LOAN AND PLEDGE AGREEMENT
Exhibit (k)(10)
AGREEMENT dated as of September 16, 2004, between CUSTODIAL TRUST COMPANY (“Bank”), a bank and
trust company organized and existing under the laws of the State of New Jersey, and XXXXX XXXXXXXX
MLP INVESTMENT COMPANY (“Borrower”), a company organized and existing under the laws of the State
of Maryland and registered as a management investment company under the Investment Company Act of
1940.
WHEREAS, Borrower may seek to obtain, and Bank may be willing to make, loans to Borrower from
time to time in an aggregate principal amount of up to the lesser of $125,000,000 or the maximum
amount Borrower is then permitted to borrow under the Investment Company Act of 1940;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS. The following terms, unless the context otherwise requires, shall have the
following meanings as used herein:
(a) “Business Day” means any day on which banks in both the States of New Jersey and
New York are open for business.
(b) “Collateral” has the meaning given in Section 7(b) below.
(c) “Custody Agreement” means the Custody Agreement dated as of September 15, 2004, between
Bank and Borrower.
(d) “Event of Default” has the meaning given in Section 17 below.
(e) “Excess Collateral” at any time means (i) all Collateral which does not consist of
cash in the Pledge Account or Pledged Securities and (ii) Collateral consisting of cash in
the Pledge
Account, and/or Pledged Securities, having an aggregate Initial Loan Value not greater than
the difference between (A) the sum of all cash in the Pledge Account and the aggregate
Initial Loan Value of all Pledged Securities and (B)the sum of the outstanding aggregate
principal amount of all the Loans and the interest accrued thereon.
(f) “Guarantee” of or by any Person means any obligation, contingent or otherwise, of such
Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other
Person (the “Primary Obligor”) in any manner, whether directly or indirectly, and including any
obligation of such Person, direct or indirect, (i) to purchase (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for
the purchase of) any security for the payment of such Indebtedness, (ii) to purchase
property, securities or services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the Primary Obligor so as to enable the Primary
Obligor to pay such Indebtedness; provided, however, that the term Guarantee shall
not include endorsements for collection or deposit, in either case in the ordinary course of
business.
(g) “Indebtedness” of any Person means, without duplication, (i) all obligations of
such Person for borrowed money or with respect to deposits or advances of any kind, (ii)
all obligations of such Person evidenced by bonds, debentures, notes or similar instruments,
(iii) all obligations of such Person upon which interest charges are customarily paid,
(iv) all obligations of such Person issued or assumed as the deferred purchase price of
property or services which under generally accepted accounting principles would be shown on a
balance sheet of such Person as a liability, (v) all Indebtedness of others secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
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otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or
not the obligations secured thereby have been assumed, (vi) all Guarantees by such Person
of Indebtedness of others, (vii) all obligations of such Person in respect of interest rate
and currency swap agreements and similar agreements obligating such Person to make payments,
whether direct or indirect or periodically or upon the happening of a contingency, and
(viii) all obligations of such Person as an account party in respect of letters of credit
and bankers’ acceptances. The Indebtedness of any Person shall include the Indebtedness of any
partnership in which such Person is a general partner.
(h) “Initial Loan Value” means the collateral value assigned to the Collateral in accordance
with Section 7(e) below.
(i) “Interest Closing Date” with respect to any Loan means the day next preceding the day that
such Loan is repaid in full and, prior to such day, any day next preceding an Interest Commencement
Date for such Loan.
(j) “Interest Commencement Date” with respect to any Loan means the date on which such Loan is
made and thereafter any 21st day of any month if such day occurs while such Loan is outstanding (or
if any such 21st day is not a Business Day, then the next succeeding Business Day).
(k) “Interest Period” with respect to any Loan means each period from and including an
Interest Commencement Date for such Loan to and including the next succeeding Interest Closing Date
for such Loan.
(l) “Lien” means, with respect to any asset, (i) any mortgage, deed of trust, lien,
pledge, encumbrance, charge or security interest in or on such asset or any assignment,
hypothecation, deposit arrangement or other preferential arrangement of or with
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respect to such asset, and (ii) any purchase option, call or similar right of a third party
with respect to such asset.
(m) “Loan” and “Loans” have the meaning given in Section 2 below.
(n) “Maintenance Loan Value” means the collateral value assigned to the Collateral in
accordance with Section 7(e) below.
(o) “Market Value” means the value assigned to the Collateral in accordance with Section 7(g)
below.
(p) “1940 Act” means the Investment Company Act of 1940 as from time to time in effect.
(q) “Person” means any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, limited liability company, corporation, government or any
agency, court or political division thereof, or any other entity.
(r) “Pledge Account” means the securities custody account maintained by Borrower at Bank that
is marked to show that the assets credited thereto are pledged to Bank pursuant to this Agreement.
(s) “Pledged Securities” means all securities pledged by Borrower to Bank pursuant to
Section 7(b)(i) below.
(t) “30-day LIBOR” means the one-month London Inter-Bank Offered Rate for U.S. dollars as
quoted on Page 3750 on the Dow Xxxxx Market Service, formerly known as the Telerate Service (or
such other page as may replace Page 3750 on that service or such other service as may be designated
for the time being by the British Bankers’ Association as the information vendor for the purpose of
displaying British Bankers’ Association Interest
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Settlement Rates), as of 11:00 a.m., London time, on an Interest Commencement Date.
2. LOANS. (a) Subject to the terms and conditions of this Agreement, Bank may, in its sole and
absolute discretion, make loans to Borrower (each, a “Loan”, and, collectively, the “Loans”) at
such times and in such amounts as Borrower may request, which amounts may be borrowed, repaid and
reborrowed, provided that the Loans shall not exceed, in aggregate principal amount at any
one time outstanding, the lesser of $125,000,000 or the maximum amount Borrower is then permitted
under the 1940 Act to borrow.
(b) Each Loan shall be in a principal amount of $100,000 or more.
(c) Borrower shall request each Loan by notice to Bank, specifying (i) the date (which
shall be a Business Day) on which Borrower desires that such Loan be made, (ii) the
principal amount of such Loan, (iii) the Collateral for such Loan and (iv) such
information about the use of the proceeds from such Loan as Bank may from time to time require,
which notice shall be received by Bank no later than the last Business Day prior to the date on
which Borrower desires that such Loan be made.
(d) The Loans shall be evidenced by the Pledge Account and the records made thereof by Bank,
which shall be conclusive, absent manifest error, as to the amount of the Loans and the interest
and payments thereon. Any failure so to record or any error in doing so shall not limit or
otherwise affect the obligation of Borrower under this Agreement to pay any amount owing with
respect to the Loans.
(e) Performance by Borrower of all the obligations and covenants it has incurred and made
under this Agreement shall in no way impair or compromise the sole and absolute discretion of Bank
to agree or not agree to make any Loan at any time.
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3. CONDITIONS PRECEDENT. (a) The obligation of Bank to make any Loan, which it has, in
its sole and absolute discretion, agreed to make, shall be subject to the fulfillment on the date
of the making of such Loan of each of the following conditions precedent: (i) that no event
has occurred and is continuing which constitutes an Event of Default or which, upon the giving of
notice, the lapse of time, or both, would constitute an Event of Default, (ii) that the
representations and warranties of Borrower in Sections 9, 10 and 11 below are correct and accurate
as though made on such date, (iii) that after giving effect to the making of such Loan, Borrower’s
continuous asset coverage, as defined in the 1940 Act, is no less than 300% of the aggregate
principal amount of all of its borrowings, including such Loan, then outstanding, (iv) that
Borrower has fulfilled, to the satisfaction of Bank, Borrower’s obligations with respect to such
Loan and the Collateral therefor as set forth in Section 7(a) below, (v) that after giving effect
to the making of such Loan and the pledge of Collateral therefor, the Collateral then held by Bank
includes Pledged Securities, and/or cash in the Pledge Account, having an aggregate Initial Loan
Value equal to or greater than the sum of the outstanding aggregate principal amount of all the
Loans and the accrued interest thereon, (vi)that after giving effect to the making of such Loan and
the pledge of Collateral therefor, the outstanding aggregate principal amount of all Loans does not
exceed the maximum then permitted under Section 2(a) above, and (vii) that Bank has received from
Borrower such documents as Bank may reasonably request.
(b) The obligation of Bank to make the first Loan which it has, in its sole and absolute
discretion, agreed to make shall be subject to the fulfillment of the condition precedent that, on
or prior to the date of the making of such Loan, Bank shall have received from Borrower (i)
the origination fee provided for in Section 13 below, (ii) a statement of assets and
liabilities and the related statement of operations and statement of changes in net assets
(“Financials”) for Borrower’s most recent (6-month or 12-
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month) fiscal period for which they are available, as well as audited Financials for
Borrower’s most recent fiscal year for which such audited Financials are available, and
(iii) if requested by Bank, a Statement of Purpose (Federal Reserve Form U-1) duly
completed and signed by Borrower.
4. TERMS OF REPAYMENT; WAIVERS. (a) The principal amount of each Loan shall be
repayable by Borrower at any time, whether or not an Event of Default has occurred and is then
continuing, either (i) in full (together with all accrued interest on such Loan) upon
demand by Bank to Borrower for such repayment in full, or (ii) in part (together with all
accrued interest on such part) upon demand by Bank to Borrower for repayment of such part.
(b) Performance by Borrower of all the obligations and covenants it has incurred and made
under this Agreement shall in no way impair or compromise the right of Bank in its sole and
absolute discretion to demand, at any time, repayment of all or any portion of any Loan.
(c) Any Loan may also become repayable by Borrower, in whole or in part, as provided in
Section 7(d) below, and shall become repayable by Borrower in its entirety as provided in Section
17 below upon the occurrence of an Event of Default.
(d) Borrower may repay any Loan in its entirety or in part at any time, without premium or
notice of any kind but together with all accrued interest on the amount thereof that is repaid.
(e) Borrower hereby waives presentment and protest of any instrument and notice thereof,
notice of default and, to the extent permitted by applicable law, all other notices to which
Borrower might otherwise be entitled.
5. INTEREST AND OTHER CHARGES. (a) Borrower shall pay Bank interest, in arrears, on the
principal amount of each Loan from the
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date on which such Loan is made pursuant to Section 2 above until such Loan is due under this
Agreement, at a rate per annum during each Interest Period equal to 30-day LIBOR on the Interest
Commencement Date of such Interest Period plus one and one-quarter percent (125 basis points),
except that if the aggregate Market Value of non-publicly traded securities
included among the Pledged Securities on any Interest Commencement Date represents no more than 10%
of the aggregate Market Value of all Pledged Securities on such date, then the interest rate per
annum during the Interest Period commencing on such Interest Commencement Date shall equal 30-day
LIBOR on such Interest Commencement Date plus one percent (100 basis points).
(b) All interest payable under this Agreement shall be calculated by Bank, on the basis
of a 360-day year and for the actual number of days elapsed. Interest accrued on a Loan pursuant to
Section 5(a) above shall be payable by Borrower (i) monthly on the 10th day of the calendar
month next succeeding the calendar month in which such Interest Period ended (or, if such 10th day
is not a Business Day, on the next succeeding Business Day), (ii) upon repayment of such
Loan in full, and (iii) as otherwise provided in this Agreement. For purposes of computing
interest, a Loan shall be deemed to be outstanding on the day that it is made, but not on the day
that it is repaid.
(c) Borrower shall pay Bank interest on any amount not paid by Borrower when due under this
Agreement, from the date payment of such amount was due until the date such amount is paid, at a
rate per annum during each Interest Period equal to 30-day LIBOR on the Interest Commencement Date
of such Interest Period plus three and one-quarter percent (325 basis points). Such interest shall
be payable on demand made by Bank from time to time.
(d) Each determination of an interest rate by Bank pursuant to this Agreement shall be
conclusive and binding on Borrower in the absence of manifest error.
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(e) In no event whatsoever shall the interest rate and other charges charged hereunder exceed
the highest rate permissible under any law which a court of competent jurisdiction, in a final
determination, deems applicable hereto. In the event that such a court determines, in a final
determination, that Bank has received interest and other charges hereunder in excess of such
highest rate, Bank shall promptly refund such excess amount to Borrower, and the provisions hereof
shall be deemed amended to provide for such permissible rate.
6. PLACE AND MANNER OF PAYMENT. Borrower shall make all payments required to be made by
it under this Agreement (whether of principal, interest or any other amount) prior to 11:00 A.M.
New York time on the date such payment is due, at such address in the United States of America as
Bank shall from time to time indicate to Borrower, in U.S. dollars and in immediately available
funds.
7. COLLATERAL SECURITY, PLEDGE AND LOAN VALUES. (a) On or before the date of the making
of any Loan, (i) Borrower shall deliver to the Pledge Account, or otherwise give to Bank as
pledgee effective control over, securities, that are acceptable to Bank in its sole and absolute
discretion and on the date of the making of such Loan either (A) have an aggregate Initial
Loan Value of no less than the principal amount of such Loan or (B) if there is on such
date Excess Collateral consisting of Pledged Securities, and/or cash credited to the Pledge
Account, have an aggregate Initial Loan Value of no less than the difference between (x)
the principal amount of such Loan and (y) the aggregate Initial Loan Value of such Excess
Collateral, (ii) Borrower shall deliver to Bank such instruments of assignment, signed in
blank by Borrower, consents and other documents, all in form and substance satisfactory to Bank, as
may be required to transfer such securities to Bank or to give Bank effective control over them and
(iii) if any of the securities transferred to Bank pursuant to this Section 7(a) are
uncertificated securities, the issuer of such
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securities shall deliver to Bank a confirmation of the registration of such securities, or of
the pledge thereof, in the name of Bank.
(b) To secure the due and punctual payment of all of the Loans, all accrued interest thereon
and all other amounts from time to time payable by Borrower under this Agreement, and the
performance by Borrower of all its obligations and covenants under this Agreement, Borrower hereby
pledges, hypothecates, assigns, transfers and sets over to Bank, and grants to Bank (i) a first
priority, perfected security interest in and lien upon, (A) all Pledged Securities at any
time credited to the Pledge Account, (B) all other property of Borrower now or at any time
hereafter in Bank’s possession including, but not limited to, all other securities, monies, claims
and credit balances, and (D) all proceeds, products and profits derived from any of the foregoing
(including all cash, securities, dividends and other property at any time and from time to time
received, receivable or otherwise distributed in respect of or in exchange for any or all of the
foregoing, proceeds of any insurance policies, proceeds of proceeds, and claims against third
parties), and all books and records related to any of the foregoing and (ii) to the extent
lawful under applicable laws and regulations, a security interest in all property of Borrower held
by, through or on behalf of any of Bank’s affiliates, including securities credited to Borrower’s
accounts with securities broker-dealer affiliates of Bank, and all proceeds, products and profits
derived from such property (all of the foregoing Pledged Securities and other property, together
with all other property in which Borrower may hereafter xxxxx x Xxxx to Bank, being herein
collectively referred to as the “Collateral”).
(c) Bank and Borrower hereby agree that each partnership interest, limited liability
company member interest and other item of property (whether investment property, financial asset,
security or instrument) held in or credited to any account of Borrower at Bank or at any affiliate
of Bank shall, with the exception of cash,
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be treated as a “financial asset” under Article 8 of the New York Uniform Commercial Code.
(d) At all times while any Loan is outstanding, Borrower shall maintain Collateral with Bank
consisting of Pledged Securities, and/or cash credited to the Pledge Account, having an aggregate
Maintenance Loan Value of not less than the sum of the outstanding aggregate principal amount of
all the Loans and the interest accrued thereon. Forthwith upon demand made to Borrower by Bank,
Borrower shall, at its option, either (i) deliver into the Pledge Account, or otherwise
give to Bank as pledgee effective control over, such additional securities, which are acceptable to
Bank in its sole and absolute discretion, or (ii) repay so much of the outstanding
aggregate principal amount of the Loans, as, in either case, may be necessary for the aggregate
Maintenance Loan Value of all Collateral consisting of Pledged Securities, and/or cash credited to
the Pledge Account, to be no less than the sum of the outstanding aggregate principal amount of all
the Loans and the interest accrued thereon.
(e) The Initial Loan Value and the Maintenance Loan Value of any of the Pledged
Securities or other item of Collateral credited to the Pledge Account are each an amount
representing a percentage of the Market Value of such Pledged Security or other item of Collateral
and shall be determined either in accordance with Schedule A hereto (which may be supplemented or
revised at any time in the sole and absolute discretion of Bank) or from time to time by Bank in
its sole and absolute discretion if such Initial Loan Value and Maintenance Loan Value are not set
forth on such Schedule A, provided that any of such Collateral that is subject to any Lien
other than one permitted under Section 16(b)(iv) below shall have no Initial or Maintenance Loan
Value.
(f) With the prior approval of Bank as to any substitute securities and/or other collateral
and as to the manner of substitution, Borrower may at any time and from time to time
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substitute such securities and/or other collateral for all or some of the Collateral,
provided that no Event of Default has occurred and is continuing and that, immediately
after giving effect to such substitution, the aggregate Initial Loan Value of all remaining Pledged
Securities, and cash in the Pledge Account, is not less than the sum of the outstanding aggregate
principal amount of the Loans and the interest accrued thereon.
(g) If and for so long as any securities (including Pledged Securities) belonging to
Borrower are listed on a national securities exchange in the United States of America, their Market
Value shall be determined for all purposes by the last sales price for such Pledged Securities on
any such exchange on the Business Day next preceding the date of determination or, if there was no
sale on that Business Day, by the last sales price for such Pledged Securities on the next
preceding Business Day on which there was a sale thereof on any such exchange, all as quoted on the
Consolidated Tape of the New York Stock Exchange or, if not quoted on such Consolidated Tape, then
as quoted by any such exchange. The Market Value of any other item of Collateral, and the Market
Value of Pledged Securities if they are not listed on any such exchange, shall be determined by
Bank for all purposes (i) based upon the prices bid (on the Business Day next preceding the
date of determination) by banks and broker/dealers which regularly quote prices on property of the
same type as such item of Collateral or (ii) if no such quotations are available for such
Business Day, based upon such factors as Bank, in its sole and absolute discretion, shall
determine. Market Value, in the case of interest-bearing Collateral, shall include accrued interest
to the date on which such Market Value is determined. Each determination of Market Value shall be
conclusive and binding on Borrower in the absence of manifest error.
(h) Subject to Section 7(j) below, Bank shall promptly pay over to Borrower (i) any
and all dividends , interest repayment or redemption proceeds and other distributions received by
Bank on
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account of the Collateral (and irrespective of whether such dividends, interest, proceeds and
other distributions are paid or made in kind), unless, at such time or after giving effect to such
payment or delivery by Bank to Borrower, the aggregate Maintenance Loan Value of all Pledged
Securities, and cash credited to the Pledge Account, is or would be less than the sum of the
outstanding aggregate principal amount of all the Loans and the interest accrued thereon.
(i) Subject to Section 7(j) below, Borrower shall be entitled to exercise, for any
purpose not inconsistent with the terms of this Agreement, any and all voting and/or consensual
rights and powers relating or pertaining to the Collateral. In furtherance of such exercise, Bank
shall deliver to Borrower all notices of meetings, proxy materials (other than proxies) and other
materials which it receives regarding (i) Pledged Securities from the issuers thereof or,
in the case of tender, exchange or similar offers for Pledged Securities, from the party (or its
agent) making the offer and (ii) regarding Pledged Securities or any other item of
Collateral, from any court having jurisdiction over (or from any Person who is a party to)
reorganization, liquidation or other similar proceedings for the issuer of such Pledged Securities
or the obligor on such other item of Collateral. Whenever Bank or any of its agents receives a
proxy with respect to Pledged Securities, Bank shall promptly request instructions from Borrower on
how such securities are to be voted, and shall give such proxy, or cause it to be given, in
accordance with such instructions. If Borrower timely informs Bank that Borrower wishes to vote any
such Pledged Securities in person, Bank shall promptly seek to have a legal proxy covering such
securities issued to Borrower.
(j) If an Event of Default occurs and for so long as it continues, Borrower shall cease to be
entitled (i) to exercise any and all voting and/or consensual rights and powers relating or
pertaining to any of the Collateral and (ii) to receive pursuant to Section 7(h) above any
dividends, interest, repayment or redemption
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proceeds and other distributions on account of the Collateral; and Bank shall have the sole
and exclusive right and authority to exercise such voting and/or consensual rights and powers and
to receive and retain such dividends, interest, proceeds and other distributions as additional
Collateral for application in accordance with the provisions of this Agreement.
(k)(i) Any time there is Excess Collateral, and provided that no Event of Default has
occurred and is continuing, Borrower may designate to Bank, in writing, any of such Excess
Collateral, and Bank, promptly upon such designation, shall release such designated Excess
Collateral from the lien and security interest granted in Section 7(b) above and, if such
designated Excess Collateral is under the control of Bank, deliver it (or control of it) pursuant
to such instructions as Borrower may have given to Bank, provided that, immediately after
giving effect to such delivery, the aggregate Initial Loan Value of all remaining Pledged
Securities, and cash in the Pledge Account, is not less than the sum of the outstanding aggregate
principal amount of all the Loans and the interest accrued thereon.
(ii) Provided that no Event of Default has occurred and is continuing, and
unless Bank and Borrower agree otherwise, Borrower shall have the right to deal freely under this
Agreement in any item of Collateral which is neither a Pledged Security nor cash credited to the
Pledge Account.
(l) Upon (i) the payment in full of all the Loans, all accrued interest thereon and
all other amounts payable by Borrower under this Agreement, and (ii) the performance by
Borrower of all its obligations and covenants under this Agreement, the security interest and lien granted in Section
7(b) above in and upon the Collateral shall terminate, and all of Bank’s rights hereunder to the
Collateral shall revert to Borrower. Upon notice from Borrower after such termination, Bank shall
deliver to Borrower, or give Borrower effective control over, all Collateral under Bank’s
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control, and shall deliver to Borrower all instruments and documents evidencing such Collateral and
such other documents as Borrower shall reasonably request to evidence such termination.
8. PROTECTION OF SECURITY INTEREST. (a) Borrower shall, at its expense and from time to time,
perform all steps reasonably requested by Bank at any time to perfect, maintain, protect and
enforce Bank’s security interest in and lien upon the Collateral, including, without limitation,
(i) executing and filing financing or continuation statements and amendments thereto, in form and
substance satisfactory to Bank, and (ii) obtaining such consents and registrations of transfer,
providing such endorsements and executing and delivering such other documents as may be required
for any sale, transfer or other disposition thereof by Bank. From time to time, Borrower shall,
upon Bank’s written request, promptly execute and deliver confirmatory written instruments pledging
the Collateral to Bank, but any failure by Borrower to do so shall not affect or limit Bank’s
security interest in, lien upon or other rights in and to the Collateral. Until payment in full of
all the Loans, all accrued interest thereon and all other amounts payable by Borrower under this
Agreement, and the performance by Borrower of its obligations and covenants under this Agreement,
Bank’s security interest in the Collateral shall continue in full force and effect.
(b) Borrower hereby irrevocably appoints Bank its true and lawful attorney in its name,
place and stead, and at its expense, in connection with the preservation and enforcement of Bank’s
rights and remedies under this Agreement (i) to receive, endorse and collect all checks and
other orders for the payment of money made payable to Borrower representing any dividend, interest
or other distribution payable or distributable in respect of any of the Collateral and to give full
discharge for the same, (ii) to give all notices, obtain all consents, effectuate all
registrations in Bank’s name or that of a proposed purchaser or other transferee and make all
transfers of all or any part of the Collateral which
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are necessary or appropriate in connection with any sale, transfer or other disposition
thereof pursuant to this Agreement, (iii) to date, insert therein the name of an assignee,
and deliver each of any instruments of assignment delivered to Bank pursuant to Section 7(a) above,
and to prepare and execute all such amendments thereto as may be required to obtain any consent
necessary for Bank’s sale, transfer or other disposition of the item of Collateral to which such
instrument of assignment pertains, (iv) to execute and deliver for value all necessary or
appropriate assignments and other instruments in connection with any such sale, transfer or other
disposition, and (v) to execute and deliver all other documents, and do all other acts and
things, which Bank deems appropriate in such connection. Borrower hereby ratifies and confirms all
that Bank, as Borrower’s attorney, may lawfully do hereunder and pursuant hereto, but,
nevertheless, at Bank’s request or that of the purchaser or other transferee in question, Borrower
shall ratify and confirm any sale, transfer or other disposition of Collateral pursuant to this
Agreement in such manner as Bank or such purchaser or other transferee may reasonably specify in
such request.
9. OTHER LIENS. Borrower represents and warrants to Bank that all Collateral is owned by
Borrower free and clear of all Liens whatsoever and that (except for Liens permitted under Section
16(b) below) it will continue to be so owned by Borrower.
10. USE OF PROCEEDS. Borrower represents and warrants to Bank that the proceeds of each Loan
will be used to purchase and carry portfolio securities in its business as an investment company
registered under the 1940 Act.
11. OTHER REPRESENTATIONS AND WARRANTIES. Borrower further represents and warrants to Bank
that:
(a) except as Bank may otherwise agree in writing with respect to specific securities, the
Collateral shall at no time
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include any Pledged Securities or other property in an amount such that
(without taking any other relationships or assets of Bank into account) Bank, either upon
exercising its rights under Section 18 below or otherwise, would become a holder of 10% or more of
any class of any equity security of any issuer or would become (or be presumed to be) an affiliate
of any issuer of securities (as such term “affiliate” is defined for purposes of the Securities Act
of 1933);
(b) except as otherwise disclosed by Borrower to Bank in writing prior to the inclusion
thereof in the Collateral, Borrower is not an affiliate (as such term “affiliate” is defined for
purposes of the Securities Act of 1933) of the issuer of any Pledged Security (or other security
included in the Collateral);
(c) if any Pledged Securities are “restricted securities” as defined in Rule 144 under the
Securities Act of 1933, then at least two years have elapsed since the later of the date such
Pledged Securities were acquired by any Person from the issuer thereof or from an affiliate of such
issuer (as such term “affiliate” is defined for purposes of the Securities Act of 1933), and,
assuming that Bank is not an affiliate of the issuer of such securities (as such term “affiliate”
is defined for purposes of the Securities Act of 1933), Bank may, in the exercise of its rights
under Section 18 below, sell such Pledged Securities pursuant to paragraph (k) of such Rule 144;
(d) Borrower (i) is a company duly organized, validly existing and in good standing
under the laws of the State of Maryland, (ii) is subject to and duly registered as a
management investment company in accordance with the 1940 Act, (iii) is qualified to do business
and is in good standing in all states in which qualification and good standing are necessary in
order for it to conduct its business and own its property, and (iv) has all
requisite power and authority to conduct its business, to own its
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property, to execute and
deliver this Agreement and to perform its obligations hereunder;
(e) this Agreement has been duly and validly executed and delivered by Borrower and
constitutes a legal, valid and binding obligation of Borrower, enforceable against it in accordance
with its terms, subject, as to enforceability of remedies, to bankruptcy, insolvency and other laws
affecting creditors’ rights generally and to general principles of equity;
(f) Borrower has taken all necessary action to authorize the execution, delivery and
performance of this Agreement, and such authorization, delivery and performance do not and will not
(i) violate its corporate charter or by-laws or any law, rule, regulation, order, judgment,
injunction, decree, determination or award presently in effect and applicable to it, (ii)
require any consent or result in a breach of or constitute a default under any agreement, lease or
instrument to which it is a party or by which it or any of its assets may be bound or affected, or
(iii) result in or require the creation or imposition of any Lien (other than in favor of
Bank pursuant to this Agreement) upon or with respect to any of the properties now owned or
hereafter acquired by it;
(g) no recording, order, authorization, consent, license, registration, approval,
exemption, filing, notice or other similar action by or with any governmental body, governmental
official or other regulatory authority (except such as have been obtained and copies or
confirmations of which have been delivered by Borrower to Bank) is or will be necessary (i)
for the legality, validity, binding effect or enforceability of this Agreement, (ii) to
permit the performance by Borrower of its obligations under this Agreement in accordance with the
terms thereof, (iii) to enable Bank to enforce its rights and remedies under this
Agreement, including any sale, transfer or other disposition by Bank of all or any part of the
Collateral or (iv) to create and perfect the Lien granted under
- 18 -
this Agreement on the Pledged Securities and other Collateral in the Pledge Account.
(h) Borrower has no Indebtedness other than Indebtedness permitted under Section 16(a) below;
(i) Borrower is not in default with respect to any of its Indebtedness;
(j) except as disclosed by it to Bank in writing prior to the date of this Agreement, there is
no litigation or other proceeding pending or, to its knowledge, threatened against or affecting
Borrower which, if determined adversely to it, would have a material adverse effect (i) on
its financial condition, operations or business or (ii) on any of the Collateral; and
(k) the unaudited balance sheet of Borrower as of June 30, 2004, a copy of which has
heretofore been delivered to Bank by Borrower, and all other statements and data submitted in
writing in connection with the request for the credit contemplated by this Agreement are true and
correct, and said balance sheet fairly presents the financial condition of Borrower as at the date
thereof and has been prepared in accordance with generally accepted accounting principles, subject,
however, to year-end audit adjustments and the absence of footnotes. Since June 30, 2004, there
have been no changes in the assets or liabilities or financial condition of Borrower other than
changes in the ordinary course of business, and no such changes have been materially adverse
changes. Borrower has no knowledge of any liabilities that it has at said date, contingent or
otherwise, not reflected in said balance sheet, and Borrower has not entered into any commitments
or contracts, or incurred any other liabilities, which are not reflected in said balance sheet,
which may have a materially adverse effect upon its financial condition, operations or business as
now conducted.
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12. REITERATION OF REPRESENTATIONS. The representations in Sections 9, 10 and 11 above shall
be deemed to be repeated by Borrower each time a Loan is made.
13. ORIGINATION FEE. Upon execution of this Agreement, Borrower shall pay Bank an origination
fee of $5,000 for the establishment of the credit facility provided in this Agreement.
14. REPORTING. (a) As soon as available, and in any event within 45 days after the close of
each of the first six months of each fiscal year of Borrower, commencing with the six months ending
on June 30, 2005, Borrower shall deliver to Bank its balance sheet at the end of such six months
and its related statement of operations and statement of changes in net assets for the portion of
the fiscal year ending on the last day of such six months, all in reasonable detail and stating in
comparative form the figures for the corresponding date and period in the previous fiscal year,
prepared in accordance with generally accepted accounting principles applied on a consistent basis
and certified by Borrower’s chief financial or accounting officer, subject, however, to year-end
audit adjustments and the absence of footnotes.
(b) As soon as available, and in any event within 60 days after the close of each of
its fiscal years, Borrower shall deliver to Bank its balance sheet as at the close of such fiscal
year and its related statement of operations and statement of changes in net assets for such fiscal
year, all in reasonable detail and stating in comparative form the figures as at the close of and
for the previous fiscal year, audited by certified public accountants satisfactory to Bank and
accompanied by a report thereon, satisfactory to Bank, issued by such accountants.
(c) Promptly after the same are available, Borrower shall deliver to Bank copies of all
reports and other material that Borrower may send to its shareholders.
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15. BORROWER’S OTHER AFFIRMATIVE COVENANTS. Borrower covenants with Bank that until the
payment in full of all Loans, all accrued interest thereon and all other amounts payable by
Borrower under this Agreement, and the performance by Borrower of all its obligations and covenants
under this Agreement, it shall:
(a) maintain and preserve its existence and all rights, privileges, approvals and other
authority adequate for the conduct of its business;
(b) promptly notify Bank in writing of any violation by Borrower of any law, statute,
regulation or ordinance of any governmental entity, or of any agency thereof, applicable to it
which would likely materially and adversely affect the Collateral or the financial condition,
operations or business of Borrower;
(c) promptly notify Bank in writing of any default by Borrower with respect to any of
Borrower’s Indebtedness;
(d) promptly execute and deliver to Bank such Statements of Purpose (Federal Reserve
Form U-1’s) under Regulation U of the Board of Governors of the Federal Reserve System as Bank may
request from Borrower with regard to any Pledged Securities; and
(e) promptly upon Bank’s request therefor, deliver to Bank such information and documents
regarding Borrower as Bank may from time to time request from Borrower.
16. BORROWER’S NEGATIVE COVENANTS. Borrower covenants with Bank that until the payment in full
of all Loans, all accrued interest thereon and all other amounts payable by Borrower under this
Agreement, and the performance by Borrower of all its obligations and covenants under this
Agreement, Borrower shall not:
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(a) create, incur, assume or permit to exist any Indebtedness, except for Loans outstanding
hereunder and Indebtedness to affiliates of Bank; or
(b) create, incur, assume or permit to exist any Lien on any property or assets now
owned or hereafter acquired by Borrower, other than (i) Liens for taxes not delinquent or
which are being contested in good faith and in appropriate proceedings, (ii) Liens in
connection with workers’ compensation, unemployment insurance or social security obligations,
(iii) mechanics’, workmen’s, materialmen’s, landlords’, carriers’ or other like Liens
arising in the ordinary course of business with respect to obligations which are not due or which
are being contested in good faith, (iv) Liens in favor of Bank, and (v) in the case
of Collateral consisting of property held by, through or on behalf of Bank’s affiliates, Liens in
favor of such affiliates.
17. EVENTS OF DEFAULT. It shall constitute an Event of Default hereunder (and upon the
occurrence thereof the then outstanding principal amount of each Loan and all accrued interest
thereon shall become immediately due and payable, without demand, presentment or notice of any
kind, all of which are hereby expressly waived) if at any time:
(a) Borrower fails to pay the principal amount of any Loan when and in the amount due; or
(b) Borrower fails to make or pay when due any interest payment, charge or other amount
required to be made or paid by it under this Agreement, and such failure continues for a period in
excess of five Business Days; or
(c) Borrower fails to transfer to Bank, and/or give to Bank effective control over, Collateral
in accordance with Section 7(d) above upon demand therefor made by Bank orally or in writing; or
- 22 -
(d) Borrower fails to perform or observe any other term, covenant or condition to be performed
or observed by it under this Agreement, and such failure continues for a period in excess of ten
days; or
(e) any representation or warranty made by Borrower in Sections 9, 10 or 11 above proves to
have been incorrect in any material respect on any of the dates as of which made or deemed to have
been repeated; or
(f) the Custody Agreement ceases at any time to be in full force and effect, or
Borrower fails to perform or observe any material term, covenant or condition thereof which is to
be performed or observed by it thereunder; or
(g) Borrower defaults in the payment when due, whether at stated maturity or otherwise, or
within any applicable grace period, of any Indebtedness of Borrower (other than Indebtedness under
this Agreement) in a principal amount of more than $100,000, whether now or hereafter existing; or
(h) Borrower fails to perform any other term, covenant or agreement on its part to be
performed under any agreement or instrument (other than this Agreement) evidencing or securing or
relating to any of its Indebtedness (whether now or hereafter existing) in a principal amount of
more than $100,000, or any event occurs or condition exists, if the effect of such failure, event
or condition is to cause, or to permit the holder or holders of such Indebtedness (with or without
the giving of notice, lapse of time or both) to cause, such Indebtedness to become due prior to its
stated maturity; or
(i)(i) Borrower as debtor commences a case or proceeding under any bankruptcy,
insolvency, reorganization, liquidation, dissolution or similar law, or seeks the appointment of a
receiver, trustee, custodian or similar official for itself or any
- 23 -
substantial part of its property, (ii) any such case or proceeding is commenced
against it, or another seeks such an appointment, which (A) is consented to or not timely
contested by it, (B) results in the entry of an order for relief, such an appointment, or
the entry of an order having a similar effect, or (C) is not dismissed within 60 days,
(iii) it makes a general assignment for the benefit of creditors, or (iv) it admits
in writing its inability to pay its debts as they become due; or
(j) one or more judgments or orders for the payment of money in an aggregate amount in
excess of $100,000 are rendered against Borrower and (A) the same remain undischarged for a
period of 14 or more consecutive days during which execution thereof is not effectively stayed upon
appeal or otherwise or (B) any proceeding by a creditor to enforce the same is pending; or
(k) any event or circumstance occurs which in the reasonable judgment of Bank materially
impairs the creditworthiness of Borrower or its ability to perform its payment or other obligations
under this Agreement; or
(l) Borrower suspends its shareholders’ right to redeem redeemable securities issued by
Borrower, or postpones the date of payment or satisfaction upon redemption of any such redeemable
securities; or
(m) Borrower (i) conducts its business in violation of the 1940 Act, (ii) ceases to be
registered under the 1940 Act as a management investment company, or (iii) is dissolved or ceases
to do business.
18. BANK’S RIGHTS AND REMEDIES. (a) If an Event of Default occurs hereunder and is
continuing, then, in addition to having the right to exercise any rights and remedies available to
a secured creditor under applicable law, Bank shall have (i) the right to have its
affiliates deliver to Bank all such Collateral as is not
- 24 -
required to be subject to a Lien in favor of such affiliates, (ii) the right (without
being required to give any notice to Borrower except as may be required in Section 18(c) below) to
sell, publicly or privately, at a place of Bank’s choosing, any or all of the Collateral (including
items included in the Collateral pursuant to Sectiopn 7(j) above) and (iii) the right to
apply the proceeds of such sale and any other cash that is part of the Collateral, in such order as
Bank in its sole and absolute discretion may determine, to the payment of the principal of, and
accrued interest on, the Loans and of any other amounts payable by Borrower under this Agreement.
(b) If any Pledged Securities or other items of Collateral are, in whole or in part, actually
convertible into or exchangeable for securities or other property, then, upon the occurrence of an
Event of Default and for so long as it continues, Bank shall have the right, in its sole and
absolute discretion, instead of selling such Pledged Securities or other items of Collateral as
provided in Section 18(a) above, to convert or exchange them pursuant to the terms applicable
thereto, to apply any cash received by Bank in such conversion or exchange to the payment of the
principal of and accrued interest on the Loans and of any other amounts payable by Borrower under
this Agreement, and to sell as provided in Section 18(a) above any securities or other property it
receives in such conversion or exchange.
(c) If any of the Pledged Securities and other items of Collateral are of a type customarily
sold on recognized markets, then no notification to Borrower of any public or private sale thereof
by Bank is required, provided, however, that if any such notice is required by
applicable law with respect to any such sale, then one Business Day’s notice thereof shall be
reasonable notification to Borrower.
19. NO WAIVER. No failure by Bank to exercise any right, power or remedy under this
Agreement, and no delay by Bank in exercising
- 25 -
any such right, power or remedy, shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or further exercise thereof
or the exercise by Bank of any other right, power or remedy. The rights and remedies of Bank
provided for in this Agreement are cumulative and not exclusive of any rights and remedies
otherwise available.
20. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire agreement of the parties
with respect to the Loans, and, except as provided in Section 5(e) above, no amendment,
modification, termination or waiver of any provision thereof or consent to a departure therefrom by
Borrower shall be effective unless the same is in writing and signed by both Bank and Borrower.
21. SUCCESSORS AND ASSIGNS; PARTICIPATIONS. (a) This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective representatives, successors and
assigns, provided, however, that except as provided in Section 21(b) below it may
not be assigned by either party hereto without the prior written consent of the other party hereto,
and any purported assignment in violation of this provision shall be null and void.
(b) Section 21(a) above notwithstanding, Bank may from time to time, in its sole and absolute
discretion and without Borrower’s further consent, (i) assign this Agreement and the Loans
to any affiliate of Bank, which is a bank (as defined in the 1940 Act), or (ii) sell
participations in any Loan or Loans, provided, however, that in the case of any
such sale of participations, Bank’s obligations under this Agreement shall remain unchanged and
that it shall remain solely responsible to Borrower for its performance thereof.
22. GOVERNING LAW; JURISDICTION. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the conflict of law principles
- 26 -
thereof. Bank’s jurisdiction as
a securities intermediary shall, for purposes of the New York Uniform Commercial Code, be the State
of New York.
(b) Any suit, action or proceeding with respect to this Agreement or any Loan may be brought
in the Supreme Court of the State of New York, County of New York, or in the United States District
Court for the Southern District of New York, and the parties hereto hereby submit to the
non-exclusive jurisdiction of such courts for the purpose of any such suit, action or proceeding,
and hereby waive for such purpose any other preferential jurisdiction by reason of their present or
future domicile or otherwise. Each of the parties hereto hereby irrevocably waives its right to
trial by jury in any suit, action or proceeding with respect to this Agreement or any Loan.
23. NOTICES. Unless otherwise specified, any notice or demand hereunder shall be sent,
delivered or transmitted to the recipient at the address or relevant telephone number set forth
after its name hereinbelow:
If to Bank, at:
CUSTODIAL TRUST COMPANY
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Loan Compliance Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Loan Compliance Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Borrower, at:
XXXXX XXXXXXXX MLP INVESTMENT COMPANY
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0
Xxx Xxxxxxx, XX 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0
Xxx Xxxxxxx, XX 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address or telephone number as each party may designate for itself by like notice.
- 27 -
24. EXPENSES. Borrower shall pay or, at the election of Bank, shall reimburse Bank for paying,
(a) all reasonable costs, fees and expenses (including reasonable attorneys’ fees) incurred by Bank
in connection with the administration or enforcement of this Agreement and Bank’s security interest
in the Collateral, and (b) all transfer, stamp, documentary or other similar taxes, assessments or
charges levied by any tax or other governmental authority in respect of this Agreement or any Loan.
25. SEVERABILITY. If any provision of this Agreement is invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining provisions
of this Agreement (and the validity, legality and enforceability of such provision in any
other jurisdiction) shall not be affected or impaired thereby.
26. MISCELLANEOUS. (a) All agreements, representations and warranties contained in this
Agreement shall survive the execution and delivery of this Agreement and the making of any Loan.
(b) Bank shall not be under any obligation at any time to ascertain whether Borrower is in
compliance with the 1940 Act, the regulations thereunder, the provisions of its charter documents
or by-laws, or its investment objectives and policies as then in effect.
(c) Bank shall be held to the exercise of reasonable care in the custody and preservation of
the Collateral in its possession, and shall be deemed to have exercised such care if such
Collateral is accorded treatment substantially equal to that which Bank accords to its own
property.
- 28 -
(d) Except to the extent that pursuant to Section 26(c) above Bank may be liable to Borrower
for Bank’s negligence in the custody and preservation of Collateral in Bank’s possession, and
except as may be otherwise provided in the matter of collateral by applicable provisions of the
Uniform Commercial Code as in effect in the State of New York, Bank shall be without liability to
Borrower for any loss, damage, cost, expense, liability or claim which does not arise from willful
misfeasance, bad faith or gross negligence on the part of Bank in taking or omitting to take any
action under this Agreement. In no event shall Bank be liable for special, incidental or
consequential damages, even if it has been advised of the possibility of such damages.
(d) Bank shall have the continuing and exclusive right to apply any and all payments by or on
behalf of Borrower, in such order as it may in its sole discretion from time to time determine, to
any portion of the Loans and/or to the accrued interest on the Loans. All payments by Borrower to
Bank pursuant to this Agreement shall be made without set-off, and none of such payments shall be
subject to any counterclaim by Borrower. To the extent that Borrower makes a payment or Bank
receives any payment for Borrower’s benefit, which is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession,
receiver or any other party under any bankruptcy, reorganization or insolvency law, common law or
equitable cause, then, to such extent, the obligation hereunder of Borrower which was to have been
satisfied by such payment shall be revived and continue as if such payment had not been received by
Bank.
(e) The headings of sections in this Agreement are for convenience of reference only and shall
not affect the meaning or construction of any provision of this Agreement.
(f) This Agreement may be executed in one or more counterparts and by the parties hereto on
separate counterparts, each of which
- 29 -
shall be deemed an original but all of which together shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed in its name
and on its behalf by its representative thereunto duly authorized, all as of the day and year first
above written.
| XXXXX XXXXXXXX MLP INVESTMENT COMPANY | ||||||
| By: | ||||||
| Name: Xxxxx Xxxxxx | ||||||
| Title: Chief Financial Officer | ||||||
| CUSTODIAL TRUST COMPANY | ||||||
| By: | ||||||
| Name: Xxx Xxxxxxxxxxx | ||||||
| Title: President | ||||||
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SCHEDULE A
| Loan Value (as a | ||||||||
| % of Market Value) | ||||||||
| Collateral Type | Initial | Maintenance | ||||||
Cash |
100 | % | 100 | % | ||||
Publicly traded securities* |
40 | % | 50 | % | ||||
PIPE securities+ |
[TBD] | [TBD] | ||||||
Other securities |
[TBD] | [TBD] | ||||||
| * | In its sole and absolute discretion, Bank to determine on a case by case basis the Initial Loan Values and Maintenance Loan Values of (a) securities of any issuer of which Borrower may be deemed to be an affiliate and (b) securities (i) representing an equity interest of 10% or more in any issuer or (ii) conferring voting power of 10% or more at any issuer. | |
| + | Initial Loan Values and Maintenance Loan Values of PIPE securities to be between 10% – 20% as determined on a case by case basis by Bank in its sole and absolute discretion. |
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