EXHIBIT 25.2(a)(3)
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YORK ENHANCED STRATEGIES FUND, LLC
Issuer
And
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
Trustee
INDENTURE
Dated as of November 17, 2005
$216,000,000 SENIOR REVOLVING NOTES
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TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS................................................1
Section 1.1. Definitions............................................1
Section 1.2. References to Collateral Valuation Schedules;
Accounting Matters; Asset Coverage Determinations.....22
ARTICLE 2 THE NOTES.................................................23
Section 2.1. Forms Generally.......................................23
Section 2.2. Forms of Securities; Certificate of Authentication....23
Section 2.3. Authorized Amount; Interest Rate; Stated Maturity;
Denominations.........................................24
Section 2.4. Execution, Authentication, Delivery and Dating........24
Section 2.5. Registration, Registration of Transfer and Exchange...25
Section 2.6. Mutilated, Defaced, Destroyed, Lost or Stolen
Securities............................................29
Section 2.7. Payment in Respect of the Securities; Rights
Preserved.............................................30
Section 2.8. Persons Deemed Owners.................................33
Section 2.9. Cancellation..........................................33
Section 2.10. Global Securities; Transfer to Physical Securities....33
Section 2.11. Securities Beneficially Owned by Non-Permitted
Holders...............................................34
Section 2.12. Borrowings on the Notes...............................34
Section 2.13. Extension of Stated Maturity by the Holders...........35
Section 2.14. Additional Issuance...................................35
ARTICLE 3 CONDITIONS PRECEDENT......................................36
Section 3.1. Closing Date Issuance.................................36
Section 3.2. Additional Issuances..................................37
ARTICLE 4 SATISFACTION AND DISCHARGE................................38
Section 4.1. Satisfaction and Discharge of Indenture...............38
Section 4.2. Application of Trust Money............................39
Section 4.3. Repayment of Monies Held by Paying Agent..............39
ARTICLE 5 EVENTS OF DEFAULT; REMEDIES...............................39
Section 5.1. Events of Default.....................................39
Section 5.2. Acceleration of Maturity; Rescission and Annulment;
Voting Rights.........................................42
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TABLE OF CONTENTS
(continued)
PAGE
Section 5.3. Collection of Indebtedness and Suits for Enforcement
by Trustee............................................43
Section 5.4. Remedies..............................................44
Section 5.5. Trustee May Enforce Claims Without Possession of
Securities............................................45
Section 5.6. Application of Money Collected........................45
Section 5.7. Limitation on Suits...................................46
Section 5.8. Unconditional Rights of Holders of Securities to
Receive Principal and Interest........................46
Section 5.9. Restoration of Rights and Remedies....................46
Section 5.10. Rights and Remedies Cumulative........................47
Section 5.11. Delay or Omission Not Waiver..........................47
Section 5.12. Control by Securityholders............................47
Section 5.13. Waiver of Defaults....................................47
Section 5.14. Undertaking for Costs.................................48
Section 5.15. Waiver of Stay or Extension Laws......................48
Section 5.16. Action on the Securities..............................49
ARTICLE 6 THE TRUSTEE...............................................49
Section 6.1. Certain Duties and Responsibilities...................49
Section 6.2. Notice of Default.....................................50
Section 6.3. Certain Rights of Trustee.............................50
Section 6.4. Not Responsible for Recitals or Issuance of
Securities............................................52
Section 6.5. May Hold Securities...................................52
Section 6.6. Money Held in Trust...................................52
Section 6.7. Compensation and Reimbursement........................52
Section 6.8. Corporate Trustee Required; Eligibility...............53
Section 6.9. Resignation and Removal; Appointment of Successor.....53
Section 6.10. Acceptance of Appointment by Successor................54
Section 6.11. Merger, Conversion, Consolidation or Succession to
Business of Trustee...................................55
Section 6.12. Authenticating Agents.................................55
ARTICLE 7 COVENANTS.................................................56
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TABLE OF CONTENTS
(continued)
PAGE
Section 7.1. Payment of Principal and Interest.....................56
Section 7.2. Maintenance of Office or Agency.......................57
Section 7.3. Money for Payments to be Held in Trust................58
Section 7.4. Existence of Issuer; Activities; Affiliate
Transactions..........................................59
Section 7.5. Protection of Collateral..............................60
Section 7.6. Certificate as to Collateral..........................61
Section 7.7. Over-Collateralization Tests..........................61
Section 7.8. Performance of Obligations............................62
Section 7.9. Payment of Taxes and Other Claims.....................62
Section 7.10. Insurance.............................................63
Section 7.11. Compliance With Laws; Asset Coverage Requirements.....63
Section 7.12. Investment Manager; Custodian; Accountants............63
Section 7.13. Minimum Net Worth.....................................63
Section 7.14. Limitations on Indebtedness or Equity Securities......63
Section 7.15. Liens.................................................64
Section 7.16. Restricted Payments...................................64
Section 7.17. Change of Name, etc...................................65
Section 7.18. Merger, Consolidation, Sale of Assets.................65
Section 7.19. Investment Dispositions, etc..........................66
Section 7.20. Modification of Certain Instruments, Organic
Documents, Agreements, etc............................66
Section 7.21. Statement as to Compliance............................67
Section 7.22. No Other Business.....................................67
Section 7.23. Reporting.............................................67
Section 7.24. Calculation Agent.....................................68
Section 7.25. Margin Stock..........................................69
Section 7.26. Pension and Welfare Plans.............................69
Section 7.27. Payment of Management or Advisory Fees................70
Section 7.28. Limitation on Bank Loans and Specified Hedging
Transactions..........................................70
Section 7.29. Short Sale Transactions...............................70
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE 8 SUPPLEMENTAL INDENTURES...................................71
Section 8.1. Supplemental Indentures Without Consent of
Securityholders.......................................71
Section 8.2. Supplemental Indentures with Consent of
Securityholders.......................................72
Section 8.3. Execution of Supplemental Indentures..................74
Section 8.4. Certain Further Limitations on Supplemental
Indentures............................................74
Section 8.5. Effect of Supplemental Indentures.....................74
Section 8.6. Reference in Securities to Supplemental Indentures....75
ARTICLE 9 PREPAYMENT OF NOTES.......................................75
Section 9.1. Mandatory Prepayment..................................75
Section 9.2. Voluntary Prepayments of Notes........................75
Section 9.3. Commitment Reductions.................................75
ARTICLE 10 ACCOUNTS, ACCOUNTINGS AND RELEASES........................76
Section 10.1. Collection of Money; General Account Requirements.....76
Section 10.2. Collection Account....................................77
Section 10.3. Payment Account; Advance Funding Account.............78
Section 10.4. Collateral Accounts...................................79
Section 10.5. Reports by Trustee....................................79
Section 10.6. Accountings...........................................79
Section 10.7. Reports to Rating Agencies: Ratings Changes...........81
ARTICLE 11 APPLICATION OF MONIES.....................................82
Section 11.1. Disbursements of Monies from Payment Account Prior to
Liquidation Direction.................................82
Section 11.2. Disbursements of Monies from Payment Account and
Collection Account After Liquidation Direction........82
ARTICLE 12 MISCELLANEOUS.............................................82
Section 12.1. Form of Documents Delivered to Trustee................83
Section 12.2. Acts of Securityholders...............................83
Section 12.3. Notices, etc., to Trustee, the Issuer, the Investment
Manager, ▇▇▇▇▇'▇ and S&P..............................84
Section 12.4. Notices to Holders; Waiver............................85
Section 12.5. Effect of Headings and Table of Contents..............86
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TABLE OF CONTENTS
(continued)
PAGE
Section 12.6. Successors and Assigns................................86
Section 12.7. Separability..........................................86
Section 12.8. Benefits of Indenture.................................86
Section 12.9. Governing Law.........................................86
Section 12.10. Submission to Jurisdiction............................86
Section 12.11. Counterparts..........................................87
Section 12.12. Limited Recourse......................................87
Section 12.13. Acts of Issuer........................................87
Section 12.14. Waiver of Jury Trial..................................87
Section 12.15. Escheat...............................................87
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INDENTURE
INDENTURE, dated as of November 17, 2005, between YORK ENHANCED
STRATEGIES FUND, LLC, a Delaware limited liability company (the "Issuer"), and
JPMorgan Chase Bank, National Association, a national banking association, as
trustee (herein, together with its permitted successors in the trusts hereunder,
called the "Trustee").
PRELIMINARY STATEMENT
The Issuer is duly authorized to execute and deliver this Indenture to
provide for the Securities issuable as provided in this Indenture. All covenants
and agreements made by the Issuer herein are for the benefit of the
Securityholders and the Trustee. The Issuer is entering into this Indenture, and
the Trustee is accepting the trusts created hereby, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged.
All things necessary to make this Indenture a valid agreement of the
Issuer in accordance with the agreement's terms have been done. Each party
hereto agrees as follows for the benefit of each other party hereto:
ARTICLE 1
DEFINITIONS
Section 1.1. Definitions.
Except as otherwise specified herein or as the context may otherwise
require, the following terms have the respective meanings set forth below for
all purposes of this Indenture, and the definitions of such terms are equally
applicable both to the singular and plural forms of such terms and to the
masculine, feminine and neuter genders of such terms. Whenever any reference is
made to an amount the determination of which is governed by Section 1.2, the
provisions of Section 1.2 shall be applicable to such determination or
calculation, whether or not reference is specifically made to Section 1.2,
unless some other method of calculation or determination is expressly specified
in the particular provision.
"Acceleration Notice": An Acceleration Notice under and as defined in
the Pledge Agreement.
"Account": The Collection Account, the Payment Account, each of the
Collateral Accounts and any other account established by the Trustee under or in
connection with this Indenture.
"Act" and "Act of Securityholders": The meanings specified in Section
12.2.
"Additional Costs": All accrued and unpaid Commitment Fee Amount,
Break Funding Cost, Increased Costs and Tax Gross-Up Amount.
"Adjusted Contributed Company Capital": At any time of determination,
Contributed Company Capital at such date minus Expensed Transaction Fees.
"Administrative Expense Limit": An amount equal to the following: (a)
during the first year after the Closing Date, an amount not in excess of 2% of
the sum of (i) the aggregate amount of the Commitments, (ii) the maximum
aggregate liquidation preference of the Preferred Shares the Issuer would be
authorized to issue under the Investment Company Act based upon the total amount
of the capital commitments in respect of Preferred Shares and assuming that the
Issuer has issued the maximum number of Notes hereunder it would be permitted to
issue, regardless of whether the Issuer has issued such Preferred Shares, and
(iii) the aggregate amount of Equity Capital Commitments, regardless of whether
the Issuer has drawn down or repaid such Equity Capital Commitments; and (b)
during any year thereafter, an amount not in excess of 2% of the Net Asset Value
of the Issuer; provided, however that notwithstanding the foregoing, the
Administrative Expense Limit for any year shall not include any Administrative
Expenses paid on the Closing Date.
"Administrative Expenses": Amounts (including indemnities) due or
accrued with respect to any Payment Date to (a) the Trustee, the Collateral
Administrator, the Custodian, the Collateral Agent or the Note Agent pursuant to
this Indenture or any other Transaction Document; (b) the Investment Manager
pursuant to the Investment Management Agreement; and (c) fees and expenses of
the feeder funds and any Person in respect of any other fees, expenses or
payments permitted under this Indenture and the documents delivered pursuant to
or in connection with the Indenture and the Securities and the other Transaction
Documents.
"Advance Funding Account": The trust account established by the
Trustee in accordance with Section 10.3(b).
"Affiliate" or "Affiliated": With respect to a Person, (a) any other
Person who, directly or indirectly, is in control of, or controlled by, or is
under common control with, such Person or (b) any other Person who is a
director, Officer or employee (i) of such Person, (ii) of any subsidiary or
parent company of such Person or (iii) of any Person described in clause (a)
above. For the purposes of this definition, control of a Person shall mean the
power, direct or indirect, (x) to vote more than 50% of the securities having
ordinary voting power for the election of directors of such Person, or (y) to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Agent Members": Members of, or participants in, the Depository.
"Agreed-Upon-Procedures Report": The meaning specified in Section
10.6(f).
"Aggregate Liquidation Preference": At any time, the aggregate
outstanding amount of the liquidation preference of the Preferred Shares.
"Aggregate Outstanding Amount": On any date of determination, the
aggregate Drawn Amount.
"Aggregate Undrawn Amount": At any time, with respect to the Notes, the
excess, if any, of (a) the aggregate amount of the Commitments in respect of all
Notes over (b) the aggregate Drawn Amount.
2
"Applicable Law": With respect to any Person or matter, any law, rule,
regulation, order, decree or other requirement having the force of law relating
to such Person or matter and, where applicable, any interpretation thereof by
any Person having jurisdiction with respect thereto or charged with the
administration or interpretation thereof.
"Applicable Margin": With respect to an Interest Accrual Period, 0.40%
per annum.
"Approved Dealer": The meaning specified in the applicable Collateral
Valuation Schedule.
"Approved Exchange": The meaning specified in the applicable
Collateral Valuation Schedule.
"Approved Investment Banking Firm": The meaning specified in the
applicable Collateral Valuation Schedule.
"Approved Third-Party Appraisal": The meaning specified in the
applicable Collateral Valuation Schedule.
"Asset Category" : A ▇▇▇▇▇'▇ Asset Category or S&P Asset Category, each
having the meaning specified in the applicable Collateral Valuation Schedule.
"Authenticating Agent": With respect to the Securities, the Person
designated by the Trustee to authenticate such Securities on behalf of the
Trustee pursuant to Section 6.12 hereof.
"Authorized Denomination": The meaning specified in Section 2.3.
"Authorized Officer": With respect to (a) the Issuer, any Officer or
other Person (including any duly appointed attorney-in-fact) who is authorized
to act for the Issuer in matters relating to, and binding upon, the Issuer or,
in respect of particular matters for which the Investment Manager has authority
to act on behalf of the Issuer and in respect of which matters the Investment
Manager has determined to act on behalf of the Issuer, any officer, employee or
agent of the Investment Manager who is authorized to act for the Investment
Manager, (b) the Investment Manager, any officer, employee or agent of the
Investment Manager who is authorized to act for the Investment Manager in
matters relating to, and binding upon, the Investment Manager with respect to
the subject matter of the request, certificate or order in question, and (c) the
Trustee or any other bank or trust company acting as trustee of an express trust
or as custodian, a Trust Officer. Each party may receive and accept a
certification of the authority of any other party as conclusive evidence of the
authority of any Person to act, and such certification may be considered as in
full force and effect until receipt by such other party of written notice to the
contrary.
"Bank Loans": The meaning specified in the applicable Collateral
Valuation Schedule.
"Bankruptcy Code": The U.S. Bankruptcy Code, Title 11 of the United
States Code, as amended from time to time.
3
"Board of Directors": With respect to the Issuer, the directors of the
Issuer duly appointed by the holders of the shares or membership interests of
the Issuer authorized to appoint such directors.
"Board Resolution": With respect to the Issuer, a resolution of the
Board of Directors.
"Borrowing": The meaning specified in Section 2.12(a).
"Borrowing Date": The meaning specified in Section 2.12(a).
"Break Funding Costs": With respect to any Prepayment on the Notes on a
date that is not a Payment Date, a fee payable to the Holders of the Notes in an
amount equal to the excess (if any) of (a) the Applicable Margin times the
amount of such Prepayment for the period from and including the Prepayment Date
to and excluding the next Payment Date (or, if there are one or more subsequent
Borrowings before the next Payment Date, the date of the next such Borrowing)
minus (b) the Commitment Fee payable for such period with respect to the amount
of such Prepayment; provided, that such Break Funding Costs will be zero with
respect to such Prepayment of any Drawn Amount that was required under the Note
Purchase Agreement to be drawn following the failure of a holder of the Notes to
meet the Rating Criteria.
"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 is located are authorized or required
by Applicable Law to close or, for final payment of principal, in the relevant
place of presentation and any day on which the Bond Market Association
recommends a closed day for the U.S. Bond Market.
"Calculation Agent": The meaning specified in Section 7.24(a).
"Capital Stock": The meaning specified in the applicable Collateral
Valuation Schedule.
"Cash": The meaning specified in the applicable Collateral Valuation
Schedule.
"Cash Equivalent": The meaning specified in the applicable Collateral
Valuation Schedule.
"Certificatable Securities": Any of the Notes.
"Certificate Date": The meaning specified in Section 7.7(a)(ii).
"Certificate of Authentication": The meaning specified in Section 2.1.
"Change in Law": The enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs after the Closing Date.
"Clearstream": Clearstream Banking Luxembourg, S.A., a corporation
organized under the laws of the Grand Duchy of Luxembourg.
4
"Closed-end Company": A "Closed-end company" as defined in Section
5(a)(2) of the Investment Company Act.
"Closing Date": November 17, 2005.
"Code": The United States Internal Revenue Code of 1986, as amended.
"Collateral": The meaning specified in the Pledge Agreement.
"Collateral Account": The meaning specified in Section 10.4.
"Collateral Agent": The meaning set forth in the Pledge Agreement.
"Collateral Administrator": JPMorgan Chase Bank, National Association.
"Collateral Administration Agreement": The Collateral Administration
Agreement dated as of the Closing Date among the Issuer, the Investment Manager
and the Collateral Administrator, as the same may be amended, supplemented or
otherwise modified from time to time.
"Collateral Valuation Schedule": The ▇▇▇▇▇'▇ Collateral Valuation
Schedule or the S&P Collateral Valuation Schedule.
"Collection Account": The trust account established pursuant to
Section 10.2(a).
"Commitment": At any time in respect of any Note, the maximum aggregate
outstanding principal amount of advances (whether at the time funded or
unfunded) that the Holder of such Note is obligated to make to the Issuer from
time to time under the Note Purchase Agreement.
"Commitment Fee": With respect to the Notes, the Commitment Fee Rate
multiplied by the Aggregate Undrawn Amount of the Notes for each day during the
Draw Period, except that no Commitment Fee shall be paid with respect to the
Aggregate Undrawn Amount attributable to a Holder that has breached its
obligation to fund a request for a Borrowing from the date of such breach to and
until the date such breach has been cured.
"Commitment Fee Amount": With respect to the Notes as of any Payment
Date, the sum of (a) the aggregate amount of Commitment Fee accrued and unpaid
as of such Payment Date plus (b) interest accrued for the Interest Accrual
Period for such Payment Date at the Interest Rate of the Notes on any accrued
and unpaid Commitment Fees that became payable on any prior Payment Date.
"Commitment Fee Rate": a rate per annum equal to 0.20%.
"Common Shareholder": At any date, with respect to any outstanding
Common Share, the record holder of such Common Share as reflected in the
register held by the Issuer.
"Common Shares": The common shares issued from time to time by the
Issuer pursuant to the Operating Agreement.
5
"Company Equity": At any date, the equity of the Issuer represented by
the Common Shares (determined in accordance with GAAP as of such date);
provided, that for purposes of Section 7.13, Company Equity will not be reduced
by Expensed Transaction Fees of the Issuer. For purposes of this Indenture,
Company Equity shall be deemed to be the Company Equity as of the end of the
most recently completed fiscal quarter for which financial statements are
available as adjusted to give effect to any capital contributions and
distributions that occurred after such fiscal quarter.
"Company Tax Distribution": Any distribution that the Issuer reasonably
and in good faith estimates should be made by it to the Holders of the Preferred
Shares or the Common Shareholders (a) to provide such Persons funds to pay taxes
in respect of the Preferred Shares or Common Shares held by such Persons or (b)
in order to preserve the U.S. federal income tax status of the Issuer as a
regulated investment company under the Code.
"Compliance Certificate": An Officer's Certificate substantially in the
form of Exhibit D.
"Contributed Company Capital": The meaning specified in the applicable
Collateral Valuation Schedule.
"Controlling Class Representative": The meaning specified in the
Pledge Agreement.
"Corporate Trust Office": The corporate trust office of the Trustee
currently located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
Attention: Worldwide Securities Services- York Enhanced Strategies Fund, LLC, or
such other address as the Trustee may designate from time to time by notice to
the Noteholders, the Investment Manager and the Issuer, or the principal
corporate trust office of any successor Trustee.
"Credit Enhancer": The meaning set forth in the Pledge Agreement.
"Credit Enhancer Liquidity Account": The Ambac Liquidity Account as
defined in the Insurance Agreement.
"Currency Hedging Transaction": The meaning specified in the applicable
Collateral Valuation Schedule.
"Custodial Account": The meaning specified in the Pledge Agreement.
"Custodial Agreement": The custodial agreement, in the form of Exhibit
C, dated as of the Closing Date among the Issuer, the Custodian, and the
Collateral Agent, as the same may be amended, supplemented or otherwise modified
from time to time.
"Custodian": JPMorgan Chase Bank, National Association, acting in its
capacity as Custodian under the Custodial Agreement and any successor thereto in
such capacity.
"Default": Any Event of Default or any occurrence that is, or with
notice or the lapse of time or both would become, an Event of Default.
"Defaulted Interest": Any interest or the Commitment Fee Amount due and
payable in respect of any Notes or any interest on such Defaulted Interest which
is not punctually paid or
6
duly provided for on the applicable Payment Date or at the Stated Maturity of
the applicable Note and any Break Funding Cost which is not punctually paid or
duly provided for on the applicable Prepayment Date and which remains unpaid.
"Defensive Hedge Transaction": The meaning specified in the applicable
Collateral Valuation Schedule.
"Depository" means DTC.
"Determination Date": The last day of each Due Period.
"Dividend Payment Date": The Business Day immediately preceding each
date on which dividends and unissued share fees, if any, are scheduled for
payment (whether or not declared or earned) on any Insured Obligations (as
defined in the Insurance Policy) in accordance with the applicable Statement of
Preferences of the Issuer.
"Dollar" or "$": A dollar or other equivalent unit in such coin or
currency of the United States of America as at the time shall be legal tender
for all debts, public and private.
"Draw Period": The period beginning on the Closing Date and ending on
the earlier to occur of the Stated Maturity of the Notes and the date on which
the Commitments terminate.
"Draw Period Termination Date": The last day of the Draw Period.
"Drawn Amount": At any time, with respect to the Notes, the aggregate
principal amount of the Notes funded on the Closing Date or by one or more
Borrowings after the Closing Date and not repaid hereunder.
"DTC": The Depository Trust Company, its nominees, and their
respective successors.
"Due Period": With respect to any Payment Date, the period commencing
immediately following the eighth Business Day prior to the preceding Payment
Date (or, on the Closing Date, in the case of the Due Period relating to the
first Payment Date) and ending on the eighth Business Day prior to such Payment
Date (or, in the case of a Due Period that is applicable to the Payment Date
relating to the Stated Maturity of any Note, or the Maturity of all Outstanding
Notes, ending on the day preceding such Payment Date).
"Eligible Counterparty": The meaning specified in the applicable
Collateral Valuation Schedule.
"Eligible Investments": The meaning specified in the applicable
Collateral Valuation Schedule.
"Equity Capital Commitments": Commitments of the holders of the Common
Shares of the Issuer to contribute equity capital to the Issuer.
"ERISA": The United States Employee Retirement Income Security Act of
1974, as amended.
7
"Escrow Account": The meaning specified in the Custodial Agreement.
"Event of Default": The meaning specified in Section 5.1.
"Excess Amount": Shall exist if on any Business Day there is a Senior
Excess Amount or a Total Excess Amount.
"Excess Date": Any Business Day on which an Excess Amount exists. An
Excess Date shall always follow a Business Day (a) that does not have an Excess
Amount or (b) on which the Issuer has satisfied both the Senior
Over-Collateralization Test and the Total Over-Collateralization Test by
complying with clause (a)(i) of Section 7.7.
"Exchange Act": The United States Securities Exchange Act of 1934, as
amended.
"Excluded Investments": The meaning specified in the applicable
Collateral Valuation Schedule.
"Expensed Transaction Fees": As of any date, all legal, tax, accounting
software and systems, and other organizational expenditures incurred in
connection with the offering and issuance of the Securities, the Preferred
Shares or the Common Shares, the formation of the Issuer and related entities
and the fees due to the Placement Agents, placement agents and initial
purchasers in connection with obtaining the Equity Capital Commitments and the
issuance of the Preferred Shares and the Common Shares and to the Trustee, the
Custodian and the Holders in connection with the placement of Securities, to the
extent such amounts have been expensed (or capitalized and amortized) on or
prior to such date.
"Extended Maturity Date": The meaning specified in Section 2.13.
"Extension Notice": The meaning specified in Section 2.13.
"Final Maturity Payment Default Notice": A Final Maturity Payment
Default Notice under and as defined in the Pledge Agreement.
"Financing Statement": The meaning specified in the UCC.
"First Extended Maturity Date": The meaning specified in Section 2.13.
"Fixed Income Investment": The meaning specified in the definition of
"Short Sale Advance Amount" as set forth in the Collateral Valuation Schedules.
"FRB": The Federal Reserve Bank of New York.
"FRS Board": The Board of Governors of the Federal Reserve System and,
as applicable, the staff thereof.
"Fund Investments": The meaning specified in the applicable Collateral
Valuation Schedule.
8
"GAAP": Generally accepted accounting principles in effect from time
to time in the United States of America.
"Global Certificatable Securities": The meaning specified in Section
2.5(c)(ii).
"Global Security": The meaning specified in Section 2.2(b).
"Grant": To grant, bargain, sell, warrant, alienate, remise, demise,
release, convey, assign, transfer, mortgage, pledge, create and grant a security
interest in, general lien upon, and right of set-off against, deposit, set over
and confirm.
"Hedging and Short Sale Transaction": The meaning specified in the
applicable Collateral Valuation Schedule.
"Holder" or "Securityholder": With respect to any Security the Person
in whose name such Security is registered in the Security Register.
"Increased Costs": With respect to any Payment Date, the amount (other
than any amount that is a tax or a stamp, registration, documentation or similar
tax), as set forth in a certificate of a Holder of a Note, delivered to the
Issuer and the Note Agent on or prior to the related Determination Date,
necessary to compensate such Holder, for (a) any increase in the cost of making
or maintaining any loan or asset purchase under the Note Purchase Agreement (or
of maintaining its obligation to make any such loan or asset purchase) resulting
from a Change in Law applicable to such Holder, (b) any reduction in any amount
received or receivable by such Holder under the Note Purchase Agreement
resulting from a Change in Law applicable to such Holder, and (c) any reduction
in the rate of return on the capital of such Holder or its bank holding company
resulting from a Change in Law applicable to such Holder or bank holding company
to a level below that which such Holder or bank holding company could have
achieved but for such Change in Law.
"Incur": To create, incur, assume or suffer to exist or otherwise
directly or indirectly become or be liable (and, with correlative meanings,
"Incurred" and "Incurrence").
"Indebtedness": Of the Issuer, means, at any date, without duplication:
(a) all obligations of the Issuer for borrowed money; (b) all obligations of the
Issuer evidenced by bonds, debentures, notes or other similar instruments; (c)
all obligations of the Issuer to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business; (d) all obligations of the Issuer as lessee under capital leases; (e)
all non-contingent obligations of the Issuer to reimburse or prepay any bank or
other Person in respect of amounts paid under a letter of credit, banker's
acceptance or similar instrument; (f) all Indebtedness of others secured by a
Lien on any asset of the Issuer, whether or not such Indebtedness is assumed by
the Issuer; and (g) all Indebtedness of others guaranteed by the Issuer, it
being acknowledged and understood that Indebtedness shall in no event include
any obligations under any Hedging and Short Sale Transactions or Structured
Product Transactions.
"Indenture": This instrument as originally executed and, if from time
to time supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof, as so supplemented or
amended. All references in this
9
instrument to designated "Articles," "Sections," "Subsections" and other
subdivisions are to the designated Articles, Sections, Subsections and other
subdivisions of this instrument as originally executed. The words "herein,"
"hereof," "hereunder" and other words of similar import refer to this Indenture
as a whole and not to any particular Article, Section, Subsection or other
subdivision.
"Independent": As to any Person, any other Person (including, in the
case of an accountant, or lawyer, a firm of accountants or lawyers or any
investment bank and any member thereof) who (a) does not have and is not
committed to acquire any material direct or any material indirect financial
interest in such Person or in any Affiliate of such Person, and (b) is not
connected with such Person as an Officer, employee, promoter, underwriter,
voting trustee, partner, director or Person performing similar functions.
"independent" when used with respect to any accountant may include an accountant
who audits the books of such Person if in addition to satisfying the criteria
set forth above the accountant is independent with respect to such Person within
the meaning of Rule 101 of the Code of Ethics of the American Institute of
Certified Public Accountants. Whenever any Independent Person's opinion or
certificate is to be furnished to the Trustee, such opinion or certificate shall
state that the signer has read this definition and that the signer is
independent within the meaning hereof.
"Independent Public Accountant": Any one of the four largest
independent public accounting firms in the United States as of the Closing Date
or any other Independent public accounting firm reasonably satisfactory to a
Majority of the Notes.
"Index Maturity": With respect to any Borrowing, the related Interest
Accrual Period.
"Insurance Agreement": The meaning set forth in the Pledge Agreement.
"Interest Accrual Period": With respect to each Borrowing, the period
beginning on and including the Borrowing Date with respect to such Borrowing to
but excluding the first Payment Date following such Borrowing Date and
thereafter each successive period beginning on and including a Payment Date and
ending on, but excluding, the next Payment Date, provided, however that with
respect to any Borrowing made in the period beginning on a Determination Date
and ending on but excluding the first Payment Date following such Determination
Date, the Interest Accrual Period shall run from and including the related
Borrowing Date of such Borrowing to but excluding the second Payment Date
following such Determination Date and, with respect to any Prepayment on the
Notes, the last Interest Accrual Period shall end on, but exclude, the date of
such Prepayment. For purposes of determining any Interest Accrual Period, if any
Payment Date is not a Business Day, then the Interest Accrual Period ending on
such Payment Date shall be extended to but excluding the date on which payment
is made and the succeeding Interest Accrual Period shall begin on and include
such date.
"Interest Amount": With respect to each Note and each LIBOR
Determination Date, the amount of interest for the related Interest Accrual
Period payable in respect of the principal amount of such Notes.
"Interest Rate": With respect to an Interest Accrual Period, LIBOR for
such Interest Accrual Period plus the Applicable Margin.
10
"Interest Rate Hedging Transaction": The meaning specified in the
applicable Collateral Valuation Schedule.
"Investment Company Act": The United States Investment Company Act of
1940, as amended.
"Investment Management Agreement": The Investment Management Agreement
dated as of the Closing Date between the Issuer and the Investment Manager
relating to the management of the investment portfolio of the Issuer, as may be
amended, supplemented or otherwise modified from time to time pursuant to the
terms thereof and Section 7.20.
"Investment Manager" means York Enhanced Strategies Management, LLC, in
its capacity as investment manager under the Investment Management Agreement,
unless terminated in accordance with the Investment Company Act. In the event of
any such termination or otherwise "Investment Manager" shall mean a replacement
investment manager only if such replacement investment manager shall have become
investment manager pursuant to the Investment Management Agreement and Section
7.12.
"Issuer": York Enhanced Strategies Fund, LLC, a Delaware limited
liability company, until a successor Person shall have become the Issuer
pursuant to the applicable provisions of this Indenture, and thereafter "Issuer"
shall mean such successor Person.
"Issuer Order": A written order or request (which may be in the form of
a standing order or request) dated and signed in the name of the Issuer by an
Authorized Officer of the Issuer, or by an Authorized Officer of the Investment
Manager where permitted, as the context may require or permit.
"LIBOR": The meaning set forth in Schedule C attached hereto.
"LIBOR Business Day": The meaning set forth in Schedule C attached
hereto.
"LIBOR Determination Date": The meaning set forth in Schedule C
attached hereto.
"Lien": With respect to any asset, any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement relating to such asset).
"Liquidation Acceleration": A Liquidation Acceleration under and as
defined in the Pledge Agreement.
"Liquidation Account": The meaning specified in the Pledge Agreement.
"Liquidation Direction": A Liquidation Direction under and as defined
in the Pledge Agreement.
"Majority of the Notes": The Holders of more than 50% of the Aggregate
Outstanding Amount of the Outstanding Notes; provided, however, that in no event
shall any Securities held
11
or controlled by the Issuer or the Investment Manager constitute Outstanding
Notes for purposes of determining the Majority of the Notes.
"Management Fee" means management fees payable to the Investment
Manager (a) during the period commencing on the Closing Date and ending on
December 31, 2006 (the "Initial Draw Period"), equal to 0.75% per annum of the
sum of (i) the aggregate capital commitments with respect to the Common Shares,
regardless of whether the Issuer has drawn down such commitments, (ii) the
aggregate capital commitments with respect to the Term Preferred Shares,
regardless of whether the Issuer has drawn down such commitments, and (iii) the
aggregate Commitments, regardless of whether the Issuer has drawn down or repaid
such commitments (the sum of (i) through (iii) being referred to as the
"Committed Capital"), (b) after the Initial Draw Period through December 31,
2007, equal to 0.75% per annum of the Net Asset Value of the Issuer using the
applicable quarter-end Net Asset Value (without reduction for any dividends
accrued on the Common Shares or the Series A-2 Preferred Share), and (c)
thereafter, equal to 1.0% per annum of the net asset value of the Issuer using
the applicable quarter-end Net Asset Value (without reduction for any dividends
accrued on the Common Shares or the Series A-2 Preferred Share).
"Margin Securities": "Margin Securities" as defined under Regulation T
issued by the Board of Governors of the Federal Reserve System.
"Margin Stock": "Margin Stock" as defined under Regulation U issued by
the Board of Governors of the Federal Reserve System.
"Market Value": The meaning specified in the applicable Collateral
Valuation Schedule.
"Market Value Price": The meaning specified in the applicable
Collateral Valuation Schedule.
"Maturity": With respect to any Security, the date on which the
outstanding principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Money": The meaning specified in Article I of the UCC.
"▇▇▇▇▇'▇": ▇▇▇▇▇'▇ Investors Service and any successor or successors
thereto.
"▇▇▇▇▇'▇ Collateral Valuation Schedule": The ▇▇▇▇▇'▇ Collateral
Valuation Schedule attached as Schedule A to this Indenture.
"▇▇▇▇▇'▇ Net Accrual Amount": The meaning specified in the applicable
Collateral Valuation Schedule.
"▇▇▇▇▇'▇ Senior Advance Amount": The meaning specified in the
applicable Collateral Valuation Schedule. For purposes of determining the
▇▇▇▇▇'▇ Net Accrual Amount on any date in connection with the calculation of the
▇▇▇▇▇'▇ Senior Advance Amount, the reference to dividends in subpart (ii) of the
definition of ▇▇▇▇▇'▇ Net Accrual Amount shall be deemed to include all
dividends accrued to such date whether or not declared.
12
"▇▇▇▇▇'▇ Senior Advance Rate": The meaning specified in the applicable
Collateral Valuation Schedule.
"▇▇▇▇▇'▇ Total Advance Amount": The meaning specified in the applicable
Collateral Valuation Schedule. For purposes of determining the ▇▇▇▇▇'▇ Net
Accrual Amount on any date in connection with the calculation of the ▇▇▇▇▇'▇
Total Advance Amount, the reference to dividends in subpart (ii) of the
definition of ▇▇▇▇▇'▇ Net Accrual Amount shall be deemed to include all
dividends accrued to such date whether or not declared.
"▇▇▇▇▇'▇ Total Advance Rate": The meaning specified in the applicable
Collateral Valuation Schedule.
"▇▇▇▇▇'▇ Valuation Procedures": The procedures prescribed by ▇▇▇▇▇'▇
for determining the Market Value of Fund Investments as set forth in the ▇▇▇▇▇'▇
Collateral Valuation Schedule.
"Net Asset Value": "Company Equity" as calculated in the definition
thereof determined by the Issuer, at any date, based upon good faith estimates
for accruals and expenses of the Issuer, which may, but need not, be fully
compliant with GAAP.
"Non-Permitted Holder": A Person that is not a Qualified Investor or
that fails to satisfy the Rating Criteria.
"Non-Reduction Period": The period from the Closing Date through the
fifth anniversary of the Closing Date.
"Note Agent": The meaning specified in the Note Purchase Agreement.
"Note Purchase Agreement": The Note Purchase Agreement dated as of
November 17, 2005, entered into among the Issuer, the Note Agent and the
Holders, as from time to time amended, modified or supplemented.
"Noteholder": With respect to any Note, the Person in whose name such
Note is registered in the Security Register.
"Notes": The Senior Revolving Notes, Due 2013, subject to the extension
of the Stated Maturity in accordance with Section 2.13 hereof, issued by the
Issuer, authenticated by the Trustee or any Authenticating Agent and designated
as a Note pursuant to this Indenture.
"Offering Memorandum": The Offering Memorandum, dated November 16, 2005
in connection with the offer and sale of the Securities.
"Officer": With respect (a) to the Issuer or any other corporation, the
Chairman of the Board of Directors, any Director, the President, any Vice
President, the Secretary, an Assistant Secretary, the Treasurer or an Assistant
Treasurer of the Issuer or other Person authorized by the Issuer; (b) any
partnership, any general partner thereof; and (c) any bank or trust company
acting as trustee of an express trust or as custodian, any Trust Officer.
"Officer's Certificate": A certificate from an Officer.
13
"Operating Agreement": The Operating Agreement of the Issuer dated as
of November 3, 2005 among the initial members and the Common Shareholders as the
same may be amended, supplemented or otherwise modified from time to time.
"Opinion of Counsel": A written opinion addressed to the Trustee and
each Rating Agency (except as otherwise provided herein), in form and substance
reasonably satisfactory to the Trustee and each applicable Rating Agency, of an
attorney at law admitted to practice before the highest court of any state of
the United States or the District of Columbia, which attorney may, except as
otherwise expressly provided in this Indenture, be counsel for the Issuer or the
Investment Manager, and which attorney shall be reasonably satisfactory to the
Trustee.
"Organic Documents": Of any Person, its certificate of formation,
limited liability company agreement, memorandum and articles of association,
charter and by-laws, operating agreement or similar constitutive documents and
includes all agreements, voting trusts and similar arrangements with or among
the holders of such Person's capital stock or other equity.
"Original Stated Maturity": November 15, 2013.
"Outstanding": As of any date of determination, all of the Securities
theretofore authenticated and delivered under this Indenture except:
(a) Securities theretofore canceled by the Security
Registrar or delivered to the Security Registrar for cancellation;
(b) Securities or portions thereof for whose payment funds
in the necessary amount have been theretofore irrevocably deposited
with the Trustee or any Paying Agent in trust for the Holders of such
Securities;
(c) Securities in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this
Indenture, unless proof satisfactory to the Trustee is presented that
any such Securities are held by a holder in due course; and
(d) Securities alleged to have been mutilated, destroyed,
lost or stolen for which replacement Securities have been issued as
provided in Section 2.6.
"outstanding": When used in the Collateral Valuation Schedules in
relation to the Notes, means the outstanding drawn principal amount of the
Notes.
"Over-Collateralization Test": Either the Senior Over-Collateralization
Test or the Total Over-Collateralization Test, as applicable.
"Paying Agent": Any Person authorized by the Issuer to pay any amounts
to be paid on any Securities on behalf of the Issuer as specified in Section
7.2.
"Payment Account": The trust account established pursuant to Section
10.3(a).
"Payment Date": The 15th of March, June, September and December of each
year, commencing March 15, 2006, or if any such date is not a Business Day, the
next Business Day; provided that the last Payment Date in respect of any Note
shall be its Stated Maturity.
14
"Payment Proceeds": With respect to any Payment Date, all of the
amounts received by the Trustee from the Issuer during the related Due Period in
respect of the payment of any amounts due hereunder.
"Pension Plan": A "pension plan," as such term is defined in Section
3(2) of ERISA.
"Performing": The meaning specified in the applicable Collateral
Valuation Schedule.
"Permitted Equity Issuance": Includes all of the following:
(a) the Preferred Shares and the Common Shares; and
(b) with respect to any Fund Investment, any funding obligation of
the Issuer to the issuer of such Fund Investment.
"Permitted Holder": A Person that is not a Non-Permitted Holder.
"Permitted Indebtedness": Includes all of the following:
(a) Indebtedness in respect of the Securities (including additional
Securities issued pursuant to Section 2.14) in an Aggregate Outstanding Amount
not to exceed the Total Maximum Commitment (as increased by any such additional
Securities and including refinancings, refundings or replacements thereof);
(b) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument drawn against
insufficient funds in the ordinary course of business; provided, that such
Indebtedness is extinguished within five Business Days of its incurrence;
(c) with respect to any Fund Investment, any funding obligation of
the Issuer to the issuer of such Fund Investment to the extent constituting
Indebtedness.
"Permitted Lien": Includes any of the following:
(a) Liens in favor of the Collateral Agent for the benefit of the
Secured Parties granted pursuant to the Pledge Agreement;
(b) any Lien or other encumbrance for taxes, assessments or other
governmental charges or levies not yet subject to penalties for non-payment or
the validity, applicability or amount of which is being contested in good faith
by appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been established by the Issuer;
(c) Liens of broker-dealers and clearing corporations (i) granted
pursuant to the Custodial Agreement or (ii) Incurred in the ordinary course of
business, but excluding Liens created in connection with the purchase of
securities on margin, the short sale of securities on margin or Securities
Lending Transactions (other than Securities Lending Transactions involving U.S.
Government Securities incurred as Interest Rate Hedging Transactions); provided,
that in the case of broker-dealer Liens relating to trades not settled in the
ordinary course of business,
15
such Liens shall be Permitted Liens under this clause (c)(ii) only if such Liens
are discharged within five Business Days of the Issuer's obtaining actual
knowledge thereof;
(d) Liens on a Short Sale Customer Account or a Short Sale Broker
Account created in accordance with Section 3.9 of the Custodial Agreement; and
(e) judgment Liens in existence less than 30 days after the entry
thereof or with respect to which execution has been stayed, in each case, so
long as the aggregate amount of all such judgment Liens at any time does not
exceed 1.5% of the Net Asset Value or judgment Liens the payment of which is
covered in full (subject to a customary deductible) by insurance.
"Person": An individual, corporation (including a business trust or a
limited liability company), partnership, joint venture, association, joint stock
company, trust (including any beneficiary thereof), unincorporated association
or government or any agency or political subdivision thereof.
"Physical Securities": Each physical Note issued hereunder.
"Placement Agents": ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated and ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Co. International Limited, in their capacity as placement agents
under the Private Placement Agency Agreement.
"Pledge Agreement": The Pledge and Intercreditor Agreement, in the form
of Exhibit B, dated as of the Closing Date, among the Issuer, the Custodian, the
Trustee, the Collateral Agent and the Credit Enhancer, as the same may be
amended, modified or supplemented from time to time pursuant to the terms hereof
and thereof.
"Pledged Securities": The meaning specified in the Pledge Agreement.
"Portfolio Limitations": The meaning specified in the applicable
Collateral Valuation Schedule.
"Preferred Shares": Any preferred shares issued by the Issuer pursuant
to the Operating Agreement, including, but not limited to, the Term Preferred
Shares.
"Prepayment": Any repayment of principal of the Notes pursuant to
Section 9.2 prior to the Maturity of such Notes.
"Prepayment Date": Any date on which a Prepayment occurs.
"Private Placement Agency Agreement": An agreement dated as of November
17, 2005, by and between the Issuer and the Placement Agents, relating to the
offer, sale and placement of the Securities as amended from time to time.
"Proceeding": Any suit in equity, action at law or other judicial or
administrative proceeding, including, without limitation, the making of a trust,
mortgage or assignment for the benefit of creditors; the voluntary or
involuntary dissolution, winding up, total or partial liquidation,
reorganization, bankruptcy, insolvency, receivership or marshalling of assets or
liabilities of any Person; or any other statutory, common law or contractual
proceeding or
16
arrangement for the postponement or adjustment of all or a substantial part of
the liabilities of such Person.
"Protected Purchaser": A protected purchaser as defined in Article 8
of the UCC.
"Qualified Investor" A Person that satisfies all of the following: (a)
such Person is an "accredited investor" within the meaning of Rule 501(a) under
the Securities Act, (b) such Person is a "qualified client" within the meaning
of Rule 205-3 under the Investment Advisers Act of 1940, as amended, (c) such
Person is a "qualified purchaser" as defined in Section 2(a)(51)(A) of the
Investment Company Act and the rules promulgated thereunder, (d) such Person is
a "qualified institutional buyer" as defined in Rule 144A(a) of the Securities
Act, and (e) such Person is acquiring any Securities hereunder for its own
account for investment and not for resale or distribution.
"Rating Agency": Each of ▇▇▇▇▇'▇ and S&P, in each case only for so long
as Securities rated by such entity on the Closing Date are Outstanding and rated
by such entity.
"Rating Agency Condition": With respect to any specified action, that
(a) each of ▇▇▇▇▇'▇ and S&P shall have been given prior written notice thereof
and (b) each of ▇▇▇▇▇'▇ and S&P shall have notified the Issuer in writing that
such action will not result at that time in a downgrading or withdrawal of its
then current ratings of the Indebtedness under this Indenture or the Preferred
Shares, as applicable. Notwithstanding the foregoing, where it is provided
herein or in any Collateral Valuation Schedule in relation to any particular
action that the Rating Agency Condition must be satisfied with respect to one
specified Rating Agency, and the other Rating Agency is not specified, it shall
only be required that such specified Rating Agency shall have been given the
notice described in clause (a) above and shall have made the notification
described in clause (b) above in relation to such action.
"Rating Agency Confirmation": Confirmation in writing (which may be
evidenced by an exchange of electronic messages or facsimiles) from each Rating
Agency (or the specified Rating Agency) that the Rating Agency Condition is
satisfied.
"Rating Criteria": Criteria that will be satisfied on any date with
respect to any purchaser of any Note if such purchaser has a rating with respect
to its unsupported senior debt obligations, or has a financial strength rating
with respect to its claims paying ability, that is (a) in the case of a short
term rating, not lower than "P-1" by ▇▇▇▇▇'▇ or, in the case of a long term
rating, not lower than "A3" by ▇▇▇▇▇'▇ (but if rated "A3" only if such purchaser
is placed on a credit watch with positive implications by ▇▇▇▇▇'▇) or not lower
than "A2" by ▇▇▇▇▇'▇ (but if rated "A2" only if such purchaser has not been
placed on a credit watch with negative implications by ▇▇▇▇▇'▇), provided that
if such purchaser has a short term rating, then such short term rating may not
be lower than "P-1" by ▇▇▇▇▇'▇ regardless of its long term rating, and (b) in
the case of a short term rating, not lower than "A-1" by S&P or, in the case of
a long term rating, "A" by S&P or "A-" by S&P and is placed on a credit watch
with positive implications by S&P (or its obligations are guaranteed by entities
with such ratings).
"Record Date": With respect to (a) any Payment Date, the date on which
the Holders of Securities entitled to receive a payment on such Payment Date are
determined, such date as to any Payment Date being the fifteenth day (whether or
not a Business Day) prior to the applicable
17
Payment Date; (b) any Prepayment Date, the date on which the Holders of the
Notes entitled to receive a Prepayment are determined, such date as to any
Prepayment Date being the fifteenth day (whether or not a Business Day) prior to
the applicable Prepayment Date.
"Reference Banks": The meaning specified in Schedule C attached
hereto.
"Registered Office": The registered office of the Issuer.
"Regulation U": Regulation U issued by the Board of Governors of the
Federal Reserve System.
"Reimbursable Expenses": Expenses of the Investment Manager that are
attributable to the Issuer, including, but not limited to, organizational and
offering fees and expenses relating to the Transaction Documents, the Common
Shares, the Preferred Shares and the Notes, marketing and travel expenses, due
diligence and negotiation expenses, research expenses, fees and expenses of
custodians, administrators, transfer and distribution agents, brokerage fees and
commissions, dealer spreads, legal fees and expenses of the Issuer and the
Investment Manger incurred in connection with matters relating to or for the
Issuer, fees and expenses of directors, insurance, including periodic premiums
payable with respect to the insurance policy for the benefit of the holders of
the Term Preferred Shares, filings and registrations, proxy expenses, rating
agencies, expenses of communications to investors, compliance expenses, audit
expenses, interest, taxes, portfolio transaction expenses, costs of responding
to regulatory inquiries and reporting to regulatory authorities, costs and
expenses of preparing and maintaining the books and records of the Issuer,
indemnification, litigation and other extraordinary fees and expenses and such
other fees and expenses as are approved by the directors as being reasonably
related to the organization, offering, capitalization, operation or
administration of the Issuer and the Fund Investments. For the avoidance of
doubt, expenses associated with the general overhead of the Investment Manager
will not be covered by the Issuer.
"Reporting Date": The last Business Day of each calendar week.
"Required Liquidity Amount": At any time that an obligation exists for
the Issuer to fund any amounts into the Credit Enhancer Liquidity Account
pursuant to Section 6.2 of the Insurance Agreement, an amount, as determined on
any date, equal to the amount of all accumulated but unpaid dividends in respect
of the Term Preferred Shares plus the total amount of unissued share fees on the
Series A-1 Preferred Shares of the Issuer, using a dividend rate that is equal
to the applicable LIBOR (as defined in the Statement of Preferences) for that
particular Rate Period (as defined in the Statement of Preferences), plus 0.30%
per annum, plus the Additional Amount (as defined in the Statement of
Preferences), if any, for the two subsequent Dividend Payment Dates (assuming
the same LIBOR for such amounts) immediately following such date, whether or not
any such dividends have been earned or declared
"Restricted Payment": Includes (a) any payment or other distribution
(including, without limitation, dividends) to any Common Shareholder in respect
of its Common Shares or to any holder in respect of the Preferred Shares; or (b)
any payment or other distribution on account of the purchase, redemption,
retirement or acquisition of any Common Share, Preferred Share or other equity
interest in the Issuer; provided, however, that notwithstanding the foregoing
neither (i) dividends on the Preferred Shares nor (ii) purchases, redemptions,
retirements or acquisitions
18
of Preferred Shares made pursuant to Section 7.7 or in order to comply with any
asset coverage test required to be maintained pursuant to Section 18 of the
Investment Company Act shall constitute Restricted Payments hereunder and,
subject to compliance with Section 7.7(c) and the limitations set forth in
Section 7.16(b), may be made or paid by the Issuer at any time. For the
avoidance of doubt, Restricted Payment shall not include any payment of
Management Fee to the Investment Manager.
"RIC Distribution": The meaning specified in Section 7.16.
"RIC Withholding Taxes": The meaning specified in Section 7.16.
"S&P": Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., and any successor or successors thereto.
"S&P Collateral Valuation Schedule": The S&P Collateral Valuation
Schedule attached as Schedule B to this Indenture.
"S&P Senior Advance Amount": The meaning specified in the applicable
Collateral Valuation Schedule.
"S&P Senior Advance Rate": The meaning specified in the applicable
Collateral Valuation Schedule.
"S&P Total Advance Amount": The meaning specified in the applicable
Collateral Valuation Schedule.
"S&P Total Advance Rate": The meaning specified in the applicable
Collateral Valuation Schedule.
"S&P Valuation Procedures": The procedures prescribed by S&P for
determining the Market Value of Fund Investments as set forth in the S&P
Collateral Valuation Schedule.
"Second Extended Maturity Date": The meaning specified in Section
2.13.
"Secured Hedging Advance Amount": The meaning specified in the
applicable Collateral Valuation Schedule.
"Secured Hedging Creditor": The meaning specified in the Pledge
Agreement.
"Secured Hedging Net Exposure": The meaning specified in the applicable
Collateral Valuation Schedule.
"Secured Hedging Transaction": The meaning specified in the applicable
Collateral Valuation Schedule.
"Secured Parties": The meaning specified in the Pledge Agreement.
"Securities": The Notes.
19
"Securities Act": The United States Securities Act of 1933, as
amended.
"Security Register" and "Security Registrar": The respective meanings
specified in Section 2.5(a).
"Securityholder": See "Holder," above.
"Senior Advance Amount": At any time of determination, subject to
Section 1.2, (a) the lower of (i) the ▇▇▇▇▇'▇ Senior Advance Amount and (ii) the
S&P Senior Advance Amount minus (b) the Required Liquidity Amount, if any.
"Senior Excess Amount": As of any Business Day, the amount, if any, by
which the Aggregate Outstanding Amount as of the close of business of such
Business Day exceeds the Senior Advance Amount as of such close of business.
"Senior Indebtedness": All Indebtedness (including contingent or
guaranteed indebtedness) and other payment obligations (including, without
limitation, interest that would accrue but for the filing of a petition
initiating a Proceeding, whether or not a claim for such interest is allowed in
the Proceeding) of the Issuer arising under or in respect of this Indenture, the
Notes, or the other Transaction Documents or under any Secured Hedging
Transaction, whether outstanding on the Closing Date or thereafter created or
incurred, including obligations owing to the Custodian under the Custodial
Agreement, to the Note Agent under the Note Purchase Agreement, to the Trustee
under this Indenture or under the Pledge Agreement, and to the Collateral
Administrator under the Collateral Administration Agreement; provided, however,
that Senior Indebtedness shall not include any Indebtedness or such other
obligations incurred in violation of this Indenture.
"Senior Over-Collateralization Test": A test that is satisfied as of
any Business Day if the Aggregate Outstanding Amount as of such Business Day, is
less than or equal to the Senior Advance Amount.
"Short Sale Broker Account": A segregated account established in
accordance with Section 3.9 of the Custodial Agreement in connection with a
Short Sale Transaction in the name of a broker, dealer, or futures commission
merchant, or in the name of the Issuer for the benefit of a broker, dealer,
futures commission merchant, in each case as a pledgee of the Issuer, or
otherwise, in accordance with an agreement between the Issuer, the Custodian and
a broker, dealer, or futures commission merchant, separate and distinct from the
Custodial Account, the Escrow Account and the Credit Enhancer Liquidity Account,
in which certain Fund Investments and/or Money of the Issuer shall be deposited
and withdrawn from time to time in connection with any Short Sale Transaction.
"Short Sale Customer Account": A segregated account established
pursuant to Section 3.9 of the Custodial Agreement in which certain Fund
Investments and/or other assets of the Issuer shall be deposited and withdrawn
from time to time in connection with Short Sale Transactions.
"Short Sale Transaction": The meaning specified in the applicable
Collateral Valuation Schedule.
20
"Specified Hedging Net Exposure": As of any date, as to any Specified
Hedging Transaction for which a determination thereof is required to be made,
shall be determined as follows: (i) each Eligible Counterparty party to each
Specified Hedging Transaction shall determine, with respect to the Specified
Hedging Transactions entered into by it with the Issuer, an amount (the
"Specified Hedging 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 Issuer on such date of
determination of each such Specified Hedging Transaction and (ii) for each
Specified Hedging Transaction, the "Specified Hedging Net Exposure" will, as of
any date, be equal to the sum of all applicable Specified Net Exposure
Components as of such date and may, for purposes of this calculation, be less
than zero.
"Specified Hedging Transaction": A Hedging and Short Sale Transaction
that is not a Defensive Hedge Transaction, a Secured Hedging Transaction or a
Short Sale Transaction.
"Stated Maturity": The Original Stated Maturity, as may be extended in
accordance with Section 2.13.
"Statement of Preferences": The meaning specified in the Operating
Agreement.
"Structured Product Transaction": The meaning specified in the
applicable Collateral Valuation Schedule.
"Tax": Any present or future tax, levy, impost, duty, charge,
assessment, deduction, withholding or fee of any nature (including interest,
penalties and additions thereto) that is imposed by any government or other
taxing authority other than a stamp, registration, documentation or similar tax.
"Tax Gross-Up Amount": The meaning specified in Section 7.1(c).
"Term Preferred Shares": The term preferred shares issued by the Issuer
pursuant to the Operating Agreement and the Statement of Preferences.
"Total Advance Amount": At any time of determination, subject to
Section 1.2, (a) the lower of (i) the ▇▇▇▇▇'▇ Total Amount and (ii) the S&P
Total Advance Amount minus (b) the Required Liquidity Amount, if any.
"Total Capitalization": The meaning specified in the applicable
Collateral Valuation Schedule.
"Total Excess Amount": As of any Business Day, the amount, if any, by
which the sum of the Aggregate Outstanding Amount and the Aggregate Liquidation
Preference as of the close of business of such Business Day exceeds the Total
Advance Amount as of such close of business.
"Total Maximum Commitment": At any date of determination, (a) on and
after the Closing Date and prior to the Draw Period Termination Date,
$216,000,000 and (b) on and after the Draw Period Termination Date, zero;
provided, that the Total Maximum Commitment may be increased in accordance with
Section 2.14 or reduced as provided in Section 9.3.
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"Total Over-Collateralization Test" A test that is satisfied as of any
Business Day if the Aggregate Outstanding Amount and the Aggregate Liquidation
Preference of the Preferred Shares, as of such Business Day, is less than or
equal to the Total Advance Amount.
"Transaction Documents": Collectively, this Indenture, the Notes, the
Note Purchase Agreement, the Pledge Agreement, the Collateral Administration
Agreement and the Custodial Agreement.
"Transfer Certificate": A duly executed transfer certificate
substantially in the form of Exhibit E.
"Trust Officer": When used with respect to the Trustee or any other
bank or trust company acting as trustee of an express trust or as custodian, any
officer within the Corporate Trust Office (or similar office or department)
working on the transactions described in this Indenture and authorized to act
for and on behalf of the Trustee or such other bank or trust company, including
any vice president, assistant vice president, officer of the Trustee or such
other bank or trust company working on the transactions described in this
Indenture.
"Trustee": JPMorgan Chase Bank, National Association, solely in its
capacity as Trustee hereunder, unless a successor Person shall have become the
Trustee pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Person.
"UCC": The Uniform Commercial Code as in effect from time to time in
the State of New York.
"Unquoted Investments": The meaning specified in the applicable
Collateral Valuation Schedule.
"U.S. Government Securities": The meaning specified in the applicable
Collateral Valuation Schedule.
"Valuation Statement": A written statement substantially in the form of
Exhibit F.
"Welfare Plan": A "welfare plan," as such term is defined in Section
3(1) of ERISA.
"Yield-To-Worst": The meaning specified in the applicable Collateral
Valuation Schedule.
"York Affiliated Entity": JGD Management Corp. (d/b/a York Capital
Management), a Delaware corporation, and the Issuer and the respective
Affiliates of each of the foregoing.
"York Enhanced Strategies Management, LLC": York Enhanced Strategies
Management, LLC, a New York limited liability company.
Section 1.2. References to Collateral Valuation Schedules; Accounting
Matters; Asset Coverage Determinations.
(a) 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
22
Valuation Schedules; provided, however, that (i) if at any time none of the
Securities are then rated by ▇▇▇▇▇'▇ but some or all of the Securities are rated
by S&P, the ▇▇▇▇▇'▇ Collateral Valuation Schedule shall not be applicable for
any purpose hereunder and (ii) if at any time none of the Securities are then
rated by S&P but some or all of the Securities are rated by ▇▇▇▇▇'▇, the S&P
Collateral Valuation Schedule shall not be applicable for any purpose hereunder.
(b) For purposes of this Indenture, 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 Issuer referred to in Section 7.23.
(c) 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.
ARTICLE 2
THE NOTES
Section 2.1. Forms Generally.
The Notes and the Trustee's or Authenticating Agent's certificate of
authentication thereon (the "Certificate of Authentication") shall be in
substantially the form required by this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon, as may be
consistent herewith, determined by the Authorized Officers of the Issuer
executing such Securities as evidenced by their execution of such Securities.
Any portion of the text of any Security may be set forth on the reverse thereof,
with an appropriate reference thereto on the face of the Security.
Section 2.2. Forms of Securities; Certificate of Authentication.
(a) Form. The form of the Securities shall be (including the
Certificate of Authentication) as set forth on Exhibit A hereto.
(b) Global Securities. Except as provided below, the Securities
shall be issued initially in the form of one or more permanent global securities
in definitive, fully registered form without interest coupons with the
applicable legends set forth in Exhibit A hereto added to the form of such
Securities (each, a "Global Security"), which shall be deposited on behalf of
the subscribers for such Securities represented thereby with the Trustee as
custodian for the Depository and registered in the name of a nominee of the
Depository for the respective accounts of DTC and Clearstream, duly executed by
the Issuer and authenticated by the Trustee as hereinafter provided.
The aggregate principal amount of the Global Securities may from time to
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time be increased or decreased by adjustments made on the records of the Trustee
or the Depository or its nominee, as the case may be, as hereinafter provided.
(c) Book-Entry Provisions. This Section 2.2(c) shall apply only to
Global Securities deposited with or on behalf of the Depository.
The Issuer shall execute and the Trustee shall, in accordance with this
Section 2.2(c), authenticate and deliver initially one or more Global Securities
that (i) shall be registered in the name of the nominee of the Depository for
such Global Security or Global Securities and (ii) shall be delivered by the
Trustee to such Depository or pursuant to such Depository's instructions or held
by the Trustee as custodian for the Depository.
Agent Members shall have no rights under this Indenture with respect to
any Global Security held on their behalf by the Trustee, as custodian for the
Depository or under the Global Security, and the Depository may be treated by
the Issuer, the Trustee, and any agent of the Issuer or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the
Trustee, or any agent of the Issuer or the Trustee, from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Global Security.
(d) Physical Securities. Except as provided in Sections 2.5(c)(ii),
2.5(c)(iii) and 2.10 hereof, owners of beneficial interests in Global Securities
will not be entitled to receive physical delivery of certificated Securities.
Section 2.3. Authorized Amount; Interest Rate; Stated Maturity;
Denominations.
The aggregate principal amount of Notes that may be authenticated and
delivered under this Indenture is limited to $216,000,000, except for Securities
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Securities pursuant to Section 2.5, 2.6, 2.10 or 8.6
of this Indenture and Securities issued pursuant to supplemental indentures in
accordance with Section 2.14 and Article 8.
The Securities shall be issued in a single class, shall bear interest
at the Interest Rate and shall mature on the Stated Maturity.
The Securities shall be issuable in the minimum denominations of
$1,000,000 and integral multiples of $1.00 in excess thereof (an "Authorized
Denomination").
Section 2.4. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Issuer by one of the
Authorized Officers of the Issuer. The signature of such Authorized Officer may
be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the Authorized Officers of the Issuer shall bind the
Issuer, notwithstanding the fact that such
24
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Securities or did not hold such offices at
the date of issuance of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Securities executed by it, to the Trustee
or the Authenticating Agent for authentication and the Trustee or the
Authenticating Agent, upon Issuer Order, shall authenticate and deliver such
Securities as provided in this Indenture and not otherwise.
Each Security authenticated and delivered by the Trustee or the
Authenticating Agent to or upon Issuer Order on the Closing Date shall be dated
as of the Closing Date. All other Securities that are authenticated after the
Closing Date for any other purpose under the Indenture shall be dated the date
of their authentication.
Securities issued upon transfer, exchange or replacement of other
Securities shall be issued in Authorized Denominations reflecting the original
aggregate principal amount of the Securities so transferred, exchanged or
replaced, but shall represent only the current outstanding principal amount of
the Securities so transferred, exchanged or replaced. In the event that any
Security is divided into more than one Security in accordance with this Article
2, the original principal amount of such Security shall be proportionately
divided among the Securities delivered in exchange therefor and shall be deemed
to be the original aggregate principal amount of such subsequently issued
Securities.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Security a
Certificate of Authentication, substantially in the form provided for herein,
executed by the Trustee or by the Authenticating Agent by the manual signature
of one of their Authorized Officers, and such certificate upon any Security
shall be conclusive evidence, and the only evidence, that such Security has been
duly authenticated and delivered hereunder.
Section 2.5. Registration, Registration of Transfer and Exchange.
(a) The Issuer shall cause to be kept a register (the "Security
Register") at the Registered Office, subject to such reasonable regulations as
it may prescribe, the Issuer shall provide for the registration of Securities
and the registration of transfers of Securities. The Trustee is hereby initially
appointed "Security Registrar" for the purpose of registering Securities and
transfers of such Securities. Upon any resignation or removal of the Security
Registrar, the Issuer shall promptly appoint a successor or, in the absence of
such appointment, assume the duties of Security Registrar.
If a Person other than the Trustee is appointed by the Issuer as
Security Registrar, the Issuer will give the Trustee prompt notice of the
appointment of a Security Registrar and of the location, and any change in the
location, of the Security Registrar, and the Trustee shall have the right to
inspect the Security Register at all reasonable times and to obtain copies
thereof and the Trustee shall have the right to rely upon a certificate executed
on behalf of the Security Registrar by an Officer thereof as to the names and
addresses of the Holders and the principal amounts and numbers of such
Securities.
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Subject to this Section 2.5, upon surrender for registration of
transfer of any Securities at the office or agency of the Issuer to be
maintained as provided in Section 7.2, the Issuer shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of any Authorized Denomination and of
like terms and a like aggregate principal amount.
Except in the case of a transfer of an interest in Notes registered in
the name of the Note Agent made pursuant to a participation or an assignment of
an interest under the Note Purchase Agreement, every Security presented or
surrendered for registration of transfer or exchange shall be duly endorsed, or
be accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Security Registrar, duly executed by the Holder thereof or its
attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer of Securities, but the Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
(b) No Security may be sold or transferred (including, without
limitation, by pledge or hypothecation) unless such sale or transfer is exempt
from the registration requirements of the Securities Act and is exempt under
applicable state securities laws. None of the Issuer, the Trustee or any other
Person may register the Securities under the Securities Act or any state
securities laws.
Transfers of the beneficial interests in any of the Securities will be
permitted only to transferees that (i) are Qualified Investors and (ii) except
to the extent that the Note Purchase Agreement provides or allows otherwise,
satisfy the Rating Criteria. In addition to the requirements of this Section 2.5
and Section 2.4, all transfers of beneficial interests in the Securities shall
be made in accordance with the Note Purchase Agreement.
(c) So long as a Global Security remains Outstanding and is held
by or on behalf of the Depository, transfers of a Global Security, in whole or
in part, shall only be made in accordance with Section 2.2(c) and this Section
2.5(c).
(i) Subject to clause (ii) of this Section 2.5(c), transfers
of a Global Security shall be limited to transfers of such Global Security in
whole, but not in part, to nominees of the Depository or to a successor of the
Depository or such successor's nominee.
(ii) Global Certificatable Security to Physical Security. If
a holder of a beneficial interest in a Certificatable Security represented by an
interest in a Global Security (together, "Global Certificatable Securities")
wishes at any time to transfer its interest in such Security to a Person who
wishes to take delivery thereof in the form of a Physical Security, as
applicable, such holder may, subject to the rules and procedures of DTC,
Clearstream or the Depository, as the case may be, transfer or cause the
transfer of such interest for an equivalent beneficial interest in one or more
such Physical Securities as described below. Upon receipt by the Trustee, as
Security Registrar, of:
(A) instructions given in accordance with the Depository's
procedures from an Agent Member, or instructions from DTC,
Clearstream or the Depository, as the
26
case may be, directing the Trustee to deliver one or more such
Physical Securities, designating the registered name or names,
address, payment instructions and the number and principal
amounts of the Physical Securities to be executed and delivered
(the aggregate principal amounts of such Physical Securities
being equal to the aggregate principal amount of the Global
Security to be transferred), in an Authorized Denomination, and
(B) a Transfer Certificate given by the transferor of such
beneficial interest, and
the Trustee, as Security Registrar, will instruct the Depository to reduce the
applicable Global Security by the aggregate principal amount of the beneficial
interest in such Global Security to be transferred and the Trustee, as Security
Registrar, shall record the transfer in the Security Register in accordance with
Section 2.5(a) and shall instruct the Issuer to execute the Physical Securities
and the Trustee shall authenticate and deliver the Physical Securities
registered in the names specified in the Transfer Certificate above in principal
amounts designated by the transferee (the aggregate of such amounts being equal
to the beneficial interest in the Global Securities to be transferred) and an
Authorized Denomination. Any purported transfer in violation of the foregoing
requirements shall be null and void ab initio, and the Trustee shall not
register any such purported transfer and shall not authenticate and deliver such
Physical Securities.
If a holder of a beneficial interest in a Global Certificatable
Security wishes at any time to exchange such interest for an interest in one or
more Physical Securities, such holder may exchange or cause the exchange of such
interest for an equivalent beneficial interest in one or more such Physical
Securities as provided below. Upon receipt by the Trustee, as Security
Registrar, of:
(A) instructions given in accordance with the Depository's
procedures from an Agent Member, or instructions from DTC,
Clearstream or the Depository, as the case may be, directing the
Trustee to deliver one or more Physical Securities and
(B) written instructions from such holder designating the
registered name or names, address, payment instructions, the
number and principal amounts of the applicable Physical
Securities to be executed and delivered (the aggregate principal
amounts of such Physical Securities being the same as the
beneficial interest in the Global Certificatable Security to be
exchanged),
the Trustee, as Security Registrar, shall instruct the Depository to reduce the
Global Security by the aggregate principal amount of the beneficial interest in
the Global Security to be exchanged, shall record the exchange in the Security
Register in accordance with Section 2.5(a) and shall instruct the Issuer to
execute the Physical Securities and the Trustee shall authenticate and deliver
the Physical Securities registered as specified in the instructions described in
clause (B) above, in an Authorized Denomination. Any purported exchange in
violation of the foregoing requirements shall be null and void ab initio, and
the Trustee shall not register any such purported exchange and shall not
authenticate and deliver such Physical Securities.
27
(iii) Other Exchanges. In the event that a Global Security is
exchanged for Securities in definitive registered form without interest coupons
pursuant to Section 2.5(c)(ii) or Section 2.10 hereof, such Securities may be
exchanged for one another only in accordance with such procedures as are
substantially consistent with the provisions above or in this Section
2.5(c)(iii), as applicable (including certification requirements intended to
insure that such transfers are made only to holders who are Qualified Investors,
and as may be from time to time adopted by the Issuer).
(iv) Transfer of Physical Securities. If a holder of a
beneficial interest in a Physical Security wishes at any time to transfer its
interest in such Physical Security to a Person who wishes to take delivery
thereof in the form of one or more Physical Securities, such holder may transfer
or cause the transfer of such interest for an equivalent beneficial interest in
one or more such Physical Securities as provided below. Upon receipt by the
Issuer and the Trustee, as Security Registrar, of:
(A) such holder's Physical Security properly endorsed for
assignment to the transferee (except in the case of a transfer
of an interest in a Note registered in the name of the Note
Agent made pursuant to a participation or an assignment of an
interest under the Note Purchase Agreement), and
(B) a Transfer Certificate given by the transferor of such
Physical Security,
the Trustee, as Security Registrar, shall cancel such Physical Security (except
in the case of a transfer of an interest in a Note registered in the name of the
Note Agent made pursuant to a participation or an assignment of an interest
under the Note Purchase Agreement) in accordance with Section 2.9, record the
transfer in the Security Register in accordance with Section 2.5(a) and shall
instruct the Issuer to execute the Physical Securities (except in the case of a
transfer of an interest in a Note registered in the name of the Note Agent made
pursuant to a participation or an assignment of an interest under the Note
Purchase Agreement) and the Trustee shall authenticate and deliver Physical
Securities (except in the case of a transfer of an interest in a Note registered
in the name of the Note Agent made pursuant to a participation or an assignment
of an interest under the Note Purchase Agreement) bearing the same designation
as the Physical Securities endorsed for transfer, registered in the names
specified in the assignment described in clause (A) above, in principal amounts
designated by the transferee (the aggregate of such amounts being the same as
the beneficial interest in the Physical Securities surrendered by the
transferor), and in Authorized Denominations. Any purported transfer in
violation of the foregoing requirements (including a purported transfer or
request to transfer by delivery to the Trustee of any patently false certificate
pursuant to clause (B) above) shall be null and void ab initio, and the Trustee
shall not register any such purported transfer and shall not authenticate and
deliver such Physical Securities.
(v) Exchange of Physical Securities. If a holder of a
beneficial interest in one or more Physical Securities wishes at any time to
exchange such Physical Securities for one or more such Physical Securities of
different principal amounts, such holder may exchange or cause the exchange of
such interest for an equivalent beneficial interest in the Physical Securities
bearing the same designation as the Physical Securities endorsed for exchange as
provided below. Upon receipt by the Trustee, as Security Registrar, of:
28
(A) such holder's Physical Securities properly endorsed for
such exchange and
(B) written instructions from such holder designating the
number and principal amounts of the applicable Physical
Securities to be issued (the aggregate principal amounts of such
Physical Securities being the same as the Physical Securities
surrendered for exchange),
the Trustee, as Security Registrar, shall cancel such Physical Securities in
accordance with Section 2.9, record the exchange in the Security Register in
accordance with Section 2.5(a) and shall instruct the Issuer to execute the
Physical Securities and the Trustee shall authenticate and deliver one or more
Physical Securities bearing the same designation as the Physical Securities
endorsed for exchange, registered in the same names as the Physical Securities
surrendered by such holder or such different names as are specified in the
endorsement described in clause (A) above, in different principal amounts
designated by such holder (the aggregate principal amounts being the same as the
beneficial interest in the Physical Securities surrendered by such holder), and
in Authorized Denominations.
(d) Any purported transfer of a Security not in accordance with
Section 2.5 shall be null and void and shall not be given effect for any purpose
hereunder.
Section 2.6. Mutilated, Defaced, Destroyed, Lost or Stolen Securities.
If (i) there shall be delivered to the Issuer or the Trustee evidence
to their reasonable satisfaction of the destruction, loss or theft of any
Security, and (ii) there is delivered to the Issuer and the Trustee such
security or indemnity as may be required by them to save each of them and any
agent of any of them harmless, then, in the absence of notice to the Issuer, the
Trustee that such Security has been acquired by a Protected Purchaser, the
Issuer shall execute and, upon Issuer Order, the Trustee shall authenticate and
deliver, in lieu of any such mutilated, defaced, destroyed, lost or stolen
Security, a new Security in replacement thereof, of like tenor (including the
same date of issuance) and equal principal amount registered in the same manner,
dated the date of its authentication, bearing interest from the date to which
interest has been paid on the mutilated, defaced, destroyed, lost or stolen
Security and bearing a number not contemporaneously outstanding.
If, after delivery of such new Security, a Protected Purchaser of the
predecessor Security presents for payment, transfer or exchange such predecessor
Security, the Issuer and the Trustee shall be entitled to recover such new
Security from the Person to whom it was delivered or any Person taking
therefrom, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer and the Trustee in connection therewith.
In case any such mutilated, defaced, destroyed, lost or stolen Security
has become due and payable, the Issuer may in its discretion, instead of issuing
a new Security in replacement thereof, pay such Security without requiring
surrender thereof except that any mutilated Security shall be surrendered.
Upon the issuance of any new Security under this Section 2.6, the
Issuer or the Trustee may require the payment by the registered Holder thereof
of a sum sufficient to cover any tax or
29
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section 2.6 in lieu of any
mutilated, defaced, destroyed, lost or stolen Security shall constitute an
original additional contractual obligation of the Issuer, and such new Security
shall be entitled, subject to the second paragraph of this Section 2.6, to all
the benefits of this Indenture equally and proportionately with any and all
other Securities duly issued hereunder.
The provisions of this Section 2.6 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, defaced, destroyed, lost or stolen Securities.
Section 2.7. Payment in Respect of the Securities; Rights Preserved.
(a) Interest shall accrue on the Drawn Amount of the Notes during
each Interest Accrual Period at the Interest Rate and will be payable in arrears
on each Payment Date. The Commitment Fee shall accrue as specified in the
definition thereof and will be payable in arrears on each Payment Date. Any
Break Funding Costs will be payable on the next Payment Date following the
Prepayment Date. Any Increased Costs shall accrue as specified in the definition
thereof and shall be payable in arrears on each Payment Date. Any Tax Gross-Up
Amounts shall accrue as specified in the definition thereof and shall be payable
in arrears on each Payment Date.
Interest on the Notes shall be due and payable on each Payment Date
immediately following the related Interest Accrual Period.
Interest will cease to accrue on each Note or, in the case of a partial
Prepayment, on such part, from the date of Prepayment or Stated Maturity unless
payment of principal is improperly withheld or unless Default is otherwise made
with respect to such payments of principal. To the extent lawful and
enforceable, interest on any Defaulted Interest shall accrue at the applicable
Interest Rate until paid as provided herein.
(b) The Drawn Amount in respect of each Note shall be due and
payable no later than the Stated Maturity unless the unpaid principal of such
Note becomes due and payable at an earlier date by declaration of acceleration
or otherwise, or as a Prepayment in accordance with the provisions of this
Indenture.
(c) As a condition to payments on any Security without the
imposition of U.S. withholding tax, the Trustee or the Issuer shall require
certification acceptable to them to enable the Issuer, the Trustee and any
Paying Agent to determine their duties and liabilities with respect to any taxes
or other charges that any of them may be required to deduct or withhold from
payments in respect of such Security under any present or future law or
regulation of the United States or any present or future law or regulation of
any political subdivision thereof or taxing authority therein or to comply with
any reporting or other requirements under any such law or regulation.
30
(d) Payments on any Security other than the Physical Securities
shall be payable by wire transfer in immediately available funds to a Dollar
account maintained by the Depository or its nominee or, if a wire transfer
cannot be effected, by a Dollar check in immediately available funds delivered
to the Depository or its nominee. Payments, if any, on the Physical Securities
shall be made by the Issuer by wire transfer in immediately available funds to
a Dollar account maintained by the Holder or as otherwise directed by the
Holder, or its nominee, provided, that the Holder thereof shall have provided
wiring instructions to the Trustee on or before the related Record Date. If
appropriate instructions for any such wire transfer are not received by the
related Record Date, then such payment shall be made by check drawn on a U.S.
bank mailed to the registered holder at its address in the register maintained
by the Trustee under this Indenture. The Issuer expects that the Depository or
its nominee, upon receipt of any payment of any of the principal amount of and
interest on a Global Security held by the Depository or its nominee, will
immediately credit the applicable Agent Members' accounts with payments in
amounts proportionate to the respective beneficial interests in such Global
Security as shown on the records of the Depository or its nominee. The Issuer
also expects that payments by Agent Members to owners of beneficial interests
in such Global Security held through Agent Members will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of the Agent Members. Upon
final payment due on the Maturity of a Note, the Holder thereof shall present
and surrender such Note at the Corporate Trust Office of the Trustee or at the
office of any Paying Agent on or prior to such Maturity; provided, however, that
if there is delivered to the Issuer and the Trustee such security or indemnity
as may be required by them to save each of them harmless and an undertaking
thereafter to surrender such certificate, then, in the absence of notice to the
Issuer or the Trustee that the applicable Note has been acquired by a Protected
Purchaser, such final payment shall be made without presentation or surrender.
If any Global Securities remain Outstanding 15 Business Days prior to
the Stated Maturity, the Investment Manager shall determine if all liquidation
proceeds will be received such that final payments will be made with respect to
such Global Securities on the Stated Maturity. If the Investment Manager
determines that (due to delayed payment of certain liquidation proceeds or
otherwise) full and final payment may be delayed beyond the Stated Maturity, the
Investment Manager will provide written notice to the Trustee and the Trustee
shall promptly notify the Depository and shall request the Depository to post on
its system notices deemed to be acceptable and appropriate under the
circumstances by the Investment Manager and the Trustee and subject to
Depository procedures and take such other action that the Investment Manager
deems to be appropriate under the circumstances, to ensure that final payments
will be distributed to the Depository for payment to the holders of such Global
Securities when the funds become available. None of the Issuer, the Trustee nor
any Paying Agent will have any responsibility or liability for any aspects of
the records maintained by the Depository or its nominee or any of the Agent
Members relating to or for payments made thereby on account of beneficial
interests in, a Global Security. In the case where any final payment of any of
the principal amount of and interest on any Note (other than on the Stated
Maturity thereof) is to be made, the Issuer or, upon Issuer Order, the Trustee,
in the name and at the expense of the Issuer shall, not more than 30 nor less
than 10 days prior to the date on which such payment is to be made, mail to the
Persons entitled thereto at their addresses appearing on the Security Register,
a notice which shall state the date on which such payment will be made,
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the amount of such payment per $100,000 initial principal amount of Notes and
shall specify the place where such Notes may be presented and surrendered for
such payment.
(e) Subject to the provisions of Sections 2.7(a) and (b) hereof the
Holders of Securities as of the Record Date in respect of a Payment Date shall
be entitled to the interest, any Commitment Fee, Increased Costs and Tax
Gross-Up Amount accrued and payable and the principal amount payable on such
Payment Date. All such payments that are mailed or wired and returned to the
Paying Agent shall be held for payment as herein provided at the office or
agency of the Issuer, to be maintained as provided in Section 7.2.
(f) Interest on any Note and any Additional Costs (other than Break
Funding Cost) which are payable, and are punctually paid or duly provided for on
any Payment Date shall be paid to the Person in whose name that Security is
registered at the close of business on the Record Date for such interest. Any
Break Funding Cost shall be paid to the Person in whose name the Notes is
registered on the Record Date for such Prepayment Date.
Payments on the Notes shall be made to Holders in the proportion that
the Aggregate Outstanding Amount of the Notes registered in the name of each
such Holder on such Record Date bears to the Aggregate Outstanding Amount of all
Notes on such Record Date.
(g) Payment of any Defaulted Interest may be made in any other
lawful manner if notice of such payment is given by the Trustee to the Issuer
and the Holders of the Notes, and such manner of payment shall be deemed
practicable by the Trustee.
(h) Interest accrued with respect to the Notes, any Break Funding
Costs, the Commitment Fee, the Increased Costs and the Tax Gross-Up Amounts
shall be calculated on the basis of the actual number of days elapsed in the
applicable Interest Accrual Period divided by 360.
(i) All reductions in the principal amount of a Note (or one or more
predecessor Notes) effected by payments made on any Payment Date or Prepayment
Date shall be binding upon all future Holders of such Securities and of any
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, whether or not such payment is noted on such
Security.
(j) The obligations of the Issuer with respect to the Securities and
this Indenture are limited recourse obligations of the Issuer payable solely
from the assets of the Issuer, including, but not limited to, the Collateral,
and following realization on such assets, any claims of the Holders shall be
extinguished. No recourse shall be had for the payment of any amount owing in
respect of the Securities against any past, present or future Officer, director,
employee, stockholder, member agent or incorporator of the Issuer, the
Securityholders, the Investment Manager, the Trustee, the Placement Agents,
their respective Affiliates or any of their successors or assigns for any
amounts payable under the Securities or this Indenture. It is understood that
the foregoing provisions of this paragraph shall not (i) prevent recourse to any
assets of the Issuer for the sums due or to become due under any security,
instrument or agreement or (ii) constitute a waiver, release or discharge of any
indebtedness or obligation evidenced by the Securities (to the extent they
evidence debt) or secured by this Indenture until such assets have been realized
upon, whereupon any outstanding indebtedness or obligation shall be
extinguished.
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It is further understood that the foregoing provisions of this paragraph shall
not limit the right of any Person to name the Issuer as a party defendant in any
Proceeding or in the exercise of any other remedy under the Securities or this
Indenture, so long as no judgment in the nature of a deficiency judgment or
seeking personal liability shall be asked for or (if obtained) enforced against
any such Person or entity.
(k) Subject to the foregoing provisions of this Section 2.7, each
Security delivered under this Indenture and upon registration of transfer of or
in exchange for or in lieu of any other Security shall carry the rights to
unpaid interest, principal and Additional Costs that were carried by such other
Securities.
(l) Notwithstanding any of the foregoing provisions with respect to
payments of any of the principal amount of and interest on the Notes, if the
Notes have become or been declared due and payable following an Event of Default
and such acceleration of Maturity and its consequences have not been rescinded
and annulled, then payments of any of the principal amount of and interest on
such Notes shall be made in accordance with Section 5.9.
Section 2.8. Persons Deemed Owners.
The Issuer, the Trustee, and any of their respective agents may treat
the Person in whose name any Security is registered as the owner of such
Security on the Security Register on the applicable Record Date for the purpose
of receiving payments on such Security and on any other date for all other
purposes whatsoever (whether or not such payments are overdue), and neither the
Issuer nor the Trustee nor any of their respective agents shall be affected by
notice to the contrary; provided however, that the Depository, or its nominee,
shall be deemed the owner of the Global Securities, and owners of beneficial
interests in Global Securities will not be considered the owners of any
Securities for the purpose of receiving notices.
Section 2.9. Cancellation.
All Securities surrendered for payment, registration of transfer,
exchange or redemption, or deemed lost or stolen, shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee, shall be promptly
canceled by it and may not be reissued or resold. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section 2.9, except as expressly permitted by this Indenture. All
canceled Securities held by the Trustee shall be destroyed or held by the
Trustee in accordance with its standard retention policy unless the Issuer shall
direct by an Issuer Order that they be returned to it.
Section 2.10. Global Securities; Transfer to Physical Securities.
(a) Except as provided in Section 2.5(c)(ii), a Global Security
deposited with the Depository pursuant to Section 2.2 shall be transferred to
the beneficial owners thereof only if such transfer complies with Section 2.5 of
this Indenture and the Depository notifies the Issuer that it is unwilling or
unable to continue as Depository for such Global Security or if at any time such
Depository ceases to be a "Clearing Agency" registered under the Exchange Act
and a successor depository is not appointed by the Issuer within 90 days after
such notice.
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(b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section 2.10 shall be surrendered by the
Depository to the Trustee's office located in the Borough of Manhattan, The City
of New York, to be so transferred, in whole or from time to time in part,
without charge, and the Trustee shall authenticate and deliver, upon such
transfer of each portion of such Global Security, an equal aggregate principal
amount of Securities of Authorized Denominations. Any Security delivered in
exchange for an interest in a Global Security shall bear the applicable legend
and shall be subject to the transfer restrictions referred to in such applicable
legends. The Holder of such a registered individual Security may transfer such
Security by surrendering it at the office or agency maintained by the Issuer for
this purpose in New York, New York, which initially will be the New York office
of the Trustee specified in Section 7.2 or at the office of any Paying Agent.
(c) Subject to the provisions of Section 2.10(b) above, the
registered Holder of a Global Security may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of either of the events specified
in paragraph (a) of this Section 2.10, the Issuer will promptly make available
to the Trustee a reasonable supply of certificated Securities in definitive,
fully registered form without interest coupons. The definitive Securities shall
be printed, lithographed or engraved, or provided by any combination thereof, or
in any other manner permitted by the rules and regulations of any applicable
securities exchange, all as determined by the Officers executing such definitive
Securities.
Section 2.11. Securities Beneficially Owned by Non-Permitted Holders.
(a) Notwithstanding anything to the contrary elsewhere in this
Indenture, except with respect to a transfer made pursuant to Section 2.07(f)
of the Note Purchase Agreement, any transfer of a beneficial interest in any
Securities to a Non-Permitted Holder shall be null and void ab initio and any
such purported transfer of which the Issuer or the Trustee shall have notice may
be disregarded by the Issuer and the Trustee for all purposes.
(b) Any transfer of a beneficial interest in any Securities to a
Non-Permitted Holder shall be subject to the provisions of Section 2.07 of the
Note Purchase Agreement.
Section 2.12. Borrowings on the Notes.
(a) On any Business Day during the Draw Period, amounts may be
borrowed by the Issuer under the Notes (each such amount borrowed, a
"Borrowing") at the direction of an Authorized Officer; provided, in each case
that (i) each applicable condition to such Borrowing specified in Section 4 of
the Note Purchase Agreement is satisfied on the date of such Borrowing (a
"Borrowing Date"), and (ii) both prior to and after giving effect to any such
Borrowing no Excess Amount exists and the Aggregate Outstanding Amount is less
than the Total Maximum Commitment.
(b) Notice of any Borrowing shall be given by the Issuer to the Note
Agent, the Investment Manager and the Trustee in accordance with the Note
Purchase Agreement.
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(c) Except for any Borrowing in an aggregate principal amount equal
to the aggregate unused amount of the Commitments, the aggregate principal
amount of any Borrowing in respect of the Notes (taken as a whole) shall be an
integral multiple of U.S. $1,000,000 and at least U.S. $5,000,000. Except as
otherwise provided by Section 2.03(b) of the Note Purchase Agreement, any
Borrowing shall be made pro rata according to the unused Commitments in respect
of the Notes.
(d) Borrowings may be prepaid in accordance with Section 9.2 and
once an amount under a Note is prepaid, subject to this Section 2.12 and the
other terms of this Indenture, it may be re-borrowed as a new Borrowing.
(e) If any holder of an interest in any of the Notes shall at any
time during the Draw Period fail to satisfy the Rating Criteria, the Issuer will
enforce its rights under the Note Purchase Agreement.
Section 2.13. Extension of Stated Maturity by the Holders.
Subject to complying with this Section 2.13, (a) upon written direction
to the Trustee by Holders of 100% of the Aggregate Outstanding Amount and with
the prior written approval of the Credit Enhancer, the Stated Maturity shall be
extended from the Original Stated Maturity to the date that is 364 days after
the Original Stated Maturity (the "First Extended Maturity Date"), and (b) upon
written direction to the Trustee by Holders of not less than 100% of the
Aggregate Outstanding Amount and with the prior written approval of the Credit
Enhancer, at the expiration of the First Extended Maturity Date, the Stated
Maturity shall be extended to a date that is 364 days after the expiration of
the First Extended Maturity Date (the "Second Extended Maturity Date" and the
First Extended Maturity Date and the Second Extended Maturity Date shall each be
referred to herein as an "Extended Maturity Date"); provided, that any Extended
Maturity Date that would otherwise be a day that is not a Business Day shall be
the preceding Business Day. Upon each extension of the Original Stated Maturity
to the First Extended Maturity Date or the Second Extended Maturity Date, as the
case may be, each reference in this Indenture to the "Stated Maturity" shall be
a reference to the Stated Maturity as so extended. Any such written direction to
the Trustee pursuant to the foregoing subparts (a) or (b) (each such notice
being an "Extension Notice") may be given no more than nine months and no less
than five months prior to the Stated Maturity, extend the Stated Maturity from
the Original Stated Maturity to the next available Extended Maturity Date so
long as on the Original Stated Maturity and on any Extended Maturity Date (i) no
Default exists, (ii) no violation of Section 7.7 (without giving effect to the
grace periods provided for therein) shall have occurred and be continuing under
this Indenture and (iii) the Rating Agency Condition is met. The Trustee shall
notify all of the Holders of its receipt of any Extension Notice within five
Business Days after the Trustee's receipt thereof that the Stated Maturity has
been extended in accordance with this Section. The Trustee shall promptly notify
the Issuer, each Holder and each Rating Agency of the effectiveness of any such
extension pursuant to this Section 2.13.
Section 2.14. Additional Issuance.
(a) At any time prior to the Stated Maturity, subject to at least 10
Business Days' written notice to the Trustee and the prior written approval of
the Credit Enhancer, the Issuer may issue and sell additional Securities,
provided that the following conditions are met: (i) such
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issue may not exceed 25% of the original issue amount of Securities authorized
to be issued on the Closing Date; (ii) the terms of the Securities issued (other
than the price thereof or the initial date from which interest accrues) are
identical to the terms of previously issued Securities; (iii) Rating Agency
Confirmation has been obtained; (iv) no Default exists at the time of and after
giving effect to the issuance of such additional Securities, (v) no violation of
any "asset coverage" test required to be maintained pursuant to Section 18 of
the Investment Company Act shall exist immediately after the issuance of such
additional Securities; and (vi) no violation of Section 7.7 (without giving
effect to the grace periods provided for therein) shall exist at the time of and
after giving effect to the issuance of such Securities. Upon the issuance of any
additional Securities in accordance with this Section 2.14, the Total Maximum
Commitment shall be deemed to have been increased by the aggregate principal
amount of such newly issued Securities.
(b) Any additional issuance pursuant to Section 2.14(a) shall first
be offered on a pro rata basis to the Holders existing at the time of such
proposed additional issuance. The Issuer shall direct the Trustee to provide
notice to such existing Holders not less than 20 Business Days prior to the date
of the proposed additional issuance. Such notice shall contain the date and
proposed amount of the additional issuance. If a Holder intends to accept the
offer to purchase its pro share of the additional Securities to be issued, such
Holder shall provide the Trustee, not later than 10 Business Days after receipt
of such notice of the proposed additional issuance, written notice of such
acceptance. Any Holder who does not affirmatively respond with a written
acceptance shall be deemed to have declined the offer to purchase its pro rata
share of such additional Securities.
ARTICLE 3
CONDITIONS PRECEDENT
Section 3.1. Closing Date Issuance.
The Securities to be issued on the Closing Date shall be executed by
the Issuer and delivered to the Trustee for authentication and thereupon the
same shall be authenticated and delivered by the Trustee upon Issuer Order and
upon receipt by the Trustee of the following:
(a) Executed Agreements. An executed counterpart of the Pledge
Agreement, the Custodial Agreement, the Investment Management Agreement and the
Note Purchase Agreement and such other documents as the Trustee may reasonably
require;
(b) Collateral Filings. Evidence that (i) Uniform Commercial Code
Financing Statements (Form UCC-1), naming the Issuer as the debtor and the
Collateral Agent as the secured party or other similar instruments or documents
in a form suitable for filing, have been prepared for filing in all
jurisdictions necessary or advisable to perfect the Liens in the Collateral
created or purported to be created by the Pledge Agreement, and (ii) the Issuer
has certified that all other actions necessary or advisable to perfect the Liens
in the Collateral created or purported to be created by the Pledge Agreement
have been taken;
(c) Officer Certificate. An Officer's Certificate of the Issuer (i)
evidencing the authorization by Board Resolution of the execution and delivery
of this Indenture, the Note
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Purchase Agreement, the Pledge Agreement, the Custodial Agreement and the
execution, authentication and delivery of the Securities applied for by it and
specifying the Stated Maturity, the principal amount and the Interest Rate for
the Notes issued by it, and (ii) certifying that (A) the attached copy of the
Board Resolution is a true and complete copy thereof, (B) such resolutions have
not been rescinded and are in full force and effect on and as of the Closing
Date and (C) the Officers authorized to execute and deliver such documents hold
the offices and have the signatures indicated thereon;
(d) No Governmental Approvals Required. Either (i) a certificate of
the Issuer or other official document evidencing the due authorization, approval
or consent of any governmental body or bodies, at the time having jurisdiction
in the premises, together with an Opinion of Counsel of the Issuer satisfactory
in form and substance to the Trustee that the Trustee is entitled to rely
thereon and that no other authorization, approval or consent of any governmental
body is required for the valid issuance of such Securities applied for by it, or
(ii) an Opinion of Counsel of the Issuer satisfactory in form and substance to
the Trustee that no such authorization, approval or consent of any governmental
body is required for the valid issuance of such Securities except as may have
been given;
(e) Opinion of Counsel. Opinions of (i) ▇▇▇▇▇ Day, special counsel
to the Issuer; (ii) Gardere ▇▇▇▇▇ ▇▇▇▇▇▇ LLP, special counsel to the Custodian,
and (iii) ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, special counsel to the Collateral Agent
and the Note Agent, in each case in form and substance satisfactory to the
Trustee, dated the Closing Date and addressed to the Trustee, the Rating
Agencies and the other parties identified in each such opinion;
(f) No Default. An Officer's Certificate of the Issuer stating that
(i) it is not in Default under this Indenture and that the issuance of the
Securities applied for by it will not result in a breach of any of the terms,
conditions or provisions of, or constitute a Default under, its Organic
Documents, any indenture or other material agreement or instrument to which the
Issuer is a party or by which it is bound, or any order of any court or
administrative agency entered in any Proceeding to which the Issuer is a party
or by which it may be bound or to which it may be subject; (ii) that all
conditions precedent provided in this Indenture relating to the authentication
and delivery of the Securities applied for by it have been complied with; and
(iii) that all expenses due or accrued with respect to the offering of the
Securities or relating to actions taken on or in connection with the Closing
Date have been paid or provided for;
(g) No Litigation, etc. An Officer's Certificate of the Issuer
stating that no material litigation, arbitration, governmental investigation,
proceeding or inquiry shall, on the Closing Date, be pending or, to the
knowledge of the Issuer, threatened with respect to any of the transactions
contemplated hereby which would be adverse to, or be detrimental to the
interests of, any of the Holders;
(h) Rating of Securities. An Officer's Certificate of the Issuer
certifying that (i) the Securities have received a rating of "Aaa" from Moody's
and that the Preferred Shares have received a rating of "Aaa" by ▇▇▇▇▇'▇ after
giving effect to the issuance of insurance policy to be issued by the Credit
Enhancer pursuant to the Insurance Agreement and (ii) the Securities have
received a rating of "AAA" by S&P and that the Preferred Shares have received a
credit enhanced rating of "AAA" by S&P; and
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Section 3.2. Additional Issuances.
Any additional Securities to be issued pursuant to Section 2.14 shall
be executed by the Issuer and delivered to the Trustee for authentication and
thereupon the same shall be authenticated and delivered by the Trustee upon
Issuer Order and upon receipt by the Trustee of evidence that the conditions set
forth in Section 3.1(c), (d), (e), (f), (g) and (h) have been satisfied on and
as of the issuance date of such additional Securities.
ARTICLE 4
SATISFACTION AND DISCHARGE
Section 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall be discharged and shall cease to be of further
effect except as to
(i) rights of registration of transfer and exchange,
(ii) substitution of mutilated, defaced, destroyed, lost or
stolen Securities,
(iii) rights of Holders of Securities to receive payments of
principal thereof and interest thereon and any Additional Costs as provided
herein,
(iv) the rights, obligations and immunities of the Trustee
hereunder; and
(v) the rights of Securityholders as beneficiaries hereof
with respect to the property deposited with the Trustee and payable to all or
any of them; and the Trustee, on demand of and at the expense of the Issuer,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture, when:
(A) either:
(1) all Securities theretofore authenticated and
delivered (other than (x) Securities which have been mutilated,
defaced, destroyed, lost or stolen and which have been replaced or paid
as provided in Section 2.6 and (y) Securities for whose payment Money
has theretofore irrevocably been deposited in trust and thereafter
repaid to the Issuer or discharged from such trust, as provided in
Section 7.3) have been delivered to the Trustee for cancellation; or
(2) all Securities not theretofore delivered to the
Trustee for cancellation have become due and payable or will become due
and payable at their Stated Maturity within one year and the Issuer has
irrevocably deposited or caused to be deposited with the Trustee, in
trust for such purpose, Cash, non-callable direct obligations of the
United States of America, provided, that the obligations are entitled
to the full faith and credit of the United States of America or are
debt obligations which are rated "Aaa" by Moody's and "AAA" by S&P, in
an amount sufficient, as verified by a firm of certified public
accountants which are internationally recognized, to pay and discharge
the entire indebtedness on such Securities not theretofore delivered to
the Trustee for
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cancellation, for principal and interest and any Additional Costs to
the date of such deposit (in the case of Securities which have become
due and payable), or to the Stated Maturity;
(B) the Issuer has paid or caused to be paid all
other sums payable by it hereunder and under the other Transaction
Documents; and
(C) the Issuer has delivered to the Trustee
Officer's certificates and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
rights and obligations of the Issuer, the Trustee and, if applicable, the
Securityholders, as the case may be, under Sections 2.7, 4.2, 5.4(c), 5.9, 6.7,
and 7.1 hereof shall survive.
Section 4.2. Application of Trust Money.
All Monies deposited with the Trustee pursuant to Section 4.1 shall be
held in trust and applied by it in accordance with the provisions of the
Securities and this Indenture, to the payment of principal and interest and any
Additional Costs, either directly or through any Paying Agent, as the Trustee
may determine, to the Person entitled thereto and for whose payment such Money
has been deposited with the Trustee; but such Money shall be segregated from
other funds to the extent required herein or required by law.
Section 4.3. Repayment of Monies Held by Paying Agent.
In connection with the satisfaction and discharge of this Indenture
with respect to the Securities, all Monies then held by any Paying Agent other
than the Trustee under the provisions of this Indenture shall, upon demand of
the Issuer, be paid to the Trustee to be held and applied pursuant to Section
7.3 hereof and thereupon such Paying Agent shall be released from all further
liability with respect to such Monies.
ARTICLE 5
EVENTS OF DEFAULT; REMEDIES
Section 5.1. Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(a) a default in the payment of any interest on any Notes or of any
Additional Costs when the same becomes due and payable, which default shall
continue for a period of three Business Days;
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(b) a default in the payment of any principal amount when the same
becomes due and payable on any Notes at Stated Maturity or on any date of
mandatory prepayment pursuant to Section 9.1;
(c) the failure of the Issuer to comply with Section 18 of the
Investment Company Act or any successor provision thereto or any applicable
"asset coverage" maintenance requirements set forth therein and such failure
shall continue for a period of 30 days or more after the earlier of (x) notice
thereof having been given to the Issuer by the Trustee or to the Issuer and the
Trustee by a Noteholder or (y) the first date on which an Authorized Officer of
the Issuer or the Investment Manager had actual knowledge of such failure;
(d) the failure of the Issuer to comply with its obligations under
Section 7.7 (Over-Collateralization Tests), or Section 7.13 (Minimum Net
Worth) ;
(e) the failure of the Issuer to comply with its obligations under
Section 7.21 (Statement as to Compliance), Section 7.29 (Limitations on Hedging
and Short Sale Transactions) or Section 10.6 (Accountings) for three (3) days or
more;
(f) the failure of the Issuer to be a registered "investment
company" under the Investment Company Act for more than 30 days;
(g) except as otherwise provided in this Section 5.1, a default in
the performance, or breach, of any other covenant or other agreement of the
Issuer in this Indenture (except for a covenant or other agreement a default in
the performance or breach of which is elsewhere in this Section 5.1 or in
Article 7 specifically dealt with) and the continuation of such default or
failure for a period of 30 days after notice thereof shall have been given to
the Issuer by the Trustee (who shall be acting at the direction of a Majority of
the Notes), or to the Issuer and the Trustee by a Majority of the Notes,
specifying such default, breach or failure and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder;
(h) any representation or warranty of the Issuer under this
Indenture (other than the representation and warranty relating to any violation
of Section 18 of the Investment Company Act, or any successor provision thereto,
and any applicable "asset coverage" maintenance requirements set forth therein)
or of the Issuer in any other Transaction Document or in any certificate
delivered pursuant hereto or thereto is or shall be incorrect in any material
respect when made or deemed made and, in the case of any such breach that is
capable of being cured, such breach continues uncured for a period of thirty
(30) days or more after the earlier of (x) notice thereof having been given to
the Issuer by the Trustee or to the Issuer and the Trustee by a Majority of the
Notes or (y) the first date on which an Authorized Officer of the Issuer or the
Investment Manager had actual knowledge of such failure;
(i) an aggregate principal amount equal to or exceeding 0.80% of the
Net Asset Value of any Indebtedness shall become due and payable (whether at
maturity, by acceleration or otherwise) and not be paid or satisfied in full, or
the holder of such Indebtedness shall be entitled to require the Issuer to
repay, repurchase, redeem, defease or otherwise retire for value such
Indebtedness, in whole or in part, prior to its scheduled payment date (in each
case, after giving effect to any grace periods applicable thereto);
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(j) the Issuer shall default in the payment when due (whether at
stated maturity or by acceleration, mandatory prepayment or otherwise) of any
amount in excess of 3.0% of the Net Asset Value (after giving effect to any
grace periods applicable thereto) required to be paid by it under any Secured
Hedging Transaction (other than any such amount that is being contested in good
faith by appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on the Issuer's books), and such default
shall continue unremedied for a period of ten (10) Business Days or more;
(k) the Issuer shall:
(i) become insolvent or generally fail to pay, or admit in
writing its inability to pay, its debts as they become due;
(ii) apply for, consent to, or acquiesce in, the appointment
of a trustee, receiver, sequestrator or other custodian for the Issuer or any of
its property, or make a general assignment for the benefit of its creditors;
(iii) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Issuer or for a substantial part of its
property (which for the avoidance of doubt shall exclude the issuers of and any
obligors on any Fund Investment), and such trustee, receiver, sequestrator or
other custodian shall not be discharged within 60 days;
(iv) permit or suffer to exist the commencement of any
bankruptcy, reorganization, indebtedness arrangement or other case or proceeding
under any bankruptcy or insolvency law, or any dissolution, winding up or
liquidation proceeding, in respect of the Issuer and, if such case or proceeding
is not commenced by the Issuer, such case or proceeding shall be consented to or
acquiesced in by the Issuer or shall result in the entry of an order for relief
or shall remain for 60 days undismissed; or
(v) take any action authorizing, or in furtherance of, any
of the foregoing;
(l) any judgments by one or more courts of competent jurisdiction
for the payment of money in an aggregate amount in excess of 1.5% of the Net
Asset Value (after giving effect to insurance, if any, available with respect
thereto) shall be rendered against the Issuer, and the same shall remain
unsatisfied, unvacated, unbonded or unstayed for a period of 30 days after the
date on which the right to appeal has expired;
(m) any Lien on any Collateral granted shall, at any time after
delivery of the Pledge Agreement, cease to be fully valid and perfected as a
first-priority Lien, except (i) for Permitted Liens, (ii) Liens on Fund
Investments the Market Value of which if excluded from the Collateral would not
cause a violation of the Over-Collateralization Tests or the covenant in Section
7.13 (in each case, without giving effect to any applicable grace period) or
(iii) as otherwise expressly permitted hereunder or under the Pledge Agreement;
(n) the Issuer shall be dissolved or terminated, and not
reconstituted substantially simultaneously therewith (and in no event later than
the same day) in accordance with the Operating Agreement; and
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(o) the Investment Manager is removed or terminated pursuant to the
Investment Management Agreement and a Majority of the Notes have not approved
the new Investment Manager within thirty (30) days.
Section 5.2. Acceleration of Maturity; Rescission and Annulment; Voting
Rights.
(a) If an Event of Default occurs and is continuing (other than an
Event of Default specified in Section 5.1(k)), the Trustee may, and shall upon
direction of a Majority of the Notes, terminate the Commitments and declare the
unpaid principal of all the Securities to be immediately due and payable, and
upon any such declaration such principal, together with all accrued and unpaid
interest (if any) thereon, any Additional Costs and other amounts payable
hereunder, shall become immediately due and payable. If an Event of Default
specified in Section 5.1(k) occurs, all unpaid principal, together with all
accrued and unpaid interest thereon, of all the Securities, any Additional
Costs and other amounts payable hereunder, shall automatically become due and
payable in accordance with Section 5.7 without any declaration or other act on
the part of the Trustee or any Securityholder and all Commitments shall
automatically terminate.
(b) At any time after such a declaration of acceleration of maturity
has been made and before a judgment or decree for payment of the Money due has
been obtained by the Trustee as hereinafter provided in this Article 5, a
Majority of the Notes, by notice to the Issuer and the Trustee, may rescind and
annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Trustee a sum
sufficient to pay:
(A) all unpaid installments of interest on and the
principal amount of the Securities, Commitment Fees and Break Funding
Costs then due,
(B) to the extent that payment of such interest is
lawful, interest upon Defaulted Interest, Increased Costs and Note Tax
Gross-Up Amounts at the applicable Interest Rate, and
(C) all unpaid Administrative Expenses and other
sums paid or advanced by the Trustee hereunder and any other amounts
then payable by the Issuer hereunder.
(ii) the Trustee has determined that all Events of Default,
other than the non-payment of the interest on or principal amount of Securities
and any Commitment Fee that have become due solely by such acceleration, have
been cured and a Majority of the Notes by written notice to the Trustee has
agreed with such determination (which agreement shall not be unreasonably
withheld) or waived as provided in Section 5.13.
No such rescission shall affect any subsequent Default or impair any
right consequent thereon.
(c) In addition to the foregoing and any other remedy available
pursuant to this Article 5, if on the last business day of each of 12
consecutive calendar months, the Securities issued pursuant to this Indenture
shall have an asset coverage (as defined in and determined in
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accordance with Section 18 of the Investment Company Act) of less than 100 per
centum, then a Majority of the Notes shall be entitled to elect at least a
majority of the members of the board of directors of the Issuer, such voting
right to continue until the Securities issued pursuant to this Indenture shall
have an asset coverage (as defined in and determined in accordance with Section
18 of the Investment Company Act) of 110 per centum or more on the last business
day of each of three consecutive calendar months.
Section 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Issuer covenants that if a Default shall occur in respect of the
payment of any principal, interest, the Commitment Fee or the Break Funding
Cost, the Issuer, will, upon demand of the Trustee or any affected Holder of
such Security, pay to the Trustee, for the benefit of the Holder of such
Security, the whole amount, if any, then due and payable for the principal
amount of and interest on such Security and any Additional Costs, with interest
upon the overdue principal and, to the extent that payments of such interest
shall be legally enforceable, upon overdue installments of interest and any
Additional Costs, at the applicable Interest Rate and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee and its agents and counsel.
If the Issuer fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as Trustee of an express trust, may, and shall upon
direction of a Majority of the Notes, institute a Proceeding for the collection
of the sums so due and unpaid, and may prosecute such Proceeding to judgment or
final decree, and may enforce the same against the Issuer or any other obligor
upon the Securities and collect the Monies adjudged or decreed to be payable in
the manner provided by law, subject, in each case, to the terms and conditions
of the Pledge Agreement.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion, and shall upon written direction of a Majority of the Notes, proceed
to protect and enforce its rights and the rights of the Securityholders by such
appropriate Proceedings as the Trustee shall deem most effectual (if no such
direction is received by the Trustee or as the Trustee may be directed by a
Majority of the Notes), to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy
or legal or equitable right vested in the Trustee by this Indenture or by law.
In case there shall be pending Proceedings relative to the Issuer or
any other obligor upon the Securities under any applicable bankruptcy,
insolvency or other similar law, or in case a receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar official shall
have been appointed for or taken possession of the Issuer or its property or
such other obligor or its property, or in case of any other comparable
Proceedings relative to the Issuer or other obligor upon the Securities, or the
creditors or property of the Issuer or such other obligor, the Trustee,
regardless of whether the principal of any Securities shall then be due and
payable as therein expressed or by declaration or otherwise and regardless of
whether the Trustee shall have made any demand pursuant to the provisions of
this Section 5.3, shall be entitled and empowered, by intervention in such
Proceedings or otherwise:
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(a) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Securities and to file
such other papers or documents as may be necessary or advisable in order to have
the claims of the Trustee (including any claim for reasonable compensation to
the Trustee and each predecessor Trustee, and their respective agents, attorneys
and counsel, and for reimbursement of all reasonable expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor Trustee,
except as a result of negligence or bad faith) and of the Holders of the
Securities allowed in any Proceedings relative to the Issuer or other obligor
upon the Securities or to the creditors or property of the Issuer or such other
obligor;
(b) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of the Securities, upon the direction of such Holders, in
any election of a trustee or a standby trustee in arrangement, reorganization,
liquidation or other bankruptcy or insolvency Proceedings or Person performing
similar functions in comparable Proceedings; and
(c) to collect and receive any Monies or other property payable to
or deliverable on any such claims, and to distribute all amounts received with
respect to the claims of the Holders of the Securities and of the Trustee on
their behalf; and any trustee, receiver or liquidator, custodian or other
similar official is hereby authorized by each of the Holders of the Securities
to make payments to the Trustee, and, in the event that the Trustee shall
consent to the making of payments directly to the Holders of the Securities, to
pay to the Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Trustee, each predecessor Trustee and their respective
agents, attorneys and counsel, and all other reasonable expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor Trustee
except as a result of negligence or bad faith.
All rights of action and of asserting claims under this Indenture, or
under any of the Securities, may be enforced by the Trustee without the
possession of any of the Securities or the production thereof in any trial or
other Proceedings relative thereto, and any action or Proceedings instituted by
the Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment, subject to the payment of the reasonable expenses,
disbursements and compensation of the Trustee, each predecessor trustee and
their respective agents and attorneys and counsel, shall be for the ratable
benefit of the Holders of the Securities Parties.
In any Proceedings brought by the Trustee on behalf of the Holders of
the Securities (including any Proceedings involving the interpretation of any
provision of this Indenture to which the Trustee shall be a party) the Trustee
shall be held to represent all such Holders.
Section 5.4. Remedies.
(a) If an Event of Default shall have occurred and be continuing,
the Commitments shall have been terminated, and the Securities shall have been
declared due and payable and such declaration and its consequences have not been
rescinded and annulled, the Issuer agrees that the Trustee may (after notice to
the Holders of Securities), and shall, upon direction by a Majority of the
Notes, to the extent permitted by applicable law, exercise one or more of the
following rights, privileges and remedies:
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(i) institute Proceedings for the collection of all amounts
then payable on the Securities or otherwise payable under this Indenture,
whether by declaration or otherwise, and, subject to the terms and conditions of
the Pledge Agreement, enforce any judgment obtained;
(ii) give (or authorize the Controlling Class Representative
to give) the Collateral Agent a Liquidation Direction or exercise any or all
other rights afforded to the Secured Parties pursuant to the Pledge Agreement;
and
(iii) exercise (or authorize the Controlling Class
Representative to exercise) any other rights and remedies that may be available
at law or in equity,
(b) If an Event of Default as described in Section 5.1(g) hereof
shall have occurred and be continuing the Trustee may, and at the direction of
the Holders of not less than 25% of the Aggregate Outstanding Amount of the
Notes shall, institute a Proceeding solely to compel performance of the covenant
or agreement or to cure the representation or warranty, the breach of which gave
rise to the Event of Default under such Section, and enforce any equitable
decree or order arising from such Proceeding.
(c) Notwithstanding any other provision of this Indenture, the
Trustee may not, prior to the date which is one year and one day or, if longer,
the applicable preference period then in effect, after the payment in full of
all Securities and the reduction of the Commitment to zero, institute against,
or join any other Person in instituting against, the Issuer any bankruptcy,
reorganization, arrangement, insolvency, moratorium or liquidation Proceedings,
or other Proceedings under federal or state bankruptcy or similar laws. Nothing
in this Section 5.4 shall preclude, or be deemed to stop, the Trustee (i) from
taking any action prior to the expiration of the aforementioned one year and one
day period (or, if longer, the applicable preference period then in effect) in
(A) any case or Proceeding voluntarily filed or commenced by the Issuer or (B)
any involuntary insolvency Proceeding filed or commenced by a Person other than
the Trustee, or (ii) from commencing against the Issuer or any of its properties
any legal action which is not a bankruptcy, reorganization, arrangement,
insolvency, moratorium or liquidation Proceeding.
Section 5.5. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any Proceeding relating thereto, and
any such Proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall be applied as
set forth in Section 5.6 hereof.
Section 5.6. Application of Money Collected.
Any Money collected by the Trustee with respect to the Securities
pursuant to this Article 5, any Money that may then be held or thereafter
received by the Trustee with respect to the Securities hereunder and any Money
received by the Trustee from the Collateral Agent prior to a Liquidation
Direction pursuant to the Pledge Agreement shall be applied and paid in
accordance with the provisions of Section 11.1, at the date or dates fixed by
the Trustee. The Trustee may fix a record date and a payment date for any
payment to the Holders pursuant to this Section 5.6.
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Section 5.7. Limitation on Suits.
No Holder of any Security shall have any right to institute any
Proceedings, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(a) such Holder has previously given to the Trustee written notice
of an Event of Default;
(b) the Trustee has received a written request from the Holders of
at least 25% of the then Aggregate Outstanding Amount of the Notes to institute
Proceedings in respect of such Event of Default in its own name as Trustee
hereunder and such Holder or Holders have delivered to the Trustee such
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request as the Trustee may deem appropriate;
(c) the Trustee for 30 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such Proceeding; and
(d) no direction inconsistent with such request has been given to
the Trustee during such 30-day period by a Majority of the Notes;
it being understood and intended that no one or more Holders of Securities shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities or to obtain or to seek to obtain priority or
preference over any other Holders of the Securities or to enforce any right
under this Indenture, except in the manner herein provided and for the equal and
ratable benefit of all the Holders of Securities.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Holders of the Note, each
representing less than a Majority of the Notes, the Trustee shall take direction
from the group representing the largest percentage of the Notes as to what
action, if any, shall be taken, notwithstanding any other provisions of this
Indenture.
Section 5.8. Unconditional Rights of Holders of Securities to Receive
Principal and Interest.
Except as expressly provided elsewhere in this Indenture,
notwithstanding any other provision in this Indenture (other than Section 2.7),
the Holder of any Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest on such
Security and any Additional Costs, as applicable, as such principal and interest
and Additional Costs become due and payable, and subject to the provisions of
this Section 5.8, to institute Proceedings for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder.
Section 5.9. Restoration of Rights and Remedies.
If the Trustee or any Securityholder has instituted any Proceeding to
enforce any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any
46
reason, or has been determined adversely to the Trustee or to such
Securityholder, then and in every such case the Issuer, the Trustee and the
Securityholder shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Securityholder shall
continue as though no such Proceeding had been instituted.
Section 5.10. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement of or
payment in respect of a mutilated, destroyed, lost or stolen Security as set
forth in Section 2.6, no right or remedy herein conferred upon or reserved to
the Trustee or to the Securityholders is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
Section 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or any Securityholder to exercise
any right or remedy accruing upon any Event of Default shall impair any such
right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein or of a subsequent Event of Default. Every right and remedy
given by this Article 5 or by law to the Trustee or to the Securityholders may
be exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Securityholders, as the case may be.
Section 5.12. Control by Securityholders.
A Majority of the Notes shall have the right following the occurrence,
and during the continuance of, an Event of Default to cause the institution of
and direct the time, method and place of conducting any Proceeding for any
remedy available to the Trustee or exercising any trust or power conferred upon
the Trustee under this Indenture; provided, that:
(a) such direction shall not conflict with any rule of law or with
any express provision of this Indenture;
(b) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction; provided, however, that,
subject to Section 6.1, the Trustee need not take any action that it determines
might involve it in liability (unless the Trustee has received indemnity as set
forth below); and
(c) the Trustee shall have been provided with indemnity reasonably
satisfactory to it.
Section 5.13. Waiver of Defaults.
Prior to the time a judgment or decree for payment of the Money due has
been obtained by the Trustee, as provided in this Article 5, a Majority of the
Notes may on behalf of the Holders of all the Securities waive any Default and
its consequences, except a Default:
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(a) in the payment of principal of any Security, interest thereon or
the Commitment Fee or Break Funding Cost; or
(b) in respect of a covenant or provision hereof that under Section
8.2 cannot be modified or amended without the waiver or consent of the Holder of
each Outstanding Security adversely affected thereby; or
(c) arising under Section 5.1(k).
In the case of any such waiver, the Issuer, the Trustee and the Holders
of the Securities shall be restored to their former positions and rights
hereunder, respectively, but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereto. The Trustee shall promptly
give notice of any such waiver to the Investment Manager and each Holder.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture, but no such waiver shall extend to any subsequent or
any other Default or impair any right consequent thereto.
Section 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by
its acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken, or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.14 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Securityholder, or group of
Securityholders, holding in the aggregate more than 10% in Aggregate Outstanding
Amount of the Notes, or to any suit instituted by any Securityholder for the
enforcement of the payment of amounts due and payable with respect to any
Securities on or after the Stated Maturity.
Section 5.15. Waiver of Stay or Extension Laws.
The Issuer covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants, the
performance of or any remedies under this Indenture; and the Issuer (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenant that it will not hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.
48
Section 5.16. Action on the Securities.
The Trustee's right to seek and recover judgment on the Securities or
under this Indenture shall not be affected by the seeking or obtaining of or
application for any other relief under or with respect to this Indenture.
Neither this Indenture nor any rights or remedies of the Trustee or the
Securityholders shall be impaired by the recovery of any judgment by the Trustee
against the Issuer or by the levy of any execution by the Collateral Agent under
any judgment upon any portion of the Collateral or upon any of the assets of the
Issuer.
ARTICLE 6
THE TRUSTEE
Section 6.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the Trustee;
and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; provided, however,
that in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not they
substantially conform to the requirements of this Indenture and shall promptly,
but in any event within three Business Days in the case of an Officer's
certificate furnished by the Investment Manager, notify the party delivering the
same if such certificate or opinion does not conform. If a corrected form shall
not have been delivered to the Trustee within 15 days after such notice from the
Trustee, the Trustee shall so notify the Holders of Securities.
(b) In case an Event of Default known to the Trustee has occurred
and is continuing, the Trustee shall, prior to the receipt of directions, if
any, from a Majority of the Notes, exercise such of the rights and powers vested
in it by this Indenture, and use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(i) this subsection shall not be construed to limit the
effect of subsection (a) of this Section 6.1;
49
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it shall be proven that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with the
direction of the Issuer or the Investment Manager in accordance with this
Indenture and/or a Majority (or such other percentage as may be required by the
terms hereof) of the Notes relating to the time, method and place of conducting
any Proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Indenture.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers contemplated hereunder, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it unless such risk or liability
relates to its ordinary services for which it has already been compensated.
(e) For all purposes under this Indenture, the Trustee shall not be
deemed to have notice or knowledge of any Event of Default described in Section
5.1(h) or any Default described in Section 5.l(g) unless a Trust Officer
assigned to and working in the Corporate Trust Office has actual knowledge
thereof or unless written notice of any event which is in fact such an Event of
Default or Default is received by the Trustee at the Corporate Trust Office, and
such notice references the Securities generally, the Issuer, the Collateral or
this Indenture. For purposes of determining the Trustee's responsibility and
liability hereunder, whenever reference is made in this Indenture to such an
Event of Default or a Default, such reference shall be construed to refer only
to such an Event of Default or Default of which the Trustee is deemed to have
notice as described in this Section 6.1.
(f) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.1.
Section 6.2. Notice of Default.
Promptly (and in no event later than two Business Days) after the
occurrence of any Default known to the Trustee or after any declaration of
acceleration has been made or delivered to the Trustee pursuant to Section 5.2,
the Trustee shall give notice to the Investment Manager, each Rating Agency and
all Holders of all Defaults hereunder known to the Trustee, unless such Default
shall have been cured or waived.
Section 6.3. Certain Rights of Trustee.
Except as otherwise provided in Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction,
50
consent, order, note or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by an Issuer Order;
(c) whenever in the administration of this Indenture the Trustee
shall (i) deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officer's Certificate or (ii) be required to determine
the value of any Collateral or funds hereunder or the cashflows projected to be
received therefrom, the Trustee may, in the absence of bad faith on its part,
rely on reports of nationally recognized accountants, investment bankers or
other Persons qualified to provide the information required to make such
determination, including nationally recognized dealers in securities of the type
being valued and securities quotation services;
(d) as a condition to the taking or omitting of any action by it
hereunder, the Trustee may consult with counsel and the advice of such counsel
or any opinion of counsel shall be full and complete authorization and
protection in respect of any action taken or omitted by it hereunder in good
faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise or to honor
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Securityholders pursuant to this Indenture, unless such
Securityholders shall have delivered to the Trustee such security or indemnity
against the costs, expenses and liabilities as the Trustee reasonably determines
might be incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, note or
other paper documents, but the Trustee, in its discretion, may and, upon the
direction of a Majority of the Notes and each Rating Agency, shall make such
further inquiry or investigation into such facts or matters as it may see fit or
as it shall be directed, and, the Trustee shall be entitled, on no less than
five Business Days advance notice to the Issuer and the Investment Manager, to
examine the books and records relating to the Securities and the Collateral and
the premises of the Issuer and the Investment Manager, personally or by agent or
attorney during the Issuer's or the Investment Manager's normal business hours;
provided, that the Trustee shall, and shall cause its agents, to hold in
confidence all such information, except (i) to the extent disclosure may be
required by law by any regulatory authority and (ii) to the extent that the
Trustee, in its sole judgment, may determine that such disclosure is consistent
with its obligations hereunder;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys; provided, that the Trustee shall not be responsible for any
misconduct or negligence on the part of any non-affiliated agent appointed
(subject to the approval of the Investment Manager or the Issuer, which shall
not be unreasonably withheld) and supervised, or non-affiliated attorney
appointed, with due care by it hereunder;
51
(h) the Trustee shall not be liable for any action it takes or omits
to take in good faith that it reasonably believes to be authorized or within its
rights or powers hereunder; and
(i) the permissive rights of the Trustee to take or refrain from
taking any action enumerated in this Indenture shall not be treated as a duty.
Section 6.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, other than the
Certificate of Authentication thereon, shall be taken as the statements of the
Issuer and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representation as to the validity or sufficiency of this
Indenture (except as may be made with respect to the validity of the Trustee's
obligations hereunder), the Collateral or the Securities. The Trustee shall not
be accountable for the use or application by the Issuer of the Securities or the
proceeds thereof or any Money paid to the Issuer pursuant to the provisions
hereof.
Section 6.5. May Hold Securities.
The Trustee, any Paying Agent, Security Registrar or any other agent of
the Issuer or the Investment Manager, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with the
Issuer or any of its Affiliates with the same rights it would have if it were
not Trustee, Paying Agent, Security Registrar or such other agent.
Section 6.6. Money Held in Trust.
Money held by the Trustee hereunder shall be held in trust to the
extent required herein. The Trustee shall be under no liability for interest on
any Money received by it hereunder except as otherwise agreed upon with the
Issuer and except to the extent of income or other gain on investments which are
deposits in or certificates of deposit of the Trustee in its commercial capacity
and income or other gain actually received by the Trustee on any of the
Collateral.
Section 6.7. Compensation and Reimbursement.
Subject to any limitations set forth in Section 11(a)(i), the Issuer
agrees:
(a) to pay the Trustee on each Payment Date reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustee (subject to any written agreement between the Issuer and the Trustee)
promptly upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision of
this Indenture (including securities transaction charges and the reasonable
compensation and expenses and disbursements of its agents and legal counsel and
of any accounting firm, except any such expense, disbursement or advance as may
be attributable to its negligence, willful misconduct or bad faith);
(c) to indemnify the Trustee and its Officers, directors, employees
and agents for, and to hold them harmless against, any loss, liability or
expense incurred without negligence, willful
52
misconduct or bad faith on their part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and expenses of
defending themselves against any claim or liability in connection with the
exercise or performance of any of their powers or duties hereunder; and
(d) to pay the Trustee reasonable additional compensation together
with its expenses (including reasonable counsel fees) for any collection action
taken pursuant to Section 5.14 hereof.
Section 6.8. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$200,000,000, subject to supervision or examination by federal or state
authority, having a long-term debt rating of at least "Baa1" by ▇▇▇▇▇'▇ and a
long-term debt rating of at least "BBB+" by S&P, and having an office within the
United States. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section 6.8, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section 6.8, it shall resign immediately in the
manner and with the effect hereinafter specified in Section 6.9.
Section 6.9. Resignation and Removal; Appointment of Successor.
(a) Notwithstanding anything herein to the contrary, no resignation
or removal of the Trustee and no appointment of a successor Trustee pursuant to
this Section 6.9 shall become effective until the acceptance of appointment by
the successor Trustee under Section 6.10. The indemnification in favor of the
Trustee in Section 6.7 hereof shall survive any resignation or removal (to the
extent of any indemnified liabilities, costs, expenses and other amounts arising
or incurred prior to, or arising out of actions or omissions occurring prior to
such resignation or removal).
(b) The Trustee may resign at any time by giving written notice
thereof to the Issuer, the Investment Manager, the Collateral Agent, the Holders
of Securities and each Rating Agency.
(c) The Trustee may be removed at any time by Act of a Majority of
the Notes any time when an Event of Default shall have occurred and be
continuing or when a successor Trustee has been appointed pursuant to Section
6.9 and Section 6.10, by Act of a Majority of the Notes, delivered to the
Trustee and to the Issuer.
(d) If at any time:
(i) the Trustee shall cease to be eligible under Section 6.8
and shall fail to resign after request therefor by the Issuer or by a Majority
of the Notes; or
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(ii) the Trustee shall become incapable of acting or shall
be adjudged as bankrupt or insolvent or a receiver or liquidator of the Trustee
or of its property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation
then, in any such case, (A) the Issuer, by Issuer Order, may remove the Trustee,
or (B) subject to Section 5.15, any Holder may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Trustee for any reason,
the Issuer, by Issuer Order, shall promptly appoint a successor Trustee. If the
Issuer shall fail to appoint a successor Trustee within 60 days after such
resignation, removal or incapability or the occurrence of such vacancy, a
successor Trustee may be appointed by Act of a Majority of the Notes delivered
to the Issuer and the retiring Trustee. The successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become the successor
Trustee and supersede any successor Trustee proposed by the Issuer. If no
successor Trustee shall have been so appointed by the Issuer or such Holders or
such appointed successor Trustee shall not have accepted appointment in the
manner hereinafter provided, subject to Section 5.15, any Holder may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Issuer shall give prompt notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by mailing
notice of such event by first class mail, postage prepaid, to each Rating
Agency, to the Holders of the Securities and to the Investment Manager. Each
notice shall include the name of the successor Trustee and the address of its
Corporate Trust Office. If the Issuer fails to mail such notice within 10 days
after acceptance of appointment by the successor Trustee, the successor Trustee
shall cause such notice to be given at the expense of the Issuer.
Section 6.10. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Issuer and the retiring Trustee an instrument accepting such
appointment. Upon delivery of the required instruments, the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts, duties and obligations of the retiring Trustee;
but, on request of the Issuer or a Majority of the Notes or the successor
Trustee, such retiring Trustee shall, upon payment of its charges then unpaid,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee, and shall duly assign,
transfer and deliver to such successor Trustee all property and Money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee, the
Issuer shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
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Section 6.11. Merger, Conversion, Consolidation or Succession to Business of
Trustee.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article 6, without the execution or filing of any paper or any further act on
the part of any of the parties hereto; provided, that the Trustee shall give
notice thereof to the Issuer, the Investment Manager, the Holders of Securities,
and each Rating Agency. In case any of the Securities have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
Section 6.12. Authenticating Agents.
Upon the request of the Issuer, the Trustee shall, and if the Trustee
so chooses the Trustee may, appoint one or more Authenticating Agents with power
to act on its behalf and subject to its direction in the authentication of
Securities in connection with issuances and transfers under Sections 2.4, 2.5,
2.6 and 8.6, as fully to all intents and purposes as though each such
Authenticating Agent had been expressly authorized by such Sections to
authenticate such Securities. For all purposes of this Indenture, the
authentication of Securities by an Authenticating Agent pursuant to this Section
6.12 shall be deemed to be the authentication of Securities "by the Trustee."
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authenticating Agent, shall be the successor of such Authenticating Agent
hereunder, without the execution or filing of any further act on the part of the
parties hereto or such Authenticating Agent or such successor corporation.
Any Authenticating Agent may at any time resign by giving prior written
notice of resignation to the Trustee and the Issuer. The Trustee may at any time
terminate the agency of any Authenticating Agent by giving written notice of
termination to such Authenticating Agent and the Issuer. Upon receiving such
notice of resignation or upon such a termination, the Trustee shall promptly
appoint a successor Authenticating Agent and shall give written notice of such
appointment of the Issuer.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services, and reimbursement for its
reasonable expenses relating thereto and the Trustee shall be entitled to be
reimbursed for such payments, subject to Section 6.7. The provisions of Sections
2.9, 6.4 and 6.5 shall be applicable to any Authenticating Agent.
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ARTICLE 7
COVENANTS
Section 7.1. Payment of Principal and Interest.
(a) The Issuer will duly and punctually pay the principal of and
interest on the Securities and any Additional Costs in accordance with the terms
of such Securities and this Indenture. Amounts properly withheld under the Code
or other applicable law by any Person from a payment to any Holder of such
amounts shall be considered as having been paid by the Issuer to such Holder for
all purposes of this Indenture.
(b) Failure of a Holder of a Security to provide the Trustee or any
Paying Agent and the Issuer with appropriate tax certifications will result in
amounts being withheld from the payment to such Holders.
(c) All payments under the Notes to any Holder thereof will be made
by the Issuer without any deduction or withholding for or on account of any Tax
unless such deduction or withholding is required by the tax law of any
jurisdiction (a "Withholding Jurisdiction"), as modified by the practice of any
relevant governmental revenue authority in such Withholding Jurisdiction, then
in effect. If the Issuer is so required to deduct or withhold, then the Issuer
will: (i) notify the Trustee (which will notify each affected Holder) of such
requirement no later than 10 days prior to the date of the payment from which
amounts are required to be withheld (provided that, despite the failure of the
Issuer to give such notice, amounts withheld pursuant to applicable laws shall
be considered as having been paid by the Issuer as provided above); (ii) pay to
the relevant authorities in such Withholding Jurisdiction the full amount
required to be deducted or withheld (including the full amount required to be
deducted or withheld from any additional amount paid by the Issuer to an
affected Holder by reason of clause (4) below) promptly upon the earlier of
determining that such deduction or withholding is required or receiving notice
that such amount has been assessed against the affected Holder; (iii) promptly
forward to the affected Holder the documentation evidencing such payment
received from such authorities; and (iv) subject to the next sentence, pay to
the affected Holder the additional amount (a "Tax Gross-Up Amount") necessary
and the Holder's delivery of the certificate required by Section 2.09(c) of the
Note Purchase Agreement to ensure that the net amount received by the affected
Holder equals the full amount the affected Holder would have received had no
such deduction or withholding been required.
However, the Issuer will not be required to make any such payment of
Tax Gross-Up Amount for or on account of any one or more of the following:
(1) any tax that would not have been imposed but for the existence
of any present or former connection between such Holder (or between a fiduciary,
settlor or beneficiary of, or a person holding a power over, such Holder, if
such Holder is an estate or a trust, or a member or shareholder of such Holder,
if such Holder is a partnership or a corporation) and the Withholding
Jurisdiction, other than the holding of the Notes or the receipt of payments in
respect thereof;
(2) any estate, inheritance, gift, sales, transfer, personal
property or similar tax;
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(3) any tax imposed on, or measured by, net income or any similar
base;
(4) any tax that is payable otherwise than by deduction or
withholding;
(5) any tax, or portion thereof, that would not have been imposed
but for a failure to timely furnish any certification, documentation,
information or other instrument that could reasonably have been furnished by or
on behalf of such Holder without undue burden or expense; or
(6) any tax imposed on a Holder that actually or constructively owns
10 percent or more of the combined voting power of all classes of stock of the
Issuer or that is a controlled foreign corporation related to the Issuer through
stock ownership;
nor shall such Tax Gross-Up Amount be paid with respect to a payment to a Holder
that is an entity other than a corporation to the extent that an owner or
beneficiary thereof, or settlor thereon, would not have been entitled to the Tax
Gross-Up Amount had such owner, beneficiary or settlor been the Holder.
Section 7.2. Maintenance of Office or Agency.
The Issuer hereby appoints the Trustee as a Paying Agent for payments
with respect to the Securities and the Issuer hereby appoints the Trustee, at
its New York Office located at 4 New York ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇▇▇, Attention: WSS Window - WSS Houston - York Enhanced Strategies, as
its agent where notices and demands to or upon the Issuer in respect of the
Securities or this Indenture may be served and where Securities may be
surrendered for registration of transfer or exchange.
The Issuer may at any time and from time to time vary or terminate the
appointment of any such agent or appoint any additional agents for any or all of
such purposes; provided, however, that the Issuer will maintain in the Borough
of Manhattan, The City of New York, an office or agency where notices and
demands to or upon the Issuer in respect of the Securities and this Indenture
may be served; provided, further, that no Paying Agent shall be appointed in a
jurisdiction which subjects payments on the Securities to withholding tax. The
Issuer shall at all times maintain a duplicate copy of the Security Register
with respect to the Securities. The Issuer shall give prompt notice to the
Trustee, each Rating Agency, and the Holders of Securities of the appointment or
termination of any such Paying Agent or agent for notices and of the location
and any change in the location of any such office or agency.
If at any time the Issuer shall fail to maintain any such required
office or agency in the Borough of Manhattan, The City of New York, or shall
fail to furnish the Trustee with the address thereof, presentations and
surrenders may be made (subject to the limitations described in the preceding
paragraph) at and notices and demands may be served on the Issuer, and
Securities may be presented and surrendered for payment to the appropriate
Paying Agent at its main office and the Issuer hereby appoint each Paying Agent
as their agent to receive such respective presentations, surrenders, notices and
demands.
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Section 7.3. Money for Payments to be Held in Trust.
All payments of amounts due and payable with respect to any Securities
that are to be made from amounts withdrawn from the Payment Account shall be
made on behalf of the Issuer by the Trustee or a Paying Agent with respect to
payments on the Securities.
When the Issuer shall have a Paying Agent that is not also the Security
Registrar, it shall furnish, or cause the Security Registrar to furnish, no
later than the fifth calendar day after each Record Date a list, if necessary,
in such form as such Paying Agent may reasonably request, of the names and
addresses of the Holders as of such Record Date and of the certificate numbers
of individual Securities held by each such Holder.
Whenever the Issuer shall have a Paying Agent other than the Trustee,
it shall, on or before the Business Day next preceding each Payment Date direct
the Trustee to deposit on such Payment Date with such Paying Agent, if
necessary, an aggregate sum sufficient to pay the amounts then becoming due with
respect to the Securities for which it acts as Paying Agent (to the extent funds
are then available for such purpose in the Payment Account), such sum to be held
in trust for the benefit of the Persons entitled thereto and (unless such Paying
Agent is the Trustee) the Issuer shall promptly notify the Trustee of its action
or failure so to act. Any Monies deposited with a Paying Agent with respect to
the Securities for which it acts as Paying Agent (other than the Trustee) in
excess of an amount sufficient to pay the amounts then becoming due on the
applicable Securities with respect to which such deposit was made shall be paid
over by such Paying Agent to the Trustee for application in accordance with
Article 10.
The initial Paying Agent for the Securities shall be as set forth in
Section 7.2. Any additional or successor Paying Agents shall be appointed by
Issuer Order with written notice thereof to the Trustee; provided however, that,
so long as any Securities are rated by a Rating Agency, with respect to any
additional or successor Paying Agent, either (i) such Paying Agent has a rating
of "Aa3" or higher or "P-1" by Moody's and "AA" or "A-1+" by S&P, or (ii) Rating
Agency Confirmation shall have been received. In the event that such successor
Paying Agent ceases to have any such rating, and Rating Agency Confirmation is
not received, the Issuer shall promptly remove such Paying Agent and appoint a
successor Paying Agent. The Issuer shall not appoint any Paying Agent (other
than the initial Paying Agent) that is not, at the time of such appointment, a
depository institution or trust company subject to supervision and examination
by federal and/or state and/or national banking authorities. The Issuer shall
cause each Paying Agent other than the Trustee to execute and deliver to the
Trustee an instrument in which such Paying Agent shall agree with the Trustee
(and if the Trustee acts as Paying Agent, it hereby so agrees), subject to the
provisions of this Section 7.3, that such Paying Agent will:
(a) allocate all sums received for payment to the Holders of
Securities for which it acts as Paying Agent on each Payment Date among such
Holders in the proportion specified in the applicable report to the extent
permitted by applicable law;
(b) hold all sums held by it for the payment of amounts due with
respect to the Securities in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed of
as herein provided and pay such sums to such Persons as herein provided;
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(c) if such Paying Agent is not the Trustee, immediately resign as a
Paying Agent and forthwith pay to the Trustee all sums held by it in trust for
the payment of Securities if at any time it ceases to meet the standards set
forth above required to be met by a Paying Agent at the time of its appointment;
(d) if such Paying Agent is not the Trustee, immediately give the
Trustee notice of any Default by the Issuer (or any other obligor on the
Securities) in the making of any payment required to be made hereunder in
respect of the Securities; and
(e) if such Paying Agent is not the Trustee at any time during the
continuance of any such Default, upon the request of the Trustee, forthwith pay
to the Trustee all sums so held in trust by such Paying Agent.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Issuer Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Issuer or such Paying Agent, such sums to be held by the Trustee
upon the same terms as those upon which such sums were held by the Issuer or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such Money.
Except as otherwise required by applicable law, any Money deposited
with the Trustee or any Paying Agent in trust for the payment on any Securities
and remaining unclaimed for two years after such amounts have become due and
payable shall be paid to the Issuer on Issuer Order; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Issuer for payment of such amounts and all liability of the Trustee or such
Paying Agent with respect to such trust Money (but only to the extent of the
amounts so paid to the Issuer) shall thereupon cease. The Trustee or such Paying
Agent, before being required to make any such release of payment, may, but shall
not be required to, adopt and employ, at the expense of the Issuer, any
reasonable means of notification of such release of payment, including, but not
limited to, mailing notice of such release to Holders whose Securities have been
called but have not been surrendered for redemption or whose right to or
interest in Monies due and payable but not claimed is determinable from the
records of any Paying Agent, at the last address of record of each such Holder.
Section 7.4. Existence of Issuer; Activities; Affiliate Transactions.
(a) To the extent possible under applicable laws, the Issuer shall
maintain in full force and effect its existence and rights as a limited
liability company formed under the laws of the State of Delaware and shall
obtain and preserve its qualification to do business as foreign corporation in
each jurisdiction in which such qualifications are or shall be necessary to
protect the validity and enforceability of this Indenture, the Securities or any
of the Collateral; provided however, that the Issuer shall be entitled to change
its jurisdiction of formation from the State of Delaware to any other
jurisdiction reasonably selected by the Issuer, so long as (i) such change is
not disadvantageous in any material respect to any of the Holders of the
Securities, (ii) notice of such change shall have been given by the Trustee to
the Holders of the Securities and each Rating Agency and (iii) on or prior to
the fifteenth Business Day following such notice the Trustee shall not have
received notice from a Majority of the Notes objecting to such change.
59
(b) The Issuer shall ensure that all limited liability or other
formalities regarding its existence (including holding regular Board of
Directors' and shareholders' meetings) are followed. The Issuer shall not take
any action, or conduct its affairs in a manner, that is likely to result in its
separate existence being ignored or its assets and liabilities being
substantively consolidated with any other Person in a bankruptcy, reorganization
or other insolvency proceeding.
(c) The Issuer shall promptly notify the Trustee, each Holder and
the Rating Agencies when the Issuer elects not to be treated as, or becomes
ineligible to be treated as, a regulated investment company for U.S. federal
income tax purposes.
(d) The Issuer shall use commercially reasonable efforts to at all
times maintain its classification as a non-diversified Closed-end Company for
purposes of the Investment Company Act and shall promptly notify the Trustee,
each Holder and the Rating Agencies when it at any time fails to maintain its
classification as a Closed-end Company.
(e) Except as permitted by the Transaction Documents (including the
Issuer entering into and performing its obligations under the Investment
Management Agreement and payment or reimbursement of all fees and expenses due
by the Issuer to the Investment Manager) or any exemptive relief sought from the
Securities and Exchange Commission, the Issuer shall not, directly or
indirectly: (i) make an investment in any of its Affiliates; (ii) sell, lease or
otherwise transfer any assets to any of its Affiliates; (iii) purchase or
acquire assets from any of its Affiliates; or (iv) enter into any other
transaction directly or indirectly with or for the benefit of any of its
Affiliates (including, without limitation, guarantees and assumptions of
obligations of any of its Affiliates); provided, however, that the Issuer may,
in compliance with the Investment Company Act, enter into any such transaction
with any of its Affiliates or for the benefit of any of its Affiliates in the
ordinary course of its business if (x) the monetary or business consideration
arising therefrom is likely to be substantially as advantageous to the Issuer as
the monetary or business consideration which it could obtain in a comparable
arm's length transaction with a Person not an Affiliate of the Issuer and (y)
written notice of such transaction is provided to the Trustee.
Section 7.5. Protection of Collateral.
(a) The Issuer shall take or cause to be taken such action within
its control as is reasonably necessary in order to maintain the perfection and
priority of the security interest of the Collateral Agent in the Collateral and
shall from time to time execute and deliver all such supplements and amendments
hereto and all such Financing Statements, continuation statements, instruments
of further assurance and other instruments, and shall take such other action as
may be reasonably necessary or advisable to secure the rights and remedies of
the Holders in respect of the Lien granted under the Pledge Agreement and to:
(i) Grant more effectively all or any portion of the
Collateral;
(ii) maintain, preserve and perfect any Grant made or to be
made by the Pledge Agreement, including, without limitation, the first priority
nature of the Lien under the Pledge Agreement or to carry out more effectively
the purposes hereof;
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(iii) perfect, publish notice of or protect the validity of
any Grant made or to be made by the Pledge Agreement (including, without
limitation, any and all actions necessary or desirable as a result of changes in
law or regulations);
(iv) enforce any of the Pledged Securities or other
instruments or property included in the Collateral;
(v) preserve and defend title to the Collateral and the
rights therein of the Collateral Agent, and the Secured Parties against the
claims of all Persons and parties; or
(vi) pay or cause to be paid any and all taxes levied or
assessed upon all or any part of the Collateral.
(b) The Issuer shall pay or cause to be paid taxes, if any, levied
on account of the beneficial ownership by the Issuer of any Pledged Securities
that secure the Securities.
(c) The Issuer shall enforce all of its material rights and remedies
under the Investment Management Agreement, Note Purchase Agreement and the other
Transaction Documents.
Section 7.6. Certificate as to Collateral.
For so long as any Notes are Outstanding, on or before March 31 in each
calendar year, commencing in 2006, the Issuer shall furnish to the Trustee and
the Rating Agencies, an Officer's Certificate certifying that as of the date of
such Officer's Certificate, the Lien created by the Pledge Agreement and the
other Transaction Documents with respect to the Collateral remains in effect
with the same priority such Lien had on the Closing Date and stating that no
further action (other than as specified in such Officer's Certificate) needs to
be taken (under the UCC) to ensure the continued effectiveness and perfection of
such Lien until June 30 in the following calendar year.
Section 7.7. Over-Collateralization Tests.
(a) Upon the occurrence of an Excess Date, the Issuer or the
Investment Manger on behalf of the Issuer shall promptly notify the Trustee in
writing (which shall provide a copy of such notice to each Holder) and each
Rating Agency thereof and, at its option (provided, that it is required to take
the actions described in clause (i) or clause (ii) below), within ten (10)
Business Days of such Excess Date, either:
(i) prepay the Notes (as provided herein) or redeem
Preferred Shares as provided in the Operating Agreement in such amounts or take
such other actions as shall be necessary to eliminate such Excess Amount; or
(ii) provide a certificate to each Rating Agency, the Trustee
and each Holder as of any date (a "Certificate Date") showing projected
compliance with the Over-Collateralization Tests as of any subsequent date
within 20 Business Days of such Excess Date (and continuing compliance with the
Over-Collateralization Tests during the remainder of such 20 Business Day
period) based upon reasonably expected settlements of all committed purchases
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and sales of Fund Investments pledged as Collateral, all anticipated additions
to the Collateral of Cash and of Fund Investments that are not pledged as
Collateral, all anticipated removals from the Collateral of Cash, and all
anticipated prepayments of the Notes (including sources of funds therefor) and
redemptions of the Term Preferred Shares to be completed within such 20 Business
Days, calculated by reference to the Market Value, Market Value Prices,
Over-Collateralization Tests, the aggregate Drawn Amount and the aggregate
liquidation preference of the Term Preferred Shares, as the case may be, as of
such Certificate Date.
(b) The Issuer will be deemed to be in compliance with each
Over-Collateralization Test so long as there is no Excess Amount. In the event
that the Issuer fails to complete the transactions described in a statement
delivered pursuant to clause (ii) above or otherwise come into compliance with
the Over-Collateralization Tests (including as a result of changes in the value
of the Collateral) within the 20 Business Day period specified therein, the
Issuer shall make the prepayments required pursuant to clause (i) above not
later than the last day of such 20 Business Day period.
(c) Notwithstanding the foregoing, in the event that the Issuer
determines that it would not be in compliance with the Over-Collateralization
Tests immediately following, and after giving effect to, any proposed prepayment
of the Notes or redemption of the Preferred Shares pursuant to this Section
7.7 , the Issuer shall instead, to the extent it makes any prepayment pursuant
to this Section 7.7, prepay such Notes in accordance with the terms of this
Indenture and no Preferred Shares shall be redeemed or repurchased unless the
aggregate outstanding principal amount of the Notes has been reduced to zero.
The preceding sentence shall not in any way limit the ability of the Issuer to
take other actions to come into compliance with the Over-Collateralization
Tests.
Section 7.8. Performance of Obligations.
The Issuer is hereby authorized to enter in to the Investment
Management Agreement and any amendments thereto and to contract with other
Persons to perform, on behalf of the Issuer, the actions and obligations to be
performed by the Issuer hereunder, including, without limitation, in respect of
the Collateral. In such event, the performance of such actions and obligations
by such Persons shall be deemed to be performance of such actions and
obligations by the Issuer, except that, to the extent an Officer's Certificate
is required to be delivered by or on behalf of the Issuer, an Authorized Officer
of the Issuer must execute such Officer's Certificates on behalf of the Issuer.
Section 7.9. Payment of Taxes and Other Claims.
The Issuer shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, all material taxes, assessments and
other governmental charges levied or imposed upon the Issuer or upon any of its
income, profits or property; provided, that the Issuer shall not be required to
pay or discharge or cause to be paid or discharged any such tax, assessment or
charge, the amount, applicability or validity of which is being contested in
good faith by appropriate proceedings and for which it maintains adequate
reserves in accordance with GAAP, and the failure of which to pay or discharge
could not result in a material adverse effect on the Collateral.
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Section 7.10. Insurance.
The Issuer shall maintain or otherwise be a beneficiary of insurance
(including directors and officers insurance and errors and omissions insurance)
consistent with the type and amount of insurance carried by Persons engaging in
similarly situated businesses.
Section 7.11. Compliance With Laws; Asset Coverage Requirements.
(a) The Issuer shall comply with all applicable statutes, rules,
regulations, orders and restrictions of any governmental authority, department,
commission, board, regulatory authority, bureau, agency and instrumentality, in
respect of the conduct of its business and the ownership of its properties,
except such as are being contested in good faith and by appropriate proceedings
in such manner as not to cause any material adverse effect on the business and
operations of the Issuer, and except for such non-compliance as could not
reasonably, individually or in the aggregate, be expected to have a material
adverse effect on the business and operations of the Issuer.
(b) Without limiting the foregoing, the Issuer shall at all times
comply with Section 18 of the Investment Company Act or any successor provision
thereto, and any applicable "asset coverage" maintenance requirements set forth
therein.
Section 7.12. Investment Manager; Custodian; Accountants.
(a) The Issuer shall at all times maintain York Enhanced Strategies
Management, LLC as the Investment Manager, unless York Enhanced Strategies
Management, LLC resigns or is removed or terminated pursuant to the Investment
Management Agreement, in which case a successor Investment Manager acceptable to
the Majority of the Notes shall be appointed within 30 days of such removal or
termination.
(b) The Custodian shall at all times be the custodian of all of the
Fund Investments and the Collateral, except as provided under the Custodial
Agreement.
(c) The Issuer's auditors shall at all times be an Independent
Public Accountant.
Section 7.13. Minimum Net Worth.
The Company Equity shall, at the end of each fiscal quarter
(determined on the date the related quarterly or annual financial statements are
required to be delivered hereunder by reference to such related quarterly or
annual financial statements), equal or exceed 50% of Contributed Company
Capital.
Section 7.14. Limitations on Indebtedness or Equity Securities.
The Issuer shall not Incur any Indebtedness or issue any equity
securities, other than Permitted Indebtedness or Permitted Equity Issuances.
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Section 7.15. Liens.
The Issuer shall not Incur or suffer to exist any Lien upon any
property or assets included in the Collateral, whether now owned or hereafter
acquired, except for Permitted Liens.
Section 7.16. Restricted Payments.
(a) The Issuer shall not make any Restricted Payment; provided,
however that, subject to Section 7.16(b), the Issuer may:
(i) make distributions (including dividends) in respect of
the Common Shares or the Preferred Shares, or repurchase, or make payments or
distributions on account of the purchase, redemption, retirement or acquisition
of, the Common Shares or the Preferred Shares pursuant to and in accordance with
the Operating Agreement, in each case, so long as, immediately after such
payments, distributions or repurchases (A) no Default or violation of Section
7.7 (without giving effect to the grace periods provided for therein) shall have
occurred and be continuing under this Indenture, (B) all representations and
warranties of the Issuer in this Indenture and the other Transaction Documents
are true and correct in all material respects, and (C) Company Equity shall be
equal to or greater than (1) Adjusted Contributed Company Capital or (2) in the
case of Company Tax Distributions, Adjusted Contributed Company Capital minus
$35,000,000; provided, however, that notwithstanding the foregoing (1) dividends
on any of the Term Preferred Shares, (2) dividends on the Series A-2 Preferred
Share up to $40 per annum and (3) purchases, redemptions, retirements or
acquisitions of any of the Preferred Shares made pursuant to Section 7.7 or in
order to comply with any asset coverage test required to be maintained pursuant
to Section 18 of the Investment Company Act shall not constitute Restricted
Payments prohibited by the foregoing and, subject to compliance with Section
7.7(c) and the limitations set forth in 7.16(b), may be made or paid by the
Issuer at any time; and
(ii) in the event that any payment or other distribution
(including, without limitation, any dividend) in respect of the Issuer's Common
Shares would be required to be made in order to preserve the U.S. federal income
tax status of the Issuer as a regulated investment company or to avoid the
imposition of the excise tax under Section 4882 of the Code (e.g., because the
requisite consents from the Common Shareholders for a "consent dividend" (as
defined in Section 565 of the Code) for U.S. federal income tax purposes have
not been obtained by the Issuer in accordance with the terms of the Operating
Agreement), such payment or distribution (a "RIC Distribution") may be
distributed for the benefit of the Common Shareholders and deposited into the
Escrow Account established pursuant to the Custodial Agreement. Funds deposited
in the Escrow Account shall not be released to the Common Shareholders unless
and until the Issuer shall have provided to the Trustee a certificate stating
that (A) no violation of the Over-Collateralization Tests or Default exists and
(B) Company Equity is equal to or greater than Adjusted Contributed Company
Capital. If the requisite consents from the Common Shareholders for a "consent
dividend" have been obtained, the Issuer shall be permitted to pay any U.S.
withholding taxes ("RIC Withholding Taxes") arising in respect of such "consent
dividend."
(b) Notwithstanding anything in Section 7.16(a) or elsewhere in this
Indenture to the contrary, the Issuer shall not declare any dividend (except a
dividend payable in stock of the Issuer), or declare any other distribution,
upon any class of the capital stock of the Issuer, or
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purchase any such capital stock, unless, in every such case, each class of
"senior securities" (as defined in Section 18 of the Investment Company Act) of
the Issuer has at the time of declaration of any such dividend or distribution
or at the time of any such purchase an "asset coverage" (as defined in and
determined in accordance with Section 18 of the Investment Company Act) of at
least 300 per centum after deducting the amount of such dividend, distribution,
or purchase price, as the case may be, except that dividends may be declared
upon the Preferred Stock if each "senior security representing indebtedness" (as
defined in Section 18 of the Investment Company Act) has an "asset coverage" (as
defined in and determined in accordance with Section 18 of the Investment
Company Act) of at least 200 per centum at the time of declaration thereof after
deducting the amount of such dividend.
Section 7.17. Change of Name, etc.
The Issuer shall not change (a) the location of its principal place of
business, chief executive office, major executive office, chief place of
business or its records concerning its business and financial affairs, (b) its
name or the name under or by which it conducts its business or (c) its
jurisdiction of organization, in each case without first giving the Trustee 30
days' prior written notice thereof and taking any and all actions that may be
necessary to maintain and preserve all Liens granted pursuant to the Pledge
Agreement.
Section 7.18. Merger, Consolidation, Sale of Assets.
The Issuer shall not consolidate or merge with or into any other
Person or sell, lease or otherwise transfer its properties and assets
substantially as an entirety to any Person, unless the Issuer provides 10 days'
prior written notice thereof to the Trustee, each Holder and the Rating Agencies
and unless:
(a) the Issuer shall be the surviving entity, or the Person (if
other than the Issuer) formed by such consolidation or into which the Issuer is
merged or to which the properties and assets of the Issuer are transferred
substantially as an entirety shall be a Person organized and existing under the
laws of the United States of America, any state thereof or the District of
Columbia, and shall expressly assume, by an amendment or supplement, executed
and delivered to the Trustee, each Holder and the Rating Agencies, in the case
of a Person succeeding the Issuer, the due and punctual payment of the principal
of and premium and interest on all of the Securities and all of the other Senior
Indebtedness hereunder and, in the case of a Person succeeding the Issuer, the
performance of every covenant and every other obligation or liability of this
Indenture and the other Transaction Documents on the part of the Issuer to be
performed or observed, all as provided herein;
(i) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(ii) the Issuer shall have delivered to the Trustee an
Officer's Certificate stating that such consolidation, merger, conveyance or
transfer and such amendment or supplement to this Indenture comply with this
Section 7.18;
(iii) the Issuer shall have taken all steps necessary to
preserve the effectiveness, perfection and priority of the Liens created under
the Pledge Agreement;
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(iv) the Issuer shall have delivered to the Trustee and each
Holder evidence that the Rating Agency Condition shall be met;
(v) the successor entity shall be a registered "investment
company" under the Investment Company Act; and
(vi) the Issuer shall have delivered the Trustee an Opinion
of Counsel concerning such of the foregoing matters described in clauses (i) and
(v).
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Issuer in accordance with this Section 7.18, the successor entity formed
by such consolidation or into which the Issuer is merged or into which such
sale, transfer, lease, conveyance or other disposition is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Issuer
under this Indenture with the same effect as if such successor entity had been
named as the Issuer herein.
Section 7.19. Investment Dispositions, etc.
The Issuer shall not sell, transfer, lease or otherwise dispose of,
or grant options, warrants or other rights with respect to, any of its assets to
any Person, other than in compliance with the provisions of this Indenture, the
other Transaction Documents, the Operating Agreement and all Applicable Laws.
The Issuer shall not transfer any Fund Investment or other asset from the
Custodial Account to any counterparty under a Structured Product Transaction or
to any other account of the Issuer unless (a) after giving effect to such
transfer, no Excess Amount exists (calculated on a pro forma basis giving effect
to such transfer) and the Aggregate Outstanding Amount is less than the Total
Maximum Commitment and (b) the Issuer shall have delivered to the Trustee an
Officer's Certificate evidencing its compliance with the foregoing clause (a).
Section 7.20. Modification of Certain Instruments, Organic Documents,
Agreements, etc.
The Issuer shall not:
(a) consent to or permit any amendment, supplement, waiver,
termination or other modification of any of the terms or provisions of the
Preferred Shares, in each case, other than any amendment, supplement or other
modification which (i) extends the date or reduces the amount of any required
payment, repurchase or redemption in respect of any Preferred Shares or (ii) is
consented to or approved by the Majority of the Notes and as to which the
Rating Agency Condition is met; the Issuer will give the Rating Agencies and the
Trustee ten Business Days' prior written notice of any such modification,
supplement, waiver or termination; or
(b) to the extent permitted by the Investment Company Act, without
the prior written consent of the Majority of the Notes and unless the Rating
Agency Condition is met, (i) except in accordance with Section 7.12, terminate
the Investment Manager, appoint a replacement Investment Manager or consent to
an assignment of the Investment Management Agreement (except in connection with
(x) an assignment that results from a change in control (within the meaning of
the Investment Advisers Act of 1940, as amended) or (y) an assignment to a York
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Affiliated Entity pursuant to the Investment Management Agreement) or (ii)
consent to any material amendment, supplement or other modification, in each
case to the extent that such amendment, supplement or other modification could
reasonably be expected to have a material adverse effect, of any of the terms or
provisions of (A) its Organic Documents, or (B) the Investment Management
Agreement (except in connection with a change of Investment Manager that
otherwise complies with clause (i) above).
Section 7.21. Statement as to Compliance.
On or before March 31 in each calendar year, commencing in 2006, or
immediately if there has been a Default under this Indenture, the Issuer shall
deliver to the Trustee, the Investment Manager, each Holder, and each Rating
Agency an Officer's Certificate stating, as to each Officer signing such
Officer's Certificate, that:
(a) a review of the activities of the Issuer and of the Issuer's
performance under this Indenture during the prior calendar year (or from the
Closing Date until December 31, 2005, in the case of the first such Officer's
Certificate) has been made under his or her supervision; and
(b) to the best of his or her knowledge, based on such review, no
Default or Event of Default has occurred during such year, or, if there has been
a Default or Event of Default, specifying each such Default or Event of Default
known to him and the nature and status thereof.
Section 7.22. No Other Business.
The Issuer shall not engage in any business or activity other than (a)
issuing the Notes pursuant to this Indenture, issuing, selling, redeeming and
repurchasing Preferred Shares (including any permitted refinancings thereof),
issuing and selling Common Shares, acquiring, owning, holding, selling,
exchanging, redeeming, pledging, structuring, negotiating, originating,
syndicating, contracting for the management of and otherwise dealing with Fund
Investments and other instruments and property in connection therewith and in
accordance with the terms hereof (including acquiring majority or controlling
interests in operating companies as a result of such activities) and entering
into Hedging and Short Sale Transactions and Structured Product Transactions,
(b) issuing or incurring any other obligations permitted by Section 7.14, (c)
engaging in other activities permitted by the Operating Agreement, including
establishing investment committees and investment policies, earning origination,
management, commitment, funding, and break-up fees, increased and break-funding
costs, premiums and similar fees and amounts with respect to Fund Investments,
obtaining governance power with respect to certain Fund Investments and
co-investing with related parties and other Persons and (d) obtaining financial
guarantee insurance with respect to the Preferred Shares and (e) engaging in any
other activities which are necessary, suitable or appropriate to accomplish the
foregoing or are incidental thereto, connected therewith or ancillary thereto.
Notwithstanding anything to the contrary contained in this Section 7.22 or
elsewhere in this Indenture, the Issuer shall have no subsidiaries.
Section 7.23. Reporting.
The Issuer shall promptly furnish to the Trustee, each Holder, the
Rating Agencies and the Custodian copies of the following financial statements,
reports and information:
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(a) as soon as available and in any event within 90 days after the
end of each fiscal year of the Issuer (beginning with the year ended December
31, 2005) a consolidated balance sheet of the Issuer as of the end of such
fiscal year and the related consolidated statements of operations, members'
equity and cash flows for such fiscal year (including a schedule setting forth
all investments of the Issuer and the Market Value of each such investment at
year end (regardless of whether such investments are then required under GAAP to
be set forth)), setting forth in comparative form the figures for the previous
fiscal year, if any, reported on without material qualification by Independent
Public Accountant, it being understood that a qualification relating only to
valuation methodology shall not be deemed a material qualification if the Issuer
has otherwise complied with Sections 10.4 and 7.7;
(b) as soon as available and in any event within 60 days after the
end of each of the first three (3) fiscal quarters of each fiscal year of the
Issuer (beginning with the quarter ended December 31, 2005) a consolidated
balance sheet of the Issuer as of the end of such fiscal quarter and the
related consolidated statements of operations, members' equity and cash flows
for such fiscal quarter and for the portion of the fiscal year ended at the end
of such fiscal quarter (including a schedule setting forth all investments of
the Issuer and the Market Value of each such investment at quarter end
(regardless of whether such investments are then required under GAAP to be set
forth)), setting forth in the case of each fiscal quarter ending on or after
December 31, 2006 in comparative form the figures for the corresponding fiscal
quarter and the corresponding portion of the previous fiscal year, all certified
(subject to normal year-end adjustments) as to fairness of presentation, GAAP
and consistency by an Authorized Officer of the Issuer;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a Compliance Certificate
(i) setting forth (A) Company Equity as of the last day of the fiscal quarter of
the Issuer most recently ended; (B) the aggregate amount of Restricted Payments
made during such fiscal quarter; (C) the aggregate principal amount of Permitted
Indebtedness, in each case as of the last day of such fiscal year or quarter;
(D) the computations relating to the Issuer's compliance with Section 7.13; and
(E) the aggregate amount of fees and expenses paid by the Issuer; and (ii)
stating whether any Default exists on the date of such certificate and, if any
Default then exists, setting forth the details thereof and the action which the
Issuer is taking or proposes to take with respect thereto; and
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the Independent
Public Accountant which reported on such statements as to whether anything has
come to their attention to cause them to believe that any Default existed on the
date of such statements and, if such a Default has come to their attention, a
statement as to the nature thereof.
Section 7.24. Calculation Agent.
(a) The Issuer agrees that there will at all times be an agent
(which does not control or is not controlled or under common control with the
Issuer or its Affiliates or the Investment Manager or its Affiliates) appointed
to calculate LIBOR in respect of each Interest Accrual Period in accordance with
the terms of Schedule C hereto (the "Calculation Agent"). The Issuer has
initially appointed the Trustee (which may delegate its responsibilities to any
of its Affiliates, provided that the Trustee shall remain responsible for the
performance of any delegated
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responsibilities in accordance with the terms hereof) as Calculation Agent for
purposes of determining LIBOR for each Interest Accrual Period. The Calculation
Agent may be removed by the Issuer at any time. If the Calculation Agent is
unable or unwilling to act as such or is removed by the Issuer, or if the
Calculation Agent fails to determine any of the information required to be
calculated pursuant to subsection (b), the Issuer will promptly appoint a
replacement Calculation Agent that does not control or is not controlled by or
under common control with the Issuer or its Affiliates. No resignation or
removal of the Calculation Agent shall be effective without a successor having
been duly appointed.
(b) The Calculation Agent shall be required to agree that, as soon
as possible after 11:00 a.m. (London time) on each LIBOR Determination Date (as
defined in Schedule C hereto), but in no event later than 11:00 a.m. (London
time) on the LIBOR Business Day immediately following each LIBOR Determination
Date, the Calculation Agent will calculate the Interest Rates for the Interest
Accrual Period on the related Payment Date, and will communicate such rates and
amounts to the Issuer, the Trustee, the Investment Manager, and each Paying
Agent. The Calculation Agent will also specify to the Issuer and the Investment
Manager the quotations upon which the Interest Rates are based, and in any event
the Calculation Agent shall notify the Issuer and the Investment Manager before
5:00 p.m. (London time) on each LIBOR Determination Date that either: (i) it has
determined or is in the process of determining the Interest Rates and the
Interest Amounts, or (ii) it has not determined and is not in the process of
determining the Interest Rates and the Interest Amounts, together with its
reasons therefor.
(c) The Calculation Agent will cause the Interest Rates, Interest
Accrual Period and Payment Date to be communicated to DTC and Clearstream by the
LIBOR Business Day immediately following each LIBOR Determination Date. The
determination of the Interest Rates and Interest Amounts by the Calculation
Agent shall (in the absence of manifest error) be final and binding upon all
parties.
Section 7.25. Margin Stock.
(a) Upon request of any Holder, the Issuer shall provide a duly
completed and executed Federal Reserve Form U-l or Form G-3, as applicable, to
such Holder. If at any time the Issuer acquires any Margin Stock, the Issuer
will take any and all actions as may be necessary, or as may be reasonably
requested by any Holder to establish compliance with Regulations T, U, and X of
the FRS Board, including, without limitation, furnishing such information
relating to such Margin Stock acquired as is required to register and file
periodic reports with the FRS Board.
(b) No proceeds of any Borrowing shall be used in violation of
Applicable Law or, directly or indirectly, to purchase, otherwise acquire or
carry Margin Stock or Margin Securities in any manner that would result in a
violation of U.S. margin requirements.
Section 7.26. Pension and Welfare Plans.
The Issuer shall not Incur any liability or obligation with respect to
any Pension Plan or any Welfare Plan (other than with respect to a fully insured
Welfare Plan). The Issuer shall not maintain or contribute to (or become
obligated to contribute to) any Pension Plan or Welfare Plan (other than a fully
insured Welfare Plan).
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Section 7.27. Payment of Management or Advisory Fees.
At any time after an Acceleration Notice or a Final Maturity Payment
Default Notice has been delivered to the Issuer or the occurrence of a
Liquidation Acceleration under the Pledge Agreement, the Issuer shall not pay,
or cause or permit to be paid, any management or advisory fees (excluding
Reimbursable Expenses) of any type to the Investment Manager unless otherwise
consented to by the Majority of the Notes.
Section 7.28. Limitation on Bank Loans and Specified Hedging Transactions.
(a) The Issuer shall not hold Bank Loans that obligate the Issuer,
whether currently or upon the happening of any contingency, to make any
revolving extensions of credit to a borrower, unless the Issuer has at all times
available to it, within the notification period specified by the documentation
governing such Bank Loans for the making of any extensions of credit thereunder,
any combination of (i) Cash, (ii) Cash Equivalents and (iii) availability under
this Indenture such that the Issuer, upon "regular way" settlement, will have
funds that are sufficient to cover the amount of any such extensions of credit.
(b) The Issuer shall maintain on a daily basis in a segregated
account within the Custodial Account Cash or Cash Equivalents in an amount equal
to the aggregate amount by which the Specified Hedging Net Exposure is less than
zero. Amounts held in such account pursuant this Section 7.28(b) may only be
withdrawn and applied to the settlement of any such Specified Hedging Net
Exposure. Any Cash or Cash Equivalents held in such account shall constitute
Excluded Investments.
Section 7.29. Short Sale Transactions.
(a) In connection with each Short Sale Transaction, the Issuer
shall:
(i) At the time the Bank Loan or Security relating to such
Short Sale Transaction is sold, deposit Cash or U.S. Government Securities in a
Short Sale Customer Account in an amount as determined by the Investment Manager
equal to the excess, if any, of (A) the Market Value of the Bank Loan or
Security relating to such Short Sale Transaction as determined as of the time
the Bank Loan or Security relating to such Short Sale Transaction is sold, over
(B) the amount of any Cash or U.S. Government Securities required to be
deposited by the Issuer in a Short Sale Broker Account in connection with such
Short Sale Transaction; and
(ii) until the Issuer replaces the Bank Loan or Security
borrowed in connection with such Short Sale Transaction, it must maintain on a
daily basis in a Short Sale Customer Account an amount in Cash or U.S.
Government Securities such that (A) the amount deposited in such Short Sale
Customer Account plus the amount of Cash or U.S. Government Securities deposited
by the Issuer in a Short Sale Broker Account in connection with such Short Sale
Transaction equals the current Market Value of the Bank Loan or Security sold
short and (B) the amount deposited in such Short Sale Customer Account plus the
amount of Cash or U.S. Government Securities deposited by the Issuer in a Short
Sale Broker Account in connection with such Short Sale Transaction is not less
than the Market Value of the Bank Loan or Security at the time it was sold
short.
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(b) The Issuer shall not permit on any date the aggregate Market
Value (as determined as of the date each equity Security was borrowed by the
Issuer in connection with any Short Sale Transaction) of equity Securities
borrowed in connection with Short Sale Transactions to exceed the greater of (A)
15% of Total Capitalization and (B) 15% of the Net Asset Value of the Issuer.
ARTICLE 8
SUPPLEMENTAL INDENTURES
Section 8.1. Supplemental Indentures Without Consent of Securityholders.
Without the consent of the Holders of any Securities, the Issuer, when
authorized by Board Resolutions, and the Trustee, at any time and from time to
time subject to the requirement provided below in this Section 8.1 with respect
to the ratings on the Notes, may enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee (x) if such supplemental indenture
would have no material adverse effect on the Securities (as evidenced by an
Opinion of Counsel which may be based as to factual matters on an Officer
Certificate of the Issuer) or (y) for any of the following purposes:
(a) to evidence the succession of another Person to the Issuer and
the assumption by any such successor Person of the covenants of the Issuer
herein and in the Securities, in each case in accordance with this Indenture;
(b) to add to the covenants of the Issuer or the Trustee for the
benefit of the Holders of the Securities or to surrender any right or power
herein conferred upon the Issuer;
(c) to convey, transfer, assign, mortgage or pledge any property to
or with the Trustee, or add to the conditions, limitations or restrictions on
the authorized amount, terms and purposes of the issue, authentication and
delivery of the Securities;
(d) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee and to add to or change any of the provisions
of this Indenture as shall be necessary to facilitate the administration of the
trusts hereunder by more than one trustee, pursuant to the requirements of
Sections 6.9 or 6.10 hereof;
(e) to provide for and/or facilitate the issuance of additional
Securities to the extent permitted by Section 2.14 and to extend to such
Securities the benefits and provisions of this Indenture;
(f) to correct or amplify the description of any property at any
time subject to the Lien under the Pledge Agreement, or to better assure, convey
and confirm unto the Trustee any property subject or required to be subjected to
the Lien under the Pledge Agreement (including, without limitation, any and all
actions necessary or desirable as a result of changes in law or regulations) or
to subject to the lien under the Pledge Agreement any additional property;
(g) to reduce the permitted Authorized Denominations;
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(h) to take any action necessary or advisable to prevent the Issuer
from being subject to withholding or other taxes, fees or assessments;
(i) to enter into any amendment, modification or waiver if the
Issuer certifies that such amendment, modification or waiver would not, upon or
after becoming effective, materially and adversely affect the rights or
interests of holders of the Securities;
(j) otherwise to correct any ambiguities, errors or inconsistencies
in this Indenture, or between any provision of the Indenture and the Offering
Memorandum; or
(k) to evidence any waiver by any Rating Agency as to any
requirement or condition, as applicable, of such Rating Agency set forth herein.
The Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations which may be therein contained, but the Trustee shall not be
obligated to enter into any such supplemental indenture which affects the
Trustee's own rights, duties, liabilities or immunities under this Indenture or
otherwise, except to the extent required by law.
The Trustee shall not enter into any such supplemental indenture until
it has received Rating Agency Confirmation. At the cost of the Issuer, the
Trustee shall provide to each Securityholder and, if applicable, each Rating
Agency, a copy of any proposed supplemental indenture (or a description of the
substance thereof) at least 10 days prior to the execution thereof by the
Trustee and a copy of the executed supplemental indenture after its execution.
Section 8.2. Supplemental Indentures with Consent of Securityholders.
With the consent of a Majority of the Notes, by Act of said Holders
delivered to the Trustee and the Issuer, the Trustee and Issuer may enter into
one or more indentures supplemental hereto to add any provisions to, or change
in any manner or eliminate any of the provisions of, this Indenture or modify in
any manner the rights of the Holders of the Securities under this Indenture,
provided, that notwithstanding anything in this Indenture to the contrary, no
such proposed supplemental indenture shall, without the consent of each Holder
adversely affected thereby:
(a) change the Stated Maturity of the Notes or the due date of any
installment of interest or Additional Costs on the Securities; reduce the
principal amount thereof or the Interest Rate (if any) thereon; change the
earliest date on which the Commitments may be terminated or reduced pursuant to
Section 9.3; change the provisions of this Indenture relating to the application
of proceeds of any Collateral to the payment of principal, interest, Additional
Costs or other amounts with respect to Notes; change any place where, or the
coin or currency in which, any Security or the principal thereof or interest, or
Additional Cost thereon is payable; or impair the right to institute suit for
the enforcement of any such payment on or after the Stated Maturity thereof;
(b) reduce the percentage of the Aggregate Outstanding Amount or
number of Holders of Securities whose consent is required for the authorization
of any such supplemental
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indenture or for any waiver of compliance with certain provisions of this
Indenture or certain Defaults hereunder or their consequences provided for in
this Indenture;
(c) materially impair or materially and adversely affect the
Collateral except as otherwise permitted in this Indenture;
(d) except as permitted by the Indenture, permit the creation of any
Lien ranking prior to or on a parity with the Lien under the Pledge Agreement
with respect to any part of the Collateral or terminate such Lien on any
property at any time subject hereto or deprive any Noteholder of the security
afforded by the Lien of the Pledge Agreement;
(e) reduce the percentage of the Aggregate Outstanding Amount of
Holders of Notes whose consent is required to request or instruct the Trustee to
exercise the remedies available to the Noteholders under the Pledge Agreement;
(f) modify any of the provisions of this Section 8.2, except to
increase any such percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the Holder of each
outstanding Security adversely affected thereby;
(g) modify the definition of the term "Outstanding"; or
(h) modify any of the provisions of this Indenture in such a manner
as to affect the methodology for calculation of the amount of any payment with
respect to any Security on any Payment Date.
Not later than 10 Business Days prior to the execution of any proposed
supplemental indenture pursuant to this Section 8.2, the Trustee, at the expense
of the Issuer, shall mail to the Holders of the Securities, the Investment
Manager and each Rating Agency, a copy of such supplemental indenture and a
notice reciting in substance the provisions of the next following sentence and
stating whether or not Rating Agency Confirmation has been or will be solicited
in connection with such proposed supplemental indenture. The Trustee may, or may
rely on an Opinion of Counsel (a copy of which will be provided to the Rating
Agencies) to, determine whether or not the Holders of Securities would be
materially and adversely affected, as applicable, by such change (after giving
notice of such change to the Holders of such Securities). Such determination
shall be conclusive and binding on all present and future Holders. The Trustee
shall not be liable for any such determination made in good faith and in
reliance upon an Opinion of Counsel delivered to the Trustee as described in
Section 8.3 hereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section 8.2, the Trustee, at the expense
of the Issuer, shall mail to the Holders of the Securities, the Investment
Manager and each Rating Agency, a copy thereof. Any failure of the Trustee to
publish or mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
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Section 8.3. Execution of Supplemental Indentures.
It shall not be necessary for any Act of Securityholders under Section
8.1 or 8.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
In executing or accepting the additional trusts created by any
supplemental indenture permitted by this Article 8 or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Sections 6.1 and 6.3 hereof) shall be fully protected
in relying upon an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture and that all
conditions precedent thereto have been complied with. The Trustee may, but shall
not be obligated to, enter into any such supplemental indenture which affects
the Trustee's own rights, duties or immunities under this Indenture or
otherwise; provided, however, that with respect to any amendment or supplement
to this Indenture which would (i) increase the duties or liabilities of, or that
adversely change the economic consequences to the Investment Manager, or (ii)
materially expand or restrict the Investment Manager's discretion, the
Investment Manager shall not be bound thereby unless the Investment Manager
shall have consented thereto in writing, such consent not to be unreasonably
withheld or delayed.
Section 8.4. Certain Further Limitations on Supplemental Indentures.
Notwithstanding anything to the contrary herein, the Issuer agrees that
it will not consent to or enter into any indenture supplemental hereto or any
amendment to any other document related hereto that:
(a) amends any provision of this Indenture or such other document
relating to the institution of proceedings for the Issuer to be adjudicated as
bankrupt or insolvent, or the consent by the Issuer to the institution of
bankruptcy or insolvency proceedings against it, or the filing with respect to
the Issuer of a petition or answer or consent seeking reorganization or relief
under applicable bankruptcy or similar law, or the consent by the Issuer or to
the filing of any such petition or to the appointment of a receiver, liquidator,
assignee, trustee or sequestrator (or other similar official) of the Issuer of
any substantial part of its property; or
(b) amends any provision of this Indenture or such other document
that provides that the obligations of the Issuer are limited recourse
obligations of the Issuer, payable solely from the assets of the Issuer in
accordance with the terms of the Indenture.
Section 8.5. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article 8,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore and thereafter authenticated and delivered hereunder
shall be bound thereby.
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Section 8.6. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article 8 may, and if required by the
Trustee shall, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Issuer shall so determine,
new Securities, so modified as to conform in the opinion of the Trustee and the
Issuer, to any such supplemental indenture, may be prepared and executed by the
Issuer, and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE 9
PREPAYMENT OF NOTES
Section 9.1. Mandatory Prepayment.
(a) The Issuer shall make a Prepayment of the Notes on each date
when any reduction in the Total Maximum Commitment shall become effective,
whether pursuant to Section 9.3 or otherwise, in an amount such that no Excess
Amount exists immediately following such reduction.
(b) The Issuer shall make a Prepayment of the Notes on any day when
required to comply with the Over-Collateralization Tests pursuant to Section
7.7.
Section 9.2. Voluntary Prepayments of Notes.
(a) The Notes may be prepaid (in whole or in part) at the option of
the Issuer without premium on any Payment Date on which the Issuer has available
Cash. Furthermore, on any Business Day (other than a Payment Date) on which the
Issuer has available Cash, the Notes may be prepaid (in whole or in part)
without premium at the option of the Issuer. The Holders of the Notes shall be
entitled to receive any related Break Funding Costs on the next Payment Date.
Prepayments will be made by the Issuer on a pro rata basis based on the Drawn
Amount of the Notes. In connection with a Prepayment, the Issuer shall comply in
all respects with the terms of the Note Purchase Agreement.
(b) Except with respect to any Prepayment required to be made, the
aggregate principal amount of any Prepayment of the Notes (taken as a whole)
shall be an integral multiple of $1,000,000 and at least $5,000,000.
(c) The Issuer will duly and punctually perform each of its
obligations under the Note Purchase Agreement.
Section 9.3. Commitment Reductions.
(a) The Issuer may not reduce the Commitments at any time during the
Non-Reduction Period unless, in each case, any such Commitment reduction is
necessary to comply with any asset coverage ratio required to be maintained by
the Issuer pursuant to Section 18 of the Investment Company Act. At any time
after the Non-Reduction Period, the Issuer may, from time to time on any Payment
Date, voluntarily reduce, in whole or in part, the amount of the
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Total Maximum Commitment; provided, that (i) all such reductions shall (x)
require at least five Business Days' prior notice to the Trustee, the Note Agent
and the Rating Agencies, and (y) permanently reduce the Total Maximum Commitment
by the amount of such reduction (such reduction permanently reducing the amount
resulting from each calculation of Total Maximum Commitment thereafter), (ii)
any partial reduction of the Total Maximum Commitment shall be in a minimum
amount of $5,000,000 and in an integral multiple of $1,000,000 for amounts in
excess thereof, and (iii) no such reduction shall reduce the Commitments to an
amount less than the Aggregate Outstanding Amount, unless a mandatory Prepayment
of the Notes shall be made on the date of such reduction pursuant to Section
9.1(a). Notwithstanding the foregoing, the Issuer will have the right to (i)
terminate the Commitment of any Holder pursuant to Section 9.3(b), and (ii)
terminate the Commitment of any Holder that fails to satisfy the Rating Criteria
in accordance with and under the circumstances described in the Note Purchase
Agreement.
(b) If, as a result of any Change in Law, the Issuer is required to
pay any Tax Gross-Up Amount or any Increased Costs to any Holder, then in each
such case the Issuer shall have the right to (i) replace such Holder with
another Permitted Holder or (ii) terminate the Commitment of such Holder. In the
event the Issuer elects to replace any such Holder or terminate the Commitment
of any such Holder pursuant to this paragraph (b), the Issuer will give 10
Business Days advance notice thereof to such Holder, the Trustee and the Note
Agent and will, on the date of replacement of such Holder or the date of the
termination of the Commitment of such Holder, pay or cause to be paid to the
Trustee for the benefit of such Holder an amount equal to the outstanding
principal amount of the Borrowings owing to such Holder, the accrued and unpaid
interest thereon and any Additional Costs owing through the date of such
prepayment or termination; provided, however, that notwithstanding the
foregoing, if such Holder transfers its Notes (subject to all applicable
conditions set forth in this Indenture and the Note Purchase Agreement relating
to the transfer of an interest in any Note) to an Affiliate of such Holder
within such 10 Business Day period and as a result of such transfer the Issuer
is no longer required to pay any Tax Gross-Up Amount or any Increased Costs,
then the Issuer shall not be permitted to exercise the rights referenced in
subclauses (i) and (ii) above at the end of such 10 Business Day period.
ARTICLE 10
ACCOUNTS, ACCOUNTINGS AND RELEASES
Section 10.1. Collection of Money; General Account Requirements.
(a) Except as otherwise expressly provided herein, the Trustee may
demand payment or delivery of, and shall receive and collect, directly and
without intervention or assistance of any fiscal agent or other intermediary,
all Money and other property payable to or receivable by the Trustee pursuant to
this Indenture. The Trustee shall segregate and hold all such Money and property
received by it in trust for the benefit of the Noteholders and shall apply it as
provided in this Indenture.
(b) The accounts established by the Trustee pursuant to this Article
10 may include any number of sub-accounts deemed necessary by the Trustee or
requested by the Custodian for convenience in administering any Money received
by the Trustee. In addition, all Cash deposited in the accounts established
pursuant to this Article 10 shall be invested in Cash
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Equivalents in accordance with the procedures set forth in Sections 10.2(b) and
10.2(c) and any restrictions applicable to such accounts.
(c) The Collateral Accounts shall be maintained pursuant to the
Custodial Agreement and the Pledge Agreement providing, inter alia, that the
establishment and maintenance of such Collateral Account will be governed by the
law of a jurisdiction satisfactory to the Issuer and the Trustee. All Monies
held by or deposited with the Trustee in any Account shall be deposited in one
or more trust accounts of a federal depository institution or state-chartered
depository institution subject to regulations regarding fiduciary funds on
deposit similar to Title 12 of the Code of Federal Regulations, Section 9.10(b),
which, in either case, has corporate trust powers, acting in its fiduciary
capacity and having a long-term debt rating of at least "Baa2" by Moody's and
"BBB" by S&P to be held in trust for the benefit of the Secured Parties. The
Trustee agrees to give the Issuer and the Collateral Agent immediate notice if
any Account or any funds on deposit therein, or otherwise to the credit of such
Account, shall become subject to any writ, order, judgment, warrant of
attachment, execution or similar process.
Section 10.2. Collection Account.
(a) The Trustee shall, prior to the Closing Date, establish a
single, segregated trust account which shall be designated as the "Collection
Account" into which the Trustee shall from time to time deposit:
(A) all Payment Proceeds; and
(B) all proceeds received from the disposition of
any Collateral under the Pledge Agreement not required to otherwise be
applied in accordance with the terms of the Pledge Agreement.
In addition, the Issuer may, but under no circumstances shall be
required to, deposit from time to time such other Monies in the Collection
Account as it deems, in its sole discretion, to be advisable. All Monies
deposited from time to time in the Collection Account pursuant to this Indenture
shall be held by the Trustee and shall be applied to the purposes herein
provided.
(b) All amounts described in Section 10.2(a) received by the Trustee
shall be immediately deposited in the Collection Account. Subject to Sections
10.2(d) and 10.2(e), all such amounts, together with any securities in which
funds included in such property are or will be invested or reinvested during the
term of this Indenture, and any income or other gain realized from such
investments, shall be held by the Trustee in the Collection Account subject to
disbursement and withdrawal as provided in this Section 10.2. By Issuer Order
executed by an Authorized Officer of the Issuer (which may be in the form of
standing instructions), the Issuer shall at all times direct the Trustee to,
and, upon receipt of such Issuer Order, the Trustee shall, invest all funds
received into the Collection Account as so directed in Cash Equivalents.
(c) If prior to the occurrence of an Event of Default, the Issuer
shall not have given any investment directions pursuant to Section 10.2(b), the
Trustee shall invest and reinvest the funds held in the Collection Account, as
fully as practicable, but only in one or more Cash Equivalents as directed by
the Investment Manager. If, after the occurrence of an Event of Default, the
Issuer shall not have given investment directions to the Trustee pursuant to
Section
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10.2(b) for three consecutive days, the Trustee shall invest and reinvest such
Monies as fully as practicable in Cash Equivalents maturing not later than the
earlier of (i) 30 days after the date of such investment or (ii) the Business
Day immediately preceding the next Payment Date. All interest and other income
from such investments shall be deposited in, any gain realized from such
investments shall be credited to, and any loss resulting from such investments
shall be charged to the Collection Account. The Trustee shall not in any way be
held liable by reason of any insufficiency of the Collection Account resulting
from any loss relating to any such investment.
(d) The Issuer may by Issuer Order direct the Trustee to, and upon
receipt of such Issuer Order the Trustee shall, use Payment Proceeds to make
Prepayments on the Notes in accordance with Section 9.1 or Section 9.2.
(e) An Authorized Officer of the Issuer shall direct the Trustee to,
and upon the receipt of such written instructions, the Trustee shall, transfer
to the Payment Account, for application pursuant to Section 11.1(a) of the
Indenture, on or about the Business Day prior to each Payment Date, any amounts
then held in the Collection Account; except that, to the extent that Payment
Proceeds in the Collection Account as of such date are in excess of the amounts
required to be distributed on the next Payment Date, the Issuer may direct the
Trustee to either (i) retain such excess amounts in the Collection Account and
not to transfer such excess amounts to the Payment Account, or (ii) so long as
no Default or Event of Default then exists, return such excess amounts to the
Issuer.
Section 10.3. Payment Account; Advance Funding Account.
(a) Payment Account. The Trustee shall, prior to the Closing Date,
establish a single, segregated trust account which shall be designated as the
"Payment Account." Except as otherwise provided in Sections 11.1 and 11.2, the
only permitted withdrawal from or application of funds on deposit in, or
otherwise to the credit of, the Payment Account shall be to pay amounts due and
payable on the Securities in accordance with their terms and the provisions of
this Indenture, Administrative Expenses, and other amounts specified therein,
and to make Prepayments in accordance with Section 9.2.
(b) Advance Funding Account. The Trustee shall, prior to the Closing
Date, establish a segregated trust account designated the "Advance Funding
Account." Any Aggregate Undrawn Amount deposited with the Trustee pursuant to
Section 2.12(e) as a result of the failure of a holder of a beneficial interest
in the Notes to satisfy the Rating Criteria and any subsequent Prepayments in
respect of such holder's Notes shall be placed in a separate subaccount relating
to such holder in the Advance Funding Account and shall be used by the Trustee
to fund such holder's pro rata portion of any subsequent Borrowing on the Notes.
Amounts so placed in the Advance Funding Account shall, for all other purposes
under this Indenture, be part of the Aggregate Undrawn Amount and such holder
shall be entitled to receive the applicable Commitment Fee thereon. Amounts held
in each subaccount of the Advance Funding Account shall be invested in Cash
Equivalents at the direction of the Issuer and the income received from such
investments shall be remitted to such holder on each Payment Date. As soon as
practical after the holder (or a transferee of such holder) satisfies the Rating
Criteria, any amounts remaining in the Advance Funding Account or the related
subaccount thereof shall be refunded to the related holder along with any income
and proceeds thereon upon written notice to the
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Trustee. Amounts in the Advance Funding Account shall not be the property of the
Issuer and shall not secure the payment of the Notes, but shall be applied only
as provided herein.
Section 10.4. Collateral Accounts.
The Collateral Agent shall, prior to the Closing Date, establish the
Custodial Account, the Escrow Account and the Liquidation Account (collectively,
the "Collateral Accounts") in accordance with the terms of the Pledge Agreement
and shall maintain such accounts in accordance with the Pledge Agreement.
Section 10.5. Reports by Trustee.
The Trustee shall supply in a timely fashion to the Issuer, the
Custodian and the Investment Manager any information regularly maintained by the
Trustee in connection with the transactions described in this Indenture that the
Issuer may from time to time request with respect to the each Account and any
other information reasonably needed and available in the Trustee's files in
connection with the transactions described in this Indenture to complete the
Valuation Statement. The Trustee shall also cause the amount of interest paid on
the Securities on each Payment Date to be communicated to DTC and Clearstream
(as long as any of the Securities are listed thereon) by the Business Day
immediately following such Payment Date.
Nothing in this Section 10.5 shall be construed to impose upon the
Trustee any duty to prepare any report or statement required under this Section
10.5 or to calculate or compute information required to be set forth in any such
report or statement other than information regularly maintained by the Trustee
by reason of its acting as Trustee hereunder.
Section 10.6. Accountings.
(a) On each Business Day the Issuer shall in good faith (i)
calculate the Moody's Senior Advance Amount and the Moody's Total Advance Amount
using the Moody's Valuation Procedures using the most recent Market Value for
each Fund Investment determined in accordance with the ▇▇▇▇▇'▇ Collateral
Valuation Schedule and (ii) calculate the S&P Senior Advance Amount and the S&P
Total Advance Amount using the S&P Valuation Procedures using the most recent
Market Value for each Fund Investment determined in accordance with the terms of
the S&P Collateral Valuation Schedule. All such calculations by the Issuer shall
be based upon information reflected on the books and records of the Issuer as of
2:00 p.m. New York time on each Business Day. The Market Value of each Fund
Investment shall be calculated by the Issuer based on the Market Value Price
from the most recent Valuation Statement (x) for purposes of the ▇▇▇▇▇'▇
Valuation Procedures, when and as set forth in the ▇▇▇▇▇'▇ Collateral Valuation
Schedule and (y) for purposes of the S&P Valuation Procedures, when and as set
forth in the S&P Collateral Valuation Schedule.
(b) As soon as reasonably practicable, and in no event later than
five Business Days of each Reporting Date, the Issuer shall furnish to the
Rating Agencies and the Trustee a Valuation Statement certified by the Issuer as
of such Reporting Date, which shall include:
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(i) a schedule of all Fund Investments by issue and by Asset
Category included in the determination of the Senior Advance Amount and the
Total Advance Amount, setting forth:
(A) the current Market Value of each such Fund Investment
and the original cost of each such Fund Investment;
(B) the written quotations from Approved Dealers, closing
price or closing bid price on an Approved Exchange, and any
Approved Third-Party Appraisal or quotation from an Approved
Investment Banking Firm or other means used for calculating the
Market Value of each such Fund Investment;
(C) to the extent applicable, information as to rating,
maturity, the Yield-to-Worst, and whether each such Fund
Investment was Performing as of such Reporting Date; and
(D) the Advance Rates applied to each such Fund Investment
to derive the portion of the Senior Advance Amount or the Total
Advance Amount, as applicable, attributable to each such Fund
Investment;
(ii) a schedule of all Unquoted Investments owned by the
Issuer, setting forth the Market Value of each such Unquoted Investment and the
date of the determination of such Market Value, its Asset Category, its cost
and, when applicable, the value provided by an Approved Third-Party Appraisal or
Approved Investment Banking Firm and the date of determination of such value;
(iii) the aggregate Market Value of all Eligible Investments,
setting forth a list of Excluded Investments and calculations of applicable
Portfolio Limitations;
(iv) the calculation of the Senior Advance Amount and the
Total Advance Amount under the ▇▇▇▇▇'▇ Collateral Valuation Schedule and the S&P
Collateral Valuation Schedule as of such date;
(v) a schedule of the Secured Hedging Net Exposure of each
Secured Hedging Transaction then outstanding;
(vi) a schedule of the aggregate amount of Indebtedness
incurred as permitted under Section 7.14 and outstanding;
(vii) a schedule of all of the assets sold with their
respective purchase and sale prices and the date of such purchase and sale of
such assets sold;
(viii) a statement certifying that, except as otherwise
indicated on the Valuation Statement, the Issuer had determined the current
Market Value of all Fund Investments using quotations provided since the date of
the immediately prior Valuation Statement;
(ix) a schedule identifying all Unquoted Investments and the
Market Value thereof as determined by the Issuer in accordance with the
Collateral Valuation Schedules; and
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(x) a schedule identifying the Market Value of all of the
Fixed Income Investments that are the subject of any Short Sale Transaction.
The information provided hereunder identifying the Fund Investments and
Market Values and/or Market Value Prices therefor is intended solely for the
purpose of credit analysis by the Holders. Each Holder agrees that it shall not
use any such information for trading purposes or furnish such information to
trading personnel or to any other Person for any purpose which is inconsistent
with the foregoing restrictions or this Indenture.
(c) Notwithstanding the provisions of Section 10.6(b), in the event
that the Issuer in good faith determines that a market disruption makes it
impracticable to deliver a Valuation Statement to be provided hereunder on its
due date, the Issuer may deliver such Valuation Statement within four Business
Days after its due date set forth herein and no Default in respect of Section
10.6(b) shall occur or be deemed to occur for such four Business Days; provided
that on such due date the Issuer shall have furnished to the Trustee and the
Rating Agencies a written statement, certified by the Issuer as of each such
date, that the Issuer reasonably believes that it is in compliance with the
Over-Collateralization Tests.
(d) Not later than the Business Day following any Excess Date, the
Issuer will deliver to the Trustee and the Rating Agencies a supplement to the
most recent Valuation Statement setting forth each of the items included in the
Valuation Statement as of such Excess Date.
(e) The Issuer's determination of the Senior Advance Amount, the
Total Advance Amount and the Market Value Price and the Market Value of Fund
Investments pursuant to 10.6(a) and (b), respectively, in good faith shall be
deemed correct for purposes of this Indenture, unless, within 30 days after
receiving the applicable Valuation Statement, the Trustee acting at the
direction of any Holder shall object in writing that such determination was made
in a manner inconsistent with the provisions of this Indenture and
disadvantageous to the Holders or as having been calculated in error. In the
event of any such dispute as to the calculation of the Senior Advance Amount,
the Total Advance Amount or Market Value, as the case may be, the good faith,
reasonable and mutually agreeable determination of the Majority of the Notes
shall be conclusive.
(f) Concurrently with the delivery of the statement of the
Independent Public Accountant accompanying the consolidated financial statements
of the Issuer as of each fiscal year-end of the Issuer and for the fiscal year
then ended (beginning with the fiscal year ended December 31, 2005), pursuant to
Section 7.23(d), the Issuer shall cause the Independent Public Accountant to
provide a report as of such fiscal year-end containing information and
calculations with respect to the Senior Advance Amount, the Total Advance Amount
and the Aggregate Liquidation Preference as of such fiscal year-end (an
"Agreed-Upon Procedures Report") in a form acceptable to the Rating Agencies.
The Issuer shall be responsible for the fees and expenses of the Independent
Public Accountant for each Agreed-Upon Procedures Report as of each fiscal
year-end of the Issuer.
Section 10.7. Reports to Rating Agencies: Ratings Changes.
In addition to the information and reports specifically required to be
provided to each Rating
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Agency pursuant to the terms of this Indenture, the Issuer shall provide each
Rating Agency with all information or reports delivered to the Trustee
hereunder, and such additional information as each Rating Agency may from time
to time reasonably request and the Issuer determines in its sole discretion may
be obtained and provided without unreasonable burden or expense. The Issuer
shall promptly notify the Trustee if the rating on any of the Notes has been, or
it is known by the Issuer that such rating will be, changed or withdrawn.
ARTICLE 11
APPLICATION OF MONIES
Section 11.1. Disbursements of Monies from Payment Account Prior to
Liquidation Direction.
(a) Prior to a Liquidation Direction, the Issuer shall have the
right, subject to Section 2.1(c) of the Pledge Agreement, to direct the
application of amounts deposited by the Issuer in the Payment Account; provided,
however, that in no event will the amount of any Administrative Expenses paid in
any year period measured from the Closing Date until the first anniversary of
the Closing Date and each subsequent year period thereafter be in excess of the
Administrative Expense Limit.
(b) Not later than 12:00 p.m., New York time, on or before the
Business Day preceding each Payment Date, the Issuer shall remit or cause to be
remitted to the Trustee for deposit in the Payment Account an amount of Cash
sufficient to pay the amounts described in Section 11.1(a) required to be paid
on such Payment Date.
(c) If on any Payment Date the amount available in the Payment
Account from amounts received in the related Due Period is insufficient to make
the full amount of the disbursements required to be made on such date, the
Trustee shall make the disbursements according to the written direction of the
Issuer given at least two Business Days prior to the Payment Date pursuant to
Section 11.1(a) above to the extent funds are available therefor.
(d) In connection with the application of funds to pay
Administrative Expenses of the Issuer in accordance with Section 11.1(a), the
Trustee shall remit such funds as directed, to the extent available, to the
appropriate vendor no later than each Payment Date.
Section 11.2. Disbursements of Monies from Payment Account and Collection
Account After Liquidation Direction.
After a Liquidation Direction, and notwithstanding any other provision
in this Indenture, all amounts, if any, in the Payment Account or the Collection
Account shall be delivered by the Trustee to the Collateral Agent to be
disbursed by the Collateral Agent in accordance with the terms of the Pledge
Agreement.
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ARTICLE 12
MISCELLANEOUS
Section 12.1. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of; any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer or
the Investment Manager may be based, insofar as it relates to legal matters,
upon a certificate or opinion of, or representations by, counsel, unless such
Authorized Officer knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to the matters
upon which its certificate or opinion is based are erroneous. Any such
certificate of an Authorized Officer of the Issuer or the Investment Manager or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, the Issuer, the Investment
Manager or any other Person, stating that the information with respect to such
factual matters is in the possession of the Issuer, the Investment Manager or
such other Person, unless such Authorized Officer of the Issuer or such counsel
knows that the certificate or opinion or representations with respect to such
matters are erroneous. Any Opinion of Counsel may also be based, insofar as it
relates to factual matters, upon a certificate or opinion of, or representations
by, an Authorized Officer of the Issuer, stating that the information with
respect to such matters is in the possession of the Issuer, unless such counsel
knows that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default is a condition
precedent to the taking of any action by the Trustee at the request or direction
of the Issuer, then notwithstanding that the satisfaction of such condition is a
condition precedent to the Issuer's rights to make such request or direction,
the Trustee shall be protected in acting in accordance with such request or
direction if it does not have knowledge of the occurrence and continuation of
such Default or Event of Default as provided in Section 6.1(d).
Section 12.2. Acts of Securityholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Securityholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Securityholders in person or by an
agent duly appointed in writing; and, except as herein
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otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee, and, where it is hereby
expressly required, to the Issuer. Such instrument or instruments (and the
action or actions embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Securityholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and conclusive in favor of the Trustee and the Issuer, if made in the manner
provided in this Section 12.2.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Trustee deems
sufficient.
(c) The principal amount and registered numbers of Securities held
by any Person, and the date of its holding the same, shall be proved by the
Security Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Securities shall bind the Holder
(and any transferee thereof) of such Security and of every Security issued upon
the registration thereof or in exchange therefor or in lieu thereof, in respect
of anything done, omitted or suffered to be done by the Trustee or the Issuer in
reliance thereon, whether or not notation of such action is made upon such
Security.
(e) In exercising any of its or their voting rights, rights to
direct and consent or any other rights as a Securityholder under this Indenture,
subject to the terms and conditions of the Indenture, including, without
limitation, Section 5.12, a Securityholder or Securityholders shall not have any
obligation or duty to any Person or to consider or take into account the
interests of any Person and shall not be liable to any Person for any action
taken by it or them or at its or their direction or any failure by it or them to
act or to direct that an action be taken, without regard to whether such action
or inaction benefits or adversely affects any Securityholder, the Issuer, or any
other Person, except for any liability to which such Securityholder may be
subject to the extent such liability results from such Securityholder's taking
or directing an action, or failing to take or direct an action, in bad faith or
in violation of the express terms of this Indenture.
(f) Any Securityholder shall have the right, upon five Business
Days' prior notice to the Trustee to obtain a complete list of Securityholders.
Section 12.3. Notices, etc., to Trustee, the Issuer, the Investment Manager,
Moody's and S&P.
Except as otherwise expressly provided herein, any request, demand,
authorization, direction, notice, consent, waiver, confirmation or Act of
Securityholders or other documents provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with any of the parties indicated
below shall be sufficient for every purpose hereunder if made, given, furnished
or filed in writing to and mailed, by certified mail, return receipt requested,
hand delivered, sent by overnight courier service guaranteeing next day delivery
or by telecopy in legible form at the following address (or at any other address
provided in writing by the relevant party):
84
(a) the Trustee at its Corporate Trust Office, telephone no. (713)
▇▇▇-▇▇▇▇, telecopy no. (▇▇▇) ▇▇▇-▇▇▇▇, Attention: Worldwide Securities
Services- York Enhanced Strategies Fund, LLC;
(b) the Issuer at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, telephone no. (▇▇▇) ▇▇▇-▇▇▇▇, telecopy no. (▇▇▇) ▇▇▇-▇▇▇▇, Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇;
(c) the Investment Manager at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telephone no. (▇▇▇) ▇▇▇-▇▇▇▇, telecopy no. (▇▇▇) ▇▇▇-▇▇▇▇,
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇;
(d) the Placement Agents at ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telephone no. (▇▇▇) ▇▇▇-▇▇▇▇, telecopy no.
(▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇;
(e) Moody's at ▇▇▇▇▇'▇ Investors Service, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telecopy no. (▇▇▇) ▇▇▇-▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇,
Attention: CBO/CLO Monitoring;
(f) S&P at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, telephone no.
(▇▇▇) ▇▇▇-▇▇▇▇, telecopy no. (▇▇▇) ▇▇▇-▇▇▇▇, Attention: Market Value
Surveillance; or
(g) each Secured Hedging Creditor at the address specified in the
relevant documents relating to the applicable Secured Hedging Transaction.
Section 12.4. Notices to Holders; Waiver.
Except as otherwise expressly provided herein, where this Indenture
provides for notice to Holders of any event,
(a) such notice shall be sufficiently given to Holders of
Securities, if in writing and mailed, first class postage prepaid, to each
Holder of Securities, as the case may be, of any event, as affected by such
event, at the address of such Holder as it appears in the Security Register, not
earlier than the earliest date and not later than the latest date, prescribed
for the giving of such notice; and
(b) such notice shall be in the English language.
Such notices will be deemed to have been given on the date of such
mailing.
The Trustee will deliver to the Holders of the Securities, any
information or notice requested in accordance with this Indenture to be so
delivered by at least 25% of the Aggregate Outstanding Amount of the Securities.
The Trustee shall deliver or cause to be delivered to each Secured
Hedging Creditor copies of all notices and reports delivered or caused to be
delivered by the Issuer or the Trustee (including those to be delivered by the
Investment Manager on behalf of the Issuer) to any Holder pursuant to terms
hereof by the same means and simultaneously with the delivery thereof to such
Holder.
85
Neither the failure to mail any notice, nor any defect in any notice so
mailed, to any particular Holder of a Security shall affect the sufficiency of
such notice with respect to other Holders of Securities. In case by reason of
the suspension of regular mail service or by reason of any other cause it shall
be impracticable to give such notice by mail, then such notification to Holders
of Securities as shall be made with the approval of the Trustee shall constitute
a sufficient notification to such Holders for every purpose hereunder.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee and such
filing shall be a condition precedent to the validity of any action taken in
reliance upon such waiver.
Section 12.5. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 12.6. Successors and Assigns.
All covenants and agreements in this Indenture by the Issuer shall bind
its successors and assigns, whether so expressed or not.
Section 12.7. Separability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality, and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 12.8. Benefits of Indenture.
Nothing in this Indenture or in the Securities, expressed or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the Securityholders, the Investment Manager, and each Secured Hedging
Creditor (which shall be express third party beneficiaries of this Indenture)
any benefit or any legal or equitable right, remedy or claim under this
Indenture.
Section 12.9. Governing Law.
THIS INDENTURE AND EACH SECURITY SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW).
Section 12.10. Submission to Jurisdiction.
The Issuer hereby irrevocably submits to the non-exclusive jurisdiction
of any New York State or federal court sitting in the Borough of Manhattan in
The City of New York in any action or proceeding arising out of or relating to
the Securities or this Indenture, and the Issuer hereby
86
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such New York State or federal court. The Issuer
hereby irrevocably waives, to the fullest extent that it may legally do so, the
defense of an inconvenient forum to the maintenance of such action or
proceeding. The Issuer irrevocably consents to the service of any and all
process in any action or proceeding by the mailing or delivery of copies of such
process to it at the office of the Issuer's agent set forth in Section 7.2. The
Issuer agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
Section 12.11. Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 12.12. Limited Recourse.
The parties hereto hereby covenant and agree that, prior to the date
which is one year and one day or, if longer, the applicable preference period
then in effect, after the payment in full of all outstanding commercial paper
and any other debt securities of a Holder, rated by an internationally
recognized agency, it will not institute against, or join any other person in
instituting against, such Holder any bankruptcy, reorganization, arrangement,
insolvency, or liquidation proceedings or other similar proceeding under the
laws of any jurisdiction. The provisions of this Section 12.12 shall survive the
termination of this Indenture.
Section 12.13. Acts of Issuer.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or performed by the
Issuer shall be effective if given or performed by the Issuer or by the
Investment Manager on the Issuer's behalf.
Section 12.14. Waiver of Jury Trial.
The Trustee and the Issuer each hereby knowingly, voluntarily and
intentionally waives (to the extent permitted by applicable law) any rights it
may have to a trial by jury in respect of any litigation based hereon, or
arising out of under, or in connection with, this Indenture, the Securities or
any other related documents, or any course of conduct, course of dealing,
statements (whether verbal or written), or actions of the Trustee or the Issuer.
This provision is a material inducement for the Trustee and the Issuer to enter
into this Indenture.
Section 12.15. Escheat.
In the absence of a written request from the Issuer to return unclaimed
funds to the Issuer, the Trustee shall from time to time following the final
Payment Date with respect to the Securities deliver all unclaimed funds to or as
directed by applicable escheat authorities, as determined by the Trustee in its
sole discretion, in accordance with the customary practices and procedures of
the Trustee. Any unclaimed funds held by the Trustee pursuant to this Section
12.15 shall be held uninvested and without any liability for interest.
87
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
YORK ENHANCED STRATEGIES FUND, LLC
By:_______________________________
Name:
Title:
JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION, as Trustee
By:_______________________________
Name:
Title:
SCHEDULE A
MOODY'S COLLATERAL VALUATION SCHEDULE
CALCULATION OF MOODY'S ADVANCE AMOUNT.
"Moody's Advance Rate" means the Moody's Senior Advance Rate or the
Moody's Total Advance Rate, as applicable.
"Moody's 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%
E-6 35.50%
F-1 53.50%
F-2 50.25%
A-1
MOODY'S MOODY'S Aaa
ASSET CATEGORY ADVANCE RATE
-------------- -------------
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%
C-3 86.75%
C-4 76.50%
C-5 71.50%
C-6 55.75%
A-2
MOODY'S MOODY'S Aa2
ASSET CATEGORY ADVANCE RATE
-------------- ------------
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%
"Moody's 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 Moody's Senior Advance Amount or Moody's Total
Advance Amount, for purposes of determining the Moody's Advance Amount,
(a) 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 a rating of "Aa2" or better by Moody's (and, if rated "Aa2" by
Moody's, such rating has not been placed on a credit watch with negative
implications by Moody's), the Market Value of such Unhedged Foreign Investment
shall be 85% of the Market Value thereof otherwise determined in accordance with
the above procedures;
A-3
(b) 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 Moody's, such
rating has not been placed on a credit watch with negative implications by
Moody's), 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%;
(c) 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 Issuer purchases a CDS, the full amount of the premiums
to be paid by the Issuer for the duration of such CDS will be deducted from the
Market Value of such Structured Product Transaction; and
(d) with respect to any Fund Investments in any Foreign Issuer from
a country that becomes an Ineligible Country after the Issuer 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 Moody's Advance Amount, the Issuer
shall assign each Eligible Investment to one of the following categories (each,
a "Moody's 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.
"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.
A-4
"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 Moody's.
"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 Moody's.
"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 Moody's or are not rated by Moody's.
"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.
"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
▇▇▇▇▇'▇.
"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
Moody's.
A-5
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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,
A-6
(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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 Moody's.
A-7
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 Moody's.
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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 ▇▇▇▇▇'▇.
"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.
"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.
A-8
"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,
▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ Rating Correlation Procedures shall be applied.
Notwithstanding any other provision contained above:
(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 ▇▇▇▇▇'▇ Asset Categories, such
Fund Investment shall be deemed to fall into the ▇▇▇▇▇'▇ Asset Category with the
lowest specified ▇▇▇▇▇'▇ Advance Rate unless the Credit Enhancer otherwise
agrees and the Rating Agency Condition with respect to ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ rating,
if such CDO Debt Security is rated by ▇▇▇▇▇'▇, 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 ▇▇▇▇▇'▇ but is publicly rated by S&P;
(iii) any Fund Investments constituting Busted Convertible
Bonds shall be deemed to fall into the ▇▇▇▇▇'▇ 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
A-9
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 ▇▇▇▇▇'▇ Advance Rate
applicable to a Fully Collateralized Structured Product Transaction, such Fully
Collateralized Structured Product Transaction shall be deemed to fall into the
▇▇▇▇▇'▇ Asset Category of its reference obligation; all other Structured Product
Transactions shall be ▇▇▇▇▇'▇ Asset Category J-3 Investments;
(v) for the purpose of determining the ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ Advance Rate will be 90%
of the ▇▇▇▇▇'▇ Advance Rate calculated for such Fund Investment pursuant to the
▇▇▇▇▇'▇ Advance Rate table in the definition of ▇▇▇▇▇'▇ Advance Rate above; and
(vi) for the purpose of determining the ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ Advance Rate will be 90% of the ▇▇▇▇▇'▇ Advance
Rate, calculated for such Fund Investment pursuant to the ▇▇▇▇▇'▇ Advance Rate
table above.
"▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ Senior
Advance Rate for the ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ Warrant/Option Advance Amount
as of such date, (v) the ▇▇▇▇▇'▇ Net Accrual Amount as of such date, and (vi)
the Aggregate Short Sale Advance Amount as of such date.
"▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ Total
Advance Rate for the ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ Warrant/Option Advance Amount
as of such date, (v) the ▇▇▇▇▇'▇ 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.
A-10
"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 Schedule 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 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 100% 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 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 ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇;
(vii) Fund Investments in any Bank Loan Participation held by
the Issuer for more than 60 consecutive days during any period while the
participating entity has a long-term debt-rating of below "A3" by ▇▇▇▇▇'▇
(unless the obligation of such participating entity is guaranteed by an entity
whose long-term debt obligations are rated "A3" or better by ▇▇▇▇▇'▇ (and, if
rated "A3" by ▇▇▇▇▇'▇, such rating has not been placed in a credit watch with
negative implications by ▇▇▇▇▇'▇);
(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 Issuer 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;
A-11
(ix) 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;
(x) Fund Investments in securities issued by the Issuer;
(xi) Fund Investments in any Hedging and Short Sale
Transaction held by the Issuer 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 ▇▇▇▇▇'▇ (unless the obligations of
such counterparty are guaranteed by an entity whose long-term debt rating is
"A3" or higher by ▇▇▇▇▇'▇) (in each case, if rated "A3" by ▇▇▇▇▇'▇, such rating
has not been placed in a credit watch with negative implications by ▇▇▇▇▇'▇);
(xii) Fund Investments in CDO Equity Securities;
(xiii) Fund Investments in catastrophe bonds and any other
non-credit risk securities; and
(xiv) Fund Investments not otherwise expressly described in
the Asset Categories above.
Excluded Investments are excluded from the calculation of the Market
Value of the Collateral for purposes of the ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇), 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
A-12
of such participating entities) with the same rating by ▇▇▇▇▇'▇
in excess of the applicable percentage of Total Capitalization set forth in the
table below (or such greater percentage approved by the Credit Enhancer and with
respect to which the Rating Agency Condition with respect to ▇▇▇▇▇'▇ 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 Credit Enhancer and with respect to which the Rating Agency Condition
with respect to ▇▇▇▇▇'▇ 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%
---------------------------------------- -------------------------------------- --------------------------------------
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 ▇▇▇▇▇'▇. If such rating is on a credit watch with
negative implications by ▇▇▇▇▇'▇, 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 ▇▇▇▇▇'▇ in excess of the applicable percentage of Total Capitalization
set forth below (or such greater percentage approved by the Credit Enhancer and
the Trustee and with respect to which the Rating Agency Condition with respect
to ▇▇▇▇▇'▇ 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 Credit Enhancer and the Trustee and with
respect to which the Rating Agency Condition with respect to ▇▇▇▇▇'▇ 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%
---------------------------------------- -------------------------------------- --------------------------------------
A-13
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 ▇▇▇▇▇'▇. If such rating is on a credit watch with
negative implications by ▇▇▇▇▇'▇, 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;
(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 ▇▇▇▇▇'▇ in excess of 50%
of Total Capitalization.
A-14
Notwithstanding the foregoing:
(A) in the event that a Fund Investment is reclassified
after its acquisition by the Issuer, for purposes of
calculating the ▇▇▇▇▇'▇ 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 Issuer (or which the
Issuer 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 Issuer after the date of such
reclassification which the Issuer 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 Issuer 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 Issuer 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
Issuer; 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 Issuer in accordance with the procedures described
below;
A-15
provided, however, (x) for purposes of making such determinations,
(A) 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;
(B) 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;
(C) 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
(D) 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 Issuer 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 Issuer) 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 Issuer.
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
A-16
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 Issuer and cost. In the event that the Issuer 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 Issuer 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 Issuer would receive if such Structured Product Transaction was
terminated or liquidated early in accordance with its terms on such date as
determined by the Issuer.
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 Issuer, 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 Credit
Enhancer and (ii) after termination (without replacement) of the Indenture,
without the
A-17
consent of the Credit Enhancer, (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 Issuer shall be made by the Investment
Manager on behalf of the Issuer, subject to the provisions of the Investment
Management Agreement.
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 ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇
and a short term rating of at least "P-1" by ▇▇▇▇▇'▇ (and, if rated "Al" or
"P-1" by ▇▇▇▇▇'▇, then such rating has not been placed on a credit watch with
negative implications by ▇▇▇▇▇'▇) or (ii) any counterparty set forth in the
Indenture (or any successor to any such listed counterparty) or any other
counterparty designated by the Issuer in writing and approved by the Credit
Enhancer.
"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
Issuer in writing and approved by the Credit Enhancer in its reasonable
discretion and with respect to which the Rating Agency Condition with respect to
▇▇▇▇▇'▇ 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 ▇▇▇▇://▇▇▇.▇▇.▇▇▇.▇▇▇,
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 Issuer
in writing and approved by the Credit Enhancer in its reasonable discretion and
with respect to which the Rating Agency Condition with respect to ▇▇▇▇▇'▇ has
been satisfied, or (b) the exchanges set forth on Annex I hereto under "Approved
Exchanges."
A-18
"Approved Investment Banking Firm" means (a) any investment banking
firm designated by the Issuer in writing and approved by the Credit Enhancer in
its reasonable discretion and with respect to which the Rating Agency Condition
with respect to ▇▇▇▇▇'▇ 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 Issuer in writing and approved by the Credit Enhancer in its
reasonable discretion and with respect to which the Rating Agency Condition with
respect to ▇▇▇▇▇'▇ 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
Issuer, 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 Issuer or the Investment Manager (or subject
to an agreement to become such an Affiliate) designated by the Issuer in writing
and approved by the Credit Enhancer in its reasonable discretion and with
respect to which the Rating Agency Condition with respect to ▇▇▇▇▇'▇ 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).
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"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
Issuer's determination, trades like a fixed income investment and has a
negligible option value.
"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 ▇▇▇▇▇'▇ or "A- 1+" if rated by S&P (and, if rated "P-1"
by ▇▇▇▇▇'▇, such rating has not been placed on a credit watch with negative
implications by ▇▇▇▇▇'▇) (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 ▇▇▇▇▇'▇ and "A+" if rated by S&P (or, if rated "Al" by
▇▇▇▇▇'▇, such rating has not been placed on a credit watch with negative
implications by ▇▇▇▇▇'▇));
(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 ▇▇▇▇▇'▇ or "A-1" if rated by S&P (and, if
rated "P-1" by ▇▇▇▇▇'▇, such rating has not been placed on a credit watch with
negative implications by ▇▇▇▇▇'▇);
(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 ▇▇▇▇▇'▇ and
"A- l" if rated by S&P (and, if rated "P-1" by ▇▇▇▇▇'▇, such rating has not been
placed on a credit watch with negative implications by ▇▇▇▇▇'▇) either at the
time of such investment or the making of a contractual commitment providing for
such investment;
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(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 ▇▇▇▇▇'▇
and "AAA" if rated by S&P (and, if rated "Aaa" and "MRl+" by ▇▇▇▇▇'▇, such
rating has not been placed on a credit watch with negative implications by
▇▇▇▇▇'▇);
(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 ▇▇▇▇▇'▇ or "A+" if rated by S&P (and, if rated "Al" and "P-1"
by ▇▇▇▇▇'▇, such rating has not been placed on a credit watch with negative
implications by ▇▇▇▇▇'▇); and
(vii) preferred shares rated in the highest investment rating
category by ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ or S&P, as the case may be; (iv) if any of
▇▇▇▇▇'▇ 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.
"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
A-21
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 Credit Enhancer, 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 Issuer 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 Issuer with an Eligible Counterparty intended to convert any payment
on a Debt or other obligation of the Issuer 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 Issuer is denominated and (ii) any Swap Transaction entered into
by the Issuer intended to convert any payment on a Debt or other obligation of
the Issuer 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 Issuer is denominated and
pursuant to which the Issuer 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 Issuer and an Eligible Counterparty intended to protect
the Issuer 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 Issuer, to (a) purchase the Fund Investment at an agreed
strike price or (b) pay to the Issuer, at the Issuer'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
Issuer for any amounts owing to such counterparty thereunder; and (iii) the
Issuer 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" 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 ▇▇▇▇▇'▇
A-22
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 ▇▇▇▇▇'▇ 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 Issuer 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 Issuer 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 Issuer 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 ▇▇▇▇▇'▇ and
a short term rating of at least "P-1" by ▇▇▇▇▇'▇ (and, if rated "Aa3" or "P-1"
by ▇▇▇▇▇'▇, then such rating has not been placed on a credit watch with negative
implications by ▇▇▇▇▇'▇) and (y) in all other cases, having a long term rating
of at least "Al" by ▇▇▇▇▇'▇ and a short term rating of at least "P-1" by ▇▇▇▇▇'▇
(and, if rated "Al" or "P-1" by ▇▇▇▇▇'▇, then such rating has not been placed on
a credit watch with negative implications by ▇▇▇▇▇'▇), (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 ▇▇▇▇▇'▇ (and, if rated "Aa2" by ▇▇▇▇▇'▇,
such rating has not been placed on a credit watch with negative implications by
▇▇▇▇▇'▇) and (y) all other cases, having a long term rating of "Aa3" or better
by ▇▇▇▇▇'▇ (and, if rated "Aa3" by ▇▇▇▇▇'▇, such rating has not been placed on a
credit watch with negative implications by ▇▇▇▇▇'▇) or (iii) whose obligations
in respect of all Hedging and Short Sale Transactions entered into with the
Issuer 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 ▇▇▇▇▇'▇ and a short term rating of at
least "P-1" by ▇▇▇▇▇'▇ (and, if rated "Aa3" or "P-1" by ▇▇▇▇▇'▇, then such
rating has not been placed on a credit watch with negative implications by
▇▇▇▇▇'▇) and (B) in all other cases, having a long term rating of at least "Al"
by ▇▇▇▇▇'▇ and a short term rating of at least "P-1" by ▇▇▇▇▇'▇ (and, if rated
"Al" or "P-1" by ▇▇▇▇▇'▇, then such rating has not been placed on a credit watch
with negative implications by ▇▇▇▇▇'▇) 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 ▇▇▇▇▇'▇ (and, if rated "Aa2" by ▇▇▇▇▇'▇, such
rating has not been placed on a credit watch with negative implications by
▇▇▇▇▇'▇) and (B) in all other cases, having a
A-23
long term rating of "Aa3" or better by ▇▇▇▇▇'▇ (and, if rated "Aa3" by ▇▇▇▇▇'▇,
such rating has not been placed on a credit watch with negative implications by
▇▇▇▇▇'▇); provided that with respect to any counterparty with which the Issuer
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 ▇▇▇▇▇'▇ (and, if rated "M1" by
▇▇▇▇▇'▇, such rating has not been placed on a credit watch with negative
implications by ▇▇▇▇▇'▇) or (ii) that is a Designated Country whose unsupported
sovereign debt obligations are rated "A3" or better by ▇▇▇▇▇'▇ (and, if rated
"A3" by ▇▇▇▇▇'▇, such rating has not been placed on a credit watch with negative
implications by ▇▇▇▇▇'▇).
"Eligible Foreign Currencies" means (i) Australian Dollars, Canadian
Dollars, Pounds Sterling and Euros and (ii) each other currency identified by
the Issuer from time to time and confirmed in writing as acceptable by the
Trustee, the Credit Enhancer and with respect to which the Rating Agency
Condition with respect to ▇▇▇▇▇'▇ 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
Issuer 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 Issuer is
A-24
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 Issuer. Fund Investments which the Issuer has contracted to purchase shall
not be deemed for purposes of the Indenture to be owned by the Issuer until
settlement of such purchase and Fund Investments which the Issuer 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 Issuer 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 Issuer 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 ▇▇▇▇▇'▇, (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
"▇▇▇▇▇'▇ Industry Classifications" or any other such industry category
designated by the Issuer in writing and approved by the Credit Enhancer in its
reasonable discretion and with respect to which the Rating Agency Condition with
respect to ▇▇▇▇▇'▇ 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 Issuer with an Eligible Counterparty intended to protect the
Issuer against changes in the floating rate of interest payable on all or a
portion of any Debt or other obligation of the Issuer 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 Issuer, 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."
A-25
"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.
"▇▇▇▇▇'▇" means ▇▇▇▇▇'▇ Investors Service, Inc., or any successor
thereto.
"▇▇▇▇▇'▇ 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 Issuer 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 Issuer as
of such date in respect of the 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 Issuer shall have drawn $404.5
million of the Equity Capital Commitments, the ▇▇▇▇▇'▇ Net Accrual Amount shall
not be less than zero.
"▇▇▇▇▇'▇ Rating Correlation Procedures" means the following procedures,
which shall be applied to any Fund Investment for which an Assigned ▇▇▇▇▇'▇
Rating is not otherwise required and does not have an Assigned ▇▇▇▇▇'▇ Rating:
(i) if another security or obligation of the same issuer has
an Assigned ▇▇▇▇▇'▇ Rating, then the applicable rating of such Fund Investment
shall be determined as follows: (a) if there is an Assigned ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ Rating, if such rating is "B 1" or higher and if such Fund
Investment is a subordinated obligation of the issuer, (3) shall be one
subcategory below such Assigned ▇▇▇▇▇'▇ Rating if such rating is between "B2"
and "Ca," inclusive, and if such Fund Investment is 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 ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ Rating if
such rating is "Baa3" or higher, (2) shall be two subcategories above such
Assigned ▇▇▇▇▇'▇ Rating if such rating is "B2" or higher, but lower than "Baa3,"
(3) shall be one subcategory above such Assigned ▇▇▇▇▇'▇ Rating if such rating
is "B 3" and (4) otherwise shall equal such rating; (d) if there is an Assigned
▇▇▇▇▇'▇ Rating on a subordinated obligation of the issuer and if such Fund
A-26
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
▇▇▇▇▇'▇ Rating if such rating is "B3" or higher and (2) otherwise shall equal
such rating; and (e) if the Assigned ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ 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 Issuer may
elect (x) to apply the ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ Rating with the
rating determined pursuant to this subclause (2)) or (y) to
present such Fund Investment to ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ Rating or
Assigned S&P Rating and (x) no other security or obligation of the
issuer has an Assigned ▇▇▇▇▇'▇ Rating or Assigned S&P Rating or (y)
another security or obligation of the issuer has an Assigned S&P
Rating, and the Issuer so elects as provided in clause A(2)(y) above,
then the Issuer may present such Fund Investment to ▇▇▇▇▇'▇ for an
estimate of such Fund Investment's rating factor, from which its
corresponding ▇▇▇▇▇'▇ rating may be determined, which shall be the
applicable rating; provided that pending receipt from ▇▇▇▇▇'▇ of such
estimate, such Fund Investment shall have an applicable rating of "B3"
if the Issuer certifies to the Trustee that the Issuer 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
A-27
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 ▇▇▇▇▇'▇ Rating" means
the publicly available rating or the monitored estimated rating
expressly assigned to a debt obligation (or facility) by ▇▇▇▇▇'▇ 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.
"▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ Advance Rate for the ▇▇▇▇▇'▇ 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.
"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
A-28
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.
"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 Credit Enhancer,
the Custodian, the Issuer 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,
A-29
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 Issuer 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 Issuer 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 Issuer 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 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
▇▇▇▇▇▇-▇▇▇▇ 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 Issuer, hedge or
mitigate risks to which the Issuer is exposed
A-30
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 ▇▇▇▇▇'▇ 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 Issuer, 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 Issuer 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 Issuer 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 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 ▇▇▇▇▇'▇ (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 ▇▇▇▇▇'▇ or (y) both a long term senior unsecured debt rating of
"A2" by ▇▇▇▇▇'▇ and a short term rating of "P-1" by ▇▇▇▇▇'▇; 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).
A-31
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 Issuer, 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 Issuer 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 ▇▇▇▇▇'▇. If such rating is on a credit watch with
negative implications by ▇▇▇▇▇'▇, both the individual and the aggregate
percentage limits shall be zero.
provided, that the Issuer 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 ▇▇▇▇▇'▇, so long as the Rating Agency
Condition with respect to ▇▇▇▇▇'▇ has been satisfied.
"Securities Lending Transactions" means all obligations of the Issuer
(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)
with a Securities Lending Counterparty.
"Semi-Liquid Investments" means (i) Unquoted Investments that are debt
Securities rated "B3" or better by ▇▇▇▇▇'▇; (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.
A-32
"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 Issuer 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 ▇▇▇▇▇'▇
Senior Advance Amount or clause (i)
of ▇▇▇▇▇'▇ 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.
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
▇▇▇▇▇'▇ 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 Issuer in
connection with such Short Sale Transaction is a Fixed Income Investment:
Short Sale Advance Amount = S minus M minus Y
Where:
A-33
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 ▇▇▇▇▇'▇ Senior Advance
Amount or clause (i) of ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ 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) "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 Issuer
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 ▇▇▇▇▇'▇ or (y) a country whose sovereign debt rating in a non-local currency
is rated "Aa2" or better by ▇▇▇▇▇'▇ (and, if rated "Aa2" by ▇▇▇▇▇'▇, such rating
has not been placed on a credit watch with negative implications by ▇▇▇▇▇'▇) 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.
A-34
"Structured Product Transaction" means a Hedging and Short Sale
Transaction between the Issuer and a counterparty in which either, (i) the
Issuer 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 Issuer 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 Issuer (as determined quarterly
in accordance with GAAP and set forth in the Issuer's financial statements)
minus net loss of the Issuer (determined quarterly in accordance with GAAP and
set forth in the Issuer'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.
"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
A-35
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
Issuer 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.
A-36
ANNEX I
▇▇▇▇▇'▇ 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
A-37
APPROVED DEALERS
▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc. Liberty Brokerage
ABN AMRO Bank Libra Securities
▇▇▇▇▇ & Co. Lincoln Partners
Amroc Investments, LLC ▇.▇. ▇▇▇▇▇▇▇, LLC
APS Financial Corporation McDonald & Company
▇. ▇▇▇▇▇ & Co. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Bank of America Mesirow Financial
Bank of Montreal ▇▇▇▇▇▇ ▇▇▇▇▇ & Co., LLC
Barclays Capital ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co.
Bear ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
BMO ▇▇▇▇▇▇▇ Bums Prudential Securities
BNP Paribas ▇▇▇▇▇▇▇ ▇▇▇▇▇
BNY Capital RBC ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ & Company ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co
Cantor ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ Capital
▇▇▇▇▇▇ Capital Partners ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney
Chicago Corporation ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
CIBC World Markets Scotia Capital Markets
CIT Group ▇▇▇▇▇▇▇ Companies, The
Citigroup ▇▇ ▇▇▇▇▇
Citimark Partners Societe Generale
Commerzbank Spear, Leeds & ▇▇▇▇▇▇▇
Credit Lyonnais SunTrust ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Company
Credit Research & Trading Swiss Bank Corporation
CS First Boston TD Securities
Delaware Bay, Inc. The Blackstone Group
Deutsche Bank ▇▇▇▇ ▇▇▇▇▇ U. S. Bancorp
First Chicago Trust Company UBS Warburg
First Security ▇▇▇ ▇▇▇▇▇▇ Union Bank of California
Fleet Wachovia Securities
General Electric Wedbush ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. ▇▇▇▇▇ Fargo
Hellmond & Associates ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company
A-38
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 InternationalFinancial 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
A-39
APPROVED INVESTMENT BANKING FIRMS
▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc. ▇▇▇▇▇▇ Brothers
ABN AMRO Bank Liberty Brokerage
▇▇▇▇▇ & Co. Lincoln Partners
Amroc Investments ▇.▇. ▇▇▇▇▇▇▇
Bank of America McDonald & Company
Bank of Montreal ▇▇▇▇▇▇▇ ▇▇▇▇▇
Bank One Mesirow Financial
Barclays Capital ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇
Bear ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
BMO ▇▇▇▇▇▇▇ ▇▇▇▇▇ Prudential Securities
Brown, Gibbons, Lang RBC ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ Capital Partners ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co
JPMorgan Chase Manhattan ▇▇▇▇ Capital
Chicago Corporation Solomon ▇▇▇▇▇ ▇▇▇▇▇▇
CIBC World Markets ▇▇▇▇▇▇▇▇ Wertheim
CIT Group Scotia Capital Markets
Citibank Group ▇▇▇▇▇▇▇ Companies
Citimark Partners ▇▇ ▇▇▇▇▇
Credit Research & Trading Sun Trust ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Company
CS First Boston Sutro & Co.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ TD Securities
Delaware Bay, Inc. The Blackstone Group
Deutsche Bank ▇▇▇▇ ▇▇▇▇▇ Union Bank of California
EVEREN Securities US Bancorp Libra
First Security ▇▇▇ ▇▇▇▇▇▇ US Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇
Fleet National Bank USB Warburg
▇▇▇▇▇▇▇ Sachs & Co. Wachovia Securities
Grantchester Holdings ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Securities Inc.
Greenwich NatWest Wedbush Morgan
Gruntal ▇▇▇▇▇ Fargo
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company
Hellmond & Associates
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
Imperial Capital
ING (Baring ▇▇▇▇▇▇ ▇▇▇▇)
▇▇▇▇▇▇▇▇▇ & Company, Inc.
JPMorgan ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Lazard Freres
A-40
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
▇▇ ▇▇▇▇▇▇
KDP
Loan Pricing Corp.
▇▇▇▇▇▇▇ ▇▇▇▇▇ Securities Pricing Service
▇▇▇▇▇▇ 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)
A-41
APPROVED THIRD PARTY APPRAISERS
▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc. ▇.▇. ▇▇▇▇▇▇ Chase
ABN AMRO Bank ▇▇▇▇▇▇▇▇▇ & Company, Inc.
▇▇▇▇▇ & Co. KPMG International
Amroc Investments Ladenburg ▇▇▇▇▇▇▇▇
Bank of America Lazard Freres
Barclays Capital ▇▇▇▇▇▇ Brothers
Bear ▇▇▇▇▇▇▇ Liberty Brokerage
BMO ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇
Brown, Gibbons, Lang McDonald & Company
Cantor ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ Capital Mesirow Financial
Citimark Partners ▇▇▇▇▇▇ ▇▇▇▇▇
Chicago Corporation ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
CIBC World Markets PriceWaterhouseCoopers
CIT World Markets ▇▇▇▇▇▇▇ ▇▇▇▇▇
Citigroup RBC ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Credit Research & Trading ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇ First Boston Scotia Capital Markets
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Companies
Delaware Bay, Inc. Sun Trust ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Company
Deloitte & Touche Sutro & Co.
Deutsche Bank Swiss Bank Corporation
Dresdner Kelinwort ▇▇▇▇▇▇▇▇▇▇▇ ▇▇ Securities
Ernst & Young The Blackstone Group
EVEREN Securities UBS Warburg
First Chicago Trust Company Union Bank
First Security ▇▇▇ ▇▇▇▇▇▇ US Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. US Bancorp Libra
Grantchester Holdings Wachovia Securities
Greenwich NatWest Wedbush ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇▇ Fargo
Hellmond & Associates ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
Imperial Capital
A-42
SCHEDULE B
S&P COLLATERAL VALUATION SCHEDUL
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 Issuer 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 CATEGORY S&P ADVANCE RATE- 30/9 S&P ADVANCE 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%
E-2 61.10% 53.58%
B-1
S&P ASSET CATEGORY S&P ADVANCE RATE- 30/9 S&P ADVANCE RATE- OTHERS
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:
(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 Issuer 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:
S&P ASSET CATEGORY S&P ADVANCE RATE- 30/9 S&P ADVANCE 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%
B-2
S&P ASSET CATEGORY S&P ADVANCE RATE- 30/9 S&P ADVANCE RATE- OTHERS
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;
(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%;
B-3
(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 Issuer purchases a CDS, the full
amount of the premiums to be paid by the Issuer 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 Issuer 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.
"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.
B-4
"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-".
"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+".
B-5
"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.
"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 ▇-▇, ▇-▇ 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
▇-▇, ▇-▇ 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.
B-6
"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 ▇▇▇▇▇'▇ or S&P
shall include shadow ratings and shall also be deemed to include an equivalent
rating in a successor rating category of ▇▇▇▇▇'▇ or S&P, as the case may be, or
if neither ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇;
(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;
(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
B-7
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 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 ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇.
"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.
B-8
"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 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); 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);
B-9
(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 Issuer 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 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 Issuer 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;
(x) 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;
(xi) Fund Investments in securities issued by the Issuer;
(xii) Fund Investments in Asset-Backed Securities which are
neither rated by S&P nor publicly rated by ▇▇▇▇▇'▇;
(xiii) Fund Investments in Bank Loans that obligate the Issuer,
whether currently or upon the happening of any contingency, to make any
revolving extensions of credit to a borrower;
(xiv) Fund Investments in any Hedging and Short Sale
Transaction held by the Issuer 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
B-10
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);
(xv) Fund Investments that do not fall into any S&P Asset
Category as provided herein;
(xvi) Fund Investments in CDO Equity Securities; and
(xvii) Fund Investments in catastrophe bonds and any other
non-credit risk securities.
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 Credit Enhancer 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 Credit
Enhancer 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 Credit Enhancer and with
respect to which Rating Agency Condition with
B-11
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 Credit Enhancer 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 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 Credit Enhancer 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;
(xv) the aggregate Market Value of Fund Investments that are
Equity Securities in excess of 20% of Total Capitalization;
B-12
(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 Issuer, 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 Issuer (or which the Issuer 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 Issuer after the date
of such reclassification which the Issuer 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 Issuer 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 Issuer
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
B-13
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 Issuer; 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 Issuer in accordance with the procedures described
below;
provided, however, (x) for purposes of making such determinations,
(A) 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;
(B) 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;
(C) 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
(D) 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
Issuer 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 Issuer) 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 Issuer.
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
B-14
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, 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 Issuer and cost. In the event that the Issuer 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 Issuer 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 Issuer would receive if such Structured Product Transaction was
terminated or liquidated early in accordance with its terms on such date, as
determined by the Issuer.
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 Issuer, 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).
B-15
"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 Credit Enhancer and (ii) after
termination (without replacement) of the Indenture, without the consent of the
Credit Enhancer;
(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 Issuer'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 Issuer
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 Issuer in writing and approved by the Credit
Enhancer in its reasonable discretion.
B-16
"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
Issuer in writing and approved by the Credit Enhancer in its reasonable
discretion and with respect to which the Rating Agency 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 ▇▇▇▇://▇▇▇.▇▇.▇▇▇.▇▇▇,
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 Issuer
in writing and approved by the Credit Enhancer 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 Issuer in writing and approved by the Credit Enhancer 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 Issuer in writing and approved by the Credit Enhancer 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 Issuer, 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 Issuer or the Investment Manager (or subject
to an agreement to become such an Affiliate) designated by the Issuer in writing
and approved by the Credit Enhancer 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
B-17
(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 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:
(a) U.S. Government Securities;
(b) 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);
(c) 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
B-18
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 "A-1+" if rated
by S&P;
(d) 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 Moody's 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;
(e) 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 Moody's
and "AAAm" or "AAAg" if rated by S&P; (f) 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 Moody's and at least "A+"
by S&P;
(g) preferred shares with a maturity of not more than 35 days and
rated in the highest investment rating category by ▇▇▇▇▇'▇ and S&P or otherwise
with respect to which the Rating Agency Condition is satisfied; and
(h) 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 Moody's 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 Moody's or S&P, as the case may be; (iv) if
any of Moody's 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
B-19
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 Credit Enhancer, 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 Issuer 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 Issuer with an Eligible Counterparty intended to convert any payment
on a Debt or other obligation of the Issuer 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 Issuer is denominated and (ii) any Swap Transaction entered into
by the Issuer intended to convert any payment on a Debt or other obligation of
the Issuer 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 Issuer is denominated and
pursuant to which the Issuer 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 Issuer and an Eligible Counterparty intended to protect
the Issuer 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 Issuer, to (a) purchase the Fund Investment at an agreed
strike price or (b) pay to the Issuer, at the Issuer'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
Issuer for any amounts owing to such counterparty thereunder; and (iii) the
Issuer may (a) pay a fee to the Eligible Counterparty in connection with the
transaction, (b) remove the Fund Investment from the Custodial Account
B-20
(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
Issuer 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 Issuer 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 Issuer 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 Issuer 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 Issuer 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 Issuer 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 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.
B-21
"Eligible Foreign Currencies" means (i) Australian Dollars, Canadian
Dollars, Pounds Sterling and Euros and (ii) each other currency identified by
the Issuer from time to time and confirmed in writing as acceptable by the
Trustee, the Credit Enhancer 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
Issuer 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 Issuer 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 Issuer. Fund Investments which the Issuer has contracted to purchase shall
not be deemed for purposes of the Indenture to be owned by the Issuer until
settlement of such purchase and Fund Investments which the Issuer 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 Issuer 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 Issuer 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
B-22
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 ▇▇▇▇▇ CDX North American High Yield Composite Index, Dow ▇▇▇▇▇
CDX North American BB, Dow ▇▇▇▇▇ CDX North American B, and Dow ▇▇▇▇▇ 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 Issuer in writing and approved by the Credit Enhancer 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 Issuer with an Eligible Counterparty intended to protect
the Issuer against changes in the floating rate of interest payable on all or a
portion of any Debt or other obligation of the Issuer 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 Issuer, 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 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.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc., or any successor
thereto.
B-23
"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.
"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
B-24
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 Credit Enhancer,
the Custodian, the Issuer 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 Issuer 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 Issuer 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 Issuer 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
B-25
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
▇▇▇▇▇▇-▇▇▇▇ 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 Issuer 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 Issuer 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 Issuer for the 90 days subsequent to such date, minus (iv) any
other current liabilities of the Issuer payable as of such date; provided that
until the earlier of two years after the Closing Date or the date on which the
Issuer shall have drawn $404.5 million of the Equity Capital Commitments, the
S&P Net Accrual Amount shall not be less than zero.
"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 Issuer, hedge or
mitigate risks to which the Issuer is exposed in the conduct of its business or
the management of its liabilities, 90% of the Secured Hedging
B-26
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 Issuer, 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 Issuer 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 Issuer 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 Issuer
(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).
"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
B-27
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 Issuer
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.
"Special Situations Investments" means, as determined in the reasonable
judgment of the Issuer, 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
B-28
that, in general, the Issuer 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 Issuer and a counterparty in which either (i) the Issuer
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 Issuer 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 Issuer (as determined quarterly
in accordance with GAAP and set forth in the Issuer's financial statements)
minus net loss of the Issuer (determined quarterly in accordance with GAAP and
set forth in the Issuer'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.
"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
▇-▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ 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
Issuer 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-30
ANNEX I
S&P INDUSTRY CLASSIFICATIONS
INDUSTRY CODE DESCRIPTION
0 Zero Default Risk
1 Aerospace & Defense
2 Air transport
3 Automotive
4 Beverage & Tobacco
5 Radio & Television
6 Brokers, Dealers & Investment houses
7 Building & Development
8 Business equipment & services
9 Cable & satellite television
10 Chemicals & plastics
11 Clothing/textiles
12 Conglomerates
13 Containers & glass products
14 Cosmetics/toiletries
15 Drugs
16 Ecological services & 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
37 Surface transport
38 Telecommunications/cellular
39 Utilities
49 Project Finance
50 CDO
51 ABS Consumer
52 ABS Commercial
53 CMBS Diversified (Conduit and CTL)
54 CMBS (Large Loan, Single Borrower, and Single Property)
55 REITs and REOCs
56 RMBS A
57 RMBS B&C, HELs, HELOCs, and Tax Lien
58 Manufactured Housing
59 U.S. Agency (Explicitly Guaranteed)
60 Monoline/FER Guaranteed
61 Non-FER Company Guaranteed
62 FFELP Student Loans (Over 70% FFELP)
B-31
APPROVED DEALERS
▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc. Liberty Brokerage
ABN AMRO Bank Libra Securities
▇▇▇▇▇ & Co. McDonald & Company
APS Financial Corporation ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇. ▇▇▇▇▇ & Co. Mesirow Financial
Bank of America ▇▇▇▇▇▇ ▇▇▇▇▇ & Co., LLC
Bank of Montreal ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co.
Barclays Capital ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Bear ▇▇▇▇▇▇▇ Prudential Securities
BMO ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
BNP Paribas RBC ▇▇▇▇ ▇▇▇▇▇▇▇▇
BNY Capital ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ & Company ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ Capital Partners Scotia Capital Markets
Chicago Corporation ▇▇▇▇▇▇▇ Companies, The
CIBC World Markets ▇▇ ▇▇▇▇▇
CIT Group Societe Generale
Citigroup Spear, Leeds & ▇▇▇▇▇▇▇
Commerzbank SunTrust ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ UBS Warburg
First Chicago Trust Company Union Bank of California
Fleet Wachovia Securities
General Electric Wedbush ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Sachs & Co. ▇▇▇▇▇ Fargo
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company
Imperial Capital
Indosuez Capital
ING (Baring ▇▇▇▇▇▇ ▇▇▇▇)
▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ & Company, Inc.
Ladenburg ▇▇▇▇▇▇▇▇
Lazard Freres & Co., LLC
▇▇▇▇▇▇ Brothers
B-32
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
B-33
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
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
Sao Paulo Stock Exchange, Brazil
▇-▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ Electronic Stock Exchange, Chile
▇▇▇▇▇▇▇▇ Stock Exchange, Chile
Bogota Stock Exchange, Colombia
Lima Stock Exchange, Peru
Caracas Stock Exchange, Venezuela
Venezuela Electronic Stock Exchange, Venezuela
B-35
APPROVED INVESTMENT BANKING FIRMS
▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc. ▇▇▇▇▇▇ Brothers
ABN AMRO Bank Liberty Brokerage
▇▇▇▇▇ & Co. McDonald & Company
Bank of America ▇▇▇▇▇▇▇ ▇▇▇▇▇
Bank of Montreal Mesirow Financial
Bank One ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇
Barclays Capital ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Bear ▇▇▇▇▇▇▇ Prudential Securities
BMO ▇▇▇▇▇▇▇ ▇▇▇▇▇ RBC ▇▇▇▇ ▇▇▇▇▇▇▇▇
Brown, Gibbons, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co
▇▇▇▇▇▇ Capital Partners Solomon ▇▇▇▇▇ ▇▇▇▇▇▇
JPMorgan Chase Manhattan ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Chicago Corporation Scotia Capital Markets
CIBC World Markets ▇▇▇▇▇▇▇ Companies
CIT Group ▇▇ ▇▇▇▇▇
Citibank Group Sun Trust ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Company
Credit Research & Trading Sutro & Co.
CS First Boston TD Securities
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ The Blackstone Group
Delaware Bay, Inc. Union Bank of California
Deutsche Bank ▇▇▇▇ ▇▇▇▇▇ US Bancorp Libra
EVEREN Securities US Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇
Fleet National Bank USB Warburg
▇▇▇▇▇▇▇ Sachs & Co. Wachovia Securities
Grantchester Holdings ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Securities Inc.
Greenwich NatWest Wedbush Morgan
Gruntal ▇▇▇▇▇ Fargo
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
Imperial Capital
ING (Baring ▇▇▇▇▇▇ ▇▇▇▇)
▇▇▇▇▇▇▇▇▇ & Company, Inc.
JPMorgan ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇-▇▇
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
▇▇ ▇▇▇▇▇▇
KDP
Loan Pricing Corp.
▇▇▇▇▇▇▇ ▇▇▇▇▇ Securities Pricing Service
▇▇▇▇▇▇ 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-37
APPROVED THIRD PARTY APPRAISERS
▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc. ▇▇▇▇▇▇▇▇▇ & Company, Inc.
ABN AMRO Bank KPMG International
▇▇▇▇▇ & Co. Ladenburg ▇▇▇▇▇▇▇▇
Bank of America Lazard Freres
Barclays Capital ▇▇▇▇▇▇ Brothers
Bear ▇▇▇▇▇▇▇ Liberty Brokerage
BMO ▇▇▇▇▇▇▇ ▇▇▇▇▇ McDonald & Company
Brown, Gibbons, Lang ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Mesirow Financial
▇▇▇▇▇▇ Capital ▇▇▇▇▇▇ ▇▇▇▇▇
Chicago Corporation ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
CIBC World Markets PriceWaterhouseCoopers
CIT World Markets ▇▇▇▇▇▇▇ ▇▇▇▇▇
Citigroup RBC ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Credit Research & Trading ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇ First Boston Scotia Capital Markets
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Companies
Delaware Bay, Inc. Sun Trust ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Company
Deloitte & Touche Sutro & Co.
Deutsche Bank Swiss Bank Corporation
Dresdner Kelinwort ▇▇▇▇▇▇▇▇▇▇▇ ▇▇ Securities
Ernst & Young The Blackstone Group
EVEREN Securities UBS Warburg
First Chicago Trust Company Union Bank
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. US Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇
Grantchester Holdings US Bancorp Libra
Greenwich NatWest Wachovia Securities
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ Wedbush ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇▇ Fargo
Imperial Capital ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company
▇.▇. ▇▇▇▇▇▇ Chase
B-38
SCHEDULE C
CALCULATION OF LIBOR
With respect to the Notes, the London interbank offered rate ("LIBOR") shall be
determined by the Calculation Agent in accordance with the following provisions
(in each case rounded to the nearest 0.00001%):
(1) On the second LIBOR Business Day (as defined below) prior to the
commencement of an Interest Accrual Period (each such day, a "LIBOR
Determination Date"), LIBOR for any given Note shall equal the rate, as obtained
by the Calculation Agent from Bloomberg Financial Markets Commodities News, for
Eurodollar deposits of the Index Maturity that appears on Dow ▇▇▇▇▇ 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 such 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)
(2) If, on any LIBOR Determination Date, such rate does not appear
on Dow ▇▇▇▇▇ 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 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.
(3) As used herein: "Reference Banks" means four major banks in the
London interbank market selected by the Calculation Agent; and "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.