Fund, after
payment shall have been made in full to the Holders of the Preferred
Shares as provided in Section 8(b) of Part I of this Statement, but not
prior thereto, any other series or class or classes of shares ranking
junior to the Preferred Shares with respect to the distribution of assets
upon dissolution, liquidation or winding up of the affairs of the Fund
shall, subject to the respective terms and provisions (if any) applying
thereto, be entitled to receive any and all assets remaining
-22-
to be paid or distributed, and the Holders of the Preferred Shares shall
not be entitled to share therein.
(e) Certain Events Not Constituting Liquidation. Neither the sale of
all or substantially all the property or business of the Fund, nor the
merger or consolidation of the Fund into or with any legal entity nor the
merger or consolidation of any legal entity into or with the Fund shall be
a dissolution, liquidation or winding up, whether voluntary or
involuntary, for the purposes of this Section 8.
9. Over-Collateralization Test Maintenance.
(a) So long as Preferred Shares are outstanding, the Fund shall
determine as of each Reporting Date whether each Over-Collateralization
Test is satisfied on such date. On or before 5:00 P.M., New York City
time, on the third Business Day after a Reporting Date on which the Fund
fails to satisfy either Over-Collateralization Test, and on or before the
third Business Day after both Over-Collateralization Tests are next
subsequently satisfied (if they are subsequently satisfied), the Fund
shall, in accordance with the Preferred Shares Insurance Agreement,
complete and deliver to the Credit Enhancer a Collateral Maintenance
Report as of the date of such failure or satisfaction, as the case may be.
The Fund shall also, in accordance with the Preferred Shares Insurance
Agreement, deliver a Collateral Maintenance Report to the Credit Enhancer
as of the last Business Day in each December of each year in which the
Preferred Shares Insurance Policy is in effect on such day, in each case
on or before the third Business Day after such day (each such day, an
"Annual Valuation Date"). A failure by the Fund to deliver a Collateral
Maintenance Report pursuant to the preceding sentence shall be deemed to
be a delivery of a Collateral Maintenance Report indicating
non-satisfaction by the Fund of each Over-Collateralization Test.
(b) Within ten Business Days after the date of delivery of a
Collateral Maintenance Report in accordance with the Preferred Shares
Insurance Agreement relating to an Annual Valuation Date, the Fund shall
cause the Independent Accountant to confirm in writing to the Credit
Enhancer (i) the mathematical accuracy of the calculations reflected in
such Collateral Maintenance Report (and in any other Collateral
Maintenance Report, randomly selected by the Independent Accountant, that
was prepared by the Fund during the quarter ending on such Annual
Valuation Date), and (ii) that, in such Collateral Maintenance Report (and
in such randomly selected Collateral Maintenance Report), the Fund
properly determined in accordance with this Statement whether the Fund, at
such Annual Valuation Date (and at the Reporting Date addressed in such
randomly selected Collateral Maintenance Report), satisfied both
Over-Collateralization Tests (such information is herein called the
"Auditor's Confirmation") . Within 60 days after the end of each fiscal
year of the Fund, the Fund shall deliver to the Credit Enhancer financial
statements of the Fund as at the end of and for such fiscal year together
with the Independent Auditor's report thereon.
(c) Within ten Business Days after the date of delivery of a
Collateral Maintenance Report in accordance with sub-paragraph (a) of this
Section 9 relating to any Reporting Date on which the Fund failed to
satisfy either Over-Collateralization Test, and relating to the first
subsequent date, if any, on which each such test is satisfied, the Fund
shall
-23-
cause the Independent Accountant to provide to the Credit Enhancer an
Auditor's Confirmation as to such Collateral Maintenance Report.
(d) If any Auditor's Confirmation delivered pursuant to
sub-paragraph (b) or (c) of this Section 9 shows that an error was made in
the Collateral Maintenance Report for a particular Reporting Date for
which such Auditor's Confirmation was required to be delivered, the
calculation or determination made by such Independent Accountant shall be
final and conclusive and shall be binding on the Fund, and the Fund shall,
as may be required by the Preferred Shares Insurance Agreement,
accordingly amend and deliver the Collateral Maintenance Report to the
Credit Enhancer promptly following receipt by the Fund of such Auditor's
Confirmation.
10. Miscellaneous.
(a) Amendment of Appendix A to Add Additional Series. Subject to the
provisions of Section 3(c) and 6(a) of this Part I, the Board of Directors
may, by resolution duly adopted, with the prior written consent of the
Credit Enhancer but without shareholder approval (except as otherwise
provided by this Statement or required by applicable law), amend and
restate Appendix A and/or Part II hereto to (1) reflect any amendments
hereto which the Board of Directors is entitled to adopt pursuant to the
terms of this Statement without shareholder approval or (2) add additional
series of Preferred Shares (and terms relating thereto) to the series
theretofore described therein. Each such additional series shall be
governed by the terms of this Statement.
(b) Appendices A, B and C. Appendices A, B and C hereto are
incorporated in and made a part of this Statement by reference thereto;
provided, however, that Appendices B and C are incorporated herein by
reference only to the extent necessary to define capitalized terms used
herein and not defined herein but defined therein, including any other
terms defined in such documents that are necessary to define such terms.
(c) No Fractional Shares. No fractional shares of Preferred Shares
shall be issued.
(d) Status of Preferred Shares Redeemed, Exchanged or Otherwise
Acquired by the Fund. Preferred Shares which are redeemed, exchanged or
otherwise acquired by the Fund shall return to the status of authorized
and unissued preferred shares without designation as to series.
(e) Board May Resolve Ambiguities. To the extent not prohibited by
applicable law, the Board of Directors may, with the prior written consent
of the Credit Enhancer but without further approval by the shareholders,
interpret or adjust the provisions of this Statement to resolve any
inconsistency or ambiguity or to remedy any formal defect and may with the
prior written consent of the Credit Enhancer amend this Statement with
respect to any series of Preferred Shares prior to the issuance of shares
of such series.
(f) Headings Not Determinative. The headings contained in this
Statement are for convenience of reference only and shall not affect the
meaning or interpretation of this statement.
-24-
(g) Notices. All notices or communications, unless otherwise
specified in the By-Laws of the Fund or this Statement, shall be
sufficiently given if in writing and delivered in person or mailed by a
nationally recognized overnight courier. The Fund shall promptly notify
any Rating Agency then rating the Preferred Shares at the request of the
Fund if the Fund no longer desires such Rating Agency to continue rating
the Preferred Shares or of any determination made by the Board of
Directors described in Section 10(e) of Part I of this Statement.
(h) References to Collateral Valuation Schedules; Accounting
Matters; Asset Coverage Determinations.
(1) References to a term having the meaning set forth in both
Collateral Valuation Schedules shall be applied separately using
such term as defined in each of the Collateral Valuation Schedules;
provided, however, that (i) if at any time none of the Term
Preferred Shares are then rated by Xxxxx'x but some or all of the
Term Preferred Shares are rated by S&P, the Xxxxx'x Collateral
Valuation Schedule shall not be applicable for any purpose hereunder
and (ii) if at any time none of the Term Preferred Shares are then
rated by S&P but some or all of the Term Preferred Shares are rated
by Xxxxx'x, the S&P Collateral Valuation Schedule shall not be
applicable for any purpose hereunder.
(2) For purposes of this Statement, all accounting terms not
otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP as in effect on the Closing Date and as applied
in the preparation of the financial statements of the Company
referred to in Section 13.2 of the Operating Agreement.
(3) For purposes of determining whether any of the asset
coverages required to be maintained pursuant to the Investment
Company Act are maintained as of any date, such asset coverage may
be calculated on the basis of values calculated as of a time within
48 hours (not including Sundays or holidays) next preceding the time
of the applicable determination.
PART II
1. Transfer of Preferred Shares.
(a) So long as the shares of a series of Preferred Shares are
represented by a global certificate as provided in Section 2 of Part II of
this Statement, a beneficial holder of Preferred Shares may sell, transfer
or otherwise dispose of Preferred Shares of such series only in whole
shares and only pursuant to the procedures established by the Securities
Depository or its successor. If the shares of a series of Preferred Shares
are no longer represented by a global certificate as provided in Section 2
of Part II of this Statement, the shares of such series of Preferred
Shares may be sold only in reliance on an exemption from the registration
requirements of the Securities Act.
2. Global Certificate.
-25-
Except as otherwise determined by the Fund, (i) all of the shares of a
series of Preferred Shares outstanding from time to time shall be represented
by one global certificate registered in the name of the Securities Depository
or its nominee and (ii) no registration of transfer of shares of a series of
Preferred Shares shall be made on the books of the Fund to any Person other
than the Securities Depository or its nominee.
Except as otherwise determined by the Fund, each certificate for shares
or any series of Preferred Shares shall include the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR
ANY STATE SECURITIES OR "BLUE SKY" LAWS. THE HOLDER HEREOF, BY
PURCHASING THE SECURITY REPRESENTED BY THIS CERTIFICATE, AGREES FOR THE
BENEFIT OF YORK ENHANCED STRATEGIES FUND, LLC (THE "COMPANY") THAT THE
SECURITY REPRESENTED BY THIS CERTIFICATE ARE BEING ACQUIRED FOR ITS OWN
ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY BE RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH SUCH CASE,
IN COMPLIANCE WITH THE OPERATING AGREEMENT AND PREFERRED SHARES
PURCHASE AGREEMENT RELATING TO THE SECURITY AND ALL APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
JURISDICTION. EACH PURCHASER OF THE SECURITY REPRESENTED BY THIS
CERTIFICATE WILL BE REQUIRED TO EXECUTE A PURCHASER'S LETTER RELATING
TO THE SHARES CERTIFYING, AMONG OTHER THINGS, THAT SUCH PURCHASER IS
(1) AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A) (1),
(2), (3) OR (7) UNDER THE SECURITIES ACT, (2) "QUALIFIED CLIENT" WITHIN
THE MEANING OF RULE 205-3 UNDER THE INVESTMENT ADVISERS ACT OF 1940,
(3) "QUALIFIED PURCHASER" WITHIN THE MEANING OF SECTION 2(a)(51)(A)
UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND THE
REGULATIONS PROMULGATED THEREUNDER, AND (4) "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A OF THE SECURITIES ACT.
UNLESS THIS SHARE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
("CEDE") OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE,
HAS AN INTEREST HEREIN.
-26-
EACH HOLDER OF THE SHARES REPRESENTED HEREBY IS DEEMED TO
REPRESENT AND WARRANT THAT EITHER (A) IT IS NOT AND WILL NOT BE A
BENEFIT PLAN INVESTOR WITHIN THE MEANING OF U.S. DEPARTMENT OF LABOR
REGULATION SECTION 2510.3-101(F)(2), A GOVERNMENTAL PLAN (AS DEFINED IN
SECTION 3(32) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974,
AS AMENDED ("ERISA")) ("A GOVERNMENTAL PLAN"), A CHURCH PLAN (AS
DEFINED IN SECTION 3(33) OF ERISA) THAT HAS NOT MADE AN ELECTION UNDER
SECTION 410(D) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE") (A "CHURCH PLAN") OR A FOREIGN PLAN THAT IS SUBJECT TO ANY
FEDERAL, STATE, LOCAL OR FOREIGN LAW THAT IS SUBSTANTIALLY SIMILAR TO
THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR
(B) ITS PURCHASE AND, PROVIDED THE COMPANY REMAINS A REGISTERED
INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT, HOLDING AND
DISPOSITION OF THE SHARES REPRESENTED HEREBY WILL NOT RESULT IN A
PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE (OR IN THE CASE OF A GOVERNMENTAL PLAN, A CHURCH PLAN OR A
FOREIGN PLAN, ANY SUBSTANTIALLY SIMILAR FEDERAL, STATE, LOCAL OR
FOREIGN LAW), UNLESS AN EXEMPTION IS AVAILABLE (ALL OF THE CONDITIONS
OF WHICH HAVE BEEN SATISFIED), OR IN ANY OTHER VIOLATION OF AN
APPLICABLE REQUIREMENT OF ERISA, THE CODE OR OTHER APPLICABLE LAW.
ANY TRANSFER IN VIOLATION OF THE FOREGOING WILL BE OF NO FORCE
AND EFFECT, WILL BE VOID AB INITIO, AND WILL NOT OPERATE TO TRANSFER
ANY RIGHTS TO THE TRANSFEREE, NOTWITHSTANDING ANY INSTRUCTIONS TO THE
CONTRARY TO THE ISSUER OR ANY INTERMEDIARY. THE COMPANY HAS THE RIGHT,
UNDER THE OPERATING AGREEMENT, TO COMPEL ANY DEFAULTING MEMBER (AS
DEFINED IN THE OPERATING AGREEMENT) TO SELL ITS INTEREST IN THE
SECURITIES, OR MAY SELL SUCH INTEREST ON BEHALF OF SUCH OWNER.
3. Force Majeure.
(a) Notwithstanding anything else set forth herein, if a Dividend
Payment Date is not a Business Day because the New York Stock Exchange is
closed for business, or because commercial banks in New York, New York,
Los Angeles, California or the city in which the Corporate Trust Office
(as such term is defined in the Indenture) is located are authorized or
required by applicable law to close, or due to an act of God, natural
disaster, act of war, civil or military disturbance, act of terrorism,
sabotage, riots or a loss or malfunction of utilities or communications
services or the dividend payable on such date can not be paid for any such
reason, then:
(1) the Dividend Payment Date for the affected Rate Period
shall be the next Business Day on which the Fund and its paying
agent, if any, are able to cause the dividend to be paid using their
reasonable best efforts;
-27-
(2) the affected Rate Period shall end on the day it would
have ended had such event not occurred and the Dividend Payment Date
had remained the scheduled date; and
(3) the next Rate Period will begin and end on the dates on
which it would have begun and ended had such event not occurred and
the Dividend Payment Date remained the scheduled date.
4. Preferred Member of the Fund.
Each registered holder of the Preferred Shares shall be automatically
admitted as a Preferred Member (as defined in the Operating Agreement) of the
Fund.
-28-
IN WITNESS WHEREOF, YORK ENHANCED STRATEGIES FUND, LLC, has caused
these presents to be signed as of November 17, 2005 in its name and on its
behalf by its President and attested by an Authorized Person. Said officers
of the Fund have executed this Statement as officers and not individually,
and the obligations and rights set forth in this Statement are not binding
upon any such officers, or the directors or shareholders of the Fund,
individually, but are binding only upon the assets and property of the Fund.
YORK ENHANCED STRATEGIES FUND, LLC
By: _____________________________
Name:
Title:
November 17, 2005
APPENDIX A
TERMS OF SERIES A-1 FLOATING RATE TERM PREFERRED SHARES OF YORK ENHANCED
STRATEGIES FUND, LLC
SECTION 1
Designation as to Series.
A series of Series A-1 Floating Rate Term Preferred Shares (the "Term
Preferred Shares"), with a Per Share Liquidation Preference of $1,000 per
share, is hereby designated "Series A-1 Floating Rate Term Preferred
Shares." All Term Preferred Shares have an Applicable Rate equal to the
applicable LIBOR for the applicable Rate Period plus 0.30% per annum plus an
additional amount. The additional amount (the "Additional Amount") will be
payable for any Rate Period only if U.S. withholding tax is required to be
paid by any Holder of Term Preferred Shares with respect to an amount of
dividends payable on the Term Preferred Shares for such Rate Period. In the
event no such withholding tax is required for a Rate Period, then the
Additional Amount will be zero for that Rate Period. In the event an
Additional Amount is payable, then the Additional Amount will be a number
which is equal to (A) 0.42857 multiplied by (B) the amount of dividends
(which could be all or some portion of the aggregate dividends payable to the
Holders of the Term Preferred Shares) which are subject to withholding for
the Rate Period. In addition, the Term Preferred Shares shall have an
initial Dividend Payment Date of March 15, 2006; and have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Operating Agreement of the
Fund applicable to Preferred Shares of the Fund, as set forth in Part I and
Part II of this Statement.
The amount of dividends per share payable on the Term Preferred Shares
on any date on which dividends shall be payable on such shares shall be
computed by multiplying the Applicable Rate for such shares in effect for
such Rate Period or Rate Periods or part thereof for which dividends have not
been paid by a fraction, the numerator of which shall be the number of days
in such Rate Period or Rate Periods or part thereof (calculated on the basis
of a 360 day year) and the denominator of which shall be 360, and applying
the rate obtained against $1,000.
In accordance with and subject to the terms of Section 6(a) of Part I
of the Statement, the Board of Directors may, from time to time with the
Credit Enhancer's prior written consent but without the vote or consent of
the Holders of Preferred Shares, authorize, create or issue any additional
series of Preferred Shares, by amending and restating this Appendix A to
provide for such additional series. Such additional series shall be subject
to the terms of the Statement, and any such amended and restated Appendix A
shall be deemed to be a part of the Statement upon its approval by the Board
of Directors. For purposes of any amendment and restatement, the designation
of the initial series of Preferred Shares and each amendment and restatement
of the Appendix A for any additional series shall be deemed to be included in
each subsequent amendment and restatement without being set forth therein.
A-1
SECTION 2
Number of Authorized Shares Per Series.
The number of authorized shares constituting the Term Preferred Shares
is 136,000.
SECTION 3
Initial Rate Period.
The Initial Rate Period for the Term Preferred Shares shall be the
period from and including the Date of Original Issue thereof to and including
March 14, 2006.
SECTION 4
Dividend Payment Dates.
Except as otherwise provided in Section 2(d) of Part I of this
Statement, dividends shall be payable on the Term Preferred Shares for the
Initial Rate Period on March 15, 2006, and for each subsequent Rate Period on
the next succeeding March 15, June 15, September 15 or December 15.
SECTION 5
Redemption Price.
The Redemption Price for any Term Preferred Share shall be an amount
equal to the sum of $1,000 plus any accumulated but unpaid dividends thereon
(whether or not earned or declared) to (but not including) the date fixed for
redemption.
X-0
XXXXXXXX X
XXXXX'X COLLATERAL VALUATION SCHEDULE
Calculation of Xxxxx'x Advance Amount
"Xxxxx'x Advance Rate" means the Xxxxx'x Senior Advance Rate or the
Moody's Total Advance Rate, as applicable.
"Xxxxx'x Senior Advance Rate" means, for purposes of determining the
Senior Over-Collateralization Test, for each Moody's Asset Category, the
percentage specified in the table below opposite such Moody's Asset Category:
Moody's Moody's Aaa
Asset Category Advance Rate
-------------- ------------
A-1 100.00%
A-2 97.00%
A-3 91.75%
A-4 79.75%
A-5 69.25%
A-6 63.75%
B-1 89.00%
B-2 87.70%
B-3 75.25%
B-4 81.50%
B-5 79.00%
B-6 59.00%
B-7 73.00%
B-8 68.75%
B-9 54.50%
B-10 48.50%
C-1 91.00%
C-2 79.75%
C-3 83.75%
C-4 71.25%
C-5 66.75%
C-6 52.25%
D-1 80.00%
D-2 73.00%
D-3 70.00%
D-4 64.75%
D-5 48.00%
D-6 44.50%
E-1 72.00%
E-2 66.75%
E-3 61.00%
E-4 57.75%
E-5 35.50%
B-1
Moody's Moody's Aaa
Asset Category Advance Rate
-------------- ------------
E-6 35.50%
F-1 53.50%
F-2 50.25%
F-3 42.25%
F-4 42.25%
F-5 25.25%
F-6 25.25%
G-1 57.00%
G-2 47.75%
G-3 40.75%
G-4 29.75%
H-1 24.50%
H-2 22.25%
H-3 18.75%
H-4 15.75%
I-1 58.75%
I-2 39.25%
I-3 19.25%
J-1(A) 33.00%
J-1(B) 18.00%
J-2 20.25%
J-3 14.25%
J-4 26.25%
"Moody's Total Advance Rate" means, for purposes of determining the
Total Over-Collateralization Test, for each Moody's Asset Category, the
percentage specified in the table below opposite such Moody's Asset Category:
Moody's Moody's Aa2
Asset Category Advance Rate
-------------- ------------
A-1 100.00%
A-2 97.50%
A-3 93.00%
A-4 82.75%
A-5 73.50%
A-6 67.50%
B-1 90.50%
B-2 89.50%
B-3 79.25%
B-4 85.25%
B-5 83.25%
B-6 66.25%
B-7 78.75%
B-8 74.00%
B-9 61.75%
B-10 55.00%
C-1 93.00%
C-2 84.25%
B-2
Moody's Moody's Aa2
Asset Category Advance Rate
-------------- ------------
C-3 86.75%
C-4 76.50%
C-5 71.50%
C-6 55.75%
D-1 83.75%
D-2 78.00%
D-3 74.50%
D-4 70.00%
D-5 52.00%
D-6 48.00%
E-1 77.00%
E-2 72.50%
E-3 66.75%
E-4 63.70%
E-5 39.25%
E-6 39.25%
F-1 60.75%
F-2 57.75%
F-3 49.00%
F-4 49.00%
F-5 29.50%
F-6 29.50%
G-1 60.75%
G-2 52.00%
G-3 47.00%
G-4 34.25%
H-1 31.25%
H-2 28.50%
H-3 25.50%
H-4 21.50%
I-1 62.75%
I-2 45.00%
I-3 24.50%
J-1(A) 44.00%
J-1(B) 24.50%
J-2 20.50%
J-3 14.75%
J-4 27.00%
"Xxxxx'x Advance Amount" means the Moody's Senior Advance Amount or the
Moody's Total Advance Amount, as applicable.
Notwithstanding the foregoing or anything in the definitions of Xxxxx'x
Senior Advance Amount or Xxxxx'x Total Advance Amount, for purposes of
determining the Xxxxx'x Advance Amount,
(i) the Market Value of any Unhedged Foreign Investment shall be 95%
of the Market Value thereof otherwise determined in accordance
with the above procedures; provided that, if the Foreign Issuer
of such Unhedged Foreign
B-3
Investment is from a country whose sovereign debt rating in a
non-local currency is not assigned a rating of "Aa2" or better by
Moody's (and, if rated "Aa2" by Xxxxx'x, such rating has not been
placed on a credit watch with negative implications by Xxxxx'x), the
Market Value of such Unhedged Foreign Investment shall be 85% of the
Market Value thereof otherwise determined in accordance with the
above procedures;
(ii) the percentage applicable above to Cash in a currency other than
Dollars shall be 95% (and not 100%; provided that, if such Cash
is the currency of a country whose sovereign debt rating in a
non-local currency is not assigned a rating of "Aa2" or better by
Moody's (and, if rated "Aa2" by Xxxxx'x, such rating has not been
placed on a credit watch with negative implications by Xxxxx'x),
the applicable percentage shall be 85%, unless such Cash is
protected against currency fluctuations as a result of Currency
Hedging Transactions, in which case, the percentage applicable
shall be 100%;
(iii) the Market Value of any Structured Product Transaction, if
positive, shall be 95% of the Market Value thereof otherwise
determined in accordance with the above procedures and, in the
case of any Structured Product Transaction in which the Fund
purchases a CDS, the full amount of the premiums to be paid by
the Fund for the duration of such CDS will be deducted from the
Market Value of such Structured Product Transaction; and
(iv) with respect to any Fund Investments in any Foreign Issuer from a
country that becomes an Ineligible Country after the Fund has
invested in such Fund Investment (and such Fund Investment does
not have a guarantor located in a currently Eligible Country), so
long as such Fund Investment is not an Excluded Investment under
clause (viii) of the definition thereof, the Market Value of such
Fund Investment shall be 90% of the Market Value thereof
otherwise determined in accordance with the above procedures.
For purposes of calculating the Xxxxx'x Advance Amount, the Fund
shall assign each Eligible Investment to one of the following categories
(each, a "Xxxxx'x Asset Category") commencing upon the initial acquisition
thereof (and, for purposes of this categorization, the Market Value Price
of a Fund Investment trading at par is equal to $1.00):
"Asset Category A-1 Investments" means (a) Cash and (b) Cash
Equivalents described in clause (vi) of the definition of such term and (c)
Cash Equivalents described in clauses (i), (ii), (iii) or (iv) of the
definition of such term that mature on the Business Day next following the
date of acquisition thereof or, in the case of any money market accounts, are
payable on demand of the holder or within one Business Day of demand.
"Asset Category A-2 Investments" means Cash Equivalents (other than
Cash in U.S. dollars, U.S. Government Securities and Cash Equivalents
described in clauses (b) or (c) of the definition of Asset Category A-1
Investments) and U.S. Government Securities with maturities of less than or
equal to 183 days.
B-4
"Asset Category A-3 Investments" means U.S. Government Securities with
final maturities more than 183 days but less than or equal to two (2) years.
"Asset Category A-4 Investments" means U.S. Government Securities with
final maturities more than two (2) years but less than or equal to ten (10)
years.
"Asset Category A-5 Investments" means U.S. Government Securities with
final maturities more than ten (10) years but less than or equal to twenty
(20) years.
"Asset Category A-6 Investments" means U.S. Government Securities with
final maturities more than twenty (20) years but less than or equal to thirty
(30) years.
"Asset Category B-1 Investments" means Bank Loans which (i) are
Performing, (ii) have a Market Value Price greater than or equal to $0.90 and
(iii) are rated "Ba3" or better by Xxxxx'x.
"Asset Category B-2 Investments" means Bank Loans which (i) are
Performing, (ii) have a Market Value Price greater than or equal to $0.90 and
(iii) are rated "B1", "B2" or "B3" by Xxxxx'x.
"Asset Category B-3 Investments" means Bank Loans which (i) are
Performing, (ii) have a Market Value Price greater than or equal to $0.90 and
(iii) are rated "Caa1" or lower by Xxxxx'x or are not rated by Xxxxx'x.
"Asset Category B-4 Investments" means Bank Loans which (i) are
Performing, (ii) have a Market Value Price greater than or equal to $0.80 and
less than $0.90 and (iii) are rated "Ba3" or better by Moody's.
"Asset Category B-5 Investments" means Bank Loans which (i) are
Performing, (ii) have a Market Value Price greater than or equal to $0.80 and
less than $0.90 and (iii) are rated "B 1", "B2" or "B3" by Moody's.
"Asset Category B-6 Investments" means Bank Loans which (i) are
Performing, (ii) have a Market Value Price greater than or equal to $0.80 and
less than $0.90 and (iii) are rated "Caa1" or lower by Moody's or are not
rated by Moody's.
"Asset Category B-7 Investments" means Bank Loans which (i) are
Performing, (ii) have a Market Value Price greater than or equal to $0.70 and
less than $0.80 and (iii) are rated "Ba3" or better by Moody's.
"Asset Category B-8 Investments" means Bank Loans which (i) are
Performing, (ii) have a Market Value Price greater than or equal to $0.70 and
less than $0.80 and (iii) are rated "B1", "B2" or "B3" by Moody's.
"Asset Category B-9 Investments" means Bank Loans which (i) are
Performing, (ii) have a Market Value Price greater than or equal to $0.70 and
less than $0.80 and (iii) are rated "Caa1" or lower by Moody's or are not
rated by Moody's.
B-5
"Asset Category B-10 Investments" means Bank Loans which (i) are
Performing and (ii) have a Market Value Price less than $0.70.
"Asset Category C-1 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a floating rate,
(iii) have a final maturity of five (5) years or less and (iv) are rated
"Baa3" or better by Xxxxx'x.
"Asset Category C-2 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a fixed rate, (iii) have a
final maturity of five (5) years or less and (iv) are rated "Baa3" or better
by Xxxxx'x.
"Asset Category C-3 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a floating rate, (iii)
have a final maturity of more than five (5) years and less than or equal to
ten (10) years and (iv) are rated "Baa3" or better by Xxxxx'x.
"Asset Category C-4 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a fixed rate, (iii) have a
final maturity of more than five (5) years and less than or equal to ten (10)
years and (iv) are rated "Baa3" or better by Xxxxx'x.
"Asset Category C-5 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a floating rate, (iii)
have a final maturity of more than ten (10) years and (iv) are rated "Baa3"
or better by Xxxxx'x.
"Asset Category C-6 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a fixed rate, (iii) have a
final maturity of more than ten (10) years and (iv) are rated "Baa3" or
better by Xxxxx'x.
"Asset Category D-1 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a floating rate, (iii)
have a final maturity of five (5) years or less and (iv) are rated "Ba1",
"Ba2" or "Ba3" by Xxxxx'x.
"Asset Category D-2 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a fixed rate, (iii) have a
final maturity of five (5) years or less and (iv) are rated "Ba1", "Ba2" or
"Ba3" by Xxxxx'x.
"Asset Category D-3 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a floating rate, (iii)
have a final maturity of more than five (5) years and less than or equal to
ten (10) years and (iv) are rated "Ba1", "Ba2" or "Ba3" by Xxxxx'x.
B-6
"Asset Category D-4 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a fixed rate, (iii) have a
final maturity of more than five (5) years and less than or equal to ten (10)
years and (iv) are rated "Ba1", "Ba2" or "Ba3" by Xxxxx'x.
"Asset Category D-5 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a floating rate, (iii)
have a final maturity of more than ten (10) years and (iv) are rated "Bal",
"Ba2" or "Ba3" by Xxxxx'x.
"Asset Category D-6 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a fixed rate, (iii) have a
final maturity of more than ten (10) years and (iv) are rated "Bal", "Ba2" or
"Ba3" by Xxxxx'x.
"Asset Category E-1 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a floating rate, (iii)
have a final maturity of five (5) years or less and (iv) are rated "B1", "B2"
or "B3" by Xxxxx'x.
"Asset Category E-2 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a fixed rate, (iii) have a
final maturity of five (5) years or less and (iv) are rated "B1", "B2" or
"B3" by Xxxxx'x.
"Asset Category E-3 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a floating rate, (iii)
have a final maturity of more than five (5) years and less than or equal to
ten (10) years and (iv) are rated "B1", "B2" or "B3" by Xxxxx'x.
"Asset Category E-4 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a fixed rate, (iii) have a
final maturity of more than five (5) years and less than or equal to ten (10)
years and (iv) are rated "B1", "B2" or "B3" by Xxxxx'x.
"Asset Category E-5 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a floating rate, (iii)
have a final maturity of more than ten (10) years and (iv) are rated "B1",
"B2" or "B3" by Xxxxx'x.
"Asset Category E-6 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a fixed rate, (iii) have a
final maturity of more than ten (10) years and (iv) are rated "B1", "B2" or
"B3" by Xxxxx'x.
B-7
"Asset Category F-1 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a floating rate, (iii)
have a final maturity of five (5) years or less and (iv) are rated "Caa1" or
lower by Moody's or are not rated by Xxxxx'x.
"Asset Category F-2 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a fixed rate, (iii) have a
final maturity of five (5) years or less and (iv) are rated "Caa1" or lower
by Moody's or are not rated by Xxxxx'x.
"Asset Category F-3 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a floating rate, (iii)
have a final maturity of more than five (5) years and less than or equal to
ten (10) years and (iv) are rated "Caa1" or lower by Moody's or are not rated
by Xxxxx'x.
"Asset Category F-4 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a fixed rate, (iii) have a
final maturity of more than five (5) years and less than or equal to ten (10)
years and (iv) are rated "Caa1" or lower by Moody's or are not rated by
Xxxxx'x.
"Asset Category F-5 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a floating rate, (iii)
have a final maturity of more than ten (10) years and (iv) are rated "Caa1"
or lower by Moody's or are not rated by Xxxxx'x.
"Asset Category F-6 Investments" means High Yield Bonds and Mezzanine
Investments (other than Preferred Stock) which are not convertible securities
and which (i) are Performing, (ii) pay interest at a fixed rate, (iii) have a
final maturity of more than ten (10) years and (iv) are rated "Caa1" or lower
by Moody's or are not rated by Xxxxx'x.
"Asset Category G-1 Investments" means convertible High Yield Bonds and
convertible Mezzanine Investments (other than Preferred Stock) which (i) are
Performing and (ii) are rated "Baa3" or better by Xxxxx'x.
"Asset Category G-2 Investments" means convertible High Yield Bonds and
convertible Mezzanine Investments (other than Preferred Stock) which (i) are
Performing and (ii) are rated "Ba1", "Ba2" or "Ba3" by Xxxxx'x.
"Asset Category G-3 Investments" means convertible High Yield Bonds and
convertible Mezzanine Investments (other than Preferred Stock) which (i) are
Performing and (ii) are rated "B1", "B2" or "B3" by Xxxxx'x.
"Asset Category G-4 Investments" means all other convertible High Yield
Bonds and convertible Mezzanine Investments (other than Preferred Stock)
which are Performing.
"Asset Category H-1 Investments" means convertible Preferred Stock
which (i) is Performing and (ii) is publicly issued Preferred Stock.
B-8
"Asset Category H-2 Investments" means Preferred Stock which is not
convertible Preferred Stock and which (i) is Performing and (ii) is publicly
issued Preferred Stock.
"Asset Category H-3 Investments" means convertible Preferred Stock
which (i) is Performing and (ii) is privately issued Preferred Stock.
"Asset Category H-4 Investments" means Preferred Stock which is not
convertible Preferred Stock and which (i) is Performing and (ii) is privately
issued Preferred Stock.
"Asset Category I-1 Investments" means Bank Loans which (i) are
non-Performing and (ii) have a Market Value Price greater than or equal to
$0.85.
"Asset Category I-2 Investments" means Bank Loans which (i) are
non-Performing and (ii) have a Market Value Price less than $0.85.
"Asset Category I-3 Investments" means High Yield Bonds and Mezzanine
Investments (convertible and non-convertible) and Preferred Stock, in each
case, which are non-Performing.
"Asset Category J-1(A) Investments" means Equity Securities that are
issued by companies that are included in the S&P 500.
"Asset Category J-1(B) Investments" means Equity Securities that are
issued by companies that are not included in the S&P 500.
"Asset Category J-2 Investments" means Private Equity Securities (other
than Preferred Stock).
"Asset Category J-3 Investments" means CDO Debt Securities and
Structured Product Transactions (other than Fully Collateralized Structured
Product Transactions) and Fund Investments (other than Preferred Stock) in
Mezzanine Investments not otherwise described in any of the preceding Asset
Categories.
"Asset Category J-4 Investments" means Fund Investments in Bank Loans
or High Yield Bonds not otherwise described in any of the preceding Asset
Categories.
Rating Procedures. References herein to any rating by Moody's or S&P
shall include ratings determined by such Rating Agency or in accordance with
guidelines approved by such Rating Agency (including, in the case of Moody's,
Xxxxx'x Rating Correlation Procedures) and shall also be deemed to include an
equivalent rating in a successor rating category of Moody's or S&P, as the
case may be, or if neither of Moody's or S&P is in the business of rating
securities, an equivalent rating from another Rating Agency. Notwithstanding
the foregoing, for so long as Xxxxx'x is in the business of rating
securities, unless the Rating Agency Condition with respect to Moody's shall
have been satisfied or the Fund Investment in question is issued by Moody's
or any Affiliate of Moody's, the Xxxxx'x Rating Correlation Procedures shall
be applied.
Notwithstanding any other provision contained above:
B-9
(i) for purposes of determining whether a Fund Investment falls
within a specific Moody's Asset Category, to the extent that any
Fund Investment would fall in more than one of the Moody's Asset
Categories, such Fund Investment shall be deemed to fall into the
Moody's Asset Category with the lowest specified Moody's Advance
Rate unless the Insurer otherwise agrees and the Rating Agency
Condition with respect to Moody's has been satisfied;
(ii) Fund Investments that are CDO Debt Securities will be assigned to
an Asset Category for High Yield Bonds using a rating that is (i)
one rating category (i.e., three rating subcategories) below the
Xxxxx'x rating, if such CDO Debt Security is rated by Moody's,
and (ii) two rating categories (i.e., six rating subcategories)
below the actual public S&P's rating, if such CDO Debt Security
is not rated by Moody's but is publicly rated by S&P;
(iii) any Fund Investments constituting Busted Convertible Bonds shall
be deemed to fall into the Xxxxx'x Asset Category into which such
Fund Investment would otherwise fall if it were not a convertible
security; provided that the Market Value of any Busted
Convertible Bonds shall be 95% of the Market Value thereof
otherwise determined in accordance with the valuation procedures
set forth herein;
(iv) for the purpose of determining the Moody's Advance Rate
applicable to a Fully Collateralized Structured Product
Transaction, such Fully Collateralized Structured Product
Transaction shall be deemed to fall into the Moody's Asset
Category of its reference obligation; all other Structured
Product Transactions shall be Xxxxx'x Asset Category J-3
Investments;
(v) for the purpose of determining the Xxxxx'x Advance Rate
applicable to Fund Investments that are Hedging and Short Sale
Transactions, at any time during the 60-day time period described
in clause (vii) of the definition of Excluded Investments below,
the Moody's Advance Rate will be 90% of the Moody's Advance Rate
calculated for such Fund Investment pursuant to the Moody's
Advance Rate table in the definition of Xxxxx'x Advance Rate
above; and
(vi) for the purpose of determining the Xxxxx'x Advance Rate
applicable to Fund Investments in Bank Loan Participations at any
time during the 60-day time period described in clause (vii) of
the definition of Excluded Investments below, the Moody's Advance
Rate will be 90% of the Moody's Advance Rate, calculated for such
Fund Investment pursuant to the Moody's Advance Rate table above.
"Moody's Senior Advance Amount" as of any date of determination under
the Senior Over-Collateralization Test, means an amount equal to the sum of
(i) the aggregate for all Eligible Investments (other than Short Sale
Transactions and Warrant/Option Investments) determined for each such
Eligible Investment by multiplying (1) the Market Value (determined as
described below) of such Eligible Investment (determined as described below)
by (2) the Moody's Senior Advance Rate for the Moody's Asset Category
applicable to such Eligible Investment under the Senior
Over-Collateralization Test, (ii) the aggregate Secured Hedging
B-10
Advance Amounts as of such date, (iii) the Defensive Hedge Advance Amount as of
such date, (iv) the Moody's Warrant/Option Advance Amount as of such date, (v)
the Moody's Net Accrual Amount as of such date and (vi) the Aggregate Short Sale
Advance Amount as of such date.
"Moody's Total Advance Amount" as of any date of determination under
the Total Over-Collateralization Test, means an amount equal to the sum of
(i) the aggregate for all Eligible Investments (other than Short Sale
Transactions and Warrant/Option Investments) determined for each such
Eligible Investment by multiplying (1) the Market Value (determined as
described below) of such Eligible Investment (determined as described below)
by (2) the Moody's Total Advance Rate for the Moody's Asset Category
applicable to such Eligible Investment under the Total Over-Collateralization
Test, (ii) the aggregate Secured Hedging Advance Amounts as of such date,
(iii) the Defensive Hedge Advance Amount as of such date, (iv) the Moody's
Warrant/Option Advance Amount as of such date, (v) the Moody's Net Accrual
Amount as of such date and (vi) the Aggregate Short Sale Advance Amount as of
such date.
Determination of Fund Investments Constituting Eligible Investments
"Eligible Investments" means, at any date, all Fund Investments in the
Collateral on such date other than Excluded Investments.
"Excluded Investments" means (without duplication):
(i) Fund Investments to the extent that they are (A) not subject to a
perfected security interest (subject in priority only to any
liens permitted under the Indenture) in favor of the Collateral
Agent for its benefit and the benefit of the other Secured
Parties (as defined in the Pledge and Intercreditor Agreement) or
(B) subject to any Liens other than Permitted Liens (the terms
"Liens" and "Permitted Liens" as used in this Appendix have the
meanings ascribed thereto under the Indenture); provided,
however, that Liens on Cash or other Fund Investments held in a
Short Sale Customer Account or a Short Sale Broker Account shall
not be Permitted Liens for purposes of this definition and such
Cash or Fund Investments held in any Short Sale Customer Account
or a Short Sale Broker Account shall be Excluded Investments;
(ii) Excess Fund Investments;
(iii) Fund Investments that have been borrowed or lent;
(iv) Fund Investments denominated in any currency (A) that is not a
currency freely convertible into Dollars or (B) that is subject
to any currency exchange restrictions;
(v) Fund Investments denominated in any currency other than Dollars
or Eligible Foreign Currencies, unless at the time of purchase of
such Fund Investments denominated in any currency other than
Dollars or Eligible Foreign Currencies, at least 100% of the
Market Value of such Fund Investments is protected against
currency fluctuations pursuant to Currency Hedging Transactions;
B-11
(vi) Fund Investments in CDO Debt Securities unless the applicable
agreements governing such CDO Debt Securities do not permit the
issuer of such CDO Debt Securities to purchase a security issued
by a Foreign Issuer from a country whose unsupported sovereign
non-local currency debt obligations are not assigned a rating of
"Aa2" or better by Moody's if after giving effect to such
purchase more than 5% of the total funded debt and contributed
equity capitalization of the issuer of such CDO Debt Securities
would be invested in countries whose unsupported sovereign
non-local currency debt obligations are not assigned a rating of
"Aa2" or better by Moody's;
(vii) Fund Investments in any Bank Loan Participation held by the Fund
for more than 60 consecutive days during any period while the
participating entity has a long-term debt-rating of below "A3" by
Moody's (unless the obligation of such participating entity is
guaranteed by an entity whose long-term debt obligations are
rated "A3" or better by Moody's (and, if rated "A3" by Moody's,
such rating has not been placed in a credit watch with negative
implications by Xxxxx'x);
(viii) Fund Investments in any Foreign Issuer from an Ineligible
Country (unless the applicable Fund Investment is unconditionally
and irrevocably guaranteed by a guarantor located in a currently
Eligible Country); provided, that if a country becomes an
Ineligible Country after the Fund has invested in a Fund
Investment relating to such country (and such Fund Investment
does not have a guarantor located in a currently Eligible
Country), such Fund Investment will not be subject to this clause
(viii) until such country has been an Ineligible Country for 180
consecutive days;
(x) Fund Investments in CDO Debt Securities issued by an issuer for
which the Investment Manager or any of its Affiliates acts as the
collateral manager or investment manager or in any comparable
capacity;
(xi) Fund Investments in securities issued by the Fund;
(xii) Fund Investments in any Hedging and Short Sale Transaction held
by the Fund for more than 60 consecutive days during any period
while the counterparty to such Hedging and Short Sale Transaction
has a long-term debt-rating of lower than "A3" by Moody's (unless
the obligations of such counterparty are guaranteed by an entity
whose long-term debt rating is "A3" or higher by Moody's) (in
each case, if rated "A3" by Moody's, such rating has not been
placed in a credit watch with negative implications by Moody's);
(xiii) Fund Investments in CDO Equity Securities;
(xiv) Fund Investments in catastrophe bonds and any other non-credit
risk securities; and
(xv) Fund Investments not otherwise expressly described in the Asset
Categories above.
B-12
Excluded Investments are excluded from the calculation of the Market
Value of the Collateral for purposes of the Xxxxx'x Valuation Procedures;
however, the Collateral may include Excluded Investments.
Application of Portfolio Limitations
"Portfolio Limitations" means, at any applicable date of determination
(determined without duplication):
(i) the aggregate Market Value of Fund Investments in any single
issuer in excess of 5% of Total Capitalization; provided,
however, that the foregoing 5% limit will be increased, up to a
maximum of 7.5% (not to include any Non-Cash Pay Instruments, any
Non-Performing Instruments or any Company Investments (other than
Equity Securities) that are rated "Caal" or lower by Moody's),
for each of any three issuers;
(ii) the aggregate Market Value of Fund Investments in issuers in any
single Industry in excess of 15% of Total Capitalization;
provided, however, that the foregoing 15% limit will be excepted,
up to a maximum of 20%, for each of any two Industry
classifications;
(iii) the aggregate Market Value of Fund Investments in all Semi-Liquid
Investments, Illiquid Investments and Non-Cash Pay Instruments in
excess of 45% of Total Capitalization;
(iv) the aggregate Market Value of Fund Investments in all Illiquid
Investments in excess of 20% of Total Capitalization;
(v) the aggregate Market Value of Fund Investments consisting of (a)
Bank Loan Participations wherein the participating entities (or
the entities guaranteeing the obligations of such participating
entities) with the same rating by Moody's in excess of the
applicable percentage of Total Capitalization set forth in the
table below (or such greater percentage approved by the Insurer
and with respect to which the Rating Agency Condition with
respect to Moody's has been satisfied), and (c) Bank Loan
Participations wherein the total exposure to any single
participating entity is in excess of the applicable percentage of
Total Capitalization set forth in the table below (or such
greater percentage approved by the Insurer and with respect to
which the Rating Agency Condition with respect to Moody's has
been satisfied);
--------------------------------------------------------------------------------
Long Term Rating of Any Single Aggregate
Participating Entities Participating Entity Limit Participating Entities
Limit
--------------------------------------------------------------------------------
Aaa 7.5% 20.0%
--------------------------------------------------------------------------------
Aa1 7.5% 20.0%
--------------------------------------------------------------------------------
Aa2 7.5% 20.0%
--------------------------------------------------------------------------------
Aa3 7.5% 15.0%
--------------------------------------------------------------------------------
A1 5.0% 15.0%
--------------------------------------------------------------------------------
A2 2.5% 10.0%
--------------------------------------------------------------------------------
A3* 2.5% 5.0%
--------------------------------------------------------------------------------
B-13
--------------------------------------------------------------------------------
Long Term Rating of Any Single Aggregate
Participating Entities Participating Entity Limit Participating Entities
Limit
--------------------------------------------------------------------------------
Baa1 or lower 0.0% 0.0%
--------------------------------------------------------------------------------
Notwithstanding the foregoing, in no event will the aggregate Market
Value of the Bank Loan Participations exceed 20% of Total Capitalization at
any time.
-------------------------
* The percentages in this row apply only if such rating is not on a
credit watch with negative implications by Moody's. If such rating is
on a credit watch with negative implications by Xxxxx'x, both the
individual and the aggregate percentage limits shall be zero.
(vi) the aggregate Market Value of Fund Investments consisting of (a)
Hedging and Short Sale Transactions wherein the counterparties
(or the entities guaranteeing the obligations of such
counterparties) with the same rating by Moody's in excess of the
applicable percentage of Total Capitalization set forth below (or
such greater percentage approved by the Insurer and the Trustee
and with respect to which the Rating Agency Condition with
respect to Moody's has been satisfied) and (b) Hedging and Short
Sale Transactions wherein the total exposure to any single
counterparty is in excess of the applicable percentage of Total
Capitalization set forth in the table below (or such greater
percentage approved by the Insurer and the Trustee and with
respect to which the Rating Agency Condition with respect to
Moody's has been satisfied);
--------------------------------------------------------------------------------
Long Term Rating of Any Single Aggregate
Counterparties Counterparty Limit Counterparties Limit
--------------------------------------------------------------------------------
Aaa 7.5% 20.0%
--------------------------------------------------------------------------------
Aa1 7.5% 20.0%
--------------------------------------------------------------------------------
Aa2 7.5% 20.0%
--------------------------------------------------------------------------------
Aa3 7.5% 15.0%
--------------------------------------------------------------------------------
A1 5.0% 15.0%
--------------------------------------------------------------------------------
A2 2.5% 10.0%
--------------------------------------------------------------------------------
A3* 2.5% 5.0%
--------------------------------------------------------------------------------
Baa1 or lower 0.0% 0.0%
--------------------------------------------------------------------------------
Notwithstanding the foregoing, in no event will the aggregate Market
Value of Hedging and Short Sale Transactions exceed 20% of Total
Capitalization at any time.
-------------------------
* The percentages in this row apply only if such rating is not on a
credit watch with negative implications by Moody's. If such rating is
on a credit watch with negative implications by Xxxxx'x, both the
individual and the aggregate percentage limits shall be zero.
(vii) the aggregate Market Value of Fund Investments (calculated using
the absolute value of each Fund Investment) consisting of
Structured Product Transactions in excess of 10% of Total
Capitalization;
B-14
(viii) the aggregate Market Value of Fund Investments consisting
of Non-Performing Instruments in excess of 25% of Total
Capitalization;
(ix) the aggregate Market Value of Fund Investments consisting of
convertible securities in excess of 25% of Total Capitalization;
(x) the aggregate Market Value of Fund Investments consisting of CDO
Debt Securities in excess of 5% of Total Capitalization;
(xi) the aggregate Market Value of Fund Investments that are Preferred
Stock in excess of 15% of Total Capitalization;
(xii) the aggregate Market Value of Fund Investments consisting of(A)
Private Equity Securities of any single issuer in excess of 3% of
Total Capitalization; provided that the foregoing 3% limit will
be increased, up to a maximum of 4%, for each of any two issuers
of Private Equity Securities; provided, further, that the
foregoing 4% limit will be increased, up to a maximum of 5%, for
one of such two issuers of Private Equity Securities; and (B)
Private Equity Securities in excess of 10% of Total
Capitalization;
(xiii) the aggregate Market Value of Fund Investments that are
Asset-Backed Securities in excess of 5% of Total Capitalization;
(xiv) the aggregate Market Value of Fund Investments that are
Dollar-denominated investments (A) in Foreign Issuers domiciled
in Designated Countries in excess of 10% of Total Capitalization
and (B) in any single Foreign Issuer domiciled in a Designated
Country in excess of 5% of Total Capitalization;
(xv) the aggregate Market Value of Fund Investments that are
non-Dollar-denominated investments in excess of 10% of Total
Capitalization;
(xvi) the aggregate Market Value of Fund Investments that are Equity
Securities in excess of 20% of Total Capitalization; and
(xvii) the aggregate Market Value of Fund Investments that are
(determined without duplication) Non-Performing Instruments,
Equity Securities and Fund Investments that are rated "Caal" or
lower by Xxxxx'x in excess of 50% of Total Capitalization.
Notwithstanding the foregoing:
(A) in the event that a Fund Investment is reclassified after its
acquisition by the Fund, for purposes of calculating the Xxxxx'x
Advance Amount, the exclusions described above in clauses (iii)
and (iv), that would otherwise become applicable following such
reclassification will not apply to assets owned by the Fund (or
which the Fund had committed to purchase) on or prior to the date
of such reclassification until 30 days after such
reclassification but shall apply (on a pro forma basis giving
effect to such reclassification for all Fund Investments) to any
B-15
asset acquired by the Fund after the date of such
reclassification which the Fund had not committed to purchase on
or prior to the date of such reclassification;
(B) for purposes of clause (i) above, a Related Person of any Person
shall be considered the same "issuer" as such Person unless such
Person is a bankruptcy remote entity; and
(C) under no circumstances shall any Cash, Cash Equivalent or U.S.
Government Securities be excluded from Eligible Investments based
upon the Portfolio Limitations set forth above.
Determination of the Market Value of Fund Investments
The Fund shall calculate the Market Value (i) of each Fund Investment
that is not an Unquoted Investment on a weekly basis as of the Determination
Date for each calendar week and (ii) of each Fund Investment that is an
Unquoted Investment as set forth in the definition of "Market Value" below.
"Market Value" means
(a) with respect to Cash, the current balance thereof;
(b) with respect to any Cash Equivalent (x) of the type
described in clause (ii) of the definition thereof (excluding banker's
acceptances), the current balance thereof, (y) of a type described in clause
(iii) of the definition thereof (and banker's acceptances described in clause
(ii) thereof), the original purchase price thereof, and (z) of a type
described in clause (v) of the definition thereof, the aggregate current net
value thereof;
(c) with respect to any Fund Investment (other than Structured
Product Transactions, Unquoted Investments, Cash and Cash Equivalents
described in clause (b) above) at any date, an amount determined by the Fund
that is not in excess of the product of (x) the Market Value Price for each
unit of such Fund Investment on such date (and, with respect to any
Securities which have an amortizing principal amount, the then current factor
related thereto, if applicable) times (y) the number of units of such Fund
Investment held by the Fund; and
(d) with respect to any Fund Investment other than Cash and
Cash Equivalents which is an Unquoted Investment at any date, the value
thereof most recently determined by the Fund in accordance with the
procedures described below;
provided, however, (x) for purposes of making such determinations,
(1) the frequency of determination of the Market Value of
any Illiquid Investment will be at least quarterly as of each Quarterly Date
and, except as otherwise provided in the following clauses, the frequency of
determination of the Market Value of any Semi-Liquid Investment will be at
least monthly as of the last Business Day of each calendar month;
(2) for Semi-Liquid Investment positions with a Market
Value of $35 million or greater but less than $70 million (and all positions
subject to this clause (x)(2) by
B-16
reason of clause (y) below), a quotation from an Approved Investment Banking
Firm or an Approved Third-Party Appraisal at least monthly;
(3) for Semi-Liquid Investment positions with a Market
Value of $70 million or greater, a quotation from an Approved Investment
Banking Firm or an Approved Third-Party Appraisal at least monthly and an
Approved Third-Party Appraisal at least quarterly; and
(4) for Illiquid Investment positions with a Market Value
of $35 million or greater (and all positions subject to this clause (x)(4) by
reason of clause (y) below) an Approved Third-Party Appraisal at least
quarterly;
(y) notwithstanding the foregoing, the aggregate Market Value of all
Unquoted Investment positions whose value is determined by the
Fund without relying on the methodology set forth in subclauses
(2), (3) or (4) of clause (x) above (it being understood that
such methodology may be used for Unquoted Investments with Market
Values below the thresholds set forth in such subclauses) may not
exceed 5% of Total Capitalization and all such Unquoted
Investment positions (i.e., those in excess of such limit and as
selected by the Fund) will be subject to subclauses (2) or (4) of
clause (x) above depending upon whether any such Unquoted
Investment is a Semi-Liquid Investment or an Illiquid Investment;
and
(z) in no event will the Market Value of any Unquoted Investment
exceed the lesser of (i) the most recently obtained quotation or
appraisal obtained as provided in clauses (x) or (y) above and
(2) the value most recently determined by the Fund.
Notwithstanding the foregoing, if the Investment Manager shall on any
day actually determine that (i) the Market Value of any Semi-Liquid
Investment determined as of the last Business Day of the preceding calendar
month or (ii) the Market Value of any Illiquid Investment determined as of
the last Quarterly Date has decreased since such last Business Day of the
preceding calendar month or last Quarterly Date, the Market Value of such
Fund Investment shall be such decreased value, and if the Investment Manager
subsequently actually determines on any day prior to the next determination
of its Market Value that the value of such Fund Investment has further
decreased, the Market Value of such Fund Investment shall be such decreased
value. If, on the other hand, the Investment Manager shall subsequently
actually determine that the value of such Fund Investment has increased, the
Market Value of such Fund Investment shall be such increased value; provided
that in no event shall the Market Value of any such Fund Investment whose
value is so increased be greater than the Market Value of such Fund
Investment previously determined as of the last Business Day of the preceding
calendar month (in the case of Semi-Liquid Investments) or as of the last
Quarterly Date (in the case of Illiquid Investments). It is expressly
understood that the Investment Manager shall have no duty whatsoever to
specifically monitor or otherwise investigate any value changes described in
this paragraph.
Prior to the first available quotation or appraisal of any Unquoted
Investment obtained as provided above, the Market Value of such Unquoted
Investment will be the lower of the value thereof as most recently determined
by the Fund and cost. In the event that the Fund elects in its
B-17
discretion to book, for purposes of its own financial accounting records, any
Unquoted Investment at a value lower than that which would require a valuation
by an Approved Investment Banking Firm or an Approved Third-Party Appraisal, as
the case may be, then the Market Value of such Unquoted Investment shall be such
lower value used by the Fund for purposes of its own financial accounting
records.
Notwithstanding the foregoing, the Market Value of any Structured
Product Transaction at any date will be equal to the net settlement amount,
if any, that the Fund would receive if such Structured Product Transaction
was terminated or liquidated early in accordance with its terms on such date
as determined by the Fund.
The Market Value of any CDO Debt Security shall be based upon a
quotation from an Approved Investment Banking Firm or an Approved Third-Party
Appraisal.
The Market Value of any Defensive Hedge Transaction where the related
Fund Investment is part of the Collateral shall be the amount, as determined
by the Fund, by which the Protected Market Value with respect to such Fund
Investment exceeds the product of the Market Value of the Fund Investment
(or, if less, the portion thereof that is an Eligible Investment), as
otherwise determined in accordance with these procedures, and the applicable
Advance Rate for such Fund Investment. The Market Value of any Defensive
Hedge Transaction where the Fund Investment is not part of the Collateral
shall be the Protected Market Value with respect to such Fund Investment.
For purposes of the definition of Market Value, (i) accrued interest on
any interest-bearing Eligible Investment shall be excluded in the
determination of Market Value by the party making such determination and (ii)
the Market Value of all non-Dollar Fund Investments shall be converted into
Dollars at the then current spot rate (after taking into account the effect
of any Currency Hedging Transactions with respect to such Fund Investment).
"Market Value Price" means with respect to any Fund Investment (other
than Cash, Structured Product Transactions and Unquoted Investments) at any
date, the price for each unit of such Fund Investment at such date obtained
from an Approved Source, including any of (a) in the case of an Approved
Exchange, the closing price as of the most recent Determination Date on such
Approved Exchange, or if such Approved Exchange is NASDAQ, the closing bid
price at such date (or if such Approved Exchange is closed for business at
such date, then the most recent available closing price or closing bid price,
as the case may be), provided that bonds may not be priced based upon the
price on an Approved Exchange pursuant to this clause (a), (i) prior to the
termination (without replacement) of the Indenture, without the consent of
the Trustee and the Insurer and (ii) after termination (without replacement)
of the Indenture, without the consent of the Insurer, (b) the average of the
bid prices at such date quoted by two Approved Dealers, or (c) the price
obtained at such date from an Approved Pricing Service.
For the purpose of this Schedule, any calculation or other
determination required to be made by the Fund shall be made by the Investment
Manager on behalf of the Fund, subject to the provisions of the Investment
Management Agreement.
B-18
Certain Definitions
The following are definitions of certain terms used in this Schedule
and elsewhere in the Indenture. Terms used in this Schedule and not defined
below have the meanings given them elsewhere in this Schedule or in the
Indenture.
"Advance Rate" means the Xxxxx'x Advance Rate.
"Aggregate Short Sale Advance Amount" means as of any date of
determination, the aggregate of the Short Sale Advance Amount of all Short
Sale Transactions; provided, however, that if on any date the aggregate
Market Value (as determined as of the date each Bank Loan or Security was
borrowed by the Issuer in connection with any Short Sale Transaction) of the
Bank Loans and other Securities comprising all Short Sale Transactions
exceeds the greater of (A) 15% of Total Capitalization and (B) 15% of the Net
Asset Value of the Issuer, then the Aggregate Short Sale Advance Amount for
that portion of the Bank Loans or other Securities comprising such Short Sale
Transactions, the Market Value (as determined as of the date each Bank Loan
or Security was borrowed by the Issuer in connection with any Short Sale
Transaction) of which exceeds the greater of (A) or (B) above, shall be
deemed to be zero.
"Approved Counterparty" means (i) any financial institutions, banks or
investment banking firms having a long term rating of at least "Al" by
Xxxxx'x and a short term rating of at least "P-1" by Xxxxx'x (and, if rated
"Al" or "P-1" by Xxxxx'x, then such rating has not been placed on a credit
watch with negative implications by Xxxxx'x) or (ii) any counterparty set
forth in the Indenture (or any successor to any such listed counterparty) or
any other counterparty designated by the Fund in writing and approved by the
Insurer.
"Approved Dealer" means (a) in the case of any Fund Investment that is
not a U.S. Government Security, any bank or broker-dealer designated by the
Fund in writing and approved by the Insurer in its reasonable discretion and
with respect to which the Rating Agency Condition with respect to Xxxxx'x has
been satisfied, (b) in the case of a U.S. Government Security, any primary
dealer in U.S. Government Securities, as reported by the Federal Reserve
Board, which as of the date hereof maintains a website at
xxxx://xxx.xx.xxx.xxx, or (c) in the case of either of the foregoing, the
banks and broker-dealers set forth on Annex I hereto under "Approved Dealers."
"Approved Exchange" means, with respect to any Security, (a) any major
securities or options exchange, the NASDAQ or any other exchange or quotation
system providing regularly published securities prices designated by the Fund
in writing and approved by the Insurer in its reasonable discretion and with
respect to which the Rating Agency Condition with respect to Xxxxx'x has been
satisfied, or (b) the exchanges set forth on Annex I hereto under "Approved
Exchanges."
"Approved Investment Banking Firm" means (a) any investment banking
firm designated by the Fund in writing and approved by the Insurer in its
reasonable discretion and with respect to which the Rating Agency Condition
with respect to Xxxxx'x has been satisfied, or (b) the firms set forth on
Annex I hereto under "Approved Investment Banking Firms."
B-19
"Approved Pricing Service" means (a) a pricing or quotation service
designated by the Fund in writing and approved by the Insurer in its
reasonable discretion and with respect to which the Rating Agency Condition
with respect to Xxxxx'x has been satisfied, or (b) the services set forth on
Annex I hereto under "Approved Pricing Services."
"Approved Source" means any of (i) two Approved Dealers, (ii) an
Approved Exchange or (iii) an Approved Pricing Service, provided, that, for
purposes of the Over-Collateralization Tests, a Bank Loan, High Yield Bond or
Mezzanine Investment which is a Fund Investment shall be considered "quoted"
or "priced" by an Approved Source only if, in the reasonable judgment of the
Fund, such Approved Source will continue to provide quotations with respect
to such Bank Loan, High Yield Bond or Mezzanine Investment on an on-going
basis in the ordinary course of its business as a pricing service or dealer,
as the case may be.
"Approved Third-Party Appraisal" means an appraisal by an Approved
Third-Party Appraiser.
"Approved Third-Party Appraiser" means (a) a third-party appraiser that
is not an Affiliate of either the Fund or the Investment Manager (or subject
to an agreement to become such an Affiliate) designated by the Fund in
writing and approved by the Insurer in its reasonable discretion and with
respect to which the Rating Agency Condition with respect to Xxxxx'x has been
satisfied, or (b) the third-party appraisers set forth on Annex I hereto
under "Approved Third-Party Appraisers."
"Asset-Backed Security" means any fixed income Security that is (i)
backed by and paid primarily from the proceeds (or payments or proceeds of a
disposition) of Eligible Assets, and (ii) issued in a transaction structured
to (A) isolate the Security and the Eligible Assets backing the Security from
the credit risk of the sponsor of the transaction and (B) result in the
creditworthiness of such Security being primarily dependent upon (x) the
creditworthiness of the Eligible Assets backing such Security and (y) any
credit support provided with respect to the creditworthiness of such Eligible
Assets; provided, however, that in no event shall an "Asset-Backed Security"
include any of the following: (a) a Security issued to provide
debtor-in-possession financing, (b) a Security issued in connection with a
receivables financing, an equipment trust certificate or similar Security,
(c) an Equity Security (including an Equity Security that is characterized as
a note), (d) a Structured Product Transaction, (e) a CDO Debt Security or (f)
a Defensive Hedge Transaction.
"Bank Loan Participation" means a Bank Loan in the form of a
participation.
"Bank Loans" means direct purchases of, assignments of, participations
in and other interests in senior debt (including term loans, revolving credit
lines and other similar loans and investments).
"Business Day" means each day other than a Saturday, Sunday or other
day on which banking institutions are not required by law or regulation to be
open in the State of New York.
"Busted Convertible Bond" means any convertible bond that, in the
Fund's determination, trades like a fixed income investment and has a
negligible option value.
B-20
"Capital Stock" of any Person means shares, equity interests (including
limited partnership interests and limited liability company interests),
participations or other equivalents (however designated) of corporate stock
of such Person.
"Cash" means any immediately available funds in U.S. dollars or any
currency other than U.S. dollars which is a freely convertible currency
(including amounts held in the Custodial Account or on deposit with the
Custodian pursuant to "sweep" arrangements linked to the Custodial Account).
"Cash Equivalents" means investments (other than Cash) that are one or
more of the following obligations or Securities:
(i) U.S. Government Securities;
(ii) certificates of deposit of, banker's acceptances issued by or
money market accounts in any depository institution or trust
company incorporated under the laws of the United States of
America or any state thereof and subject to supervision and
examination by Federal and/or state banking authorities, so long
as the deposits offered by such depository institution or trust
company at the time of such investment are rated and have a
rating of at least "P-1" if rated by Xxxxx'x or "A-1+" if rated
by S&P (and, if rated "P-1" by Xxxxx'x, such rating has not been
placed on a credit watch with negative implications by Xxxxx'x)
(or, in the case of the principal depository institution in a
holding company system whose deposits are not so rated, the long
term debt obligations of such holding company are rated and such
rating is at least "Al" if rated by Xxxxx'x and "A+" if rated by
S&P (or, if rated "Al" by Xxxxx'x, such rating has not been
placed on a credit watch with negative implications by Xxxxx'x));
(iii) commercial paper issued by any depository institution or trust
company incorporated under the laws of the United States of
America or any state thereof and subject to supervision and
examination by Federal and/or state banking authorities, or any
corporation incorporated under the laws of the United States of
America or any state thereof, so long as the commercial paper of
such issuer is rated and has at the time of such investment a
short term rating of at least "P- l" if rated by Xxxxx'x or "A-1"
if rated by S&P (and, if rated "P-1" by Xxxxx'x, such rating has
not been placed on a credit watch with negative implications by
Xxxxx'x);
(iv) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of
America or any state thereof the obligations of which at the time
of such investment are rated and that have a credit rating of at
least "P-1" if rated by Xxxxx'x and "A- l" if rated by S&P (and,
if rated "P-1" by Xxxxx'x, such rating has not been placed on a
credit watch with negative implications by Xxxxx'x) either at the
time of such investment or the making of a contractual commitment
providing for such investment;
B-21
(v) shares of any money market fund or similar investment vehicle, so
long as such money market fund is rated and has at the time of
such investment a short-term rating of at least "Aaa" and "MRl+"
if rated by Xxxxx'x and "AAA" if rated by S&P (and, if rated
"Aaa" and "MRl+" by Xxxxx'x, such rating has not been placed on a
credit watch with negative implications by Xxxxx'x);
(vi) unleveraged overnight repurchase obligations on customary terms
with respect to investments described in clauses (i) through (v)
above entered into with a depository institution, trust company
or corporation of the type described in clause (iii) above or a
Subsidiary of any such depository institution, trust company or
corporation if such depository institution, trust company or
corporation also has a rating of at least "Al" and "P-1" if rated
by Xxxxx'x or "A+" if rated by S&P (and, if rated "Al" and "P-1"
by Xxxxx'x, such rating has not been placed on a credit watch
with negative implications by Xxxxx'x); and
(vii) preferred shares rated in the highest investment rating category
by Xxxxx'x and S&P or otherwise with respect to which the Rating
Agency Condition is satisfied;
provided, that: (i) in no event shall Cash Equivalents include any
obligation that provides for the payment of interest alone; (ii) Cash
Equivalents referred to in clauses (ii) and (iii) above shall mature
within 183 days of issuance; (iii) if any of Xxxxx'x or S&P changes its
rating system, then any ratings included in this definition shall be
deemed to be an equivalent rating in a successor rating category of
Xxxxx'x or S&P, as the case may be; (iv) if any of Xxxxx'x or S&P is
not in the business of rating securities, then any ratings included in
this definition shall be deemed to be an equivalent rating from another
Rating Agency; (v) Cash Equivalents (other than U.S. Government
Securities or money market funds maintained by the Custodian) shall not
include any such investment of more than $100 million in any single
issuer; (vi) in no event shall Cash Equivalents include any obligation
that is not denominated in Dollars or Eligible Foreign Currencies; and
(vii) none of the foregoing obligations or securities will constitute
Cash Equivalents (A) if all, or substantially all, of the remaining
amounts payable thereunder will consist of interest and not principal
payments, or (B) if such security has an assigned rating from S&P with
an "r" or "t" subscript, or (C) if such security is a mortgage-backed
security or (D) if such security is an inverse floater security.
"CDO Debt Securities" means any Securities that entitle the holders
thereof to receive payments that depend primarily on cash flow from, or
proceeds upon the sale of a pool of Securities serving as collateral for such
Securities; provided that if more than one class or other similar designation
of such Securities receive payments that depend primarily on cash flow from
all or substantially all of the underlying collateral Securities, then the
class or other similar designation the payment of which is most deeply
subordinated (other than any class or other similar designation constituting
only nominal capital) and any class or other similar designation that, as
indicated in any relevant offering documentation, is stated to be at least
reasonably likely to be treated as equity for U.S. Federal income tax
purposes will be excluded from "CDO Debt Securities"; provided, further that
(x) CDO Debt Securities shall not include any Structured Product Transaction
and (y) CDO Debt Securities shall only include CDO Debt Securities issued in
a "cash-flow" or "market value" collateralized debt obligation transactions.
B-22
"CDO Equity Securities" means any Securities (other than CDO Debt
Securities) that entitle the holders thereof to receive payments that depend
primarily on cash flow from, or proceeds upon sale of a pool of Securities
serving as collateral for such Securities (whether or not such Securities
have been rated by a nationally recognized statistical rating organization);
provided that CDO Equity Securities shall not include any Structured Product
Transaction.
"CDS" means a credit default swap substantially in the form approved by
the Insurer, which approval shall not be unreasonably withheld.
"Contributed Company Capital" means, at any date, the aggregate gross
amount of Cash contributed as equity capital (excluding, for the avoidance of
doubt, the Preferred Shares) to the Fund by the holders of the Common Shares
on or prior to such date (without regard to any other changes in Company
Equity).
"Currency Hedging Transaction" means (i) any Swap Transaction entered
into by the Fund with an Eligible Counterparty intended to convert any
payment on a Debt or other obligation of the Fund or any Company Investment
denominated in one currency to another currency or to protect against
fluctuations in the exchange rate of a currency in which a payment to be made
or received by the Fund is denominated and (ii) any Swap Transaction entered
into by the Fund intended to convert any payment on a Debt or other
obligation of the Fund or any Company Investment denominated in one currency
to another currency or to protect against fluctuations in the exchange rate
of a currency in which a payment to be made or received by the Fund is
denominated and pursuant to which the Fund has no on-going payment
obligations.
"Defensive Hedge Advance Amount" means, as of any date of
determination, 98% of the aggregate Market Value of all Defensive Hedge
Transactions; provided, however, that the Defensive Hedge Advance Amount
shall in no event exceed an amount equal to (x) 20% of the Total
Capitalization as of such date of determination less (y) the sum of the
aggregate Market Value as of such date of determination of all Fund
Investments in Bank Loan Participations and Structured Product Transactions
and, if the Secured Hedging Advance Amount is positive, the Secured Hedging
Advance Amount.
"Defensive Hedge Transaction" means a Hedging and Short Sale
Transaction between the Fund and an Eligible Counterparty intended to protect
the Fund against fluctuations in the market value of a Fund Investment and
pursuant to which (i) the Eligible Counterparty has agreed for a period of
time, at the direction of the Fund, to (a) purchase the Fund Investment at an
agreed strike price or (b) pay to the Fund, at the Fund's election, an amount
by which an agreed strike price exceeds the current price of the Fund
Investment; (ii) the Eligible Counterparty does not have recourse to the
Collateral or the Fund for any amounts owing to such counterparty thereunder;
and (iii) the Fund may (a) pay a fee to the Eligible Counterparty in
connection with the transaction, (b) remove the Fund Investment from the
Custodial Account (whereby it is no longer part of the Collateral) and pledge
the Fund Investment to the counterparty as security for its obligations to
the Eligible Counterparty and (c) agree to deliver the Fund Investment to the
Eligible Counterparty in satisfaction of all of its obligations to the
Eligible Counterparty in connection with the transaction.
B-23
"Designated Country" means (i) each of Canada, Great Britain,
Australia, Denmark, New Zealand, Sweden, Switzerland, Luxembourg, The
Netherlands and any G-7 nation, (ii) any other country whose unsupported
sovereign debt obligations are rated at least Aa2 by Xxxxx'x and (iii) each
other country identified by the Fund from time to time and with respect to
which the Rating Agency Condition with respect to Xxxxx'x has been satisfied.
"Determination Date" means (a) with respect to any regularly scheduled
Valuation Statement prepared pursuant to the Indenture or the Operating
Agreement and any other Preferred Shares document, the related Reporting
Date, (b) for the purpose of determining the Market Value Price of a Fund
Investment at any date when the Fund is in compliance, or reasonably believes
it is in compliance, with the covenants relating to the
Over-Collateralization Tests, the last Business Day of the preceding calendar
week ending prior to such date and (c) for the purpose of determining the
Market Value Price of a Fund Investment at any date when the Fund is not, or
reasonably believes that it is not, in compliance with any covenant relating
to the Over-Collateralization Tests, the date on which the most current
pricing information with respect to such Fund Investment is reasonably
available.
"Distressed Debt" means debt Securities and Bank Loans which are, in
the Investment Manager's reasonable business judgment, impaired in
fundamental ways due to credit, liquidity, interest rate or other issues,
which may not be performing or may be in default, and which are generally
trading at a substantial discount to par.
"Eligible Assets" means financial assets, either fixed or revolving,
that by their terms convert into cash within a finite time period plus any
rights or other assets designed to assure the servicing or timely
distribution of proceeds to security holders.
"Eligible Counterparty" means, with respect to any Hedging and Short
Sale Transaction (other than a CDS in which the Fund is the counterparty
writing or providing the protection with respect to the reference asset), (a)
any Approved Counterparty or (b) any Person (i) (x) in the case of a Currency
Hedging Transaction, having a long term rating of at least "Aa3" by Xxxxx'x
and a short term rating of at least "P-1" by Xxxxx'x (and, if rated "Aa3" or
"P-1" by Xxxxx'x, then such rating has not been placed on a credit watch with
negative implications by Xxxxx'x) and (y) in all other cases, having a long
term rating of at least "Al" by Xxxxx'x and a short term rating of at least
"P-1" by Xxxxx'x (and, if rated "Al" or "P-1" by Xxxxx'x, then such rating
has not been placed on a credit watch with negative implications by Xxxxx'x),
(ii) if no short term rating is available, (x) in the case of a Currency
Hedging Transaction, having a long term rating of "Aa2" or better by Xxxxx'x
(and, if rated "Aa2" by Xxxxx'x, such rating has not been placed on a credit
watch with negative implications by Xxxxx'x) and (y) all other cases, having
a long term rating of "Aa3" or better by Xxxxx'x (and, if rated "Aa3" by
Xxxxx'x, such rating has not been placed on a credit watch with negative
implications by Xxxxx'x) or (iii) whose obligations in respect of all Hedging
and Short Sale Transactions entered into with the Fund are absolutely and
unconditionally guaranteed by an Affiliate of such Person having (x) (A) in
the case of a Currency Hedging Transaction, having a long term rating of at
least "Aa3" by Xxxxx'x and a short term rating of at least "P-1" by Xxxxx'x
(and, if rated "Aa3" or "P-1" by Xxxxx'x, then such rating has not been
placed on a credit watch with negative implications by Xxxxx'x) and (B) in
all other cases, having a long term rating of at least "Al" by Xxxxx'x and a
short term rating of at least "P-1" by Xxxxx'x (and, if rated "Al" or "P-1"
by Xxxxx'x, then such rating has
B-24
not been placed on a credit watch with negative implications by Xxxxx'x) or (y)
if no short term rating is available, (A) in the case of a Currency Hedging
Transaction, having a long term rating of "Aa2" or better by Xxxxx'x (and, if
rated "Aa2" by Xxxxx'x, such rating has not been placed on a credit watch with
negative implications by Xxxxx'x) and (B) in all other cases, having a long term
rating of "Aa3" or better by Xxxxx'x (and, if rated "Aa3" by Xxxxx'x, such
rating has not been placed on a credit watch with negative implications by
Xxxxx'x); provided that with respect to any counterparty with which the Fund has
entered into a Hedging and Short Sale Transaction, such counterparty that would
qualify as an "Eligible Counterparty" pursuant to clause (b) above but for the
fact that such counterparty had suffered a ratings downgrade shall be deemed to
be an "Eligible Counterparty" for thirty 30 days after the day it would
otherwise have ceased to qualify as an Eligible Counterparty.
"Eligible Country" means each country (i) whose unsupported sovereign
debt obligations are rated "Aa2" or better by Xxxxx'x (and, if rated "M1" by
Xxxxx'x, such rating has not been placed on a credit watch with negative
implications by Xxxxx'x) or (ii) that is a Designated Country whose
unsupported sovereign debt obligations are rated "A3" or better by Xxxxx'x
(and, if rated "A3" by Xxxxx'x, such rating has not been placed on a credit
watch with negative implications by Xxxxx'x).
"Eligible Foreign Currencies" means (i) Australian Dollars, Canadian
Dollars, Pounds Sterling and Euros and (ii) each other currency identified by
the Fund from time to time and confirmed in writing as acceptable by the
Trustee, the Insurer and with respect to which the Rating Agency Condition
with respect to Xxxxx'x has been satisfied.
"Eligible Investments" has the meaning assigned to such term in this
Schedule under "Determination of Fund Investments Constituting Eligible
Investments."
"Equity Securities" means equity securities (including, for the
avoidance of doubt, Private Equity Securities) that will generally consist of
common or preferred stock of small to medium capitalization companies that
have either (i) undergone leveraged buyouts or recapitalizations, yet are
still substantially leveraged, or (ii) been burdened by complex legal,
financial or ownership issues and are selling at a discount to the underlying
asset or business value.
"Excess Fund Investments" means any Fund Investments or portion thereof
having a Market Value in excess of the percentages of Total Capitalization
set forth in the definition of Portfolio Limitations (in each case determined
by the Fund using the most recent Market Value for the applicable Fund
Investments).
"Excluded Investments" has the meaning assigned to such term in this
Schedule under "Determination of Fund Investments Constituting Eligible
Investments."
"Foreign Issuer" means any issuer of a Fund Investment that is
incorporated or otherwise formed or organized outside the United States
unless such Fund Investment is irrevocably and unconditionally guaranteed by
any United States corporation, company, trust or other business entity;
provided, however, that none of the following shall be a Foreign Issuer:
B-25
(i) an offshore holding company issuer whose operating subsidiaries
principally do business, and hold their assets, in the United States, or (ii)
an issuer of a CDO Debt Security.
"Fully Collateralized Structured Product Transaction" means a
Structured Product Transaction relating to a single Bank Loan or High Yield
Bond pursuant to which the Fund is required to pledge collateral in an amount
that is not less than 100% of the notional amount of such transaction.
"Fund Investments" means all Cash, Cash Equivalents, Bank Loans,
Securities, Short Sale Transactions and Structured Product Transactions owned
by the Fund. Fund Investments which the Fund has contracted to purchase
shall not be deemed for purposes of the Indenture to be owned by the Fund
until settlement of such purchase and Fund Investments which the Fund has
contracted to sell shall not cease to be Fund Investments for purposes of the
Indenture until settlement of such sale.
"Hedging and Short Sale Transaction" means any transaction entered into
by the Fund with an Eligible Counterparty that is (i) a Swap Transaction;
(ii) an Interest Rate Hedging Transaction; (iii) a Currency Hedging
Transaction; (iv) a transaction under which the Fund borrows a Bank Loan or
Security and sells or otherwise disposes of such or any substantially similar
Bank Loan or Security prior to the date on which the same must be returned to
the lender thereof (and commonly known as a "short sale"), (v) a Securities
Lending Transaction; (vi) a credit derivative transaction (including, but not
limited to, a CDS) or repurchase agreement; (vii) an obligation to enter into
any of the foregoing; or (viii) any combination of any of the foregoing.
"High Yield Bonds" means debt Securities (including convertible debt
Securities) that are generally rated below "Baa3" by Xxxxx'x, (a) which are
issued pursuant to a public registration, Rule 144A or as a private placement
and (b) which are not Cash Equivalents, Bank Loans, Mezzanine Investments or
CDO Debt Securities.
"Illiquid Investments" means (a) Unquoted Investments that do not
qualify as Semi-Liquid Investments.
"Industry" means any industry category listed in Annex I hereto under
"Xxxxx'x Industry Classifications" or any other such industry category
designated by the Fund in writing and approved by the Insurer in its
reasonable discretion and with respect to which the Rating Agency Condition
with respect to Xxxxx'x has been satisfied.
"Ineligible Country" means any country other than the United States or
an Eligible Country.
"Interest Only Security" means any security that by its terms provides
for periodic payments of interest and does not provide for the repayment of a
stated principal amount.
"Interest Rate Hedging Transaction" means (i) any Swap Transaction
entered into by the Fund with an Eligible Counterparty intended to protect
the Fund against changes in the floating rate of interest payable on all or a
portion of any Debt or other obligation of the Fund or its subsidiaries or on
any Fund Investment or to protect against fluctuations in interest rates, or
(ii) any Swap Transaction or repurchase agreement entered into by the Fund,
in each case with an
B-26
Eligible Counterparty, intended to protect against changes in the market value
of any Fund Investment resulting from fluctuations in interest rates.
"Market Value" has the meaning assigned to such terms in this Schedule
under "Determination of Market Value of Fund Investments."
"Market Value Price" has the meaning assigned to such term in this
Schedule under "Determination of Market Value of Fund Investments."
"Mezzanine Investments" means (i) debt Securities or other obligations
of an issuer (including convertible debt Securities and obligations and
Securities backed by real estate collateral) that (A) are subordinated to
other debt of such issuer and (B) may be issued with equity participation
features such as convertibility, senior equity securities, common stock or
warrants or (ii) Preferred Stock issued in connection with management
buyouts, acquisitions, refinancings, recapitalizations and later stage growth
capital financings.
"Xxxxx'x" means Xxxxx'x Investors Service, Inc., or any successor
thereto.
"Xxxxx'x Net Accrual Amount" means, as of any date, an amount, which
may be positive or negative, equal to (i) the aggregate amount of accrued
interest payable to the Fund on all interest-bearing Eligible Investments,
all declared but unpaid dividends payable on Eligible Investments that are
Equity Securities and all due and unpaid commitment fees payable to the
Issuer in respect of Eligible Investments, in each case as of such date minus
(ii) the aggregate amount of accrued interest, dividends (including, without
duplication, any Company Tax Distribution), premiums, commitment fees and
Unissued Share Fee and accrued and unpaid Administrative Expenses, if any,
payable by the Fund as of such date in respect of Indebtedness issued
pursuant to the Indenture and the Preferred Shares, respectively; provided
that until the earlier of two years after the Closing Date or the date on
which the Fund shall have drawn $404.5 million of the Equity Capital
Commitments, the Xxxxx'x Net Accrual Amount shall not be less than zero.
"Xxxxx'x Rating Correlation Procedures" means the following procedures,
which shall be applied to any Fund Investment for which an Assigned Xxxxx'x
Rating is not otherwise required and does not have an Assigned Xxxxx'x Rating:
(i) if another security or obligation of the same issuer has an
Assigned Xxxxx'x Rating, then the applicable rating of such Fund
Investment shall be determined as follows: (a) if there is an
Assigned Xxxxx'x Rating of a security of the issuer of the same
priority, then the rating of such Fund Investment shall be such
rating; (b) if the Assigned Xxxxx'x Rating is on a senior
unsecured obligation of the issuer, then the applicable rating of
such Fund Investment (1) shall be one subcategory above such
Assigned Xxxxx'x Rating, if such Fund Investment is a senior
secured obligation of the issuer, with a rating of "Aaa"
remaining the same; (2) shall be two subcategories below such
Assigned Xxxxx'x Rating, if such rating is "B1" or higher and if
such Fund Investment is a subordinated obligation of the issuer,
(3) shall be one subcategory below such Assigned Xxxxx'x Rating
if such rating is between "B2" and "Ca," inclusive, and if such
Fund Investment is
B-27
a subordinated obligation of the issuer; and (4) otherwise shall be
"C" if such Fund Investment is a subordinated obligation of the
issuer; (c) if the Assigned Xxxxx'x Rating is on a subordinated
obligation of the issuer and if such Fund Investment is a senior
secured obligation of the issuer, then the applicable rating of such
Fund Investment (1) shall be one subcategory above such Assigned
Xxxxx'x Rating if such rating is "Baa3" or higher, (2) shall be two
subcategories above such Assigned Xxxxx'x Rating if such rating is
"B2" or higher, but lower than "Baa3," (3) shall be one subcategory
above such Assigned Xxxxx'x Rating if such rating is "B3" and (4)
otherwise shall equal such rating; (d) if there is an Assigned
Xxxxx'x Rating on a subordinated obligation of the issuer and if
such Fund Investment is a senior unsecured obligation of the issuer,
then the applicable rating of such Fund Investment (1) shall be one
subcategory above such Assigned Xxxxx'x Rating if such rating is
"B3" or higher and (2) otherwise shall equal such rating; and (e) if
the Assigned Xxxxx'x Rating is on a senior secured obligation of the
issuer, then the applicable rating of such Fund Investment (1) shall
be one subcategory below such Assigned Xxxxx'x Rating if such rating
is "Ca" or higher and such Fund Investment is a senior unsecured
obligation of the issuer; (2) shall be two subcategories below such
Assigned Xxxxx'x Rating if such rating is "Caa2" or higher and such
Fund Investment is a subordinated obligation of the issuer; and (3)
otherwise shall be "C"; and
(ii) if no other security or obligation of the same issuer has an
Assigned Xxxxx'x Rating, the applicable ratings of such Fund
Investment shall be determined using any one of the methods below:
A. (1) if such Fund Investment has an Assigned S&P Rating, then the
applicable rating of such Fund Investment will be (a) one subcategory
below the Xxxxx'x equivalent of the Assigned S&P Rating if such Fund
Investment is rated "BBB-" or higher by S&P; and (b) two subcategories
below the Xxxxx'x equivalent of the Assigned S&P Rating if such Fund
Investment is rated "BB+" or lower by S&P; and
(2) if such Fund Investment does not have an Assigned S&P Rating but
another security or obligation of the issuer has an Assigned S&P Rating
("parallel security"), then the Fund may elect (x) to apply the Xxxxx'x
equivalent of the rating of such parallel security determined in
accordance with the methodology set forth in subclause (1) above, in
which case, the applicable rating of such Fund Investment will be
determined in accordance with the methodology set forth in clause (i)
above (for such purpose treating the parallel security as if it had an
Assigned Xxxxx'x Rating with the rating determined pursuant to this
subclause (2)) or (y) to present such Fund Investment to Xxxxx'x for an
estimate of such Fund Investment's rating factor as provided in clause
B below;
B. if such Fund Investment does not have an Assigned Xxxxx'x Rating or
Assigned S&P Rating and (x) no other security or obligation of the
issuer has an Assigned Xxxxx'x Rating or Assigned S&P Rating or (y)
another security or obligation of the issuer has an Assigned S&P
Rating, and the Fund so elects as provided in clause A(2)(y) above,
then the Fund may present such Fund Investment to Xxxxx'x for an
estimate of such Fund Investment's rating factor, from which its
corresponding Xxxxx'x rating may be
B-28
determined, which shall be the applicable rating; provided that pending
receipt from Xxxxx'x of such estimate, such Fund Investment shall have an
applicable rating of "B3" if the Fund certifies to the Trustee that the
Fund believes that such estimate will be at least "B3";
C. with respect to a Fund Investment issued by a U.S. issuer, if (1)
neither the issuer nor any of its Affiliates is subject to
reorganization or bankruptcy proceedings, (2) no debt securities or
obligations of the issuer are in default, (3) neither the issuer nor
any of its Affiliates have defaulted on the payment of any debt during
the past two years, (4) the issuer has been in existence for the past
four years, (5) the issuer is current on any cumulative dividends, (6)
the fixed-charge ratio for the issuer exceeds 120% for each of the past
two fiscal years (and for the most recent four quarters), (7) the
issuer had a net profit before tax in the past fiscal year and the most
recent quarter, and (8) the annual financial statements of the issuer
are unqualified and certified by a firm of independent accountants of
national reputation, and quarterly statements are unaudited but signed
by a corporate officer, the applicable rating of such Fund Investment
will be "B3" if such Fund Investment is a senior secured obligation and
"Caa1" if such Fund Investment is not a senior secured obligation;
D. with respect to a Fund Investment issued by a U.S. issuer, if (1)
neither the issuer nor any of its Affiliates is subject to
reorganization or bankruptcy proceedings, (2) no debt security or
obligation of the issuer has been in default in payment during the past
two years, and (3) such Fund Investment does not fall within the
immediately preceding paragraph (C), the applicable rating of such Fund
Investment will be "Caa2"; and
E. if a debt security or obligation of the issuer has been in default in
payment during the past two years, the applicable rating of such Fund
Investment will be "Ca".
For the purposes of this definition, "Assigned Xxxxx'x Rating" means
the publicly available rating or the monitored estimated rating
expressly assigned to a debt obligation (or facility) by Xxxxx'x that
addresses the full amount of the principal and interest promised, and
"Assigned S&P Rating" means the publicly available rating assigned to a
debt obligation (or facility) by S&P that includes no subscripts,
asterisks or other qualifications, that is not stated to be an
unmonitored rating, and that addresses the full amount of the principal
and interest promised.
"Xxxxx'x Warrant/Option Advance Amount" means, as of any date of
determination, an amount equal to the sum for all Warrant/Option Investments
of the product of(i) the Warrant/Option Intrinsic Value of such
Warrant/Option Investment multiplied by (ii) the Xxxxx'x Advance Rate for the
Xxxxx'x Asset Category applicable to the Related Equity Securities of such
Warrant/Option Investment.
"NASDAQ" means the electronic inter-dealer quotation system operated by
NASDAQ, Inc., a subsidiary of the National Association of Securities Dealers,
Inc., or any successor thereto.
B-29
"Non-Cash Pay Instrument" means a High Yield Bond which falls in Asset
Category C, D, E, F or G that (a) does not provide for the payment of cash
interest or preferred dividends, or provides for the total deferral of
interest until the final maturity thereof, (b) is a debt security that has an
initial current yield on the date of purchase or acquisition thereof of less
than 2.5% per annum and provides for an increase in the rate of interest
payable in respect thereof at any time after the date it was purchased or
acquired (other than any increase resulting from (i) a change in a generally
recognized floating rate interest rate index, (ii) a change in the weighted
average interest rate on underlying collateral in the case of Securities the
interest rate on which is based on such weighted average interest rate or
(iii) a change in an interest rate spread or margin resulting from an
announced change in the rating of the issuer's debt obligations) or (c) is a
debt security that provides for the partial deferral of interest until the
final maturity thereof and which has cash interest payable without deferral
at a rate per annum less than (x) with respect to Fund Investments bearing
interest at a fixed rate, 2.5% per annum and (y) with respect to Fund
Investments bearing interest at a floating rate, a eurodollar rate plus 2%
per annum. For purposes of clause (b) of this definition, if the current
yield is increased to 2.5% or more per annum, then at the time of the
increase of such interest rate, the Security will cease to be a "Non-Cash Pay
Instrument."
"Non-Credit Risk Security" means a security with respect to which an
institutional money manager would evaluate its value primarily by reference
to factors other than (a) the coupon (or the coupon as adjusted for any
purchase discount or premium) in relation to prevailing market yields, (b)
the credit worthiness of the issuing entity or (c) the adequacy of the
underlying financial assets supporting such security to ensure the repayment
of the security according to its terms (which adequacy may be measured by a
credit analysis of the likelihood of the obligors of such underlying assets
to pay according to the terms of such underlying assets and/or an analysis of
the sufficiency of the income streams thereon to meet the payment terms of
the security).
"Non-Performing Instrument" means (i) any Fund Investment that is debt
and the issuer of which is in default of any principal or interest payment
obligations in respect thereof (without giving effect to any applicable grace
period or waiver), (ii) any Fund Investment that is Preferred Stock and the
issuer of which has failed to meet any scheduled redemption obligations or to
pay its latest declared cash dividend or (iii) any Fund Investment that is a
CDO Debt Security and the issuer of which has failed to pay any current
interest or principal in cash when due.
"Outstanding Principal Amount" means the outstanding aggregate
principal amount of the Notes under the Indenture at any given time.
"Performing" means, (i) with respect to any Fund Investment that is
Bank Loan or other debt, the issuer of such Fund Investment is not in default
of any payment obligations in respect thereof, (ii) with respect to any Fund
Investment that is Preferred Stock, the issuer of such Fund Investment has
not failed to meet any scheduled redemption obligations or to pay its latest
declared cash dividend or (iii) with respect to any Fund Investment that is a
CDO Debt Security, the issuer of such Fund Investment has not failed to pay
any current interest or principal in cash when due.
B-30
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Pledge and Intercreditor Agreement" means the Pledge and Intercreditor
Agreement dated as of the Closing Date, among the Trustee, the Insurer, the
Custodian, the Fund and the Collateral Agent identified therein, as amended,
extended, restated, supplemented or modified from time to time in accordance
with the terms thereof.
"Portfolio Limitations" has the meaning assigned to such term in this
Schedule under "Application of Portfolio Limitations."
"Preferred Stock" means, as applied to the Capital Stock of any Person,
Capital Stock of such Person of any class or classes (however designated)
that ranks prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding
up of such Person, to any shares (or other interests) of Capital Stock of
such Person.
"Private Equity Securities" means, at any time of determination any
Equity Security which the Fund believes in good faith (based on the facts and
circumstances available to it) is (i) commonly regarded by investment
professionals as a "private equity security" and (ii) not traded or listed on
any national or regional securities exchange, any designated offshore
Securities market (as defined in Regulation S under the Securities Act) or on
the NASDAQ National Market and is not actively quoted or traded on any
automated quotation system or in the over-the-counter market; provided,
however, that "Private Equity Securities" shall not include (a) any Equity
Securities convertible or exchangeable for any Equity Securities traded or
quoted in the markets described in clause (ii) above, or (b)any equity
Securities which may be resold under an effective registration statement
under the Securities Act at the time of determination.
"Protected Market Value" means, with respect to any Fund Investment
that is the subject of a Defensive Hedge Transaction, the Protected Price of
such Fund Investment times the number of units of such Fund Investment that
are held by the Fund and are the subject of such Defensive Hedge Transaction.
"Protected Price" means, with respect to any Defensive Hedge
Transaction, (i) the agreed strike price at which the Eligible Counterparty
to such Defensive Hedge Transaction has agreed to purchase the Fund
Investment that is the subject of such Defensive Hedge Transaction or (ii)
the agreed strike price under a Defensive Hedge Transaction pursuant to which
the Eligible Counterparty has agreed to pay the Fund an amount equal to the
excess of the agreed strike price over the current price of the Fund
Investment that is the subject of such Defensive Hedge Transaction.
"Quarterly Date" means the last Business Day of each February, May,
August and November, commencing November 30, 2005.
"Related Person" means, with respect to any issuer, (a) any Person of
which such issuer is a Subsidiary, (b)any Person that is a Subsidiary of such
issuer, (c) with respect to a debt obligation, any Person that relies on, or
is relied upon for, the cash flows of such issuer to service
B-31
debt obligations or does not have a credit rating independent of such Person or
(d) with respect to a debt obligation, any Person that guarantees the issuer's
payment of such debt obligation; provided, however, that, in any such case, a
Person shall not be a Related Person of a second Person solely as a consequence
of the common control of such Persons by a single financial sponsor.
"Reporting Date" means the last Business Day of each calendar week,
commencing November 25, 2005.
"S&P" means Standard & Poor's Ratings Services, a Division of The
XxXxxx-Xxxx Companies, Inc., or any successor thereto.
"Secured Hedging Advance Amount" means as of any date of determination,
(i) if the Secured Hedging Net Exposure is greater than zero and the Secured
Hedging Transactions entered into, in the judgment of the Fund, hedge or
mitigate risks to which the Fund is exposed in the conduct of its business or
the management of its liabilities, 90% of the Secured Hedging Net Exposure,
and (ii) if the Secured Hedging Net Exposure is less than zero, 100% of the
Secured Hedging Net Exposure; provided that any Secured Hedging Transaction
having a Secured Hedging Net Exposure greater than zero and a counterparty
with a rating of less than "A3" by Xxxxx'x shall be deemed, for purposes of
calculating the Secured Hedging Advance Amount, to have a Secured Hedging Net
Exposure of zero.
"Secured Hedging Net Exposure" as of any date, as to any Secured
Hedging Transaction for which a determination thereof is required to be made,
shall be determined as follows: (i) each Eligible Counterparty party to each
Secured Hedging Transaction shall determine, with respect to the Secured
Hedging Transactions entered into by it with the Fund, an amount (the
"Secured Net Exposure Component") equal to the net current market value on
the bid side of the market if the position is long and on the ask/offer side
of the market if the position is short to the Fund on such date of
determination of each such Secured Hedging Transaction and (ii) for each
Secured Hedging Transaction, the "Secured Hedging Net Exposure" will, as of
any date, be equal to the sum of all applicable Secured Net Exposure
Components as of such date and may, for purposes of this calculation, be less
than zero.
"Secured Hedging Transaction" means any Interest Rate Hedging
Transaction or Currency Hedging Transaction entered into by the Fund with any
Person that is an Eligible Counterparty which is secured by Collateral
pursuant to the Pledge and Intercreditor Agreement and for avoidance of doubt
shall exclude Structured Product Transactions.
"Securities" means common and preferred stock, partnership units and
participations, member interests in limited liability companies, notes,
bonds, debentures, trust receipts and other obligations, instruments or
evidences of indebtedness, including debt instruments of public and private
issuers and tax-exempt securities (including, without limitation, warrants,
rights, put and call options and other options and rights relating thereto,
or any combination thereof), guarantees of indebtedness, choses in action,
trade claims, other property or interests commonly regarded as securities or
any form of interest or participation therein, but not including Bank Loans
or Hedging and Short Sale Transactions.
B-32
"Securities Lending Counterparty" means any bank, broker-dealer or
other financial institution (other than an insurance company) that has:
(i) in the case of a loan with a term of 90 days or less, short-term
senior unsecured debt ratings of "P-1" from Xxxxx'x (or a
guarantor with such ratings);
(ii) in the case of a loan with a term of longer than 90 days but less
than a year, either (x) a long-term senior unsecured debt rating
of at least "Al" by Xxxxx'x or (y) both a long term senior
unsecured debt rating of "A2" by Xxxxx'x and a short term rating
of "P-1" by Xxxxx'x; and
(iii) in the case of a loan for a one year term or more, a long-term
senior unsecured debt rating that, individually and together with
all other Securities Lending Counterparties' ratings, is
consistent with the limits set forth in the table below (or a
guarantor with such ratings).
No more than 50% of Total Capitalization may be loaned pursuant to
Securities Lending Transactions regardless of duration. At the time a
Securities Lending Transaction for a term of one year or more is
entered into by the Fund, the percentage of the Fund Investments loaned
to a single counterparty shall not exceed the individual percentage set
forth below for the credit rating of such counterparty, and the
percentage of the Fund Investments loaned by the Fund to counterparties
having the same credit rating shall not exceed the aggregate percentage
set forth below for such credit rating:
--------------------------------------------------------------------------------
Long-Term Senior Unsecured Individual Aggregate
Debt Rating of Securities Securities Lending Securities Lending
Lending Counterparty Counterparty Limit Counterparty Limit
--------------------------------------------------------------------------------
Aaa 10% 20%
--------------------------------------------------------------------------------
Aa1 10% 20%
--------------------------------------------------------------------------------
Aa2 10% 20%
--------------------------------------------------------------------------------
Aa3 10% 15%
--------------------------------------------------------------------------------
A1 10% 10%
--------------------------------------------------------------------------------
A2* 5% 5%
--------------------------------------------------------------------------------
A3 or lower 0% 0%
--------------------------------------------------------------------------------
---------------------------
* The percentages in this row apply only if such rating is not on a
credit watch with negative implications by Xxxxx'x. If such rating is
on a credit watch with negative implications by Xxxxx'x, both the
individual and the aggregate percentage limits shall be zero.
provided, that the Fund may enter into a Securities Lending Transaction
with a Securities Lending Counterparty having, at such time, a
long-term senior unsecured debt rating below "A2" by Xxxxx'x, so long
as the Rating Agency Condition with respect to Xxxxx'x has been
satisfied.
"Securities Lending Transactions" means all obligations of the Fund (i)
to purchase investments which arise out of or in connection with the sale of
the same or substantially similar
B-33
investments or other similar transactions having the same economic effect
(excluding Swap Transactions); and (ii) incurred in connection with any security
lending transactions described in clause (i) with a Securities Lending
Counterparty.
"Semi-Liquid Investments" means (i) Unquoted Investments that are debt
Securities rated "B3" or better by Xxxxx'x; (ii) Unquoted Investments that
are not subject to any enforceable agreement containing a material condition
to, or material restriction on, the ability of the holder of such Unquoted
Investment or an assignee of such holder to sell, assign, transfer or
otherwise liquidate the investment in a commercially reasonable time and
manner (other than in any such agreement contained in the Collateral
Documents and customary securities law arrangements or restrictions); (iii)
solely for purposes of the definition of Portfolio Limitations, Unquoted
Investments which are High Yield Bonds or Mezzanine Investments and are part
of an issue that is greater or equal to $40 million in original principal
amount; or (iv) solely for purposes of the definition of Portfolio
Limitations, Unquoted Investments which are High Yield Bonds that are held by
ten or more holders or the issuer thereof has a total capitalization in
excess of $150.0 million.
"Short Sale Advance Amount" means, as of any date of determination with
respect to any Short Sale Transaction for which a determination thereof is
required to be made, an amount calculated as follows:
(i) If the Security borrowed by the Fund in connection with such
Short Sale Transaction is a Non-Fixed Income Investment:
Short Sale Advance Amount = S minus M minus X
Where:
S= The aggregate value of the net proceeds from
the sale of the Non-Fixed Income Investment
in the Short Sale Transaction that are not
included in clause (i) of Xxxxx'x Senior
Advance Amount or clause (i) of Xxxxx'x
Total Advance Amount, determined as of the
date of such sale.
M= The lesser of (a) the Market Value of such
Non-Fixed Income Investment as of the date
of determination and (b) the original price
of such Non-Fixed Income Investment on the
date it was borrowed.
B-34
X= The product of (a) the Market Value of such
Non-Fixed Income Investment as of the date
of determination, multiplied by (b) one
minus the Xxxxx'x Advance Rate applicable to
such Non-Fixed Income Investment as of the
date of determination; provided, however,
that in no event shall X be less then 0.
(ii) If the Bank Loan or Security borrowed by the Fund in connection
with such Short Sale Transaction is a Fixed Income Investment:
Short Sale Advance Amount = S minus M minus Y
Where:
S= The aggregate value of the net proceeds from
the sale of such Fixed Income Investment in
the Short Sale Transaction that are not
included in clause (i) of Xxxxx'x Senior
Advance Amount or clause (i) of Xxxxx'x
Total Advance Amount, determined as of the
date of such sale.
M= The lesser of (a) the Market Value of such
Fixed Income Investment as of the date of
determination and (b) the original price of
such Fixed Income Investment on the date it
was borrowed.
Y= The lesser of (a) the product of (i) the
------
Market Value of such Fixed Income Investment
as of the date of determination, multiplied
by (ii) one minus the Xxxxx'x Advance Rate
applicable to such Fixed Income Investment
as of the date of determination, and (b) (i)
110% of the par value of such Fixed Income
Investment, minus (ii) the Market Value of
such Fixed Income Investment as of the date
of determination; provided, however that in
no event shall Y be less then 0.
(iii) For purposes of this definition:
(A) "Fixed Income Investment" means any Bank Loan or Security
that (i) provides a return in the form of fixed periodic payments and/or a
return of a fixed principal amount at maturity, which return is fixed at the
time of purchase of such security, and (ii) at the time of determination
constitutes indebtedness of the issuer.
B-35
(B) "Non-Fixed Income Investment" means any Security that is
borrowed by the Fund in a Short Sale Transaction that is not a Fixed Income
Investment.
"Short Sale Transaction" means a transaction under which the Fund
borrows a Bank Loan or Security and sells or otherwise disposes of such or
any substantially similar Bank Loan or Security prior to the date on which
the same must be returned to the lender thereof (and commonly known as a
"short sale").
"Specified Foreign Country" means each Designated Country other than
(x) a country whose sovereign debt rating in a non-local currency is rated
"Aaa" by Xxxxx'x or (y) a country whose sovereign debt rating in a non-local
currency is rated "Aa2" or better by Xxxxx'x (and, if rated "Aa2" by Xxxxx'x,
such rating has not been placed on a credit watch with negative implications
by Xxxxx'x) and in the case of(y) which is (a) a member of the European Union
that has adopted the Euro as its lawful currency, (b) Canada, (c) Great
Britain or (d) Australia.
"Structured Product Transaction" means a Hedging and Short Sale
Transaction between the Fund and a counterparty, in which either (i) the Fund
is the counterparty to a CDS purchasing protection from an Eligible
Counterparty with respect to a reference asset or an index that refers to or
is based upon a number of reference assets, or (ii) the Fund is the
counterparty writing or providing the protection with respect to a CDS
relating to a reference asset or an index that refers to or is based upon a
number of reference assets.
"Swap Transaction" means: (i) any rate, basis, debt or equity swap;
(ii) any put, cap, collar or floor agreement; (iii) any rate, basis, debt or
equity futures or forward contract; (iv) any rate, basis, debt or equity
option representing an obligation to buy or sell a security, debt or equity;
and (v) any other similar agreement.
"Total Capitalization" means the sum of (a) Contributed Company Capital
plus aggregate undistributed net income of the Fund (as determined quarterly
in accordance with GAAP and set forth in the Fund's financial statements)
minus net loss of the Fund (determined quarterly in accordance with GAAP and
set forth in the Fund's financial statements), in each case excluding any
reduction in Company Equity as a result of placement or structuring fees and
organizational expenditures, (b) the aggregate outstanding liquidation
preference of the Preferred Shares plus the aggregate liquidation preference
of fully subscribed but unissued Preferred Shares and (c) the aggregate
Outstanding Principal Amount plus the amount, if any, by which the Total
Maximum Commitment exceeds the Outstanding Principal Amount; provided,
however, until June 30, 2007, for purpose of clauses (i) through (vi) of the
Portfolio Limitations, "Total Capitalization" will be the greater of (1) the
amount determined pursuant to clauses (a), (b) and (c) above and (ii) $404.5
million; provided, further, that, for purposes of the definition of Portfolio
Limitations, Total Capitalization shall not exceed $809.0 million.
"Unhedged Foreign Investment" means any portion of any Fund Investment
denominated in a currency other than Dollars which is not protected against
currency fluctuations as a result of Currency Hedging Transactions.
"Unquoted Investments" means Fund Investments other than Cash or Cash
Equivalents for which the Market Value has not been obtained from an Approved
Source.
B-36
"U.S. Government Securities" means Securities that are direct
obligations of, or obligations the timely payment of principal and interest
on which is fully guaranteed by, the United States of America or any agency
or instrumentality of the United States of America the obligations of which
are backed by the full faith and credit of the United States of America and
in the form of conventional bills, bonds and notes. In no event shall U.S.
Government Securities include: (i) any security providing for the payment of
interest only; (ii) any Swap Transaction; or (iii) any obligation on which
all or any portion of the payments thereunder is based, directly or
indirectly, on any Swap Transaction.
"Warrant/Option Intrinsic Value" means, with respect to any
Warrant/Option Investment, the product of (x) an amount by which the current
price (based on the price from an Approved Source or an Approved Investment
Banking Firm) of the applicable Related Equity Securities exceeds the agreed
strike price of the Related Equity Securities with respect to such
Warrant/Option Investment, multiplied by (y) the number of shares of the
Related Equity Securities. For the avoidance of doubt, the Warrant/Option
Intrinsic Value shall always be zero if, in the case of a call Warrant/Option
Investment, the agreed strike price of the applicable Related Equity
Securities for such Warrant/Option Investment is equal to or greater than the
current price of the applicable Related Equity Securities for such
Warrant/Option Investment or, in the case of a put Warrant/Option Investment,
the agreed strike price of the applicable Related Equity Securities for such
Warrant/Option Investment is equal to or less than the current price of the
applicable Related Equity Securities for such Warrant/Option Investment.
"Warrant/Option Investments" means any Fund Investments held by the
Fund that are warrants or call options or similar rights with respect to
Equity Securities (the "Related Equity Securities').
"Yield to Worst" means, in respect of any High Yield Bond or other debt
security, the lesser of (a) the yield-to-maturity and (b) the lowest
yield-to-call calculated on each scheduled call date.
B-37
ANNEX I
XXXXX'X INDUSTRY CLASSIFICATIONS
1. Aerospace and Defense
2. Automobile
3. Banking
4. Beverage, Food and Tobacco
5. Buildings and Real Estate
6. Chemicals, Plastics and Rubber
7. Containers, Packaging and Glass
8. Diversified/Conglomerate Manufacturing
9. Diversified/Conglomerate Service
10. Diversified Natural Resources, Precious Metals and Minerals
11. Ecological
12. Electronics
13. Finance
14. Farming and Agriculture
15. Grocery
16. Healthcare, Education and Childcare
17. Home and Office Furnishings, Housewares and Durable Consumer Products
18. Hotels, Motels, Inns and Gaming
19. Insurance
20. Leisure, Amusement, Motion Pictures
21. Machinery (Non-Agriculture, Non-Construction and Non-Electronic)
22. Mining, Steel, Iron and Nonprecious Metals
23. Oil and Gas
24. Personal and Non-Durable Consumer Products (Manufacturing Only)
25. Personal, Food and Miscellaneous Services
26. Printing and Publishing
27. Cargo Transport
28. Retail Stores
29. Telecommunications
30. Textiles and Leather
31. Personal Transportation
32. Utilities
33. Broadcasting and Entertainment
34. Structured Finance Obligations
B-38
APPROVED DEALERS
X.X. Xxxxxxx & Sons, Inc. Liberty Brokerage
ABN AMRO Bank Libra Securities
Xxxxx & Co. Lincoln Partners
Amroc Investments, LLC X.X. Xxxxxxx, LLC
APS Financial Corporation McDonald & Company
X. Xxxxx & Co. Xxxxxxx Xxxxx
Bank of America Mesirow Financial
Bank of Montreal Xxxxxx Xxxxx & Co., LLC
Barclays Capital Xxxxxx Xxxxxx & Co.
Bear Xxxxxxx Xxxxxx Xxxxxxx
BMO Xxxxxxx Bums Prudential Securities
BNP Paribas Xxxxxxx Xxxxx
BNY Capital RBC Xxxx Xxxxxxxx
Xxxxx Xxxxxxx Xxxx & Company Xxxxxx X. Xxxxx & Co
Cantor Xxxxxxxxxx Xxxx Capital
Xxxxxx Capital Partners Xxxxxxx Xxxxx Barney
Chicago Corporation Xxxxxxxx Xxxxxxxx
CIBC World Markets Scotia Capital Markets
CIT Group Xxxxxxx Companies, The
Citigroup XX Xxxxx
Citimark Partners Societe Generale
Commerzbank Spear, Leeds & Xxxxxxx
Credit Lyonnais SunTrust Xxxxxxxx-Xxxxxxxx Company
Credit Research & Trading Swiss Bank Corporation
CS First Boston TD Securities
Delaware Bay, Inc. The Blackstone Group
Deutsche Bank Xxxx Xxxxx U. S. Bancorp
First Chicago Trust Company UBS Warburg
First Security Xxx Xxxxxx Union Bank of California
Fleet Wachovia Securities
General Electric Wedbush Xxxxxx
Xxxxxxx Xxxxx & Co. Xxxxx Fargo
Hellmond 7 Associates Xxxxxxx Xxxxx & Company
Xxxxxxxx Xxxxx Xxxxxx & Xxxxx
Imperial Capital
Indosuez Capital
ING (Baring Xxxxxx Xxxx)
X.X. Xxxxxx Xxxxx
Xxxxxxxxx & Company, Inc.
Ladenburg Xxxxxxxx
Xxxxxx Freres & Co., LLC
Xxxxxx Brothers
B-39
APPROVED EXCHANGES
Asian Stock Exchanges
Nagoya Stock Exchange,Japan
Osaka Securities Exchange, Japan
Tokyo Stock Exchange, Japan
Stock Exchange of Singapore (SES), Singapore
Singapore International Monetary Exchange Ltd. (SIMEX), Singapore
European Stock Exchanges
Paris Stock Exchange, France
Frankfurt Stock Exchange, Germany
FTSE International (London Stock Exchange), United Kingdom
London International Financial Futures and Options Exchange, United
Kingdom
North American Stock Exchanges
Alberta Stock Exchange, Canada
Montreal Stock Exchange, Canada
Toronto Stock Exchange, Canada
Vancouver Stock Exchange, Canada
Winnipeg Stock Exchange, Canada
AMEX, United States
New York Stock Exchange (NYSE),United States
NASDAQ, United States
Chicago Stock Exchange, United States
Chicago Board Options Exchange, United States
Chicago Board of Trade, United States
Chicago Mercantile Exchange, United States
Pacific Stock Exchange, United States
Philadelphia Stock Exchange, United States
B-40
APPROVED INVESTMENT BANKING FIRMS
X.X. Xxxxxxx & Sons, Inc. Xxxxxx Brothers
ABN AMRO Bank Liberty Brokerage
Xxxxx & Co. Lincoln Partners
Amroc Investments, LLC X.X. Xxxxxxx
Bank of America McDonald & Company
Bank of Montreal Xxxxxxx Xxxxx
Bank One Mesirow Financial
Barclays Capital Xxxxxx Xxxxx & Xxxxxx
Bear Xxxxxxx Xxxxxx Xxxxxxx
BMO Xxxxxxx Xxxxx Prudential Securities
Brown, Gibbons, Lang RBC Xxxx Xxxxxxxx
Xxxxxx Xxxxxxxxxx Xxxxxxx Xxxxx
Xxxxxx Capital Partners Xxxxxx X. Xxxxx & Co
JPMorgan Chase Manhattan Xxxx Capital
Chicago Corporation Solomon Xxxxx Xxxxxx
CIBC World Markets Xxxxxxxx Wertheim
CIT Group Scotia Capital Markets
Citibank Group Xxxxxxx Companies
Citimark Partners XX Xxxxx
Credit Research & Trading Sun Trust Xxxxxxxx-Xxxxxxxx Company
CS First Boston Sutro & Co.
Xxxxxx Xxxxxxxxx TD Securities
Delaware Bay, Inc. The Blackstone Group
Deutsche Bank Xxxx Xxxxx Union Bank of California
EVEREN Securities US Bancorp Libra
First Security Van Kesper US Bancorp Xxxxx Xxxxxxx
Fleet National Bank USB Warburg
Xxxxxxx Sachs & Co. Wachovia Securities
Grantchester Holdings Xxxxxxxxxxx Xxxxxxx Securities Inc.
Greenwich NatWest Wedbush Morgan
Gruntal Xxxxx Fargo
Xxxxxxxxx & Xxxxx Xxxxxxx Xxxxx & Company
Hellmond & Associates
Xxxxxxxx Xxxxx Xxxxxx & Xxxxx
Imperial Capital
ING (Baring Xxxxxx Xxxx)
Xxxxxxxxx & Company, Inc.
JPMorgan Xxxxx
Xxxxxxxxx Xxxxxxxx
Xxxxxx Xxxxxx
X-00
APPROVED PRICING SERVICES
Advantage Data, Inc.
Bloomberg
Bridge Information Systems, Inc.
Data Resources Inc.
Fixed Income Pricing System
Interactive Data Corp
International Securities Market Association
XX Xxxxxx
KDP
Loan Pricing Corp.
Xxxxxxx Xxxxx Securities Pricing Service
Xxxxxx Data Corp.
Reuters (only for pricing Foreign Issuer Securities)
Societe Generale
Standard & Poor's
Telerate
Wood Gundy (only for pricing Securities issued by the Canadian federal or
Canadian provincial governments)
B-42
APPROVED THIRD PARTY APPRAISERS
X.X. Xxxxxxx & Sons, Inc. X.X. Xxxxxx Chase
ABN AMRO Bank Xxxxxxxxx & Company, Inc.
Amroc Investments, LLC KPMG International
Xxxxx & Co. Ladenburg Xxxxxxx
Bank of America Lazard Freres
Barclays Capital Xxxxxx Brothers
Bear Xxxxxxx Liberty Brokerage
BMO Xxxxxxx Xxxxx X.X. Xxxxxxx
Brown, Gibbons, Lang McDonald & Company
Cantor Xxxxxxxxxx Xxxxxxx Xxxxx
Xxxxxx Capital Mesirow Financial
Chicago Corporation Xxxxxx Xxxxx
CIBC World Markets Xxxxxx Xxxxxxx
CIT World Markets PriceWaterhouseCoopers
Citigroup Xxxxxxx Xxxxx
Citimark Partners RBC Xxxx Xxxxxxxx Xxxxxx X. Xxxxx
Credit Research & Trading Xxxxxxxx Xxxxxxxx
XX First Boston Scotia Capital Markets
Xxxxxx Xxxxxxxxx Xxxxxxx Companies
Delaware Bay, Inc. Sun Trust Xxxxxxxx-Xxxxxxxx Company
Deloitte & Touche Sutro & Co.
Deutsche Bank Swiss Bank Corporation
Dresdner Kelinwort Xxxxxxxxxxx XX Securities
Ernst & Young The Blackstone Group
EVEREN Securities UBS Warburg
First Chicago Trust Company Union Bank
First Security Van Kesper US Bancorp Xxxxx Xxxxxxx
Xxxxxxx Xxxxx & Co. US Bancorp Libra
Grantchester Holdings Wachovia Securities
Greenwich NatWest Wedbush Xxxxxx
Xxxxxxxxx & Xxxxx Xxxxx Fargo
Hellmond & Associates Xxxxxxx Xxxxx & Company
Xxxxxxxx Xxxxx Xxxxxx & Xxxxx
Imperial Capital
B-43
APPENDIX C
S&P COLLATERAL VALUATION SCHEDULE
Calculation of S&P Advance Amount
"S&P Advance Rate" means the S&P Senior Advance Rate or the S&P Total
Advance Rate, as applicable.
"S&P Senior Advance Rate" means, for purposes of determining the Senior
Over-Collateralization Test, for each S&P Asset Category, the percentage
specified in the table below opposite such S&P Asset Category; provided that:
(i) so long as the aggregate number of issuers (without duplication)
of the Eligible Investments is equal to or greater than 30 and
the aggregate number of Industries (without duplication) in which
the Eligible Investments are invested is equal to or greater than
9, the percentage specified in the column entitled "S&P Advance
Rate -- 30/9" in the table below opposite such S&P Asset Category;
and
(ii) for all other cases, the percentage specified in the column
entitled "S&P Advance Rate -- Others" in the table below opposite
such S&P Asset Category;
provided that, for purposes of this definition only, each $7.0 million
in Cash or Cash Equivalents held by the Fund or each $7.0 million in
available unfunded amount under the Indenture shall be treated as one
issuer and one Industry; provided, further, that a Related Person of
any Person shall be considered the same "issuer" as such Person unless
such Person is a bankruptcy remote entity; provided, further, that
during the first 365 days following the Closing Date only, the S&P
Senior Advance Rate for each S&P Asset Category may be, at the election
of the Investment Manager, the percentage specified in the column
entitled "S&P Advance Rate --30/9" in the table below opposite such S&P
Asset Category regardless of the aggregate number of issuers of the
Eligible Investments or the aggregate number of Industries in which the
Eligible Investments are invested:
S&P Asset S&P Advance S&P Advance
Category Rate -- 30/9 Rate -- Others
--------------------------------------------------------------------------------
A-1 100.00% 100.00%
A-2 99.00% 99.00%
A-3 96.00% 96.00%
A-4 92.00% 92.00%
A-5 82.20% 82.20%
A-6 68.20% 68.20%
A-7 53.20% 53.20%
B-1 85.99% 81.36%
B-2 81.14% 74.82%
C-1 83.92% 81.84%
C-2 82.86% 80.63%
C-3 81.64% 79.18%
D-1 78.31% 74.90%
D-2 74.92% 70.79%
D-3 71.69% 66.92%
E-1 65.64% 59.02%
C-1
S&P Asset S&P Advance S&P Advance
Category Rate -- 30/9 Rate -- Others
--------------------------------------------------------------------------------
E-2 61.10% 53.58%
E-3 56.59% 48.21%
F-1 50.34% 41.46%
F-2 41.97% 31.64%
F-3 31.26% 18.35%
G-1 76.92% 74.84%
G-2 75.86% 73.63%
G-3 74.64% 72.18%
G-4 71.31% 67.90%
G-5 67.92% 63.79%
G-6 64.69% 59.92%
G-7 58.64% 52.02%
G-8 54.10% 46.58%
G-9 49.59% 41.21%
G-10 24.26% 11.35%
H 35.54% 27.56%
I-1 66.94% 57.54%
I-2 58.57% 47.15%
I-3 24.39% 9.71%
J-1 36.10% 14.52%
J-2 5.90% 8.25%
"S&P Total Advance Rate" means, for purposes of determining the Total
Over-Collateralization Test, for each S&P Asset Category, the percentage
specified in the table below opposite such S&P Asset Category; provided that:
(iii) so long as the aggregate number of issuers (without duplication)
of the Eligible Investments is equal to or greater than 30 and
the aggregate number of Industries (without duplication) in which
the Eligible Investments are invested is equal to or greater than
9, the percentage specified in the column entitled "S&P Advance
Rate -- 30/9" in the table below opposite such S&P Asset Category;
and
(iv) for all other cases, the percentage specified in the column
entitled "S&P Advance Rate -- Others" in the table below opposite
such S&P Asset Category;
provided that, for purposes of this definition only, each $7.0 million
in Cash or Cash Equivalents held by the Fund or each $7.0 million in
available unfunded amount under the Indenture shall be treated as one
issuer and one Industry; provided, further, that a Related Person of
any Person shall be considered the same "issuer" as such Person unless
such Person is a bankruptcy remote entity; provided, further, that
during the first 365 days following the Closing Date only, the S&P
Total Advance Rate for each S&P Asset Category may be, at the election
of the Investment Manager, the percentage specified in the column
entitled "S&P Advance Rate --30/9" in the table below opposite such S&P
Asset Category regardless of the aggregate number of issuers of the
Eligible Investments or the aggregate number of Industries in which the
Eligible Investments are invested:
C-2
S&P Asset S&P Advance S&P Advance
Category Rate -- 30/9 Rate -- Others
--------------------------------------------------------------------------------
A-1 100.00% 100.00%
A-2 98.00% 99.00%
A-3 97.00% 97.00%
A-4 92.00% 94.00%
A-5 84.60% 84.60%
A-6 72.40% 72.40%
A-7 59.40% 59.40%
B-1 88.42% 84.60%
B-2 84.41% 79.18%
C-1 86.75% 85.02%
C-2 85.86% 84.03%
C-3 84.86% 82.83%
D-1 82.11% 79.30%
D-2 79.31% 75.90%
D-3 76.64% 72.71%
E-1 71.62% 66.16%
E-2 67.86% 61.67%
E-3 64.14% 57.23%
F-1 58.91% 51.59%
F-2 51.99% 43.46%
F-3 43.10% 32.45%
G-1 79.75% 78.02%
G-2 78.86% 77.03%
G-3 77.86% 75.83%
G-4 75.11% 72.30%
G-5 72.31% 68.90%
G-6 69.64% 65.71%
G-7 64.62% 59.16%
G-8 60.86% 54.67%
G-9 57.14% 50.23%
G-10 36.10% 25.45%
H 49.00% 38.00%
I-1 72.63% 64.87%
I-2 65.68% 56.26%
I-3 37.44% 25.32%
J-1 47.45% 29.65%
J-2 22.90% 16.50%
"S&P Advance Amount" means the S&P Senior Advance Amount or the S&P
Total Advance Amount, as applicable.
Notwithstanding the foregoing or the definition of S&P Senior Advance
Amount or S&P Total Advance Amount, for purposes of determining the S&P
Advance Amount,
(i) the Market Value of any Unhedged Foreign Investment shall be 95%
of the Market Value thereof otherwise determined in accordance
with the above procedures; provided that, if the Foreign Issuer
of such Unhedged Foreign Investment is from a country whose
sovereign debt rating in a non-local currency is not assigned an
S&P OC Test Rating of "AA" or better, the Market Value of such
Unhedged Foreign Investment shall be 85% of the Market Value
thereof otherwise determined in accordance with the above
procedures;
C-3
(ii) the percentage applicable above to Cash in a currency other than
Dollars shall be (a) with respect to Cash in a currency other
than Dollars, held for a period of five (5) Business Days or
less, 95% (and not 100%) and (b) with respect to Cash in a
currency other than Dollars, held for a period of more than five
(5) Business Days, 0%, unless in either case such Cash is
protected against currency fluctuations as a result of Currency
Hedging Transactions, in which case, the percentage applicable
shall be 100%;
(iii) the Market Value of any Preferred Stock or Structured Product
Transaction shall be 95% of the Market Value thereof otherwise
determined in accordance with the above procedures and, in the
case of any Structured Product Transaction in which the Fund
purchases a CDS, the full amount of the premiums to be paid by
the Fund for the duration of such CDS will be deducted from the
Market Value of such Structured Product Transaction;
(iv) the Market Value of any CDO Debt Security that is not assigned an
S&P OC Test Rating of "CCC" or better shall be zero; and
(v) the Market Value of any Non-Cash Pay Instrument that is not a
U.S. Government Security shall be 95% of the Market Value thereof
otherwise determined in accordance with the above procedures.
For purposes of the S&P Advance Amount, the Fund shall assign each Fund
Investment to one of the following categories (each, an "S&P Asset Category")
commencing upon the initial acquisition thereof (and, for purposes of this
categorization, the Market Value Price of a Fund Investment trading at par is
equal to $1.00):
"Asset Category A-1 Investments" means (a) Cash and (b) Cash
Equivalents described in clause (vi) of the definition of such term and (c)
Cash Equivalents described in clauses (i), (ii), (iii) or (iv) of the
definition of such term that mature on the Business Day next following the
date of acquisition thereof or are payable on demand of the holder or within
one Business Day of demand.
"Asset Category A-2 Investments" means Cash Equivalents (other than
Cash in U.S. dollars, U.S. Government Securities and Cash Equivalents
described in clauses (b) or (c) of the definition of Asset Category A-1
Investments) and U.S. Government Securities with maturities of less than or
equal to 183 days.
"Asset Category A-3 Investments" means U.S. Government Securities with
final maturities more than 183 days but less than or equal to two (2) years.
"Asset Category A-4 Investments" means U.S. Government Securities with
final maturities more than two (2) years but less than or equal to five (5)
years.
"Asset Category A-5 Investments" means U.S. Government Securities with
final maturities more than five (5) years but less than or equal to ten (10)
years.
C-4
"Asset Category A-6 Investments" means U.S. Government Securities with
final maturities more than ten (10) years but less than or equal to twenty
(20) years.
"Asset Category A-7 Investments" means U.S. Government Securities with
final maturities more than twenty (20) years but less than or equal to thirty
(30) years.
"Asset Category B-1 Investments" means Bank Loans which (i) are
Performing and (ii) have a Market Value Price greater than or equal to $0.90.
"Asset Category B-2 Investments" means Bank Loans which (i) are
Performing and (ii) have a Market Value Price greater than or equal to $0.85
but less than $0.90.
"Asset Category C-1 Investments" means High Yield Bonds and Mezzanine
Investments which (i) are Performing and (ii) have an S&P OC Test Rating of
"BBB+" or better.
"Asset Category C-2 Investments" means High Yield Bonds and Mezzanine
Investments which (x) (i) are Performing and (ii) have an S&P OC Test Rating
of "BBB" or (y) Securities (other than securities issued by a Foreign Issuer)
which are fully defeased.
"Asset Category C-3 Investments" means High Yield Bonds and Mezzanine
Investments which (i) are Performing and (ii) have an S&P OC Test Rating of
"BBB-".
"Asset Category D-1 Investments" means High Yield Bonds (other than
convertible Securities) and Mezzanine Investments which (i) are Performing
and (ii) have an S&P OC Test Rating of "BB+".
"Asset Category D-2 Investments" means High Yield Bonds (other than
convertible Securities) and Mezzanine Investments which (i) are Performing
and (ii) have an S&P OC Test Rating of "BB".
"Asset Category D-3 Investments" means High Yield Bonds (other than
convertible Securities) and Mezzanine Investments which (i) are Performing
and (ii) have an S&P OC Test Rating of "BB-".
"Asset Category E-1 Investments" means High Yield Bonds (other than
convertible Securities) and Mezzanine Investments which (i) are Performing
and (ii) have an S&P OC Test Rating of "B+".
"Asset Category E-2 Investments" means High Yield Bonds (other than
convertible Securities) and Mezzanine Investments which (i) are Performing
and (ii) have an S&P OC Test Rating of "B".
"Asset Category E-3 Investments" means High Yield Bonds (other than
convertible Securities) and Mezzanine Investments which (i) are Performing
and (ii) have an S&P OC Test Rating of "B-".
C-5
"Asset Category F-1 Investments" means High Yield Bonds (other than
convertible Securities) and Mezzanine Investments which (i) are Performing
and (ii) have an S&P OC Test Rating of "CCC+".
"Asset Category F-2 Investments" means High Yield Bonds (other than
convertible Securities) and Mezzanine Investments which (a) are Performing
and (b) have an S&P OC Test Rating of "CCC".
"Asset Category F-3 Investments" means High Yield Bonds (other than
convertible Securities) and Mezzanine Investments which (i) are Performing
and (ii) have an S&P OC Test Rating of "CCC-" or lower or are not rated.
"Asset Category G-1 Investments" means convertible bonds which (i) are
Performing and (ii) have an S&P OC Test Rating of at least "BBB+".
"Asset Category G-2 Investments" means convertible bonds which (i) are
Performing and (ii) have an S&P OC Test Rating of "BBB".
"Asset Category G-3 Investments" means convertible bonds which (i) are
Performing and (ii) have an S&P OC Test Rating of "BBB-".
"Asset Category G-4 Investments" means convertible bonds which (i) are
Performing and (ii) have an S&P OC Test Rating of "BB+".
"Asset Category G-5 Investments" means convertible bonds which (i) are
Performing and (ii) have an S&P OC Test Rating of "BB".
"Asset Category G-6 Investments" means convertible bonds which (i) are
Performing and (ii) have an S&P OC Test Rating of "BB-".
"Asset Category G-7 Investments" means convertible bonds which (i) are
Performing and (ii) have an S&P OC Test Rating of "B+".
"Asset Category G-8 Investments" means convertible bonds which (i) are
Performing and (ii) have an S&P OC Test Rating of "B".
"Asset Category G-9 Investments" means convertible bonds which (i) are
Performing and (ii) have an S&P OC Test Rating of "B-".
"Asset Category G-10 Investments" means convertible bonds (not covered
by Asset Categories G-1 through 0-9) which are Performing.
"Asset Category H Investments" means Preferred Stock which is
Performing.
"Asset Category I-1 Investments" means Bank Loans which (i) are
non-Performing and (ii) have a Market Value Price equal to or greater than
$0.85.
C-6
"Asset Category I-2 Investments" means (i) Bank Loans which have a
Market Value Price less than $0.85 and (ii) Bank Loans described in Asset
Categories X-0, X-0 or I-1 above that have an S&P OC Test Rating below "B-"
(including Bank Loans with an S&P OC Test Rating of "NR") to the extent that
the aggregate Market Value of such Bank Loans is in excess of 15% of Total
Capitalization; (iii) Bank Loans that would otherwise fall in Asset
Categories X-0, X-0 or I-1 above that are originated under a credit agreement
that provided for aggregate credit facilities at origination of less than
$150,000,000 to the extent that the aggregate Market Value of such Bank Loans
is in excess of 15% of Total Capitalization; and (iv) Bank Loans that are
unsecured or subordinated.
"Asset Category I-3 Investments" means non-Performing High Yield Bonds,
Mezzanine Investments, convertible bonds and Preferred Stock.
"Asset Category J-1 Investments" means Equity Securities which are not
Private Equity Securities.
"Asset Category J-2 Investments" means Fund Investments in Bank Loans,
High Yield Bonds, Mezzanine Investments, Private Equity Securities or CDO
Debt Securities not otherwise described in any of the preceding Asset
Categories and Structured Product Transactions (other than Fully
Collateralized Structured Product Transactions).
Rating Procedures. References herein to any rating by Xxxxx'x or S&P
shall include shadow ratings and shall also be deemed to include an
equivalent rating in a successor rating category of Xxxxx'x or S&P, as the
case may be, or if neither Xxxxx'x nor S&P is in the business of rating
securities, an equivalent rating from another Rating Agency.
Notwithstanding any other provision contained in this Schedule:
(i) with respect to Fund Investments that are Preferred Stock, if
such Preferred Stock does not have a public rating by S&P, then
such Preferred Stock shall be assigned a rating for purposes
hereof that is (a) two rating sub-categories below the S&P OC
Test Rating of the issuer if rated above "BB+" and (b) one rating
category (i.e., three rating sub-categories) below the S&P OC
Test Rating if the issuer is rated below "BBB-";
(ii) Fund Investments that are CDO Debt Securities will be assigned to
an Asset Category for High Yield Bonds using a rating that is (i)
one rating category (i.e., three rating subcategories) below the
S&P rating, if such CDO Debt Security is rated by S&P, and (ii)
two rating categories (i.e., six rating subcategories) below the
actual public Xxxxx'x rating (and not the rating assigned
pursuant to the S&P OC Test Rating), if such CDO Debt Security is
not rated by S&P but is publicly rated by Xxxxx'x;
(iii) Fund Investments that are Busted Convertible Bonds will be
assigned to an S&P Asset Category into which such Fund
Investments would otherwise fall if they were not convertible
securities provided that the Market Value of any Busted
Convertible Bonds shall be 95% of the Market Value thereof
otherwise determined in accordance with valuation procedures set
forth herein;
C-7
(iv) the determination of the S&P Advance Rate applicable to a
Structured Product Transaction shall be subject to the
following: (A) each Fully Collateralized Structured Product
Transaction shall be deemed to fall into the S&P Asset Category
of its reference obligation; (B) each Single Asset Structured
Product Transaction (other than a Fully Collateralized Structured
Product Transaction) in which the reference obligation has an S&P
OC Test Rating of "BBB-" or better shall be deemed to fall into
the S&P Asset Category of its reference obligation and shall have
an S&P Advance Rate equal to 95% of the S&P Advance Rate
applicable to such reference obligation; (C) each Single Asset
Structured Product Transaction (other than a Fully Collateralized
Structured Product Transaction) in which the reference obligation
has an S&P OC Test Rating of less than "BBB-" shall be deemed to
fall into the S&P Asset Category of its reference obligation and
shall have an S&P Advance Rate equal to 90% of the S&P Advance
Rate applicable to such reference obligation; (D) each Indexed
Structured Product Transaction (other than a Fully Collateralized
Structured Product Transaction) comprised primarily of reference
obligations that have an S&P OC Test Rating of "BBB-" or better
shall be deemed to fall into the S&P Asset Category for High
Yield Bonds having an S&P OC Test Rating of "BBB-" and shall have
an S&P Advance Rate equal to 95% of the S&P Advance Rate
applicable to High Yield Bonds having such a rating; and (E) each
Indexed Structured Product Transaction (other than a Fully
Collateralized Structured Product Transaction) comprised
primarily of reference obligations that have an S&P OC Test
Rating of less than "BBB-" shall be deemed to fall into the S&P
Asset Category for High Yield Bonds having an S&P OC Test Rating
of "CCC" and shall have an S&P Advance Rate equal to 90% of the
S&P Advance Rate applicable to High Yield Bonds having such a
rating.
(v) for the purpose of determining the S&P Advance Rate applicable to
Fund Investments that are Hedging and Short Sale Transactions, at
any time during the 60-day time period or 30-day time period, as
the case may be, described in clause (xvii) of the definition of
Excluded Investments below, the S&P Advance Rate will be 90% of
the S&P Advance Rate calculated for such Fund Investment pursuant
to the S&P Advance Rate table in the definition of S&P Advance
Rate above;
(vi) for the purpose of determining the S&P Advance Rate applicable to
Fund Investments in Bank Loan Participations, at any time during
the 60-day time period described in clause (viii) of the
definition of Excluded Investments below, the S&P Advance Rate
will be 90% of the S&P Advance Rate calculated for such Fund
Investment pursuant to the S&P Advance Rate table in the
definition of S&P Advance Rate above;
(vii) for the purpose of determining the S&P Advance Rate applicable to
Fund Investments in any Foreign Issuer, at any time during the
180-day time period described in clause (ix) of the definition of
Excluded Investments below, the S&P Advance Rate will be 85% of
the S&P Advance Rate calculated for such Fund
C-8
Investment pursuant to the S&P Advance Rate table in the definition
of S&P Advance Rate above;
(viii) for the purpose of determining the S&P Advance Rate
applicable to Fund Investments (other than Asset Category 1-3
Investments) that are not priced by an Approved Source, the S&P
OC Test Rating of such Fund Investments will be one rating
category (i.e., three rating sub-categories) below the S&P OC
Test Rating determined without giving effect to this clause
(viii); and
(ix) Fund Investments that are Asset-Backed Securities will be
assigned to an S&P Asset Category for High Yield Bonds using a
rating that is (i) one rating category (i.e., three rating
sub-categories) below the S&P rating if such Asset-Backed
Security is rated by S&P, and (ii) two rating categories (i.e.,
six rating sub-categories) below the actual public Xxxxx'x rating
(and not the rating assigned pursuant to the S&P OC Test Rating),
if such Asset-Backed Security is not rated by S&P but is publicly
rated by Xxxxx'x.
"S&P Senior Advance Amount", as of any date of determination under the
Senior Over-Collateralization Test, means an amount equal to the sum of (i)
the aggregate for all Eligible Investments (other than Warrant/Option
Investments) determined for each such Eligible Investment by multiplying (1)
the Market Value (determined as described below) of such Eligible Investment
(determined as described below) by (2) the S&P Senior Advance Rate for the
S&P Asset Category applicable to such Eligible Investment under the Senior
Over-Collateralization Test, (ii) the aggregate Secured Hedging Advance
Amounts as of such date, (iii) the Defensive Hedge Advance Amount as of such
date, (iv) the S&P Warrant/Option Advance Amount as of such date, (v) the S&P
Net Accrual Amount as of such date, and (vi) the Aggregate Short Sale Advance
Amount as of such date.
"S&P Total Advance Amount", as of any date of determination under the
Total Over-Collateralization Test, means an amount equal to the sum of (i)
the aggregate for all Eligible Investments (other than Warrant/Option
Investments) determined for each such Eligible Investment by multiplying (1)
the Market Value (determined as described below) of such Eligible Investment
(determined as described below) by (2) the S&P Total Advance Rate for the S&P
Asset Category applicable to such Eligible Investment under the Total
Over-Collateralization Test, (ii) the aggregate Secured Hedging Advance
Amounts as of such date, (iii) the Defensive Hedge Advance Amount as of such
date, (iv) the S&P Warrant/Option Advance Amount as of such date, (v) the S&P
Net Accrual Amount as of such date, and (vi) the Aggregate Short Sale Advance
Amount as of such date.
Determination of Fund Investments Constituting Eligible Investments
"Eligible Investments" means, at any date, all Fund Investments in the
Collateral on such date other than Excluded Investments.
"Excluded Investments" means (without duplication):
(i) Fund Investments to the extent that they are (A) not subject to a
perfected security interest (subject in priority only to any
Liens permitted under the Indenture) in
C-9
favor of the Collateral Agent for its benefit and the benefit of the
other Secured Parties (as defined in the Pledge and Intercreditor
Agreement) or (B) subject to any Liens other than Permitted Liens
(the terms "Liens" and "Permitted Liens" as used in this Appendix
have the meanings ascribed thereto under the Indenture); provided,
however, that Liens on Cash or other Fund Investments held in a
Short Sale Customer Account or Short Sale Broker Account shall not
be Permitted Liens for purposes of this definition and Cash or Fund
Investments held in any Short Sale Customer Account or Short Sale
Broker Account shall be Excluded Investments;
(ii) Excess Fund Investments;
(iii) Fund Investments that have been borrowed or lent;
(iv) Fund Investments denominated in any currency (A) that is not a
currency freely convertible into Dollars or (B) that is subject
to any currency exchange restrictions;
(v) Fund Investments denominated in any currency other than Dollars
or Eligible Foreign Currencies, unless at the time of purchase of
such Fund Investments denominated in any currency other than
Dollars or Eligible Foreign Currencies, at least 95% of the
Market Value of such Fund Investments is protected against
currency fluctuations pursuant to Currency Hedging Transactions;
(vi) Fund Investments in CDO Debt Securities unless the applicable
agreements governing such CDO Debt Securities deny borrowing base
credit to the issuer of such CDO Debt Securities to the extent
that more than 7.5% of the total funded debt and equity
capitalization of the issuer of such CDO Debt Securities is
invested in Foreign Issuers located in Ineligible Countries
(other than investments which are fully guaranteed by a guarantor
located in an Eligible Country);
(vii) Fund Investments in CDO Debt Securities unless the applicable
agreements governing such CDO Debt Securities deny borrowing base
credit to the issuer of such CDO Debt Securities to the extent
that more than 15% of the total funded debt and contributed
equity capitalization of the issuer of such CDO Debt Securities
would be invested in Foreign Issuers located in countries whose
unsupported sovereign non-local currency debt obligations are not
assigned a rating of "AA-" or better from S&P (other than
investments which are fully guaranteed by an entity located in a
country whose unsupported sovereign non-local currency debt
obligations are assigned a rating of "AA-" or better by S&P);
(viii) (A) Fund Investments in any Bank Loan Participation held by
the Fund for more than 60 consecutive days during any period
while any bank or other institution that sold such Bank Loan
Participation has a long-term debt-rating of below an S&P OC Test
Rating of "A-" (unless the obligation of such bank or other
institution are guaranteed by an entity whose long-term debt
obligations are assigned an S&P OC Test Rating of "A-" or
better); and (B) Fund Investments in
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any Bank Loan Participation if at the date of acquisition of such
Bank Loan Participation the bank or other institution that sold such
Bank Loan Participation had a long-term debt rating of below an S&P
OC Test Rating of "A-" (unless the obligations of such bank or other
institution are guaranteed by an entity whose long-term debt
obligations are assigned an S&P OC Test Rating of "A-" or better);
(ix) Fund Investments in any Foreign Issuer from an Ineligible Country
(unless the applicable Fund Investment is fully guaranteed by a
guarantor located in a currently Eligible Country), provided that
if a country becomes an Ineligible Country after the Fund has
invested in a Fund Investment relating to such country (and such
Fund Investment does not have a guarantor located in a currently
Eligible Country), such Fund Investment will not be subject to
this clause (ix) until such country has been an Ineligible
Country for 180 consecutive days;
(xi) Fund Investments in CDO Debt Securities issued by an issuer for
which the Investment Manager or any Affiliate of the Investment
Manager acts as the collateral manager or investment manager or
in any comparable capacity;
(xii) Fund Investments in securities issued by the Fund;
(xiii) Fund Investments in Asset-Backed Securities which are
neither rated by S&P nor publicly rated by Xxxxx'x;
(xiv) Fund Investments in Bank Loans that obligate the Fund, whether
currently or upon the happening of any contingency, to make any
revolving extensions of credit to a borrower;
(xv) Fund Investments in any Hedging and Short Sale Transaction held
by the Fund for more than (i) 60 consecutive days during any
period while the counterparty to such Hedging and Short Sale
Transaction has a long-term debt-rating of lower than "A-" by S&P
(unless the obligations of such counterparty are guaranteed by an
entity whose long-term debt rating is "A-" or higher by S&P) or
has a short-term debt-rating of "A-2" by S&P (unless the
obligations of such counterparty are guaranteed by an entity
whose short-term debt rating is "A-1" or higher by S&P) or (ii)
30 consecutive days during any period while the counterparty to
such Hedging and Short Sale Transaction has a short-term
debt-rating of lower than "A-2" by S&P (unless the obligations of
such counterparty are guaranteed by an entity whose short-term
debt rating is "A-1" or higher by S&P);
(xvi) Fund Investments that do not fall into any S&P Asset Category as
provided herein;
(xvii) Fund Investments in CDO Equity Securities; and
(xviii) Fund Investments in catastrophe bonds and any other
non-credit risk securities.
C-11
Excluded Investments are excluded from the calculation of the Market
Value of the Collateral for purposes of the S&P Valuation Procedures;
however, the Collateral may include Excluded Investments.
Application of Portfolio Limitations
"Portfolio Limitations" means, at any applicable date of determination
(determined without duplication):
(i) the aggregate Market Value of Fund Investments in any single
issuer in excess of 5% of Total Capitalization, provided,
however, that the foregoing 5% limit will be increased up to a
maximum of 7.5% (not to include any Non-Cash Pay Instruments, any
Non-Performing Instruments or any Fund Investments (other than
Equity Securities) that are rated CCC or lower by S&P) for each
of any three issuers;
(ii) the aggregate Market Value of Fund Investments in issuers in any
single Industry in excess of 25% of Total Capitalization;
(iii) the aggregate Market Value of Fund Investments in all Semi-Liquid
Investments, Illiquid Investments and Non-Cash Pay Instruments in
excess of 45% of Total Capitalization;
(iv) the aggregate Market Value of Fund Investments in all Illiquid
Investments in excess of 20% of Total Capitalization;
(v) the aggregate Market Value of Fund Investments consisting of (a)
Bank Loan Participations in excess of 20% of Total
Capitalization, (b) Bank Loan Participations wherein the
participating entities are rated "A-" or lower by S&P in excess
of 5% (or such greater percentage approved by the Insurer and
with respect to which Rating Agency Condition with respect to S&P
has been satisfied) of Total Capitalization, (c) Bank Loan
Participations wherein the total exposure to any one
participating entity is in excess of 5% (or such greater
percentage approved by the Insurer and with respect to which
Rating Agency Condition with respect to S&P has been satisfied)
of Total Capitalization; (d) Hedging and Short Sale Transactions
wherein the counterparties have a long term debt rating of lower
than "A-" by S&P (unless the obligations of such counterparty are
guaranteed by an entity whose long term debt rating is "A-" or
higher by S&P) in excess of 7.5% (or such greater percentage
approved by the Insurer and with respect to which Rating Agency
Condition with respect to S&P has been satisfied) of Total
Capitalization; (e) Hedging and Short Sale Transactions wherein
the total exposure to any one counterparty is in excess of 7.5%
(or such greater percentage approved by the Insurer and with
respect to which Rating Agency Condition with respect to S&P has
been satisfied) of Total Capitalization; and (1) Hedging and
Short Sale Transactions of the kind described in clause (iv) of
the definition of "Hedging and Short Sale Transactions" wherein
the counterparties have a short term debt rating of "A-l" by S&P
(unless the obligations of such counterparty are
C-12
guaranteed by an entity whose short term debt rating is higher than
"A-1" by S&P) in excess of 25% (or such greater percentage approved
by the Insurer and with respect to which Rating Agency Condition
with respect to S&P has been satisfied) of Total Capitalization;
(vi) the aggregate Market Value of Fund Investments (calculated using
the absolute value of each Fund Investment) consisting of
Structured Product Transactions in excess of 5% of Total
Capitalization;
(vii) the aggregate Market Value of Fund Investments consisting of
Non-Performing Instruments in excess of 20% of Total
Capitalization;
(viii) the aggregate Market Value of Fund Investments consisting
of convertible securities in excess of 25% of Total
Capitalization;
(ix) the aggregate Market Value of Fund Investments consisting of CDO
Debt Securities in excess of 5% of Total Capitalization;
(x) the aggregate Market Value of Fund Investments that are Preferred
Stock in excess of 15% of Total Capitalization;
(xi) the aggregate Market Value of Fund Investments consisting of (A)
Private Equity Securities of any single issuer in excess of 3% of
Total Capitalization; provided that the foregoing 3% limit will
be increased, up to a maximum of 4%, for each of any two issuers
of Private Equity Securities; provided, further, that the
foregoing 4% limit will be increased, up to a maximum of 5%, for
one of such two issuers of Private Equity Securities; and (B)
Private Equity Securities in excess of 10% of Total
Capitalization;
(xii) the aggregate Market Value of Fund Investments that are
Asset-Backed Securities in excess of 5% of Total Capitalization;
(xiii) the aggregate Market Value of Fund Investments that are
Dollar-denominated investments (A) in Foreign Issuers domiciled
in Designated Countries in excess of 10% of Total Capitalization,
and (B) in any single Foreign Issuer domiciled in a Designated
Country in excess of 5% of Total Capitalization;
(xiv) the aggregate Market Value of Fund Investments that are
non-Dollar-denominated investments in excess of 10% of Total
Capitalization;
C-13
(xv) the aggregate Market Value of Fund Investments that are Equity
Securities in excess of 20% of Total Capitalization;
(xvi) the aggregate Market Value of Fund Investments that are
(determined without duplication) Non-Performing Instruments,
Equity Securities and Fund Investments that are rated "CCC" or
lower by S&P in excess of 50% of Total Capitalization;
(xvii) the aggregate Market Value of Unhedged Foreign Investments
in excess of 5% of Total Capitalization.
Notwithstanding the foregoing:
(A) in the event that a Fund Investment is reclassified after its
acquisition by the Fund, for purposes of calculating the S&P
Advance Amount, the exclusions described above in clauses (iii)
and (iv), that would otherwise become applicable following such
reclassification will not apply to assets owned by the Fund (or
which the Fund had committed to purchase) on or prior to the date
of such reclassification until 30 days after such
reclassification but shall apply (on a pro forma basis giving
effect to such reclassification for all Fund Investments) to any
asset acquired by the Fund after the date of such
reclassification which the Fund had not committed to purchase on
or prior to the date of such reclassification;
(B) for purposes of clause (i) above, a Related Person of any Person
shall be considered the same "issuer" as such Person unless such
Person is a bankruptcy remote entity; and
(C) under no circumstances shall any Cash, Cash Equivalent or U.S.
Government Securities be excluded from Eligible Investments based
upon the Portfolio Limitations set forth above.
Determination of the Market Value of Fund Investments
The Fund shall calculate the Market Value (i) of each Fund Investment
that is not an Unquoted Investment on a weekly basis as of the Determination
Date for each calendar week and (ii) of each Fund Investment that is an
Unquoted Investment as set forth in the definition of "Market Value" below.
"Market Value" means
(a) with respect to Cash, the current balance thereof;
(b) with respect to any Cash Equivalent (x) of the type
described in clause (ii) of the definition thereof (excluding banker's
acceptances), the current balance thereof, (y) of a type described in clause
(iii) of the definition thereof (and banker's acceptances described in clause
(ii) thereof), the original purchase price thereof, and (z) of a type
described in clause (v) of the definition thereof, the aggregate current net
value thereof;
(c) with respect to any Fund Investment (other than Unquoted
Investments, Structured Product Transactions, Cash and Cash Equivalents
described in clause (b) above) at any date, an amount determined by the Fund
that is not in excess of the product of (x) the Market Value Price for each
unit of such Fund Investment on such date (and, with respect to any
Securities which have an amortizing principal amount, the then current factor
related thereto, if applicable) times (y) the number of units of such Fund
Investment held by the Fund; and
C-14
(d) with respect to any Fund Investment other than Cash and
Cash Equivalents which is an Unquoted Investment at any date, the value
thereof most recently determined by the Fund in accordance with the
procedures described below;
provided, however, (x) for purposes of making such determinations,
(1) the frequency of determination of the Market Value of
any Illiquid Investment will be at least quarterly as of each Quarterly Date
and, except as otherwise provided in the following clauses, the frequency of
determination of the Market Value of any Semi-Liquid Investment will be at
least monthly as of the last Business Day of each calendar month;
(2) for Semi-Liquid Investment positions with a Market
Value of $35 million or greater but less than $70 million (and all positions
subject to this clause (x)(2) by reason of clause (y) below), a quotation
from an Approved Investment Banking Firm or an Approved Third-Party Appraisal
at least monthly;
(3) for Semi-Liquid Investment positions with a Market
Value of $70 million or greater, a quotation from an Approved Investment
Banking Firm or an Approved Third-Party Appraisal at least monthly and an
Approved Third-Party Appraisal at least quarterly; and
(4) for Illiquid Investment positions with a Market Value
of $35 million or greater (and all positions subject to this clause (x)(4) by
reason of clause (y) below) an Approved Third-Party Appraisal at least
quarterly;
(y) notwithstanding the foregoing, the aggregate Market Value of all
Unquoted Investment positions whose value is determined by the
Fund without relying on the methodology set forth in subclauses
(2), (3) or (4) of clause (x) above (it being understood that
such methodology may be used for Unquoted Investments with Market
Values below the thresholds set forth in such subclauses) may not
exceed 5% of Total Capitalization, and all such Unquoted
Investment positions (i.e., those in excess of such limit and as
selected by the Fund) will be subject to subclauses (2) or (4) of
clause (x) above depending upon whether any such Unquoted
Investment is a Semi-Liquid Investment or an Illiquid Investment;
and
(z) in no event will the Market Value of any Unquoted Investment
exceed the lesser of (1) the most recently obtained quotation or
appraisal obtained as provided in clauses (d)(x) or (d)(y) above
and (2) the value most recently determined by the Fund.
Notwithstanding the foregoing, if the Investment Manager shall on any
day actually determine that (i) the Market Value of any Semi-Liquid
Investment determined as of the last Business Day of the preceding calendar
month or (ii) the Market Value of any Illiquid Investment determined as of
the last Quarterly Date has decreased since such last Business Day of the
preceding calendar month or last Quarterly Date, the Market Value of such
Fund Investment shall be such decreased value, and if the Investment Manager
subsequently actually determines on any day prior to the next determination
of its Market Value that the value of such Fund Investment has further
decreased, the Market Value of such Fund Investment shall be such
C-15
decreased value. If, on the other hand, the Investment Manager shall
subsequently actually determine that the value of such Fund Investment has
increased, the Market Value of such Fund Investment shall be such increased
value; provided that in no event shall the Market Value of any such Fund
Investment whose value is so increased be greater than the Market Value of such
Fund Investment previously determined as of the last Business Day of the
preceding calendar month (in the case of Semi-Liquid Investments) or as of the
last Quarterly Date (in the case of Illiquid Investments). It is expressly
understood that the Investment Manager shall have no duty, in the absence of
actual knowledge on its part, to implement any value changes described in this
paragraph.
Prior to the first available quotation or appraisal of any Unquoted
Investment obtained as provided above, the Market Value of such Unquoted
Investment will be the lower of the value thereof as most recently determined
by the Fund and cost. In the event that the Fund elects in its discretion to
book, for purposes of its own financial accounting records, any Unquoted
Investment at a value lower than that which would require a valuation by an
Approved Investment Banking Firm or an Approved Third-Party Appraisal, as the
case may be, then the Market Value of such Unquoted Investment shall be such
lower value used by the Fund for purposes of its own financial accounting
records.
Notwithstanding the foregoing, the Market Value of any Structured
Product Transaction at any date will be equal to the net settlement amount,
if any, that the Fund would receive if such Structured Product Transaction
was terminated or liquidated early in accordance with its terms on such date,
as determined by the Fund.
The Market Value of any CDO Debt Security will be based upon a
quotation from an Approved Investment Banking Firm or an Approved Third-Party
Appraisal, as applicable.
The Market Value of any Defensive Hedge Transaction where the related
Fund Investment is part of the Collateral shall be the amount, as determined
by the Fund, by which the Protected Market Value with respect to such Fund
Investment exceeds the product of the Market Value of the Fund Investment
(or, if less, the portion thereof that is an Eligible Investment), as
otherwise determined in accordance with these procedures, and the applicable
Advance Rate for such Fund Investment. The Market Value of any Defensive
Hedge Transaction where the Fund Investment is not part of the Collateral
shall be the Protected Market Value with respect to such Fund Investment.
For purposes of the definition of Market Value, (i) accrued interest on
any interest-bearing Eligible Investment shall be excluded in the
determination of Market Value by the party making such determination and (ii)
the Market Value of all non-Dollar Fund Investments shall be converted into
Dollars at the then current spot rate (after taking into account the effect
of any Currency Hedging Transaction with respect to such Fund Investment).
"Market Value Price" means with respect to any Fund Investment (other
than Cash, Structured Product Transactions and Unquoted Investments) at any
date, the price for each unit of such Fund Investment at such date obtained
from an Approved Source, including any of:
C-16
(a) in the case of an Approved Exchange, the closing price as
of the most recent Determination Date on such Approved Exchange, or if such
Approved Exchange is NASDAQ, the closing bid price at such date (or if such
Approved Exchange is closed for business at such date, then the most recent
available closing price or closing bid price, as the case may be), provided
that bonds may not be priced based upon the price on an Approved Exchange
pursuant to this clause (a), (i) prior to the termination (without
replacement) of the Indenture, without the consent of the Trustee and the
Insurer and (ii) after termination (without replacement) of the Indenture,
without the consent of the Insurer;
(b) the lower of the bid prices at such date quoted by two
Approved Dealers;
(c) the average of the bid prices at such date quoted by three
Approved Dealers;
(d) the average of the bid prices at such date quoted by two
Approved Dealers; provided that the Market Value Price of any Fund Investment
may be determined pursuant to this clause (d) only if the following four
conditions are met: (1) such Fund Investment is a Special Situations
Investment, (2) using the lower bid price of the two bid prices for such Fund
Investment, the Over-Collateralization Tests would be satisfied, (3) other
than the Fund's initial determination of the Market Value Price for such Fund
Investment, the lower bid price of such Fund Investment must be greater than
85% of, and less than 115% of, the immediately previous lowest bid price
obtained by the Fund from the Approved Dealers for such Fund Investment, and
(4) the aggregate Market Value of Fund Investments the Market Value Prices of
which are determined by applying this clause (d) shall not exceed 10% of
Total Capitalization; or
(e) the price obtained at such date from an Approved Pricing
Service.
Certain Definitions
The following are definitions of certain terms used in this Schedule
and elsewhere in the Indenture. Terms used in this Schedule and not defined
below have the meanings given them elsewhere in this Schedule or in the
Indenture.
"Advance Rate" means the S&P Advance Rate.
"Aggregate Short Sale Advance Amount" means as of any date of
determination, the aggregate of the Short Sale Advance Amount of all Short
Sale Transactions.
"Approved Counterparty" means (i) any financial institutions, banks or
investment banking firms having a long term rating of at least "A+" by S&P
and a short term rating of at least "A-1" by S&P or (ii) any counterparty set
forth in the Indenture (or any successor to any such listed counterparty) or
any other counterparty designated by the Fund in writing and approved by the
Insurer in its reasonable discretion.
"Approved Dealer" means (a) in the case of any Fund Investment that is
not a U.S. Government Security, any bank or broker-dealer designated by the
Fund in writing and approved by the Insurer in its reasonable discretion and
with respect to which the Rating Agency
C-17
Condition with respect to S&P has been satisfied and (b) in the case of a U.S.
Government Security, any primary dealer in U.S. Government Securities, as
reported by the Federal Reserve Board, which as of the date hereof maintains a
website at xxxx://xxx.xx.xxx.xxx or (c) in the case of either of the foregoing,
the banks and broker-dealers set forth on Annex I hereto under "Approved
Dealers."
"Approved Exchange" means, with respect to any Security, (a) any major
securities or options exchange, the NASDAQ or any other exchange or quotation
system providing regularly published securities prices designated by the Fund
in writing and approved by the Insurer in its reasonable discretion, and with
respect to which the Rating Agency Condition with respect to S&P has been
satisfied, or (b) the exchanges set forth on Annex I hereto under "Approved
Exchanges."
"Approved Investment Banking Firm" means (a) any investment banking
firm designated by the Fund in writing and approved by the Insurer in its
reasonable discretion and with respect to which the Rating Agency Condition
with respect to S&P has been satisfied, or (b) the firms set forth on Annex I
hereto under "Approved Investment Banking Firms."
"Approved Pricing Service" means (a) a pricing or quotation service
designated by the Fund in writing and approved by the Insurer in its
reasonable discretion and with respect to which the Rating Agency Condition
with respect to S&P has been satisfied, or (b) the services set forth on
Annex I hereto under "Approved Pricing Services."
"Approved Source" means any of (i) two Approved Dealers (so long as the
lower of two bid prices is being used and three Approved Dealers (if the
average of three bid prices is being used), (ii) an Approved Exchange or
(iii) an Approved Pricing Service, provided, that, for purposes of the
Over-Collateralization Tests, a Bank Loan, High Yield Bond or Mezzanine
Investment which is a Fund Investment shall be considered "quoted" or
"priced" by an Approved Source only if, in the reasonable judgment of the
Fund, such Approved Source will continue to provide quotations with respect
to such Bank Loan, High Yield Bond or Mezzanine Investment on an on-going
basis in the ordinary course of its business as a pricing service or dealer,
as the case may be.
"Approved Third-Party Appraisal" means an appraisal by an Approved
Third-Party Appraiser.
"Approved Third-Party Appraiser" means (a) a third-party appraiser that
is not an Affiliate of either the Fund or the Investment Manager (or subject
to an agreement to become such an Affiliate) designated by the Fund in
writing and approved by the Insurer in its reasonable discretion and with
respect to which the Rating Agency Condition with respect to S&P has been
satisfied, or (b) the third-party appraisers set forth on Annex I hereto
under "Approved Third-Party Appraisers."
"Asset-Backed Security" means any fixed income Security that is (i)
backed by and paid primarily from the proceeds (or payments or proceeds of a
disposition) of Eligible Assets, and (ii) issued in a transaction structured
to (A) isolate the Security and the Eligible Assets backing the Security from
the credit risk of the sponsor of the transaction and (B) result in the
C-18
creditworthiness of such Security being primarily dependent upon (x) the
creditworthiness of the Eligible Assets backing such Security and (y) any
credit support provided with respect to the creditworthiness of such Eligible
Assets; provided, however, that in no event shall an "Asset-Backed Security"
include any of the following: (a) a Security issued to provide
debtor-in-possession financing, (b) a Security issued in connection with a
receivables financing, an equipment trust certificate or similar Security,
(c) an Equity Security (including an Equity Security that is characterized as
a note), (d) a Structured Product Transaction, (e) a CDO Debt Security or (f)
a Defensive Hedge Transaction.
"Bank Loan Participation" means a Bank Loan in the form of a
participation.
"Bank Loans" means direct purchases of, assignments of, participations
in and other interests in senior debt (including term loans, revolving credit
lines and other similar loans and investments).
"Business Day" means each day other than a Saturday, Sunday or other
day on which banking institutions are not required by law or regulation to be
open in the State of New York.
"Busted Convertible Bond" means any convertible bond that trades like a
fixed income investment.
"Capital Stock" of any Person means shares, equity interests (including
limited partnership interests and limited liability company interests),
participations or other equivalents (however designated) of corporate stock
of such Person.
"Cash" means any immediately available funds in U.S. dollars or any
currency other than U.S. dollars which is a freely convertible currency
(including amounts held in the Custodial Account or on deposit with the
Custodian pursuant to "sweep" arrangements linked to the Custodial Account).
"Cash Equivalents" means investments (other than Cash) that are one or
more of the following obligations or Securities:
(i) U.S. Government Securities;
(ii) certificates of deposit of, banker's acceptances issued by or
money market accounts in any depository institution or trust
company incorporated under the laws of the United States of
America or any state thereof and subject to supervision and
examination by Federal and/or state banking authorities, so long
as the deposits offered by such depository institution or trust
company at the time of such investment are rated and have a
rating of at least "A-1+" if rated by S&P (or, in the case of the
principal depository institution in a holding company system
whose deposits are not so rated, the long term debt obligations
of such holding company are rated and such rating is at least
"A+" if rated by S&P);
(iii) commercial paper issued by any depository institution or trust
company incorporated under the laws of the United States of
America or any state thereof and subject to supervision and
examination by Federal and/or state banking
C-19
authorities, or any corporation incorporated under the laws of the
United States of America or any state thereof, so long as the
commercial paper of such issuer is rated and has at the time of such
investment a short term rating of at least "A-1+" if rated by S&P;
(iv) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of
America or any state thereof the obligations of which at the time
of such investment are rated and that have a credit rating of at
least "P-1" if rated by Xxxxx'x and "A-1" if rated by S&P either
at the time of such investment or the making of a contractual
commitment providing for such investment;
(v) shares of any money market fund or similar investment vehicle, so
long as such money market fund is rated and has at the time of
such investment a short-term rating of at least "Aaa" and "MR1+"
if rated by Xxxxx'x and "AAAm" or "AAAg" if rated by S&P;
(vi) unleveraged overnight repurchase obligations on customary terms
with respect to investments described in clauses (i) through (iv)
above entered into with a depository institution, trust company
or corporation that has a rating of at least "P-1" by Xxxxx'x and
at least "A+" by S&P;
(vii) preferred shares with a maturity of not more than 35 days and
rated in the highest investment rating category by Xxxxx'x and
S&P or otherwise with respect to which the Rating Agency
Condition is satisfied; and
(viii) investments in Qualifying Short-Term Debt;
provided, that: (i) in no event shall Cash Equivalents include any
obligation that provides for the payment of interest alone; (ii) Cash
Equivalents referred to in clauses (i), (ii) and (iii) above shall
mature within 183 days of issuance; (iii) if any of Xxxxx'x or S&P
changes its rating system, then any ratings included in this definition
shall be deemed to be an equivalent rating in a successor rating
category of Xxxxx'x or S&P, as the case may be; (iv) if any of Xxxxx'x
or S&P is not in the business of rating securities, then any ratings
included in this definition shall be deemed to be an equivalent rating
from another Rating Agency; (v) Cash Equivalents (other than U.S.
Government Securities or money market funds maintained by the
Custodian) shall not include any such investment of more than $100
million in any single issuer; (vi) in no event shall Cash Equivalents
include any obligation that is not denominated in Dollars or Eligible
Foreign Currencies; and (vii) none of the foregoing obligations or
securities will constitute Cash Equivalents (A) if all, or
substantially all, of the remaining amounts payable thereunder will
consist of interest and not principal payments, or (B) if such security
has an assigned rating from S&P with an "r" or "t" subscript, or (C) if
such security is a mortgage-backed security or (D) if such security is
an inverse floater security.
"CDO Debt Securities" means any Securities that entitle the holders
thereof to receive payments that depend primarily on cash flow from, or
proceeds upon the sale of a pool of
C-20
Securities serving as collateral for such Securities; provided that if more than
one class or other similar designation of such Securities receive payments that
depend primarily on cash flow from all or substantially all of the underlying
collateral Securities, then the class or other similar designation the payment
of which is most deeply subordinated (other than any class or other similar
designation constituting only nominal capital) and any class or other similar
designation that, as indicated in any relevant offering documentation, is stated
to be at least reasonably likely to be treated as equity for U.S. Federal income
tax purposes will be excluded from "CDO Debt Securities"; provided, further that
(x) CDO Debt Securities shall not include any Structured Product Transaction and
(y) CDO Debt Securities shall only include CDO Debt Securities issued in a
"cash-flow" or "market value" collateralized debt obligation transactions.
"CDO Equity Securities" means any Securities (other than CDO Debt
Securities) that entitle the holders thereof to receive payments that depend
primarily on cash flow from, or proceeds upon sale of a pool of Securities
serving as collateral for such Securities (whether or not such Securities
have been rated by a nationally recognized statistical rating organization);
provided that CDO Equity Securities shall not include any Structured Product
Transaction.
"CDS" means a credit default swap substantially in the form approved by
the Insurer, which approval shall not be unreasonably withheld.
"Contributed Company Capital" means, at any date, the aggregate gross
amount of Cash contributed as equity capital (excluding, for the avoidance of
doubt, the Preferred Shares) to the Fund by the holders of the Common Shares
on or prior to such date (without regard to any other changes in Company
Equity).
"Currency Hedging Transaction" means (i) any Swap Transaction entered
into by the Fund with an Eligible Counterparty intended to convert any
payment on a Debt or other obligation of the Fund or any Company Investment
denominated in one currency to another currency or to protect against
fluctuations in the exchange rate of a currency in which a payment to be made
or received by the Fund is denominated and (ii) any Swap Transaction entered
into by the Fund intended to convert any payment on a Debt or other
obligation of the Fund or any Company Investment denominated in one currency
to another currency or to protect against fluctuations in the exchange rate
of a currency in which a payment to be made or received by the Fund is
denominated and pursuant to which the Fund has no on-going payment
obligations.
"Defensive Hedge Advance Amount" means, as of any date of
determination, 98% of the aggregate Market Value of all Defensive Hedge
Transactions; provided, however, that the Defensive Hedge Advance Amount
shall in no event exceed an amount equal to (x) 20% of the Total
Capitalization as of such date of determination less (y) the sum of the
aggregate Market Value as of such date of determination of all Fund
Investments in Bank Loan Participations and Structured Product Transactions
and, if the Secured Hedging Advance Amount is positive, the Secured Hedging
Advance Amount.
"Defensive Hedge Transaction" means a Hedging and Short Sale
Transaction between the Fund and an Eligible Counterparty intended to protect
the Fund against fluctuations in the market value of a Fund Investment and
pursuant to which (i) the Eligible Counterparty has agreed for a period of
time, at the direction of the Fund, to (a) purchase the Fund Investment at
C-21
an agreed strike price or (b) pay to the Fund, at the Fund's election, an amount
by which an agreed strike price exceeds the current price of the Fund
Investment; (ii) the Eligible Counterparty does not have recourse to the
Collateral or the Fund for any amounts owing to such counterparty thereunder;
and (iii) the Fund may (a) pay a fee to the Eligible Counterparty in connection
with the transaction, (b) remove the Fund Investment from the Custodial Account
(whereby it is no longer part of the Collateral) and pledge the Fund Investment
to the counterparty as security for its obligations to the Eligible Counterparty
and (c) agree to deliver the Fund Investment to the Eligible Counterparty in
satisfaction of all of its obligations to the Eligible Counterparty in
connection with the transaction.
"Designated Country" shall mean (i) each of Canada, Great Britain,
Australia, Denmark, New Zealand, Sweden, Switzerland, Luxembourg, The
Netherlands and any G-7 nation and (ii) each other country identified by the
Fund from time to time and confirmed as acceptable by S&P.
"Determination Date" means (a) with respect to any regularly scheduled
Valuation Statement prepared pursuant to the Indenture or the Operating
Agreement and any other Preferred Shares document, the related Reporting
Date, (b) for the purpose of determining the Market Value Price of a Fund
Investment at any date when the Fund is in compliance, or reasonably believes
it is in compliance, with the covenants relating to the
Over-Collateralization Tests, the last Business Day of the preceding calendar
week ending prior to such date and (c) for the purpose of determining the
Market Value Price of a Fund Investment at any date when the Fund is not, or
reasonably believes that it is not, in compliance with any covenant relating
to the Over-Collateralization Tests, the date on which the most current
pricing information with respect to such Fund Investment is reasonably
available.
"Distressed Debt" means debt Securities and Bank Loans which are, in
the Investment Manager's reasonable business judgment, impaired in
fundamental ways due to credit, liquidity, interest rate or other issues,
which may not be performing or may be in default, and which are generally
trading at a substantial discount to par.
"Eligible Assets" means financial assets, either fixed or revolving,
that by their terms convert into cash within a finite time period plus any
rights or other assets designed to assure the servicing or timely
distribution of proceeds to security holders.
"Eligible Counterparty" means, with respect to any Hedging and Short
Sale Transaction (other than a CDS in which the Fund is the counterparty
writing or providing the protection with respect to the reference asset), (a)
any Approved Counterparty or (b) any person (i) having an unsecured,
unguaranteed and unsupported long-term debt rating of "AA-" or better under
the S&P OC Test Rating or (ii) whose obligations in respect of all Hedging
and Short Sale Transactions entered into with the Fund are absolutely and
unconditionally guaranteed by an Affiliate of such Person having an
unsecured, unguaranteed and unsupported long-term debt rating of "AA-" or
better under the S&P OC Test Rating; provided that with respect to any
Eligible Counterparty with which the Fund has entered into a Hedging and
Short Sale Transaction, any counterparty that would qualify as an "Eligible
Counterparty" pursuant to clause (b) above but for the fact that such
counterparty had suffered a ratings downgrade shall be
C-22
deemed to be an "Eligible Counterparty" for thirty 30 days after the day it
would otherwise have ceased to qualify as an Eligible Counterparty.
"Eligible Country" shall mean each country (i) whose unsupported
sovereign debt obligations are rated "AA+" or better by S&P or (ii) that is a
Designated Country whose unsupported sovereign debt obligations are rated
"A-" or better by S&P.
"Eligible Foreign Currencies" means (i) Australian Dollars, Canadian
Dollars, Pounds Sterling and Euros and (ii) each other currency identified by
the Fund from time to time and confirmed in writing as acceptable by the
Trustee, the Insurer and with respect to which Rating Agency Condition with
respect to S&P has been satisfied.
"Eligible Investments" has the meaning assigned to such term in this
Schedule under "Determination of Fund Investments Constituting Eligible
Investments."
"Equity Securities" means equity securities (including, for the
avoidance of doubt, Private Equity Securities) that will generally consist of
common or preferred stock of small to medium capitalization companies that
have either (i) undergone leveraged buyouts or recapitalizations, yet are
still substantially leveraged, or (ii) been burdened by complex legal,
financial or ownership issues and are selling at a discount to the underlying
asset or business value.
"Excess Fund Investments" means any Fund Investments or portion thereof
having a Market Value in excess of the percentages of Total Capitalization
set forth in the definition of Portfolio Limitations (in each case determined
by the Fund using the most recent Market Value for the applicable Fund
Investments).
"Excluded Investments" has the meaning assigned to such term in this
Schedule under "Determination of Fund Investments Constituting Eligible
Investments."
"Foreign Issuer" means any issuer of a Fund Investment that is
incorporated or otherwise formed or organized outside the United States
unless such Fund Investment is irrevocably and unconditionally guaranteed by
any United States corporation, company, trust or other business entity;
provided, however, that none of the following shall be a Foreign Issuer:
(i) an offshore holding company issuer whose operating subsidiaries
principally do business, and hold their assets, in the United States, or (ii)
an issuer of a CDO Debt Security.
"Fully Collateralized Structured Product Transaction" means a
Structured Product Transaction relating to a single Bank Loan or High Yield
Bond pursuant to which the Fund is required to pledge collateral in an amount
that is not less than 100% of the notional amount of such transaction.
"Fund Investments" means all Cash, Cash Equivalents, Bank Loans,
Securities, Short Sale Transactions and Structured Product Transactions owned
by the Fund. Fund Investments which the Fund has contracted to purchase
shall not be deemed for purposes of the Indenture to be owned by the Fund
until settlement of such purchase and Fund Investments which the Fund has
contracted to sell shall not cease to be Fund Investments for purposes of the
Indenture until settlement of such sale.
C-23
"Hedging and Short Sale Transaction" means any transaction entered into
by the Fund with an Eligible Counterparty that is (i) a Swap Transaction;
(ii) an Interest Rate Hedging Transaction; (iii) a Currency Hedging
Transaction; (iv) a transaction under which the Fund borrows a Bank Loan or
Security and sells or otherwise disposes of such or any substantially similar
Bank Loan or Security prior to the date on which the same must be returned to
the lender thereof (and commonly known as a "short sale"), (v) a Securities
Lending Transaction; (vi) a credit derivative transaction (including, but not
limited to, a CDS) or repurchase agreement; (vii) an obligation to enter into
any of the foregoing; or (viii) any combination of any of the foregoing.
"High Yield Bonds" means debt Securities (including convertible debt
Securities) that are generally rated below "BBB-" by S&P, (a) which are
issued pursuant to a public registration, Rule 144A or as a private placement
and (b) which are not Cash Equivalents, Bank Loans, Mezzanine Investments or
CDO Debt Securities.
"Illiquid Investments" means (a) Unquoted Investments that do not
qualify as Semi-Liquid Investments; (b) Bank Loan Participations (other than
(x) Bank Loan Participations that qualify as Semi-Liquid Investments and (y)
Bank Loan Participations which may be converted into a Bank Loan assignment
at the option of the Issuer); and (c) Private Equity Securities.
"Indexed Structured Product Transaction" means a Structured Product
Transaction in which the reference obligation is an index, including, without
limitation, Dow Xxxxx CDX North American High Yield Composite Index, Dow
Xxxxx CDX North American BB, Dow Xxxxx CDX North American B, and Dow Xxxxx
CDX North American Investment Grade Composite.
"Industry" means any industry category listed in Annex I hereto under
"S&P Industry Classifications" or any other such industry category designated
by the Fund in writing and approved by the Insurer in its reasonable
discretion and with respect to which the Rating Agency Condition with respect
to S&P has been satisfied.
"Ineligible Country" shall mean any country other than the United
States or an Eligible Country.
"Interest Rate Hedging Transaction" means (i) any Swap Transaction
entered into by, the Fund with an Eligible Counterparty intended to protect
the Fund against changes in the floating rate of interest payable on all or a
portion of any Debt or other obligation of the Fund or its subsidiaries or on
any Fund Investment or to protect against fluctuations in interest rates, or
(ii) any Swap Transaction or repurchase agreement entered into by the Fund,
in each case with an Eligible Counterparty, intended to protect against
changes in the market value of any Fund Investment resulting from
fluctuations in interest rates.
"Market Value" has the meaning assigned to such terms in this Schedule
under "Determination of Market Value of Fund Investments."
"Market Value Price" has the meaning assigned to such term in this
Schedule under "Determination of Market Value of Fund Investments."
"Mezzanine Investments" means (i) debt Securities or other obligations
of an issuer (including convertible debt Securities and obligations, and
Securities back by real estate
C-24
collateral) that (A) are subordinated to other debt of such issuer and (B) may
be issued with equity participation features such as convertibility, senior
equity securities, common stock or warrants or (ii) Preferred Stock issued in
connection with management buyouts, acquisitions, refinancings,
recapitalizations and later stage growth capital financings.
"Xxxxx'x" means Xxxxx'x Investors Service, Inc., or any successor
thereto.
"NASDAQ" means the electronic inter-dealer quotation system operated by
NASDAQ, Inc., a subsidiary of the National Association of Securities Dealers,
Inc., or any successor thereto.
"Non-Cash Pay Instrument" means a High Yield Bond which falls in Asset
Category C, D, E, F or G that (a) does not provide for the payment of cash
interest or preferred dividends, or provides for the total deferral of
interest until the final maturity thereof, (b) is a debt security that has an
initial current yield on the date of purchase or acquisition thereof of less
than 2.5% per annum and provides for an increase in the rate of interest
payable in respect thereof at any time after the date it was purchased or
acquired (other than any increase resulting from (i) a change in a generally
recognized floating rate interest rate index, (ii) a change in the weighted
average interest rate on underlying collateral in the case of Securities the
interest rate on which is based on such weighted average interest rate or
(iii) a change in an interest rate spread or margin resulting from an
announced change in the rating of the issuer' s debt obligations) or (c) is a
debt security that provides for the partial deferral of interest until the
final maturity thereof and which has cash interest payable without deferral
at a rate per annum less than (x) with respect to Fund Investments bearing
interest at a fixed rate, 2.5% per annum and (y) with respect to Fund
Investments bearing interest at a floating rate, a eurodollar rate plus 2%
per annum. For purposes of clause (b) of this definition, if the current
yield is increased to 2.5% or more per annum, then at the time of the
increase of such interest rate, the Security will cease to be a "Non-Cash Pay
Instrument."
"Non-Credit Risk Security" means a security with respect to which an
institutional money manager would evaluate its value primarily by reference
to factors other than (a) the coupon (or the coupon as adjusted for any
purchase discount or premium) in relation to prevailing market yields, (b)
the credit worthiness of the issuing entity or (c) the adequacy of the
underlying financial assets supporting such security to ensure the repayment
of the security according to its terms (which adequacy may be measured by a
credit analysis of the likelihood of the obligors of such underlying assets
to pay according to the terms of such underlying assets and/or an analysis of
the sufficiency of the income streams thereon to meet the payment terms of
the security).
"Non-Performing Instrument" means (i) any Fund Investment that is debt
and the issuer of which is in default of any principal or interest payment
obligations in respect thereof (without giving effect to any applicable grace
period or waiver), (ii) any Fund Investment that is Preferred Stock and the
issuer of which has failed to meet any scheduled redemption obligations or to
pay its latest declared cash dividend or (iii) any Fund Investment that is a
CDO Debt Security and the issuer of which has failed to pay any current
interest or principal in cash when due.
C-25
"Outstanding Principal Amount" means the outstanding aggregate
principal amount of the Notes under the Indenture at any given time.
"Performing" means, (i) with respect to any Fund Investment that is a
Bank Loan or other debt, the issuer of such Fund Investment is not in default
of any payment obligations in respect thereof, (ii) with respect to any Fund
Investment that is Preferred Stock, the issuer of such Fund Investment has
not failed to meet any scheduled redemption obligations or to pay its latest
declared cash dividend or (iii) with respect to any Fund Investment that is a
CDO Debt Security, the issuer of such Fund Investment has not failed to pay
any current principal or interest in cash when due.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Pledge and Intercreditor Agreement" means the Pledge and Intercreditor
Agreement dated as of the Closing Date, among the Trustee, the Insurer, the
Custodian, the Fund and the Collateral Agent identified therein, as amended,
extended, restated, supplemented or modified from time to time in accordance
with the terms thereof.
"Portfolio Limitations" has the meaning assigned to such term in this
Schedule under "Application of Portfolio Limitations."
"Preferred Stock" means, as applied to the Capital Stock of any Person,
Capital Stock of such Person of any class or classes (however designated)
that ranks prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding
up of such Person, to any shares (or other interests) of Capital Stock of
such Person.
"Private Equity Securities" means, at any time of determination, any
Equity Security which the Fund believes in good faith (based on the facts and
circumstances available to it) is (i) commonly regarded by investment
professionals as a "private equity security" and (ii) not traded or listed on
any national or regional securities exchange, any designated offshore
Securities market (as defined in Regulation S under the Securities Act) or on
the NASDAQ National Market and is not actively quoted or traded on any
automated quotation system or in the over-the-counter market; provided,
however, that "Private Equity Securities" shall not include (a) any Equity
Securities convertible or exchangeable for any Equity Securities traded or
quoted in the markets described in clause (ii) above, or (b) any equity
Securities which may be resold under an effective registration statement
under the Securities Act at the time of determination.
"Protected Market Value" means, with respect to any Fund Investment
that is the subject of a Defensive Hedge Transaction, the Protected Price of
such Fund Investment times the number of units of such Fund Investment that
are held by the Fund and are the subject of such Defensive Hedge Transaction.
"Protected Price" means, with respect to any Defensive Hedge
Transaction, (i) the agreed strike price at which the Eligible Counterparty
to such Defensive Hedge Transaction has agreed to purchase the Fund
Investment that is the subject of such Defensive Hedge Transaction
C-26
or (ii) the agreed strike price under a Defensive Hedge Transaction pursuant to
which the Eligible Counterparty has agreed to pay the Fund an amount equal to
the excess of the agreed strike price over the current price of the Fund
Investment that is the subject of such Defensive Hedge Transaction.
"Qualifying Short-Term Debt" means short-term debt of issuers rated
"A-1" by S&P that (i) does not have an "r" suffix attached to their ratings,
(ii) has a predetermined fixed dollar amount of principal due at maturity
that cannot vary, (iii) does not constitute more than 20% of the rated
issue's outstanding principal amount, (iv) does not mature beyond 30 days,
and (v) if the debt may be liquidated prior to its maturity, the interest
thereon should be tied to a single interest rate index plus a single fixed
spread (if any) and should move proportionately with that index. For
purposes of this definition, "short-term debt" includes commercial paper,
federal funds, repurchase agreements, unsecured certificates of deposit, time
deposits and banker's acceptances.
"Quarterly Date" means the last Business Day of each February, May,
August and November, commencing November 30, 2005.
"Related Person" means, with respect to any issuer, (a) any Person of
which such issuer is a Subsidiary, (b) any Person that is a Subsidiary of
such issuer, (c) with respect to a debt obligation, any Person that relies
on, or is relied upon for, the cash flows of such issuer to service debt
obligations or does not have a credit rating independent of such Person or
(d) with respect to a debt obligation, any Person that guarantees the
issuer's payment of such debt obligation; provided, however, that, in any
such case, a Person shall not be a Related Person of a second Person solely
as a consequence of the common control of such Persons by a single financial
sponsor.
"Reporting Date" means the last Business Day of each calendar week,
commencing November 25, 2005.
"S&P" means Standard & Poor's Ratings Services, a Division of The
XxXxxx-Xxxx Companies, Inc., or any successor thereto.
"S&P Net Accrual Amount" shall mean, as of any date, an amount, which
may be positive or negative, equal to (i) the aggregate amount of accrued
interest payable to the Fund on all interest-bearing Eligible Investments,
all declared but unpaid dividends payable on Eligible Investments that are
Equity Securities and all due and unpaid commitment fees payable to the
Issuer in respect of Eligible Investments, in each case as of such date minus
(ii) the aggregate amount of accrued interest and dividends payable by the
Fund as of such date in respect of the Drawn Amount (as defined in the
Indenture) and the Preferred Shares, respectively, minus (iii) the amount of
other anticipated expenses of the Fund for the 90 days subsequent to such
date, minus (iv) any other current liabilities of the Fund payable as of such
date; provided that until the earlier of two years after the Closing Date or
the date on which the Fund shall have drawn $404.5 million of the Equity
Capital Commitments, the S&P Net Accrual Amount shall not be less than zero.
C-27
"S&P Warrant/Option Advance Amount" means, as of any date of
determination, an amount equal to the sum for all Warrant/Option Investments
of the product of (i) the Warrant/Option Intrinsic Value of such
Warrant/Option Investment multiplied by (ii) the S&P Advance Rate for the S&P
Asset Category applicable to the Related Equity Securities of such
Warrant/Option Investment.
"Secured Hedging Advance Amount" means as of any date of determination,
(i) if the Secured Hedging Net Exposure is greater than zero and the Secured
Hedging Transactions entered into, in the judgment of the Fund, hedge or
mitigate risks to which the Fund is exposed in the conduct of its business or
the management of its liabilities, 90% of the Secured Hedging Net Exposure,
and (ii) if the Secured Hedging Net Exposure is less than zero, 100% of the
Secured Hedging Net Exposure; provided that any Secured Hedging Transaction
having a Secured Hedging Net Exposure greater than zero and a counterparty
with a rating of less than "A-" by S&P shall be deemed, for purposes of
calculating the Secured Hedging Advance Amount, to have a Secured Hedging Net
Exposure of zero.
"Secured Hedging Net Exposure" as of any date, as to any Secured
Hedging Transaction for which a determination thereof is required to be made,
shall be determined as follows: (i) each Eligible Counterparty party to each
Secured Hedging Transaction shall determine, with respect to the Secured
Hedging Transactions entered into by it with the Fund, an amount (the
"Secured Net Exposure Component") equal to the net current market value on
the bid side of the market if the position is long and on the ask/offer side
of the market if the position is short to the Fund on such date of
determination of each such Secured Hedging Transaction and (ii) for each
Secured Hedging Transaction, the "Secured Hedging Net Exposure" will, as of
any date, be equal to the sum of all applicable Secured Net Exposure
Components as of such date and may, for purposes of this calculation, be less
than zero.
"Secured Hedging Transaction" means any Interest Rate Hedging
Transaction or Currency Hedging Transaction entered into by the Fund with any
Person that is an Eligible Counterparty, which is secured by Collateral
pursuant to the Pledge and Intercreditor Agreement and for avoidance of doubt
shall exclude Structured Product Transactions.
"Securities" means common and preferred stock, partnership units and
participations, member interests in limited liability companies, notes,
bonds, debentures, trust receipts and other obligations, instruments or
evidences of indebtedness, including debt instruments of public and private
issuers and tax-exempt securities (including, without limitation, warrants,
rights, put and call options and other options and rights relating thereto,
or any combination thereof), guarantees of indebtedness, choses in action,
trade claims, other property or interests commonly regarded as securities or
any form of interest or participation therein, but not including Bank Loans
or Hedging and Short Sale Transactions.
"Securities Lending Transactions" means all obligations of the Fund (i)
to purchase investments which arise out of or in connection with the sale of
the same or substantially similar investments or other similar transactions
having the same economic effect (excluding Swap Transactions); and (ii)
incurred in connection with any security lending transactions described in
clause (i).
C-28
"Semi-Liquid Investments" means (i) Unquoted Investments that are debt
Securities rated "B-" or better by S&P; (ii) Unquoted Investments that are
not subject to any enforceable agreement containing a material condition to,
or material restriction on, the ability of the holder of such Unquoted
Investment or an assignee of such holder to sell, assign, transfer or
otherwise liquidate the investment in a commercially reasonable time and
manner (other than in any such agreement contained in the Collateral
Documents and customary securities law arrangements or restrictions); (iii)
Bank Loan Participations (other than Bank Loan Participations which may be
converted into a Bank Loan assignment at the option of the Issuer) for which
the Market Value has been obtained from an Approved Source that "quoted" or
"priced" the participation interest in the Bank Loan and not merely the Bank
Loan itself; (iv) solely for purposes of the definition of Portfolio
Limitations, Unquoted Investments which are High Yield Bonds or Mezzanine
Investments and are part of an issue that is greater or equal to $40 million
in original principal amount; or (v) solely for purposes of the definition of
Portfolio Limitations, Unquoted Investments which are High Yield Bonds that
are held by ten or more holders or the issuer thereof has a total
capitalization in excess of $150.0 million.
"Short Sale Advance Amount" means, as of any date of determination with
respect to any Short Sale Transaction for which a determination thereof is
required to be made, an amount calculated as follows:
Short Sale Advance Amount = CP+SP-(MV*(2-AR))
Where:
CP= The Market Value of the Cash or U.S.
Government Securities held in a Short Sale
Customer Account or Short Sale Broker
Account as security for the obligations of
the Issuer with respect to such Short Sale
Transaction.
SP= The original price of the Bank Loan or
Security borrowed in such Short Sale
Transaction, determined as of the date it
was borrowed.
MV= The Market Value of the Bank Loan or
Security borrowed in such Short Sale
Transaction as of the date of determination.
AR= The S&P Advance Rate applicable to the Bank
Loan or Security borrowed in connection
with such Short Sale Transaction.
"Short Sale Transaction" means a transaction under which the Fund
borrows a Bank Loan or Security and sells or otherwise disposes of such or
any substantially similar Bank Loan or Security prior to the date on which
the same must be returned to the lender thereof (and commonly known as a
"short sale").
"Single Asset Structured Product Transaction" means a Structured
Product Transaction in which the reference obligation is a single debt
security.
C-29
"Special Situations Investments" means, as determined in the reasonable
judgment of the Fund, any Securities or Loans issued by (i) an out-of-favor
company with visible potential operating cash flows and/or liquidation
values, and with businesses that are understandable, but may have complex
legal, operational and financial issues, or (ii) a fundamentally sound
operating company with sustainable margins that may have a poorly conceived
capital structure that, in general, the Fund has purchased substantial
positions in such Securities or Loans, often with the goal of influencing the
values of investments through active management.
"Specified Foreign Country" shall mean each Designated Country other
than (x) a country whose sovereign debt rating in a non-local currency is
rated "AAA" by S&P or (y) a country whose sovereign debt rating in a
non-local currency is rated "AA" or better by S&P and in the case of (y)
which is (a) a member of the European Union that has adopted the Euro as its
lawful currency, (b) Canada, (c) Great Britain or (d) Australia.
"Structured Product Transaction" means a Hedging and Short Sale
Transaction between the Fund and a counterparty in which either, (i) the Fund
is the counterparty to a CDS purchasing protection from an Eligible
Counterparty with respect to a reference asset or an index that refers to or
is based upon a number of reference assets, or (ii) the Fund is the
counterparty writing or providing the protection with respect to a CDS
relating to a reference asset or an index that refers to or is based upon a
number of reference assets.
"Swap Transaction" means: (i) any rate, basis, debt or equity swap;
(ii) any put, cap, collar or floor agreement; (iii) any rate, basis, debt or
equity futures or forward contract; (iv) any rate, basis, debt or equity
option representing an obligation to buy or sell a security, debt or equity;
and (v) any other similar agreement.
"Total Capitalization" means the sum of (a) Contributed Company Capital
plus aggregate undistributed net income of the Fund (as determined quarterly
in accordance with GAAP and set forth in the Fund's financial statements)
minus net loss of the Fund (determined quarterly in accordance with GAAP and
set forth in the Fund's financial statements), in each case excluding any
reduction in Company Equity as a result of placement or structuring fees and
organizational expenditures, (b) the aggregate outstanding liquidation
preference of the Preferred Shares plus the aggregate liquidation preference
of fully subscribed but unissued Preferred Shares and (c) the aggregate
Outstanding Principal Amount plus the amount, if any, by which the Total
Maximum Commitment exceeds the Outstanding Principal Amount; provided,
however, that until June 30, 2007, for purpose of clauses (i) through (v) of
the Portfolio Limitations, "Total Capitalization" will be the greater of (i)
the amount determined pursuant to clauses (a), (b) and (c) above and (ii)
$404.5 million; provided, further, that, for purposes of the definition of
Portfolio Limitations, Total Capitalization shall not exceed $809.0 million.
"Unhedged Foreign Investment" means any portion of any Fund Investment
denominated in a currency other than Dollars which is not protected against
currency fluctuations as a result of Currency Hedging Transactions; provided,
however, that if 95% or more of the Market Value of a Fund Investment
denominated in a currency other than Dollars is so protected against currency
fluctuations, all of such Fund Investment shall be deemed to be protected
against currency fluctuations for purposes of this definition and the
calculation of the Over-Collateralization Tests.
C-30
"Unquoted Investments" means Fund Investments other than Cash or Cash
Equivalents for which the Market Value has not been obtained from an Approved
Source.
"US. Government Securities" means Securities that are direct
obligations of, or obligations the timely payment of principal and interest
on which is fully guaranteed by, the United States of America or any agency
or instrumentality of the United States of America the obligations of which
are backed by the full faith and credit of the United States of America and
in the form of conventional bills, bonds and notes. In no event shall U.S.
Government Securities include: (i) any security providing for the payment of
interest only; (ii) any Swap Transaction; or (iii) any obligation on which
all or any portion of the payments thereunder is based, directly or
indirectly, on any Swap Transaction.
"Warrant/Option Intrinsic Value" means, with respect to any
Warrant/Option Investment, the product of (x) an amount by which the current
price (based on the price from an Approved Source or an Approved Investment
Banking Firm) of the applicable Related Equity Securities exceeds the agreed
strike price of the Related Equity Securities with respect to such
Warrant/Option Investment, multiplied by (y) the number of shares of the
Related Equity Securities. For the avoidance of doubt, the Warrant/Option
Intrinsic Value shall always be zero if, in the case of a call Warrant/Option
Investment, the agreed strike price of the applicable Related Equity
Securities for such Warrant/Option Investment is equal to or greater than the
current price of the applicable Related Equity Securities for such
Warrant/Option Investment or, in the case of a put Warrant/Option
Investment, the agreed strike price of the applicable Related Equity
Securities for such Warrant/Option Investment is equal to or less than the
current price of the applicable Related Equity Securities for such
Warrant/Option Investment.
"Warrant/Option Investments" means any Fund Investments held by the
Fund that are warrants or call options or similar rights with respect to
Equity Securities (the "Related Equity Securities").
"Yield to Worst" means, in respect of any High Yield Bond or other debt
security, the lesser of (a) the yield-to-maturity and (b) the lowest
yield-to-call calculated on each scheduled call date.
C-31
ANNEX I
S&P INDUSTRY CLASSIFICATIONS
Industry Industry
Code Description Code Description
-------- ------------------------- -------- ---------------------------
0 Zero Default Risk 37 Surface transport
1 Aerospace & Defense 38 Telecommunications/cellular
2 Air transport 39 Utilities
3 Automotive 49 Project Finance
4 Beverage & Tobacco 50 CDO
5 Radio & Television 51 ABS Consumer
6 Brokers, Dealers & 52 ABS Commercial
Investment houses
7 Building & Development 53 CMBS Diversified
(Conduit and CTL)
8 Business equipment & 54 CMBS (Large Loan,
services Single Borrower, and
Single Property)
9 Cable & satellite 55 REITs and REOCs
television 56 RMBS A
10 Chemicals & plastics 57 RMBS B&C, HELs, HELOCs,
11 Clothing/textiles and Tax Lien
58 Manufactured Housing
12 Conglomerates 59 U.S. Agency (Explicitly
13 Containers & glass Guaranteed)
products 60 Monoline/FER Guaranteed
14 Cosmetics/toiletries 61 Non-FER Company
15 Drugs Guaranteed
62 FFELP Student Loans
16 Ecological services & (Over 70% FFELP)
equipment
17 Electronics/electrical
18 Equipment leasing
19 Farming/agriculture
20 Financial
intermediaries
21 Food/drug retailers
22 Food products
23 Food service
24 Forest products
25 Health care
26 Home furnishings
27 Lodging & casinos
28 Industrial equipment
29 Insurance
30 Leisure
goods/activities/movies
31 Nonferrous
metals/minerals
32 Oil & gas
33 Publishing
34 Rail industries
35 Retailers (except food
& drug)
36 Steel
C-32
APPROVED DEALERS
X.X. Xxxxxxx & Sons, Inc. Liberty Brokerage
ABN AMRO Bank Libra Securities
Xxxxx & Co. McDonald & Company
APS Financial Corporation Xxxxxxx Xxxxx
X. Xxxxx & Co. Mesirow Financial
Bank of America Xxxxxx Xxxxx & Co., LLC
Bank of Montreal Xxxxxx Xxxxxx & Co.
Barclays Capital Xxxxxx Xxxxxxx
Bear Xxxxxxx Prudential Securities
BMO Xxxxxxx Xxxx Xxxxxxx Xxxxx
BNP Paribas RBC Xxxx Xxxxxxxx
BNY Capital Xxxxxx X. Xxxxx & Co
Xxxxx Xxxxxxx Xxxx & Company Xxxxxxx Xxxxx Xxxxxx
Xxxxxx Xxxxxxxxxx Xxxxxxxx Xxxxxxxx
Xxxxxx Capital Partners Scotia Capital Markets
Chicago Corporation Xxxxxxx Companies, The
CIBC World Markets XX Xxxxx
CIT Group Societe Generale
Citigroup Spear, Leeds & Xxxxxxx
Commerzbank SunTrust Xxxxxxxx-Xxxxxxxx Company
Credit Lyonnais Swiss Bank Corporation
Credit Research & Trading TD Securities
CS First Boston The Blackstone Group
Delaware Bay, Inc. U. S. Bancorp
Deutsche Bank Xxxx Xxxxx UBS Warburg
First Chicago Trust Company Union Bank of California
Fleet Wachovia Securities
General Electric Wedbush Xxxxxx
Xxxxxxx Sachs & Co. Xxxxx Fargo
Xxxxxxxx Xxxxx Xxxxxx & Xxxxx Xxxxxxx Xxxxx & Company
Imperial Capital
Indosuez Capital
ING (Baring Xxxxxx Xxxx)
X.X. Xxxxxx Xxxxx
Xxxxxxxxx & Company, Inc.
Ladenburg Xxxxxxxx
Xxxxxx Freres & Co., LLC
Xxxxxx Brothers
C-33
APPROVED EXCHANGES
African Stock Exchanges
Johannesburg Stock Exchange, South Africa
The South African Futures Exchange(SAFEX), South Africa
Asian Stock Exchanges
Sydney Futures Exchange, Australia
Australian Stock Exchanges, Australia
Shenzhen Stock Exchange, China
Stock Exchange of Hong Kong,Hong Kong
Hong Kong Futures Exchange,Hong Kong
National Stock Exchange of India,India
Bombay Stock Exchange, India
Jakarta Stock Exchange, Indonesia
Indonesia NET Exchange,Indonesia
Nagoya Stock Exchange,Japan
Osaka Securities Exchange, Japan
Tokyo Grain Exchange, Japan
Tokyo International Financial Futures Exchange (TIFFE), Japan
Tokyo Stock Exchange, Japan
Korea Stock Exchange, Korea
Kuala Lumpur Stock Exchange, Malaysia
New Zealand Stock Exchange, New Zealand
Karachi Stock Exchange, Pakistan
Lahore Stock Exchange, Pakistan
Stock Exchange of Singapore (SES), Singapore
Singapore International Monetary Exchange Ltd. (SIMEX), Singapore
Colombo Stock Exchange, Sri Lanka
Sri Lanka Stock Closings, Sri Lanka
Taiwan Stock Exchange, Taiwan
The Stock Exchange of Thailand, Thailand
European Stock Exchanges
Vienna Stock Exchange, Austria
EASDAQ, Belgium
Zagreb Stock Exchange, Croatia
Prague Stock Exchange, Czech Republic
Copenhagen Stock Exchange, Denmark
Helsinki Stock Exchange, Finland
Paris Stock Exchange, France
NouveauMarche, France
MATIF, France
Frankfurt Stock Exchange, Germany
Athens Stock Exchange, Greece
Budapest Stock Exchange, Hungary
C-34
Italian Stock Exchange, Italy
National Stock Exchange of Lithuania,Lithuania
Macedonian Stock Exchange, Macedonia
Amsterdam Stock Exchange, The Netherlands
Oslo Stock Exchange, Norway
Warsaw Stock-Exchange, Poland
Lisbon Stock Exchange, Portugal
Bucharest Stock Exchange, Romania
Russian Securities Market News, Russia
Ljubljana Stock Exchange,Inc., Slovenia
Barcelona Stock Exchange, Spain
Madrid Stock Exchange, Spain
MEFF: (Spanish Financial Futures & Options Exchange), Spain
Stockholm Stock Exchange, Sweden
Swiss Exchange, Switzerland
Istanbul Stock Exhange, Turkey
FTSE International (London Stock Exchange), United Kingdom
London Stock Exchange: Daily Price Summary, United Kingdom
Electronic Share Information, UnitedKingdom
London Metal Exchange,United Kingdom
London InternationalFinancial Futures and Options Exchange, United
Kingdom
Middle Eastern Stock Exchanges
Tel Aviv Stock Exchange, Israel
Amman Financial Market, Jordan
Istanbul Stock Exhange, Turkey
North American Stock Exchanges
Alberta Stock Exchange, Canada
Montreal Stock Exchange, Canada
Toronto Stock Exchange, Canada
Vancouver Stock Exchange, Canada
Winnipeg Stock Exchange, Canada
Mexican Stock Exchange, Mexico
AMEX, United States
New York Stock Exchange (NYSE),United States
NASDAQ, United States
Chicago Stock Exchange, United States
Chicago Board Options Exchange, United States
Chicago Board of Trade, United States
Chicago Mercantile Exchange, United States
Pacific Stock Exchange, United States
Philadelphia Stock Exchange, United States
South American Stock Exchanges
Bermuda Stock Exchange, Bermuda
Rio de Janeiro Stock Exchange, Brazil
C-35
Sao Paulo Stock Exchange, Brazil
Cayman Islands Stock Exchange, Cayman Islands
Chile Electronic Stock Exchange, Chile
Xxxxxxxx Stock Exchange, Chile
Bogota Stock Exchange, Colombia
Lima Stock Exchange, Peru
Caracas Stock Exchange, Venezuela
Venezuela Electronic Stock Exchange, Venezuela
C-36
APPROVED INVESTMENT BANKING FIRMS
X.X. Xxxxxxx & Sons, Inc. Xxxxxx Brothers
ABN AMRO Bank Liberty Brokerage
Xxxxx & Co. McDonald & Company
Bank of America Xxxxxxx Xxxxx
Bank of Montreal Mesirow Financial
Bank One Xxxxxx Xxxxx & Xxxxxx
Barclays Capital Xxxxxx Xxxxxxx
Bear Xxxxxxx Prudential Securities
BMO Xxxxxxx Xxxxx RBC Xxxx Xxxxxxxx
Brown, Gibbons, Xxxx Xxxxxxx Xxxxx
Xxxxxx Xxxxxxxxxx Xxxxxx X. Xxxxx & Co
Xxxxxx Capital Partners Solomon Xxxxx Xxxxxx
JPMorgan Chase Manhattan Xxxxxxxx Xxxxxxxx
Chicago Corporation Scotia Capital Markets
CIBC World Markets Xxxxxxx Companies
CIT Group XX Xxxxx
Citibank Group Sun Trust Xxxxxxxx-Xxxxxxxx Company
Credit Research & Trading Sutro & Co.
CS First Boston TD Securities
Xxxxxx Xxxxxxxxx The Blackstone Group
Delaware Bay, Inc. Union Bank of California
Deutsche Bank Xxxx Xxxxx US Bancorp Libra
EVEREN Securities US Bancorp Xxxxx Xxxxxxx
Fleet National Bank USB Warburg
Xxxxxxx Sachs & Co. Wachovia Securities
Grantchester Holdings Xxxxxxxxxxx Xxxxxxx Securities Inc.
Greenwich NatWest Wedbush Morgan
Gruntal Xxxxx Fargo
Xxxxxxxxx & Xxxxx Xxxxxxx Xxxxx & Company
Xxxxxxxx Xxxxx Xxxxxx & Xxxxx
Imperial Capital
ING (Baring Xxxxxx Xxxx)
Xxxxxxxxx & Company, Inc.
JPMorgan Xxxxx
Xxxxxxxxx Xxxxxxxx
Lazard Freres
C-37
APPROVED PRICING SERVICES
Advantage Data, Inc.
Bloomberg
Bridge Information Systems, Inc.
Data Resources Inc.
Fixed Income Pricing System
Interactive Data Corp
International Securities Market Association
XX Xxxxxx
KDP
Loan Pricing Corp.
Xxxxxxx Xxxxx Securities Pricing Service
Xxxxxx Data Corp.
Reuters (only for pricing Foreign Issuer Securities)
Societe Generale
Standard & Poor's
Telerate
Wood Gundy (only for pricing Securities issued by the Canadian federal or
Canadian provincial governments)
C-38
APPROVED THIRD PARTY APPRAISERS
X.X. Xxxxxxx & Sons, Inc. X.X. Xxxxxx Chase
ABN AMRO Bank Xxxxxxxxx & Company, Inc.
Xxxxx & Co. KPMG International
Bank of America Ladenburg Xxxxxxxx
Barclays Capital Lazard Freres
Bear Xxxxxxx Xxxxxx Brothers
BMO Xxxxxxx Xxxxx Liberty Brokerage
Brown, Gibbons, Lang McDonald & Company
Cantor Xxxxxxxxxx Xxxxxxx Xxxxx
Xxxxxx Capital Mesirow Financial
Chicago Corporation Xxxxxx Xxxxxxx
CIBC World Markets PriceWaterhouseCoopers
CIT World Markets Xxxxxxx Xxxxx
Citigroup RBC Xxxx Xxxxxxxx Xxxxxx X. Xxxxx
Credit Research & Trading Xxxxxxxx Xxxxxxxx
XX First Boston Scotia Capital Markets
Xxxxxx Xxxxxxxxx Xxxxxxx Companies
Delaware Bay, Inc. Sun Trust Xxxxxxxx-Xxxxxxxx Company
Deloitte & Touche Sutro & Co.
Deutsche Bank Swiss Bank Corporation
Dresdner Kelinwort Xxxxxxxxxxx XX Securities
Ernst & Young The Blackstone Group
EVEREN Securities UBS Warburg
First Chicago Trust Company Union Bank
Xxxxxxx Xxxxx & Co. US Bancorp Xxxxx Xxxxxxx
Grantchester Holdings US Bancorp Libra
Greenwich NatWest Wachovia Securities
Xxxxxxxxx & Xxxxx Wedbush Xxxxxx
Xxxxxxxx Xxxxx Xxxxxx & Xxxxx Xxxxx Fargo
Imperial Capital Xxxxxxx Xxxxx & Company
C-39
APPENDIX B
Statement of Preferences of Series A-2 Preferred Share
EXECUTION COPY
STATEMENT OF PREFERENCES
OF
SERIES A-2 PREFERRED SHARE
OF
YORK ENHANCED STRATEGIES FUND, LLC
The Board of Directors of York Enhanced Strategies Fund, LLC, a Delaware
limited liability company (the "Company"), acting pursuant to the power vested
in it by Section 5.2 and Section 5.3 of the Operating Agreement of the Company,
dated as of November 3, 2005 (as the same may be amended and/or restated, the
"Operating Agreement"), do hereby cause the Company to create and establish a
series of preferred shares of interest. Capitalized terms not defined herein
shall have the meanings ascribed to them in the Operating Agreement. The amount
thereof and the powers, preferences, duties, liabilities and obligations thereof
are hereby fixed as follows:
Section 1. Designation and Amount. The Company hereby creates and establishes
a series of preferred shares of interest consisting of one share and
designates such share as the "Series A-2 Preferred Share" (the "Special
Share"). The Company is authorized to issue one Special Share to York
Enhanced Strategies Management, LLC.
Section 2. Dividends.
(a) The Special Share shall rank on a parity with shares of any other
series of the Preferred Shares as to the payment of dividends by
the Company. The Special Share will rank senior to the Common
Shares as to the payment of dividends.
(b) The holder of the Special Share shall be entitled to receive
when, as and if declared by the Board of Directors, or a duly
authorized committee thereof, out of funds legally available
therefor in accordance with the Operating Agreement and
applicable law, cumulative cash dividends in an amount equal to
the greater of (i) 4% per year of the Base Liquidation Preference
(as defined below) of such Special Share, but in no event greater
than $40 per year, and (ii) (a) 100% of the amount by which the
cumulative distributions and amounts distributable to the holders
of the Common Shares (excluding any distribution relating to the
original capital payment made for the Common Shares) exceed a 2%
quarterly weighted average return on undistributed capital
attributable to the Common Shares until the holder of the Special
Share has received from the Company an amount equal to 20% of the
aggregate cumulative distributions of net income and gain to the
holders of the Common Shares as well as amounts paid to the
holder of the Special Share under this Section 2(a), and
thereafter (b) an amount (payable at the same time as any
distributions to the holders of the Common Shares) such that
after receipt thereof the holder of the Special Share will have
received from the Company an amount equal to 20%, and the holders
of the Common Shares will have received an amount equal to 80%,
of the incremental aggregate distributions of net income and gain
to the holders of the Common Shares and the Special Share. The 2%
quarterly weighted average return on undistributed capital
referenced in the foregoing clause (ii)(a) shall be cumulative
(but not compounded) up to an aggregate of 8% per year.
Distributions in respect of the Special Share shall be payable on
such dates (each, a "Dividend Payment Date") as the Board of
Directors, in consultation with the holder of the Special Share,
may determine, but no less often than semi-annually on June 15 and
December 15 of each year if no distribution is being paid in
respect of the Common Shares, commencing on March 15, 2006 (or if
any such day is not a Business Day, then on the next succeeding
Business Day), to the holder of record of the Special Share as it
appears on the stock register of the Company at the close of
business on the fifth preceding Business Day of such Dividend
Payment Date, in preference to dividends on Common Shares and any
other Shares of the Company ranking junior to the Special Share in
payment of dividends. Dividends on the Special Share shall
accumulate from the date on which such Special Share is originally
issued. Each period beginning on and including a Dividend Payment
Date (or the date of original issue of the Special Share, in the
case of the first dividend period after issuance of such Special
Share) and ending on but excluding the next succeeding Dividend
Payment Date is referred to herein as a "Dividend Period."
Dividends on account of arrears for any past Dividend Period or in
connection with the redemption of the Special Share may be
declared and paid at any time, without reference to any Dividend
Payment Date, to the holder of record on such date not exceeding
30 days preceding the payment date thereof as shall be fixed by
the Board of Directors.
(c) (i) No full dividends shall be declared or paid on the Special
Share for any Dividend Period or part thereof unless full
cumulative dividends due through the most recent Dividend Payment
Dates therefor for all series of Preferred Shares of the Company
ranking on a parity with the Special Share as to the payment of
dividends have been or contemporaneously are declared and paid
through the most recent Dividend Payment Dates therefor. If full
cumulative dividends due have not been paid on all such
outstanding Preferred Shares, any dividends being paid on such
Preferred Shares (including the Special Share) will be paid as
nearly pro rata as possible in proportion to the respective
amounts of dividends accumulated but unpaid on each such series
of Preferred Shares on the relevant Dividend Payment Date. The
holder of the Special Share shall not be entitled to any
dividends, whether payable in cash, property or shares, in excess
of full cumulative dividends as provided in this Section 2 on the
Special Share. No interest or sum of money in lieu of interest
shall be payable in respect of any dividend payments on the
Special Share that may be in arrears.
(ii) For so long as the Special Share is outstanding, the Company
shall not pay any dividend or other distribution (other than
a dividend or distribution paid in Common Shares, or
options, warrants or rights to subscribe for or purchase
Common Shares or other shares, if any, ranking junior to the
Special Share as to dividends and upon liquidation) in
respect of the Common Shares or any other shares of the
Company ranking junior to the Special Share as to the
payment of dividends and the distribution of assets upon
liquidation, or call for redemption, redeem, purchase or
otherwise acquire for consideration any Common Shares or any
other shares of the
Company ranking junior to the Special Share as to the
payment of dividends and the distribution of assets upon
liquidation (except by conversion into or exchange for
shares of the Company ranking junior to the Special Share as
to dividends and upon liquidation), unless, in each case,
(A) all cumulative dividends on the Special Share due on or
prior to the date of such action have been declared and paid
(or shall have been declared and sufficient funds for the
payment thereof deposited with the applicable
dividend-disbursing agent) or (B) the Company has redeemed
the Special Share or set aside liquid assets sufficient
therefor.
(iii) Any dividend payment made on the Special Share shall first
be credited against the dividends accumulated with respect
to the earliest Dividend Period for which dividends have not
been paid.
(d) Not later than the Business Day immediately preceding each
Dividend Payment Date, the Company shall deposit with the
dividend-disbursing agent cash or cash equivalents having an
initial combined value sufficient to pay the dividends that are
payable on such Dividend Payment Date, which cash equivalents (if
any) shall mature on or prior to such Dividend Payment Date. The
Company may direct the dividend-disbursing agent with respect to
the investment of any such cash or cash equivalents, provided
that such investment consists exclusively of cash or cash
equivalents, and provided further that the proceeds of any such
investment will be available at the opening of business on such
Dividend Payment Date.
(e) Notwithstanding anything to the contrary contained herein or in
the Operating Agreement, no dividends may be paid in respect of
the Special Share if after giving effect to the payment of such
dividend the Company would not be able to pay its debts as such
debts become due in the ordinary course of business.
Section 3. Liquidation Rights.
(a) Liquidation Preference and Redemption Price.
The Special Share will have a liquidation preference equal to
$1,000 per Special Share (the "Base Liquidation Preference") plus
accumulated and unpaid dividends (whether or not earned or
declared) and will be redeemable at the option of the Company in
whole or in part at any time after the termination for any or no
reason of the Investment Management Agreement in accordance with
the provisions thereof in an amount equal to the Base Liquidation
Preference plus accumulated and unpaid dividends (whether or not
earned or declared) calculated as of the date of redemption.
(b) Distributions Upon Liquidation.
Upon the dissolution, liquidation or winding up of the
affairs of the Company, whether voluntary or involuntary, the
holder of the Special Share shall be entitled to receive and to be
paid (or have set aside for payment) out of the assets of the
Company available for distribution to its shareholders, before any
payment or distribution shall be made on the Common Shares or on
any other class of shares of the Company ranking junior to the
Special Share upon dissolution, liquidation or winding up, an
amount equal to the Base Liquidation Preference plus an amount
equal to all dividends thereon (whether or not earned or declared)
accumulated but unpaid to (but not including) the date of final
distribution in same day funds in connection with the liquidation
of the Company. After the payment to the holder of the Special
Share of the full preferential amounts provided for in this
Section 3(b), the holder of the Special Share as such shall have
no right or claim to any of the remaining assets of the Company.
(c) Pro Rata Distributions.
In the event the assets of the Company available for
distribution to the holder of the Special Share upon any
dissolution, liquidation, or winding up of the affairs of the
Company, whether voluntary or involuntary, shall be insufficient
to pay in full all amounts to which such holder is entitled
pursuant to Section 3(b) above, no such distribution shall be made
on account of any shares of any other class or series of Preferred
Shares ranking on a parity with the Special Share with respect to
the distribution of assets upon such dissolution, liquidation or
winding up, unless proportionate distributive amounts shall be
paid on account of the Special Share, ratably, in proportion to
the full distributable amounts for which holders of all such
parity shares are respectively entitled upon such dissolution,
liquidation or winding up; provided, however, that in no event
shall such pro rata distribution be greater than the Base
Liquidation Preference.
(d) Rights of Junior Shares.
Subject to the rights of the holders of shares of any series
or class or classes of shares ranking on a parity with the Special
Share with respect to the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Company, after
payment shall have been made in full to the holder of the Special
Share as provided in Section 3(b) above, but not prior thereto,
any other series or class or classes of shares ranking junior to
the Special Share with respect to the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the
Company shall, subject to the respective terms and provisions (if
any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the holder of the Special
Share shall not be entitled to share therein.
(e) Certain Events Not Constituting Liquidation.
Neither the sale of all or substantially all of the property
or business of the Company, nor the merger or consolidation of the
Company into or with any legal entity nor the merger or
consolidation of any legal entity into or with the Company shall
be a dissolution, liquidation or winding up, whether voluntary or
involuntary, for the purposes of this Section 3.
(f) Clarification. For the avoidance of doubt, the phrase "whether or
not earned" as used in this Section 3 shall not be deemed to
imply that the holder of the Special
Share would be entitled to any amounts pursuant to this Section 3
in respect of dividends calculated under clause (ii) of Section
2(b) above unless such amounts are actually earned in accordance
with the terms of such clause (ii).
Section 4. Asset Coverage. The Company shall not issue or sell any Preferred
Shares (including, without limitation, the Special Share) unless
immediately thereafter the Preferred Shares (including, without
limitation, the Special Share) will have an asset coverage of at least
200%, as required under the Investment Company Act. Furthermore, the
Company may not declare or pay any dividend or distribution with
respect to the Common Shares or purchase any of its outstanding Common
Shares unless the Preferred Shares (including, without limitation, the
Special Share) have, at the time of the dividend, distribution or
purchase, an asset coverage of at least 200% after deducting the amount
of the dividend, distribution or purchase price.
Section 5. Voting Rights.
(a) General.
Except as otherwise provided in the Operating Agreement, the
By-Laws or a resolution of the Board of Directors, or as required
by applicable law, the holder of the Special Share shall have no
power to vote on any matter except matters submitted to a vote of
the Common Shares. In any matter submitted to a vote of the
holders of the Common Shares, the holder of the Special Share
shall be entitled to one vote, and the holders of the outstanding
Preferred Shares, including the Special Share, and the Common
Shares shall vote together as a single class; provided, however,
that at any meeting of the Members of the Company held for the
election of Directors, the holders of the outstanding Preferred
Shares, including the Special Share, shall be entitled, as a
class, to the exclusion of the holders of all other securities and
classes or series of Shares of the Company, to elect a number of
the Company's Directors, such that following the election of
Directors at the meeting of the Members, the Company's Board of
Directors shall contain two Directors elected by the holders of
the outstanding Preferred Shares, including the Special Share.
Subject to Section 5(b) hereof, the holders of the outstanding
Shares of the Company, including the holders of the outstanding
Preferred Shares (including the Special Share) voting as a single
class, shall elect the balance of the Directors.
(b) Right to Elect Majority of Board of Directors.
Subject to the rights of any creditors of the Company under
applicable law, during any period in which any one or more of the
conditions described below shall exist (such period being referred
to herein as a "Voting Period"), the number and/or composition of
Directors constituting the Board of Directors shall be adjusted as
necessary to permit the holders of outstanding Preferred Shares,
including the Special Share, voting separately as one class (to
the exclusion of the holders of all other securities and classes
and series of Shares of the Company) to elect the number of
Directors that, when added to the two Directors elected
exclusively by the holders of Preferred Shares pursuant to Section
5(a) above, would constitute a simple majority of the Board of
Directors as so adjusted. The
Company and the Board of Directors shall take all necessary
actions, including effecting the removal of Directors or
amendment of the Operating Agreement, to effect an adjustment of
the number and/or composition of Directors as described in the
preceding sentence. A Voting Period shall commence:
(i) if at any time accumulated dividends (whether or not earned
or declared, and whether or not funds are then legally
available in an amount sufficient therefor) on the Special
Share equal to at least six months' dividends shall be due
and unpaid and sufficient cash or specified securities shall
not have been deposited with the dividend-disbursing agent
for the payment of such accumulated dividends; or
(ii) if at any time holders of any Preferred Shares are entitled
to elect a majority of the Directors of the Company under
the Investment Company Act or the Statement of Preferences
creating any other Preferred Shares.
A Voting Period shall terminate when neither of the
conditions in subsections (i) and (ii) above are continuing. Upon
the termination of a Voting Period, the voting rights described in
this Section 5(b) shall cease, subject always, however, to the
reverting of such voting rights in the holders of Preferred Shares
upon the further occurrence of any of the events described in this
Section 5(b).
(c) Right to Vote with Respect to Certain Other Matters.
So long as the Special Share is outstanding, the Company
shall not, without the affirmative vote or consent of the holder
of the Special Share present and voting on such matter, voting
separately as one class, amend, alter or repeal the provisions of
the Operating Agreement or this Statement of Preferences, so as to
materially and adversely affect the rights, powers or preferences
of the Special Share; provided that a merger or consolidation that
would adversely affect the rights, powers or preferences of the
Special Share may be consummated without the consent of the holder
of the Special Share, if such holder receives 90 days' prior
written notice thereof. To the extent permitted under the
Investment Company Act, in the event that more than one series of
Preferred Shares are outstanding, the Company shall not effect any
of the actions set forth in the preceding sentence which
materially and adversely affect the rights and preferences set
forth in the Statement of Preferences for a series of Preferred
Shares differently than such rights and preferences for any other
series of Preferred Shares without the affirmative vote or consent
of the holders of at least a majority of the Preferred Shares
outstanding and present and voting on such matter of each series
adversely affected (each such adversely affected series voting
separately as a class). Notwithstanding anything that may be
contained herein to the contrary, the holder of the Special Share
shall not be entitled to vote on any matter that solely affects
the rights or interests of one or more other series of Preferred
Shares or Common Shares. In the event a vote of the holders of
Preferred Shares is required pursuant to the provisions of Section
13(a) of the Investment Company Act, the Company shall notify any
rating agency rating any series of Preferred Shares at least ten
Business Days prior to any such vote.
Unless a higher percentage is required under the Operating
Agreement, By-Laws or applicable provisions of Delaware law or
the Investment Company Act, the affirmative vote of the holders
of a majority of the outstanding Preferred Shares, voting as a
separate class, will be required to approve (i) any plan of
reorganization (as such term is used in the Investment Company
Act) adversely affecting the Preferred Shares, (ii) any action
requiring a vote of security holders under Section 13(a) of the
Investment Company Act, or (iii) any conversion of the Company
from a closed-end to an open-end investment company. For purposes
of this Section 5(c), the phrase "vote of the holders of a
majority of the outstanding Preferred Shares" (or any like
phrase) shall mean, in accordance with Section 2(a)(42) of the
Investment Company Act, the vote, at the annual or a special
meeting of the Members of the Company duly called, of the lesser
of (i) 67% or more of the Preferred Shares present at such
meeting and entitled to vote on such matter, if the holders of
more than 50% of the outstanding Preferred Shares entitled to
vote on such matter are present or represented by proxy; and (ii)
more than 50% of the outstanding Preferred Shares entitled to
vote on such matter. The class vote of holders of Preferred
Shares described above will in each case be in addition to a
separate vote of the requisite percentage of Common Shares and
Preferred Shares, including the Special Share, voting together as
a single class, necessary to authorize the action in question. An
increase in the number of authorized Preferred Shares pursuant to
the Operating Agreement or the issuance of additional shares of
any series of Preferred Shares (other than the Special Share)
pursuant to the Operating Agreement shall not in and of itself be
considered to adversely affect the rights and preferences of the
Preferred Shares.
(d) Voting Procedures.
(i) As soon as practicable after the accrual of any right
of the holders of Preferred Shares, including the
Special Share, to elect additional Directors as
described in Section 5(b) above, the Board of Directors
of the Company shall call a special meeting of such
holders, by mailing a notice of such special meeting to
such holders, such meeting to be held not less than 10
nor more than 45 days after the date of mailing of such
notice. If the Board of Directors does not call such a
special meeting, it may be called by any such holder on
like notice. The record date for determining the
holders entitled to notice of and to vote at such
special meeting shall be the close of business on the
fifth Business Day preceding the day on which such
notice is mailed or such other date as the Board of
Directors shall determine. At any such special meeting
and at each meeting of holders of Preferred Shares,
including the Special Share, held during a Voting
Period at which directors are to be elected, such
holders, voting together as a class (to the exclusion
of the holders of all other securities and classes of
Shares of the Company), shall be entitled to elect the
number of Directors prescribed in Section 5(b) above on
a one-vote-per-share basis. At any such meeting, or
adjournment thereof in the absence of a quorum, a
majority of such holders present in person or by proxy
shall have the power to adjourn the meeting without
notice, other than by an
announcement at the meeting, to a date not more than
120 days after the original record date.
(ii) The terms of office of all persons who are Directors of
the Company at the time of a special meeting of holders
of Preferred Shares to elect Directors shall continue,
notwithstanding the election at such meeting by such
holders of the number of Directors that they are
entitled to elect, and the persons so elected by such
holders, together with the two incumbent Directors
elected by the holders of Preferred Shares, and the
remaining incumbent Directors elected by the holders of
the Common Shares and Preferred Shares, shall
constitute the duly elected Directors of the Company.
(iii) Simultaneously with the termination of a Voting
Period, the terms of office of the additional Directors
elected by the holders of Preferred Shares pursuant to
Section 5(b) above shall terminate, the remaining
Directors shall constitute the Directors of the Company
and the voting rights of such holders of Preferred
Shares, including the Special Share, to elect
additional Directors pursuant to Section 5(b) above
shall cease, subject to the provisions of the last
sentence of Section 5(b). Upon the expiration of the
terms of the Directors elected by the holders of
Preferred Shares pursuant to Section 5(b) above, the
number of Directors shall be automatically reduced to
the number of Directors on the Board of Directors
immediately preceding such Voting Period.
(e) Exclusive Remedy.
Unless otherwise required by law, the holder of the Special
Share shall not have any rights or preferences other than those
specifically set forth herein or in the Operating Agreement. The
holder of the Special Share shall have no preemptive rights or
rights to cumulative voting. In the event that the Company fails
to pay any dividends on the Special Share, the exclusive remedy of
the holder shall be the right to vote for Directors pursuant to
the provisions of this Section 5.
Section 6. Book-Entry. The Special Share will be issued in book entry form,
and the holder of the Special Share will not be entitled to a share
certificate therefor unless the Board of Directors approves the
issuance of a Special Share certificate.
Section 7. Transfers of Special Share. In addition to the requirements for
transfer set forth in the Operating Agreement, no Transfer of the
Special Share shall be made to any Person (other than the Company)
without the consent of the Company which shall not be unreasonably
withheld.
Section 8. Regulations. The Board of Directors may make such additional rules
and regulations, not inconsistent with this Statement of Preferences,
as it may deem expedient concerning the issue, transfer and
registration of any certificates (if any such certificates are issued)
for the Special Share. It may appoint, or authorize any officer or
officers of
the Company to appoint, one or more transfer agents or one or more
transfer clerks and one or more registrars.
Section 9. Other Rights or Preferences. Unless otherwise required by law, the
Special Share shall not have any rights or preferences other than those
set forth herein or in the Operating Agreement.
Section 10. Headings Not Determinative. The headings contained in this
Statement are for convenience of reference only and shall not affect
the meaning or interpretation of this Statement.
Section 11. Member of the Company. The registered holder of the Special Share
shall be automatically admitted as a Preferred Member of the Company.
IN WITNESS WHEREOF, YORK ENHANCED STRATEGIES FUND, LLC has caused these
presents to be signed as of November 17, 2005 in its name and on its behalf by
its President and attested by an Authorized Person. Said officers of the Company
have executed this Statement as officers and not individually, and the
obligations and rights set forth in this Statement are not binding upon any such
officers, or the directors or shareholders of the Company, individually, but are
binding only upon the assets and property of the Company.
YORK ENHANCED STRATEGIES FUND, LLC
By: _____________________________
Name: Xxxxxxx X. Xxxxx
Title: President
Attest: _____________________________
Name:
Title:
APPENDIX C
Form of Notice of Transfer
[DATE]
York Enhanced Strategies Fund, LLC
c/o York Enhanced Strategies Management, LLC
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: [_________________]
Fax: (000) 000-0000
Tel: (000) 000-0000
Ladies and Gentlemen:
This letter (the "Transfer Certificate") is to advise you that [_______________]
(the "Purchaser") will purchase (contingent only upon the approval of such
purchase by York Enhanced Strategies Fund, LLC, a Delaware limited liability
company (the "Company")) in a private resale (the "Purchase") from
[___________________] (the "Seller") [insert number or amount] of [Common Shares
(the "Shares") or the Seller's Common Share Commitment (the "Commitment")]
issued pursuant to the Operating Agreement of the Company dated as of
[_____________, 2005] (as amended, modified or supplemented from time to time,
the "Operating Agreement"). Capitalized terms used herein and not defined have
the respective meanings assigned to them in the Operating Agreement, a copy of
which has been provided to the undersigned by the Seller. The Seller has also
provided to the Purchaser the final Private Placement Memorandum, dated [OCTOBER
__, 2005], relating to the Common Shares of the Company, together with any
supplements thereto (the "Private Placement Memorandum"); the Subscription
Agreement, dated as of [________], 2005, by and between the Company and the
initial purchaser of the Shares (the "Subscription Agreement"); and any other
written materials furnished or made available to the Seller by or on behalf of
the Company and relating to the purchase of the Shares (collectively, the
"Offering Materials").
The undersigned hereby irrevocably agrees, represents and warrants on behalf of
the Purchaser that:
1. The Purchaser has received from the Investment Manager and has
truthfully and accurately completed and returned to the Investment
Manager a subscription agreement, which is attached hereto, and the
representations and warranties made by the Purchaser in such
subscription agreement, including, without limitation, the
representations and warranties relating to the Purchaser's status as
an "accredited investor" within the meaning of Regulation D promulgated
under the Securities Act, as a "qualified client" within the meaning of
Rule 205-3 promulgated under the Advisers Act and as a "qualified
purchaser" with the meaning of Section 2(a)(51)(A) of the Investment
Company Act and the regulations promulgated thereunder, accurately
describe the status of the Purchaser. The Purchaser understands that
the Company and the Investment Manager will rely on the representations
and warranties made by the Purchaser in the subscription agreement in
determining the eligibility of the Purchaser to purchase the Shares.
2. If the Purchaser resells or transfers all or any portion of the Shares,
the Purchaser will obtain from each purchaser or transferee a letter
containing the same representations and agreements as set forth herein
and will have such purchaser or transferee complete a subscription
agreement.
3. The Purchaser (i) hereby agrees that this Transfer Certificate may be
attached to the Operating Agreement and (ii) by executing and
delivering this Transfer Certificate, with the consent of the Company,
hereby becomes a Substituted Member under the Operating Agreement and
agrees to be bound by all the terms thereof.
4. The Purchaser hereby constitutes and appoints the Investment Manager
its true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution for the Purchaser and in its name,
place and stead, in any and all capacities, to take any and all actions
as are authorized by the power of attorney contained in the Operating
Agreement.
The power of attorney granted hereby shall be deemed an irrevocable
special power of attorney, coupled with an interest, which the
Investment Manager may exercise for the Purchaser by the signature of
the Company or by listing the Purchaser as a Member, and executing any
instrument with the signature of the Company as attorney-in-fact for
the Purchaser. This grant of authority shall survive the assignment by
the Purchaser of all or any portion of its Shares or Common Share
Commitment, except where the assignment is of the Purchaser's entire
interest in the Company and the assignee thereof with the consent of
the Board of Directors is admitted as a Substituted Member; provided,
however, that this power of attorney shall survive the delivery of such
assignment for the sole purpose of enabling the Board of Directors to
effect such substitution.
5. The Purchaser agrees to bear all of the Company's expenses and costs
incurred in connection with the Transfer and substitution, including
all legal fees and filing fees.
6. If the Purchaser acquires the obligations of the Transferor under the
Transferor's Common Share Commitment with respect to all or any portion
of such Common Share Commitment, the Purchaser hereby agrees to assume
and timely and faithfully complete all of the Transferor's obligations
with respect to such Common Share Commitment and assume all other
obligations of the Transferor under the Operating Agreement.
7. [THE PURCHASER ACKNOWLEDGES THAT IT IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A OF THE SECURITIES ACT AND CAN THEREFORE
HOLD GLOBAL SECURITIES.] [OR] [THE PURCHASER ACKNOWLEDGES THAT IT IS
INELIGIBLE TO HOLD GLOBAL SECURITIES AND THEREFORE MUST HAVE A PHYSICAL
SECURITY DELIVERED TO IT.]
Very truly yours,
[NAME OF PURCHASER]
Address:
By: ________________________ __________________________
Name:
Title: __________________________
This Transfer Certificate shall constitute (i) the notice of Transfer required
under subsection 11.2(a)(iii) of the Operating Agreement and (ii) the instrument
of transfer required under subsection 11.2(b)(ii) of the Operating Agreement.
[NAME OF SELLER]
Address:
By: ________________________ __________________________
Name:
Title: __________________________
The undersigned, on behalf of the Company, hereby acknowledges receipt of this
Transfer Certificate and acknowledges and agrees that this Transfer Certificate
shall constitute the notice of Transfer required under subsection 11.2(a)(iii)
of the Operating Agreement and the instrument of transfer required under
subsection 11.2(b)(ii) of the Operating Agreement. The undersigned, on behalf of
the Company, hereby consents to the Transfer which is the subject of this notice
of Transfer pursuant to subsections 11.2(a)(iii) and 11.2(b)(i) of the Operating
Agreement and hereby acknowledges and agrees that the Purchaser shall become a
Substituted Member under the Operating Agreement pursuant to subsection 11.2(b)
of the Operating Agreement. The proper authorized Person of the Company will
record on the books and records of the Company the Purchaser as a Member of the
Company.
By: York Enhanced Strategies Management, LLC,
Investment Manager of York Enhanced
Strategies Fund, LLC
By: ___________________________
Name:
Title:
Appendix D
Subscription Agreement
Appendix E
Schedule of Members
