Exhibit K-7
EXECUTION COPY
SPECIAL VALUE EXPANSION FUND, LLC
2,000 Shares
Money Market Cumulative Preferred(TM) Shares (MMP(R))
Liquidation Preference U.S. $50,000 per Share
DISTRIBUTION AGREEMENT
----------------------
November 16, 2004
▇▇▇▇▇▇ Brothers Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Special Value Expansion Fund, LLC, a Delaware limited
liability company (the "Fund"), proposes to issue and sell to you (the "Initial
Purchaser") from time to time in accordance with the terms hereof up to 2,000
shares of its Money Market Cumulative Preferred Shares in multiple series, each
with a liquidation preference of U.S. $50,000 per share (each a "series of
Preferred Shares" and, collectively, the "Preferred Shares"). The date on which
the Fund issues each series of Preferred Shares is herein referred to as a
"Date of Original Issue".
The Preferred Shares will be issued by the Fund pursuant to
the Amended and Restated Operating Agreement, dated as of August 19, 2004 (the
"Operating Agreement"), among ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, as the initial member, SVOF MM,
LLC, as the special member, and the common shareholders, and the Statement of
Preferences relating to the Preferred Shares (the "Statement of Preferences")
dated November 16, 2004. The payment of the liquidation preference of the
Preferred Shares upon mandatory redemption of the Preferred Shares on or before
September 1, 2014, and the timely payment of dividends on the Preferred Shares
(whether or not declared) will be guaranteed by Ambac Assurance Corporation
(the "Insurer") under a guaranty insurance policy (the "Insurance Policy").
On September 1, 2004, the Fund entered into an Investment
Management Agreement, dated as of September 1, 2004 (the "Investment Management
Agreement"), with ▇▇▇▇▇▇▇▇▇▇ Capital Partners, LLC, a Delaware limited
liability company ("▇▇▇▇▇▇▇▇▇▇"), as investment manager (the "Investment
Manager"). On November 17, 2004 (the "Initial Date of Original Issue"), the
Fund will enter into (i) a Credit Agreement, dated as of November 17, 2004 (the
"Credit Agreement"), with various financial institutions (the "Lenders"), the
Insurer, Union Bank of California, N.A., as administrative agent (the
"Administrative Agent"), and IXIS Financial Products Inc., as arranger, (ii) a
Pledge and Intercreditor Agreement, dated as of November 17, 2004 (the "Pledge
Agreement"), with the Insurer, the Administrative Agent, ▇▇▇▇▇ Fargo Bank,
National Association, as custodian (the "Custodian"), and IXIS Financial
Products Inc., as secured parties representative (the "Secured Parties
Representative"), (iii) the Insurance Agreement, dated as of November 17, 2004
relating to the Insurance Policy (the "Insurance Agreement"), with the Insurer,
(iv) an Amended and Restated Custodial Agreement, dated as of November 17, 2004
(the "Custodial Agreement"), with the Custodian, the Fund, the Administrative
Agent and the Secured Parties Representative, and (v) an Auction Agency
Agreement (including the form of Broker-Dealer Agreement) with Deutsche Bank
Trust Company Americas (the "Auction Agent"), dated November 17, 2004 (the
"Auction Agency Agreement"). Collectively, the Operating Agreement, the
Investment Management Agreement, the Credit Agreement, the Pledge Agreement,
the Insurance Agreement, the Custodial Agreement and the Auction Agency
Agreement are referred to herein as the "Fund Agreements." This Distribution
Agreement is herein referred to as this "Agreement."
The Preferred Shares will be offered and sold to the Initial
Purchaser without being registered under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance upon an exemption therefrom. The Fund has
prepared and has delivered to the Initial Purchaser copies of a preliminary
offering circular dated November 11, 2004 setting forth information concerning
the Fund, the Investment Manager, the Fund Agreements, the series of Preferred
Shares to be issued on the Initial Date of Original Issue, the Preferred
Shares, the Insurance Policy and the terms of the sale of the Preferred Shares
(including any appendices or exhibits thereto and any information incorporated
therein by reference, as the same may be amended or supplemented from time to
time, the "Preliminary Offering Circular"). If the Initial Purchaser enters
into a separate agreement with you, substantially in the form of Exhibit A
hereto (each a "Purchase Agreement"), with respect to the initial series of
Preferred Shares pursuant to Section 3(d) hereof, the Fund will prepare a final
offering circular, dated the date of such determination, consisting of the
Preliminary Offering Circular as of such date and including such initial
dividend rate with such additional changes as shall be consented to by you (the
"Initial Final Offering Circular"). In connection with the sale of each series
of Preferred Shares after the Initial Date of Original Issue, the Fund will
prepare and deliver to you copies of a preliminary offering circular in
accordance with Section 3(c) hereof and copies of a final offering circular
with respect to such series of Preferred Shares setting forth the initial
dividend rate on such series of Preferred Shares in accordance with Section
3(d) hereof (each such final offering circular, including the Initial Final
Offering Circular, including any appendices or exhibits thereto and any
information incorporated therein by reference, as the same may be amended or
supplemented from time to time in accordance with the terms hereof, is herein
referred to as the "Offering Circular"). The Fund hereby confirms that it has
authorized the use of the Offering Circular in connection with the offering and
resale of the Preferred Shares by the Initial Purchaser as provided herein.
1. Ramp-Up Period. On the basis of the representations and
warranties contained herein, and subject to the terms and satisfaction of the
conditions set forth herein, the Fund hereby grants you the exclusive right to
solicit offers to purchase the Preferred Shares from Prospective Investors (as
hereinafter defined) pursuant to the terms of this Agreement and you hereby
agree to use your best efforts to solicit offers to purchase shares of each
series of the Preferred Shares from Prospective Investors, at a purchase price
of $50,000 per share during any Marketing Period (as hereinafter defined)
during the period commencing on the date hereof to but excluding the earlier of
September 1, 2006 and the date on which all of the Preferred Shares have been
sold pursuant to the terms of this Agreement (the "Ramp-Up Period").
2. Restrictions. The Initial Purchaser agrees:
(a) Not to solicit offers for, or offer or sell, the
Preferred Shares by means of any form of general solicitation or advertising,
including, but not limited to, (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar medium or
broadcast over television or radio, or (ii) any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising;
(b) To solicit offers for the Preferred Shares only from, and
will offer, sell or deliver the Preferred Shares, as part of its initial
offering of any series of Preferred Shares, only to persons whom the Initial
Purchaser reasonably believes to be "qualified institutional buyers" within the
meaning of Rule 144A under the Securities Act purchasing for their own account,
to whom notice has been given that such sale or delivery is being made in
reliance on Rule 144A (any person meeting the requirements of this Section 2(b)
is referred to herein as a "Prospective Investor") and in each case, in
transactions in accordance with Rule 144A; and
(c) Not to solicit any offers for, or offer or sell Preferred
Shares to any Prospective Investor unless the Initial Purchaser has sent to
such Prospective Investor a copy of a preliminary Offering Circular or the
Offering Circular and not to confirm a sale of any series of Preferred Shares
with a purchaser of the Preferred Shares of such series without first or
simultaneously delivering an Offering Circular relating to such series of
Preferred Shares (and any amendment or supplement thereto that the Fund shall
have furnished to the Initial Purchaser prior to the date of such confirmation
of sale).
The Initial Purchaser hereby represents and warrants to, and
agrees with, the Fund that, if it enters into a Purchase Agreement in respect
of the Offered Preferred Shares (as hereinafter defined) of any series pursuant
to Section 3(d) hereof, it will be purchasing the Offered Preferred Shares of
such series pursuant to a private sale exempt from registration under the
Securities Act without the intent to distribute such Offered Preferred Shares
in violation of the Securities Act or applicable laws of any state of the
United States.
3. Procedures. (a) Notice of Issuance. After the Initial Date
of Original Issue, the Fund shall give the Initial Purchaser and the Insurer
written notice, substantially in the form of Exhibit B hereto (a "Notice of
Issuance"), of its intention to sell one or more series of Preferred Shares
(the "Offered Preferred Shares") no less than thirty days prior to the proposed
Marketing Commencement Date (as hereinafter defined). Each Notice of Issuance
shall state (i) the proposed Date of Original Issue for such Offered Preferred
Shares and (ii) the number of Offered Preferred Shares to be issued, which in
any event shall not be less than 600 shares nor more than 1,300 shares.
(b) Marketing Period. (i) Subject to the satisfaction of the
conditions set forth in Section 3(c) hereof, the Initial Purchaser shall be
obligated to use its best efforts to solicits offers to purchase Offered
Preferred Shares pursuant to Section 1 hereof during the period (the "Marketing
Period") commencing on the seventh business day (each a "Marketing Commencement
Date") prior to the Date of Original Issue for such Offered Preferred Shares
and ending on the second business day prior to such Date of Original Issue. The
Fund reserves the right, in its sole discretion, to suspend the solicitation of
offers to purchase Offered Preferred Shares during any Marketing Period. Upon
the receipt of written notice from the Fund, the Initial Purchaser will suspend
solicitation of offers to purchase Offered Preferred Shares during such
Marketing Period until such time as the Fund has advised the Initial Purchaser
that such solicitation may be resumed.
(ii) If (A) the Fund suspends the solicitation of offers to
purchase Offered Preferred Shares during any Marketing Period and then
advises the Initial Purchaser that it may resume soliciting offers to
purchase Offered Preferred Shares or (B) the Initial Purchaser is not
obligated to solicit offers to purchase Offered Preferred Shares
pursuant to Section 1 hereof during any Marketing Period as a result
of the occurrence of an event described in Section 7(n) hereof, (1)
any further obligation of the Initial Purchaser to solicit offers to
purchase such Offered Preferred Shares shall be subject to the
satisfaction of the conditions set forth in Section 3(c) hereof on the
date the Fund requests the Initial Purchaser to resume soliciting such
offers to purchase or on the date of the cessation of the event
described in Section 7(n) hereof, as the case may be, (2) the Date of
Original Issue for such Offered Preferred Shares shall be postponed to
a date agreed upon by the Fund and the Initial Purchaser that is at
least seven full business days after the resumption of solicitation or
the cessation of the event described in Section 7(n) hereof, as the
case may be, (3) the Marketing Period for such Offered Preferred
Shares shall recommence on the date described in clause (1) above and
shall end on the second business day prior to such Date of Original
Issue and (4) the Fund shall make any changes that in the opinion of
counsel for the Fund or counsel for the Initial Purchaser may be
necessary in the preliminary Offering Circular with respect to such
Offered Preferred Shares to reflect such changes.
(c) Conditions to Marketing Period. The obligation of the
Initial Purchaser to solicit offers to purchase Offered Preferred Shares during
any Marketing Period therefor will be subject to the accuracy on and as of the
related Marketing Commencement Date of the representations and warranties of
the Fund and Investment Manager contained herein, to the performance by the
Fund and the Investment Manager of all of their respective obligations required
to be performed hereunder on or prior to such Marketing Commencement Date and
to each of the following additional terms and conditions:
(i) No stop order suspending the sale of such Offered
Preferred Shares in any jurisdiction shall have been issued and no
proceeding for that purpose shall have been commenced or shall be pending
or threatened;
(ii) The Fund shall have prepared and delivered to the
Initial Purchaser copies of a preliminary Offering Circular with respect
to such Offered Preferred Shares, consisting of the Initial Final Offering
Circular, amended or supplemented in a manner satisfactory to the Initial
Purchaser to include the following information:
(A) the number of such Offered Preferred Shares being
offered, the initial Auction Date for such Offered Preferred Shares
and the number of Rate Period Days in the initial Rate Period therefor
which in no event shall exceed 28 Rate Period Days without the consent
of the Initial Purchaser;
(B) all information with respect to the Insurer contained in
any documents filed by Ambac Financial Group with the Securities and
Exchange Commission (the "Commission") pursuant to Section 13, 14 or
15(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
since the date of the Initial Final Offering Circular;
(C) all financial and statistical information with respect to
the Insurer contained in such preliminary Offering Circular under the
heading "Capitalization of the Company--Ambac" as of the end of a
fiscal year of the Insurer ending less than one year and ninety days
before the last day of such Marketing Period and, if the last day of
such Marketing Period will be more than 160 days after the end of such
fiscal year (155 days, in the case of the fiscal year ending December
31, 2005), all financial and statistical information with respect to
the Insurer contained in such preliminary Offering Circular under the
heading "Capitalization of the Company--Ambac and the Money Markets
Preferred Shares Policy" presented as of the end of a fiscal quarter
of the Insurer ending less than 160 days (or 155 days, in the case of
the fiscal year ending December 31, 2005) before the last day of such
Marketing Period; and
(D) all information contained in the most recent annual and
semi-annual reports filed by the Fund with the Commission pursuant to
the 1940 Act since the date of the Initial Final Offering Circular,
and all financial statements (excluding, in each case, any summary or
schedule of the assets of the Fund included therewith) provided to the
Lenders pursuant to Section 6.1.2 of the Credit Agreement, including,
without limitation, the following:
(1) if such Marketing Commencement Date is during the period
commencing on December 31, 2004 to, but excluding, February 28,
2005, (x) an audited consolidated balance sheet of the Fund as of
September 30, 2004 and the related audited consolidated statements
of operations, members' equity and cash flows for the period from
the date of the Fund's organization and ending September 30, 2004
furnished by the Fund to the Lenders pursuant to Section 6.1.2 of
the Credit Agreement and (y) the information contained in the Fund's
annual report for the period from the date of the Fund's
organization and ending September 30, 2004 filed by the Fund with
the Commission;
(2) if such Marketing Commencement Date is during the period
commencing on February 28, 2005 to, but excluding, May 31, 2005, (x)
the audited financial statements and information from the Fund's
annual report described in paragraph (1) above and (y) an unaudited
consolidated balance sheet of the Fund as of December 31, 2004 and
the related unaudited consolidated statements of operations,
members' equity and cash flows for the quarter ending December 31,
2004 furnished by the Fund to the Lenders pursuant to Section 6.1.2
of the Credit Agreement;
(3) if such Marketing Commencement Date is during the period
commencing on May 31, 2005 to, but excluding, August 31, 2005, (x)
the audited financial statements and information from the Fund's
annual report described in paragraph (1) above, (y) an unaudited
consolidated balance sheet of the Fund as of March 31, 2005 and the
related unaudited consolidated statements of operations, members'
equity and cash flows for the quarter and the portion of the year
ending March 31, 2005 furnished by the Fund to the Lenders pursuant
to Section 6.1.2 of the Credit Agreement and (z) the information
contained in the Fund's semi-annual report for the six months ending
March 31, 2005 filed by the Fund with the Commission;
(4) if such Marketing Commencement Date is during the period
commencing on August 31, 2005 to, but excluding, December 31, 2005,
(x) the audited financial statements described in paragraph (1)
above, (y) the information from the Fund's semi-annual report
described in paragraph (3) above and (z) an unaudited consolidated
balance sheet of the Fund as of June 30, 2005 and the related
unaudited consolidated statements of operations, members' equity and
cash flows for the quarter and the portion of the year ending June
30, 2005 furnished by the Fund to the Lenders pursuant to Section
6.1.2 of the Credit Agreement;
(5) if such Marketing Commencement Date is during the period
commencing on December 31, 2005 to, but excluding, February 28,
2006, (x) the audited consolidated balance sheet of the Fund as of
September 30, 2005 and the related audited consolidated statements
of operations, members' equity and cash flows for the year ending
September 30, 2005 furnished by the Fund to the Lenders pursuant to
Section 6.1.2 of the Credit Agreement and (y) the information
contained in the Fund's annual report for the year ending September
30, 2005 filed by the Fund with the Commission;
(6) if such Marketing Commencement Date is during the period
commencing on February 28, 2006 to, but excluding, May 31, 2006, (x)
the audited financial statements and information from the Fund's
annual report described in paragraph (5) above and (y) an unaudited
consolidated balance sheet of the Fund as of December 31, 2005 and
the related unaudited consolidated statements of operations,
members' equity and cash flows for the quarter ending December 31,
2005 furnished by the Fund to the Lenders pursuant to Section 6.1.2
of the Credit Agreement; and
(7) if such Marketing Commencement Date is during the period
commencing on May 31, 2006 to, but excluding, August 31, 2006, (x)
the audited financial statements and information from the Fund's
annual report described in paragraph (5) above and (y) an unaudited
consolidated balance sheet of the Fund as of March 31, 2006 and the
related unaudited consolidated statements of operations, members'
equity and cash flows for the quarter ending March 31, 2006
furnished by the Fund to the Lenders pursuant to Section 6.1.2 of
the Credit Agreement;
(iii) The Initial Purchaser shall not have discovered and
disclosed to the Fund during or prior to the commencement of such
Marketing Period that such preliminary Offering Circular or any
amendment or supplement thereto contains an untrue statement of a fact
which, in the reasonable opinion of the Initial Purchaser, is material
or omits to state any fact which, in the reasonable opinion of the
Initial Purchaser, is material and is required to be stated therein or
is necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; (iv) The
Initial Purchaser shall have received a certificate on such Marketing
Commencement Date signed by any Vice President, Treasurer or Assistant
Treasurer of the Insurer, dated such Marketing Commencement Date, in
which such officer consents to the inclusion of the information under
the heading "Capitalization of the Company--Ambac" in such preliminary
Offering Circular (the "Insurer's Information") and certifies that the
Insurer's Information as of such Marketing Commencement Date is true
and correct in all material respects and does not include any untrue
statement of a material fact; and
(v) If such preliminary Offering Circular contains financial
data with respect to the Fund, the Initial Purchaser shall have
received a letter from the certified independent accountants of the
Fund, addressed to the Initial Purchaser, dated the Marketing
Commencement Date, in form and substance acceptable to the Initial
Purchaser (A) confirming that they are independent public accountants
with respect to the Fund within the meaning of Rule 101 of the Code of
Professional Conduct of the AICPA and its interpretations and rulings
thereunder and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission and (B) stating, as of the Marketing
Commencement Date (or, with respect to matters involving changes or
developments since the respective dates as of which specified
financial information is given in such preliminary Offering Circular,
as of a date not more than five days prior to the Marketing
Commencement Date), the conclusions and findings of such firm with
respect to the financial information and other matters ordinarily
covered by accountants' "comfort letters" to underwriters in
connection with registered public offerings.
(d) Pricing. The Initial Purchaser and the Fund may enter
into a Purchase Agreement with respect to a series of Offered Preferred Shares,
pursuant to which the Initial Purchaser will agree to purchase, and the Fund
will agree to sell, such Offered Preferred Shares on the Date of Original Issue
therefor, on the second business day prior to such Date of Original Issue or on
such other business day as shall be agreed upon by the Initial Purchaser and
the Fund (the "Pricing Date"). The Purchase Agreement with respect to a series
of Offered Preferred Shares will set forth the initial dividend rate on such
series of Offered Preferred Shares. On the Pricing Date for each series of
Offered Preferred Shares, the Fund will prepare and provide copies to the
Initial Purchaser of an Offering Circular, dated such Pricing Date, consisting
of the preliminary Offering Circular with respect to such series of Offered
Preferred Shares as of such Pricing Date and including the initial dividend
rate on such series of Offered Preferred Shares with such additional changes as
shall be consented to by the Initial Purchaser. If the Initial Purchaser and
the Fund do not enter into a Purchase Agreement with respect to a series of
Offered Preferred Shares, the Initial Purchaser will have no further obligation
hereunder in respect of such series of Offered Preferred Shares.
4. Representations, Warranties and Agreements of the Fund and
the Investment Manager. (a) The Fund and the Investment Manager jointly and
severally represent and warrant to, and agree with, the Initial Purchaser on
and as of the date hereof, as of each Marketing Commencement Date, as of each
Date of Original Issue and as of each date on which the Offering Circular shall
be amended or supplemented (each of such times referenced above being referred
to herein as a "Representation Date") that:
(i) The Offering Circular, as of its date, did not, and as of
such Representation Date, will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided that no representation or warranty is made as to (i) the
information contained in the Offering Circular in reliance upon and in
conformity with written information relating to the Initial Purchaser
furnished to the Fund by or on behalf of the Initial Purchaser
specifically for use therein (the "Initial Purchaser's Information") or
(ii) the Insurer's Information;
(ii) Each Offering Document (as defined in Section 6(g)
hereof) provided by the Fund or the Investment Manager to Prospective
Investors, as of the date thereof, will not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided that no representation or warranty is made as to
the Initial Purchaser's Information or the Insurer's Information;
(iii) The Offering Circular, as of its date, contains all of
the information that, if requested by a prospective purchaser of the
Money Market Preferred Shares on such Representation Date, would be
required to be provided to such prospective purchaser pursuant to Rule
144A(d)(4) under the Securities Act;
(iv) Assuming compliance by the Initial Purchaser with the
agreements set forth in Section 2 hereof, it is not necessary, in
connection with the issuance and sale of each series of Preferred Shares
to the Initial Purchaser and the offer, resale and delivery of such
series of Preferred Shares by the Initial Purchaser in the manner
contemplated by this Agreement, to register such series of Preferred
Shares under the Securities Act;
(v) A notification of registration of the Fund as an
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act"), on Form N-8A (the "1940 Act Notification") has been
prepared by the Fund in conformity with the 1940 Act and has been filed
with the Commission prior to the Initial Date of Original Issue;
(vi) The 1940 Act Notification, and any amendment or
supplement thereto, conformed or will conform in all material respects
to the requirements of the 1940 Act and the rules and regulations of the
Commission under the 1940 Act (the "1940 Act Rules and Regulations") and
did not or will not, as of its filing date, contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances in which they were made, not misleading;
provided that no representation or warranty is made as to the Initial
Purchaser's Information or the Insurer's Information;
(vii) The Fund is duly registered under the 1940 Act as a
closed-end non-diversified management investment company;
(viii) The Fund has not received any notice from the
Commission pursuant to Section 8(e) of the 1940 Act with respect to the
1940 Act Notification (or any amendment or supplement thereto);
(ix) The registration statement on Form N-2 to be filed by
the Fund in accordance with Section 6(a) hereof (the "Registration
Statement"), when filed with the Commission, will conform in all
material respects to the requirements of the 1940 Act and the 1940 Act
Rules and Regulations and will not, as of its effective date, contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were
made, not misleading; provided that no representation or warranty is
made as to the Initial Purchaser's Information or the Insurer's
Information;
(x) The Fund (A) is a limited liability company duly formed,
validly existing and in good standing under the laws of the State of
Delaware, (B) has the limited liability company power and authority to
own or hold its properties and to conduct the business in which it will
engage as described in the Offering Circular and (C) is qualified to do
business and is in good standing in each jurisdiction where the nature
of its business requires such qualification, except where the failure to
so qualify or to be in good standing would not reasonably be expected to
have a material adverse effect on the business, management, financial
condition, stockholders' equity or results of operations of the Fund (a
"Material Adverse Effect");
(xi) The Fund has an authorized capitalization as set forth
in the Offering Circular. All of the issued common shares of the Fund
issued on or before such Representation Date have been duly and validly
authorized and issued, are fully paid and non-assessable and conform to
the description thereof contained in the related Offering Circular;
(xii) The shares of each series of Offered Preferred Shares
when sold by the Fund pursuant to this Agreement will have been duly and
validly authorized and, when issued and delivered against payment
therefor in accordance with this Agreement, will be duly and validly
issued, fully paid and non-assessable; and the Offered Preferred Shares
will conform to the description thereof contained in the related
Offering Circular;
(xiii) The Fund has the requisite power and authority to
execute and deliver this Agreement and the Fund Agreements and perform
its obligations hereunder and thereunder;
(xiv) Each of the Fund Agreements has been duly authorized,
executed and delivered by the Fund and, assuming due execution and
delivery thereof by the other parties thereto, constitutes the legal,
valid and binding obligation of the Fund enforceable in accordance with
its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency or other similar laws relating to or affecting generally the
enforcement of creditors' rights or by general equitable principles;
(xv) This Agreement has been duly authorized, executed and
delivered by the Fund;
(xvi) The execution, delivery and performance of this
Agreement and the Fund Agreements by the Fund and the consummation of
the transactions contemplated hereby and thereby will not (A) conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which
the Fund is a party or by which the Fund is bound or to which any of the
property or assets of the Fund is subject, (B) result in any violation
of the provisions of the Operating Agreement or (C) result in the
violation of any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Fund or any
of its properties or assets, except in the case of clauses (A) and (C),
such conflicts, breaches or violations that in the aggregate would not
reasonably be expected to have a Material Adverse Effect;
(xvii) No consent, approval, authorization or order of, or
filing or registration with, any court or governmental agency or body
having jurisdiction over the Fund or any of its properties or assets is
required for the execution, delivery and performance of this Agreement
and the Fund Agreements by the Fund and the consummation of the
transactions contemplated hereby and thereby, except for those which
have been obtained or made;
(xviii) The Fund is not (A) in violation of the Operating
Agreement, (B) in default, and no event has occurred which, with notice
or lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained
in any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which it is a party or by which it is bound
or to which any of its properties or assets is subject or (C) in
violation of any law, ordinance, governmental rule, regulation or court
decree to which it or its property or assets may be subject or has
failed to obtain any material license, permit, certificate, franchise or
other governmental authorization or permit necessary to the ownership of
its property or to the conduct of its business, except, in the case of
clauses (B) and (C), such defaults, events, violations or failures that
in the aggregate would not reasonably be expected to have a Material
Adverse Effect;
(xix) There are no legal or governmental proceedings pending
to which the Fund is a party or of which any property or assets of the
Fund is the subject which is reasonably likely to have a Material
Adverse Effect, and to the best of its knowledge, no such proceedings
are threatened or contemplated by governmental authorities or threatened
by others;
(xx) The financial statements (including the related notes
and supporting schedules), if any, of the Fund included in the Offering
Circular present fairly the financial condition and results of
operations of the Fund, at the dates and for the periods indicated, and
have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis in all material respects
throughout the periods involved;
(xxi) The independent public accountants certifying any
audited financial statements of the Fund included in the Offering
Circular are independent public accountants as required by the 1940 Act
and the 1940 Act Rules and Regulations;
(xxii) This Agreement and each of the Fund Agreements
complies in all material respects with all applicable provisions of the
1940 Act, the 1940 Act Rules and Regulations, the Investment Advisers
Act of 1940 (the "Advisers Act"), and the rules and regulations adopted
by the Commission under the Advisers Act (the "Advisers Act Rules and
Regulations");
(xxiii) The Fund is, and at all times through the completion
of the transactions contemplated hereby, will be, in compliance in all
material respects with the terms and conditions of the 1940 Act, except
for such failures to comply that in the aggregate would not reasonably
be expected to have a Material Adverse Effect or a material adverse
effect on the shareholders of the Fund;
(xxiv) No person is serving or acting as an officer, trustee
or investment adviser of the Fund except in accordance with the
provisions of the 1940 Act and the 1940 Act Rules and Regulations and
the Advisers Act and the Advisers Act Rules and Regulations; and
(xxv) Neither the Fund nor any of its affiliates (as defined
in Rule 501(b) of Regulation D) has, directly or through any agent
(other than the Initial Purchaser), (A) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any
security (as such term is defined in the Securities Act) which is or
will be integrated with the offering and sale of the Preferred Shares in
a manner that would require the registration of the Preferred Shares
under the Securities Act; (B) engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D)
in connection with the offering of the Preferred Shares or (C) otherwise
taken or will take any action that would require the registration of the
Preferred Shares under the Securities Act.
(b) The Investment Manager represents and warrants to, and
agrees with, the Initial Purchaser on and as of each Representation Date that:
(i) The Investment Manager has been duly formed and is
validly existing as a limited liability company, in good standing under
the laws of its jurisdiction of organization, is duly registered and
qualified to do business and is in good standing in each jurisdiction in
which its ownership or lease of property or the conduct of its business as
described in the Offering Circular requires such qualification, and has
all limited liability company power and authority necessary to own or hold
its properties and to conduct its business as described in the Offering
Circular, except where the failure to so qualify or to be in good standing
would not reasonably be expected to have a material adverse effect on the
condition (financial or other), business, properties or results of
operations of the Investment Manager or on the ability of the Investment
Manager to perform its obligations under this Agreement and the Fund
Agreements to which it is a party ("Investment Manager Material Adverse
Effect");
(ii) The Investment Manager is duly registered as an
investment adviser under the Advisers Act and is not prohibited by the
Advisers Act, the 1940 Act, the Advisers Act Rules and Regulations or the
1940 Act Rules and Regulations from acting under the Fund Agreements to
which it is a party;
(iii) Each of the Fund Agreements to which the Investment
Manager is a party has been duly authorized, executed and delivered by the
Investment Manager, and, assuming due execution and delivery thereof by
the other parties thereto, constitutes the legal, valid and binding
obligation of the Investment Manager enforceable in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency or other similar laws relating to or affecting generally the
enforcement of creditors' rights or by general equitable principles;
(iv) This Agreement has been duly authorized, executed and
delivered by the Investment Manager;
(v) The execution, delivery and performance of this Agreement
and the Fund Agreements to which the Investment Manager is a party and the
consummation of the transactions contemplated hereby and thereby will not
(A) conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which
the Investment Manager is a party or by which the Investment Manager is
bound or to which any of the property or assets of the Investment Manager
is subject, (B) result in any violation of the provisions of the operating
agreement of the Investment Manager or (C) result in the violation of any
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Investment Manager or any of
its properties or assets, except in the case of clauses (A) and (C), such
conflicts, breaches or violations that in the aggregate would not
reasonably be expected to have an Investment Manager Material Adverse
Effect;
(vi) No consent, approval, authorization or order of, or
filing or registration with, any court or governmental agency or body
having jurisdiction over the Investment Manager or any of its properties
or assets is required for the execution, delivery and performance of this
Agreement and the Fund Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby, except
for those which have been obtained or made;
(vii) The Investment Manager has the financial resources
available to it necessary for the performance of its services and
obligations as contemplated in the Offering Circular and under this
Agreement and the Fund Agreements to which it is a party;
(viii) There are no legal or governmental proceedings pending
to which the Investment Manager is a party or of which any property or
assets of the Investment Manager is the subject which is reasonably likely
to have an Investment Manager Material Adverse Effect, and to the best of
the Investment Manager's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others; and
(ix) The Investment Manager is not (A) in violation of its
operating agreement, (B) in default, and no event has occurred which, with
notice or lapse of time or both, would constitute such a default, in the
due performance or observance of any term, covenant or condition contained
in any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which it is a party or by which it is bound or
to which any of its properties or assets is subject or (C) in violation of
any law, ordinance, governmental rule, regulation or court decree to which
it or its property or assets may be subject or has failed to obtain any
material license, permit, certificate, franchise or other governmental
authorization or permit necessary to the ownership of its property or to
the conduct of its business, except, in the case of clauses (B) and (C),
such defaults, events, violations or failures that in the aggregate would
not reasonably be expected to have an Investment Manager Material Adverse
Effect.
(c) Reliance. The Fund, the Investment Manager and the
Initial Purchaser agree that (i) any Offered Preferred Shares purchased by the
Initial Purchaser hereunder shall be purchased by the Initial Purchaser, in
reliance on the representations and warranties of, and the performance of the
covenants and agreements by, the Fund and the Investment Manager contained
herein and on the terms and conditions and in the manner provided herein and
(ii) any Offered Preferred Shares sold by the Fund hereunder shall be sold by
the Fund in reliance on the performance of the covenants and agreements by the
Initial Purchaser contained herein.
5. Sale and Delivery. (a) Sale. Subject to the terms and
conditions and in reliance upon the representations and warranties contained
herein, including, without limitation the conditions set forth in Section 7
hereof, on the Date of Original Issue for each series of Offered Preferred
Shares with respect to which the Initial Purchaser and the Fund shall have
entered into a Purchase Agreement, the Initial Purchaser and the Fund shall
consummate the sale of such Offered Preferred Shares contemplated by such
Purchase Agreement.
(b) Delivery. Delivery of and payment for each series of
Offered Preferred Shares shall be made at the offices of Skadden, Arps, Slate,
▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, New York, New York, or at such other place as shall be
agreed upon by the Initial Purchaser and the Fund, at 9:00 A.M., New York City
time, on the Date of Original Issue thereof.
(c) Global Certificates. On the Date of Original Issue for
each series of Offered Preferred Shares, the Fund shall deliver the global
certificates representing the shares of such series to the Auction Agent as
custodian for The Depository Trust Company ("DTC") against payment by the
Initial Purchaser to or upon order of the Fund of the purchase price for the
shares of such series by wire transfer in U.S. dollars in same-day funds. Time
shall be of the essence, and delivery at the time and place specified pursuant
to this Agreement or such other place as may be agreed upon by the Initial
Purchaser is a further condition of the obligations of the Initial Purchaser
hereunder. Upon delivery, the shares of each series of Offered Preferred Shares
shall be in global form, registered in the name of DTC or its nominee. The Fund
agrees to make one or more global certificates evidencing the shares of each
series of Offered Preferred Shares available for inspection by the Initial
Purchaser in New York, New York at least 24 hours prior to the Date of Original
Issue thereof.
(d) Date of Original Issue Fee. The Fund hereby agrees to pay
or cause to be paid a fee per share of each series of Offered Preferred Shares
sold to a Prospective Investor purchased by the Initial Purchaser hereunder
upon and subject to completion of the delivery of and payment for such share on
the Date of Original Issue thereof, which amount shall be withheld by the
Initial Purchaser from the gross proceeds of the offering of the shares of such
series. The fee payable on the Date of Original Issue of each series of Offered
Preferred Shares will equal the product of (i) $50,000, (ii) the number of
shares of such series of Offered Preferred Shares, (iii) 0.25% and (iv) the
number of Rate Period Days in the initial Rate Period for such series divided
by 360.
(e) Structuring and Placement Fee. The Fund hereby agrees to
pay or cause to be paid to the Initial Purchaser on the Initial Date of
Original Issue a structuring and placement fee in an amount equal to $625,000
payable in immediately available funds.
6. Further Agreements of the Fund and the Investment Manager.
Each of the Fund and the Investment Manager jointly and severally agrees with
the Initial Purchaser:
(a) to file or cause to be filed (i) a registration statement
with respect to the Fund with the Commission pursuant to Section 8(b) of the
1940 Act (the "Registration Statement") on or prior to December 1, 2004 and any
amendment to the Registration Statement with the Commission requested by the
Commission and (iii) any other filings required to be made by the Commission
pursuant to the 1940 Act, in each case, in conformity with the requirements of
the 1940 Act and the 1940 Act Rules and Regulations; and to furnish promptly to
the Initial Purchaser and to counsel for the Initial Purchaser a copy of the
Registration Statement each as originally filed with the Commission and, during
the Ramp-Up Period, each amendment to the 1940 Act Notification and the
Registration Statement, including all financial statements, consents and
exhibits thereto;
(b) to advise the Initial Purchaser promptly of receipt by
the Fund of any notice from the Commission pursuant to Section 8(e) of the 1940
Act with respect to the 1940 Act Notification or the Registration Statement (or
any amendment or supplement to either of them);
(c) during any Marketing Period (i) to advise the Initial
Purchaser promptly and, if requested, confirm such advice in writing, of the
happening of any event which makes any statement of a material fact made in the
Offering Circular untrue or which requires the making of any additions to or
changes in the Offering Circular in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, (ii)
to advise the Initial Purchaser promptly of any order preventing or suspending
the use of the Offering Circular, of any suspension of the qualification of the
shares of any series of Offered Preferred Shares for offering or sale in any
jurisdiction and of the initiation or threatening of any proceeding for any
such purpose, and (iii) to use its best efforts to prevent the issuance of any
such order preventing or suspending the use of the Offering Circular or
suspending any such qualification and, if any such suspension is issued, to
obtain the lifting thereof at the earliest possible time;
(d) prior to making any amendment or supplement to the
Offering Circular, including, without limitation, any such amendment or
supplement effected by incorporating by reference in the Offering Circular any
information with respect to the Fund contained in any annual or semi-annual
report filed by the Fund with the Commission pursuant to the 1940 Act but
excluding any such amendment or supplement effected by incorporating by
reference any information with respect to the Insurer contained in any filing
made by Ambac Financial Group with the Commission pursuant to Section 13, 14 or
15(d) of the Exchange Act, to furnish a copy thereof to the Initial Purchaser
and counsel for the Initial Purchaser and not to effect any such amendment or
supplement or incorporate any such report by reference without the consent of
the Initial Purchaser, which consent shall not be unreasonably withheld (for
the avoidance of doubt, this paragraph shall not prohibit the Fund from making
any filing or amending or supplementing any filing with the Commission without
the Initial Purchaser's consent, but such filing will not be incorporated by
reference into the Offering Circular without the Initial Purchaser's consent);
(e) prior to making any amendment or supplement to the
Insurer's Information in any Offering Circular, other than by incorporating by
reference any information with respect to the Insurer contained in any filing
made by Ambac Financial Group with the Commission pursuant to Section 13, 14 or
15(d) of the Exchange Act, to furnish a copy thereof to the Insurer and not to
effect any such amendment or supplement without the consent of the Insurer;
(f) if any event shall occur or condition exist as a result
of which it is necessary, in the opinion of counsel for the Initial Purchaser,
after discussions with the Fund, the Investment Manager and their counsel, to
amend or supplement the Offering Circular during any Marketing Period in order
that the Offering Circular will not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a Prospective Investor,
not misleading, or if at any time it is necessary during any Marketing Period
to amend or supplement the Offering Circular to comply with applicable law, to
immediately notify the Initial Purchaser to suspend solicitations of offers to
purchase Offered Preferred Shares pursuant to Section 3(b) hereof and, prior to
any resumption of such solicitation, prepare such amendment or supplement as
may be necessary to correct such untrue statement or omission or so that the
Offering Circular, as so amended or supplemented, will comply with applicable
law;
(g) to extend to all Prospective Investors during a Marketing
Period the opportunity to ask questions of, and receive answers from, the Fund
and the Investment Manager concerning the Fund and the Offered Preferred Shares
and the terms and conditions of the offering thereof and to obtain any
information such Prospective Investors may consider necessary in making an
informed investment decision or in order to verify the accuracy of the
information set forth in the Offering Circular, to the extent the Fund or the
Investment Manager possess the same or can acquire it without unreasonable
effort or expense (any such additional information, including, without
limitation, any valuation statements or other reports provided to Prospective
Investors, together with the Offering Circular are referred to herein as the
"Offering Documents");
(h) to supply to the Initial Purchaser, on a continuing basis
so long as the Initial Purchaser is party to a Broker-Dealer Agreement, (i)
copies of all valuation statements, all auditor's agreed-upon procedures
reports, all auditor's statements with respect to defaults under the Credit
Agreement and all officer's certificates furnished by the Fund to the Lenders
pursuant to the Credit Agreement, (ii) copies of all reports showing compliance
or noncompliance with the Investment Company Act Preferred Shares Asset
Coverage test and the rating agency guidelines furnished to the Insurer
pursuant to the Insurance Agreement, (iii) copies of all reports filed by the
Fund with the Commission, (iv) copies of all audited and unaudited financial
statements of the Fund delivered by the Fund to the Lenders pursuant to the
Credit Agreement, (iv) copies of all correspondence with, and information that
the Fund makes available to any Rating Agency, in connection with the Preferred
Shares and the Fund Agreements and the transactions contemplated hereby and
thereby and (vi) copies of any amendments to the Fund Agreements, provided that
the Initial Purchaser agrees that all non-public information obtained by it
pursuant to this Section 6(h) shall be subject to that certain confidentiality
agreement, dated November 20, 2003, between the Initial Purchaser and the
Investment Manager;
(i) to promptly take from time to time such actions as the
Initial Purchaser may reasonably request to qualify Offered Preferred Shares
for offering and sale under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchaser may designate and to continue such
qualifications in effect for the term of this Agreement; and to arrange for the
determination of the eligibility for investment of Offered Preferred Shares
under the laws of such jurisdictions as the Initial Purchaser may reasonably
request; provided that the Fund shall not be obligated to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or to file a
general consent to service of process in any jurisdiction;
(j) to assist the Initial Purchaser in arranging for the
shares of each series of Offered Preferred Shares to be eligible for clearance
and settlement through DTC;
(k) not to, and to cause its affiliates not to, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as such term is defined in the Securities Act) which could be
integrated with the sale of the Preferred Shares in a manner which would
require registration of any of the Preferred Shares under the Securities Act;
(l) not to, and to cause its affiliates not to, authorize or
knowingly permit any person acting on their behalf to, solicit any offer to buy
or offer to sell Preferred Shares by means of any form of general solicitation
or general advertising within the meaning of Regulation D or in any manner
involving a public offering within the meaning of Section 4(2) of the
Securities Act; and not to offer, sell, contract to sell or otherwise dispose
of, directly or indirectly, any securities under circumstances where such
offer, sale, contract or disposition would cause the exemption afforded by
Section 4(2) of the Securities Act to cease to be applicable to the offering
and sale of the Preferred Shares as contemplated by this Agreement;
(m) during the Ramp-Up Period, to make its officers,
employees, independent accountants and legal counsel reasonably available upon
request by the Initial Purchaser and to provide the Initial Purchaser with such
information concerning the business and financial affairs of the Fund, the
Investment Manager, the Preferred Shares and the Fund Agreements as the Initial
Purchaser may reasonably request;
(n) to advise the Initial Purchaser if either Standard &
Poor's Ratings Service ("S&P") or ▇▇▇▇▇'▇ Investors Service ("Moody's")
downgrades the ratings of the Preferred Shares, proposes to downgrade the
Preferred Shares or puts any rating of the Preferred Shares under surveillance
or review;
(o) during the Ramp-Up Period, without the prior written
consent of the Initial Purchaser, to amend, supplement or otherwise modify any
of the terms or provisions of the Statement of Preferences or any of the terms
or provisions of the Operating Agreement which define the preferences, voting
powers, rights, terms or conditions of the Preferred Shares or otherwise relate
to the Preferred Shares (the "Preferred Share Provisions");
(p) during the Ramp-Up Period, without the prior written
consent of the Initial Purchaser, which consent shall not be unreasonably
withheld, (i) to amend, supplement or otherwise modify, or consent to the
amendment, supplement or modification of, (A) any of the terms or provisions of
the Operating Agreement, other than the Preferred Share Provisions, or (B) any
of the other Fund Agreements, in each case, other than any such amendment,
supplement or modification that does not adversely affect in any material
respect the interests of the Initial Purchaser or the holders of the Preferred
Shares; and
(q) during the Ramp-Up Period, promptly provide to the
Initial Purchaser a copy of any notice given to the Lenders pursuant to Section
6.1.7 of the Credit Agreement.
7. Conditions of Initial Purchaser's Obligations. The
obligations of the Initial Purchaser hereunder in respect of the shares of each
series of Offered Preferred Shares, including its obligation to purchase any
series of Offered Preferred Shares from the Fund on the Date of Original Issue
of such series pursuant to a Purchase Agreement, are subject to the accuracy,
on and as of each Representation Date, of the representations and warranties of
the Fund and the Investment Manager contained herein, to the accuracy of the
statements of the Fund and the Investment Manager and their respective officers
made in any certificates delivered pursuant hereto, to the performance by the
Fund and the Investment Manager of their obligations required to be performed
hereunder on or prior to the Date of Original Issue of such series, and to the
satisfaction of each of the following additional terms and conditions:
(a) Copies of the final Offering Circular (and any amendments
or supplements thereto) with respect to such series of Offered Preferred Shares
shall have been distributed to the Initial Purchaser in accordance with Section
3(d) hereof, and no stop order suspending the sale of the shares of such series
of Offered Preferred Shares in any jurisdiction shall have been issued and no
proceeding for that purpose shall have been commenced or shall be pending or
threatened.
(b) The Initial Purchaser shall not have discovered and
disclosed to the Fund that the Offering Circular or any amendment or supplement
thereto contains an untrue statement of a fact which, in the reasonable opinion
of the Initial Purchaser, is material or omits to state any fact which, in the
reasonable opinion of the Initial Purchaser, is material and is required to be
stated therein or is necessary in order to make the statements therein, in
light of the circumstances in which they were made, not misleading.
(c) Each of the Auction Agency Agreement and the
Broker-Dealer Agreement with ▇▇▇▇▇▇ Brothers Inc. shall have been duly executed
and delivered by the parties thereto and shall be in full force and effect or,
in the case of the Auction Agency Agreement, a similar agreement with a
replacement auction agent shall be in full force and effect.
(d) The Insurance Policy shall have been duly executed and
delivered by the Insurer to the Secured Parties Representative, shall be in
full force and effect and shall have been amended, if necessary, to include
such series of Offered Preferred Shares as a "Insured Obligation" thereunder.
(e) An indemnification agreement between the Insurer and the
Initial Purchaser, in form and substance satisfactory to the Initial Purchaser,
shall have been executed and delivered by the parties thereto and shall be in
full force and effect.
(f) The Initial Purchaser shall have received an opinion of
▇▇▇▇▇▇▇, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, special counsel to the Fund, dated
such Date of Original Issue and addressed to the Initial Purchaser, regarding
negative assurances concerning the Offering Circular and the accuracy of the
descriptions of the Preferred Shares and the Fund Agreements in the Offering
Circular, in the form attached hereto as Exhibit C.
(g) The Initial Purchaser shall have received an opinion of
▇▇▇▇▇▇▇, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, special counsel to the Fund, dated
such Date of Original Issue and addressed to the Initial Purchaser, regarding
general corporate matters, due formation of the Fund, issuance of the shares of
such series of Preferred Shares, New York enforceability of the Fund
Agreements, compliance with securities laws, the 1940 Act and the Advisers Act,
and other New York and federal law matters, in the form attached hereto as
Exhibit D.
(h) The Initial Purchaser shall have received an opinion of
▇▇▇▇▇▇▇, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, special counsel to the Fund, dated
such Date of Original Issue and addressed to the Initial Purchaser, that the
statements set forth in the Offering Circular under the heading "Certain U.S.
Federal Income Tax Aspects of an Investment in the Company" accurately describe
the material federal income tax consequences to holders of the Preferred
Shares, in the form attached hereto as Exhibit E.
(i) The Initial Purchaser shall have received an opinion of
▇▇▇▇▇▇▇, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, special counsel to the Investment
Manager, dated such Date of Original Issue and addressed to the Initial
Purchaser, regarding general corporate matters, due formation of the Investment
Manager, New York enforceability of the Fund Agreements to which the Investment
Manager is a party, compliance with securities laws, the 1940 Act and the
Advisers Act, and other New York and federal law matters, in the form attached
hereto as Exhibit F.
(j) The Initial Purchaser shall have received an opinion of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, special counsel to the Custodian,
dated such Date of Original Issue and addressed to the Initial Purchaser,
regarding general corporate matters, due organization of the Custodian, New
York enforceability of the Fund Agreements to which the Custodian is a party,
and New York and federal law matters, in the form attached hereto as Exhibit G.
(k) The Initial Purchaser shall have received an opinion of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, dated such Date of Original Issue and addressed
to the Initial Purchaser, with respect to the validity of the shares of such
series of Preferred Shares and such other matters as the Initial Purchaser may
reasonably request.
(l) The Initial Purchaser shall have received an opinion from
▇▇▇▇ ▇▇▇, Assistant General Counsel of the Insurer, dated such Date of Original
Issue and addressed to the Initial Purchaser, pertaining to the enforceability
of the Insurance Policy and other matters, in the form attached hereto as
Exhibit H.
(m) The Initial Purchaser shall have received a letter from
S&P stating that the shares of such series of Offered Preferred Shares have
received a rating of "AAA" from S&P and a letter from Moody's stating that the
shares of such series of Offered Preferred Shares have received a rating of
"Aaa" from Moody's.
(n) (i) Trading in the auction rate securities market shall
not have been suspended, generally disrupted or limited during the Marketing
Period immediately preceding such Date of Original Issue, (ii) a material
disruption in the securities settlement system maintained by DTC shall have not
occurred and be continuing on such Date of Original Issue or (iii) any
moratorium on commercial banking activities shall not have been declared by
federal or state authorities and be continuing on such Date of Original Issue.
(o) The Initial Purchaser shall have received on such Date of
Original Issue a certificate or certificates signed by a senior executive
officer and senior financial officer of the Fund, dated such Date of Original
Issue, in which such officers shall state that, to the best of their knowledge
(A) the representations and warranties of the Fund in this Agreement and the
Fund Agreements are true and correct on and as of such Date of Original Issue;
(B) that the Fund has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied hereunder or under the Fund Documents
at or prior to such Date of Original Issue; (C) no event or occurrence which
with the passage of time or the giving of notice thereof or both would become
an "Event of Default" (as defined in the Credit Agreement) has occurred and is
continuing; (D) subsequent to the date as of which information is given in the
Offering Circular, there has not been any material change in the capital stock
or debt of the Fund or any material adverse change, or any development which is
reasonably likely to cause a material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity, results
of operations, business or prospects of the Fund, other than as set forth or
contemplated in the Offering Circular; and (E) nothing has come to such
officers' attention that would lead such officers to believe that the Offering
Circular as of such Date of Original Issue includes any untrue statement of a
material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided that such officers shall make no such statement
with respect to the Initial Purchaser's Information or the Insurer's
Information.
(p) The Initial Purchaser shall have received on such Date of
Original Issue a certificate or certificates signed by the person serving as
the chief executive officer of the Investment Manager or the person serving as
the chief financial officer of the Investment Manager and any other officer of
the Investment Manager, dated such Date of Original Issue, in which such
officers shall state that, to the best of their knowledge (A) the
representations and warranties of the Investment Manager in this Agreement and
any other Fund Agreements to which the Investment Manager is a party are true
and correct on and as of such Date of Original Issue; (B) that the Investment
Manager has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied hereunder or under the Fund Agreements at or
prior to such Date of Original Issue; (C) no event or occurrence which with the
passage of time or the giving of notice thereof or both would become an "Event
of Default" (as defined in the Credit Agreement) has occurred and is
continuing; and (D) nothing has come to such officers' attention that would
lead such officers to believe that the Offering Circular as of such Date of
Original Issue includes any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided that such officers shall make no such statement with respect to the
Initial Purchaser's Information or the Insurer's Information.
(q) If the Offering Circular with respect to such series of
Preferred Shares contains financial data with respect to the Fund, the Initial
Purchaser shall have received a letter from the certified independent
accountants of the Fund, addressed to the Initial Purchaser, dated such Date of
Original Issue, in form and substance acceptable to the Initial Purchaser (A)
confirming that they are independent public accountants with respect to the
Fund within the meaning of Rule 101 of the Code of Professional Conduct of the
AICPA and its interpretations and rulings thereunder and are in compliance with
the applicable requirements relating to the qualification of accountants under
Rule 2-01 of Regulation S-X of the Commission and (B) stating, as of such Date
of Original Issue (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Offering Circular, as of a date not more than five
days prior to the Date of Original Issue), the conclusions and findings of such
firm with respect to the financial information and other matters covered in the
letter with respect to the Offering Circular delivered pursuant to Section 3(c)
hereof and (C) confirming in all material respects the conclusions and findings
set forth in the initial letter.
(r) On such Date of Original Issue, (i) ▇▇▇▇▇▇▇▇▇▇ is acting
as the investment manager of the Fund pursuant to the Investment Management
Agreement, (ii) the Board of Directors has not approved the termination of the
Investment Management Agreement or the termination of ▇▇▇▇▇▇▇▇▇▇ as the
investment manager of the Fund, (iii) neither the Fund nor ▇▇▇▇▇▇▇▇▇▇ has
provided the other party with notice of the termination of the Investment
Management Agreement and (iv) no event has occurred as of such Date of Original
Issue which gives the Insurer or any other party the right to terminate the
Investment Management Agreement.
(s) As of such Date of Original Issue, the Board of Directors
shall not have failed to declare dividends payable in respect of any
outstanding series of Preferred Shares.
(t) The Initial Purchaser shall have received all other
documents, opinions and certificates in respect of the issuance of such series
of Offered Preferred Shares that it shall have received hereunder on the
Initial Date of Original Issue in respect of the issuance of the initial series
of Preferred Shares.
8. Termination. The Fund may terminate this Agreement for any
reason, at any time, upon the giving of 10 days' written notice of such
termination to the Initial Purchaser. This Agreement will automatically
terminate, without the giving of any notice, on the first date on which ▇▇▇▇▇▇
Brothers Inc. is no longer the exclusive Broker-Dealer with respect to the
Preferred Shares.
9. Indemnification. (a) The Fund and the Investment Manager
shall, jointly and severally, indemnify and hold harmless the Initial
Purchaser, its affiliates, their respective officers, directors, shareholders,
partners, trustees, employees, representatives and agents, and each person, if
any, who controls the Initial Purchaser within the meaning of the Securities
Act (collectively referred to for purposes of this Section 9(a) and Section 10
as a "Initial Purchaser Indemnified Party"), from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof
(including, without limitation, any loss, claim, damage, liability or action
relating to purchases and sales of the Preferred Shares), to which that Initial
Purchaser Indemnified Party may become subject, whether commenced or
threatened, under the Securities Act, any other federal or state statutory law
or regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement
or alleged untrue statement of a material fact contained in the Preliminary
Offering Circular, any other preliminary Offering Circular, any final Offering
Circular or in any other Offering Document or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and shall reimburse
each Initial Purchaser Indemnified Party promptly upon demand for any legal or
other expenses reasonably incurred by that Initial Purchaser Indemnified Party
in connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that neither the Fund nor the Investment Manager shall be liable in any such
case to the extent that any such loss, claim, damage, liability or action
arises out of, or is based upon, an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with the Initial Purchaser's Information or the
Insurer's Information; provided, further, that the foregoing indemnity
agreement with respect to the Preliminary Offering Circular or any other
preliminary Offering Circular shall not inure to the benefit of the Initial
Purchaser if any such loss, claim, damage, liability or action results from the
fact that both (i) the person asserting any such loss, claim, damage or
liability was not sent a copy of the final Offering Circular with respect to
the Offered Preferred Shares purchased by such person at or prior to the time
written confirmation of the sale of such Offered Preferred Shares was sent to
such person and (ii) the untrue statement in or omission from the Preliminary
Offering Circular or such other preliminary Offering Circular was corrected in
such final Offering Circular unless, in either case, such failure to deliver
such final Offering Circular was a result of non-compliance by the Fund with
the provisions of Section 3(d)hereof.
(b) The Initial Purchaser shall indemnify and hold harmless
the Fund, the Investment Manager and their respective officers, directors,
employees, representatives and agents, and each person, if any, who controls
the Fund or the Investment Manager within the meaning of the Securities Act
(collectively referred to for purposes of this Section 9(b) and Section 10 as a
"Fund Indemnified Party"), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including,
without limitation, any loss, claim, damage, liability or action relating to
purchases and sales of the Preferred Shares), to which that Fund Indemnified
Party may become subject, whether commenced or threatened, under the Securities
Act, any other federal or state statutory law or regulation, at common law or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Circular, any other
preliminary Offering Circular, any final Offering Circular or in any other
Offering Document or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with the Initial Purchaser's Information,
and shall reimburse each Fund Indemnified Party promptly upon demand for any
legal or other expenses reasonably incurred by that Fund Indemnified Party in
connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred.
(c) As soon as reasonably practicable after receipt by a
Initial Purchaser Indemnified Party or a Fund Indemnified Party (each an
"Indemnified Party") under this Section 9 of notice of any claim or the
commencement of any action, the Indemnified Party shall, if a claim in respect
thereof is to be made against the indemnifying party pursuant to Section 9(a)
or 9(b), notify the indemnifying party in writing of the claim or the
commencement of that action; provided, however, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have
under this Section 9 except to the extent that it has been materially
prejudiced (through the forfeiture of substantive rights or defenses) by such
failure; and, provided, further, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have to an
Indemnified Party otherwise than under this Section 9. If any such claim or
action shall be brought against an Indemnified Party and it notifies the
indemnifying party of its intention to seek indemnification hereunder, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party,
to assume the defense thereof with counsel reasonably satisfactory to the
Indemnified Party. After notice from the indemnifying party to the Indemnified
Party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the Indemnified Party under this
Section 9 for any legal or other expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation or providing evidence; provided, however, that an
Indemnified Party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel for the
Indemnified Party will be at the expense of such Indemnified Party unless (i)
the indemnifying party has failed to provide counsel satisfactory to such
Indemnified Party in a timely manner, (ii) such Indemnified Party determines
that such counsel's representation of such Indemnified Party would present such
counsel with a conflict of interest or (iii) the Indemnified Party determines
that there may be legal defenses available to it or other Indemnified Parties
which are different from or in addition to those available to the indemnifying
party. It is understood that the indemnifying party or parties shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees, disbursements and other charges of more than
one separate firm of attorneys (in addition to any local counsel) at any one
time for all such Indemnified Party or Parties. Each Indemnified Party, as a
condition of the indemnity agreements contained in Sections 9(a) and 9(b)
hereof, shall use all reasonable efforts to cooperate with the indemnifying
party in the defense of any such action or claim. No indemnifying party shall
(i) without the prior written consent of the respective Indemnified Parties
(which consent shall not be unreasonably withheld), settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the Indemnified Parties
are actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an explicit unconditional release of
each Indemnified Party from all liability arising out of such claim, action,
suit or proceeding, or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with the consent of the indemnifying party or if
there be a final judgment of the plaintiff in any such action, the indemnifying
party agrees to indemnify and hold harmless any Indemnified Party from and
against any loss or liability by reason of such settlement or judgment.
(d) Notwithstanding the provisions of Section 9(a), Section
9(b) and Section 10 hereof, (i) the Initial Purchaser shall not be required to
indemnify the Fund Indemnified Parties pursuant to Section 9(b) hereof and/or
contribute amounts pursuant to Section 10 hereof by reason of any untrue or
alleged untrue statement or omission or alleged omission in an aggregate amount
that exceeds the amount of the total fees received by the Initial Purchaser
under this Agreement, (ii) the Investment Manager shall not be required to
indemnify the Initial Purchaser Indemnified Parties pursuant to Section 9(a)
hereof and/or contribute amounts pursuant to Section 10 hereof by reason of any
untrue or alleged untrue statement or omission or alleged omission in an
aggregate amount that exceeds the amount of the total fees received by the
Investment Manager from the Fund pursuant to the Investment Management
Agreement and through the direct or indirect ownership by the Investment
Manager and its affiliates of the Carried Interest (as defined in the Offering
Circular) and (iii) if, as of the end of the fiscal quarter of the Fund
immediately preceding the date of any demand by a Initial Purchaser Indemnified
Party for indemnification or contribution from the Fund and the Investment
Manager pursuant to Section 9 or 10 hereof, the Company Equity (as defined in
the Credit Agreement, or if the Credit Agreement has been terminated, as
defined in the Credit Agreement immediately before termination) equals or
exceeds 60% of Contributed Company Capital (as defined in the Credit Agreement,
or if the Credit Agreement has been terminated, as defined in the Credit
Agreement immediately before termination), any such demand for indemnification
and/or contribution by a Initial Purchaser Indemnified Party from the
Investment Manager will be in an amount up to the Investment Manager Percentage
(as hereinafter defined) of the amount being demanded from the Fund and the
Investment Manager pursuant to Section 9 hereof and/or Section 10 hereof;
provided, however that, if the Fund fails to pay any amount demanded of it by a
Initial Purchaser Indemnified Party pursuant to Section 9 and/or 10 hereof
within 14 days of such demand, such Initial Purchaser Indemnified Party may,
subject to the limitations set forth in clause (ii) of this Section 9(d),
demand payment by the Investment Manager of the full amount being demanded from
the Fund and the Investment Manager pursuant to Section 9 hereof and/or Section
10 hereof. If the Investment Manager pays any amount of the Fund Percentage (as
hereinafter defined) of any demand made by a Initial Purchaser Indemnified
Party pursuant to the proviso in the immediately preceding sentence, the
Investment Manager shall have the right to recover such amount from the Fund
and such payment shall in no way limit any claim the Investment Manager may
have against the Fund for such amount, whether in law or at equity. The
"Investment Manager Percentage" on the date of any demand for indemnification
or contribution from the Fund and the Investment Manager pursuant to Section 9
hereof and/or Section 10 hereof will equal the percentage equivalent of a
fraction, the numerator of which is the total fees received by the Investment
Manager from the Fund pursuant to the Investment Management Agreement and
through the direct or indirect ownership by the Investment Manager and its
affiliates of the Carried Interest on or prior to such date, and the
denominator of which is the sum of the total gross proceeds from the sale of
the Preferred Shares under this Agreement received by the Fund on or prior to
such date and the total fees received by the Investment Manager from the Fund
pursuant to the Investment Management Agreement and through the direct or
indirect ownership by the Investment Manager and its affiliates of the Carried
Interest on or prior to such date; and the "Fund Percentage" on any such date
will equal 100% minus the Investment Manager Percentage on such date. For the
purposes of this Section 9(d), the "direct or indirect ownership by the
Investment Manager and its affiliates of the Carried Interest" shall not
include any direct or indirect ownership of the Carried Interest by the members
of the Fund's advisory board or employees of the Investment Manager other than
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇.
(e) The obligations of the Fund, the Investment Manager and
the Initial Purchaser in this Section 9 and in Section 10 are in addition to
any other liability that the Fund, the Investment Manager or the Initial
Purchaser, as the case may be, may otherwise have, including in respect of any
breaches of representations, warranties and agreements made herein by any such
party.
10. Contribution. If the indemnification provided for in
Section 9 is unavailable or insufficient to hold harmless an Indemnified Party
under Section 9(a) or 9(b), then each indemnifying party shall, in lieu of
indemnifying such Indemnified Party, contribute to the amount paid or payable
by such Indemnified Party as a result of such loss, claim, damage or liability,
or action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Fund and the Investment Manager
on the one hand and the Initial Purchaser on the other from the offering of the
Preferred Shares hereunder or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Fund and the Investment Manager on the one hand
and the Initial Purchaser on the other with respect to the statements or
omissions that resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Fund and the Investment Manager on the one
hand and the Initial Purchaser on the other with respect to such offering shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Preferred Shares offered under this Agreement (before deducting
expenses) received by the Fund on the one hand, and the total fees received by
the Initial Purchaser under this Agreement, on the other, bear to the total
gross proceeds from the sale of the Preferred Shares under this Agreement. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to the Fund or the Investment
Manager or information supplied by the Fund or the Investment Manager on the
one hand or to the Initial Purchaser's Information on the other, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The Fund, the
Investment Manager and the Initial Purchaser agree that it would not be just
and equitable if contributions pursuant to this Section 10 were to be
determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an Indemnified Party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section 10 shall be deemed to include, for purposes of this Section 10, any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending or preparing to defend any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
11. Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of and be binding upon the Initial Purchaser, the
Fund, the Investment Manager and their respective successors and permitted
assigns, provided, however, that neither this Agreement nor any of the rights,
interest or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties. This Agreement
and the terms and provisions hereof are for the sole benefit of only those
persons, except as provided in Sections 9 and 10 with respect to affiliates,
officers, directors, employees, representatives, agents and controlling persons
of the Fund, the Investment Manager and the Initial Purchaser. Nothing in this
Agreement is intended or shall be construed to give any person, other than the
persons referred to in this Section 11, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
12. Additional Broker/Dealer Agreement. The Fund hereby
agrees that ▇▇▇▇▇▇ Brothers Inc. shall be the sole Broker-Dealer for the
Preferred Shares; provided, however that the Fund may enter into Broker-Dealer
Agreements with one or more additional Broker-Dealers selected by the Fund
("Additional Broker-Dealer Agreements") if (1)(a) the amount by which the
Applicable Rate for a series of the Preferred Shares for a Rate Period exceeds
the Reference Rate for such Rate Period (the "Preferred Shares' Spread") is
more than 15 basis points more than the amount by which the dividend rate for
comparable structured finance auction rate preferred securities with the same
ratings, the same financial guarantor and the same auction rate period
("Comparable Securities") exceeds the LIBOR rate for the related auction rate
period for the Comparable Securities (the "Comparable Securities' Spread") for
three out of five consecutive Rate Periods for such series of Preferred Shares
(such three periods, the "Applicable Periods" and such an event, an "Additional
Dealer Event"), (b) there has not been a material adverse change in the credit
quality of the Preferred Shares (either as a result of a material adverse
change in the assets of the Fund or the financial condition of the Insurer)
during the Applicable Periods, (c) the Fund provides ▇▇▇▇▇▇ Brothers Inc. with
prior written notice of its intention to enter into Additional Broker-Dealer
Agreements because of the auction results for the Preferred Shares during the
Applicable Periods and (d) the Preferred Shares' Spread for the two consecutive
Rate Periods immediately following Initial Purchaser's receipt of such notice
is more than 15 basis points more than the Comparable Securities' Spread or
(2)(a) three Additional Dealer Events occur over the course of any 12
consecutive months, (b) there has not been a material adverse change in the
credit quality of the Preferred Shares (either as a result of a material
adverse change in the assets of the Fund or the financial condition of the
Insurer) during the Applicable Periods relating to any of the Additional Dealer
Events and (c) the Fund provides the Initial Purchaser with prior written
notice of its intention to enter into Additional Broker-Dealer Agreements
because of the occurrence of three Additional Dealer Events over the course of
such 12 consecutive months.
13. Expenses. The Fund agrees with the Initial Purchaser to
pay (i) the costs incident to the authorization, issuance, sale, preparation
and delivery of the Preferred Shares and any taxes payable in that connection;
(ii) the costs incident to the preparation, printing and distribution of the
Offering Circular and any amendments or supplements thereto; (iii) the costs of
preparing and distributing each of the Fund Agreements; (iv) the costs incident
to the preparation, printing and delivery of the global certificates evidencing
the Preferred Shares, including stamp duties and transfer taxes, if any,
payable upon issuance of the Preferred Shares; (v) the fees and expenses of
counsel to the Fund; (vi) the reasonable fees and expenses of counsel to the
Initial Purchaser; (vii) the fees and expenses of qualifying the Preferred
Shares under the securities laws of the several jurisdictions and of preparing
and distributing Blue Sky Memoranda (including related reasonable fees and
expenses of counsel for the Initial Purchaser); (viii) any fees charged by
rating agencies for rating the Preferred Shares; (ix) the fees and expenses of
the Insurer, the Custodian and the Auction Agent (including related fees and
expenses of any counsel to such parties), to the extent obligated to pay such
amounts in accordance with the Fund Agreements; (x) all expenses and
application fees incurred in connection with the approval of the Preferred
Shares for book-entry transfer by DTC; and (xi) all other costs and expenses
incident to the performance of the obligations of the Fund under this Agreement
which are not otherwise specifically provided for in this Section 13.
14. Survival. The respective indemnities, rights of
contribution, representations, warranties and agreements of the Fund (including
Section 12 hereof), the Investment Manager and the Initial Purchaser contained
in this Agreement or made by or on behalf of the Fund, the Investment Manager
or the Initial Purchaser pursuant to this Agreement or any certificate
delivered pursuant hereto shall survive the delivery of and payment for any of
the Offered Preferred Shares and shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any of them or any of their respective
affiliates, officers, directors, employees, representatives, agents or
controlling persons.
15. Notices, etc.. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Initial Purchaser, shall be delivered or sent
by nationally recognized overnight courier or telecopy transmission to:
▇▇▇▇▇▇ Brothers Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
Telecopier no.: (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇)
(▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇▇▇ ▇▇▇▇▇);
(b) if to the Fund, shall be delivered or sent by nationally
recognized overnight courier or telecopy transmission to:
Special Value Expansion Fund, LLC
C/o Tennenbaum Capital Partners, LLC
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopier no.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to Investment Manager, shall be delivered or sent by
nationally recognized overnight courier or telecopy transmission to:
▇▇▇▇▇▇▇▇▇▇ Capital Partners, LLC
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopier no.: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as may be specified by prior written notice to the
other parties hereto.
Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof.
16. Definition of Terms. For purposes of this Agreement, (a)
capitalized terms used but not defined herein shall have the meanings given to
such terms in the Statement of Preferences, (b) the term "business day" means
any day on which the New York Stock Exchange, Inc. is open for trading, and (c)
except where otherwise expressly provided, the term "affiliate" has the meaning
set forth in Rule 405 under the Securities Act.
17. Initial Purchaser's Information. The parties hereto
acknowledge and agree that, for all purposes of this Agreement, the "Initial
Purchaser's Information" consists solely of the following information in the
Offering Circular the fourth full paragraph on the third page of the Offering
Circular, the first sentence of the third paragraph under the caption "Certain
Terms of the Offering--Plan of Distribution" and the information under the
caption "Certain Terms of the Offering - Other Information."
18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
19. Counterparts. This Agreement may be executed in one or
more counterparts (which may include counterparts delivered by telecopier) and,
if executed in more than one counterpart, the executed counterparts shall each
be deemed to be an original, but all such counterparts shall together
constitute one and the same instrument.
20. Amendments. No amendment or waiver of any provision of
this Agreement, nor any consent or approval to any departure therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
parties hereto.
21. Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
22. Entirety. This Agreement constitutes the entire agreement
of the parties hereto with respect to the subject matter hereof and supersedes
all prior understandings and agreements of such parties.
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us a counterpart hereof, whereupon
this instrument will become a binding agreement among the Fund, the Investment
Manager and the Initial Purchaser in accordance with its terms.
Very truly yours,
SPECIAL VALUE EXPANSION FUND, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Secretary
▇▇▇▇▇▇▇▇▇▇ CAPITAL PARTNERS, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Managing Partner
Accepted:
▇▇▇▇▇▇ BROTHERS INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------
Authorized Signatory
EXHIBIT A
FORM OF PURCHASE AGREEMENT
SPECIAL VALUE EXPANSION FUND, LLC
SERIES [_] MONEY MARKET CUMULATIVE PREFERRED(TM) SHARES (MMP(R))
Special Value Expansion Fund, LLC
C/o Tennenbaum Capital Partners, LLC
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
The undersigned agrees to purchase, and the Special Value Expansion
Fund, LLC (the "Fund") agrees to sell, the following number of Series [_] Money
Market Cumulative Preferred Shares (the "Offered Preferred Shares") described
in the Distribution Agreement, dated November ?, 2004, among the undersigned,
the Fund and ▇▇▇▇▇▇▇▇▇▇ Capital Partners, LLC (as it may be supplemented or
amended from time to time, the "Distribution Agreement") and in the Preliminary
Private Placement Memorandum dated ______, 200_ of the Fund relating to the
Offered Preferred Shares and having the following terms:
NUMBER OF SHARES:
INITIAL DIVIDEND RATE: __%
DATE OF ORIGINAL ISSUE: ______________
DATE OF INITIAL AUCTION: ______________
INITIAL DIVIDEND PAYMENT DATE: ______________
Our obligation to purchase the Offered Preferred Shares hereunder is
subject to the conditions set forth in Section 7 of the Distribution Agreement.
This Agreement shall be governed by and construed in accordance with
the laws of New York.
▇▇▇▇▇▇ BROTHERS INC.
By:
---------------------------
[Title]
ACCEPTED: , 200_
SPECIAL VALUE EXPANSION FUND, LLC
By:
----------------------------------
[Title]
EXHIBIT B
NOTICE OF ISSUANCE
SPECIAL VALUE EXPANSION FUND, LLC
SERIES [_] MONEY MARKET CUMULATIVE PREFERRED(TM) SHARES (MMP(R))
NOTICE IS HEREBY GIVEN that Special Value Expansion Fund, LLC is
proposing to issue _______________ shares of Series [__] Money Market
Cumulative Preferred Shares (the "Preferred Shares") on _________.
Terms used herein have the meanings set forth in the Statement of
Preferences relating to the Preferred Shares.
SPECIAL VALUE EXPANSION FUND, LLC
By: __________________________________
Name:_________________________________
Title:________________________________
Date:_________________________________
EXHIBIT C
FORM OF NEGATIVE ASSURANCES
OF SKADDEN, ARPS, SLATE, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
AS SPECIAL COUNSEL TO THE FUND
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EXHIBIT D
FORM OF OPINION OF ▇▇▇▇▇▇▇, ARPS, SLATE, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
AS SPECIAL COUNSEL TO THE FUND
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EXHIBIT E
FORM OF OPINION OF ▇▇▇▇▇▇▇, ARPS, SLATE, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
AS SPECIAL TAX COUNSEL TO THE FUND
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EXHIBIT F
FORM OF OPINION OF ▇▇▇▇▇▇▇, ARPS, SLATE, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
AS SPECIAL COUNSEL TO THE INVESTMENT MANAGER
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EXHIBIT G
FORM OF OPINION OF ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
AS SPECIAL COUNSEL TO THE CUSTODIAN
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EXHIBIT H
FORM OF OPINION OF ▇▇▇▇ ▇▇▇,
ASSISTANT GENERAL COUNSEL TO AMBAC
----------------------------------