<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 19, 2000
1933 ACT FILE NO. 333-95423
1940 ACT FILE NO. 811-09571
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
(CHECK APPROPRIATE BOXES)
[ ] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X] PRE-EFFECTIVE AMENDMENT NO. 1
[ ] POST-EFFECTIVE AMENDMENT NO.
AND
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] AMENDMENT NO. 3
NUVEEN SENIOR INCOME FUND
Enter Name of Registrant as Specified in Charter
333 WEST WACKER DRIVE, CHICAGO, ILLINOIS 60606
Address of Principal Executive Offices (Number, Street, City, State and Zip
Code)
(312) 917-7700
Registrant's Telephone Number, including Area Code
GIFFORD R. ZIMMERMAN, ESQ. -- VICE PRESIDENT AND SECRETARY
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
Name and Address (Number, Street, City, State and Zip code) of Agent for Service
Copies of Communications To:
<TABLE>
<S> <C> <C>
DAVID A. STURMS, ESQ. ERIC F. FESS, ESQ. THOMAS A. HALE, ESQ.
VEDDER PRICE KAUFMAN & KAMMHOLZ CHAPMAN & CUTLER SKADDEN, ARPS, SLATE,
222 N. LASALLE STREET 111 W. MONROE MEAGHER & FLOM (ILLINOIS)
CHICAGO, IL 60601 CHICAGO, IL 60603 333 WEST WACKER DRIVE,
SUITE 2100
CHICAGO, IL 60606
</TABLE>
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this Registration Statement
If any of the securities being registered on this Form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
The undersigned registrant hereby undertakes that: (1) For purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective. (2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
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<PAGE> 2
The information in this Prospectus is not complete and may be changed.
These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This Prospectus
is not an offer to sell these securities and is not soliciting an offer to
buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, MAY 19, 2000
(LOGO) $46,000,000
NUVEEN SENIOR INCOME FUND
1,840 SHARES, SERIES TH
TAXABLE AUCTIONED PREFERRED SHARES ("TAPS")
LIQUIDATION PREFERENCE $25,000 PER SHARE
------------------------
Nuveen Senior Income Fund (the "Fund") is a non-diversified, closed-end
management investment company. The Fund's investment objective is to seek a high
level of current income, consistent with preservation of capital. The Fund seeks
to achieve its objective primarily by investing in senior secured loans whose
interest rates float or adjust periodically based on a benchmark interest rate.
Senior loans hold the most senior position in the capital structure of the
borrower, are usually secured with specific collateral, and have a claim on the
assets of the borrower that comes before other lenders to and holders of
securities of the borrower, such as holders of subordinated debt, preferred
stock or common stock. However, senior loans typically are below investment
grade quality and have speculative characteristics.
Nuveen Senior Loan Asset Management Inc. (the "Adviser") is the Fund's
investment adviser. The Adviser is a wholly-owned subsidiary of the John Nuveen
Company.
<TABLE>
Per Share Sales Load(1) Proceeds to Fund(2)
----------- -------- -----------
<S> <C> <C> <C>
Public Offering Price.................................... $ 25,000 $ $
Total.................................................... $46,000,000 $ $
</TABLE>
- ---------------
(1) The Fund and the Adviser have agreed to indemnify the Underwriters against
certain liabilities under the Securities Act of 1933. See "Underwriting."
(2) Plus accumulated dividends, if any, from the Date of Original Issue.
The dividend rate for the initial Dividend Period for the TAPS issued
pursuant to the Offering will be % per annum. For each Dividend Period
following the initial Dividend Period, the dividend rate on the TAPS will be the
Applicable Rate for such series in effect from time to time as determined,
except as described herein, on the basis of Orders placed in an Auction
conducted on the Business Day preceding the commencement of such Dividend
Period, as set forth herein. The Applicable Rate that results from an Auction
for any Dividend Period will not be greater than the Maximum Rate then in effect
or less than the Minimum Rate then in effect.
Dividends on shares of TAPS will accumulate at the Applicable Rate from the
Date of Original Issue and shall be payable on each Dividend Payment Date
thereafter, commencing , 2000. The initial Dividend Period for the
shares of TAPS will be days. Dividend Periods after the initial
Dividend Period for the TAPS shall be either Standard Rate Periods (28 days) or,
subject to certain conditions and with notice to the holders of TAPS, periods
longer or shorter than 28 days and having such durations as the Board of
Trustees shall specify (each, a "Special Rate Period"). The initial Auction Date
will be , 2000.
The Fund is offering 1,840 TAPS at a price per share of $25,000 (the
"Offering"). It is a condition of the Underwriters' obligation to purchase the
TAPS that the TAPS be rated "aaa" by Moody's as of the Date of Original Issue.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus sets forth concisely information about the Fund that you
should know before investing. You should retain it for future reference. A
statement of additional information ("SAI") dated , 2000,
containing additional information about the Fund, is on file with the SEC and is
incorporated by reference into this Prospectus. The table of contents of the SAI
appears on page 53 of this Prospectus. You may obtain a copy of the SAI without
charge by calling the Fund at 1-800-257-8787, or writing the Fund at 333 West
Wacker Drive, Chicago, Illinois 60606.
------------------------
PAINEWEBBER INCORPORATED
DEUTSCHE BANC ALEX. BROWN
A.G. EDWARDS & SONS, INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
PRUDENTIAL SECURITIES
SALOMON SMITH BARNEY
------------------------
THE DATE OF THIS PROSPECTUS IS MAY , 2000.
<PAGE> 3
(continued from previous page)
TAPS having a Dividend Period of one year or less than one year may be
redeemed at the option of the Fund, in whole or in part, on any Dividend Payment
Date at a redemption price equal to $25,000 per share, plus accumulated and
unpaid dividends thereon to the date fixed for redemption. TAPS having a
Dividend Period of more than one year are redeemable at the option of the Fund,
in whole or in part, prior to the end of the relevant Dividend Period, subject
to any Specific Redemption Provisions, at a redemption price equal to $25,000
per share, plus accumulated and unpaid dividends thereon to the redemption date,
plus a redemption premium, if any, determined by the Board of Trustees after
consultation with the Broker-Dealers. See "Description of TAPS
-- Redemption -- Optional Redemption." The TAPS are, under certain conditions,
subject to mandatory redemption, in whole or in part, if the Fund does not
maintain the "aaa" credit rating for the TAPS or if the Fund, on any Valuation
Date or the last Business Day of any month, shall fail to meet the TAPS Basic
Maintenance Amount or the 1940 Act TAPS Asset Coverage, respectively, and in any
such case such failure is not cured on a timely basis as specified herein. See
"Description of TAPS -- Redemption -- Mandatory Redemption."
Certain capitalized terms not otherwise defined in this Prospectus have the
meanings provided in the Statement included as Appendix A to the SAI.
The Underwriters are offering the TAPS subject to various conditions. It is
expected that the TAPS will be delivered to the Underwriters through the
facilities of The Depository Trust Company on or about , 2000.
------------------------
THE TAPS ARE NOT BANK DEPOSITS. AN INVESTMENT IN TAPS IS NOT GUARANTEED,
ENDORSED OR INSURED BY ANY BANK, FINANCIAL INSTITUTION OR GOVERNMENT ENTITY,
SUCH AS THE FEDERAL DEPOSIT INSURANCE CORPORATION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Financial Highlights........................................ 7
The Fund.................................................... 8
Use of Proceeds............................................. 8
Capitalization and Information Regarding Senior
Securities................................................ 9
Portfolio Composition....................................... 10
The Fund's Investments...................................... 10
Risk Factors................................................ 21
Management of the Fund...................................... 27
Description of TAPS......................................... 29
Description of Credit Facility/Commercial Paper Program..... 42
The Auction................................................. 43
Description of Common Shares................................ 45
Certain Provisions in the Declaration of Trust.............. 46
Repurchase of Common Shares; Conversion to Open-End Fund.... 47
Net Asset Value............................................. 47
Federal Taxation............................................ 49
Underwriting................................................ 51
Custodian and Transfer Agent, Dividend Disbursing Agent and
Redemption Agent.......................................... 51
Legal Opinions.............................................. 52
Available Information....................................... 52
Special Note Regarding Forward-Looking Statements........... 52
Table of Contents for the Statement of Additional
Information............................................... 53
</TABLE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
NEITHER THE FUND NOR THE UNDERWRITERS HAVE AUTHORIZED ANY OTHER PERSON TO
PROVIDE YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. NEITHER THE FUND NOR THE
UNDERWRITERS ARE MAKING AN OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION
WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION
APPEARING IN THIS PROSPECTUS IS ACCURATE AS OF THE DATE ON THE FRONT COVER ONLY.
ii
<PAGE> 4
PROSPECTUS SUMMARY
THE FUND................... The Fund is a non-diversified, closed-end
management investment company organized as a
Massachusetts business trust. See "The Fund." The
Fund's common shares, $.01 par value ("Common
Shares"), are traded on the New York Stock Exchange
under the symbol "NSL." See "Description of Common
Shares." As of April 30, 2000, the Fund had
29,610,618 Common Shares outstanding and net assets
of $281,899,277.
INVESTMENT ADVISER......... Nuveen Senior Loan Asset Management Inc. (the
"Adviser") is the Fund's investment adviser. The
Adviser is a wholly-owned subsidiary of The John
Nuveen Company.
INVESTMENT OBJECTIVES AND
POLICIES................... The Fund's investment objective is to seek a high
level of current income, consistent with
preservation of capital. There can be no assurance
that the Fund will achieve its investment
objective.
The Fund seeks to achieve its objective primarily
by investing in senior secured loans whose interest
rates adjust periodically based on a benchmark,
such as the prime rate offered by one or more major
United States banks, or the London Inter-Bank
Offered Rate (known as "LIBOR").
Under normal circumstances, the Fund will invest at
least 80% of its total assets in adjustable rate,
U.S. dollar-denominated senior loans ("Senior
Loans") that are secured. Senior Loans are made to
corporations, partnerships, limited liability
companies and other entities ("Borrowers") to
finance leveraged buyouts, recapitalizations,
mergers, acquisitions, stock repurchases, debt
refinancings and, to a lesser extent, for general
operating and other purposes.
Although Senior Loans have the most senior position
in a Borrower's capital structure and the Fund
normally will invest at least 80% of its total
assets in Senior Loans that are secured by specific
collateral, Senior Loans are typically below
investment grade quality and may have below
investment grade ratings; these ratings are
associated with securities having speculative
characteristics. Because of the features of Senior
Loans, the Fund's Adviser believes, based on its
experience, that these ratings do not necessarily
reflect the true risk of loss of principal or
interest on a Senior Loan. For example, the Fund's
Adviser believes that Senior Loans tend to have
more favorable loss recovery rates as compared to
other types of below investment grade quality debt
obligations. Accordingly, the Fund's Adviser
generally does not take ratings into account when
determining whether to invest in a Senior Loan and,
in any event, does not view ratings as a
determinative factor in its investment decisions.
Investing in Senior Loans does, however, involve
investment risk, and some Borrowers default on
their Senior Loan payments. The Fund attempts to
manage these risks through a varied portfolio and
ongoing analysis and monitoring of Borrowers. As a
result, the Fund is highly dependent on the credit
analysis abilities of the Fund's Adviser.
1
<PAGE> 5
The Fund may invest up to 20% of its total assets
in U.S. dollar-denominated Senior Loans of
Borrowers that are organized or located in
countries outside the United States.
In addition, the Fund may invest up to 20% of its
total assets, in the aggregate, in:
- Senior Loans which are not secured by any
collateral;
- other income producing securities such as
investment and non-investment grade corporate
debt securities, high quality, short-term debt
securities with remaining maturities of one year
or less and U.S. government securities (subject
to the limit that the Fund may not invest more
than 5% of its total assets in junior debt
securities or fixed rate income securities with
effective maturities greater than one year,
provided that the 5% limitation does not apply to
securities acquired in connection with the Fund's
investments in Senior Loans); and
- equity securities and warrants acquired in
connection with the Fund's investments in Senior
Loans.
The Fund may also engage in lending of its
securities, repurchase agreements, reverse
repurchase agreements and, for hedging and risk
management purposes, certain derivative
transactions. See "Risk Factors -- General Risks of
Investing in the Fund."
For additional information on the Fund's objective
and policies, see "The Fund's Investments."
LEVERAGE................... The Fund uses financial leverage for investment
purposes. Including the proceeds of the TAPS, it is
currently anticipated that the amount of leverage
will represent approximately 40% (and in no event
will it exceed 50%) of the Fund's total assets. In
addition to issuing TAPS, the Fund borrows money
pursuant to a credit facility and/or issues
commercial paper or notes. It is currently
anticipated that the amount of leverage represented
by a credit facility and/or a commercial paper
program will be approximately 30% of the Fund's
total assets. See "Description of Credit
Facility/Commercial Paper Program." The Fund's
obligations under any credit facility and/or
commercial paper program are senior to the TAPS.
Payments to holders of TAPS in liquidation or
otherwise will be subject to the prior payment of
all outstanding indebtedness, including the Fund's
obligations under any credit facility and/or the
commercial paper program. On December 14, 1999, the
Fund entered into a credit agreement pursuant to
which a commercial bank provides the Fund with
access to a $150 million revolving credit facility.
As of January 31, 2000, the Fund had borrowed $127
million under such revolving credit facility. The
Fund expects to replace the revolving credit
facility by entering into a definitive agreement
with a syndicate of commercial banks to establish a
$150 million commercial paper program and an
associated $155 million liquidity facility.
However, there can be no assurance that any
commercial paper or notes will be issued, that the
commercial paper or notes will remain outstanding,
or that the Fund will borrow or, if it borrows,
that such borrowing will be continued. See
"Description of Commercial Paper Program."
2
<PAGE> 6
THE OFFERING............... The Fund is offering 1,840 TAPS Series TH, each at
a purchase price of $25,000 per share, plus
accumulated dividends, if any, from the date the
share is issued. The TAPS are being offered by a
group of underwriters (the "Underwriters") led by
PaineWebber Incorporated, Deutsche Bank Securities
Inc., A.G. Edwards & Sons, Inc., Goldman, Sachs &
Co., Merrill Lynch & Co., Prudential Securities and
Salomon Smith Barney Inc. See "Underwriting."
PRINCIPAL INVESTMENT
RISKS...................... Risk is inherent in all investing. Therefore,
before investing in the Fund you should carefully
consider certain risks. The primary risks of
investing in TAPS shares are:
- senior indebtedness of the Fund (including any
credit facility and/or commercial paper program)
may constitute a substantial lien and burden on
the TAPS by reason of its prior claim against the
income of the Fund and against the net assets of
the Fund in liquidation;
- the Fund will not be permitted to declare
dividends or other distributions with respect to
the TAPS or purchase TAPS unless at the time
thereof the Fund meets certain asset coverage
requirements and payments of principal and of
interest on the senior indebtedness are not in
default;
- if an auction fails you may not be able to sell
some or all of your shares;
- because of the nature of the market for TAPS
shares, you may receive less than the price you
paid for your shares if you sell them outside of
the auction, especially when market interest
rates are rising;
- a rating agency could downgrade TAPS shares,
which could affect liquidity;
- the Fund may be forced to redeem your shares to
meet regulatory or rating agency requirements or
may voluntarily redeem your shares in certain
circumstances;
- in extraordinary circumstances the Fund may not
earn sufficient income from its investments to
pay dividends;
- if an issuer of a Senior Loan in which the Fund
invests defaults, there may be a negative impact
on the income and net asset value of the Fund's
portfolio; and
- the TAPS are junior to certain senior
indebtedness of the Fund, including obligations
under any credit facility and/or commercial paper
program.
For additional general risks of investing in the
Fund, see "Risk Factors -- General Risks of
Investing in the Fund."
TRADING MARKET............. TAPS are not listed on an exchange. Instead, you
may buy or sell TAPS at an auction that normally is
held every 28 days, by submitting orders to a
broker-dealer that has entered into an agreement
with the Auction Agent and the Fund (a
"Broker-Dealer"), or to a broker-dealer that has
entered into a separate agreement with a
Broker-Dealer. In addition to the auctions,
Broker-Dealers and other broker-dealers may
maintain a secondary trading market in TAPS outside
of
3
<PAGE> 7
auctions, but may discontinue this activity at any
time. There is no assurance that a secondary market
will provide shareholders with liquidity or that
the trading price in any secondary market would be
$25,000. You may transfer shares outside of
auctions only to or through a Broker-Dealer or a
broker-dealer that has entered into a separate
agreement with a Broker-Dealer.
The first auction date for the TAPS will be
, 2000, the business day before the
dividend payment date for the initial Dividend
Period for the TAPS. The start date for subsequent
Dividend Periods normally will be the business day
following the auction date unless the then-current
Dividend Period is a Special Rate Period, or the
day that normally would be the auction date or the
first day of the subsequent rate period is not a
business day.
DIVIDENDS AND RATE
PERIODS.................... The table below shows the dividend rate for the
initial rate period on TAPS offered in this
Prospectus. For subsequent Dividend Periods, TAPS
will pay dividends based on a rate set at auctions,
normally held every 28 days. In most instances
dividends are also payable every 28 days, on the
day following the end of the rate period. The
Applicable Rate that results from an Auction will
not be greater than 150% (the "Maximum Rate") of
the applicable AA Composite Commercial Paper Rate
(for a Dividend Period of fewer than 184 days) or
the Applicable Treasury Index Rate (for a Dividend
Period of 184 days or more) at the close of
business on the Business Day next preceding such
Auction Date. The Applicable Rate that results from
an Auction with respect to a Dividend Period of 28
days or fewer will not be lower than 70% of the
applicable AA Composite Commercial Paper Rate (the
"Minimum Rate"). There is no Minimum Rate with
respect to Dividend Periods longer than 28 days.
See "Description of TAPS -- Dividends and Dividend
Periods -- Determination of Dividend Rate" and "The
Auction."
The table below also shows the date from which
dividends on the TAPS will accumulate at the
initial rate and the dividend payment date for the
initial Dividend Period. If the day on which
dividends otherwise would be paid is not a business
day, then dividends will be paid on the first
business day that falls after that day.
Finally, the table below shows the number of days
of the initial Dividend Period for TAPS. Subsequent
rate periods generally will be 28 days. The
dividend payment date for Special Rate Periods of
more than 28 days will be set out in the notice
designating a Special Rate Period. See "Description
of TAPS -- Dividends and Dividend Periods --
Notification of Dividend Periods."
<TABLE>
<CAPTION>
DIVIDEND
DATE OF PAYMENT NUMBER OF
INITIAL ACCUMULATION DATE FOR DAYS OF
DIVIDEND AT INITIAL INITIAL RATE INITIAL
RATE RATE* PERIOD* RATE PERIOD
-------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
%
--------
* All dates are 2000.
</TABLE>
4
<PAGE> 8
RATINGS.................... It is a condition of the Underwriters' obligation
to purchase the TAPS that the TAPS receive a rating
of "aaa" from Moody's. A rating of "aaa" is the
highest category of ratings that Moody's assigns to
preferred stock.
RESTRICTIONS ON DIVIDEND,
REDEMPTION AND OTHER
PAYMENTS................... Under the 1940 Act, the Fund is not permitted to
declare any dividend on TAPS unless, after giving
effect to such dividend, asset coverage with
respect to the Fund's senior securities
representing indebtedness, including all
outstanding senior indebtedness of the Fund,
including the Fund's obligations under the credit
facility and/or commercial paper programs, if any,
is at least 200%. In addition, the Fund is not
permitted to declare any distribution on or
purchase or redeem any TAPS unless, after giving
effect to such distribution, purchase or
redemption, asset coverage with respect to the
Fund's senior securities representing indebtedness,
including the Fund's obligations under the credit
facility and/or commercial paper program, if any,
is at least 300%. Dividends or other distributions
on or redemptions or purchases of TAPS are also
prohibited at any time that an event of default
under the credit facility and/or commercial paper
program, if any, has occurred and is continuing.
See "Description of TAPS -- Restrictions on
Dividend, Redemption and Other Payments" and
"Description of Credit Facility/Commercial Paper
Program."
ASSET MAINTENANCE.......... The Fund must maintain Eligible Assets having an
aggregated Discounted Value at least equal to the
TAPS Basic Maintenance Amount as of each Valuation
Date. The Fund also must maintain asset coverage
for the TAPS on a non-discounted basis of at least
200% as of the last business day of each month. See
"Description of TAPS -- Asset Maintenance."
The Discount Factors and guidelines for calculating
the Discounted Value of the Fund's portfolio for
purposes of determining whether the TAPS Basic
Maintenance Amount has been satisfied have been
established by Moody's in connection with the
Fund's receipt from Moody's of the "aaa" credit
rating with respect to the TAPS on their Date of
Original Issue.
The Fund estimates that on the Date of Original
Issue, the 1940 Act TAPS Asset Coverage, based on
the composition of its portfolio as of April 30,
2000, after giving effect to the issuance of the
TAPS ($46,000,000) and the deduction of sales loads
and estimated offering expenses for such shares
($620,288) and giving effect to any credit facility
and/or commercial program, will be 252%.
5
<PAGE> 9
In addition to the 1940 Act TAPS Asset Coverage and
the TAPS Basic Maintenance Amount, under a credit
facility and/or commercial paper program, the Fund
may not permit the Fund's asset coverage ratio (as
defined separately by agreement) to fall below 300%
for more than four consecutive business days or
below 275% at any time without occurring an event
of default under the applicable agreement. See
"Description of Commercial Paper Program."
REDEMPTION................. Although the Fund ordinarily does not expect to
redeem TAPS, it may be required to redeem shares
if, for example, the Fund does not meet an asset
coverage ratio required by law or correct a failure
to meet a rating agency guideline in a timely
manner. The Fund voluntarily may redeem TAPS under
certain conditions. See "Description of TAPS --
Redemption."
VOTING RIGHTS.............. Except as otherwise indicated, holders of TAPS have
one vote per share and vote together with holders
of Common Shares as a single class.
In connection with the election of the Board of
Trustees, the holders of outstanding shares of
Preferred Shares, including TAPS, as a class, shall
be entitled to elect two Trustees of the Fund. The
holders of outstanding Common Shares and Preferred
Shares, including TAPS, voting together, shall
elect the remainder. However, upon the Fund's
failure to pay dividends on the Preferred Shares in
an amount equal to two full years of dividends, the
holders of Preferred Shares have the right to
elect, as a class, the smallest number of
additional Trustees as shall be necessary to assure
that a majority of the Trustees has been elected by
the holders of Preferred Shares. The terms of the
additional Trustees shall end when the Fund pays or
provides for all accumulated and unpaid dividends.
See "Description of TAPS -- Voting Rights."
FEDERAL INCOME TAXES....... The Distributions with respect to TAPS (other than
distributions in redemption of TAPS subject to
Section 302(b) of the Internal Revenue Code of
1986, as amended (the "Code")) will constitute
dividends to the extent of the Fund's current or
accumulated earnings and profits, as calculated for
federal income tax purposes. Such dividends
generally will be taxable as ordinary income to
holders. Because the Fund's portfolio income will
consist principally of interest income, corporate
investors in the TAPS generally will not be
entitled to the 70% dividends received deduction
regardless of the holders' respective holding
periods for their TAPS shares. Dividends designated
by the Fund as capital gain distributions will be
treated as long-term capital gains in the hands of
holders. The Internal Revenue Service currently
requires that a regulated investment company that
has two or more classes of stocks allocate to each
such class proportionate amounts of each type of
its income (such as ordinary income and capital
gains). Accordingly, the Fund intends to designate
distributions made with respect to TAPS as capital
gain distributions in proportion to the TAPS share
of total dividends paid during the year. See
"Federal Taxation."
This Summary is qualified in its entirety by reference to the more detailed
information included elsewhere in this Prospectus, the Fund's Statement of
Additional Information and the Fund's Statement Establishing and Fixing the
Rights and Preferences of Taxable Auctioned Preferred Shares (the "Statement")
attached as Appendix A to the Statement of Additional Information. Capitalized
terms used but not defined in this Prospectus shall have the meanings given to
such terms in the Statement.
6
<PAGE> 10
FINANCIAL HIGHLIGHTS
(UNAUDITED)
Information contained in the table below under the headings "Per Share
Operating Performance" and "Ratios/Supplemental Data" shows the unaudited
operating performance of the Fund from the commencement of the Fund's operations
on October 29, 1999 until January 31, 2000.
<TABLE>
<S> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period...................... $ 9.55
--------
Net Investment Income.................................. .23
Net Gains or Losses on Securities (Both Realized and
Unrealized)........................................... (.03)
--------
Total From Investment Operations.................. .20
--------
Distributions from Net Investment Income.................. (.15)
--------
Organizational and Offering Costs......................... (.01)
--------
Net Asset Value, End of Period............................ $ 9.59
========
Per Share Market Value, End of Period..................... $ 9.5625
========
Total Return on Net Asset Value........................... 2.02%
Total Return on Market Value.............................. (2.85)%
Ratios/Supplemental Data:
Net Assets, End of Period (In Thousands).................. $284,067
Ratio of Operating Expenses to Average Net Assets Before
Expense Reimbursement.................................. 2.03%*
Ratio of Net Investment Income to Average Net Assets
Before Expense Reimbursement........................... 8.92%*
Ratio of Operating Expenses to Average Net Assets After
Expense
Reimbursement.......................................... 1.54%*
Ratio of Net Investment Income to Average Net Assets After
Expense Reimbursement.................................. 9.41%*
Portfolio Turnover Rate................................... 14%
</TABLE>
- ---------------
* Annualized.
7
<PAGE> 11
THE FUND
The Fund is a non-diversified, closed-end management investment company
registered under the 1940 Act. The Fund was organized as a Massachusetts
business trust on August 13, 1999, pursuant to an Agreement and Declaration of
Trust governed by the laws of The Commonwealth of Massachusetts (the
"Declaration"). The Fund's principal office is located at 333 West Wacker Drive,
Chicago, Illinois 60606, and its telephone number is 1-800-257-8787. On October
26, 1999, the Fund issued an aggregate of 26,000,000 common shares of beneficial
interest, par value $.01 per share ("Common Shares"), pursuant to the initial
public offering thereof and commenced its operations. On November 16, 1999 and
December 10, 1999, the Fund issued an additional 2,000,000 and 1,600,000 Common
Shares, respectively, in connection with the partial exercises by the
Underwriters of the over-allotment option. The Fund's Common Shares are traded
on the New York Stock Exchange (the "Exchange") under the symbol "NSL." On
December 14, 1999, the Fund entered into a credit agreement pursuant to which a
commercial bank provides the Fund with access to a $150 million revolving credit
facility. The Fund expects to replace the revolving credit facility by entering
into a definitive agreement with a syndicate of commercial banks to establish a
$150 million commercial paper program and an associated $155 million liquidity
facility. However, there can be no assurance that any commercial paper or notes
will be issued, that the commercial paper or notes will remain outstanding, or
that the Fund will borrow or, if it borrows, that such borrowing will be
continued. See "Description of Credit Facility/Commercial Paper Program."
The following table provides information about the Fund's outstanding
shares as of January 31, 2000:
<TABLE>
<CAPTION>
AMOUNT AMOUNT HELD BY THE AMOUNT
TITLE OF CLASS AUTHORIZED FUND OR FOR ITS ACCOUNT OUTSTANDING
- -------------- ---------- ----------------------- -----------
<S> <C> <C> <C>
Common Shares............................. Unlimited -0- 29,610,617
TAPS Series TH............................ Unlimited -0- -0-
</TABLE>
USE OF PROCEEDS
The estimated net proceeds of this offering will be $45,379,712 after
payment of offering expenses and the sales load.
The estimated net proceeds of the offering will be invested in accordance
with the Fund's investment objective and policies as stated below. The Fund will
invest the estimated net proceeds of the offering in accordance with the Fund's
investment objective and policies as soon as practicable. It is anticipated
that, under normal market conditions, such investments will be completed no
later than one month after the completion of the offering. The Fund's actual
investment timetable will depend on the availability of Senior Loans and other
market conditions. Pending such investments, it is anticipated that the proceeds
will be invested in high-quality, short-term debt securities.
8
<PAGE> 12
CAPITALIZATION AND INFORMATION REGARDING SENIOR SECURITIES
(UNAUDITED)
CAPITALIZATION
The following table sets forth the capitalization of the Fund as of January
31, 2000, and as adjusted to give effect to the issuance of the shares of TAPS
offered hereby.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
------------ ------------
<S> <C> <C>
Shareholders' Equity:
Preferred Shares, $.01 par value per share (no shares
issued; 1,840 shares issued, as adjusted, at $25,000
per share liquidation preference)...................... $ -- $ 46,000,000
Common Shares, $.01 par value per share; unlimited shares
authorized, 29,610,617 shares outstanding*............. 296,106 296,106
Paid-in surplus........................................... 282,189,181 281,568,893
Balance of undistributed net investment income............ 2,186,481 2,186,481
Accumulated net realized gain from investment
transactions........................................... 151,759 151,759
Net unrealized appreciation (depreciation) of
investments............................................ (756,840) (756,840)
------------ ------------
Net assets................................................ $284,066,687 $329,446,399
============ ============
</TABLE>
- ---------------
* None of these outstanding shares are held by or for the account of the Fund.
SENIOR SECURITIES
The following table shows certain information regarding each class of
senior security of the Fund as of January 31, 2000. The Fund borrowed $127
million in aggregate principal amount of bank debt. On May 24, 2000, the Fund
expects to pay its bank debt with proceeds of the issuance of commercial paper
or notes with an aggregate principal amount of $105 million.
<TABLE>
<S> <C>
Total amount outstanding:
Short-term loan..................................... $127,000,000
Commercial Paper/Notes.............................. N/A
Asset coverage:
Per $1,000 of short-term loan(1).................... $ 3,237
Per $1,000 of Commercial Paper/Notes(1)............. N/A
Approximate market value:
Per $1,000 of short-term loan....................... $ 1,000
Per $1,000 of Commercial Paper/Notes................ N/A
</TABLE>
- ---------------
(1) Calculated by subtracting the Fund's total liabilities (not including senior
securities) from the Fund's total assets and dividing such amount by the
number of notes outstanding.
9
<PAGE> 13
PORTFOLIO COMPOSITION
(BASED ON SENIOR LOAN HOLDINGS AS OF JANUARY 31, 2000)
<TABLE>
<S> <C>
MOODY'S RATINGS
Ba3......................................................... 24.3%
Ba2......................................................... 3.1
Ba1......................................................... 1.1
B3.......................................................... 1.4
B2.......................................................... 7.6
B1.......................................................... 31.4
NR.......................................................... 31.1
S&P RATINGS
BBB......................................................... 1.1%
BB+......................................................... 1.4
BB.......................................................... 13.5
BB-......................................................... 14.6
B+.......................................................... 30.0
B........................................................... 3.8
B-.......................................................... 2.8
NR.......................................................... 32.8
</TABLE>
THE FUND'S INVESTMENTS
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek a high level of current income,
consistent with preservation of capital. The Fund's investment objective is a
fundamental policy of the Fund, meaning that it may be changed only by a vote of
a majority of the shareholders of the Fund. See "Investment Restrictions" in the
Statement of Additional Information. The Fund will invest primarily in
adjustable rate, U.S. dollar-denominated, secured Senior Loans. Investment in
such floating rate instruments is expected to minimize changes in the underlying
principal value of the Senior Loans, and therefore the Fund's net asset value,
resulting from changes in market interest rates. The Borrowers of such Senior
Loans operate in a variety of industries and geographical regions. The Fund
provides individual investors with access to a market normally accessible only
to financial institutions and larger corporate or institutional investors.
Under normal circumstances, the Fund will invest at least 80% of its total
assets in adjustable rate, U.S. dollar-denominated, secured Senior Loans. The
Fund may invest up to 20% of its total assets in U.S. dollar-denominated Senior
Loans of Borrowers that are organized or located in countries outside the United
States. The Fund may invest up to 20% of its total assets, in the aggregate, in:
- Senior Loans which are not secured by any collateral;
- other income producing securities such as investment and non-investment
grade corporate debt securities, high quality, short-term debt securities
with remaining maturities of one year or less and U.S. government
securities (subject to the limit that the Fund may not invest more than
5% of its total assets in junior debt securities or fixed rate income
securities with effective maturities greater than one year, provided that
the 5% limitation does not apply to securities acquired in connection
with the Fund's investments in Senior Loans); and
- equity securities and warrants acquired in connection with the Fund's
investments in Senior Loans.
Pending initial investment in Senior Loans, or if the Adviser determines
that market conditions temporarily warrant a defensive investment policy, the
Fund may invest, subject to its ability to liquidate its relatively illiquid
portfolio of Senior Loans, up to 100% of its assets in cash and high quality,
short-term debt securities.
10
<PAGE> 14
CERTAIN CHARACTERISTICS OF SENIOR LOANS
General Description. Senior Loans generally are negotiated between a
Borrower and the Lenders represented by one or more Lenders acting as agent
("Agent") of all the Lenders. The Agent is responsible for negotiating the loan
agreement ("Loan Agreement") that establishes the terms and conditions of the
Senior Loan and the rights of the Borrower and the Lenders. The Agent is paid a
fee by the Borrower for its services.
Rates of Interest. Interest rates on Senior Loans adjust periodically. The
interest rates are adjusted based on a base rate plus a premium or spread over
the base rate. The base rate usually is LIBOR, the prime rate offered by one or
more major United States banks (the "Prime Rate") or the certificate of deposit
rate ("CD Rate") or other base lending rates used by commercial lenders. LIBOR,
as provided for in Loan Agreements, usually is an average of the interest rates
quoted by several designated banks as the rates at which they pay interest to
major depositors in the London Inter-Bank market on U.S. dollar-denominated
deposits. The Adviser believes that changes in short-term LIBOR rates are
closely related to changes in the Federal Reserve federal funds rate, although
the two are not technically linked. The Prime Rate quoted by a major U.S. bank
is generally the interest rate at which that bank is willing to lend U.S.
dollars to its most creditworthy borrowers, although it may not be the bank's
lowest available rate. The CD Rate, as provided for in Loan Agreements, usually
is the average rate paid on large certificates of deposit traded in the
secondary market.
Interest rates on Senior Loans may adjust daily, monthly, quarterly,
semi-annually or annually. The Fund will not invest more than 10% of its total
assets in Senior Loans with interest rates that adjust less often than
semi-annually. The Fund's portfolio of Senior Loans will at all times have a
dollar-weighted average time until the next interest rate adjustment of 90 days
or less. The Fund may use interest rate swaps and other investment practices to
shorten the effective interest rate adjustment period of Senior Loans. If the
Fund does so, it considers the shortened period to be the adjustment period of
the Senior Loans. See "Risk Factors -- General Risks of Investing in the
Fund -- Investment Practices and Special Risks."
When interest rates decline, the value of a portfolio invested in fixed
rate obligations can be expected to rise. Conversely, when interest rates rise,
the value of a portfolio invested in fixed rate obligations can be expected to
decline. Although the Fund's net asset value will vary, the Fund's management
expects the Fund's policy of acquiring interests in Senior Loans, the interest
rates on which are adjustable, to limit fluctuations in net asset value as a
result of changes in interest rates. Accordingly, the Fund's management expects
the value of the Fund's portfolio to fluctuate less than a portfolio of fixed
rate, longer-term obligations as a result of interest rate changes. However,
changes in prevailing interest rates can be expected to cause some fluctuation
in the Fund's net asset value. In addition to changes in interest rates, changes
in the credit quality of Borrowers (and Lenders where the Fund holds a
Participation) will also affect the Fund's net asset value. Further, a serious
deterioration in the credit quality of one or more Borrowers could cause a
prolonged or permanent decrease in the Fund's net asset value. Fluctuations in
net asset value would be magnified as a result of the Fund's use of leverage.
Maturity. The Fund expects that its Senior Loans will have stated
maturities ranging from three to ten years, although the Fund has no policy
limiting the maturity of the Senior Loans that it purchases. Senior Loans
usually have mandatory and optional prepayment provisions. Because of
prepayments, the actual remaining maturity of Senior Loans may be considerably
less than their stated maturity. The Fund estimates that the actual maturity of
the Senior Loans in its portfolio at any given time will be approximately 18-24
months. Because the interest rates on Senior Loans adjust periodically, the Fund
and the Adviser believe that reinvestment by the Fund in Senior Loans after
prepayment generally should not result in a significant reduction in the
interest payable to the Fund.
Protective Provisions of Senior Loans. Secured Senior Loans generally have
the most senior position in a Borrower's capital structure, although some Senior
Loans may hold an equal ranking with other senior securities of the Borrower.
The capital structure of a Borrower may include Senior Loans, senior and
11
<PAGE> 15
junior subordinated debt (which may include "junk bonds"), preferred stock and
common stock issued by the Borrower, typically in descending order of seniority
with respect to claims on the Borrower's assets.
Senior Loans generally are secured by specific collateral, which may
include guarantees. In order to borrow money pursuant to collateralized Senior
Loans, a Borrower will frequently, for the term of the Senior Loan, pledge as
collateral assets such as trademarks, accounts receivable, inventory, buildings,
real estate, franchises and common and preferred stock in its subsidiaries. In
addition, in the case of some Senior Loans, there may be additional collateral
pledged in the form of guarantees or other credit support by, and/or securities
of, affiliates of the Borrowers. In certain instances, a collateralized Senior
Loan may be secured only by stock in the Borrower or its subsidiaries.
Collateral may consist of assets that may not be readily liquidated, and there
is no assurance that the liquidation of such assets would satisfy fully a
Borrower's obligations under a Senior Loan. The Fund may invest in Senior Loans
which are not secured by any collateral, subject to the limitations set forth
under "The Fund's Investments -- Investment Objective and Policies." Senior
Loans that are not secured by specific collateral generally pose a greater risk
of non-payment of interest or loss of principal than do collateralized Senior
Loans.
Loan Agreements may include various restrictive covenants designed to limit
the activities of the Borrower in an effort to protect the right of the Lenders
to receive timely payments of interest on and repayment of principal of the
Senior Loans. Restrictive covenants may include mandatory prepayment provisions
arising from excess cash flows and typically include restrictions on dividend
payments, specific mandatory minimum financial ratios, limits on total debt and
other financial tests. Breach of such covenants, if not waived by the Lenders,
is generally an event of default under the applicable Loan Agreement and may
give the Lenders the right to accelerate principal and interest payments. The
Adviser will consider the terms of such restrictive covenants in deciding
whether to invest in Senior Loans for the Fund's portfolio. When the Fund holds
a Participation in a Senior Loan it may not have the right to vote to waive
enforcement of any restrictive covenant breached by a Borrower. Lenders voting
in connection with a potential waiver of a restrictive covenant may have
interests different from those of the Fund and such Lenders may not consider the
interests of the Fund in connection with their votes.
Investing in Senior Loans involves investment risk despite these covenants,
and some Borrowers default on their Senior Loan payments. The Adviser and the
Fund attempt to manage these risks through selection of a varied portfolio of
Senior Loans and analysis and monitoring of Borrowers and any collateral pledged
to secure the loans.
Borrowers. Borrowers operate in a variety of industries and geographic
regions. The Fund does not intend to invest more than 10% of its total assets in
Senior Loans of a single Borrower. In addition, the Fund will not invest more
than 25% of its total assets in Borrowers that conduct their principal
businesses in the same industry. Most Senior Loans are made to U.S. Borrowers.
The Fund may, however, invest up to 20% of its total assets in Senior Loans made
to Borrowers organized or located outside the U.S. These Senior Loans must be
U.S. dollar-denominated. Investing in the Senior Loans of foreign Borrowers
involves special risks. See "Risk Factors -- General Risks of Investing in the
Fund -- Investment in Foreign Issuers."
The capital structure of a Borrower may include Senior Loans, senior and
junior subordinated debt (which may include "junk bonds"), preferred stock and
common stock. Senior Loans typically have the most senior claim on a Borrower's
assets and common stock the most junior claim. The proceeds of Senior Loans that
the Fund will purchase usually will be used by Borrowers to finance leveraged
buyouts, recapitalizations, mergers, acquisitions, stock repurchases, debt
refinancings and, to a lesser extent, for general operating and other purposes.
Although Senior Loans have the most senior position in a Borrower's capital
structure and are usually secured by specific collateral, they are typically
below investment grade quality and may have below investment grade ratings;
these ratings are associated with securities having speculative characteristics.
See "Risk Factors -- General Risks of Investing in the Fund -- High Yield/ High
Risk Securities."
The Fund may purchase and retain in its portfolio Senior Loans of Borrowers
that have filed for protection under the federal bankruptcy laws or that have
had involuntary bankruptcy petitions filed
12
<PAGE> 16
against them by creditors. Because of the protective features of Senior Loans,
the Fund and the Adviser believe that Senior Loans of Borrowers that either are
experiencing, or are more likely to experience, financial difficulty may
sometimes represent attractive investment opportunities.
The Adviser performs its own credit analysis of the Borrower in addition to
utilizing information prepared and supplied by an Agent or other Lenders. When
evaluating a Borrower, the Adviser considers many factors, including the
Borrower's past and future projected financial performance. The Adviser also
considers a Borrower's management, collateral and industry. The Adviser
continues to monitor a Borrower on an ongoing basis for so long as the Fund
continues to own the Senior Loan. Although the Adviser will use its best
judgment in selecting Senior Loans, there can be no assurance that such analysis
will disclose factors that may impair the value of a Senior Loan. You should
expect the Fund's net asset value to fluctuate as a result of changes in the
credit quality of Borrowers and other factors. A serious deterioration in the
credit quality of one or more Borrowers could cause a permanent decrease in the
Fund's net asset value. See "Risk Factors -- General Risks of Investing in the
Fund -- Credit Risk."
The Adviser generally relies on its own credit analysis of Borrowers and
not on analyses prepared by ratings agencies or other independent parties.
Because of the features of Senior Loans, the Adviser believes, based on its
experience, that ratings may not necessarily reflect the true risk of loss of
principal or interest on a Senior Loan. For example, the Adviser believes that
Senior Loans tend to have more favorable loss recovery rates as compared to
other types of below investment grade quality debt obligations.
There is no minimum rating or other independent evaluation of a Borrower or
its securities limiting the Fund's investments. Although a Senior Loan often is
not rated by any rating agency at the time the Fund purchases the Senior Loan,
rating agencies have become more active in rating an increasing number of Senior
Loans and at any given time a substantial portion of the Senior Loans in the
Fund's portfolio may be rated. The lack of a rating does not necessarily imply
that a Senior Loan is of lesser investment quality; however, most Senior Loans,
when rated, are below investment grade quality. The Adviser generally does not
take ratings into account when determining whether to invest in a Senior Loan
and does not view ratings as a determinative factor in its investment decisions.
There is no limit on the percentage of the Fund's assets that may be invested in
Senior Loans that are rated below investment grade or that are unrated but of
comparable quality. Investing in Senior Loans involves risk and the Fund
attempts to manage these risks through a varied portfolio and ongoing analyses
and monitoring of Borrowers.
THE SENIOR LOAN MARKET
The volume of newly issued Senior Loans increased from approximately $66
billion in 1987 to approximately $273 billion in 1998 (Source: Donaldson,
Lufkin & Jenrette; Loan Pricing Corporation) and transactions in Senior Loans in
the secondary market increased from approximately $8 billion in 1991 to
approximately $67 billion in 1998 (Source: Loan Pricing Corporation; Securities
Data Corporation).
THE SENIOR LOAN PROCESS
The Fund normally relies on the Agent to collect principal and interest
payments on a Senior Loan. Furthermore, the Fund also relies in part on the
Agent to monitor compliance by the Borrower with the restrictive covenants in
the Loan Agreement and to notify the Fund (or the Lender from which the Fund has
purchased a Participation) of any adverse change in the Borrower's financial
condition. The Fund will act as a Lender with respect to a syndicated Senior
Loan only where the Agent, at the time of the Fund's investment, has outstanding
debt or deposit obligations rated investment grade by a rating agency, or where
such debt or obligations are unrated but determined by the Adviser to be of
comparable quality. A rating agency's top four major rating categories generally
are considered to be investment grade. The lowest tier of investment grade
rating is considered to have speculative characteristics. The Fund will not
purchase interests in Senior Loans unless the Agent, Lender and any other person
positioned between the Fund and the Borrower has entered into an agreement that
provides for the holding of assets in safekeeping for, or the prompt
disbursement of assets to, the Fund. Insolvency of the Agent or other persons
positioned between the Fund and the Borrower could result in losses for the
Fund. See "Risk Factors."
13
<PAGE> 17
The Fund may be required to pay, and may receive, various fees and
commissions in connection with purchasing, selling and holding interests in
Senior Loans. The fees normally paid by Borrowers include three primary
types: facility fees, commitment fees and prepayment penalties. Facility fees
are paid to Lenders when a Senior Loan is originated. Commitment fees are paid
to Lenders on an ongoing basis based on the unused portion of a Senior Loan
commitment. Lenders may receive prepayment penalties when a Borrower prepays a
Senior Loan. The Fund receives these fees directly from the Borrower if the Fund
is an Original Lender (as defined below) or, in the case of commitment fees and
prepayment penalties, if the Fund acquires an Assignment. Whether the Fund
receives a facility fee in the case of an Assignment, or any fees in the case of
a Participation, depends on negotiations between the Fund and the Lender selling
such interests. When the Fund buys an Assignment, it may be required to pay a
fee, or forgo a portion of interest and fees payable to it, to the Lender
selling the Assignment. Occasionally, the assignor pays a fee to the assignee. A
person selling a Participation to the Fund may deduct a portion of the interest
and any fees payable to the Fund as an administrative fee. The Fund may be
required to pass along to a person that buys a Senior Loan from the Fund a
portion of any fees that the Fund is entitled to. Fees that the Fund
occasionally may receive may enhance the Fund's income.
TYPES OF SENIOR LOAN INVESTMENTS
The Fund may act as one of the group of Lenders originating a Senior Loan
(an "Original Lender"), act as an Agent, purchase Assignments of portions of
Senior Loans from third parties and invest in Participations in Senior Loans.
Senior Loans also include certain foreign debt obligations that are in the form
of notes rather than Loan Agreements. All of these interests in Senior Loans are
sometimes referred to simply as Senior Loans.
The Fund as Original Lender. When the Fund acts as an Original Lender it
may participate in structuring the Senior Loan. The Fund will not act as sole
Agent or sole principal negotiator of a Senior Loan. When the Fund is a member
of the originating syndicate group for a Senior Loan, it may share in a fee paid
to the Original Lenders. When the Fund is an Original Lender it will have a
direct contractual relationship with the Borrower, may enforce compliance by the
Borrower with the terms of the Loan Agreement and may have rights with respect
to any funds acquired by other Lenders through set-off. Lenders also have full
voting and consent rights under the applicable Loan Agreement. Action subject to
Lender vote or consent generally requires the vote or consent of the holders of
some specified percentage of the outstanding principal amount of the Senior
Loan. Certain decisions, such as reducing the amount of interest on or principal
of a Senior Loan, releasing all or substantially all of the collateral or
changing the maturity of a Senior Loan, frequently require the unanimous vote or
consent of all Lenders affected.
The Fund as Agent. Acting in the capacity of an Agent in a Senior Loan may
subject the Fund to certain risks in addition to those associated with the
Fund's current role as a Lender. In consideration of such risks, the Fund will
invest no more than 20% of its total assets in Senior Loans in which it acts as
an Agent or co-Agent and the size of any such individual Senior Loan will not
exceed 5% of the Fund's total assets. The Fund's ability to receive fee income
may also be constrained by certain requirements for qualifying as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). The Fund intends to comply with those requirements and may limit its
investments in Senior Loans in which it acts as Agent in order to do so.
Assignments. The purchaser of an Assignment typically succeeds to all the
rights and obligations under the Loan Agreement of the assigning Lender and
becomes a Lender under the Loan Agreement. Assignments may, however, be arranged
through private negotiations, and the rights and obligations acquired by the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender.
Participations. Participations by the Fund in a Lender's portion of a
Senior Loan typically will result in the Fund having a contractual relationship
only with such Lender, not with the Borrower. As a result, the Fund may have the
right to receive payments of principal, interest and any fees to which it is
entitled only from the Lender selling the Participation and only upon receipt by
such Lender of such payments
14
<PAGE> 18
from the Borrower. In connection with purchasing Participations, the Fund
generally will have no right to enforce compliance by the Borrower with the
terms of the Loan Agreement, nor have any rights with respect to any funds
acquired by other Lenders through set-off against the Borrower, and the Fund may
not directly benefit from the collateral supporting the Senior Loan in which it
has purchased the Participation. As a result, the Fund may assume the credit
risk of both the Borrower and the Lender selling the Participation. In the event
of the insolvency of the Lender selling a Participation, the Fund may be treated
as a general creditor of such Lender. After the period of initial investment,
the Fund does not currently intend to invest more than 20% of its total assets
in Participations.
The Fund has taken the following measures in an effort to minimize risks
from investing in Participations. The Fund will only acquire Participations if
the Lender selling the Participation, and any other persons interpositioned
between the Fund and the Lender, (i) at the time of investment has outstanding
debt or deposit obligations rated investment grade (BBB or A-3 or higher by
Standard & Poor's Corporation ("S&P"), Baa or P-3 or higher by Moody's Investor
Service, Inc. ("Moody's") or BBB or F3 or higher by Fitch IBCA, Inc, ("Fitch"))
or has debt or obligations that are unrated by S&P, Moody's and Fitch and
determined by the Adviser to be of comparable quality and (ii) has entered into
an agreement which provides for the holding of assets in safekeeping for, or the
prompt disbursement of assets to, the Fund. Long-term debt rated BBB by S&P is
regarded by S&P as having adequate capacity to pay interest and repay principal
and debt rated Baa by Moody's is regarded by Moody's as a medium grade
obligation, i.e., it is neither highly protected nor poorly secured and debt
rated BBB by Fitch is regarded by Fitch as having adequate capacity for timely
payment of financial commitments. Commercial paper rated A-3 by S&P indicates
that S&P believes such obligations exhibit adequate protection parameters but
that adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial commitment on
the obligation, issues of commercial paper rated P-3 by Moody's are considered
by Moody's to have an acceptable ability for repayment of short-term debt
obligations but the effect of industry characteristics and market compositions
may be more pronounced and issues of commercial paper rated F3 by Fitch are
considered to be of fair credit quality with an adequate capacity for timely
payment of financial commitments but near-term adverse changes could result in a
reduction to non-investment grade.
The selling Lenders and other persons interpositioned between such Lenders
and the Fund with respect to such Participations will likely conduct their
principal business activities in the banking, finance and financial services
industries. Although, as discussed above, the Fund will take measures which it
believes reduce its exposure to any risks incident to this practice, the Fund
may be more susceptible than an investment company without such a practice to
any single economic, political or regulatory occurrence affecting such
industries. Persons engaged in such industries may be more susceptible than are
persons engaged in some other industry to, among other things, fluctuations in
interest rates, changes in the Federal Open Market Committee's monetary policy,
governmental regulations concerning such industries, capital raising activities
generally and fluctuations in the financial markets generally.
When the Fund holds a Participation in a Senior Loan, the Fund generally
will not have the right to enforce compliance by the Borrower with the Loan
Agreement, nor rights to any funds acquired by other Lenders through set-off
against the Borrower. In addition, the Fund may not have the right to vote on
whether to waive enforcement of any restrictive covenant breached by a Borrower.
Lenders voting in connection with a potential waiver of a restrictive covenant
may have interests different from those of the Fund and may not consider the
interests of the Fund. The Fund may not benefit directly from the collateral
supporting a Senior Loan in which it has purchased the Participation, although
Lenders that sell Participations generally are required to distribute
liquidation proceeds received by them pro rata among the holders of such
Participations. For purposes of the Fund's policy of investing at least 80% of
its total assets in secured Senior Loans, a Participation in a Senior Loan will
be deemed to be secured if the underlying Senior Loan is secured.
Role of Agent. On behalf of the several Lenders, an Agent generally will be
required to administer and manage the Senior Loan and, with respect to
collateralized Senior Loans, to service or monitor the collateral. In this
connection, the valuation of assets pledged as collateral will reflect market
value and the
15
<PAGE> 19
Agent may rely on independent appraisals as to the value of specific collateral.
The Agent, however, may not obtain an independent appraisal as to the value of
assets pledged as collateral in all cases. The Fund normally will rely primarily
on the Agent (where the Fund is an Original Lender or owns an Assignment) or the
selling Lender (where the Fund owns a Participation) to collect principal of and
interest on a Senior Loan. Furthermore, the Fund usually will rely on the Agent
(where the Fund is an Original Lender or owns an Assignment) or the selling
Lender (where the Fund owns a Participation) to monitor compliance by the
Borrower with the restrictive covenants in the Loan Agreement and notify the
Fund of any adverse change in the Borrower's financial condition or any
declaration of insolvency.
Loan Agreements may provide for the termination of the Agent's agency
status in the event that it fails to act as required under the relevant Loan
Agreement, becomes insolvent, enters FDIC receivership or, if not FDIC insured,
enters into bankruptcy. Should such an Agent, Lender or assignor with respect to
an Assignment interpositioned between the Fund and the Borrower become insolvent
or enter FDIC receivership or bankruptcy, any interest in the Senior Loan of
such person and any loan payment held by such person for the benefit of the Fund
should not be included in such person's or entity's bankruptcy estate. If,
however, any such amount were included in such person's or entity's bankruptcy
estate, the Fund would incur certain costs and delays in realizing payment or
could suffer a loss of principal or interest. In such event, the Fund could
experience a decrease in net asset value.
Prepayments. Pursuant to the relevant Loan Agreement, a Borrower may be
required in certain circumstances, and may have the option at any time, to
prepay the principal amount of a Senior Loan, often without incurring a
prepayment penalty. Because the interest rates on Senior Loans are periodically
redetermined at relatively short intervals, the Fund and the Adviser believe
that the prepayment of, and subsequent reinvestment by the Fund in, Senior Loans
will not have a materially adverse impact on the yield on the Fund's portfolio
and may have a beneficial impact on income due to receipt of prepayment
penalties, if any, and any facility fees earned in connection with reinvestment.
Commitments to Make Additional Loans. A Lender may have certain obligations
pursuant to a Loan Agreement, which may include the obligation to make
additional loans in certain circumstances. The Fund currently intends to reserve
against such contingent obligations by segregating a sufficient amount of cash,
liquid securities and liquid Senior Loans as a reserve against such commitments.
The Fund will not purchase interests in Senior Loans that would require the Fund
to make any such additional loans if such additional loan commitments in the
aggregate would exceed 20% of the Fund's total assets or would cause the Fund to
fail to meet the diversification requirements set forth under the heading
"Investment Policies and Techniques" in the Statement of Additional Information.
WARRANTS, EQUITY SECURITIES AND JUNIOR DEBT; SHORT-TERM DEBT SECURITIES
The Fund may acquire equity securities and warrants issued by a Borrower or
its affiliates as part of a package of investments in the Borrower or its
affiliates issued in connection with a Senior Loan of the Borrower. The Fund
also may convert a warrant so acquired into the underlying security. The Fund
may acquire junior debt securities as part of a package of investments in the
Borrower or its affiliates issued in connection with a Senior Loan of the
Borrower, and may invest separately up to 5% of its total assets in junior debt
securities. The Fund generally will acquire interests in warrants, equity and
junior bonds or other debt securities only when the Adviser believes that the
value the Fund gives in exchange for such interests is substantially outweighed
by their potential value. However, investments in warrants, equity and junior
debt securities entail certain risks in addition to those associated with
investments in Senior Loans. The value of these securities may be affected more
rapidly, and to a greater extent, by company-specific developments and general
market conditions. These risks may increase fluctuations in the Fund's net asset
value. The Fund may frequently possess material non-public information about a
Borrower as a result of its ownership of a Senior Loan of such Borrower. Because
of prohibitions on trading in securities of issuers while in possession of such
information the Fund might be unable to enter into a transaction in a security
of such a Borrower when it would otherwise be advantageous to do so. The Fund's
investments in warrants, equity securities and junior debt securities are
subject to the limitations set forth under "The Fund's Investments -- Investment
Objective and Policies."
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The Fund may invest in high quality, short-term debt securities with
remaining maturities of one year or less. These may include commercial paper
rated at least in the top two rating categories by S&P, Moody's or Fitch, or
unrated commercial paper considered by the Adviser to be of similar quality;
interests in short-term loans of Borrowers having short-term debt obligations
rated, or a short-term credit rating, at least in such top two rating
categories, or having no rating but determined by the Adviser to be of
comparable quality; certificates of deposit and bankers' acceptances; and
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. These securities may pay interest at adjustable rates or at
fixed rates. The Fund's investments in high quality, short-term debt securities
are subject to the limitations set forth under "The Fund's
Investments -- Investment Objective and Policies." In spite of those
limitations, pending initial investment in Senior Loans, or if the Adviser
determines that market conditions temporarily warrant a defensive investment
policy, the Fund may invest, subject to its ability to liquidate its relatively
illiquid portfolio of Senior Loans, up to 100% of its assets in cash and high
quality, short-term debt securities.
STRUCTURED NOTES
The Fund may invest up to 10% of its total assets in structured notes,
which are privately negotiated debt obligations with rates of return determined
by reference to the total rate of return on one or more Senior Loans referenced
in such notes. The rate of return on the structured note may be determined by
applying a multiplier to the rate of total return on the referenced loan or
loans. Application of a multiplier is comparable to the use of financial
leverage, a speculative technique. Leverage magnifies the potential for gain and
the risk of loss; as a result, a relatively small decline in the value of a
referenced Senior Loan could result in a relatively large loss in the value of a
structured note.
USE OF LEVERAGE
The Fund uses financial leverage through borrowing, issuing commercial
paper or notes and preferred shares of beneficial interest ("Leverage
Instruments") in an amount currently intended to be approximately 40% of its
total assets (including the proceeds from such Leverage Instruments). See
"Description of TAPS" and "Description of Credit Facility/Commercial Paper
Program." The Fund employs Leverage Instruments for the purpose of acquiring
additional income-producing investments when the Adviser believes that such use
of proceeds will enhance the Fund's net income. The amount of outstanding
Leverage Instruments may vary with prevailing market or economic conditions.
Leverage entails special risks. See "Risk Factors -- Risks of Investing in
TAPS -- Leverage Risk." The management fee paid to the Adviser will be
calculated on the basis of the Fund's total managed assets, including proceeds
of Leverage Instruments, so the fees will be higher when leverage is utilized.
INTEREST RATE AND OTHER HEDGING TRANSACTIONS
The Fund may enter into various interest rate hedging and risk management
transactions. Certain of these interest rate hedging and risk management
transactions involve derivative instruments. A derivative is a financial
instrument whose performance is derived at least in part from the performance of
an underlying index, security or asset. The values of certain derivatives can be
affected dramatically by even small market movements, sometimes in ways that are
difficult to predict.
There are many different types of derivatives, with many different uses.
- The Fund expects to enter into these transactions primarily to seek to
preserve a return on a particular investment or portion of its portfolio,
and may also enter into such transactions to seek to protect against
decreases in the anticipated rate of return on floating or variable rate
financial instruments the Fund owns or anticipates purchasing at a later
date, or for other risk management strategies such as managing the
effective dollar-weighted average duration of the Fund's portfolio.
- The Fund may also engage in hedging transactions to seek to protect the
value of its portfolio against declines in net asset value resulting from
changes in interest rates, credit conditions or other market changes.
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<PAGE> 21
- The Fund does not intend to engage in such transactions to enhance the
yield on its portfolio or to increase income available for distributions.
Market conditions will determine whether and in what circumstances the Fund
would employ any of the hedging and risk management techniques described below.
The successful utilization of hedging and risk management transactions requires
skills different from those needed in the selection of the Fund's portfolio
securities. The Fund believes that the Adviser possesses the skills necessary
for the successful utilization of hedging and risk management transactions. The
Fund will incur brokerage and other costs in connection with its hedging
transactions.
The Fund may enter into interest rate swaps or purchase or sell interest
rate caps or floors. Interest rate swaps involve the exchange by the Fund with
another party of their respective obligations to pay or receive interest, e.g.,
an exchange of an obligation to make floating rate payments for an obligation to
make fixed rate payments. For example, the Fund may seek to shorten the
effective interest rate redetermination period of a Senior Loan in its
portfolio. The Fund could exchange the Borrower's obligation to make fixed rate
payments for an obligation to make payments that readjust monthly. In such
event, the Fund would consider the interest rate redetermination period of such
Senior Loan to be the shorter period.
The successful use of swaps, caps and floors to preserve the rate of return
on a portfolio of financial instruments depends on the Adviser's ability to
predict correctly the direction and extent of movements in interest rates.
Although the Fund believes that use of the hedging and risk management
techniques described above will benefit the Fund, if the Adviser's judgment
about the direction or extent of the movement in interest rates is incorrect,
the Fund's overall performance would be worse than if it had not entered into
any such transactions. For example, if the Fund had purchased an interest rate
swap or an interest rate floor to hedge against its expectation that interest
rates would decline but instead interest rates rose, the Fund would lose part or
all of the benefit of the increased payments it would receive as a result of the
rising interest rates because it would have to pay amounts to its counterparty
under the swap agreement or would have paid the purchase price of the interest
rate floor.
Because these hedging transactions are entered into for good-faith risk
management purposes, the Adviser and the Fund believe such obligations do not
constitute senior securities. The Fund will usually enter into interest rate
swaps on a net basis, i.e., where the two parties make net payments with the
Fund receiving or paying, as the case may be, only the net amount of the two
payments. The net amount of the excess, if any, of the Fund's obligations over
its entitlements with respect to each interest rate swap will be accrued and an
amount of cash or liquid securities having an aggregate net asset value at least
equal to the accrued excess will be maintained in a segregated account by the
Fund's custodian. If the Fund enters into a swap on other than a net basis, the
Fund will maintain in the segregated account the full amount of the Fund's
obligations under each such swap. Accordingly, the Fund does not treat swaps as
senior securities. The Fund may enter into swaps, caps and floors with member
banks of the Federal Reserve System, members of the New York Stock Exchange or
other entities determined by the Adviser to be creditworthy. If a default occurs
by the other party to such transaction, the Fund will have contractual remedies
pursuant to the agreements related to the transaction but such remedies may be
subject to bankruptcy and insolvency laws which could affect the Fund's rights
as a creditor. The swap market has grown substantially in recent years with a
large number of banks and financial services firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps and floors are more recent innovations
and they are less liquid than swaps. There can be no assurance, however, that
the Fund will be able to enter into interest rate swaps or to purchase interest
rate caps or floors at prices or on terms the Adviser believes are advantageous
to the Fund. In addition, although the terms of interest rate swaps, caps and
floors may provide for termination, there can be no assurance that the Fund will
be able to terminate an interest rate swap or to sell or offset interest rate
caps or floors that it has purchased.
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New financial products continue to be developed and the Fund may invest in
any such products as may be developed to the extent consistent with its
investment objective and the regulatory and federal tax requirements applicable
to investment companies.
LENDING OF PORTFOLIO HOLDINGS
The Fund may seek to increase its income by lending financial instruments
in its portfolio in accordance with present regulatory policies, including those
of the Board of Governors of the Federal Reserve System and the SEC. Such loans
may be made, without limit, to brokers, dealers, banks or other recognized
institutional borrowers of financial instruments and would be required to be
secured continuously by collateral, including cash, cash equivalents or U.S.
Treasury bills maintained on a current basis at an amount at least equal to the
market value of the financial instruments loaned. The Fund would have the right
to call a loan and obtain the financial instruments loaned at any time on five
days' notice. For the duration of a loan, the Fund would continue to receive the
equivalent of the interest paid by the issuer on the financial instruments
loaned and also may receive compensation from the investment of the collateral.
The Fund would not have the right to vote any financial instruments having
voting rights during the existence of the loan, but the Fund could call the loan
in anticipation of an important vote to be taken among holders of the financial
instruments or in anticipation of the giving or withholding of their consent on
a material matter affecting the financial instruments. As with other extensions
of credit, risks of delay in recovery or even loss of rights in the collateral
exist should the borrower of the financial instruments fail financially.
However, the loans would be made only to firms deemed by the Adviser to be
creditworthy and when, in the judgment of the Adviser, the consideration which
can be earned currently from loans of this type justifies the attendant risk.
The creditworthiness of firms to which the Fund lends its portfolio holdings
will be monitored on an ongoing basis by the Adviser. No specific limitation
exists as to the percentage of the Fund's assets which the Fund may lend.
"WHEN ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS
The Fund may also purchase and sell interests in Senior Loans and other
portfolio securities on a "when issued" or "delayed delivery" basis. No income
accrues to the Fund on such interests or securities in connection with such
purchase transactions prior to the date the Fund actually takes delivery of such
interests or securities.
- These transactions are subject to market fluctuation; the value of the
interests in Senior Loans and other portfolio debt securities at delivery
may be more or less than their purchase price, and yields generally
available on such interests or securities when delivery occurs may be
higher or lower than yields on the interests or securities obtained
pursuant to such transactions.
- Because the Fund relies on the buyer or seller, as the case may be, to
consummate the transaction, failure by the other party to complete the
transaction may result in the Fund missing the opportunity of obtaining a
price or yield considered to be advantageous. When the Fund is the buyer
in such a transaction, however, it will maintain, in a segregated account
with its custodian, cash or liquid securities having an aggregate value
equal to the amount of such purchase commitments until payment is made.
The Fund will make commitments to purchase interests or securities on such
basis only with the intention of actually acquiring these interests or
securities, but the Fund may sell such interests or securities prior to the
settlement date if such sale is considered to be advisable. To the extent the
Fund engages in "when issued" or "delayed delivery" transactions, it will do so
for the purpose of acquiring interests or securities for the Fund's portfolio
consistent with the Fund's investment objective and policies and not for the
purpose of investment leverage. No specific limitation exists as to the
percentage of the Fund's assets which may be used to acquire securities on a
"when issued" or "delayed delivery" basis.
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<PAGE> 23
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements (a purchase of, and a
simultaneous commitment to resell, a financial instrument at an agreed upon
price on an agreed upon date) only with member banks of the Federal Reserve
System and member firms of the New York Stock Exchange. When participating in
repurchase agreements, the Fund buys securities from a vendor, e.g., a bank or
brokerage firm, with the agreement that the vendor will repurchase the
securities at a higher price at a later date. Such transactions afford an
opportunity for the Fund to earn a return on available cash at minimal market
risk, although the Fund may be subject to various delays and risks of loss if
the vendor is unable to meet its obligation to repurchase. In evaluating whether
to enter into a repurchase agreement, the Adviser will consider carefully the
creditworthiness of the vendor. If the member bank or member firm that is the
party to the repurchase agreement petitions for bankruptcy or otherwise becomes
subject to the U.S. Bankruptcy Code, the Fund might experience delays in
recovering its cash. The securities underlying a repurchase agreement will be
marked to market every business day so that the value of the collateral is at
least equal to the value of the loan, including the accrued interest thereon,
and the Adviser will monitor the value of the collateral. No specific limitation
exists as to the percentage of the Fund's assets which may be used to
participate in repurchase agreements.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements with respect to debt
obligations which could otherwise be sold by the Fund. A reverse repurchase
agreement is an instrument under which the Fund may sell an underlying debt
instrument and simultaneously obtain the commitment of the purchaser (a
commercial bank or a broker or dealer) to sell the security back to the Fund at
an agreed upon price on an agreed upon date. The Fund will maintain in a
segregated account with its custodian cash or liquid securities in an amount
sufficient to cover its obligations with respect to reverse repurchase
agreements. The Fund receives payment for such securities only upon physical
delivery or evidence of book entry transfer by its custodian. Reverse repurchase
agreements could involve certain risks in the event of default or insolvency of
the other party, including possible delays or restrictions upon the Fund's
ability to dispose of the underlying securities. An additional risk is that the
market value of securities sold by the Fund under a reverse repurchase agreement
could decline below the price at which the Fund is obligated to repurchase them.
Reverse repurchase agreements will be considered borrowings by the Fund and as
such would be subject to the restrictions on borrowing described in the
Statement of Additional Information under "Investment Restrictions." The Fund
will not hold more than 5% of the value of its total assets in reverse
repurchase agreements.
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RISK FACTORS
Risk is inherent in all investing. Investing in any investment company
security involves risk, including the risk that you may receive little or no
return on your investment or even that you may lose part or all of your
investment. Therefore, before investing you should consider carefully the
following risks that you assume when you invest in TAPS.
RISKS OF INVESTING IN TAPS
Payment Restrictions. The Fund is prohibited from declaring, paying or
making any dividends or distributions on TAPS unless it satisfies certain
conditions. See "Description of TAPS -- Restrictions on Dividend, Redemption and
Other Payments." The Fund is also prohibited from declaring, paying or making
any dividends or distributions on Common Shares unless it satisfies certain
conditions. These prohibitions on the payment of dividends or distributions
might impair the Fund's ability to maintain its qualification as a regulated
investment company for federal income tax purposes. The Fund intends, however,
to redeem TAPS if necessary to comply with the asset coverage requirements.
There can be no assurance, however, that such redemptions can be effected in
time to permit the Fund to distribute its income as required to maintain its
qualification as a regulated investment company under the Code. See "Federal
Taxation -- Federal Income Tax Treatment of the Fund."
Auction Risk. You may not be able to sell your TAPS at an auction if the
auction fails; that is, if there are more TAPS offered for sale than there are
buyers for those shares. Also, if you place hold orders (orders to retain TAPS)
at an auction only at a specified rate, and that bid rate exceeds the rate set
at the auction, you will not retain your TAPS. Finally, if you buy shares or
elect to retain shares without specifying a rate below which you would not wish
to continue to hold those shares, and the auction sets a below-market rate, you
may receive a lower rate of return on your shares than the market rate.
Secondary Market Risk. Broker-Dealers and other broker-dealers that have
entered into a separate agreement with a Broker-Dealer may maintain a secondary
trading market in TAPS outside of auctions, but may discontinue this activity
any time. You may transfer TAPS outside of auctions only to or through a
Broker-Dealer or such other broker-dealers. If you try to sell your TAPS between
auctions, you may not be able to sell any or all of your shares, or you may not
be able to sell them for $25,000 per share or $25,000 per share plus accumulated
dividends. If the Fund has designated a Special Rate Period (a rate period of
more or less than 28 days), changes in interest rates could affect the price you
would receive if you sold your shares in the secondary market. Broker-Dealers
that maintain a secondary trading market for TAPS are not required to maintain
this market, and the Fund is not required to redeem shares either if an auction
or an attempted secondary market sale fails because of a lack of buyers. TAPS
are not registered on a stock exchange or the NASDAQ stock market. If you sell
your TAPS to a Broker-Dealer between auctions, you may receive less than the
price you paid for them, especially when market interest rates have risen since
the last auction and especially during a Special Rate Period of more than 28
days. Accrued TAPS dividends, however, may partially compensate for the
increased market interest rates.
Ratings and Asset Coverage Risk. While Moody's assigns a rating of "aaa" to
TAPS, the ratings do not eliminate or necessarily mitigate the risks of
investing in TAPS. A rating agency could downgrade TAPS, which may make your
shares less liquid at an auction or in the secondary market. If a rating agency
downgrades TAPS, the Fund will seek to alter its portfolio or will be required
to redeem TAPS shares. See "Description of TAPS -- Redemption -- Mandatory
Redemption." The Fund may also voluntarily redeem TAPS shares in certain
circumstances. See "Description of TAPS -- Asset Maintenance" for a description
of the asset maintenance tests the Fund must meet.
Inflation Risk. Inflation is the reduction in the purchasing power of money
resulting from the increase in the price of goods and services. Inflation risk
is the risk that the inflation adjusted (or "real") value of your TAPS
investment or the income from that investment will be worth less in the future.
As inflation occurs, the real value of the TAPS shares and distributions
declines. In an inflationary period, however, it is expected that, through the
auction process, TAPS dividend rates would increase, tending to offset this
risk.
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Leverage Risk. The Fund uses financial leverage for investment purposes by
employing Leverage Instruments in an amount currently anticipated to represent
approximately 40% (and in no event exceeding 50%) of its total assets (including
the proceeds from such Leverage Instruments). In addition to issuing shares of
TAPS, the Fund borrows money pursuant to a credit facility and/or issues
commercial paper or notes in an aggregate amount currently representing
approximately 30% of the Fund's total assets. The Fund may also borrow funds (a)
in connection with a loan made by a bank or other party that is privately
arranged and not intended to be publicly distributed or (b) in an amount equal
to up to 5% of its total assets for temporary purposes.
Under the requirements of the 1940 Act, the value of the Fund's total
assets, less all liabilities and indebtedness of the Fund not represented by
senior securities, must be at least equal, immediately after any borrowing or
commercial paper or note issuance, to 300% of the aggregate value of borrowings
represented by senior securities. Upon the issuance of TAPS, the value of the
Fund's total assets, less all liabilities and indebtedness of the Fund not
represented by senior securities, must be at least equal, immediately after the
issuance of the TAPS, to 200% of the aggregate value of borrowings represented
by senior securities and the TAPS.
If the Fund seeks an investment grade rating from one or more nationally
recognized statistical rating organizations for any commercial paper and notes
(which the Fund expects to do), asset coverage or portfolio composition
provisions in addition to and more stringent than those required by the 1940 Act
may be imposed in connection with the issuance of such a rating. In addition,
restrictions may be imposed on certain investment practices in which the Fund
may otherwise engage. Any lender with respect to borrowings by the Fund may
require additional asset coverage and portfolio composition provisions as well
as restrictions on the Fund's investment practices.
The Fund's leveraged capital structure creates special risks not associated
with unleveraged funds having similar investment objectives and policies. The
money borrowed pursuant to any credit facility or any commercial paper or notes
may constitute a substantial lien and burden on the TAPS by reason of their
prior claim against the income of the Fund and against the net assets of the
Fund in liquidation. The Fund will not be permitted to declare dividends or
other distributions, including dividends and distributions with respect to TAPS,
or purchase or redeem shares, including TAPS unless (i) at the time thereof the
Fund meets certain asset coverage requirements and (ii) there is no event of
default under any credit facility or commercial paper program that is
continuing. See "Description of TAPS -- Restrictions on Dividend, Redemption and
Other Payments" and "Description of Credit Facility/Commercial Paper Program
-- Restrictive Covenants and 1940 Act Restrictions." In the event of a default
under a credit facility and/or commercial paper program, the lenders have the
right to cause a liquidation of the collateral (i.e., sell Senior Loans and
other assets of the Fund) and if any such default is not cured within 40 days,
the lenders can control the liquidation as well.
The Fund reserves the right at any time, if it believes that market
conditions are appropriate, to increase its level of debt or other senior
securities to maintain or increase the Fund's current level of leverage to the
extent permitted by the 1940 Act and existing agreements between the Fund and
third parties.
Because the fee paid to the Adviser will be calculated on the basis of
total managed assets, the fee will be higher when leverage is utilized, giving
the Adviser an incentive to utilize leverage.
There can be no assurance that any commercial paper or notes will be issued
or, if issued, that the commercial paper or notes will remain outstanding or
that the Fund will borrow or, if it borrows, that such borrowing will be
continued.
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GENERAL RISKS OF INVESTING IN THE FUND
Borrower Credit Risk. Senior Loans, like most other debt obligations, are
subject to the risk of default. Default in the payment of interest or principal
on a Senior Loan results in a reduction in income to the Fund, a reduction in
the value of the Senior Loan and a decrease in the Fund's net asset value. This
decrease in the Fund's net asset value would be magnified by the Fund's use of
Leverage Instruments. The risk of default increases in the event of an economic
downturn or a substantial increase in interest rates. An increased risk of
default could result in a decline in the value of Senior Loans and in the Fund's
income which could impair the ability of the Fund to pay dividends on TAPS
shares.
The Fund may acquire Senior Loans of Borrowers that are experiencing, or
are more likely to experience, financial difficulty, including Senior Loans of
Borrowers that have filed for bankruptcy protection. Borrowers may have Senior
Loans or other outstanding debt obligations that are rated below investment
grade or that are unrated but of comparable quality to such securities. Debt
securities rated below investment grade are viewed by the rating agencies as
speculative and are commonly known as "junk bonds."
Senior Loans may not be rated at the time that the Fund purchases them.
However, rating agencies (including, but not limited to, Moody's, S&P and Fitch)
have begun rating Senior Loans. If a Senior Loan is rated at the time of
purchase, the Adviser may consider the rating when evaluating the Senior Loan
but, in any event, the Adviser does not view ratings as a determinative factor
in investment decisions. As a result, the Fund is more dependent on the
Adviser's credit analysis abilities. Because of the protective terms of most
Senior Loans, the Adviser believes that the Fund is more likely to recover more
of its investment in a defaulted Senior Loan than would be the case for most
other types of defaulted debt securities. The values of Senior Loans of
Borrowers that have filed for bankruptcy protection or that are experiencing
payment difficulty will reflect, among other things, the Adviser's assessment of
the likelihood that the Fund ultimately will receive repayment of the principal
amount of such Senior Loans, the likely duration, if any, of a lapse in the
scheduled payment of interest and repayment of principal and prevailing interest
rates.
In the case of collateralized Senior Loans, there is no assurance that sale
of the collateral would raise enough cash to satisfy the Borrower's payment
obligation or that the collateral can or will be liquidated. In the event of
bankruptcy, liquidation may not occur and the court may not give lenders the
full benefit of their senior positions. If the terms of a Senior Loan do not
require the Borrower to pledge additional collateral in the event of a decline
in the value of the original collateral, the Fund will be exposed to the risk
that the value of the collateral will not at all times equal or exceed the
amount of the Borrower's obligations under the Senior Loan. To the extent that a
Senior Loan is collateralized by stock in the Borrower or its subsidiaries, such
stock may lose all of its value in the event of bankruptcy of the Borrower.
Uncollateralized Senior Loans involve a greater risk of loss. Some Senior Loans
in which the Fund may invest are subject to the risk that a court, pursuant to
fraudulent conveyance or other similar laws, could subordinate such Senior Loans
to presently existing or future indebtedness of the Borrower or take other
action detrimental to the holders of Senior Loans, such as the Fund, including,
under certain circumstances, invalidating such Senior Loans. Lenders commonly
have certain obligations pursuant to the Loan Agreement, which may include the
obligation to make additional loans or release collateral in certain
circumstances.
Because the primary source of income for the Fund is the interest and
principal payments on the Senior Loans in which it invests, any default by an
issuer of a Senior Loan could have a negative impact on the Fund's ability to
pay dividends on the TAPS shares and could result in the redemption of some or
all of the TAPS shares. Information about most Senior Loans is less readily
available and reliable than is the case for many other types of securities. In
addition, there is no minimum rating or other independent evaluation of a
Borrower or its securities limiting the Fund's investments. The Adviser relies
exclusively or primarily on its own evaluation of Borrower credit quality in
selecting Senior Loans for purchase. As a result, the Fund is particularly
dependent on the analytical abilities of the Adviser.
Interest Rate Risk. When interest rates decline, the value of a portfolio
invested in Senior Loans can be expected to rise. Conversely, when interest
rates rise, the value of a portfolio invested in Senior Loans
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<PAGE> 27
can be expected to decline. Although the income available to the Fund will vary,
the Adviser expects the Fund's policy of acquiring primarily interests in
floating rate Senior Loans to minimize fluctuations in net asset value to the
Fund resulting from changes in market interest rates. However, because floating
or variable rates on Senior Loans only reset periodically, changes in prevailing
interest rates can be expected to cause some fluctuations in the Fund's net
asset value. Similarly, a sudden and significant increase in market interest
rates may cause a decline in the Fund's net asset value.
The Fund invests primarily in Senior Loans whose interest rates reset
frequently. If market interest rates fall, these interest rates will be reset at
lower levels, reducing the Fund's income which in turn may affect the Fund's
ability to pay dividends on the TAPS. A material decline in the Fund's net asset
value may impair the Fund's ability to maintain required levels of asset
coverage.
Senior Loans. Information about most Senior Loans is less readily available
and reliable than is the case for many other types of securities. In addition,
there is no minimum rating or other independent evaluation of a Borrower or its
securities limiting the Fund's investments. The Adviser relies exclusively or
primarily on its own evaluation of Borrower credit quality in selecting Senior
Loans for purchase. As a result, the Fund is particularly dependent on the
analytical abilities of the Adviser.
No active trading market currently exists for many Senior Loans. Senior
Loans are thus relatively illiquid. Liquidity relates to the ability of the Fund
to sell an investment in a timely manner at a price approximately equal to its
value on the Fund's books. The illiquidity of Senior Loans may impair the Fund's
ability to realize the full value of its assets in the event of a voluntary or
involuntary liquidation of such assets. Because of the lack of an active trading
market, illiquid securities are also difficult to value and prices provided by
external pricing services may not reflect the true fair value of the securities.
However, many Senior Loans are of a large principal amount and are held by a
large number of financial institutions. In the Adviser's opinion, this should
enhance their liquidity. In addition, in recent years the number of
institutional investors purchasing Senior Loans has increased. The risks of
illiquidity are particularly important when the Fund's operations require cash,
and may in certain circumstances require that the Fund borrow to meet short-term
cash requirements. To the extent that a secondary market does exist for certain
Senior Loans, the market may be subject to irregular trading activity, wide
bid/ask spreads and extended trade settlement periods. The Fund has no
limitation on the amount of its assets that may be invested in securities that
are not readily marketable or that are subject to restrictions on resale (except
as noted elsewhere herein). The substantial portion of the Fund's assets
invested in Senior Loans may restrict the ability of the Fund to dispose of its
investments in a timely fashion and at a fair price, and could result in capital
losses to the Fund and impair the ability of the Fund to pay dividends on TAPS
shares. The market for Senior Loans could be disrupted in the event of an
economic downturn or a substantial increase or decrease in interest rates. This
could result in increased volatility in the market and in the Fund's net asset
value and market price per share.
If legislation or state or federal regulators impose additional
requirements or restrictions on the ability of financial institutions to make
loans that are considered highly leveraged transactions, the availability of
Senior Loans for investment by the Fund may be adversely affected. In addition,
such requirements or restrictions could reduce or eliminate sources of financing
for certain Borrowers. This would increase the risk of default. If legislation
or federal or state regulators require financial institutions to dispose of
Senior Loans that are considered highly leveraged transactions or subject such
Senior Loans to increased regulatory scrutiny, financial institutions may
determine to sell such Senior Loans. Such sales could result in prices that, in
the opinion of the Adviser, do not represent fair value. If the Fund attempts to
sell a Senior Loan at a time when a financial institution is engaging in such a
sale, the price the Fund could get for the Senior loan may be adversely
affected.
Acting in the capacity of an Agent in a Senior Loan may subject the Fund to
certain risks in addition to those associated with the Fund's current role as a
Lender. Should an Agent or a Lender positioned between the Fund and a Borrower
become insolvent or enter FDIC receivership or bankruptcy, where the Fund is an
Original Lender or has purchased an Assignment any interest of such person in
the Senior Loan and in any loan payment held by such person for the benefit of
the Fund should not be included in
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<PAGE> 28
the person's estate. If, however, these items are included in their estate, the
Fund would incur costs and delays in realizing payment and could suffer a loss
of principal or interest.
Some Senior Loans are subject to the risk that a court, pursuant to
fraudulent conveyance or other similar laws, could subordinate the Senior Loans
to presently existing or future indebtedness of the Borrower or take other
action detrimental to Lenders. Such court action could under certain
circumstances include invalidation of Senior Loans. Any Lender, which could
include the Fund, is subject to the risk that a court could find the Lender
liable for damages in a claim by a Borrower arising under the common laws of
tort or contracts or anti-fraud provisions of certain securities laws for
actions taken or omitted to be taken by the Lenders under the relevant terms of
a Loan Agreement or in connection with actions with respect to the collateral
underlying in the Senior Loan.
Participations. The Fund may purchase Participations in Senior Loans. Under
a Participation, the Fund generally will have rights that are more limited than
the rights of Lenders or of persons who acquire a Senior Loan by Assignment. In
a Participation, the Fund typically has a contractual relationship with the
Lender selling the Participation, but not with the Borrower. As a result, the
Fund assumes the credit risk of the Lender selling the Participation in addition
to the credit risk of the Borrower. In the event of insolvency of the Lender
selling the Participation, the Fund may be treated as a general creditor of the
Lender and may not have a senior claim to the Lenders' interest in the Senior
Loan. A Lender selling a Participation and other persons interpositioned between
the Lender and the Fund with respect to Participations will likely conduct their
principal business activities in the banking, finance and financial services
industries. The Fund does not currently intend to invest more than 20% of its
total assets in such Participations but may invest a greater portion of its
assets in Participations during its period of initial investment. To the extent
the Fund invests in Participations, the Fund may be more susceptible than a fund
without such a policy to any single economic, political or regulatory occurrence
affecting such industries. The Fund has taken measures which it believes reduce
its exposure to such risks but no assurances can be given as to their
effectiveness.
Investment in Foreign Issuers. The Fund may invest up to 20% of its total
assets, measured at the time of investment, in U.S. dollar-denominated Senior
Loans to Borrowers that are organized or located in countries outside the United
States. Although the Senior Loans will require payment of interest and principal
in U.S. dollars, these Borrowers may have significant non-U.S. dollar revenues.
Investment in foreign Borrowers involves special risks, including that foreign
Borrowers may be subject to:
- less rigorous regulatory requirements and accounting and reporting
requirements than U.S. Borrowers;
- differing legal systems and laws relating to creditors' rights;
- the potential inability to enforce legal judgments;
- economic adversity that would result if the value of the Borrower's
non-U.S. dollar-denominated revenues and assets were to fall (in U.S.
dollar-denominated terms) because of fluctuations in currency values; and
- the potential for political, social and economic adversity in the foreign
Borrower's country.
High Yield/High Risk Securities. The Fund may invest up to 100% of its
assets in Senior Loans and other securities that are rated below investment
grade, or that are unrated but determined by the Adviser to be below investment
grade quality. Securities rated below investment grade quality are commonly
known as "high yield/high risk" or "junk" bonds. Junk bonds, while generally
offering higher yields than investment grade securities with similar maturities
and features, involve greater risks, including the possibility of default or
bankruptcy. They are regarded as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal. The price volatility of
these securities due to factors such as interest rate sensitivity, market
perception of the creditworthiness of the issuer and general market liquidity is
likely to result in increased fluctuation in the Fund's net asset value,
particularly in response to economic downturns. See "Additional Information
About the Fund's Investments" in the Statement of Additional Information.
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<PAGE> 29
Investment Practices and Special Risks. The Fund may use interest rate and
other hedging transactions, lend portfolio holdings, purchase and sell Senior
Loans and other securities on a "when issued" or "delayed delivery" basis, and
use repurchase and reverse repurchase agreements. These investment practices
involve risks. The values of certain derivatives can be affected dramatically by
even small market movements, sometimes in ways that are difficult to predict.
The successful utilization of hedging and risk management transactions requires
skills different from those needed in the selection of the Fund's portfolio
securities. Although the Adviser believes that these investment practices may
aid the Fund in achieving its investment objective, there is no assurance that
these practices will achieve this result. If these transactions are not
successful, they may result in losses to the Fund and may impair the Fund's
ability to pay dividends on TAPS shares.
INTEREST RATE FLUCTUATIONS
When interest rates decline, the value of a portfolio invested in fixed
rate obligations can be expected to rise. Conversely, when interest rates rise,
the value of a portfolio invested in fixed rate obligations can be expected to
decline. Although the Fund's net asset value will vary, the Adviser expects the
Fund's policy of acquiring primarily interests in floating rate Senior Loans to
minimize fluctuations in net asset value resulting from changes in market
interest rates. However, because floating or variable rates on Senior Loans only
reset periodically, changes in prevailing interest rates can be expected to
cause some fluctuations in the Fund's net asset value. Similarly, a sudden and
significant increase in market interest rates, may cause a decline in the Fund's
net asset value.
Income Risk. The Fund invests primarily in Senior Loans whose interest
rates reset frequently. If market interest rates fall, these interest rates will
be reset at lower levels, reducing the Fund's income and in turn, dividends paid
to Common Shareholders.
Net Asset Value Fluctuations. The Senior Loans in which the Fund will
invest generally are not listed on any securities exchange. Certain Senior Loans
are traded by institutional investors in an over-the-counter secondary market
for Senior Loan obligations that has developed over the past several years. No
active trading market currently exists for many of the Senior Loans in which the
Fund will invest. The secondary market for those Senior Loans generally is
comparatively illiquid relative to markets for other income securities. Because
of the lack of an active trading market, Senior Loans are generally more
difficult to value than liquid securities for which an active trading market
exists. In determining net asset value, the Fund will utilize the valuations of
Senior Loans furnished by an independent third-party pricing service provider,
which typically values Senior Loans at the mean of the highest bona fide bid and
lowest bona fide ask prices when current quotations are readily available.
Senior Loans for which current quotations are not readily available are valued
at a fair value as determined by the pricing service provider using a wide range
of market data and other information and analyses, including credit
considerations considered relevant by the pricing service provider, to determine
valuations. If the pricing service provider does not provide a value for a
Senior Loan or if no pricing service provider is then acting as such for the
Fund, a value will be determined by the Adviser. To the extent that an active
secondary trading market in Senior Loan interests develops to a reliable degree,
the pricing service provider may rely to an increasing extent on such market
prices and quotations in determining valuations of the Senior Loan interests in
the Fund's portfolio. The Fund purchases Senior Loans primarily to seek to
achieve its investment objective of high current income, consistent with
preservation of capital, and does not anticipate that it will actively trade
Senior Loans. To the extent a trading market continues to develop, certain
participants in the market may have objectives other than current income and may
pursue short-term trading strategies, which may result in erratic movements in
the market prices for Senior Loans as a result of movements in short-term
interest rates or otherwise. Although the Fund's policy of acquiring interests
in floating rate Senior Loans is intended to minimize fluctuations in net asset
value resulting from changes in market interest rates, the Fund's net asset
value will fluctuate.
NON-DIVERSIFICATION
The Fund has registered as a "non-diversified" investment company. This
means that it may invest more than 5% of the value of its assets in the
obligations of any single issuer, including Senior Loans of a
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<PAGE> 30
single Borrower and Participations purchased from a single Lender. However, the
Fund does not intend to invest more than 10% of the value of its assets in
Senior Loans of a single Borrower. If the Fund invests a relatively high
percentage of its assets in obligations of a limited number of issuers, the Fund
will be more at risk to any single corporate, economic, political or regulatory
event that impacts one or more of those issuers. In addition, the Fund must
satisfy certain asset diversification rules to qualify as a regulated investment
company for federal income tax purposes.
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
The Board of Trustees is responsible for the management of the Fund,
including supervision of the duties performed by the Adviser. There are six
Trustees of the Fund, one of whom is an "interested person" (as defined in the
1940 Act) and five of whom are not "interested persons." The names and business
addresses of the Trustees and officers of the Fund and their principal
occupations and other affiliations during the past five years are set forth
under "Management of the Fund" in the Statement of Additional Information.
INVESTMENT ADVISER
Nuveen Senior Loan Asset Management Inc., 333 West Wacker Drive, Chicago,
IL 60606, serves as the investment adviser to the Fund. In this capacity, the
Adviser is responsible for the selection and ongoing monitoring of the assets in
the Fund's investment portfolio, managing the Fund's business affairs and
providing certain clerical, bookkeeping and administrative services. The Adviser
is a recently-formed, wholly-owned subsidiary of The John Nuveen Company. The
John Nuveen Company is a majority-owned subsidiary of The St. Paul Companies,
Inc., a publicly-traded company which is principally engaged in providing
property-liability insurance through subsidiaries. See the Statement of
Additional Information under "Management of the Fund -- Investment Adviser."
Day to day operations and execution of specific investment strategies are
the responsibility of the Adviser. Jeffrey W. Maillet is the Executive Managing
Director of the Adviser and is primarily responsible for the day to day
management of the Fund's portfolio. Mr. Maillet has been employed by the Adviser
since August 1999. Prior to joining the Adviser, Mr. Maillet was a Senior Vice
President of Van Kampen Investment Advisory Corp. since 1989. Mr. Maillet has
eighteen years experience in managing portfolios and creating investments,
particularly those featuring floating rate senior collateralized loans to
companies and other entities in diverse industries and regions. Over the past
eighteen years, he has managed the purchase of over 2,000 Senior Loans with an
aggregate principal amount of approximately $28 billion.
INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an investment management agreement between the Adviser and the
Fund, the Fund has agreed to pay for the services and facilities provided by the
Adviser an annual management fee, payable on a monthly basis, according to the
following schedule:
<TABLE>
<CAPTION>
AVERAGE DAILY MANAGED ASSETS* MANAGEMENT FEE
- ----------------------------- --------------
<S> <C>
Less than $1 billion................................. .8500 of 1.0%
$1 billion to $2 billion............................. .8375 of 1.0
$2 billion to $5 billion............................. .8250 of 1.0
$5 billion to $10 billion............................ .8000 of 1.0
$10 billion and over................................. .7750 of 1.0
</TABLE>
- ---------------
* For purposes of calculation of the management fee, the Fund's "managed
assets" shall mean the average daily gross asset value of the Fund, minus
the sum of the Fund's accrued and unpaid dividends on any outstanding
Preferred Shares, including the TAPS, and accrued liabilities (other than
the principal amount of any borrowings incurred, commercial paper or notes
issued by the Fund and the liquidation preference of any outstanding
Preferred Shares, including the TAPS).
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<PAGE> 31
Because the fee paid to the Adviser will be calculated on the basis of the
Fund's managed assets, which include the proceeds of leverage, the dollar amount
of the Adviser's fees from the Fund will be higher (and the Adviser will benefit
to that extent) when leverage is utilized.
In addition to the fee of the Adviser, the Fund pays all other costs and
expenses of its operations, including compensation of its Trustees (other than
those affiliated with the Adviser), custodian, transfer and dividend disbursing
expenses, legal fees, expenses of independent auditors, expenses of repurchasing
shares, expenses of preparing, printing and distributing shareholder reports,
notices, proxy statements and reports to governmental agencies, and taxes, if
any.
For the first ten years of the Fund's operations, the Adviser has agreed to
reimburse the Fund for fees and expenses in the amounts, and for the time
periods, set forth below:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
REIMBURSED REIMBURSED
YEAR ENDING (AS A PERCENTAGE YEAR ENDING (AS A PERCENTAGE
OCTOBER 31, OF MANAGED ASSETS) OCTOBER 31, OF MANAGED ASSETS)
----------- ------------------ ----------- ------------------
<S> <C> <C> <C>
2000 .45% 2005 .35%
2001 .45 2006 .25
2002 .45 2007 .15
2003 .45 2008 .10
2004 .45 2009 .05
</TABLE>
- ---------------
* From the commencement of operations.
The Adviser has not agreed to reimburse the Fund for any portion of its fees and
expenses beyond October 31, 2009.
LEGAL PROCEEDINGS
A lawsuit brought in June 1996 (Green et al. v. Nuveen Advisory Corp., et
al.) by certain individual common shareholders of six leveraged closed-end funds
sponsored by Nuveen is currently pending in federal district court. The
plaintiffs allege that the leveraged closed-end funds engaged in certain
practices that violated various provisions of the 1940 Act and common law. The
plaintiffs also alleged, among other things, breaches of fiduciary duty by the
funds' directors and Nuveen Advisory Corp., an affiliate of the Adviser, and
various misrepresentations and omissions in prospectuses and shareholder reports
relating to the use of leverage through the issuance and periodic auctioning of
preferred stock and the basis of the calculation and payment of management fees
to Nuveen Advisory Corp. and Nuveen. Plaintiffs also filed a motion to certify
defendant and plaintiff classes.
The defendants are vigorously defending the case and filed motions to
dismiss the entire lawsuit asserting that the claims are without merit and to
oppose certification of any classes. By opinion dated March 30, 1999, the court
granted most of the defendants' motion to dismiss and denied plaintiffs' motion
to certify defendant and plaintiff classes. The court dismissed all claims
against the funds, the funds' directors and Nuveen. The court dismissed these
claims without prejudice (which means that the plaintiffs can re-file the claims
if they can correct the defects that led to the claims being dismissed) on the
ground that the claims should have been brought as derivative claims on behalf
of the funds. The only remaining claim is brought under Section 36(b) of the
1940 Act against Nuveen Advisory Corp., and relates solely to advisory fees
Nuveen Advisory Corp. received from the six relevant funds. Discovery is
underway on that single claim. While the Fund cannot assure you that the
litigation will be decided in Nuveen Advisory Corp.'s favor, the Adviser
believes a decision, if any, against the defendants would have no material
effect on the Fund, its Common Shares, the TAPS or the ability of the Adviser to
perform its duties under the investment management agreement.
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<PAGE> 32
DESCRIPTION OF TAPS
The following is a brief description of the terms of the TAPS. This
description does not purport to be complete and is subject to and qualified in
its entirety by reference to the more detailed description of the TAPS in the
Fund's Statement Establishing and Fixing the Rights and Preferences of Taxable
Auctioned Preferred Shares (the "Statement") attached as Appendix A to the
Statement of Additional Information.
GENERAL
The Fund's Declaration authorizes the issuance of an unlimited number of
preferred shares, par value $.01 per share, in one or more classes or series,
with rights as determined by the Board of Trustees without the approval of
common shareholders. The Statement currently authorizes the issuance of 1,840
TAPS Series TH. The TAPS have a liquidation preference of $25,000 per share,
plus all accumulated but unpaid dividends (whether or not earned or declared) to
the date of final distribution. The TAPS when issued and sold through this
Offering (i) will be fully paid and non-assessable, (ii) will not be convertible
into Common Shares or other capital stock of the Fund, (iii) will have no
preemptive rights, and (iv) will not be subject to any sinking fund. The TAPS
will be subject to optional and mandatory redemption as described under
"-- Redemption."
Holders of TAPS will not receive certificates representing their ownership
interest in such shares. DTC will initially act as Securities Depository for the
Agent Members with respect to the TAPS.
In addition to serving as the Auction Agent in connection with the Auction
Procedures described below, the Auction Agent will act as the transfer agent,
registrar, and paying agent for the TAPS. Furthermore, the Auction Agent will
send notices to holders of TAPS of any meeting at which holders of TAPS have the
right to vote. See "-- Voting Rights." However, the Auction Agent generally will
serve merely as the agent of the Fund, acting in accordance with the Fund's
instructions.
Except in an Auction, the Fund will have the right (to the extent permitted
by applicable law) to purchase or otherwise acquire any share of TAPS, so long
as the Fund is current in the payment of dividends on the TAPS and on any other
capital shares of the Fund ranking on a parity with the TAPS with respect to the
payment of dividends or upon liquidation.
DIVIDENDS AND DIVIDEND PERIODS
General. Holders of TAPS will be entitled to receive, when, as and if
declared by the Board of Trustees, out of funds legally available therefor,
cumulative cash dividends on their shares, at the Applicable Rate determined as
described under "-- Determination of Dividend Rate," payable on the respective
dates set forth below. Dividends so declared and payable shall be paid to the
extent permitted under the Code, and to the extent available and in preference
to and priority over any dividend declared and payable on the Common Shares.
On the Business Day next preceding each Dividend Payment Date, the Fund is
required to deposit with the Paying Agent sufficient funds for the payment of
declared dividends. The Fund does not intend to establish any reserves for the
payment of dividends.
Each dividend will be paid by the Paying Agent to the record holder, which
holder is expected to be the nominee of the Securities Depository. The
Securities Depository will credit the accounts of the Agent Members of the
beneficial owners in accordance with the Securities Depository's normal
procedures. The Securities Depository's current procedures provide for it to
distribute dividends in same-day funds to Agent Members who are in turn expected
to distribute such dividends to the persons for whom they are acting as agents.
The Agent Member of a beneficial owner will be responsible for holding or
disbursing such payments on the applicable Dividend Payment Date to such
beneficial owner in accordance with the instructions of such beneficial owner.
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<PAGE> 33
Dividends in arrears for any past Dividend Period may be declared and paid
at any time, without reference to any regular Dividend Payment Date, to the
nominee of the Securities Depository. Any dividend payment shall first be
credited against the earliest declared but unpaid dividends.
Holders will not be entitled to any dividends, whether payable in cash,
property or shares, in excess of full cumulative dividends except as described
under "-- Determination of Dividend Rate." No interest will be payable in
respect of any dividend payment or payments which may be in arrears. See
"-- Default Period."
The amount of dividends per outstanding share payable (if declared) on each
Dividend Payment Date of each Dividend Period of less than one year (or in
respect of dividends on another date in connection with a redemption during such
Dividend Period) shall be computed by multiplying the Applicable Rate (or the
Default Rate) for such Dividend Period (or a portion thereof) by a fraction, the
numerator of which will be the number of days in such Dividend Period (or
portion thereof) such share was outstanding and for which the Applicable Rate or
the Default Rate was applicable and the denominator of which will be 365,
multiplying the amount so obtained by the liquidation value, and rounding the
amount so obtained to the nearest cent. During any Dividend Period of one year
or more, the amount of dividends per share payable on any Dividend Payment Date
(or in respect of dividends on another date in connection with a redemption
during such Dividend Period) shall be computed as described in the preceding
sentence, except that it will be determined on the basis of a year consisting of
twelve 30-day months.
Determination of Dividend Rate. The dividend rate for the initial Dividend
Period (i.e. the period from and including the Date of Original Issue to and
including the initial Auction Date) and the initial Auction Date are set forth
on the inside cover page of the Prospectus. For each subsequent Dividend Period,
subject to certain exceptions, the dividend rate will be the Applicable Rate
that the Auction Agent advises the Fund has resulted from an Auction.
The initial Dividend Period for the TAPS shall be days. Dividend
Periods after the initial Dividend Period shall either be Standard Rate Periods
(28 days) or, subject to certain conditions and with notice to holders, Special
Rate Periods.
A Special Rate Period will not be effective unless Sufficient Clearing Bids
exist at the Auction in respect of such Special Rate Period (that is, in
general, the number of shares subject to Bids by Potential Beneficial Owners is
at least equal to the number of shares subject to Sell Orders by Existing
Holders). If Sufficient Clearing Bids do not exist at any Auction in respect of
a Special Rate Period, the Dividend Period commencing on the Business Day
succeeding such Auction will be the Standard Rate Period, and the holders of the
shares of the affected series will be required to continue to hold such shares
for such Standard Rate Period.
Dividends will accumulate at the Applicable Rate from the Date of Original
Issue and shall be payable on each Dividend Payment Date thereafter. For
Dividend Periods greater than 30 days, Dividend Payment Dates shall occur on a
monthly basis on the first day of each month within such Dividend Period and on
the Business Day following the last day of such Dividend Period. Dividends will
be paid through the Securities Depository on each Dividend Payment Date.
Except during a Default Period as described below, the Applicable Rate
resulting from an Auction for a Standard Rate Period or less will not be less
than the Minimum Rate, which is equal to 70% of the applicable AA Composite
Commercial Paper Rate. For all other Rate Periods, the Applicable Rate resulting
from an Auction will not be greater than the Maximum Rate, which is equal to
150% of the applicable AA Composite Commercial Paper Rate (for a Dividend Period
of fewer than 184 days) or the applicable Treasury Index Rate (for a Dividend
Period of 184 days or more (each, a "Reference Rate")). In each case the Maximum
Rate is subject to upward but not downward adjustment in the discretion of the
Board of Trustees after consultation with the Broker-Dealers, provided that
immediately following any such increase the Fund would be in compliance with the
TAPS Basic Maintenance Amount.
The Maximum Rate for the shares of TAPS will apply automatically following
an Auction for such shares in which Sufficient Clearing Bids have not been made
(other than because all shares of TAPS were
30
<PAGE> 34
subject to Submitted Hold Orders) or following the failure to hold an Auction
for any reason on the Auction Date scheduled to occur (except for circumstances
in which the Dividend Rate is the Default Rate, as described below). The All
Hold Rate will apply automatically following an Auction in which all of the
Outstanding Shares of TAPS Series TH are subject (or are deemed to be subject)
to Hold Orders.
Prior to each Auction, Broker-Dealers will notify holders of the term of
the next succeeding Dividend Period as soon as practicable after the
Broker-Dealers have been so advised by the Fund. After each auction, on the
Auction Date, Broker-Dealers will notify holders of the Applicable Rate for the
next succeeding Dividend Period and of the Auction Date of the next succeeding
Auction.
Notification of Dividend Period. The Fund will designate the duration of
Dividend Periods of the TAPS; provided, however, that no such designation is
necessary for a Standard Rate Period and that any designation of a Special Rate
Period shall be effective only if (i) notice thereof shall have been given as
provided herein, (ii) any failure to pay in the timely manner to the Auction
Agent the full amount of any dividend on, or the redemption price of, the TAPS
shall have been cured as set forth under "-- Default Period," (iii) Sufficient
Clearing Bids shall have existed in an Auction held on the Auction Date
immediately preceding the first day of such proposed Special Rate Period, (iv)
if the Fund shall have mailed a notice of redemption with respect to any shares,
as described under "-- Redemption," the Redemption Price with respect to such
shares shall have been deposited with the Paying Agent, and (v) the Fund has
confirmed that, as of the Auction Date next preceding the first day of such
Special Rate Period, it has Eligible Assets with an aggregate Discounted Value
at least equal to the TAPS Basic Maintenance Amount (as defined below) and has
consulted with the Broker-Dealers and has provided notice and a TAPS Basic
Maintenance Certificate (as defined below) to each Rating Agency which is then
rating the TAPS and so requires.
If the Fund proposes to designate any Special Rate Period consisting of not
fewer than 7 nor more than 30 Business Days prior to the first day of such
Special Rate Period (or two Business Days in the event the duration of the
Special Rate Period is fewer than 8 days), notice shall be (i) made by press
release and (ii) communicated by the Fund by telephonic or other means to the
Auction Agent and confirmed in writing promptly thereafter. Each such notice
shall state (A) that the Fund proposes to exercise its option to designate a
succeeding Special Rate Period, specifying the first and last days thereof and
(B) that the Fund will, by 3:00 p.m. New York City time, on the second Business
Day next preceding the first day of such Special Rate Period, notify the Auction
Agent, who will promptly notify the Broker-Dealers, of either (x) its
determination, subject to certain conditions, to proceed with such Special Rate
Period, in which case the Fund may specify the terms of any Specific Redemption
Provisions, or (y) its determination not to proceed with such Special Rate
Period in which latter event the succeeding Dividend Period shall be a Standard
Rate Period.
No later than 3:00 p.m., New York City time, on the second Business Day
next preceding the first day of any proposed Special Rate Period, the Fund shall
deliver to the Auction Agent, who will promptly deliver to the Broker-Dealers
and Existing Holders, either:
(i) a notice stating (A) that the Fund has determined to designate the
next succeeding Dividend Period as a Special Rate Period, specifying the
first and last days thereof and (B) the terms of the Specific Redemption
Provisions, if any; or
(ii) a notice stating that the Fund has determined not to exercise its
option to designate a Special Rate Period.
If the Fund fails to deliver either such notice with respect to any
designation of any proposed Special Rate Period to the Auction Agent or is
unable to make the confirmation described above by 3:00 p.m., New York City
time, on the second Business Day next preceding the first day of such proposed
Special Rate Period, the Fund shall be deemed to have delivered a notice to the
Auction Agent with respect to such Dividend Period to the effect set forth in
clause (ii) above, thereby resulting in a Standard Rate Period.
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<PAGE> 35
Default Period. A "Default Period" will commence on the applicable date set
forth below if the Fund fails to (i) declare prior to the close of business on
the second Business Day preceding any Dividend Payment Date, for payment on, or
(to the extent permitted as described below) within two Business Days after,
such Dividend Payment Date to the persons who held TAPS as of 12:00 noon, New
York City time, on the Business Day preceding such Dividend Payment Date, the
full amount of any dividend payable on such Dividend Payment Date, (ii) deposit,
irrevocably in trust, in same-day funds, with a designated paying agent by 12:00
noon, New York City time, (A) on or (to the extent permitted as described below)
within two Business Days after any Dividend Payment Date the full amount of any
declared dividend on the relevant series of TAPS payable on such Dividend
Payment Date (together with the failure to timely declare dividends described in
(i) above, hereinafter referred to as a "Dividend Default") or (B) on or (to the
extent permitted as described below) within two Business Days after any date
fixed for redemption of TAPS called for redemption, the applicable redemption
price (a "Redemption Default"), or (iii) maintain the "aaa" credit rating unless
the "aaa" credit rating is restored by the Dividend Payment Date next following
the date on which the Fund fails to maintain the "aaa" credit rating (a "Rating
Default"). A Default Period with respect to a Dividend Default or a Redemption
Default will consist of the period commencing on and including the
aforementioned Dividend Payment Date or redemption date, as the case may be, and
ending on and including the Business Day on which, by 12:00 noon, New York City
time, all unpaid dividends and unpaid redemption price shall have been so
deposited or shall have otherwise been made available to the applicable holders
in same day funds. A Default Period with respect to a Rating Default shall
commence as of the date on which the Fund fails to maintain the "aaa" credit
rating (provided that such Rating Default shall be deemed not to have occurred
and such Default Period shall not commence if such Rating Default is cured by
the next succeeding Dividend Payment Date) and shall end on the earlier of the
date on which such default is cured as provided herein or the date on which the
TAPS is mandatorily redeemed as provided herein. Holders of two-thirds of the
TAPS then outstanding may waive any Dividend Default, Redemption Default or
Rating Default.
The Applicable Rate for each Default Period, including each Dividend Period
commencing during a Default Period, will be equal to the Default Rate. The
Default Rate is the Reference Rate multiplied by three.
Each subsequent Dividend Period commencing after the beginning of a Default
Period shall be a Standard Rate Period; provided, however, that the commencement
of a Default Period will not by itself cause the commencement of a new Dividend
Period. Any dividend due on any Dividend Payment Date (if, prior to 12:00 noon,
New York City time, on such Dividend Payment Date, the Fund has declared such
dividend payable on or within two Business Days after such Dividend Payment Date
to the persons who held such shares as of 12:00 noon, New York City time, on the
Business Day preceding such Dividend Payment Date) or redemption price with
respect to such shares not paid to such persons when due may (if such default is
not solely due to the willful failure of the Fund) be paid to such persons in
the same form of funds by 12:00 noon, New York City time, on any of the first
two Business Days after such Dividend Payment Date or due date, as the case may
be, provided that such amount is accompanied by an additional amount for such
period of non-payment at the Default Rate applied to the amount of such default
based on the actual number of days comprising such period divided by 365. For
the purposes of the foregoing, payment to a person in same-day funds made on or
before 12:00 noon New York City time on any Business Day at any time will be
considered equivalent to payment to that person in New York Clearing House
(next-day) funds at the same time on the preceding Business Day, and any payment
made after 12:00 noon, New York City time, on any Business Day shall be
considered to have been made instead in the same form of funds and to the same
person before 12:00 noon, New York City time, on the next Business Day.
Subject to the foregoing, and any requirements of Massachusetts law, to the
extent that the Fund's net investment income for any year exceeds any current or
accumulated dividends on the TAPS, it will be distributed to the holders of the
Common Shares. The term "net investment income" includes interest, dividends,
short-term capital gains and other income received or accrued less the advisory
fee, bank custodian charges, taxes (except capital gains taxes) and other
expenses properly chargeable against
32
<PAGE> 36
income, but generally does not include net capital gains, dividends paid in
shares of stock, transfer taxes, brokerage or other capital charges or
distributions designated as a return of capital. Any realized net capital gains
(defined as the excess of net long-term capital gains over net short-term
capital losses) of the Fund will be distributed annually to the holders of the
Common Shares (subject to the prior rights of the holders of the TAPS) subject
to the foregoing and any requirements of Massachusetts law.
RESTRICTIONS ON DIVIDEND, REDEMPTION AND OTHER PAYMENTS
Under the 1940 Act, the Fund may not (i) declare any dividend with respect
to the TAPS if, at the time of such declaration (and after giving effect
thereto), asset coverage with respect to the Fund's senior securities
representing indebtedness, including all outstanding senior indebtedness of the
Fund, including the Fund's obligations under any credit facility or commercial
paper program, would be less than 200% (or such other percentage as may in the
future be specified in or under the 1940 Act as the minimum asset coverage for
senior securities representing stock of a closed-end investment company as a
condition of declaring dividends on its preferred stock) or (ii) declare any
other distribution on the TAPS or purchase or redeem TAPS if at the time of the
declaration (and after giving effect thereto), asset coverage with respect to
the Fund's senior securities representing indebtedness would be less than 300%
(or such higher percentage as may in the future be specified in or under the
1940 Act as the minimum asset coverage for senior securities representing stock
of a closed-end investment company as a condition of declaring distributions,
purchases or redemptions of its capital stock). "Senior securities representing
indebtedness" generally means any bond, debenture, note or similar obligation or
instrument constituting a security (other than stock) and evidencing
indebtedness and includes the Fund's obligations under any credit facility or
commercial paper program. See "Description of Credit Facility/Commercial Paper
Program." For purposes of determining asset coverage for senior securities
representing indebtedness in connection with the payment of dividends or other
distributions on or purchases or redemptions of stock, the term "senior
security" does not include any promissory note or other evidence of indebtedness
issued in consideration of any loan, extension or renewal thereof, made by a
bank or other person and privately arranged, and not intended to be publicly
distributed. The term "senior security" also does not include any such
promissory note or other evidence of indebtedness in any case where such a loan
is for temporary purposes only and in an amount not exceeding 5% of the value of
the total assets of the Fund at the time when the loan is made; a loan is
presumed under the 1940 Act to be for temporary purposes if it is repaid within
60 days and is not extended or renewed; otherwise it is presumed not to be for
temporary purposes. For purposes of determining whether the 200% and 300% asset
coverage requirements described above apply in connection with dividends or
distributions on or purchases or redemptions of TAPS, such asset coverages may
be calculated on the basis of values calculated as of a time within 48 hours
(not including Sundays or holidays) next preceding the time of the applicable
determination. In addition, a declaration of a dividend or other distribution on
or purchase or redemption of TAPS is prohibited unless there is no event of
default under indebtedness senior to the TAPS, if any, and immediately after
such transaction, the Fund would have eligible portfolio holdings with an
aggregated discounted value at least equal to the asset coverage requirements
under indebtedness senior to the TAPS, if any. See "Description of Credit
Facility/Commercial Paper Program -- Restrictive Covenants."
Upon failure to pay dividends for two years or more, the holders of TAPS
will acquire certain additional voting rights. See "-- Voting Rights." Such
rights shall be the exclusive remedy of the holders of TAPS upon any failure to
pay dividends on the TAPS.
For so long as any TAPS are outstanding, except in connection with the
liquidation of the Fund, or a refinancing of the TAPS as provided in the
Statement, the Fund will not declare, pay or set apart for payment any dividend
or other distribution (other than a dividend or distribution paid in shares of,
or options, warrants or rights to subscribe for or purchase, Common Shares or
other shares, if any, ranking junior to the TAPS as to dividends or upon
liquidation) in respect to Common Shares or any other shares of the Fund ranking
junior to or on a parity with the TAPS as to dividends or upon liquidation, or
call for redemption, redeem, purchase or otherwise acquire for consideration any
Common Shares or any other such junior shares (except by conversion into or
exchange for shares of the Fund ranking junior to the
33
<PAGE> 37
TAPS as to dividends and upon liquidation) or any such parity shares (except by
conversion into or exchange for shares of the Fund ranking junior to or on a
parity with the TAPS as to dividends and upon liquidation), unless (i)
immediately after such transaction, the Fund would have Eligible Assets with an
aggregate Discounted Value at least equal to the TAPS Basic Maintenance Amount
(see "-- Asset Maintenance"); (ii) full cumulative dividends on the TAPS due on
or prior to the date of the transaction have been declared and paid; and (iii)
the Fund has redeemed the full number of shares of TAPS required to be redeemed
by any provision for mandatory redemption contained in the Statement (see
"-- Redemption").
REDEMPTION
Optional Redemption. To the extent permitted under the 1940 Act and
Massachusetts law, the Fund at its option may redeem TAPS having a Dividend
Period of one year or less, in whole or in part, on the Dividend Payment Date
upon not less than 15 days' and not more than 40 days' prior notice. The
optional redemption price per share shall be $25,000 per share, plus an amount
equal to accumulated but unpaid dividends thereon (whether or not earned or
declared) to the date fixed for redemption. TAPS having a Dividend Period of
more than one year are redeemable at the option of the Fund, in whole or in
part, prior to the end of the relevant Dividend Period, subject to any Specific
Redemption Provisions, which may include the payment of redemption premiums to
the extent required under any applicable Specific Redemption Provisions. The
Fund shall not effect any optional redemption unless after giving effect thereto
(i) the Fund has available certain Deposit Securities with maturity or tender
dates not later than the day preceding the applicable redemption date and having
a value not less than the amount (including any applicable premium) due to
holders of TAPS by reason of the redemption of TAPS on such date fixed for the
redemption and (ii) the Fund would have Eligible Assets with an aggregate
Discounted Value at least equal to the TAPS Basic Maintenance Amount.
The Fund also reserves the right to repurchase TAPS in market or other
transactions from time to time in accordance with applicable law and at a price
that may be more or less than the liquidation preference of the TAPS, but is
under no obligation to do so.
Mandatory Redemption. If the Fund fails to maintain, as of any Valuation
Date, Eligible Assets with an aggregate Discounted Value at least equal to the
TAPS Basic Maintenance Amount or, as of the last Business Day of any month, the
1940 Act TAPS Asset Coverage, and such failure is not cured within the last
Business Day of the following month in the case of a failure to maintain the
1940 Act TAPS Asset Coverage as of such last Business Day (each an "Asset
Coverage Cure Date"), the TAPS will be subject to mandatory redemption out of
funds legally available therefor. See "-- Asset Maintenance." The number of TAPS
to be redeemed in such circumstances will be equal to the lesser of (i) the
minimum number of shares of TAPS the redemption of which, if deemed to have
occurred immediately prior to the opening of business on the relevant Asset
Coverage Cure Date, would result in the Fund having sufficient Eligible Assets
to restore the TAPS Basic Maintenance Amount or 1940 Act TAPS Asset Coverage, as
the case may be, in either case as of the relevant Asset Coverage Cure Date
(provided that, if there is no such minimum number of shares the redemption of
which would have such result, all shares of TAPS then outstanding will be
redeemed), and (ii) the maximum number of shares of TAPS that can be redeemed
out of funds expected to be available therefor on the Mandatory Redemption Date
(as defined below) at the Mandatory Redemption Price (as defined below).
The Fund shall allocate the number of shares required to be redeemed to
satisfy the TAPS Basic Maintenance Amount or the 1940 Act TAPS Asset Coverage,
as the case may be, among the holders of TAPS in proportion to the number of
shares they hold and shares of other Preferred Shares subject to mandatory
redemption provisions.
If the Fund at any time fails to maintain the "aaa" credit rating for the
TAPS, and such failure is not cured within 90 calendar days thereafter (the
"Rating Default Cure Date"), all shares of TAPS will be subject to mandatory
redemption out of funds legally available therefor, on the Mandatory Redemption
Date, and dividends thereon will be payable at the Default Rate until such
redemption is effected as
34
<PAGE> 38
provided above under "-- Dividends and Dividend Periods -- Default Period." To
maintain the "aaa" credit rating, the Fund must maintain a rating for the TAPS
in the highest rating category from a nationally recognized statistical rating
organization, as used in the rules and regulations under the Exchange Act, which
shall be Moody's.
TAPS may be subject to mandatory redemption in accordance with the
foregoing redemption provision notwithstanding the terms of any Specific
Redemption Provisions.
The Fund is required to effect such a mandatory redemption not later than
30 days after the Asset Coverage Cure Date or the Rating Default Cure Date, as
the case may be (the "Mandatory Redemption Date"), except that if the Fund does
not have funds legally available for the redemption of, or is not otherwise
legally permitted to redeem, all of the required number of TAPS which are
subject to mandatory redemption, or the Fund otherwise is unable to effect such
redemption on or prior to such Mandatory Redemption Date, the Fund will redeem
those TAPS on the earliest practicable date on which the Fund will have such
funds available, upon notice to record owners of TAPS and the Paying Agent. The
Fund's ability to make a mandatory redemption may be limited by the provisions
of the 1940 Act or Massachusetts law.
The redemption price per share in the event of any mandatory redemption
will be $25,000 per share, plus an amount equal to accumulated but unpaid
dividends (whether or not earned or declared) to the date fixed for redemption,
plus (in the case of a Dividend Period of more than one year) any redemption
premium, if any, determined by the Board of Trustees after consultation with the
Broker-Dealers and set forth in any applicable Specific Redemption Provisions
(the "Mandatory Redemption Price").
Redemption Procedure. Pursuant to Rule 23c-2 under the 1940 Act, the Fund
will file a notice of its intention to redeem with the SEC so as to provide at
least the minimum notice required by such Rule or any successor provision
(notice currently must be filed with the SEC generally at least 30 days prior to
the redemption date). The Auction Agent will use its reasonable efforts to
provide telephonic notice to each holder of TAPS called for redemption not later
than the close of business on the Business Day immediately following the
Business Day on which the Auction Agent determines the shares to be redeemed
(or, during a Default Period with respect to such shares, not later than the
close of business on the Business Day immediately following the day on which the
Auction Agent receives notice of redemption from the Fund). Such telephonic
notice will be confirmed promptly in writing not later than the close of
business on the third Business Day preceding the redemption date by providing
the notice sent by the Paying Agent to each holder of record of TAPS called for
redemption, the Paying Agent (if different from the Auction Agent) and the
Securities Depository ("Notice of Redemption"). Notice of Redemption will be
addressed to the registered owners of the TAPS at their addresses appearing on
the share records of the Fund. Such notice will set forth (i) the redemption
date, (ii) the number and identity of TAPS to be redeemed, (iii) the redemption
price (specifying the amount of accumulated dividends to be included therein),
(iv) that dividends on the shares to be redeemed will cease to accumulate on
such redemption date, and (v) the provision under which redemption shall be
made.
If fewer than all of the shares of a series of TAPS are redeemed on any
date, the shares to be redeemed on such date will be selected by the Fund on a
pro rata basis in proportion to the number of shares held by such holders, by
lot or by such other method as is determined by the Fund to be fair and
equitable, subject to the terms of any Specific Redemption Provisions. TAPS may
be subject to mandatory redemption as described herein notwithstanding the terms
of any Specific Redemption Provisions. The Auction Agent will give notice to the
Securities Depository, whose nominee will be the record holder of all of the
TAPS, and the Securities Depository will determine the number of shares to be
redeemed from the account of the Agent Member of each beneficial owner. Each
Agent Member will determine the number of shares to be redeemed from the account
of each beneficial owner for which it acts as agent. An Agent Member may select
for redemption shares from the accounts of some beneficial owners without
selecting for redemption any shares from the accounts of other beneficial
owners. Notwithstanding the foregoing, if neither the Securities Depository nor
its nominee is the record holder of all of the shares, the particular
35
<PAGE> 39
shares to be redeemed shall be selected by the Fund by lot, on a pro rata basis
between each series or by such other method as the Fund shall deem fair and
equitable, as contemplated above.
If Notice of Redemption has been given, then upon the deposit of funds
sufficient to effect such redemption, all rights of the owners of the shares so
called for redemption will cease, except the right of the owners of such shares
to receive the redemption price, but without interest, and such shares will no
longer be deemed to be outstanding for any purpose. The Fund shall be entitled
to receive from the Paying Agent, promptly after the date fixed for redemption,
any cash deposited with the Paying Agent in excess of (i) the aggregate
redemption price of the TAPS called for redemption on such date and (ii) such
other amounts, if any, to which holders of TAPS called for redemption may be
entitled. The Fund will be entitled to receive, from time to time, from the
Paying Agent the interest, if any, earned on such funds deposited with the
Paying Agent and the owners of shares so redeemed will have no claim to any such
interest. Any funds so deposited which are unclaimed two years after such
redemption date will be paid by the Paying Agent to the Fund upon its request.
Thereupon the Paying Agent will be relieved of all responsibility to the owners
of such shares and such owners may look only to the Fund for payment.
So long as any TAPS are held of record by the nominee of the Securities
Depository, the redemption price for such shares will be paid on the redemption
date to the nominee of the Securities Depository. The Securities Depository's
normal procedures provide for it to distribute the amount of the redemption
price to Agent Members who, in turn, are expected to distribute such funds to
the persons for whom they are acting as agent.
Notwithstanding the provisions for redemption described above, no TAPS may
be redeemed unless all dividends in arrears on the outstanding TAPS, and all
capital stock of the Fund ranking on a parity with the TAPS with respect to the
payment of dividends or upon liquidation, have been or are being
contemporaneously paid or set aside for payment, except in connection with the
liquidation of the Fund in which case all TAPS and all shares ranking in a
parity with the TAPS must receive proportionate amounts.
Except for the provisions described above, nothing contained in the
Statement limits any legal right of the Fund to purchase or otherwise acquire
any TAPS outside of an Auction at any price, whether higher or lower than the
price that would be paid in connection with an optional or mandatory redemption,
so long as, at the time of any such purchase, there is no arrearage in the
payment of dividends on or the mandatory or optional redemption price with
respect to, any shares of TAPS for which Notice of Redemption has been given and
the Fund is in compliance with the 1940 Act TAPS Asset Coverage and has Eligible
Assets with an aggregate Discounted Value at least equal to the TAPS Basic
Maintenance Amount after giving effect to such purchase or acquisition on the
date thereof. Any shares which are purchased, redeemed or otherwise acquired by
the Fund shall have no voting rights. If fewer than all the outstanding TAPS are
redeemed or otherwise acquired by the Fund, the Fund shall give notice of such
transaction to the Auction Agent, in accordance with the procedures agreed upon
by the Board of Trustees.
ASSET MAINTENANCE
The Fund is required to satisfy two separate asset maintenance requirements
in respect of the TAPS: (i) the Fund must maintain assets in its portfolio that
have a value, discounted in accordance with the Rating Agency Guidelines, at
least equal to the aggregate liquidation preference of the TAPS plus specified
liabilities, payment obligations and other amounts; and (ii) the Fund must
maintain asset coverage for TAPS of at least 200%.
TAPS Basic Maintenance Amount. The Fund must maintain, as of each Valuation
Date on which any share of TAPS is Outstanding, Eligible Assets having an
aggregate Discounted Value at least equal to the TAPS Basic Maintenance Amount,
which is calculated separately for Moody's (if Moody's is then rating the TAPS)
and any Other Rating Agency which is then rating the TAPS and so requires. If
the Fund fails to maintain Eligible Assets having an aggregated Discounted Value
at least equal to the TAPS Basic Maintenance Amount as of any Valuation Date and
such failure is not cured on or before the
36
<PAGE> 40
related Asset Coverage Cure Date, the Fund will be required in certain
circumstances to redeem certain of the shares of TAPS. See
"-- Redemption -- Mandatory Redemption."
The "TAPS Basic Maintenance Amount" as of any Valuation Date is defined as
the dollar amount equal to:
(1) the sum of (A) the products resulting from multiplying the number
of outstanding TAPS on such date by the liquidation preference per share of
such series; (B) the aggregate amount of dividends that will have
accumulated at the Applicable Rate (whether or not earned or declared) to
and including the first following Dividend Payment Date for each share of
TAPS outstanding that follows such Valuation Date (or to the 42nd day after
such Valuation Date, if such 42nd day occurs before the first following
Dividend Payment Date); (C) the aggregate amount of dividends that would
accumulate at the then current Maximum Rate for a Standard Rate Period
multiplied by the Volatility Factor (1.89) on any shares of TAPS
outstanding from the first day following the Dividend Payment Date referred
to in (B) above through the 42nd day after such Valuation Date, but only if
such 42nd day occurs after the first day following the Dividend Payment
Date, except that if such Valuation Date occurs during a Default Period,
the dividend for purposes of the calculation would accumulate at the
Default Rate; (D) the amount of anticipated Fund expenses for the 90 days
subsequent to such Valuation Date; (E) any current liabilities, including,
without limitation, any indebtedness senior to the TAPS and indebtedness
due within one year and any redemption premium due with respect to shares
of TAPS for which a Notice of Redemption has been given, as of such
Valuation Date to the extent not reflected in any of (1)(A) through (1)(D);
and (F) without duplication, 10% of the exercise price of any call option
written by the Fund and the exercise price of any put option written by the
Fund;
less
(2) the sum of any cash or the value of any Fund assets irrevocably
deposited by the Fund for the payment of any of (1)(B) through (1)(F)
(value for purposes of this clause (2) shall mean the Discounted Value of
the security, except that if the security matures prior to the relevant
redemption payment date and is either fully guaranteed by the U.S.
Government or is rated P-2 by Moody's and A-2 by S&P, it will be valued at
its face value).
Solely for purposes of calculating the TAPS Basic Maintenance Amount,
interest on borrowed funds outstanding as of any date will be treated as
dividend payments, at a deemed dividend rate equal to the interest rate payable
on such funds on the relevant date, but shall be subject to multiplication by
the larger of the factors that the Fund has been informed by each applicable
Rating Agency are applicable (as described in 1(C) above) only in the event that
interest on such borrowed funds is payable on the basis of a variable rate of
interest, and the interest rate is subject to change within the relevant 43-day
period.
The Market Value of the Fund's portfolio securities (used in calculating
the Discounted Value of Eligible Assets) is calculated by using the valuations
of Senior Loans furnished by one or more independent third-party pricing service
approved by the Board of Trustees. The pricing service typically values Senior
Loans at the mean of the highest bona fide bid and lowest bona fide ask prices
when current quotations are readily available. Senior Loans for which current
quotations are not readily available are valued at a fair value as determined by
the pricing service using pricing matrices and other information and analysis,
including credit considerations considered relevant by such pricing services to
determine valuations. If the Adviser believes that a value provided by the
pricing service does not represent a fair value as a result of information,
specific to that Senior Loan or Borrower or its affiliates, which the Adviser
believes that the pricing agent may not be aware, pursuant to procedures
approved by the Board of Trustees, the Adviser may in its discretion value the
Senior Loan and the Fund will utilize that price instead of the price as
determined by the pricing service. If the pricing service does not provide a
value for a Senior Loan, pursuant to procedures approved by the Board of
Trustees, a value will be determined by the Adviser. See "Net Asset Value."
37
<PAGE> 41
The discount factors, the criteria used to determine whether the assets
held in the Fund's portfolio are Eligible Assets, and guidelines for determining
the market value of the Fund's portfolio holdings for purposes of determining
compliance with the TAPS Basic Maintenance Amount are based on criteria
established in connection with rating the TAPS. In no event shall the Discounted
Value of any asset of the Fund exceed its unpaid principal balance or face
amount as of the date of calculation. The Discount Factor relating to any asset
of the Fund, the TAPS Basic Maintenance Amount, the assets eligible for
inclusion in the calculation of the Discounted Value of the Fund's portfolio and
certain definitions and methods of calculation relating thereto may be changed
from time to time by the Fund, without shareholder approval, but only in the
event that the Fund receives written confirmation from each Rating Agency which
is then rating the TAPS and which so requires that any such changes would not
impair the "aaa" Credit Rating. If the Fund fails to maintain the "aaa" Credit
Rating and is unable to restore the "aaa" Credit Rating by the Rating Default
Cure Date, the Fund will be required to redeem the TAPS. See
"-- Redemption -- Mandatory Redemption."
A rating agency's guidelines will apply to TAPS only so long as such rating
agency is rating such shares. The Fund will pay certain fees to Moody's for
rating TAPS. The ratings assigned to TAPS are not recommendations to buy, sell
or hold TAPS. Such ratings may be subject to revision or withdrawal by the
assigning rating agent at any time. Any rating of TAPS should be evaluated
independently of any other rating.
1940 Act TAPS Asset Coverage. The Fund is also required to maintain, as of
the last Business Day on any month in which any share of TAPS is outstanding,
asset coverage of at least 200% (or such other percentage as may in the future
be specified in or under the 1940 Act as the minimum asset coverage for senior
securities representing shares of a closed-end investment company as a condition
of declaring dividends on its common shares) ("1940 Act TAPS Asset Coverage").
If the Fund fails to maintain the 1940 Act TAPS Asset Coverage as of the last
Business Day of any month and such failure is not cured as of the related Asset
Coverage Cure Date, the Fund will be required to redeem certain shares of TAPS.
See "-- Redemption -- Mandatory Redemption."
The Fund estimates that based on the composition of its portfolio as of
April 30, 2000, after giving effect to the issuance of the TAPS ($46,000,000)
and the deduction of sales loads and estimated offering expenses for such shares
($620,288), and giving effect to any credit facility and/or commercial paper
program, the 1940 Act TAPS Asset Coverage will be computed as follows:
<TABLE>
<S> <C> <C> <C>
Value of Fund assets less liabilities not representing
senior securities $466,278,989
- -------------------------------------------------------------------------- =
252%
Senior securities representing indebtedness plus aggregate
liquidation preference of the TAPS $185,000,000
</TABLE>
Notices. Upon the Date of Original Issue and in certain other
circumstances, the Fund is required to deliver to the Auction Agent and to any
Rating Agency which is then rating the TAPS (i) a certificate with respect to
the calculation of the TAPS Basic Maintenance Amount and the value of the
portfolio holdings of the Fund; (ii) a certificate with respect to the
calculation of the 1940 Act Asset Coverage; and (iii) a letter proposed by the
Fund's independent accountants regarding the accuracy of such calculations. See
"Description of TAPS -- Notices" in the Statement of Additional Information.
LIQUIDATION RIGHTS
In the event of a liquidation, dissolution or winding up of the Fund,
whether voluntary or involuntary, the holders of TAPS then outstanding and any
other shares ranking on a parity with the TAPS then outstanding, in preference
to the holders of Common Shares, will be entitled to payment, out of the assets
of the Fund, or the proceeds thereof, available for distribution to shareholders
after satisfaction of claims of creditors of the Fund, of a liquidation
distribution in the amount equal to $25,000 per share of the TAPS, plus an
amount equal to accumulated dividends (whether or not earned or declared but
without interest) to the date of payment of such distribution is made in full or
a sum sufficient for the payment
38
<PAGE> 42
thereof is set apart with the Paying Agent. However, holders of TAPS will not be
entitled to any premium to which such holder would be entitled to receive upon
redemption of such TAPS. After payment of the full amount of such liquidation
distribution, the owners of the TAPS will not be entitled to any further
participation in any distribution of assets of the Fund.
If, upon the liquidation, dissolution or winding up of the Fund, whether
voluntary or involuntary, the assets of the Fund or proceeds thereof available
for distribution to shareholders after satisfaction of claims of creditors of
the Fund shall be insufficient to pay in full the liquidation distribution to
which owners of any TAPS are entitled, such assets or the proceeds thereof will
be distributed ratably among the owners of the TAPS and any other shares ranking
on a parity with TAPS until payment in full is made to the owners of the TAPS of
the liquidation distribution to which they are entitled, no dividend or other
distribution shall be made to the holders of Common Shares and no purchase,
redemption or other acquisition for any consideration by the Fund shall be made
in respect of the Common Shares.
A consolidation or merger of the Fund with or into any other trust or
company or a sale, lease or exchange of all or substantially all of the assets
of the Fund in consideration for the issuance of equity securities of another
trust or company, shall not be deemed to be a liquidation, dissolution or
winding up of the Fund.
To the extent other TAPS are issued by the Fund, such shares will
participate equally and on a pro rata basis with the TAPS then outstanding in
connection with any liquidation, dissolution or winding up of the Fund.
VOTING RIGHTS
Except as otherwise indicated herein and except as otherwise required by
applicable law, holders of TAPS have one vote per share and vote together with
holders of shares of Common Shares as a single class. Under applicable rules of
the New York Stock Exchange, the Fund is currently required to hold annual
meetings of shareholders.
In connection with the election of the Board of Trustees, the holders of
outstanding Preferred Shares, including the TAPS, represented in person or by
proxy at said meeting, shall be entitled, as a class, to the exclusion of the
holders of all other securities and classes of capital stock of the Fund, to
elect two Trustees of the Fund. The holders of outstanding Common Shares and
Preferred Shares, including the TAPS, voting together as a single class, shall
elect the balance of the Trustees. Notwithstanding the foregoing, if (a) at the
close of business on any Dividend Payment Date accumulated dividends (whether or
not earned or declared) on outstanding shares of the Preferred Shares, including
outstanding TAPS, equal to at least two full years' dividends shall be due and
unpaid; or (b) any time holders of any other Preferred Shares are entitled under
the 1940 Act to elect a majority of the Trustees of the Fund, then the number of
members constituting the Board shall automatically be increased by the smallest
number that, when added to the two Trustees elected exclusively by the holders
of Preferred Shares as described above, would constitute a majority of the Board
as so increased by such smallest number; and at a special meeting of
shareholders which will be called and held as soon as practicable, and at all
subsequent meetings at which Trustees are to be elected, the holders of
outstanding Preferred Shares, including the TAPS, voting as a separate class,
will be entitled to elect the smallest number of additional Trustees that,
together with the two Trustees which such holders will be in any event entitled
to elect, constitutes a majority of the total number of Trustees of the Fund as
so increased. The terms of office of the persons who are Trustees at the time of
that election will continue. If the Fund thereafter shall pay, or declare and
set apart for payment, in full all dividends payable on all outstanding
Preferred Shares, including the TAPS, for all past Dividend Periods, the voting
rights stated in the preceding sentence shall cease, and the terms of office of
all of the additional Trustees elected by the holders of Preferred Shares,
including the TAPS (but not of the Trustees with respect to whose election the
holders of Common Shares were entitled to vote or the two Trustees the holders
of Preferred Shares, including the TAPS, have the right to elect in any event),
will terminate automatically. Any shares of TAPS issued after the date hereof
shall
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vote with the TAPS as a single class on the matters described above, and the
issuance of any other shares of TAPS by the Fund may reduce the voting power of
the TAPS.
The affirmative vote of the holders of a majority of the outstanding
Preferred Shares determined with reference to a "majority of outstanding voting
securities" as the term is defined in Section 2(a)(42) of the 1940 Act,
including the TAPS, voting as a class, is required to (i) amend, alter or repeal
any of the preferences, rights or powers of such class so as to affect
materially and adversely such preferences, rights or powers; (ii) increase the
authorized number of TAPS; (iii) create, authorize or issue shares of any class
of capital stock ranking senior to or on a parity with the TAPS with respect to
the payment of dividends or the distribution of assets, or any securities
convertible into, or warrants, options or similar rights to purchase, acquire or
receive, such shares of capital stock ranking senior to or on parity with the
TAPS or reclassify any authorized shares of capital stock of the Fund into any
shares ranking senior to or on parity with the TAPS (except that, the Board of
Trustees, without the vote or consent of the holders of TAPS, may from time to
time authorize, create and classify, and the Fund may from time to time issue,
series or shares of Preferred Shares, including, other series of TAPS, ranking
on a parity with the TAPS with respect to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up to the
affairs of the Fund, and may authorize, reclassify and/or issue any additional
TAPS Series TH, including shares previously purchased or redeemed by the Fund,
subject to continuing compliance by the Fund with the 1940 Act TAPS Asset
Coverage and TAPS Basic Maintenance Amount requirements); (iv) institute any
proceedings to be adjudicated bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against it, or file a
petition seeking or consenting to reorganization or relief under any applicable
federal or state law relating to bankruptcy or insolvency, or consent to the
appointment of a receiver, liquidator, assignee, Trustee, sequestrator (or other
similar official) of the Fund or a substantial part of its property, or make any
assignment for the benefit of creditors, or, except as may be required by
applicable law, admit in writing its inability to pay its debts generally as
they become due or take any corporate action in furtherance of any such action;
(v) create, incur or suffer to exist, or agree to create, incur or suffer to
exist, or consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any material
lien, mortgage, pledge, charge, security interest, security agreement,
conditional sale or trust receipt or other material encumbrance of any kind upon
any of the Fund's assets as a whole, except (A) liens the validity of which are
being contested in good faith by appropriate proceedings, (B) liens for taxes
that are not then due and payable or that can be paid thereafter without
penalty, (C) liens, pledges, charges, security interests, security agreements or
other encumbrances arising in connection with any indebtedness senior to the
TAPS, see "Description of Commercial Paper Program;" (D) liens, pledges,
charges, security interests, security agreements or other encumbrances arising
in connection with any indebtedness permitted under clause (vi) below and (E)
liens to secure payment for services rendered including, without limitation,
services rendered by the Fund's custodian and the Auction Agent, or (vi) create,
authorize, issue, incur or suffer to exist any indebtedness for borrowed money
or any direct or indirect guarantee of such indebtedness for borrowed money or
any direct or indirect guarantee of such indebtedness, except the Fund may
borrow as may be permitted by the Fund's investment restrictions; provided,
however, that transfers of assets by the Fund subject to an obligation to
repurchase shall not be deemed to be indebtedness for purposes of this provision
to the extent that after any such transaction the Fund has Eligible Assets with
an aggregate Discounted Value at least equal to the TAPS Basic Maintenance
Amount as of the immediately preceding Valuation Date.
In addition, the affirmative vote of the holders of a majority of the
outstanding shares of TAPS, voting separately from any other series, shall be
required with respect to any matter that materially and adversely affects the
rights, preferences, or powers of such series in a manner different from that of
other series of classes of the Fund's shares of capital stock. For purposes of
the foregoing, no matter shall be deemed to adversely affect any right,
preference or power unless such matter (i) alters or abolishes any preferential
right of such series; (ii) creates, alters or abolishes any right in respect of
redemption of such series; or (iii) creates or alters (other than to abolish)
any restriction on transfer applicable to such series.
The foregoing voting provisions will not apply with respect to the TAPS if,
at or prior to the time when a vote is required, such shares have been (i)
redeemed or (ii) called for redemption, and sufficient funds shall have been
deposited in trust to effect such redemption.
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The Board of Trustees, without the vote or consent of any holder of the
Preferred Shares, including the TAPS, or any other shareholder of the Fund, may
from time to time amend, alter or repeal certain definitions primarily related
to Moody's rating of the TAPS provided that the Board of Trustees receives
written confirmation from Moody's (if Moody's is then rating the TAPS) (with
such confirmation in no event being required to be obtained from a particular
rating agency in the case of the definitions relevant only to and adopted in
connection with the rating of the TAPS, if any, by any Other Rating Agency) that
such amendment, alteration or repeal would not impair the rating then assigned
by Moody's.
In addition, the Board of Trustees, without the vote or consent of any
holder of Preferred Shares, including TAPS, or any other shareholder of the
Fund, may from time to time adopt, amend, alter or repeal any or all of any
additional or other definitions or add covenants and other obligations of the
Fund (e.g., maintenance of minimum liquidity level) or confirm the applicability
of covenants and other obligations set forth herein in connection with obtaining
or maintaining the rating of Moody's, or any Other Rating Agency with respect to
TAPS and any such amendment, alteration or repeal will not be deemed to affect
the preferences, rights or powers of TAPS or the holders thereof, provided the
Board of Trustees receives written confirmation from the relevant rating agency
(such confirmation in no event being required to be obtained from a particular
rating agency with respect to definitions or other provisions relevant only to
another rating agency's rating) that any such amendment, alteration or repeal
would not adversely affect the rating then assigned by such rating agency.
Also, subject to compliance with applicable law, the Board of Trustees may
amend the definition of Maximum Rate to increase the percentage amount by which
the Reference Rate is multiplied to determine the Maximum Rate shown therein
without the vote or consent of the holders of the Preferred Shares, including
TAPS, or any other shareholder of the Fund, and without receiving any
confirmation from any rating agency after consultation with the Broker-Dealers,
provided that immediately following any such increase the Fund would be in
compliance with the TAPS Basic Maintenance Amount.
Unless otherwise required by law, holders of TAPS shall not have any
relative rights or preferences or other special rights other than those
specifically set forth in the Statement. The holders of shares of TAPS shall
have no rights to cumulative voting. In the event that the Fund fails to pay any
dividends on the shares of TAPS, the exclusive remedy of the holders shall be
the right to vote for Trustees as discussed above.
RESTRICTIONS ON TRANSFER
TAPS may be transferred only (a) pursuant to an Order placed in an Auction,
(b) to or through a Broker-Dealer, or (c) to the Fund or any Affiliate.
Notwithstanding the foregoing, a transfer other than pursuant to an Auction will
not be effective unless the selling Existing Holder or the Agent Member of such
Existing Holder, in the case of an Existing Holder whose shares are listed in
its own name on the books of the Auction Agent, or the Broker-Dealer or Agent
Member of such Broker-Dealer, in the case of a transfer between persons holding
TAPS through different Broker-Dealers, advises the Auction Agent of such
transfer.
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DESCRIPTION OF CREDIT FACILITY/COMMERCIAL PAPER PROGRAM
General. The Fund is authorized to borrow money in an amount up to 33 1/3%
of the Fund's total assets (including the amount borrowed) without the consent
of holders of Preferred Shares, including the TAPS. In this connection, the Fund
may issue notes, commercial paper or other evidences of indebtedness and may
secure such borrowings by mortgaging, pledging, or otherwise granting a security
interest in the Fund's assets. The Fund may use the proceeds from borrowings for
investment purposes. The terms of any such borrowings are subject to the
provisions of the 1940 Act, as further described below. The terms of such
borrowings also will be subject to the provisions of any credit agreements
related to the borrowings and, to the extent that the Fund seeks a rating for
the borrowings, any additional guidelines imposed by such rating agencies. Such
provisions and guidelines may be more restrictive than those imposed by the 1940
Act.
The Fund expects to establish a commercial paper program and related
liquidity facility (the "CP Program") before the end of the second calendar
quarter of 2000 and has established an interim credit facility pending the
finalization of the terms of such program (the "Credit Facility"). Any
subsequent senior indebtedness issued by the Fund may have terms that differ
substantially from the terms of the CP Program and Credit Facility described
below.
Ranking of Senior Indebtedness. The rights of lenders to receive payments
of interest on and repayments of principal of any borrowings made by the Fund,
including those made under the CP Program or Credit Facility, will be senior to
the rights of holders of Preferred Shares, including the TAPS, with respect to
the payment of dividends or upon liquidation. Notes issued by the Fund in
connection with the CP Program will be secured by a first priority perfected
security interest on the portfolio of Senior Loans held by the Fund. The Credit
Facility is unsecured.
Credit Facility. The Fund has entered into a credit agreement pursuant to
which one or more commercial banks will provide the Fund with access to a $150
million revolving credit facility. Draws under the Credit Facility bear interest
at a rate of either (i) the higher of the announced prime rate of the agent
under the Credit Facility and the federal funds rate plus .50% (the "Base
Rate"); or (ii) LIBOR plus .50%, as selected by the Fund. The Credit Facility
matures on December 12, 2000 and individual LIBOR draws under the facility may
have interest periods of one, two, three or six months. Outstanding amounts may
be prepaid at any time prior to maturity, subject to breakage costs. Overdue
principal, interest or other amounts will bear interest at a rate which is 2% in
excess of the greater of the then current Base Rate or the rate then applicable
to the loan. In addition, the Fund will pay a commitment fee equal to .125% per
annum on the average undrawn amount of the Credit Facility. The Fund will bear
administrative and other expenses in connection with maintaining the facility.
The aggregate annualized cost of the facility is not expected to exceed an
amount equal to LIBOR plus .62%.
CP Program. The Fund expects to enter into a definitive agreement with a
syndicate of commercial banks to establish a $150 million commercial paper
program and an associated $155 million liquidity facility (the "Liquidity
Facility"). Pursuant to the CP Program, a special purpose bankruptcy-remote
Delaware entity (the "CP Issuer") will be established for the sole purpose of
issuing commercial paper and lending the proceeds to the Fund under a revolving
credit facility. The amount owed by the Fund pursuant to the credit facility
will be evidenced by a noted issued in favor of the CP Issuer (the "Senior
Note"). The Senior Note would bear interest at a rate sufficient to cover the
aggregate of (i) interest payable on (or a discount in connection with the
issuance of) the CP Issuer's commercial paper; (ii) interest payable on loans
made pursuant to the Liquidity Facility; (iii) commitment fees payable under the
Liquidity Facility; and (iv) other fees, costs, and expenses payable in
connection with the operation of the CP Program and Liquidity Facility. Loans
made in connection with the CP Program would mature at the date which is two
years, subject to extension, following the closing date of the CP Program or
upon acceleration following an event of default. The Fund expects to use the
initial issuance of commercial paper to pay down the outstanding balance of
borrowings made under the Credit Facility and thereafter to repay maturing
commercial paper. The aggregate annualized cost of the CP Program and related
Liquidity Facility is not expected to exceed an amount equal to LIBOR plus .62%.
The Senior
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<PAGE> 46
Note will be secured by a first priority perfected security interest in the
entire portfolio of Senior Loans held by the Fund.
Liquidity Facility. If commercial paper proceeds are insufficient to
finance advances under the credit facility or repay maturing commercial paper,
the CP Issuer would be able to borrow under the Liquidity Facility. Loans made
under the Liquidity Facility would mature at the date which is two years,
subject to extension, following the closing date of the CP Program or upon
acceleration following an event of default. Loans made under the Liquidity
Facility are expected to bear interest at a rate of either (i) the higher of the
announced prime rate of the agent under the Liquidity Facility and the federal
funds rate plus .50%; or (ii) LIBOR plus .50% as selected by the Fund. Any
unused portion of the Liquidity Facility would be subject to a commitment fee
that is expected to be approximately .125% per annum. The Liquidity Facility
will be secured by a first priority perfected security interest in the CP
Issuer's right, title and interest in and to (i) the Senior Note; (ii) the
collateral securing the Senior Note; and (iii) the credit agreement pursuant to
which the Senior Note is issued.
Restrictive Covenants and 1940 Restrictions. The credit agreements
governing the Credit Facility and the CP Program (the "Credit Agreement")
include usual and customary covenants for this type of transaction including
limits on the Fund's ability to (i) incur additional debt or issue preferred
shares without approval of the lenders, (ii) incur liens or pledge portfolio
securities; (iii) incur obligations under derivative instruments; and (iv)
change its investment objective or fundamental investment restrictions without
the approval of lenders. In addition, the Credit Agreements do not permit the
Fund's asset coverage ratio (as defined in the Credit Agreements) to fall below
300% for more than four consecutive business days or below 275% at any time (the
"Credit Agreement Asset Coverage Test").
Under the requirements of the 1940 Act, the Fund must have asset coverage
of at least 300% immediately after any borrowing under the Credit Facility or CP
Program. For this purpose, asset coverage means the ratio which the value of the
total assets of the Fund, less liabilities and indebtedness not represented by
senior securities, bears to the aggregate amount of borrowings represented by
senior securities issued by the Fund. The Credit Agreement limits the Fund's
ability to pay dividends or make other distributions, including with respect to
the TAPS, or purchase or redeem shares, including TAPS, unless the Fund complies
with the Credit Agreement Asset Coverage Test. In addition, the Credit Agreement
does not permit the Fund to declare dividends or other distributions with
respect to the TAPS or purchase or redeem shares of TAPS (i) at any time that an
event of default under the Credit Facility or Credit Agreement for the CP
Programs has occurred and is continuing; or (ii) if, after giving effect to such
declaration, the Fund would not meet the asset coverage ratio set forth in the
Credit Agreement.
THE AUCTION
GENERAL
Auction Agency Agreement. The Fund has entered into an Auction Agency
Agreement (the "Auction Agency Agreement") with the Auction Agent (currently,
Bankers Trust Company), which provides, among other things, that the Auction
Agent will follow the Auction Procedures for purposes of determining the
Applicable Rate for shares of each series of TAPS so long as the Applicable Rate
for shares of such series is to be based on the results of an Auction.
Broker-Dealer Agreements. Each Auction requires the participation of one or
more Broker-Dealers. The Auction Agent has entered into agreements
(collectively, the "Broker-Dealer Agreements") with several Broker-Dealers
selected by the Fund, which provide for the participation of those
Broker-Dealers in Auctions for TAPS.
The Auction Agent is acting as agent for the Fund in connection with
Auctions. In the absence of bad faith or negligence on its part, the Auction
Agent will not be liable for any action taken, suffered, or omitted or for any
error of judgment made by it in the performance of its duties under the Auction
Agency Agreement and will not be liable for any error of judgment made in good
faith unless the Auction Agent will have been negligent in ascertaining the
pertinent facts.
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The Auction Agent after each Auction for TAPS will pay to each
Broker-Dealer, from funds provided by the Fund, a service charge at the annual
rate of 1/4 of 1% in the case of any Auction immediately preceding a Rate Period
of less than one year, or a percentage agreed to by the Fund and the Broker-
Dealers in the case of any Auction immediately preceding a Rate Period of one
year or longer, of the purchase price of TAPS placed by such Broker-Dealer at
such Auction. For the purposes of the preceding sentence, TAPS will be placed by
a Broker-Dealer if such shares were (a) the subject of Hold Orders deemed to
have been submitted to the Auction Agent by the Broker-Dealer and were acquired
by such Broker-Dealer for its own account or were acquired by such Broker-Dealer
for its customers who are Beneficial Owners or (b) the subject of an Order
submitted by such Broker-Dealer that is (i) a Submitted Bid of an Existing
Holder that resulted in such Existing Holder continuing to hold such shares as a
result of the Auction or (ii) a Submitted Bid of a Potential Holder that
resulted in such Potential Holder purchasing such shares as a result of the
Auction or (iii) a valid Hold Order.
AUCTION PROCEDURES
Prior to the Submission Deadline on each Auction Date for shares of a
series of TAPS, each customer of a Broker-Dealer who is listed on the records of
that Broker-Dealer (or, if applicable, the Auction Agent) as a holder of shares
of such series (a "Beneficial Owner") may submit orders ("Orders") with respect
to shares of such series to that Broker-Dealer as follows:
- Hold Order -- indicating its desire to hold shares of such series without
regard to the Applicable Rate for shares of such series for the next Rate
Period thereof.
- Bid -- indicating its desire to sell shares of such series at $25,000 per
share if the Applicable Rate for shares of such series for the next Rate
Period thereof is less than the rate specified in such Bid (also known as
a hold-at-a-rate order).
- Sell Order -- indicating its desire to sell shares of such series at
$25,000 per share without regard to the Applicable Rate for shares of
such series for the next Rate Period thereof.
A Beneficial Owner may submit different types of Orders to its
Broker-Dealer with respect to a series of TAPS then held by such Beneficial
Owner. A Beneficial Owner of shares of such series that submits a Bid with
respect to shares of such series to its Broker-Dealer having a rate higher than
the Maximum Rate for shares of such series on the Auction Date therefor will be
treated as having submitted a Sell Order with respect to such shares to its
Broker-Dealer. A Beneficial Owner of shares of such series that fails to submit
an Order with respect to such shares to its Broker-Dealer will be deemed to have
submitted a Hold Order with respect to such shares of such series to its
Broker-Dealer; provided, however, that if a Beneficial Owner of shares of such
series fails to submit an Order with respect to shares of such series to its
Broker-Dealer for an Auction relating to a Rate Period of more than 28 Rate
Period Days, such Beneficial Owner will be deemed to have submitted a Sell Order
with respect to such shares to its Broker-Dealer. A Sell Order shall constitute
an irrevocable offer to sell the TAPS subject thereto. A Beneficial Owner that
offers to become the Beneficial Owner of additional TAPS is, for purposes of
such offer, a Potential Beneficial Owner as discussed below.
A customer of a Broker-Dealer that is not a Beneficial Owner of a series of
TAPS but that wishes to purchase shares of such series, or that is a Beneficial
Owner of shares of such series that wishes to purchase additional shares of such
series (in each case, a "Potential Beneficial Owner"), may submit Bids to its
Broker-Dealer in which it offers to purchase shares of such series at $25,000
per share if the Applicable Rate for shares of such series for the next Rate
Period thereof is not less than the rate specified in such Bid. A Bid placed by
a Potential Beneficial Owner of shares of such series specifying a rate higher
than the Maximum Rate for shares of such series on the Auction Date therefor
will not be accepted.
The Broker-Dealers in turn will submit the Orders of their respective
customers who are Beneficial Owners and Potential Beneficial Owners to the
Auction Agent, designating themselves (unless otherwise permitted by the Fund)
as Existing Holders in respect of shares subject to Orders submitted or deemed
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<PAGE> 48
submitted to them by Beneficial Owners and as Potential Holders in respect of
shares subject to Orders submitted to them by Potential Beneficial Owners.
However, neither the Fund nor the Auction Agent will be responsible for a
Broker-Dealer's failure to comply with the foregoing. Any Order placed with the
Auction Agent by a Broker-Dealer as or on behalf of an Existing Holder or a
Potential Holder will be treated in the same manner as an Order placed with a
Broker-Dealer by a Beneficial Owner or Potential Beneficial Owner. Similarly,
any failure by a Broker-Dealer to submit to the Auction Agent an Order in
respect of any shares of TAPS held by it or customers who are Beneficial Owners
will be treated in the same manner as a Beneficial Owner's failure to submit to
its Broker-Dealer an Order in respect of TAPS held by it. A Broker-Dealer may
also submit Orders to the Auction Agent for its own account as an Existing
Holder or Potential Holder, provided it is not an affiliate of the Fund.
If Sufficient Clearing Bids for a series of TAPS exist (that is, the number
of shares of such series subject to Bids submitted or deemed submitted to the
Auction Agent by Broker-Dealers as or on behalf of Potential Holders with rates
equal to or lower than the Maximum Rate for all Rate Periods and higher than or
equal to the Minimum Rate for Standard Rate Periods or less for shares of such
series is at least equal to the number of shares of such series subject to Sell
Orders submitted or deemed submitted to the Auction Agent by Broker-Dealers as
or on behalf of Existing Holders), the Applicable Rate for shares of such series
for the next succeeding Rate Period thereof will be the lowest rate specified in
the Submitted Bids which, taking into account such rate and all lower rates bid
by Broker-Dealers as or on behalf of Existing Holders and Potential Holders,
would result in Existing Holders and Potential Holders owning the shares of such
series available for purchase in the Auction. If Sufficient Clearing Bids for
shares of a series of TAPS do not exist, the Applicable Rate for shares of such
series for the next succeeding Rate Period thereof will be the Maximum Rate for
shares of such series on the Auction Date therefor. In such event, Beneficial
Owners of shares of such series that have submitted or are deemed to have
submitted Sell Orders may not be able to sell in such Auction all shares of such
series subject to such Sell Orders. If Broker-Dealers submit or are deemed to
have submitted to the Auction Agent Hold Orders with respect to all Existing
Holders of a series of TAPS, the Applicable Rate for shares of such series for
the next succeeding Rate Period thereof will be the All Hold Rate.
The Auction Procedures include a pro rata allocation of shares for purchase
and sale, which may result in an Existing Holder continuing to hold or selling,
or a Potential Holder purchasing, a number of a series of TAPS that is fewer
than the number of shares of such series specified in its Order. To the extent
the allocation procedures have that result, Broker-Dealers that have designated
themselves as Existing Holders or Potential Holders in respect of customer
Orders will be required to make appropriate pro rata allocations among their
respective customers.
Settlement of purchases and sales will be made on the next Business Day
(also a Dividend Payment Date) after the Auction Date through the Securities
Depository. Purchasers will make payment through their Agent Members in same-day
funds to the Securities Depository against delivery to their respective Agent
Members. The Securities Depository will make payment to the sellers' Agent
Members in accordance with the Securities Depository's normal procedures, which
now provide for payment against delivery by their Agent Members in same-day
funds.
DESCRIPTION OF COMMON SHARES
In addition to the TAPS, the Declaration authorizes the issuance of an
unlimited number of Common Shares. All Common Shares have equal rights to the
payment of dividends and the distribution of assets upon liquidation. Common
Shares are fully paid and, subject to matters discussed in "Certain Provisions
in the Declaration of Trust," non-assessable when issued and have no preemptive,
conversion rights or rights to cumulative voting. So long as any TAPS are
outstanding, the Fund is not permitted to declare dividends on, make any
distributions with respect to, or purchase its Common Shares unless, at the time
of such declaration, distribution or purchase, as applicable (and after giving
effect thereto), all accumulated dividends on Preferred Shares have been paid.
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CERTAIN PROVISIONS IN THE DECLARATION OF TRUST
Under Massachusetts law, shareholders could, in certain circumstances, be
held personally liable for the obligations of the Fund. However, the Declaration
contains an express disclaimer of shareholder liability for debts or obligations
of the Fund and requires that notice of such limited liability be given in each
agreement, obligation or instrument entered into or executed by the Fund or the
trustees. The Declaration further provides for indemnification out of the assets
and property of the Fund for all loss and expense of any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund would be unable to meet its
obligations. The Fund believes that the likelihood of such circumstances is
remote.
The Declaration includes provisions that could limit the ability of other
entities or persons to acquire control of the Fund or to convert the Fund to
open-end status. Specifically, the Declaration requires a vote by holders of at
least two-thirds of the Common Shares and Preferred Shares, voting together as a
single class, except as described below, to authorize (1) a conversion of the
Fund from a closed-end to an open-end investment company, (2) a merger or
consolidation of the Fund, or a series or class of the Fund, with any
corporation, association, trust or other organization or a reorganization or
recapitalization of the Fund, or a series or class of the Fund, (3) a sale,
lease or transfer of all or substantially all of the Fund's assets (other than
in the regular course of the Fund's investment activities), (4) in certain
circumstances, a termination of the Fund, or a series or class of the Fund, or
(5) a removal of Trustees by shareholders, and then only for cause, unless, with
respect to (1) through (4), such transaction has already been authorized by the
affirmative vote of two-thirds of the total number of Trustees fixed in
accordance with the Declaration or the By-laws, in which case the affirmative
vote of the holders of at least a majority of the Fund's Common Shares and
Preferred Shares outstanding at the time, voting together as a single class, is
required; provided, however, that where only a particular class or series is
affected (or, in the case of removing a Trustee, when the Trustee has been
elected by only one class), only the required vote by the applicable class or
series will be required. None of the foregoing provisions may be amended except
by the vote of at least two-thirds of the Common Shares and Preferred Shares
(including the TAPS), voting together as a single class. In the case of the
conversion of the Fund to an open-end investment company, or in the case of any
of the foregoing transactions constituting a plan of reorganization which
adversely affects the holders of Preferred Shares, the action in question will
also require the affirmative vote of the holders of at least two-thirds of the
Fund's Preferred Shares outstanding at the time, voting as a separate class, or,
if such action has been authorized by the affirmative vote of two-thirds of the
total number of Trustees fixed in accordance with the Declaration or the
By-laws, the affirmative vote of the holders of at least a majority of the
Fund's Preferred Shares outstanding at the time, voting as a separate class. The
votes required to approve the conversion of the Fund from a closed-end to an
open-end investment company or to approve transactions constituting a plan of
reorganization which adversely affects the holders of Preferred Shares are
higher than those required by the 1940 Act. The Board of Trustees believes that
the provisions of the Declaration relating to such higher votes are in the best
interest of the Fund and its shareholders.
Reference should be made to the Declaration on file with the Securities and
Exchange Commission for the full text of these provisions.
46
<PAGE> 50
REPURCHASE OF COMMON SHARES; CONVERSION TO OPEN-END FUND
The Fund is a closed-end management investment company and as such its
shareholders will not have the right to cause the Fund to redeem their shares.
Instead, the Common Shares will trade in the open market at a price that will be
a function of several factors, including dividend levels (which are in turn
affected by expenses), net asset value, price, dividend stability, relative
demand for and supply of such shares in the market, general market and economic
conditions and other factors. Because shares of closed-end investment companies
may frequently trade at prices lower than net asset value, the Fund's Board of
Trustees has currently determined that, at least annually, it will consider
action that might be taken to reduce or eliminate any material discount from net
asset value in respect of Common Shares, which may include the repurchase of
such shares in the open market or in private transactions, the making of a
tender offer for such shares at net asset value, or the conversion of the Fund
to an open-end investment company. The Fund cannot assure you that its Board of
Trustees will decide to take any of these actions, or that share repurchases or
tender offers will actually reduce market discount.
If the Fund converted to an open-end investment company, it would be
required to redeem all Preferred Shares (including the TAPS) then outstanding
(requiring in turn that it liquidate a portion of its investment portfolio) and
repay all outstanding borrowings including those made pursuant to the CP Program
or Liquidity Facility. The Common Shares would no longer be listed on the New
York Stock Exchange. In contrast to a closed-end investment company,
shareholders of an open-end investment company may require the company to redeem
their shares at any time (except in certain circumstances as authorized by or
under the 1940 Act) at a price based on their net asset value, less any
redemption charge that is in effect at the time of redemption. Because its
shares are redeemable, an open-end fund is required to invest no more than 15%
of its total assets in illiquid securities. Many Senior Loans are illiquid,
which might require that the Fund change its overall investment strategy if a
decision were made to convert the Fund to an open-end fund. The Board of
Trustees believes that the closed-end fund structure is desirable, given the
Fund's investment objective and policies, and the generally illiquid nature of
Senior Loans. Investors should assume, therefore, that it is highly unlikely
that the Board would vote to convert the Fund to an open-end investment company.
See "Certain Provisions in the Declaration of Trust" for a discussion of the
voting requirements applicable to the conversion of the Fund to an open-end
investment company.
Before deciding whether to take any action if the Common Shares trade below
net asset value, the Board would consider all relevant factors, including the
extent and duration of the discount, the liquidity of the Fund's portfolio, the
extent to which the fund is leveraged, the impact of any action that might be
taken on the Fund or its shareholders, and market considerations. Based on these
considerations, even if the Fund's shares should trade at a discount, the Board
of Trustees may determine that, in the interest of the Fund and its
shareholders, no action should be taken.
NET ASSET VALUE
The Fund's net asset value per Common Share will be determined as of the
close of trading (normally 4:00 p.m. eastern time) on each day the New York
Stock Exchange is open for business. Net asset value is calculated by taking the
fair value of the Fund's total assets, including interest or dividends accrued
but not yet collected, less liabilities (including Leverage Instruments), and
dividing by the total number of shares outstanding. The result, rounded to the
nearest cent, is the net asset value per share.
The Senior Loans in which the Fund will invest generally are not listed on
any securities exchange. Certain Senior Loans are traded by institutional
investors in an over-the-counter secondary market for Senior Loan obligations
that has developed over the past several years. This secondary market for those
Senior Loans generally is comparatively illiquid relative to markets for other
income securities and no active trading market exists for many Senior Loans. In
determining net asset value, the Fund will utilize the valuations of Senior
Loans furnished to the Adviser by an independent third-party pricing service
approved by the Board of Trustees. The Board of Trustees has reviewed the
various alternatives for pricing the Fund's portfolio of Senior Loans and has
determined that the use of a pricing service is a reasonable, fair and
appropriate method of valuing Senior Loans. The Adviser has entered into one or
more
47
<PAGE> 51
agreements with pricing service providers to provide pricing services for the
Fund. There can be no assurance that the pricing service providers will continue
to provide these services or will provide a value for each Senior Loan held by
the Fund. However, the Adviser believes that if a pricing service provider
declines to continue to act as such for the Fund, or does not provide values for
a significant portion of the Senior Loans in the Fund's portfolio, one or more
alternative independent third-party pricing service providers will be available
to provide comparable services on similar terms. During any period in which no
pricing service provider is acting as such for the Fund, or for any Senior Loan
for which no value from a pricing service provider is available, the Adviser
will value the Fund's Senior Loans as described below.
A pricing service provider typically will value Senior Loans at the mean of
the highest bona fide bid and lowest bona fide ask prices when current
quotations are readily available. Senior Loans for which current quotations will
not be readily available are valued at a fair value as determined by the pricing
service provider using a wide range of market data and other information and
analysis, including credit considerations considered relevant by the pricing
service provider to determine valuations. The procedures of any pricing service
provider and its valuations will be reviewed by the officers of the Adviser
under the general supervision of the Board of Trustees. If the Adviser believes
that a value provided by a pricing service provider does not represent a fair
value as a result of information, specific to that Senior Loan or Borrower or
its affiliates, which the Adviser believes that the pricing agent may not be
aware, the Adviser may in its discretion value the Senior Loan subject to
procedures approved by the Board of Trustees and reviewed on a periodic basis,
and the Fund will utilize that price instead of the price as determined by the
pricing service provider. In addition to such information the Adviser will
consider, among other factors, (i) the creditworthiness of the Borrower and (ii)
the current interest rate, the period until next interest rate reset and
maturity of such Senior Loan interests in determining a fair value of a Senior
Loan. If the pricing service provider does not provide a value for a Senior Loan
or if no pricing service provider is then acting, a value will be determined by
the Adviser in the manner described above.
It is expected that the Fund's net asset value will fluctuate as a function
of interest rate and credit factors. Because of the short-term nature of such
instruments, however, the Fund's net asset value is expected to fluctuate less
in response to changes in interest rates than the net asset values of investment
companies with portfolios consisting primarily of longer term fixed-income
securities.
Because a secondary trading market in Senior Loans has not yet fully
developed, the pricing services or the Adviser may not rely solely on but may
consider, to the extent they believe such information to be reliable, prices or
quotations provided by banks, dealers or other pricing service providers with
respect to secondary market transactions in Senior Loans. To the extent that an
active secondary trading market in Senior Loan interests develops to a reliable
degree, the pricing service providers or the Adviser may rely to an increasing
extent on such market prices and quotations in reviewing the valuations of the
Senior Loan interests in the Fund's portfolio. To the extent a trading market
continues to develop, certain participants in the market may have objectives
other than current income and may pursue short-term trading strategies, which
may result in erratic movements in the market prices for Senior Loans as a
result of movements in short-term interest rates. Although the Fund's policy of
acquiring interests in floating rate Senior Loans is intended to minimize
fluctuations in net asset value resulting from changes in market interest rates,
the Fund's net asset value will fluctuate. In light of the senior nature of
Senior Loan interests that may be included in the Fund's portfolio and taking
into account the Fund's access to non-public information with respect to
Borrowers relating to such Senior Loan interests, the Adviser does not currently
believe that consideration on a systematic basis of ratings provided by any
nationally recognized statistical rating organization or price fluctuations with
respect to long- or short-term debt of such Borrowers subordinate to the Senior
Loans of such Borrowers is necessary in order to review the value of such Senior
Loan interests. Accordingly, the Adviser generally will not systematically
consider (but may consider in certain instances) and, in any event, will not
rely solely upon such ratings or price fluctuations in determining or reviewing
valuations of Senior Loan interests in the Fund's portfolio.
48
<PAGE> 52
FEDERAL TAXATION
The following is intended to be a general summary of certain federal income
tax consequences of investing in TAPS. It is not intended as a complete
discussion of all such tax consequences, nor does it purport to deal with all
categories of investors. Investors are therefore advised to consult with their
tax advisers before making an investment in the Fund.
FEDERAL INCOME TAX TREATMENT OF THE FUND
The Fund has elected to be treated as a regulated investment company under
Subchapter M of the Code and intends to qualify under those provisions each
year. As a regulated investment company, the Fund generally will not be subject
to federal income tax on its investment company taxable income and net capital
gains (net long-term capital gains in excess of the sum of net short-term
capital losses and capital loss carryovers from prior years), if any, that it
distributes to shareholders. However, the Fund would be subject to corporate
income tax (currently at a 35% maximum effective rate) on any undistributed
income. The Fund intends to distribute to its shareholders, at least annually,
substantially all of its investment company taxable income and net capital
gains.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are also subject to a nondeductible 4% federal
excise tax. To prevent imposition of the tax, the Fund must distribute during
each calendar year an amount equal to the sum of (1) at least 98% of its
ordinary income (not taking into account any capital gains or losses) for the
calendar year, (2) at least 98% of its capital gains in excess of its capital
losses (adjusted for certain ordinary losses) for the twelve month period ending
on October 31 of the calendar year, and (3) all such ordinary income and capital
gains for previous years that were not distributed during such years. A
distribution will be treated as having been paid on December 31 if it is
declared by the Fund in October, November or December with a record date in such
months and is paid by the Fund in January of the following year. Accordingly,
such distributions will be taxable to shareholders in the calendar year in which
the distributions are declared. To prevent application of the excise tax, the
Fund intends to make its distributions in accordance with the calendar year
distribution requirement.
If in any taxable year the Fund fails to qualify as a regulated investment
company under the Code, the Fund would be taxed in the same manner as an
ordinary corporation and distributions to its shareholders would not be
deductible by the Fund in computing its taxable income. In addition, in the
event of a failure to qualify, the Fund's distributions, to the extent derived
from the Fund's current or accumulated earnings and profits, would constitute
dividends (eligible for the corporate dividends-received deduction) which are
taxable to shareholders as ordinary income, even though those distributions
might otherwise (at least in part) have been treated in the shareholders' hands
as long-term capital gains.
FEDERAL INCOME TAX TREATMENT OF HOLDERS OF TAPS
Under present law and based in part on the advice of counsel, the Fund
believes that TAPS will constitute stock of the Fund, and thus distributions
with respect to TAPS (other than distributions in redemption of TAPS subject to
taxable exchange treatment under Section 302(b) of the Code) will constitute
dividends to the extent of the Fund's current or accumulated earnings and
profits, as calculated for federal income tax purposes. Such dividends generally
will be taxable as ordinary income to holders and generally will not qualify for
the dividends received deduction available to corporations under Section 243 of
the Code. Dividends designated by the Fund as capital gain distributions will be
treated as long-term capital gains in the hands of holders regardless of the
holders' respective holding periods for their TAPS. The Service currently
requires that a regulated investment company that has two or more classes of
stock allocate to each such class proportionate amounts of each type of its
income (such as ordinary income and capital gains). Accordingly, the Fund
intends to designate distributions made with respect to TAPS as capital gain
distributions in proportion to the TAPS' share of total dividends paid during
the year. See "Tax-Matters -- Federal Income Tax Treatment of Holders of TAPS"
in the Statement of Additional Information.
49
<PAGE> 53
SALE OF SHARES
The sale of TAPS will be a taxable transaction for federal income tax
purposes. Selling holders of TAPS will generally recognize gain or loss in an
amount equal to the difference between their basis in the TAPS and the amount
received in exchange therefor. If such shares of TAPS are held as a capital
asset, the gain or loss will generally be a capital gain or loss. Similarly, a
redemption (including a redemption resulting from liquidation of the Fund), if
any, of shares of TAPS by the Fund generally will give rise to capital gain or
loss if the shareholder does not own (and is not regarded under certain tax law
rules of constructive ownership as owning) any Common Shares in the Fund and
provided that the redemption proceeds do not represent declared but unpaid
dividends. Any loss realized upon a taxable disposition of shares of TAPS held
for six months or less will be treated as a long-term capital loss to the extent
of any capital gains dividends received with respect to such shares.
BACKUP WITHHOLDING
The Fund may be required to withhold, for U.S. federal income taxes, 31% of
all taxable distributions payable to shareholders who fail to provide the Fund
with their correct taxpayer identification number or who fail to make required
certifications, or if the Fund or a shareholder has been notified by the
Internal Revenue Service that they are subject to backup withholding. Corporate
shareholders and other shareholders specified in the Code are exempt from such
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against the shareholder's U.S. federal income tax
liability if the appropriate information is provided to the Internal Revenue
Service.
OTHER TAXATION
Foreign shareholders, including shareholders who are nonresident aliens,
may be subject to U.S. withholding tax on certain distributions at a rate of 30%
or such lower rates as may be prescribed by any applicable treaty. Investors are
advised to consult their own tax advisors with respect to the application to
their own circumstances of the above-described general taxation rules and with
respect to the state, local or foreign tax consequences to them of an investment
in TAPS.
50
<PAGE> 54
UNDERWRITING
The underwriters named below (the "Underwriters"), acting through
PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York 10019,
as lead representative, and Deutsche Bank Securities Inc., A.G. Edwards & Sons,
Inc., Goldman, Sachs & Co., Merrill Lynch & Co., Prudential Securities
Incorporated and Salomon Smith Barney Inc. as their representatives (together
with PaineWebber Incorporated, the "Representatives"), have severally agreed,
subject to the terms and conditions of the Underwriting Agreement with the Fund
and the Adviser (the "Underwriting Agreement"), to purchase from the Fund the
number of TAPS set forth opposite their respective names. The Underwriters are
committed to purchase all of such TAPS if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS TAPS
- ------------ ---------
<S> <C>
PaineWebber Incorporated.................................
Deutsche Bank Securities Inc. ...........................
A.G. Edwards & Sons, Inc. ...............................
Goldman, Sachs & Co. ....................................
Merrill Lynch & Co. .....................................
Prudential Securities Incorporated.......................
Salomon Smith Barney Inc. ...............................
Total..........................................
</TABLE>
The Underwriters have advised the Fund that they propose initially to offer
the TAPS to the public at the public offering price set forth on the cover page
of this Prospectus, and to certain dealers at such price less a concession not
in excess of $ per share. The Underwriters may allow, and such dealers may
reallow, a discount not in excess of $ per share to other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed. Investors must pay for any TAPS purchased in the initial public
offering on or before , 2000.
The Underwriters will act in Auctions as Broker-Dealers as set forth under
"The Auction" and will be entitled to fees for services as Broker-Dealers as set
forth under "The Auction--Broker-Dealer Agreements." The Underwriters also may
provide information to be used in ascertaining the Reference Rate.
The Fund anticipates that the Underwriters from time to time may act as
dealers in connection with the execution of the Trust's portfolio transactions.
The Trust and the Adviser have agreed to indemnify the Underwriters against
certain liabilities including liabilities under the Securities Act of 1933, as
amended.
CUSTODIAN AND TRANSFER AGENT,
DIVIDEND DISBURSING AGENT AND REDEMPTION AGENT
The custodian of the assets of the Fund is Chase Bank of Texas, National
Association, 600 Travis Street, Houston, Texas 77002. The Custodian performs
custodial, fund accounting and portfolio accounting services. The Fund's
transfer, shareholder services and dividend paying agent is The Chase Manhattan
Bank, 4 New York Plaza, New York, New York 10004. Bankers Trust Company, 4
Albany Street, New York, New York 10006, a banking corporation organized under
the laws of New York, is the Auction Agent with respect to TAPS and acts as
transfer agent, registrar, dividend disbursing agent, and redemption agent with
respect to such shares.
51
<PAGE> 55
LEGAL OPINIONS
Certain legal matters in connection with the TAPS offered hereby will be
passed upon for the Fund by Vedder, Price, Kaufman & Kammholz, Chicago,
Illinois, and for the Underwriters by Skadden, Arps, Slate, Meagher & Flom
(Illinois) and its affiliates. Vedder, Price, Kaufman & Kammholz will rely as to
certain matters of Massachusetts law on the opinion of Bingham Dana LLP, Boston,
Massachusetts.
AVAILABLE INFORMATION
The Fund is subject to the informational requirements of the Securities
Exchange Act of 1934, the 1940 Act and is required to file reports, proxy
statements and other information with the SEC. These documents can be inspected
and copied for a fee at the SEC's public reference room, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's New York Regional Office, Seven World
Trade Center, New York, New York 10048 and Chicago Regional Office, Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661-2511. Reports, proxy statements, and other information about the Funds can
be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
This Prospectus does not contain all of the information in the Fund's
registration statement, including amendments, exhibits, and schedules.
Statements in this Prospectus about the contents of any contract or other
document are not necessarily complete and in each instance reference is made to
the copy of the contract or other document filed as an exhibit to the
registration statement, each such statement being qualified in all respects by
this reference.
Additional information about the Fund and TAPS shares can be found in the
Fund's Registration Statement (including amendments, exhibits, and schedules) on
Form N-2 filed with the SEC. The SEC maintains a web site (http://www.sec.gov)
that contains each Fund's Registration Statement, other documents incorporated
by reference, and other information the Fund has filed electronically with the
Commission, including proxy statements and reports filed under the Securities
Exchange Act of 1934. Additional information may be found on the Internet at
http://www.nuveen.com.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus constitute forward-looking
statements, which involve known and unknown risks, uncertainties and other
factors that may cause the actual results, levels of activity, performance or
achievements of the Fund to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, those listed
under "Risk Factors" and elsewhere in this Prospectus. As a result of the
foregoing and other factors, no assurance can be given as to the future results,
levels of activity or achievements, and neither the Fund nor any other person
assumes responsibility for the accuracy and completeness of such statements.
52
<PAGE> 56
TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies........................... S-1
Investment Policies and Techniques.......................... S-3
Management of the Fund...................................... S-7
Portfolio Transactions...................................... S-12
Net Asset Value............................................. S-13
Description of TAPS......................................... S-15
Additional Information Concerning the Auctions for TAPS..... S-16
Certain Provisions in the Declaration of Trust.............. S-17
Repurchase of Common Shares; Conversion to Open-End Fund.... S-18
Tax Matters................................................. S-20
Certain Owners of Record.................................... S-23
Experts..................................................... S-24
</TABLE>
53
<PAGE> 57
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUVEEN SENIOR INCOME FUND
1,840 SHARES
TAXABLE AUCTIONED PREFERRED SHARES
LIQUIDATION PREFERENCE $25,000 PER SHARE
[NUVEEN LOGO]
-------------------
PROSPECTUS
-------------------
PAINEWEBBER INCORPORATED
DEUTSCHE BANC ALEX. BROWN
A.G. EDWARDS & SONS, INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
PRUDENTIAL SECURITIES
SALOMON SMITH BARNEY
------------------------
MAY , 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 58
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION DATED
May 19, 2000
NUVEEN SENIOR INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relating to this offering does not
constitute a prospectus, but should be read in conjunction with the Prospectus
relating thereto dated ________ __, ____ (the "Prospectus"). This Statement of
Additional Information does not include all information that a prospective
investor should consider before purchasing shares of TAPS in this offering, and
investors should obtain and read the Prospectus prior to purchasing such shares.
A copy of the Prospectus may be obtained without charge by calling (800)
257-8787. Capitalized terms used but not defined in this Statement of Additional
Information have the meanings ascribed to them in the Prospectus.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
Investment Objective and Policies.........................................................S-1
Investment Policies and Techniques........................................................S-3
Management of the Fund....................................................................S-7
Portfolio Transactions...................................................................S-12
Net Asset Value..........................................................................S-13
Description of Taps......................................................................S-15
Additional Information Concerning the Auctions for TAPS..................................S-16
Certain Provisions in the Declaration of Trust...........................................S-17
Repurchase of Common Shares; Conversion to Open-End Fund.................................S-18
Tax Matters..............................................................................S-20
Certain Owners of Record.................................................................S-23
Experts ................................................................................S-24
</TABLE>
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS __________, 1999.
THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT
COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL
THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE> 59
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek a high level of current
income, consistent with preservation of capital. The Fund seeks to achieve its
objective primarily by investing in senior secured loans whose interest rates
adjust periodically based on a benchmark index such as the Prime Rate or LIBOR.
Although the Fund's net asset value will vary, the Fund's policy of acquiring
interests in floating or variable rate, U.S. dollar-denominated senior loans
("Senior Loans") is expected to minimize the fluctuations in the Fund's net
asset value as a result of changes in interest rates. The Fund's net asset value
may be affected by changes in the credit quality of Borrowers with respect to
Senior Loan interests in which the Fund invests. Fluctuations in net asset value
may be magnified as a result of the Fund's use of leverage. In addition, the
Fund's use of leverage may affect the Fund's ability to make distributions. An
investment in the Fund may not be appropriate for all investors and is not
intended to be a complete investment program. No assurance can be given that the
Fund will achieve its investment objective. For further discussion of the
characteristics of Senior Loan interests and associated special risk
considerations, see "The Fund's Investments" in the Prospectus.
INVESTMENT RESTRICTIONS
The Fund's investment objective and certain fundamental investment
policies of the Fund are described in the Prospectus. The Fund, as a fundamental
policy, may not, without the approval of the holders of a majority of the shares
of the Fund:
1. Purchase any security if, as a result of such purchase, 25% or more
of the Fund's total assets (taken at current value) would be invested in the
securities of borrowers and other issuers having their principal business
activities in the same industry (the electric, gas, water and telephone utility
industries, commercial banks, thrift institutions and finance companies being
treated as separate industries for purposes of this restriction); provided, that
this limitation shall not apply with respect to obligations issued or guaranteed
by the U.S. Government or by its agencies or instrumentalities and provided
further that for purposes of this limitation, the term "issuer" shall not
include a lender selling a participation to the Fund together with any other
person interpositioned between such lender and the Fund with respect to a
participation.
2. Borrow money, except as permitted by the 1940 Act.*
3. Issue senior securities, as defined in the 1940 Act, other than (i)
preferred shares which immediately after issuance will have asset coverage of at
least 200%, (ii) indebtedness which immediately after issuance will have asset
coverage of at least 300%, or (iii) the borrowings permitted by investment
restriction 2. above.
4. Make loans of money or property to any person, except for obtaining
interest in Senior Loans in accordance with its investment objective, through
loans of portfolio securities or the acquisition of securities subject to
repurchase agreements.
5. Act as an underwriter of securities, except to the extent the Fund
may be deemed to be an underwriter in certain cases when disposing of its
portfolio investments or acting as an agent or one of a group of coagents in
originating senior loans.
6. Purchase or sell real estate, commodities or commodities contracts
except pursuant to the exercise by the Fund of its rights under loan agreements,
except to the extent the interests in senior loans the Fund may invest in are
considered to be interests in real estate, commodities or commodities contracts
and except to the extent that hedging instruments the Fund may invest in are
considered to be commodities or commodities contracts.
- ---------
* The Fund borrows money as described in the Prospectus under "Description of
Commercial Paper Program."
S-1
<PAGE> 60
In addition to the foregoing fundamental investment policies, the Fund
is also subject to the following non-fundamental restrictions and policies,
which may be changed by the Board of Trustees. The Fund may not:
1. Purchase any securities (other than obligations issued or guaranteed
by the United States Government or by its agencies or instrumentalities), if as
a result more than 10% of the Fund's total assets would then be invested in
securities of a single issuer or if as a result the Fund would hold more than
10% of the outstanding voting securities of any single issuer; provided that,
with respect to 50% of the Fund's assets, the Fund may invest up to 25% of its
assets in the securities of any one issuer. For purposes of this restriction,
the term issuer includes both the borrower under a loan agreement and the lender
selling a participation to the Fund together with any other persons
interpositioned between such lender and the Fund with respect to a
participation.
2. Sell any security "short," write, purchase or sell puts, calls or
combinations thereof, or purchase or sell financial futures or options, except
to the extent that the hedging transactions in which the Fund may engage would
be deemed to be any of the foregoing transactions.
3. Invest in securities of other investment companies, except that the
Fund may purchase securities of other investment companies to the extent
permitted by (i) the 1940 Act, as amended from time to time, (ii) the rules and
regulations promulgated by the Securities and Exchange Commission under the 1940
Act, as amended from time to time, or (iii) an exemption or other relief from
the provisions of the 1940 Act. The Fund will rely on representations of
Borrowers in loan agreements in determining whether such borrowers are
investment companies.
4. Make investments for the purpose of exercising control or
participation in management, except to the extent that exercise by the Fund of
its rights under loan agreements would be deemed to constitute such control or
participation.
For purposes of non-fundamental investment restriction number 1, the
Fund will consider all relevant factors in determining whether to treat the
Lender selling a Participation and any persons interpositioned between such
Lender and the Fund as an issuer, including: the terms of the Loan Agreement and
other relevant agreements (including inter-creditor agreements and any
agreements between such person and the Fund's custodian); the credit quality of
such Lender or interpositioned person; general economic conditions applicable to
such Lender or interpositioned person; and other factors relating to the degree
of credit risk, if any, of such Lender or interpositioned person incurred by the
Fund.
The Fund generally will not engage in the trading of securities for the
purpose of realizing short-term profits, but it will adjust its portfolio as it
deems advisable in view of prevailing or anticipated market conditions to
accomplish the Fund's investment objective. For example, the Fund may sell
securities in anticipation of a movement in interest rates. Frequency of
portfolio turnover will not be a limiting factor if the Fund considers it
advantageous to purchase or sell securities. The Fund anticipates that the
annual portfolio turnover rate of the Fund will not be in excess of 100%. A high
rate of portfolio turnover involves correspondingly greater expenses than a
lower rate, which expenses must be borne by the Fund and its shareholders.
The foregoing restrictions and limitations will apply only at the time
of purchase of securities and the percentage limitations will not be considered
violated unless an excess or deficiency occurs or exists immediately after and
as a result of an acquisition of securities, unless otherwise indicated.
The foregoing fundamental investment policies, together with the
investment objective of the Fund, cannot be changed without approval by holders
of a "majority of the Fund's outstanding voting shares." As defined in the 1940
Act, this means the vote of (i) 67% or more of the Fund's shares present at a
meeting, if the holders of more than 50% of the Fund's shares are present or
represented by proxy, or (ii) more than 50% of the Fund's shares, whichever is
less.
The Fund is an entity commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Declaration contains an express disclaimer of shareholder liability
for acts or obligations of the Fund and requires that notice of this disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Fund or the trustees. The Declaration further provides for indemnification
out of the assets and property of the Fund
S-2
<PAGE> 61
for all loss and expense of any shareholder personally liable for the
obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
both inadequate insurance existed and the Fund itself were unable to meet its
obligations. The Fund believes the likelihood of these circumstances is remote.
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the discussion of the Fund's
investment objectives, policies, and techniques that are described in the
Prospectus.
ORIGINATING SENIOR LOANS
Senior Loans are typically arranged through private negotiations
between a borrower (the "Borrower") and several lenders (the "Lenders")
represented in each case by one or more such Lenders acting as Agent of the
several Lenders (the "Agent"). On behalf of the several Lenders, the Agent,
which is frequently the entity that originates the Senior Loan and invites the
other parties to join the lending syndicate, will be primarily responsible for
negotiating the Senior Loan agreements that establish the relative terms,
conditions and rights of the Borrower and the several Lenders (the "Loan
Agreements"). The co-agents, on the other hand, are not responsible for
administration of a Senior Loan, but are part of the initial group of Lenders
that commit to providing funding for a Senior Loan. In large transactions, it is
common to have several Agents; however, one such Agent typically has primary
responsibility for documentation and administration of the Senior Loan. The
Agent is required to administer and manage the Senior Loan and to service or
monitor the collateral. The Fund will not act as sole Agent in a transaction.
The Agent is also responsible for the collection of principal and interest and
fee payments from the Borrower and the apportionment of these payments to the
credit of all Lenders that are parties to the Loan Agreement. The Agent is
responsible for monitoring compliance by the Borrower with the restrictive
covenants in the Loan Agreement and of notifying the Lenders of any adverse
change in the Borrower's financial condition. In addition, the Agent generally
is responsible for determining that the Lenders have obtained a perfected
security interest in the collateral securing the Senior Loan.
Lenders generally rely on the Agent to collect their portion of the
payments on the Senior Loan and to use appropriate creditor remedies against the
Borrower. Typically under Loan Agreements, the Agent is given broad discretion
in enforcing the Loan Agreement. The Borrower compensates the Agent for these
services. Such compensation may include special fees paid on structuring and
funding the Senior Loan and other fees paid on a continuing basis. The precise
duties and rights of an Agent are defined in the Loan Agreement.
When the Fund is an Agent, it has, as a party to the Loan Agreement, a
direct contractual relationship with the Borrower and, prior to allocating
portions of the Senior Loan to Lenders, if any, assumes all risks associated
with the Senior Loan. The Agent may enforce compliance by this Borrower with the
terms of the Loan Agreement. Agents also have voting and consent rights under
the applicable Loan Agreement. Action subject to Agent vote or consent generally
requires the vote or consent of the holders of some specified percentage of the
outstanding principal amount of the Senior Loan, which percentage varies
depending on the relevant Loan Agreement. Certain decisions, such as reducing
the amount or increasing the time for payment of interest on or repayment of
principal of a Senior Loan, or releasing all or substantially all of the
collateral therefor, frequently require the unanimous or consent of all Lenders
affected.
Pursuant to the terms of a Loan Agreement, the Fund as Agent typically
has sole responsibility for servicing and administering a loan on behalf of the
other Lenders. Each Lender in a Senior Loan is generally responsible for
performing its own credit analysis and its own investigation of the financial
condition of the Borrower. Generally, Loan Agreements will hold the Fund liable
for any action taken or omitted that amounts to gross negligence or willful
misconduct. In the event of a Borrower's default on a loan, the Loan Agreements
generally provide that the Lenders do not have recourse against the Fund for its
activities as Agent. Instead, Lenders will be required to look to the Borrower
for recourse.
Acting in the capacity of an Agent in a Senior Loan may subject the
Fund to certain risks in addition to those associated with the Fund's role as a
Lender. An Agent is charged with the above-described duties and responsibilities
to Lenders and Borrowers subject to the terms of the Loan Agreement. Failure to
adequately discharge such
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<PAGE> 62
responsibilities in accordance with the standard of care set forth in the Loan
Agreement may expose the Fund to liability for breach of contract. If a
relationship of trust is found between the Agent and the Lenders, the Agent will
be held to a higher standard of conduct in administering the loan. In
consideration of such risks, the Fund will invest no more than 20% of its total
assets in Senior Loans in which it acts as Agent or co-agent and the size of any
individual loan will not exceed 5% of the Fund's total assets.
LENDING FEES
In the process of buying, selling and holding Senior Loans, the Fund
may receive and/or pay certain fees. These fees are in addition to interest
payments received and may include facility fees, commitment fees, commissions
and prepayment penalty fees. When the Fund buys a Senior Loan it may receive a
facility fee, and when it sells a Senior Loan it may pay a facility fee. On an
ongoing basis, the Fund may receive a commitment fee based on the undrawn
portion of the underlying line of credit portion of a Senior Loan. In certain
circumstances, the Fund may receive a prepayment penalty fee upon the prepayment
of a Senior Loan by a Borrower. Other fees received by the Trust may include
covenant waiver fees and covenant modification fees.
BORROWER COVENANTS
A Borrower must comply with various restrictive covenants contained in
a Loan Agreement. Such covenants, in addition to requiring the scheduled payment
of interest and principal, may include restrictions on dividend payments and
other distributions to shareholders, provisions requiring the Borrower to
maintain specific minimum financial ratios, and limits on total debt. In
addition, the Loan Agreement may contain a covenant requiring the Borrower to
prepay the Senior Loan with any free cash flow. Free cash flow is generally
defined as net cash flow after scheduled debt service payments and permitted
capital expenditures, and includes the proceeds from asset dispositions or sales
of securities. A breach of a covenant which is not waived by the Agent, or by
the lenders directly, as the case may be, is normally an event of acceleration;
i.e., the Agent, or the lenders directly, as the case may be, have the right to
call the outstanding Senior Loan. The typical practice of an Agent or a Lender
in relying exclusively or primarily on reports from the Borrower may involve a
risk of fraud by the Borrower. In the case of a Senior Loan in the form of a
Participation, the agreement between the buyer and seller may limit the rights
of the holder of a Senior Loan to vote on certain changes which may be made to
the Loan Agreement, such as waiving a breach of a covenant. However, the holder
of the Participation will, in almost all cases, have the right to vote on
certain fundamental issues such as changes in principal amount, payment dates
and interest rate.
ADMINISTRATION OF LOANS
In a typical Senior Loan, the Agent administers the terms of the Loan
Agreement. In such cases, the Agent is normally responsible for the collection
of principal and interest payments from the Borrower and the apportionment of
these payments to the credit of all institutions that are parties to the Loan
Agreement. The Fund will generally rely upon the Agent or an intermediate
participant to receive and forward to the Fund its portion of the principal and
interest payments on the Senior Loan. Furthermore, unless under the terms of a
Participation Agreement the Fund has direct recourse against the Borrower, the
Fund will rely on the Agent and the other members of the lending syndicate to
use appropriate credit remedies against the Borrower. The Agent is typically
responsible for monitoring compliance with covenants contained in the Loan
Agreement based upon reports prepared by the Borrower. The seller of the Senior
Loan usually does, but is often not obligated to, notify holders of Senior Loans
of any failures of compliance. The Agent may monitor the value of the collateral
and, if the value of the collateral declines, may accelerate the Senior Loan,
may give the Borrower an opportunity to provide additional collateral or may
seek other protection for the benefit of the participants in the Senior Loan.
The Agent is compensated by the Borrower for providing these services under a
Loan Agreement, and such compensation may include special fees paid upon
structuring and funding the Senior Loan and other fees paid on a continuing
basis. With respect to Senior Loans for which the Agent does not perform such
administrative and enforcement functions, the Fund will perform such tasks on
its own behalf, although a collateral bank will typically hold any collateral on
behalf of the Fund and the other lenders pursuant to the applicable Loan
Agreement.
A financial institution's appointment as Agent may usually be
terminated in the event that it fails to observe the requisite standard of care
or becomes insolvent, enters Federal Deposit Insurance Corporation ("FDIC")
receivership,
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<PAGE> 63
or, if not FDIC insured, enters into bankruptcy proceedings. A successor Agent
would generally be appointed to replace the terminated Agent, and assets held by
the Agent under the Loan Agreement should remain available to holders of Senior
Loans. However, if assets held by the Agent for the benefit of the Fund were
determined to be subject to the claims of the Agent's general creditors, the
Fund might incur certain costs and delays in realizing payment on a Senior Loan,
or suffer a loss of principal and/or interest. In situations involving other
intermediate participants, similar risks may arise.
PREPAYMENTS
Senior Loans usually require, in addition to scheduled payments of
interest and principal, the prepayment of the Senior Loan from free cash flow or
asset sales. The degree to which Borrowers prepay Senior Loans, whether as a
contractual requirement or at their election, may be affected by general
business conditions, the financial condition of the Borrower and competitive
conditions among Lenders, among others. As such, prepayments cannot be predicted
with accuracy. Upon a prepayment, either in part or in full, the actual
outstanding debt on which the Fund derives interest income will be reduced.
However, the Fund may receive both a prepayment penalty fee from the prepaying
Borrower and a facility fee upon the purchase of a new Senior Loan with the
proceeds from the prepayment of the former. Prepayments generally will not
materially affect the Fund's performance because the Fund should be able to
reinvest prepayments in other Senior Loans that have similar or identical yields
and because receipt of such fees may mitigate any adverse impact on the Fund's
yield.
OTHER INFORMATION REGARDING SENIOR LOANS
From time to time, the Adviser and its affiliates may borrow money from
various banks in connection with their business activities. Such banks may also
sell Senior Loans to or acquire them from the Fund or may be intermediate
participants with respect to Senior Loans in which the Fund owns interests. Such
banks may also act as Agents for Senior Loans held by the Fund.
The Fund may acquire interests in Senior Loans which are designed to
provide temporary or "bridge" financing to a Borrower pending the sale of
identified assets or the arrangement longer-term loans or the issuance and sale
of debt obligations. The Fund may also invest in Senior Loans of Borrowers who
have obtained bridge loans from other parties. A Borrower's use of bridge loans
involves a risk that the Borrower may be unable to locate permanent financing to
replace the bridge loan, which may impair the Borrower's perceived
creditworthiness.
To the extent that collateral consists of the stock of the Borrower's
subsidiaries or other affiliates, the Fund will be subject to the risk that this
stock will decline in value. Such a decline, whether as a result of bankruptcy
proceedings or otherwise, could cause the Senior Loan to be undercollateralized
or unsecured. In most credit agreements there is no formal requirement to pledge
additional collateral. In addition, the Fund may invest in Senior Loans
guaranteed by, or fully secured by assets of, shareholders or owners, even if
the Senior Loans are not otherwise collateralized by assets of the Borrower;
provided, however, that such guarantees are fully secured. There may be
temporary periods when the principal asset held by a Borrower is the stock of a
related company, which may not legally be pledged to secure a Senior Loan. On
occasions when such stock cannot be pledged, the Senior Loan will be temporarily
unsecured until the stock can be pledged or is exchanged for or replaced by
other assets, which will be pledged as security for the Senior Loan. However,
the Borrower's ability to dispose of such securities, other than in connection
with such pledge or replacement, will be strictly limited for the protection of
the holders of Senior Loans. During any such period in which the Senior Loan is
temporarily unsecured, such Senior Loans will not be treated as secured Senior
Loans for purposes of the Fund's policy of investing in normal circumstances at
least 80% of its total assets in secured Senior Loans.
If a Borrower becomes involved in bankruptcy proceedings, a court may
invalidate the Fund's security interest in the loan collateral or subordinate
the Fund's rights under the Senior Loan to the interests of the Borrower's
unsecured creditors. Such action by a court could be based, for example, on a
"fraudulent conveyance" claim to the effect that the Borrower did not receive
fair consideration for granting the security interest in the loan collateral to
the Fund. For Senior Loans made in connection with a highly leveraged
transaction, consideration for granting a security interest may be deemed
inadequate if the proceeds of the Loan were not received or retained by the
Borrower, but were instead paid to other persons (such as shareholders of the
Borrower) in an amount which left the Borrower insolvent or without
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<PAGE> 64
sufficient working capital. There are also other events, such as the failure to
perfect a security interest due to faulty documentation or faulty official
filings, which could lead to the invalidation of the Fund's security interest in
loan collateral. If the Fund's security interest in loan collateral is
invalidated or the Senior Loan is subordinated to other debt of a Borrower in
bankruptcy or other proceedings, it is unlikely that the Fund would be able to
recover the full amount of the principal and interest due on the Loan.
INTEREST RATE AND OTHER HEDGING TRANSACTIONS
The Fund may enter into various interest rate hedging and risk
management transactions. Certain of these interest rate hedging and risk
management transactions involve derivative instruments. A derivative is a
financial instrument whose performance is derived at least in part from the
performance of an underlying index, security or asset. The values of certain
derivatives can be affected dramatically by even small market movements,
sometimes in ways that are difficult to predict. There are many different types
of derivatives, with many different uses. The Fund expects to enter into these
transactions primarily to seek to preserve a return on a particular investment
or portion of its portfolio, and may also enter into such transactions to seek
to protect against decreases in the anticipated rate of return on floating or
variable rate financial instruments the Fund owns or anticipates purchasing at a
later date, or for other risk management strategies such as managing the
effective dollar-weighted average duration of the Fund's portfolio. The Fund may
also engage in hedging transactions to seek to protect the value of its
portfolio against declines in net asset value resulting from changes in interest
rates or other market changes. The Fund does not intend to engage in such
transactions to enhance the yield on its portfolio or to increase income
available for distributions. Market conditions will determine whether and in
what circumstances the Fund would employ any of the hedging and risk management
techniques described below. The successful utilization of hedging and risk
management transactions requires skills different from those needed in the
selection of the Fund's portfolio securities. The Fund believes that the Adviser
possesses the skills necessary for the successful utilization of hedging and
risk management transactions. The Fund will incur brokerage and other costs in
connection with its hedging transactions.
The Fund may enter into interest rate swaps or purchase or sell
interest rate caps or floors. Interest rate swaps involve the exchange by the
Fund with another party of their respective obligations to pay or receive
interest, e.g., an exchange of an obligation to make floating rate payments for
an obligation to make fixed rate payments. For example, the Fund may seek to
shorten the effective interest rate redetermination period of a Senior Loan in
its portfolio with an interest rate redetermination period of one year. The Fund
could exchange the Borrower's obligation to make fixed rate payments for one
year for an obligation to make payments that readjust monthly. In such event,
the Fund would consider the interest rate redetermination period of such Senior
Loan to be the shorter period.
The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payments of interest at the difference of the index and the predetermined rate
on a notional principal amount (the reference amount with respect to which
interest obligations are determined although no actual exchange of principal
occurs) from the party selling such interest rate cap. The purchase of an
interest rate floor entitles the purchaser, to the extent that a specified index
falls below a predetermined interest rate, to receive payments of interest at
the difference of the index and the predetermined rate on a notional principal
amount from the party selling such interest rate floor. The Fund will not enter
into swaps, caps or floors if, on a net basis, the aggregate notional principal
amount with respect to such agreements exceeds the net assets of the Fund. The
Fund will not sell interest rate caps or floors that it does not own.
In circumstances in which the Adviser anticipates that interest rates
will decline, the Fund might, for example, enter into an interest rate swap as
the floating rate payor or, alternatively, purchase an interest rate floor. In
the case of purchasing an interest rate floor, if interest rates declined below
the floor rate, the Fund would receive payments from its counterparty which
would wholly or partially offset the decrease in the payments it would receive
in respect of the portfolio assets being hedged. In the case where the Fund
purchases such an interest rate swap, if the floating rate payments fell below
the level of the fixed rate payment set in the swap agreement, the Fund's
counterparty would pay the Fund amounts equal to interest computed at the
difference between the fixed and floating rates over the notional principal
amount. Such payments would offset or partially offset the decrease in the
payments the Fund would receive in respect of floating rate portfolio assets
being hedged.
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<PAGE> 65
The successful use of swaps, caps and floors to preserve the rate of
return on a portfolio of financial instruments depends on the Adviser's ability
to predict correctly the direction and extent of movements in interest rates.
Although the Fund believes that use of the hedging and risk management
techniques described above will benefit the Fund, if the Adviser's judgment
about the direction or extent of the movement in interest rates is incorrect,
the Fund's overall performance would be worse than if it had not entered into
any such transactions. For example, if the Fund had purchased an interest rate
swap or an interest rate floor to hedge against its expectation that interest
rates would decline but instead interest rates rose, the Fund would lose part or
all of the benefit of the increased payments it would receive as a result of the
rising interest rates because it would have to pay amounts to its counterparty
under the swap agreement or would have paid the purchase price of the interest
rate floor.
Because these hedging transactions are entered into for good faith risk
management purposes, the Adviser and the Fund believe such obligations do not
constitute senior securities. The Fund will usually enter into interest rate
swaps on a net basis, i.e., where the two parties make net payments with the
Fund receiving or paying, as the case may be, only the net amount of the two
payments. The net amount of the excess, if any, of the Fund's obligations over
its entitlements with respect to each interest rate swap will be accrued and an
amount of cash or liquid securities having an aggregate net asset value at least
equal to the accrued excess will be maintained in a segregated account by the
Fund's custodian. If the Fund enters into a swap on other than a net basis, the
Fund will maintain in the segregated account the full amount of the Fund's
obligations under each such swap. Accordingly, the Fund does not treat swaps as
senior securities. The Fund may enter into swaps, caps and floors with member
banks of the Federal Reserve System, members of the New York Stock Exchange or
other entities determined by the Adviser, pursuant to procedures adopted and
reviewed on an ongoing basis by the Board of Trustees, to be creditworthy. If a
default occurs by the other party to such transaction, the Fund will have
contractual remedies pursuant to the agreements related to the transaction but
such remedies may be subject to bankruptcy and insolvency laws which could
affect the Fund's rights as a creditor. The swap market has grown substantially
in recent years with a large number of banks and financial services firms acting
both as principals and as agents utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid. Caps and floors are more
recent innovations and they are less liquid than swaps. There can be no
assurance, however, that the Fund will be able to enter into interest rate swaps
or to purchase interest rate caps or floors at prices or on terms the Adviser
believes are advantageous to the Fund. In addition, although the terms of
interest rate swaps, caps and floors may provide for termination, there can be
no assurance that the Fund will be able to terminate an interest rate swap or to
sell or offset interest rate caps or floors that it has purchased.
The Fund may also engage in credit derivative transactions. Default
price risk derivatives are linked to the price of reference securities or loans
after a default by the issuer or borrower, respectively. Market spread
derivatives are based on the risk that changes in market factors, such as credit
spreads, can cause a decline in the value of a security, loan or index. There
are three basic transactional forms for credit derivatives; swaps, options and
structured instruments. The use of credit derivative is a highly specialized
activity which involves strategies and risks different from those associated
with ordinary portfolio security transactions. If the Adviser is incorrect in
its forecasts of default risks, market spreads or other applicable factors, the
investment performance of the Fund would diminish compared with what it would
have been if these techniques were not used. Moreover, even if the Adviser is
correct in its forecasts, there is a risk that a credit derivative position may
correlate imperfectly with the price of the asset or liability being hedged.
Credit derivative transaction exposure will be limited to 10% of the total
assets of the Fund.
New financial products continue to be developed and the Fund may invest
in any such products as may be developed to the extent consistent with its
investment objective and the regulatory and federal tax requirements applicable
to investment companies.
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
The management of the Fund, including general supervision of the duties
performed for the Fund under the Management Agreement, is the responsibility of
the Board of Trustees of the Fund. The number of Trustees of the Fund is
currently set at six, one of whom is an "interested" person (as the term
"interested" persons is defined in the 1940 Act)
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<PAGE> 66
and five of whom are not "interested" persons. None of the Trustees who are not
"interested" persons of the Fund has ever been a director or employee of, or
consultant to, Nuveen or its affiliates. The names and business addresses of the
Trustees and officers of the Fund and their principal occupations and other
affiliations during the past five years are set forth below, with those Trustees
who are "interested persons" of the Fund indicated by an asterisk.
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS DURING THE PAST
NAME AND ADDRESS DATE OF BIRTH OFFICES WITH THE FUND FIVE YEARS
---------------- ------------- --------------------- ----------
<S> <C> <C> <C>
Timothy R. Schwertfeger* 3/28/49 Chairman, President Chairman since July 1, 1996 of The John
333 West Wacker Drive and Trustee Nuveen Company, John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp., prior
thereto, Executive Vice President and Director
of The John Nuveen Company, John
Nuveen & Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp.; Chairman and Director (since January
1997) of Nuveen Asset Management, Inc.;
Director (since 1996) of Institutional Capital
Corporation; Chairman and Director of
Rittenhouse Financial services Inc. (since
1999); Chairman and Director of the Adviser
(since 1999).
James E. Bacon 2/27/31 Trustee Business consultant; Director of Lone Star
114 W. 4th St. Industries, Inc. (cement); retired.
New York, NY 10036
Jack B. Evans 10/22/48 Trustee President, The Hall-Perrine Foundation, a
115 Third Street, S.E. private philanthropic corporation (since
Cedar Rapids, IA 52401 1996); formerly President and Chief
Operating Officer, SCI Financial Group, Inc.,
a regional financial services firm.
William L. Kissick 7/29/32 Trustee Professor, School of Medicine and the
University of Pennsylvania Wharton School of Management and
224 NEB/2L Chairman, Leonard Davis Institute of Health
Philadelphia, PA 19104 Economics, University of Pennsylvania.
Thomas E. Leafstrand 11/11/31 Trustee Retired, previously Vice President in charge
412 W. Franklin of Municipal Underwriting and Dealer Sales
Wheaton, IL 60187 at The Northern Trust Company.
Sheila W. Wellington 2/24/32 Trustee President (since 1993) of Catalyst (a
250 Park Avenue not-for-profit organization focusing on
New York, NY 10003 women's leadership development in business
and the professions).
</TABLE>
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<PAGE> 67
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS DURING THE PAST
NAME AND ADDRESS DATE OF BIRTH OFFICES WITH THE FUND FIVE YEARS
---------------- ------------- --------------------- ----------
<S> <C> <C> <C>
Alan G. Berkshire 12/28/60 Vice President and Senior Vice President (since May 1999) formerly
333 West Wacker Drive Assistant Secretary Vice President (since May 1998), Secretary
Chicago, IL 60606 (since may 1998) and General Counsel (since
September 1997) of The John Nuveen Co.
Incorporated and the John Nuveen Company;
Senior Vice President (since May 1999),
formerly Vice President (since Sept. 1997) and
Secretary of Nuveen Advisory Corp., Nuveen
Institutional Advisory Corp. and Nuveen Asset
Management, Inc. Senior Vice President and
Secretary (since Sept. 1999) of the Adviser;
prior thereto, Partner in the law firm of
Kirkland & Ellis.
Peter H. D'Arrigo 11/28/67 Vice President and Vice President of John Nuveen & Co.
333 West Wacker Drive Treasurer Incorporated (January 1999); Vice President and
Chicago, IL 60606 Treasurer of the Adviser (September 1999);
prior thereto, Assistant Vice President
(January 1997); formerly, Associate of John
Nuveen & Co. Incorporated; Vice President and
Treasurer of the Adviser (since Sept. 1999);
Chartered Financial Analyst.
Lorna C. Ferguson 10/24/45 Vice President Vice President of John Nuveen & Co.
333 West Wacker Drive Incorporated; Vice President (since
Chicago, IL 60606 January 1998) of Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.
Stephen D. Foy 5/31/54 Vice President and Vice President of John Nuveen & Co.
333 West Wacker Drive Controller Incorporated; Vice President of the Adviser
Chicago, IL 60606 (since Sept. 1999); Certified Public
Accountant.
Jeffrey W. Maillet 9/30/56 Vice President Executive Managing Director of the Adviser
333 West Wacker Drive (since September 1999); prior thereto, Senior
Chicago, IL 60606 Vice President of Van Kampen Investment
Advisory Corp. (since 1989).
Larry W. Martin 7/27/51 Vice President and Vice President, Assistant Secretary and
333 West Wacker Drive Assistant Secretary Assistant General Counsel of John Nuveen &
Chicago, IL 60606 Co. Incorporated; Vice President and
Assistant Secretary of Nuveen Advisory Corp.
and Nuveen Institutional Advisory Corp.; Vice
President and Assistant Secretary (since
January 1997) of Nuveen Asset Management,
Inc.; Assistant Secretary of The John Nuveen
Company; Vice President and Assistant
Secretary of the Adviser (since September 1999).
</TABLE>
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<PAGE> 68
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS DURING THE PAST
NAME AND ADDRESS DATE OF BIRTH OFFICES WITH THE FUND FIVE YEARS
---------------- ------------- --------------------- ----------
<S> <C> <C> <C>
Gifford R. Zimmerman 9/9/56 Vice President and Vice President, Assistant Secretary and
333 West Wacker Drive Secretary Associate General Counsel of John Nuveen & Co.
Chicago, IL 60606 Incorporated; Vice President and Assistant
Secretary of Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.; Assistant
Secretary, The John Nuveen Company; Vice
President and Assistant Secretary of the
Adviser (since Sept. 1999); Chartered Financial
Analyst.
</TABLE>
Jeffrey W. Maillet is the portfolio manager of the Fund. Mr. Maillet
has more than 18 years of experience in Senior Loan fund management and has
managed the purchase of more than 2,000 senior secured bank issues totaling in
excess of $28 billion.
Thomas E. Leafstrand and Timothy R. Schwertfeger serve as members of
the Executive Committee of the Board of Trustees of the Fund. The Executive
Committee, which meets between regular meetings of the Board of Trustees, is
authorized to exercise all of the powers of the Board of Trustees. Mr.
Schwertfeger is also a director or Trustee, as the case may be, of 106 Nuveen
open-end and closed-end funds advised by Nuveen Advisory Corp., Nuveen
Institutional Advisory Corp. and Nuveen Senior Loan Asset Management Inc. (the
Adviser)
The other Trustees of the Fund are directors or Trustees, as the case
may be, of 8 Nuveen open-end funds and 5 Nuveen closed-end funds advised by
Nuveen Institutional Advisory Corp.; and one additional fund advised by the
Adviser.
At the next annually scheduled meeting, holders of TAPS shares, voting
as a separate class, will elect two Trustees and the remaining Trustees shall be
elected by Common Shareholders and holders of TAPS shares, voting together as a
single class.
The following table sets forth estimated compensation to be paid by the
Fund projected through the end of the Fund's first full fiscal year. The Fund
has no retirement or pension plans. The officers and Trustees affiliated with
Nuveen serve without any compensation from the Fund.
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<PAGE> 69
<TABLE>
<CAPTION>
Estimated Aggregate Total Compensation Deferred
Compensation from Trust and Fund Compensation Payable
Name of Trustee from the Trust (1) Complex Paid to Trustees (2) from the Trust (3)
- ----------------- -------------------- ----------------------------- ---------------------
<S> <C> <C> <C>
James E. Bacon.................... $ 5,903 $ 44,000 $ 2,426
Jack B. Evans..................... $ 5,903 $ 44,000 $ 2,436
William L. Kissick................ $ 5,903 $ 44,000 $ 2,183
Thomas E. Leafstrand.............. $ 6,641 $ 45,600 $ 2,933
Sheila W. Wellington.............. $ 5,903 $ 44,000 $ 4,873
</TABLE>
(1) The estimated compensation paid to the independent trustees
for the fiscal year ended July 31, 2000 for services to the
Fund.
(2) Based on the compensation paid to the independent trustees for
the fiscal year ended July 31, 2000 for services to the eleven
open-end and closed-end funds advised by NIAC and the Adviser.
(3) Pursuant to a deferred compensation agreement with the Trust,
deferred amounts are treated as though an equivalent dollar
amount has been invested in shares of one or more eligible
Nuveen Funds. The amounts provided are the total deferred
fees (including the return from the assumed investment in the
eligible Nuveen Funds) payable from the Trust.
INVESTMENT ADVISER
The Adviser acts as investment adviser to the Fund, with responsibility
for the overall management of the Fund. Its address is 333 West Wacker Drive,
Chicago, Illinois 60606. The Adviser is also responsible for managing the Fund's
business affairs and providing day-to-day administrative services to the Fund.
For additional information regarding the management services performed by the
Adviser, see "Management of the Fund" in the Prospectus.
The Adviser is a wholly-owned subsidiary of The John Nuveen Company and
is an affiliated entity of John Nuveen & Co. Incorporated ("Nuveen"), which is
also a co-managing underwriter of the Fund's TAPS. Nuveen is sponsor of the
Nuveen Defined Portfolios, registered unit investment trusts, is the principal
underwriter for the Nuveen Mutual Funds, and has served as co-managing
underwriter for the shares of the Nuveen Exchange-Traded Funds. Over 1,300,000
individuals have invested to date in Nuveen's funds and trusts. Founded in 1898,
Nuveen brings over a century of expertise to the municipal bond market. Overall,
Nuveen and its affiliates manage or oversee more than $70 billion in assets in a
variety of products. Nuveen currently sponsors 60 funds traded on the New York
or American Stock Exchange, with more than $27 billion in assets. Nuveen, like
the Adviser, is a subsidiary of The John Nuveen Company which, in turn, is
approximately 78% owned by The St. Paul Companies, Inc. ("St. Paul"). St. Paul
is a publicly traded company located in St. Paul, Minnesota, and is principally
engaged in providing property-liability insurance through subsidiaries.
Pursuant to an investment management agreement between the Adviser and
the Fund, the Fund has agreed to pay for the services and facilities provided by
the Adviser an annual management fee, payable on a monthly basis, according to
the following schedule:
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<TABLE>
<CAPTION>
AVERAGE DAILY MANAGED ASSETS MANAGEMENT FEE
- ---------------------------- --------------
<S> <C>>
Less than $1 billion...................................... .8500 of 1%
$1 billion to $2 billion.................................. .8375 of 1%
$2 billion to $5 billion.................................. .8250 of 1%
$5 billion to $10 billion................................. .8000 of 1%
$10 billion and over...................................... .7750 of 1%
</TABLE>
- -------------
* For purposes of calculation of the management fee, the Fund's "managed
assets" shall mean the average daily gross asset value of the Fund,
minus the sum of the Fund's accrued and unpaid dividends on any
outstanding Preferred Shares and accrued liabilities (other than the
principal amount of any borrowings incurred, commercial paper or notes
issued by the Fund and the liquidation preference of any outstanding
Preferred Shares).
All fees and expenses are accrued daily and deducted before payment of
dividends to investors. The investment management agreement has been approved by
a majority of the disinterested Trustees of the Fund and the sole shareholder of
the Fund.
For the first ten years of the Fund's operation, the Adviser has agreed
to reimburse the Fund for fees and expenses in the amounts, and for the time
periods, set forth below:
<TABLE>
<CAPTION>
PERCENTAGE REIMBURSED PERCENTAGE REIMBURSED
YEAR ENDING (AS A PERCENTAGE OF YEAR ENDING (AS A PERCENTAGE OF
OCT. 31 MANAGED ASSETS) OCT. 31 MANAGED ASSETS)
------- --------------- ------- ---------------
<S> <C> <C> <C>
1999* .45% 2005 .35%
2000 .45% 2006 .25%
2001 .45% 2007 .15%
2002 .45% 2008 .10%
2003 .45% 2009 .05%
2004 .45%
</TABLE>
- -------------
* From the commencement of operations.
Reducing Fund expenses in this manner will tend to increase the amount
of income available for the Common Shareholders and to pay dividends on
Preferred Shares during the period of reimbursement. The Adviser has not agreed
to reimburse the Fund for any portion of its fees and expenses beyond October
31, 2009.
PORTFOLIO TRANSACTIONS
The Adviser is responsible for decisions to buy and sell securities for
the Fund and for the placement of the Fund's securities business, the
negotiation of the prices to be paid for principal trades and the allocation of
its transactions among various dealer firms. Portfolio securities will normally
be purchased directly from an underwriter or in the over-the-counter market from
the principal dealers in such securities, unless it appears that a better price
or execution may be obtained through other means. Portfolio securities will not
be purchased from Nuveen or its affiliates except in compliance with the 1940
Act.
With respect to interests in Senior Loans, the Fund generally will
engage in privately negotiated transactions for purchase or sale in which the
Adviser will negotiate on behalf of the Fund, although a more developed market
may exist for certain Senior Loans. The Fund may be required to pay fees, or
forgo a portion of interest and any fees payable to the Fund, to the Lender
selling Participations or Assignments to the Fund. The Adviser will determine
the Lenders
S-12
<PAGE> 71
from whom the Fund will purchase Assignments and Participations by considering
their professional ability, level of service, relationship with the Borrower,
financial condition, credit standards and quality of management. Although the
Fund intends generally to hold interests in Senior Loans until maturity or
prepayment of the Senior Loan, the illiquidity of many Senior Loans may restrict
the ability of the Adviser to locate in a timely manner persons willing to
purchase the Fund's interests in Senior Loans at a fair price, should the Fund
desire to sell such interests. See "Risks" in the Prospectus.
The Fund expects that substantially all other portfolio transactions
will be effected on a principal (as opposed to an agency) basis and,
accordingly, does not expect to pay any brokerage commissions. Purchases from
underwriters will include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers will include the spread between the bid
and asked price. It is the policy of the Adviser to seek the best execution
under the circumstances of each trade. The Adviser evaluates price as the
primary consideration, with the financial condition, reputation and
responsiveness of the dealer considered secondary in determining best execution.
Given the best execution obtainable, it will be the Adviser's practice to select
dealers who, in addition, furnish research information (primarily credit
analyses of issuers and general economic reports) and statistical and other
services to the Adviser. It is not possible to place a dollar value on
information and statistical and other services received from dealers. Since it
is only supplementary to the Adviser's own research efforts, the receipt of
research information is not expected to reduce significantly the Adviser's
expenses. While the Adviser will be primarily responsible for the placement of
the business of the Fund, the policies and practices of the Adviser in this
regard must be consistent with the foregoing and will, at all times, be subject
to review by the Board of Trustees of the Fund.
The Adviser may manage other investment accounts and investment
companies for other clients who have investment objectives similar to those of
the Fund. Subject to applicable laws and regulations, the Adviser seeks to
allocate portfolio transactions equitably whenever concurrent decisions are made
to purchase or sell assets or securities by the Fund and another advisory
account. In making such allocations the main factors to be considered will be
the respective investment objectives, the relative size of portfolio holdings of
the same or comparable securities, the availability of cash for investment and
the size of investment commitments generally held. While this procedure could
have a detrimental effect on the price or amount of the securities available to
the Fund from time to time, it is the opinion of the Board of Trustees that the
benefits available from the Advisers organization will outweigh any disadvantage
that may arise from exposure to simultaneous transactions.
NET ASSET VALUE
The Fund's net asset value per share is determined as of the close of
trading (normally 4:00 p.m. eastern time) on each day the New York Stock
Exchange is open for business. Net asset value per Common Share is calculated by
taking the fair value of the Fund's total assets, including interest or
dividends accrued but not yet collected, less liabilities, and dividing by the
total number of shares outstanding. The result, rounded to the nearest cent, is
the net asset value per share.
The Senior Loans in which the Fund will invest generally are not listed
on any securities exchange. Certain Senior Loans are traded by institutional
investors in an over-the-counter secondary market for Senior Loan obligations
that has developed over the past several years. This secondary market for those
Senior Loans generally is comparatively illiquid relative to markets for other
income securities and no active trading market exists for many Senior Loans. In
determining net asset value, the Fund will utilize the valuations of Senior
Loans furnished to the Adviser by an independent third-party pricing service
approved by the Board of Trustees. The Board of Trustees has reviewed the
various alternatives for pricing the Fund's portfolio of Senior Loans and has
determined that the use of a pricing service is a reasonable, fair and
appropriate method of valuing Senior Loans. The Adviser has entered into one or
more agreements with pricing service providers to provide pricing services for
the Fund.
S-13
<PAGE> 72
There can be no assurance that the pricing service providers will continue to
provide these services or will provide a value for each Senior Loan held by the
Fund. However, the Adviser believes that if a pricing service provider
declines to continue to act as such for the Fund, or does not provide values for
a significant portion of the Senior Loans in the Fund's portfolio, one or more
alternative independent third-party pricing service providers will be available
to provide comparable services on similar terms. During any period in which no
pricing service provider is acting as such for the Fund, or for any Senior Loan
for which no value from a pricing service provider is available, the Adviser
will value the Fund's Senior Loans as described below.
A pricing service provider typically will value Senior Loans at the
mean of the highest bona fide bid and lowest bona fide ask prices when current
quotations are readily available. Senior Loans for which current quotations will
not be readily available are valued at a fair value as determined by the pricing
service provider using a wide range of market data and other information and
analysis, including credit considerations considered relevant by the pricing
service provider to determine valuations. The procedures of any pricing service
provider and its valuations will be reviewed by the officers of the Adviser
under the general supervision of the Board of Trustees. If the Adviser believes
that a value provided by a pricing service provider does not represent a fair
value as a result of information, specific to that Senior Loan or Borrower or
its affiliates, which the Adviser believes that the pricing agent may not be
aware, the Adviser may in its discretion value the Senior Loan subject to
procedures approved by the Board of Trustees and reviewed on a periodic basis,
and the Fund will utilize that price instead of the price as determined by the
pricing service provider. In addition to such information the Adviser will
consider, among other factors, (i) the creditworthiness of the Borrower and (ii)
the current interest rate, the period until next interest rate reset and
maturity of such Senior Loan interests in determining a fair value of a Senior
Loan. If the pricing service provider does not provide a value for a Senior Loan
or if no pricing service provider is then acting, a value will be determined by
the Adviser in the manner described above.
It is expected that the Fund's net asset value will fluctuate as a
function of interest rate and credit factors. Because of the short-term nature
of such instruments, however, the Fund's net asset value is expected to
fluctuate less in response to changes in interest rates than the net asset
values of investment companies with portfolios consisting primarily of longer
term fixed-income securities.
Because a secondary trading market in Senior Loans has not yet fully
developed, the pricing service or the Adviser may not rely solely on but may
consider, to the extent they believe such information to be reliable, prices or
quotations provided by banks, dealers or other pricing services providers with
respect to secondary market transactions in Senior Loans. To the extent that an
active secondary trading market in Senior Loan interests develops to a reliable
degree, the pricing service provider or the Adviser may rely to an increasing
extent on such market prices and quotations in reviewing the valuations of the
Senior Loan interests in the Fund's portfolio. To the extent a trading market
continues to develop, certain participants in the market may have objectives
other than current income and may pursue short-term trading strategies, which
may result in erratic movements in the market prices for Senior Loans as a
result of movements in short-term interest rates or otherwise. Although the
Fund's policy of acquiring interests in floating rate Senior Loans is intended
to minimize fluctuations in net asset value resulting from changes in market
interest rates, the Fund's net asset value will fluctuate. In light of the
senior nature of Senior Loan interests that may be included in the Fund's
portfolio and taking into account the Fund's access to non-public information
with respect to Borrowers relating to such Senior Loan interests, the Adviser
does not currently believe that consideration on a systematic basis of ratings
provided by any nationally recognized statistical rating organization or price
fluctuations with respect to long- or short-term debt of such Borrowers
subordinate to the Senior Loans of such Borrowers is necessary in order to
review the value of such Senior Loan interests. Accordingly, the Adviser
generally will not systematically consider (but may consider in certain
instances) and, in any event, will not rely solely upon such ratings or price
fluctuations in determining or reviewing valuations of Senior Loan interests in
the Fund's portfolio.
Other portfolio securities (other than short-term obligations, but
including listed issues) may be valued on the basis of prices furnished by one
or more pricing services which determine prices for normal, institutional-size
trading units of such securities using market information, transactions for
comparable securities and various relationships
S-14
<PAGE> 73
between securities that are generally recognized by institutional traders. In
certain circumstances, portfolio securities will be valued at the last sale
price on the exchange that is the primary market for such securities, or the
last quoted bid price for those securities for which the over-the-counter market
is the primary market or for listed securities in which there were no sales
during the day. The value of interest rate swaps will be determined in
accordance with a discounted present value formula and then confirmed by
obtaining a bank quotation.
Short-term obligations which mature in 60 days or less will be valued
at amortized cost, if their original term to maturity when acquired by the Fund
was 60 days or less, or will be valued at amortized cost using their value on
the 61st day prior to maturity, if their original term to maturity when acquired
by the Fund was more than 60 days, unless in each case this is determined not to
represent fair value. Repurchase agreements will be valued at cost plus accrued
interest. Securities for which there exist no price quotations or valuations and
all other assets will be valued at a fair value as determined in good faith by
or on behalf of the Trustees.
DESCRIPTION OF TAPS
NOTICES. The Fund must deliver a certificate with respect to the
calculation of the TAPS Basic Maintenance Amount and the value of the portfolio
holdings of the Fund (a "TAPS Basic Maintenance Certificate") (i) to the Auction
Agent, each Rating Agency which is then rating the TAPS and which so requires as
of (a) the Business Day preceding the Date of Original Issue and (b) any
Valuation Date on which the Fund fails to have Eligible Assets with an aggregate
Discounted Value at least equal to 115% of the TAPS Basic Maintenance Amount,
(ii) to the Auction Agent, each Rating Agency which is then rating the TAPS and
which so requires as of (a) every fourth Valuation Date after the Date of
Original Issue for the first year following the Date of Original Issue, (b) if
the Fund fails to have Eligible Assets with an aggregate Discounted Value at
least equal to the TAPS Basic Maintenance Amount, and (c) on request by each
Rating Agency, as applicable, (iii) to the Auction Agent, each Rating Agency
which is then rating the TAPS and which so requires as of the last Valuation
Date of each fiscal quarter and a Valuation Date during such fiscal quarter
randomly selected by the Fund's independent accountants as provided below, and
(iv) to the Auction Agent, each Rating Agency which is then rating the TAPS and
which so requires as of a Business Day on or before any Asset Coverage Cure Date
relating to the Fund's cure of a failure to have Eligible Assets with an
aggregate Discounted Value at least equal to the TAPS Basic Maintenance Amount.
Such TAPS Basic Maintenance Certificate shall be delivered in the case of clause
(i)(a) on the Date of Original Issue and in the case of clauses (i)(b), (ii),
(iii) and (iv) above on or before the third Business Day after the relevant
Valuation Date or Asset Coverage Cure Date.
The Fund is required to deliver to the Auction Agent, each Rating
Agency which is then rating the TAPS and which so requires, a certificate with
respect to the calculation of the 1940 Act TAPS Asset Coverage and the value of
the portfolio holdings of the Fund (a "1940 Act TAPS Asset Coverage
Certificate") (i) as of the Business Day preceding the Date of Original Issue
with respect to TAPS, and (ii) as of (a) the last Valuation Date of each quarter
thereafter, and (b) as of the Business Day on or before the Asset Coverage Cure
Date relating to the failure to satisfy the 1940 Act Asset Coverage (as defined
under "Description of Senior Notes -- Asset Maintenance"). Such 1940 Act TAPS
Asset Coverage Certificate shall be delivered in the case of clause (i) on the
Date of Original Issue and in the case of clause (ii) on or before the third
Business Day after the relevant Valuation Date or the Asset Coverage Cure Date.
Such certificate must be accompanied by a certificate from the Fund's
accountants certifying as to the accuracy of the Fund's calculations.
On the Date of Original Issue, the Fund shall deliver to the Auction
Agent, each Rating Agency which is then rating the TAPS and which so requires, a
letter prepared by the Fund's independent accountants (an "Accountant's
Certificate") regarding the accuracy of the calculations made by the Fund in the
TAPS Basic Maintenance Certificate and the 1940 Act TAPS Asset Coverage
Certificate required to be delivered by the Fund on the Date of Original Issue.
Within eight Business Days after the last Valuation Date of each fiscal quarter
of the Fund on which an TAPS Basic Maintenance Certificate is required to be
delivered, the Fund will deliver to the Auction Agent, each Rating Agency which
is then rating the TAPS and which so requires, an Accountant's Certificate
regarding the accuracy of the calculations made by the Fund in such TAPS Basic
Maintenance Certificate and in any other TAPS Basic Maintenance
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<PAGE> 74
Certificate randomly selected by the Fund's independent accountants during such
fiscal quarter. Within eight Business Days after the last Valuation Date of each
fiscal quarter of the Fund on which a 1940 Act TAPS Asset Coverage Certificate
is required to be delivered, the Fund will deliver to the Auction Agent, each
Rating Agency which is then rating the TAPS and which so requires an
Accountant's Certificate regarding the accuracy of calculations made by the Fund
in such 1940 Act TAPS Asset Coverage Certificate. In addition, the Fund will
deliver to the relevant persons specified in the preceding sentence an
Accountant's Certificate regarding the accuracy of the calculations made by the
Fund on each TAPS Basic Maintenance Certificate and 1940 Act TAPS Asset Coverage
Certificate required to be delivered as of a Business Day on or before any Asset
Coverage Cure Date, within five days after the relevant Asset Coverage Cure
Date. If an Accountant's Certificate delivered with respect to an Asset Coverage
Cure Date shows an error was made in the Fund's report with respect to such
Asset Coverage Cure Date, the calculation or determination made by the Fund's
independent accountants will be conclusive and binding on the Fund with respect
to such reports. If any other Accountant's Certificate shows that an error was
made in any such report, the calculation or determination made by the Fund's
independent accountants will be conclusive and binding on the Fund; provided,
however, any errors shown in the Accountant's Certificate filed on a quarterly
basis shall not be deemed to be a failure to have Eligible Assets with an
aggregate Discounted Value at least equal to the TAPS Basic Maintenance Amount
on such prior Valuation Dates. In the event that a TAPS Basic Maintenance
Certificate or 1940 Act TAPS Asset Coverage Certificate or the applicable
Accountant's Certificates with respect to an applicable Asset Coverage Cure Date
are not delivered within the time periods specified in the Statement, the Fund
shall be deemed to have failed to have Eligible Assets with an aggregate
Discounted Value at least equal to the TAPS Basic Maintenance Amount or the 1940
Act TAPS Asset Coverage, as the case may be, as of the related Valuation Date,
and such failure shall be deemed not to have been cured as of such Asset
Coverage Cure Date for purposes of the mandatory redemption provisions.
ADDITIONAL INFORMATION CONCERNING THE AUCTIONS FOR TAPS
GENERAL
AUCTION AGENCY AGREEMENT. The Fund has entered into an Auction Agency
Agreement (the "Auction Agency Agreement") with the Auction Agent (currently,
Bankers Trust Company), which provides, among other things, that the Auction
Agent will follow the Auction Procedures for purposes of determining the
Applicable Rate for shares of each series of TAPS so long as the Applicable Rate
for shares of such series is to be based on the results of an Auction.
BROKER-DEALER AGREEMENTS. Each Auction requires the participation of
one or more Broker-Dealers. The Auction Agent has entered into agreements
(collectively, the "Broker-Dealer Agreements") with several Broker-Dealers
selected by the Fund, which provide for the participation of those
Broker-Dealers in Auctions for shares of TAPS. See "Broker-Dealers" below.
SECURITIES DEPOSITORY. The Depository Trust Company ("DTC") will act as
the Securities Depository for the Agent Members with respect to shares of each
series of TAPS. One certificate for all of the shares of each series of TAPS
will be registered in the name of Cede, as nominee of the Securities Depository.
Such certificate will bear a legend to the effect that such certificate is
issued subject to the provisions restricting transfers of shares of TAPS
contained in the Statement. The Fund will also issue stop-transfer instructions
to the transfer agent for shares of each series of TAPS. Prior to the
commencement of the right of holders of preferred shares to elect a majority of
the Fund's Trustees, as described under "Description of TAPS-Voting Rights" in
the Prospectus, Cede will be the holder of record of all shares of each series
of TAPS and owners of such shares will not be entitled to receive certificates
representing their ownership interest in such shares.
DTC, a New York-chartered limited purpose trust company, performs
services for its participants (including the Agent Members), some of whom
(and/or their representatives) own DTC. DTC maintains lists of its participants
and will maintain the positions (ownership interests) held by each such
participant (the "Agent Member") in shares of TAPS, whether for its own account
or as a nominee for another person.
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<PAGE> 75
CONCERNING THE AUCTION AGENT
The Auction Agent is acting as agent for the Fund in connection with
Auctions. In the absence of bad faith or negligence on its part, the Auction
Agent will not be liable for any action taken, suffered, or omitted or for any
error of judgment made by it in the performance of its duties under the Auction
Agency Agreement and will not be liable any error of judgment made in good faith
unless the Auction Agent will have been negligent in ascertaining the pertinent
facts.
The Auction Agent may rely upon, as evidence of the identities of the
Existing Holders of shares of TAPS, the Auction Agent's registry of Existing
Holders, the results of Auctions and notices from any Broker-Dealer (or other
Person, if permitted by the Fund) with respect to transfers described under "The
Auction-Secondary Market Trading and Transfer of TAPS" in the Prospectus and
notices from the Fund. The Auction Agent is not required to accept any such
notice for an Auction unless it is received by the Auction Agent by 3:00 p.m.,
New York City time, on the Business Day preceding such Auction.
The Auction Agent may terminate the Auction Agency Agreement upon
notice to the Fund on a date no earlier than 45 days after such notice. If the
Auction Agent should resign, the Fund will use its best efforts to enter into an
agreement with a successor Auction Agent containing substantially the same terms
and conditions as the Auction Agency Agreement. The Fund may remove the Auction
Agent, provided that prior to such removal, the Fund shall have entered into
such an agreement with a successor Auction Agent.
BROKER-DEALERS
The Auction Agent after each Auction for shares of TAPS will pay to
each Broker-Dealer, from funds provided by the Fund, a service charge at the
annual rate of 1/4 of 1% in the case of any Auction immediately preceding a Rate
Period of less than one year, or a percentage agreed to by the Fund and the
Broker-Dealers in the case of any Auction immediately preceding a Rate Period of
one year or longer, of the purchase price of shares of TAPS placed by such
Broker-Dealer at such Auction. For the purposes of the preceding sentence,
shares of TAPS will be placed by a Broker-Dealer if such shares were (a) the
subject of Hold Orders deemed to have been submitted to the Auction Agent by the
Broker-Dealer and were acquired by such Broker-Dealer for its own account or
were acquired by such Broker-Dealer for its customers who are Beneficial Owners
or (b) the subject of an Order submitted by such Broker-Dealer that is (i) a
Submitted Bid of an Existing Holder that resulted in such Existing Holder
continuing to hold such shares as a result of the Auction or (ii) a Submitted
Bid of a Potential Holder that resulted in such Potential Holder purchasing such
shares as a result of the Auction or (iii) a valid Hold Order.
The Fund may request the Auction Agent to terminate one or more
Broker-Dealer Agreements at any time, provided that at least one Broker-Dealer
Agreement is in effect after such termination.
The Broker-Dealer Agreement provides that a Broker-Dealer (other than
an affiliate of the Fund) may submit Orders in Auctions for its own account,
unless the Fund notifies all Broker-Dealers that they may no longer do so, in
which case Broker-Dealers may continue to submit Hold Orders and Sell Orders for
their own accounts. Any Broker-Dealer that is an affiliate of the Fund may
submit Orders in Auctions, but only if such Orders are not for its own account.
If a Broker-Dealer submits an Order for its own account in any Auction, it
might have an advantage over other Bidders because it would have knowledge of
all Orders submitted by it in that Auction; such Broker-Dealer, however, would
not have knowledge of Orders submitted by other Broker-Dealers in that Auction.
CERTAIN PROVISIONS IN THE DECLARATION OF TRUST
Under the Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Declaration contains an express disclaimer of shareholder liability
for debts or obligations of the Fund and requires that notice of such limited
liability be given in each agreement, obligation or instrument entered into or
executed by the Fund or the Trustees. The Declaration further provides for
indemnification out of the assets and property of the Fund for all loss and
expense of any shareholder held personally liable for the
S-17
<PAGE> 76
obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund would be unable to meet its obligations. The Fund believes that the
likelihood of such circumstances is very remote.
The Declaration includes provisions that could limit the ability of
other entities or persons to acquire control of the Fund. Specifically, the
Declaration requires a vote by holders of at least two-thirds of the Common
Shares and TAPS shares, voting together as a single class, except as described
below, to authorize (1) a conversion of the Fund from a closed-end to an
open-end investment company, (2) a merger or consolidation of the Fund, or a
series or class of the Fund, with any corporation, association, trust or other
organization or a reorganization or recapitalization of the Fund, or a series or
class of the Fund, (3) a sale, lease or transfer of all or substantially all of
the Fund's assets (other than in the regular course of the Fund's investment
activities), (4) in certain circumstances, a termination of the Fund, or a
series or class of the Fund or (5) removal of Trustees, and then only for cause,
unless, with respect to (1) through (4), such transaction has already been
authorized by the affirmative vote of two-thirds of the total number of Trustees
fixed in accordance with the Declaration or the By-laws, in which case the
affirmative vote of the holders of at least a majority of the Fund's Common
Shares and TAPS shares outstanding at the time, voting together as a single
class, is required; provided, however, that where only a particular class or
series is affected (or, in the case of removing a Trustee, when the Trustee has
been elected by only one class), only the required vote by the applicable class
or series will be required. None of the foregoing provisions may be amended
except by the vote of at least two-thirds of the Common Shares and TAPS shares,
voting together as a single class. In the case of the conversion of the Fund to
an open-end investment company, or in the case of any of the foregoing
transactions constituting a plan of reorganization which adversely affects the
holders of TAPS shares, the action in question will also require the affirmative
vote of the holders of at least two-thirds of the Fund's TAPS shares outstanding
at the time, voting as a separate class, or, if such action has been authorized
by the affirmative vote of two-thirds of the total number of Trustees fixed in
accordance with the Declaration or the By-laws, the affirmative vote of the
holders of at least a majority of the Fund's TAPS shares outstanding at the
time, voting as a separate class. The votes required to approve the conversion
of the Fund from a closed-end to an open-end company or to approve transactions
constituting a plan of reorganization which investment adversely affects the
holders of TAPS shares are higher than those required by the 1940 Act. The Board
of Trustees believes that the provisions of the Declaration relating to such
higher votes are in the best interest of the Fund and its shareholders.
Reference should be made to the Declaration on file with the Securities
and Exchange Commission for the full text of these provisions.
The Declaration provides that the obligations of the Fund are not
binding upon the Trustees of the Fund individually, but only upon the assets and
property of the Fund, and that the Trustees shall not be liable for errors of
judgment or mistakes of fact or law. Nothing in the Declaration, however,
protects a Trustee against any liability to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
REPURCHASE OF COMMON SHARES; CONVERSION TO OPEN-END FUND
The Fund is a closed-end investment company, and as such its
shareholders will not have the right to cause the Fund to redeem their shares.
Instead, the Fund's Common Shares will trade in the open market at a price that
will be a function of several factors, including dividend levels (which are in
turn affected by expenses), net asset value, call protection, price, dividend
stability, relative demand for and supply of such shares in the market, general
market and economic conditions and other factors. Because shares of a closed-end
investment company may frequently trade at prices lower than net asset value,
the Fund's Board of Trustees has currently determined that, at least annually,
it will consider action that might be taken to reduce or eliminate any material
discount from net asset value in respect of Common Shares, which may include the
repurchase of such shares in the open market or in private transactions, the
making of a tender offer for such shares at net asset value, or the conversion
of the Fund to an open-end investment company. There can be no assurance,
however, that the Board of Trustees will decide to take any of the these
actions, or that share repurchases or tender offers, if undertaken, will reduce
market discount.
S-18
<PAGE> 77
Notwithstanding the foregoing, at any time when the Fund's TAPS shares
are outstanding, the Fund may not purchase, redeem or otherwise acquire any of
its Common Shares unless (1) all accrued TAPS shares dividends have been paid
and (2) at the time of such purchase, redemption or acquisition, the net asset
value of the Fund's portfolio (determined after deducting the acquisition price
of the Common Shares) is at least 200% of the liquidation value of the
outstanding TAPS shares (expected to equal the original purchase price per share
plus any accrued and unpaid dividends thereon). The staff of the Securities and
Exchange Commission currently requires that any tender offer made by a
closed-end investment company for its shares must be at a price equal to the net
asset value of such shares on the close of business on the last day of the
tender offer. Any service fees incurred in connection with any tender offer made
by the Fund will be borne by the Fund and will not reduce the stated
consideration to be paid to tendering shareholders.
Subject to its investment limitations, the Fund may borrow to finance
the repurchase of shares or to make a tender offer. Interest on any borrowings
to finance share repurchase transactions or the accumulation of cash by the Fund
in anticipation of share repurchases or tenders will reduce the Fund's net
income. Any share repurchase, tender offer or borrowing that might be approved
by the Board of Trustees would have to comply with the Securities Exchange Act
of 1934, as amended, and the 1940 Act and the rules and regulations thereunder.
Although the decision to take action in response to a discount from net
asset value will be made by the Board at the time it considers such issue, it is
the Board's present policy, which may be changed by the Board, not to authorize
repurchases of Common Shares or a tender offer for such shares if (1) such
transactions, if consummated, would (a) result in the delisting of the Common
Shares from the New York Stock Exchange, or (b) impair the Fund's status as a
regulated investment company under the Code (which would make the Fund a taxable
entity, causing the Fund's income to be taxed at the corporate level in addition
to the taxation of shareholders who receive dividends from the Fund) or as a
registered closed-end investment company under the 1940 Act; (2) the Fund would
not be able to liquidate portfolio securities in an orderly manner and
consistent with the Fund's investment objectives and policies in order to
repurchase shares; or (3) there is, in the Board's judgment, any (a) material
legal action or proceeding instituted or threatened challenging such
transactions or otherwise materially adversely affecting the Fund, (b) general
suspension of or limitation on prices for trading securities on the New York
Stock Exchange, (c) declaration of a banking moratorium by Federal or state
authorities or any suspension of payment by United States banks in which the
Fund invests, (d) material limitation affecting the Fund or the issuers of its
portfolio securities by Federal or state authorities on the extension of credit
by lending institutions or on the exchange of foreign currency, (e) commencement
of war, armed hostilities or other international or national calamity directly
or indirectly involving the United States, or (f) other event or condition which
would have a material adverse effect (including any adverse tax effect) on the
Fund or its shareholders if shares were repurchased. The Board of Trustees may
in the future modify these conditions in light of experience.
Conversion to an open-end company would require the approval of the
holders of at least two-thirds of the Fund's Common Shares and TAPS shares
outstanding at the time, voting together as a single class, and of the holders
of at least two- thirds of the Fund's TAPS shares outstanding at the time,
voting as a separate class; provided, however, that such separate class vote
shall be a majority vote if the action in question has previously been approved,
adopted or authorized by the affirmative vote of two-thirds of the total number
of Trustees fixed in accordance with the Declaration or By-laws. See the
Prospectus under "Certain Provisions in the Declaration of Trust" for a
discussion of voting requirements applicable to conversion of the Fund to an
open-end company. If the Fund converted to an open-end company, it would be
required to redeem all TAPS shares then outstanding and repay outstanding
borrowings including those made pursuant to the CP Program and Liquidity
Facility and the Fund's Common Shares would no longer be listed on the New York
Stock Exchange. Shareholders of an open-end investment company may require the
company to redeem their shares at any time (except in certain circumstances as
authorized by or under the 1940 Act) at their net asset value, less such
redemption charge, if any, as might be in effect at the time of redemption. In
order to avoid maintaining large cash positions or liquidating favorable
investments to meet redemptions, open-end companies typically engage in a
continuous offering of their shares. Open-end companies are thus subject to
periodic asset in-flows and out-flows that can complicate portfolio management.
The Board of Trustees may at any time propose conversion of the Fund to an
open-end company depending upon their judgment as to the advisability of such
action in light of circumstances then prevailing.
S-19
<PAGE> 78
The repurchase by the Fund of its shares at prices below net asset
value will result in an increase in the net asset value of those shares that
remain outstanding. However, there can be no assurance that share repurchases or
tenders at or below net asset value will result in the Fund's shares trading at
a price equal to their net asset value. Nevertheless, the fact that the Fund's
shares may be the subject of repurchase or tender offers at net asset value from
time to time, or that the Fund may be converted to an open-end company, may
reduce any spread between market price and net asset value that might otherwise
exist.
In addition, a purchase by the Fund of its Common Shares will decrease
the Fund's total assets, which would likely have the effect of increasing the
Fund's expense ratio. Any purchase by the Fund of its Common Shares at a time
when TAPS shares are outstanding will increase the leverage applicable to the
outstanding Common Shares then remaining.
Before deciding whether to take any action if the Common Shares trade
below net asset value, the Board would consider all relevant factors, including
the extent and duration of the discount, the liquidity of the Fund's portfolio,
the impact of any action that might be taken on the Fund or its shareholders and
market considerations. Based on these considerations, even if the Fund's shares
should trade at a discount, the Board of Trustees may determine that, in the
interest of the Fund and its shareholders, no action should be taken.
TAX MATTERS
The following is intended to be a general summary of certain federal
income tax consequences of investing in TAPS. It is not intended as a complete
discussion of all such tax consequences, nor does it purport to deal with all
categories of investors. Investors are therefore advised to consult with their
tax advisers before making an investment in the Fund.
FEDERAL INCOME TAX TREATMENT OF THE FUND
The Fund elected to be treated as a regulated investment company under
Subchapter M of the Code and intends to qualify under those provisions each
year. To qualify as a regulated investment company, the Fund must, among other
things, (a) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stock, securities or foreign currencies, or
other income derived with respect to its business of investing in stocks,
securities or currencies; and (b) diversify its holdings so that, at the end of
each quarter of its fiscal year, (i) at least 50% of the market value of the
Fund's assets is represented by cash, U.S. Government securities, securities of
other regulated investment companies and other securities, with such other
securities of any one issuer limited for the purposes of this calculation to an
amount not greater than 5% of the value of the Fund's total assets and 10% of
the outstanding voting securities of such issuer and (ii) not more than 25% of
the value of its total assets is invested in the securities of any one issuer
(other than U.S. Government securities or securities of other regulated
investment companies).
As a regulated investment company, in any fiscal year with respect to
which the Fund distributes at least 90% of its net investment income (i.e., the
Fund's investment company taxable income, as that term is defined in the Code,
without regard to the deduction for dividends paid), the Fund (but not its
shareholders) generally will be relieved of U.S. federal income taxes on its net
investment income and net capital gain (i.e., the Fund's net long-term capital
gain in excess of the sum of net short-term capital loss and capital loss
carryovers from prior years, if any) that it distributes to shareholders.
However, the Fund will be subject under current tax rates to a federal income
tax at a maximum effective rate of 35% on any undistributed net investment
income and net capital gain. Amounts not distributed on a timely basis in
accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax payable by the Fund. To avoid the tax, the Fund must
distribute, or be deemed to have distributed, during each calendar year an
amount equal to the sum of (1) at least 98% of its ordinary income for the
calendar year, (2) at least 98% of its capital gain net income for the
twelve-month period ending on October 31 of the calendar year, and (3) all
ordinary income and capital gain net income for previous years that were not
distributed during such years. For this purpose, any income or gain retained by
the Fund that is subject to corporate tax will be considered to have been
distributed by year-end. To prevent application of the excise tax, the Fund
intends to make its distributions in accordance with the
S-20
<PAGE> 79
calendar year distribution requirement. Compliance with the calendar year
distribution requirement may limit the extent to which the Fund will be able to
retain its net capital gain for investment.
If in any taxable year the Fund fails to qualify as a regulated
investment company under the Code, the Fund will be taxed in the same manner as
an ordinary corporation, and distributions to its shareholders will not be
deductible by the Fund in computing its taxable income. In addition, in the
event of failure to qualify, the Fund's distributions, to the extent derived
from the Fund's current or accumulated earnings and profits, will constitute
dividends (eligible for the corporate dividends-received deduction) which are
taxable to shareholders as ordinary income, even though those distributions
might otherwise (at least in part) have been treated in the shareholder's hands
as long-term capital gain. If the fund fails to qualify as a regulated
investment company for any year, it generally must pay out its earnings and
profits accumulated in that year, less an interest charge to the Treasury on
50% of such earnings and profits, before it can again qualify as a regulated
investment company.
If the Fund does not meet the asset coverage requirements of the 1940
Act, the Fund will be required to suspend distributions to the holders of the
Common Shares and/or the Preferred Shares until the asset coverage is restored.
See "Description of TAPS -- Dividends and Dividend Periods." Such a suspension
of distributions might prevent the Fund from distributing at least 90% of its
net investment income, as is required in order to qualify for taxation as a
regulated investment company, or cause the Fund to incur a tax liability or a
non-deductible 4% excise tax on its undistributed taxable income (including
gain), or both.
Upon any failure to meet the asset coverage requirements of the 1940
Act, the Fund intends to repurchase or redeem (to the extent permitted under the
1940 Act) TAPS in order to maintain or restore the requisite asset coverage and
avoid failure to remain qualified as a regulated investment company. The
determination to repurchase or redeem TAPS and the amounts to be repurchased or
redeemed, if any, will be made in the sole discretion of the Fund.
Use of the Fund's cash to repurchase or redeem TAPS may adversely
affect the Fund's ability to distribute annually at least 90% of its net
investment income, which distribution is required to qualify for taxation as a
regulated investment company. The Fund may also recognize income in connection
with funding repurchases or redemptions of TAPS, and such income would be taken
into account in determining whether or not the above-described distribution
requirements have been met. Depending on the size of the Fund's assets relative
to its outstanding senior securities, redemption of TAPS might restore asset
coverage. Payment of distributions after restoration of asset coverage could
requalify (or avoid a disqualification of) the Fund as a regulated investment
company, depending upon the facts and circumstances.
Investments of the Fund in securities issued at a discount (or treated
as if issued at a discount) or providing for deferred interest or payment of
Interest in kind are subject to special tax rules that will affect the amount,
timing and character of distributions to shareholders. For example, with respect
to certain securities issued or treated as if issued at a discount, the Fund
will be required to accrue as income each year a portion of the discount and to
distribute such income each year in order to satisfy the 90% distribution
requirement and the distribution requirements for avoiding income and excise
taxes. In order to generate sufficient cash to make distributions necessary to
satisfy the 90% distribution requirement and to avoid income and excise taxes,
the Fund may have to borrow money or dispose of securities that it would
otherwise have continued to hold.
The Fund's transactions in forward contracts and options and futures
contracts will be subject to special provisions of the Code that, among other
things, may affect the character of gain and loss realized by the Fund (i.e.,
may affect whether gain or loss is ordinary or capital), accelerate recognition
of income to the Fund, defer Fund losses, and affect the determination of
whether capital gain and loss is characterized as long-term or short-term
capital gain or loss. These rules could therefore affect the character, amount
and timing of distributions to shareholders. These provisions also may require
the Fund to mark-to-market certain types of the positions in its portfolio
(i.e., treat them as if they were closed out), which may cause the Fund to
recognize income without receiving cash with which to make distributions in
amounts necessary to satisfy the distribution requirements for avoiding income
and excise taxes. The Fund will monitor its transactions, will make the
appropriate tax elections, and will make the appropriate entries in its books
and records when it acquires any option, futures contract, forward contract, or
hedged investment in order to mitigate the effect of these rules and prevent
disqualification of the Fund as a regulated investment company and minimize the
imposition of income and excise taxes.
S-21
<PAGE> 80
If the Fund fails to qualify as a regulated investment company for any
year, it generally must pay out its earnings and profits accumulated in that
year, less an interest charge to the Treasury on 50% of such earnings and
profits, before it can again qualify as a regulated investment company.
FEDERAL INCOME TAX TREATMENT OF HOLDERS OF TAPS
Under present law and based in part on the advice of counsel (which
advice relies in part on the Fund's representation that there is no express or
implied agreement between or among a Broker-Dealer or any other party, and the
Fund or any owners of the TAPS, that the Broker-Dealer or any other party will
guarantee or otherwise arrange to ensure that an owner of TAPS will be able to
sell his or her shares), the Fund believes that the TAPS will constitute stock
of the Fund, and thus distributions with respect to the TAPS (other than
distributions in redemption of the TAPS subject to section 302(b) of the Code)
will constitute dividends to the extent of the Fund's current or accumulated
earnings and profits, as calculated for federal income tax purposes. The
following discussion assumes such treatment will apply.
The Fund's income will consist of net investment income and may also
consist of net capital gain. The character of the Fund's income will not affect
the amount of dividends to which the holders of the TAPS are entitled. Holders
of the TAPS are entitled to receive only the amount of dividends as determined
by periodic auctions. For federal income tax purposes, however, the Internal
Revenue Service currently requires that a regulated investment company that has
two or more classes of shares allocate to each such class proportionate amounts
of each type of its income (such as ordinary income and net capital gain) for
each tax year. Accordingly, the Fund intends to designate distributions made
with respect to the Common Shares and the TAPS as consisting of particular types
of income (net capital gain, dividend income and ordinary income), in accordance
with each class's proportionate share of the total dividends paid to both
classes. Thus, each dividend paid with respect to the TAPS during a year will be
designated as ordinary income dividends and, if the Fund designates any dividend
as a capital gain dividend, capital gains in proportion to the TAPS's
proportionate share of the total dividends paid on the TAPS during the year to
the total distributions paid on both the TAPS and the Common Shares during the
year. Each holder of the TAPS during the year will be notified of the allocation
within 60 days after the end of the year. The amount of the net capital gain
realized by the Fund may not be significant, and there is no assurance that any
such income will be realized by the Fund in any year. Distributions of the
Fund's net investment income are taxable to shareholders as ordinary income.
Distributions of the Fund's net capital gain, if any, are taxable to
shareholders at rates applicable to long-term capital gain, regardless of the
length of time the TAPS have been held by holders. Distributions in excess of
the Fund's earnings and profits will first reduce a shareholder's adjusted tax
basis in his or her shares of TAPS and, after the adjusted tax basis is reduced
to zero, will constitute capital gains to a holder of shares of TAPS who holds
his or her shares of TAPS as a capital asset.
Although the Fund is required to distribute annually at least 90% of
its net investment income, the Fund is not required to distribute net capital
gain to the shareholders. The Fund may retain and reinvest such gains and pay
federal income taxes on such gains (the "net undistributed capital gain").
However, it is unclear whether a portion of the net undistributed capital gain
would have to be allocated to the TAPS for federal income tax purposes. Until
and unless the Fund receives acceptable guidance from the Internal Revenue
Service as to the allocation of the net undistributed capital gain between the
Common Shares and the TAPS, the Fund intends to distribute its net capital gain
for any year during which it has shares of TAPS outstanding. Such distribution
will affect the tax character but not the amount of dividends to which holders
of shares of TAPS are entitled.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December with a record date in such
months, and paid in January of the following year, will be treated as having
been distributed by the Fund and received by the shareholders on December 31. In
addition, solely for the purpose of satisfying the 90% distribution requirement
and the distribution requirement for avoiding income taxes, certain
distributions made after the close of a taxable year of the Fund may be "spilled
back" and treated as paid during such taxable year. In such case, shareholders
will be treated as having received such dividends in the taxable year in which
the distribution was actually made. The Service has ruled privately that
dividends paid following the close of the taxable year that are treated for tax
purposes as derived from income from the prior year will be treated as dividends
"paid" in the prior year for purposes of determining the proportionate share of
a particular type of income for each class. Accordingly, the Fund intends to
treat any such dividends that are paid following the close of a taxable year as
"paid"
S-22
<PAGE> 81
in the prior year for purposes of determining a class's proportionate share of a
particular type of income. However, the private ruling is not binding on the
Internal Revenue Service, and there can be no assurance that the Internal
Revenue Service will respect such treatment.
Most of the Fund's net investment income is expected to be derived from
interest-bearing securities. Accordingly, dividends paid with respect to the
TAPS generally will not qualify for the dividend received deduction available to
corporate shareholders. However, from time to time, a portion of the Fund's net
investment income may be attributable to dividends on equity securities which
are eligible for the dividends received deduction under Section 243 of the Code.
Corporate shareholders who otherwise are eligible to claim the dividends
received deduction under Section 243 of the Code can deduct 70% of the portion
of the TAPS dividends representing the shareholder's portion of the Fund's
eligible dividend income. The Internal Revenue Service has ruled that corporate
shareholders of a regulated investment company must meet the 45-day holding
requirements of Section 246(c)(1)(A) of the Code with respect to the shares of
the regulated investment company to qualify for the dividends received
deduction. The Fund will inform holders of shares of TAPS of the source and tax
status of all distributions shortly after the close of each calendar year.
SALE OF SHARES
The sale of shares of TAPS will be a taxable transaction for federal
income tax purposes. Selling holders of shares of TAPS will generally recognize
gain or loss in an amount equal to the difference between their basis in the
TAPS and the amount received in exchange therefor. If such shares of TAPS are
held as a capital asset, the gain or loss will generally be a capital gain or
loss. Similarly, a redemption (including a redemption resulting from liquidation
of the Fund), if any, of shares of TAPS by the Fund generally will give rise to
capital gain or loss if the shareholder does not own (and is not regarded under
certain tax law rules of constructive ownership as owning) any Common Shares in
the Fund and provided that the redemption proceeds do not represent declared but
unpaid dividends. Any loss realized on a sale or exchange will be disallowed to
the extent the shares disposed of are replaced within a period of 61 days
beginning 30 days before and ending 30 days after the disposition of the shares.
In such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized upon a taxable disposition of shares of TAPS
held for six months or less will be treated as a long-term capital loss to the
extent of any distributions of net capital gain received with respect to such
shares.
BACKUP WITHHOLDING
The Fund may be required to withhold for U.S. federal income taxes 31%
of all taxable distributions payable to shareholders who fail to provide the
Fund with their correct taxpayer identification number or who fail to make
required certifications, or if the Fund or a shareholder has been notified by
the Internal Revenue Service that they are subject to backup withholding.
Individual shareholders who are Non-U.S. Persons (as defined below) and who
certify as to their status as Non-U.S. Persons, certain Corporate shareholders
and other shareholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's U.S. federal income tax liability
provided the appropriate information is provided to the Internal Revenue
Service.
A holder of TAPS that is not a "United States person" within the
meaning of the Code (a "Non-U.S. Person") generally will be subject to a
withholding tax of 30% (or lower applicable treaty rate) on dividends from the
Fund (other than dividends designated as capital gain distributions) that are
not "effectively connected with a United States trade or business carried on by
such holder of TAPS. Non-effectively connected capital gain dividends and gains
realized from the sales of TAPS will not be subject to United States federal
income tax in the case of a holder of TAPS that is (i) a Non-U.S. Person that is
a corporation or (ii) an individual Non-U.S. Person that is not present in the
United States for more than 182 days during the taxable year (assuming that
certain other conditions are met). Prospective investors that are Non-U.S.
Persons should consult their United States tax advisors concerning the tax
consequences to them of an investment in TAPS. Investors are advised to consult
their own tax advisors with respect to the application to their own
circumstances of the above-described general taxation rules and with respect to
the state, local or foreign tax consequences to them of an investment in TAPS.
CERTAIN OWNERS OF RECORD
As of May 18, 2000, no person was known by the Fund to own beneficially or to
hold of record 5% or more of the outstanding common shares of the Fund, except
as set forth below:
Prudential Securities 4,246,153 shares or 14.34%; AG Edwards 2,389,143 shares
or 8.07%; PaineWebber 4,435,648 shares or 14.98%; FiServ Securities 3,328,496
shares or 11.24% and Merrill Lynch 1,535,867 shares or 5.19%.
S-23
<PAGE> 82
EXPERTS
The Statement of Net Assets of the Fund as of October 14, 1999
appearing in this Statement of Additional Information, has been audited by KPMG,
303 East Wacker Drive, Chicago, Illinois 60601, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and is included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
S-24
<PAGE> 83
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholder
Nuveen Senior Income Fund:
We have audited the accompanying statement of net assets of Nuveen Senior Income
Fund (the "Fund"), as of October 14, 1999. This financial statement is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit of this financial statement provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of the Fund as of October 14,
1999, in conformity with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
October 14, 1999
<PAGE> 84
FINANCIAL STATEMENTS
Nuveen Senior Income Fund
Statements of Net Assets
October 14, 1999
Assets:
Cash .............................................................. $100,084
--------
Total assets .................................................... 100,084
--------
Net assets .......................................................... $100,084
========
Net Assets Represent:
Cumulative preferred shares, $25,000 liquidation value; unlimited
number of shares authorized, no shares outstanding .............. $ --
Common shares, $.01 par value; unlimited number of shares
authorized, 10,480 shares outstanding ........................... 105
Paid-in surplus ................................................... 99,979
--------
$100,084
========
Net asset value per Common share outstanding ($100,084
divided by 10,480 Common Shares outstanding) .................... $ 9.55
========
The Fund was organized as a Massachusetts business trust on August 13, 1999, and
has been inactive since that date except for matters relating to its
organization and registration as a closed-end management investment company
under the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended, and the sale of 10,480 Common Shares to Nuveen Senior Loan
Asset Management Inc., the Fund's investment adviser (the "Adviser"), a wholly
owned subsidiary of The John Nuveen Company. John Nuveen & Co. Incorporated,
also a wholly owned subsidiary of The John Nuveen Company, has agreed to pay all
organizational expenses (approximately $10,000) and all offering costs (other
than the sales load) that exceed $.01 per common shares.
The Fund is authorized by its Declaration of trust to issue an unlimited number
of preferred shares having a liquidation value of $25,000 per share in one or
more classes or series, with dividend, liquidation preference and other rights
as determined by the Fund's Board of Trustees, by action of the Board of
Trustees without the approval of the Common Shareholders.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
Actual results may differ from those estimates.
<PAGE> 85
Portfolio of Investments
NUVEEN SENIOR INCOME FUND (NSL)
January 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Ratings*
Principal ----------------- Stated Market
Amount (000) Description Moody's S&P Maturity** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VARIABLE RATE SENIOR LOAN INTERESTS*** - 124.8%
Aerospace/Defense - 5.2%
$ 14,961 Fairchild Corp., Term Loan B Ba3 BB- 04/03/06 $14,680,522
- -----------------------------------------------------------------------------------------------------------------------------------
Automotive - 3.5%
9,967 MetalForming Technologies, Inc., Term Loan B NR NR 06/30/06 9,891,917
- -----------------------------------------------------------------------------------------------------------------------------------
Beverage, Food & Tobacco - 6.8%
9,476 American Bottling Company, Inc., Term Loan B NR NR 10/07/07 9,505,863
6,179 Eagle Family Foods Inc., Term Loan B1 B 12/31/05 5,972,619
1,145 Triarc Consumer Products Group, LLP, Term Loan B B1 B+ 03/01/06 1,152,034
2,795 Triarc Consumer Products Group, LLP, Term Loan C B1 B+ 03/01/07 2,810,963
- -----------------------------------------------------------------------------------------------------------------------------------
19,441,479
- -----------------------------------------------------------------------------------------------------------------------------------
Chemicals, Plastics & Rubber - 8.8%
7,500 Huntsman ICI Chemicals LLC, Term Loan B Ba3 BB 06/30/07 7,550,000
7,500 Huntsman ICI Chemicals LLC, Term Loan C Ba3 BB 06/30/08 7,550,000
9,975 Lyondell Chemical Co., Term Loan E Ba3 NR 03/31/06 10,220,090
- -----------------------------------------------------------------------------------------------------------------------------------
25,320,090
- -----------------------------------------------------------------------------------------------------------------------------------
Containers, Packaging & Glass - 1.7%
2,639 Graham Packaging Co., Term Loan B B1 B+ 01/31/06 2,641,629
2,187 Graham Packaging Co., Term Loan C B1 B+ 01/31/07 2,188,778
- -----------------------------------------------------------------------------------------------------------------------------------
4,830,407
- -----------------------------------------------------------------------------------------------------------------------------------
Diversified Manufacturing - 2.4%
6,965 Western Industries Holding Inc., Term Loan B NR NR 06/23/06 6,951,941
- -----------------------------------------------------------------------------------------------------------------------------------
Ecological - 3.8%
4,545 Allied Waste North America, Inc., Term Loan B Ba3 BB 07/21/06 4,406,250
5,455 Allied Waste North America, Inc., Term Loan C Ba3 BB 07/21/07 5,287,500
1,000 Stericycle Inc., Term Loan B B1 BB- 11/10/06 1,003,438
- -----------------------------------------------------------------------------------------------------------------------------------
10,697,188
- -----------------------------------------------------------------------------------------------------------------------------------
Electronic Services - 6.6%
4,815 Semiconductor Components Industries, LLC, Term Loan B NR BB- 08/04/06 4,865,972
5,185 Semiconductor Components Industries, LLC, Term Loan C NR BB- 08/04/07 5,240,278
8,771 Via Systems, Inc., Term Loan B1 B+ 03/31/04 8,536,954
- -----------------------------------------------------------------------------------------------------------------------------------
18,643,204
- -----------------------------------------------------------------------------------------------------------------------------------
Farming & Agricultural - 1.8%
2,496 Scotts Company, Term Loan B Ba3 BB 06/30/06 2,512,676
2,495 Scotts Company, Term Loan C Ba3 BB 06/30/07 2,511,921
- -----------------------------------------------------------------------------------------------------------------------------------
5,024,597
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 86
Portfolio of Investments (continued)
NUVEEN SENIOR INCOME FUND (NSL)
January 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Ratings*
Principal ----------------- Stated Market
Amount (000) Description Moody's S&P Maturity** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Finance - 7.2%
$ 4,975 Bridge Information Systems, Inc., Term Loan B NR NR 07/07/05 $ 4,688,938
4,987 Bridge Information Systems, Inc., Term Loan B NR NR 07/07/05 4,700,689
4,987 Bridge Information Systems, Inc., Term Loan B NR NR 03/05/06 4,700,689
6,500 Sovereign Bancorp, Inc., Term Loan B Ba2 NR 11/14/03 6,524,375
- -----------------------------------------------------------------------------------------------------------------------------------
20,614,691
- -----------------------------------------------------------------------------------------------------------------------------------
Healthcare - 6.8%
5,000 Lifepoint Hospitals Holdings, Inc., Term Loan B B1 B+ 11/11/05 4,978,125
7,437 Quest Diagnostics, Inc., Term Loan B Ba3 BB 08/16/06 7,476,719
6,865 Quest Diagnostics, Inc., Term Loan C Ba3 BB 08/16/07 6,901,587
- -----------------------------------------------------------------------------------------------------------------------------------
19,356,431
- -----------------------------------------------------------------------------------------------------------------------------------
Home & Office Furnishings/Housewares - 3.3%
10,000 World Kitchen Inc., Term Loan C B1 BB- 04/09/07 9,500,000
- -----------------------------------------------------------------------------------------------------------------------------------
Hotels, Motels, Inns & Gaming - 3.4%
10,000 Wyndham International, Inc., Term Loan B NR NR 06/30/06 9,741,667
- -----------------------------------------------------------------------------------------------------------------------------------
Insurance - 3.5%
5,000 GAB Robins North America, Inc., Term Loan B NR NR 12/01/05 4,981,250
4,950 USI Holdings Corp., Term Loan NR B+ 09/17/04 4,931,438
- -----------------------------------------------------------------------------------------------------------------------------------
9,912,688
- -----------------------------------------------------------------------------------------------------------------------------------
Leisure & Entertainment - 6.7%
4,000 Bally Total Fitness Holding Corp., Term Loan B1 B+ 11/10/04 3,994,167
3,447 Fitness Holdings Worldwide, Inc., Term Loan B NR B+ 11/02/06 3,448,756
6,553 Fitness Holdings Worldwide, Inc., Term Loan C NR B+ 11/02/07 6,557,494
5,000 Six Flags Theme Parks Inc., Term Loan B Ba3 B+ 09/30/05 5,017,188
- -----------------------------------------------------------------------------------------------------------------------------------
19,017,605
- -----------------------------------------------------------------------------------------------------------------------------------
Mining, Steel, Iron & Non-Precious Metals - 1.3%
3,580 ASARCO Inc., Term Loan B1 BB 06/21/01 3,573,459
- -----------------------------------------------------------------------------------------------------------------------------------
Non-Durable Consumer Products - 3.5%
5,283 Norwood Promotional Products, Inc., Term Loan B NR NR 05/31/06 5,302,899
4,706 Norwood Promotional Products, Inc., Term Loan C NR NR 11/30/06 4,723,530
- -----------------------------------------------------------------------------------------------------------------------------------
10,026,429
- -----------------------------------------------------------------------------------------------------------------------------------
Personal & Miscellaneous Services - 1.5%
4,300 Weight Watchers International, Inc.,
Transferable Loan Certificate Ba2 B+ 09/30/06 4,308,063
- -----------------------------------------------------------------------------------------------------------------------------------
Printing & Publishing - 3.0%
7,000 American Media Operations, Inc., Term Loan B-1 Ba3 B+ 04/01/07 7,018,958
1,496 Merrill Corp., Term Loan B B1 BB- 11/23/07 1,504,199
- -----------------------------------------------------------------------------------------------------------------------------------
8,523,157
- -----------------------------------------------------------------------------------------------------------------------------------
Restaurants & Food Service - 3.5%
4,975 Domino's Inc., Term Loan B B1 B+ 12/21/06 4,999,689
4,980 Domino's Inc., Term Loan C B1 B+ 12/21/07 5,004,900
- -----------------------------------------------------------------------------------------------------------------------------------
10,004,589
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
Ratings*
Principal ----------------- Stated Market
Amount (000) Description Moody's S&P Maturity** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Retail/Catalog - 1.8%
$ 5,000 Micro Warehouse, Inc., Term Loan B B1 BB- 01/31/07 $ 4,981,250
- -----------------------------------------------------------------------------------------------------------------------------------
Retail/Stores - 3.5%
5,920 HMV Media Group PLC, Term Loan C B1 BB- 03/28/06 5,838,600
4,080 HMV Media Group PLC, Term Loan D B1 BB- 08/28/06 4,023,900
- -----------------------------------------------------------------------------------------------------------------------------------
9,862,500
- -----------------------------------------------------------------------------------------------------------------------------------
Telecommunications/Cellular/PCS - 12.0%
2,108 American Cellular Corp., Term Loan B B2 NR 06/25/07 2,108,129
2,108 American Cellular Corp., Term Loan C B2 NR 12/25/07 2,108,129
10,000 BCP Telecomunicacoes, Term Loan A NR NR 03/31/00 10,025,000
10,000 Centennial Cellular Operating Co. LLC, Term Loan A B1 B+ 11/30/06 10,020,833
5,000 Omnipoint Communications Inc., Term Loan A B2 NR 03/31/08 4,996,875
4,992 Omnipoint Communications Inc., Term Loan C B2 NR 02/17/06 5,013,046
- -----------------------------------------------------------------------------------------------------------------------------------
34,272,012
- -----------------------------------------------------------------------------------------------------------------------------------
Telecommunications/CLEC - 7.1%
10,000 Level 3 Communications, LLC, Term Loan B B1 B+ 01/15/08 10,064,583
5,000 RCN Corp., Term Loan B B1 B+ 06/03/06 5,030,208
5,000 Teligent Inc., Term Loan B3 B- 06/30/06 4,965,625
- -----------------------------------------------------------------------------------------------------------------------------------
20,060,416
- -----------------------------------------------------------------------------------------------------------------------------------
Telecommunications/Hybrid - 1.8%
5,000 Nextel Partners Operating Co., Term Loan B B2 B- 01/29/08 5,065,625
- -----------------------------------------------------------------------------------------------------------------------------------
Telecommunications/Satellite - 1.7%
5,000 Satelites Mexicanos, S.A. de C.V., Bond B1 B+ 06/30/04 4,700,000
- -----------------------------------------------------------------------------------------------------------------------------------
Telecommunications/Wireless Messaging - 2.7%
8,106 Arch Paging, Inc., Term Loan C B2 B 06/30/06 7,558,495
- -----------------------------------------------------------------------------------------------------------------------------------
Textiles & Leather - 3.5%
9,875 Norcross Safety Products LLC, Term Loan NR NR 09/30/05 9,800,938
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation/Cargo - 3.2%
9,000 North American Van Lines, Inc., Term Loan B B1 B+ 11/18/07 8,983,125
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation/Personal - 1.8%
2,500 Avis Rent A Car, Inc., Term Loan B Ba3 BB+ 06/30/06 2,516,667
2,500 Avis Rent A Car, Inc., Term Loan C Ba3 BB+ 06/30/07 2,516,667
- -----------------------------------------------------------------------------------------------------------------------------------
5,033,334
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation/Rail Manufacturing - 1.4%
4,000 Kansas City Southern Railway Co., Term Loan B Ba1 BBB 12/29/06 4,027,499
- -----------------------------------------------------------------------------------------------------------------------------------
Total Variable Rate Senior Loan Interests (cost $355,162,158) 354,405,318
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 88
Portfolio of Investments (continued)
NUVEEN SENIOR INCOME FUND (NSL)
January 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Principal Stated Market
Amount (000) Description Maturity** Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS - 19.7%
Commercial Paper:
$ 9,995 Cargill Inc. 02/04/00 $ 9,995,458
6,070 Centex Corp. 02/01/00 6,070,000
9,997 Central & South West Corp. 02/03/00 9,996,806
10,000 Maytag Corp. 02/01/00 10,000,000
9,997 Nabisco, Inc. 02/03/00 9,996,844
10,000 Texas Utilities Co. 02/01/00 10,000,000
- ------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $56,059,108) 56,059,108
- ------------------------------------------------------------------------------------------------------
Total Investments (cost $411,221,266) - 144.5% 410,464,426
- ------------------------------------------------------------------------------------------------------
Bank Borrowings Payable - (44.7)%+ (127,000,000)
- ------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -0.2% 602,261
- ------------------------------------------------------------------------------------------------------
Net Assets - 100% $284,066,687
======================================================================================================
</TABLE>
NR Not rated.
* Bank loans rated below Baa by Moody's Investor Service, Inc. or BBB by
Standard & Poor's Group are considered to be below investment grade.
** Senior Loans in the Fund's portfolio generally are subject to mandatory
and/or optional prepayment. Because of these mandatory prepayment
conditions and because there may be significant economic incentives for a
Borrower to prepay, prepayments of Senior Loans in the Fund's portfolio may
occur. As a result, the actual remaining maturity of Senior Loans held in
the Fund's portfolio may be substantially less than the stated maturities
shown. The Fund estimates that the actual average maturity of the Senior
Loans held in its portfolio will be approximately 18-24 months.
*** Senior Loans in which the Fund invests generally pay interest at rates
which are periodically redetermined by reference to a base lending rate
plus a premium. These base lending rates are generally (i) the prime rate
offered by one or more major United States banks, (ii) the lending rate
offered by one or more major European banks, such as the London Inter-Bank
Offered Rate ("LIBOR") and (iii) the certificate of deposit rate. Senior
loans are generally considered to be restricted in that the Fund ordinarily
is contractually obligated to receive approval from the Agent Bank and/or
borrower prior to the disposition of a Senior Loan.
+ Bank borrowings payable based on total assets equals (30.7)%.
See accompanying notes to financial statements.
<PAGE> 89
STATEMENT OF NET ASSETS
January 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at market value (cost $411,221,266) $410,464,426
Cash 587,451
Interest receivable 3,123,236
Other assets 176,537
- -----------------------------------------------------------------------------
Total assets 414,351,650
- -----------------------------------------------------------------------------
LIABILITIES
Bank borrowings payable 127,000,000
Accrued expenses:
Management fees 119,111
Other 915,445
Common share dividends payable 2,250,407
- -----------------------------------------------------------------------------
Total liabilities 130,284,963
- -----------------------------------------------------------------------------
Net assets $284,066,687
=============================================================================
Common shares outstanding 29,610,617
=============================================================================
Net asset value per Common share outstanding (net assets
divided by Common shares outstanding) $ 9.59
=============================================================================
<CAPTION>
STATEMENT OF OPERATIONS
For the Period October 29, 1999 (commencement of operations) through
January 31, 2000 (Unaudited)
- -----------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest $7,732,135
Fees 48,109
- -----------------------------------------------------------------------------
Total investment income 7,780,244
- -----------------------------------------------------------------------------
EXPENSES
Management fees 662,026
Interest expense 524,305
Custodian's fees and expenses 94,169
Shareholders' servicing agent fees and expenses 68,082
Professional fees 41,378
Shareholders' reports - printing and mailing expenses 6,296
Trustees' fees and expenses 5,218
Other expenses 41,970
- -----------------------------------------------------------------------------
Total expenses before expense reimbursement 1,443,444
Expense reimbursement (350,484)
- -----------------------------------------------------------------------------
Net expenses 1,092,960
- -----------------------------------------------------------------------------
Net investment income 6,687,284
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain from investment transactions 151,759
Change in net unrealized appreciation (depreciation) of
investments (756,840)
- -----------------------------------------------------------------------------
Net gain (loss) from investments (605,081)
- -----------------------------------------------------------------------------
Net increase in net assets from operations $6,082,203
=============================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 90
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Period October 29, 1999 (commencement of operations)
through January 31, 2000 (Unaudited)
- ------------------------------------------------------------------------------
<S> <C>
OPERATIONS
Net investment income $6,687,284
Net realized gain from investment transactions 151,759
Net change in unrealized appreciation (depreciation)
of investments (756,840)
- ------------------------------------------------------------------------------
Net increase in net assets from operations 6,082,203
- ------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From undistributed net investment income (4,500,803)
From accumulated net realized gains from investment
transactions --
- ------------------------------------------------------------------------------
Decrease in net assets from distributions to Common shareholders (4,500,803)
- ------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from sale of Common shares 282,383,896
Net proceeds from Common shares issued to shareholders due to
reinvestment of distributions 1,307
- ------------------------------------------------------------------------------
Net increase in net assets 283,966,603
Net assets at the beginning of period 100,084
- ------------------------------------------------------------------------------
Net assets at the end of period $284,066,687
==============================================================================
Balance of undistributed net investment income at the
end of period $ 2,186,481
==============================================================================
<CAPTION>
STATEMENT OF CASH FLOWS
For the Period October 29, 1999 (commencement of operations)
through January 31, 2000 (Unaudited)
- ------------------------------------------------------------------------------
<S> <C>
CHANGE IN NET ASSETS FROM OPERATIONS $ 6,082,203
- ------------------------------------------------------------------------------
Adjustments to Reconcile the Change in Net Assets from
Operations to Net Cash used for Operating Activities:
Increase in investments at value (410,464,426)
Increase in interest receivable (3,123,236)
Increase in other assets (176,537)
Increase in management fees 119,111
Increase in other liabilities 915,445
Increase in Common shares dividends payable 2,250,407
- ------------------------------------------------------------------------------
Total adjustments (410,479,236)
- ------------------------------------------------------------------------------
NET CASH USED FOR OPERATING ACTIVITIES (404,397,033)
- ------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank borrowings 127,000,000
Proceeds from shares sold 282,383,896
Proceeds from shares reinvested 1,307
Distributions to shareholders (4,500,803)
- ------------------------------------------------------------------------------
Net cash provided by financing activities 404,884,400
- ------------------------------------------------------------------------------
NET INCREASE IN CASH 487,367
Cash at the beginning of period 100,084
- ------------------------------------------------------------------------------
CASH AT THE END OF PERIOD $ 587,451
==============================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 91
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Nuveen Senior Income Fund (the "Fund") is a non-diversified, closed-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund is listed on the New York Stock Exchange and trades
under the ticker symbol "NSL". The Fund was organized as a Massachusetts
business Trust on August 13, 1999. The Fund commenced operations on October 29,
1999.
The Fund seeks to provide a high level of current income, consistent with
preservation of capital by investing primarily in senior secured loans whose
interest rates float or adjust periodically based on a benchmark interest rate
index. The Fund seeks to increase the income available for distribution to
Common shareholders by utilizing financial leverage.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Investment Valuation
The prices of senior loans in the Fund's investment portfolio are provided by
pricing services approved by the Fund's Board of Trustees. The pricing service
providers typically value senior loans at the mean of the highest bona fide bid
and lowest bona fide ask prices when current quotations are readily available.
Senior loans for which current quotations are not readily available are valued
at a fair value using a wide range of market data and other information and
analysis, including credit considerations considered relevant by such pricing
service providers to determine valuations. Short-term investments which mature
within 60 days are valued at amortized cost, which approximates market value.
Investment Transactions
Investment transactions are recorded on a trade date basis.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts when required for federal
income tax purposes. Facilities fees on senior loans purchased are treated as
market discounts. Market premiums and discounts are amortized over the expected
life of each respective borrowing.
Income Taxes
The Fund intends to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its net
investment income, in addition to any significant amounts of net realized
capital gains from investment transactions. The Fund currently considers
significant net realized capital gains as amounts in excess of $.01 per share.
Net realized capital gain distributions are subject to federal taxation.
Dividends and Distributions to Shareholders
The Fund intends to declare and pay monthly distributions to Common
shareholders. Generally payment is made or reinvestment is credited to
shareholder accounts on the first business day after month-end. Net realized
capital gains from investment transactions, if any, are distributed to
shareholders not less frequently than annually. Furthermore, capital gains are
distributed only to the extent they exceed available capital loss carryforwards.
Distributions to shareholders of net investment income, and net realized capital
gains are recorded on the ex-dividend date. The amount and timing of
distributions are determined in accordance with federal income tax regulations,
which may differ from generally accepted accounting principles. Accordingly,
temporary over-distributions as a result of these differences may occur and will
be classified as either distributions in excess of net investment income and/or
distributions in excess of net realized gains from investment transactions,
where applicable.
<PAGE> 92
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the period October 29, 1999 (commencement of
operations)through January 31, 2000.
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on the Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
2. FUND SHARES
During the period October 29, 1999 (commencement of operations)through January
31, 2000, 29,600,000 shares were sold and 137 shares were issued to shareholders
due to reinvestment of distributions.
3. DISTRIBUTIONS TO SHAREHOLDERS
The Fund declared a dividend distribution of $.0785 per share from its net
investment income which was paid on March 1, 2000, to shareholders of record on
February 15, 2000.
4. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term investments) during
period October 29, 1999 (commencement of operations)through January 31, 2000,
aggregated $395,103,671 and $40,339,803, respectively.
At January 31, 2000, the identified cost of investments owned for federal income
tax purposes was $411,221,266.
5. UNREALIZED APPRECIATION (DEPRECIATION)
At January 31, 2000, net unrealized depreciation of investments for federal
income tax purposes aggregated $756,840 of which $1,568,082 related to
appreciated securities and $2,324,922 related to depreciated securities.
6. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Fund's investment management agreement with Nuveen Senior Loan Asset
Management Inc. (the "Adviser"), a wholly owned subsidiary of The John Nuveen
Company, the Fund pays an annual management fee, payable monthly, of .8500 of
1%, reduced on managed assets of $1 billion or more, which is based upon the
average daily managed assets of the Fund. "Managed assets" shall mean the
average daily gross asset value of the Fund, minus the sum of the Fund's accrued
and unpaid dividends on any outstanding Preferred Shares and accrued liabilities
(other than the principal amount of any borrowings incurred, commercial paper or
notes issued by the Fund and the liquidation preference of any outstanding
Preferred Shares).
The Adviser has agreed to waive part of its management fees or reimburse certain
expenses of the Fund in an amount equal to .45% of the average daily managed
assets for the period October 29, 1999 (commencement of operations) through
October 31, 2004, .35% of the average daily managed assets for the year ended
October 31, 2005, .25% of the average daily managed assets for the year ended
October 31, 2006, .15% of the average daily managed assets for the year ended
October 31, 2007, .10% of the average daily managed assets for the year ended
October 31, 2008, and .05% of the average daily managed assets for the year
ended October 31, 2009. The Adviser has not agreed to reimburse the Fund for any
portion of its fees and expenses beyond October 31, 2009.
The fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Fund pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to their officers, all of whom receive remuneration for their
services to the Fund from the Adviser.
<PAGE> 93
7. COMPOSITION OF NET ASSETS
At January 31, 2000, net assets consisted of:
- -------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 296,106
Paid-in surplus 282,189,181
Balance of undistributed net investment income 2,186,481
Accumulated net realized gain from investment transactions 151,759
Net unrealized appreciation (depreciation) of investments (756,840)
- -------------------------------------------------------------------------------
Net assets $284,066,687
===============================================================================
Authorized shares:
Common Unlimited
Preferred Unlimited
===============================================================================
8. COMMITMENTS
Pursuant to the terms of certain of the Variable Rate Senior Loan agreements,
the Fund may have unfunded loan commitments. There were no such unfunded loan
commitments as of January 31, 2000. The Fund generally will maintain with its
custodian short-term investments and/or cash having an aggregate value at least
equal to the amount of unfunded loan commitments.
9. SENIOR LOAN PARTICIPATION COMMITMENTS
The Fund invests primarily in assignments, participations or acts as a party to
the primary lending syndicate of a Variable Rate Senior Loan interest to United
States and foreign corporations, partnerships, and other entities. If the Fund
purchases a participation of a Senior Loan Interest, the Fund would typically
enter into a contractual agreement with the lender or other third party selling
the participation, but not with the borrower directly. As such, the Fund assumes
the credit risk of the Borrower, Selling Participant or other persons
interpositioned between the Fund and the Borrower. There were no such
participation commitments as of January 31, 2000.
10. BORROWINGS
In accordance with its investment policies, the Fund may borrow money from banks
for investment purposes in an amount up to 331/3% of the Fund's total assets
immediately after such borrowing or issuance.
The Trust has entered into a $150,000,000 revolving credit agreement with
Deutsche Bank AG which expires December 19, 2000. The Trust paid $200,000 in
fees in connection with obtaining the agreement. These Prepaid fees are being
amortized into expense over the term of the agreement. Interest is charged at a
rate of either the Fed Funds rate plus .50%, LIBOR plus .50% or the Prime Rate.
An unused commitment fee of .125% is charged on the unused portion of the
facility.
The average daily balance of bank borrowings for the period October 29, 1999
(commencement of operations) through January 31, 2000, was approximately
$29,958,000 with an average interest rate of 6.72%.
<PAGE> 94
FINANCIAL HIGHLIGHTS
(Unaudited)
Selected data for a share outstanding throughout the period October 29, 1999
(commencement of operations) through January 31, 2000:
<TABLE>
<CAPTION>
Investment Operations Less Distributions
--------------------------------- ------------------------------
Net
Realized/
Beginning Net Unrealized Net
Net Asset Investment Investment Investment Capital
Value Income Gain (Loss) Total Income Gains Total
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended 7/31:
2000 (a) $9.55 $.23 $(.03) $.20 $(.15) $-- $(.15)
<CAPTION>
Total Returns
------------------------------
Organization
and Ending Ending Based on
Offering Net Asset Market Based on Net Asset
Costs Value Value Market Value+ Value+
<S> <C> <C> <C> <C> <C>
Year Ended 7/31:
2000 (a) $(.01) $9.59 $9.5625 (2.85)% 2.02%
<CAPTION>
Ratios/Supplemental Data
------------------------------------------------------------------------------------------
Before Reimbursement After Reimbursement**
---------------------------- ----------------------------------
Ratio of Ratio of Net Ratio of Ratio of Net
Operating Investment Operating Investment
Ending Expenses to Income to Expenses to Income to Portfolio
Net Assets Average Average Average Average Turnover
(000) Net Assets++ Net Assets++ Net Assets++ Net Assets++ Rate
<S> <C> <C> <C> <C> <C> <C>
Year Ended 7/31:
2000 (a) $284,067 2.03%* 8.92%* 1.54%* 9.41%* 14%
</TABLE>
* Annualized.
** After expense reimbursement, where applicable.
+ Total Return on Market Value is the combination of reinvested dividend
income, reinvested capital gain distributions, if any, and changes in stock
price per share. Total Return on Net Asset Value is the combination of
reinvested dividend income, reinvested capital gain distributions, if any,
and changes in net asset value per share. Total returns are not annualized.
++ Each Ratio of Operating Expenses to Average Net Assets and each Ratio of
Net Investment Income to Average Net Assets includes the effect of the
interest expense paid on bank borrowings of .74%.
(a) For the period October 29, 1999 (commencement of operations) through
January 31, 2000.
<PAGE> 95
NUVEEN SENIOR INCOME FUND
STATEMENT ESTABLISHING AND FIXING THE RIGHTS AND
PREFERENCES OF TAXABLE AUCTIONED PREFERRED SHARES (the "Statement")
Nuveen Senior Income Fund, a Massachusetts business trust (the
"Trust"), certifies that:
FIRST: Pursuant to the authority expressly vested in the Board of the
Fund by Articles IV and VI of Fund's Declaration of Trust (which, as hereafter
restated or amended from time to time, are together with this Statement herein
called the "Declaration"), the Board of Trustees has, by resolution, authorized
the issuance of 1,840 Preferred Shares, $.01 par value, liquidation preference
of $25,000 per share, classified as Series TH Taxable Auctioned Preferred Shares
("TAPS").
SECOND: The preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of the shares of such series of TAPS are as follows:
DESIGNATION
Series TH: A series of 1,840 Preferred Shares, liquidation preference
$25,000 per share, is hereby designated "Series TH Taxable Auctioned Preferred
Shares" ("TAPS Series TH"). Each share of TAPS Series TH shall have an
Applicable Rate for its initial Dividend Period equal to [_____]% per annum and
an initial Dividend Payment Date of __________, 2000; and each share of TAPS
Series TH shall have such other preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption, in addition to those required by applicable law or set
forth in the Declaration applicable to preferred shares of the Fund, as are set
forth in Part I and Part II of this Statement. The TAPS Series TH shall
constitute a separate series of Preferred Shares of the Fund.
Subject to the provisions of Section 12(b) of Part I hereof, the Board
of Trustees of the Fund may, in the future, classify additional authorized
shares of the Fund's Preferred Shares as TAPS Series TH, with the same
preferences, rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption and other terms of the
respective series herein described, except that the Applicable Rate for its
initial Dividend Period, its initial Dividend Payment Date and any other
changes in the terms herein set forth shall be as set forth in an amendment to
this Statement.
As used in Part I and Part II of this Statement, capitalized terms
shall have the meanings provided in Section 18 of Part I.
PART I: TAPS TERMS
1. Number of Shares; Ranking.
(a) The initial number of authorized shares constituting TAPS
Series TH is 1,840 shares. No fractional shares of TAPS Series TH shall be
issued.
(b) Any shares of TAPS Series TH which at any time have been
redeemed or purchased by the Fund shall, after such redemption or purchase, have
the status of authorized but unissued shares of Preferred Shares.
(c) The shares of TAPS Series TH shall rank on a parity with
shares of any other series of Preferred Shares (including any other shares of
TAPS) as to the payment of dividends to which such shares are entitled and the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Fund.
A-1
<PAGE> 96
(d) No holder of shares of TAPS Series TH shall have, solely
by reason of being such a holder, any preemptive or other right to acquire,
purchase or subscribe for any shares of TAPS Series TH, shares of Common Shares
of the Fund or other securities of the Fund which it may hereafter issue or
sell.
2. Dividends.
(a) The Holders of shares of TAPS Series TH shall be entitled
to receive, when, as and if declared by the Board of Trustees, out of funds
legally available therefor, cumulative cash dividends on their shares at the
Applicable Rate, determined as set forth in paragraph (c) of this Section 2, and
no more, payable on the respective dates determined as set forth in paragraph
(b) of this Section 2. Dividends on the Outstanding shares of TAPS Series TH
issued on the Date of Original Issue shall accumulate from the Date of Original
Issue.
(b) (i) Dividends shall be payable when, as and if declared by
the Board of Trustees following the initial Dividend Payment Date, subject
to subparagraph (b)(ii) of this Section 2, on the shares of TAPS Series TH,
with respect to any Dividend Period greater than 30 days on a monthly basis
on the first day of each month within such Dividend Period and on the
Business Day following the last day of such Dividend Period.
(ii) If a day for payment of dividends resulting from the
application of subparagraph (b)(i) above is not a Business Day, then the
Dividend Payment Date shall be the day next succeeding such day, or if the
day next succeeding such day for payment of dividends is not a Business
Day, then the Dividend Payment Date shall be the first Business Day prior
to such day for payment of dividends that is next succeeded by a Business
Day; provided, however, that if the Securities Depository pays dividends in
same-day funds, and such day for payment is not a Business Day, the
Dividend Payment Date shall be the first Business Day following such day
for payment of dividends.
(iii) The Fund shall pay to the Paying Agent not later than
3:00 p.m., New York City time, on the Business Day next preceding each
Dividend Payment Date for the shares of TAPS Series TH, an aggregate amount
of funds available on the next Business Day in the City of New York, New
York, equal to the dividends to be paid to all Holders of such shares on
such Dividend Payment Date. The Fund shall not be required to establish any
reserves for the payment of dividends.
(iv) All moneys paid to the Paying Agent for the payment of
dividends shall be held in trust for the payment of such dividends by the
Paying Agent for the benefit of the Holders specified in subparagraph
(b)(v) of this Section 2. Any moneys paid to the Paying Agent in accordance
with the foregoing but not applied by the Paying Agent to the payment of
dividends, including interest earned on such moneys, will, to the extent
permitted by law, be repaid to the Fund at the end of 90 days from the date
on which such moneys were to have been so applied.
(v) Each dividend on TAPS Series TH shall be paid on the
Dividend Payment Date therefor to the Holders of that series as their names
appear on the share ledger or share records of the Fund on the Business Day
next preceding such Dividend Payment Date. Dividends in arrears for any
past Dividend Period may be declared and paid at any time, without
reference to any regular Dividend Payment Date, to the Holders as their
names appear on the share ledger or share records of the Fund on such date,
not exceeding 15 days preceding the payment date thereof, as may be fixed
by the Board of Trustees. No interest will be payable in respect of any
dividend payment or payments which may be in arrears.
(c) (i) The dividend rate on Outstanding shares of TAPS Series
TH during the period from and after the Date of Original Issue to and
including the last day of the initial Dividend Period therefor
shall be equal to the rate per annum set forth under "Designation" above.
For each subsequent Dividend Period with respect to the shares of TAPS
Series TH Outstanding thereafter, the dividend rate shall be equal to the
rate per annum that results from an Auction for Outstanding shares of TAPS
Series TH on the respective Auction Date therefor next preceding such
subsequent Dividend Period; provided, however, that if an Auction for any
subsequent Dividend Period of TAPS Series TH is not held for any reason or
if Sufficient Clearing Orders have
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not been made in an Auction (other than as a result of all shares of TAPS
Series TH being the subject of Submitted Hold Orders), then the dividend
rate on the shares of TAPS Series TH for any such Dividend Period shall be
the Maximum Rate for such shares on the Auction Date for such Dividend
Period (except (i) during a Default Period when the dividend rate shall be
the Default Rate, as set forth in Section 2(c)(ii) below) or (ii) after a
Default Period and prior to the beginning of the next Dividend Period when
the dividend rate shall be the Maximum Rate at the close of business on the
last of such Default Period). The all Hold Rate will apply automatically
following an Auction in which all of the Outstanding shares of TAPS Series
TH are subject (or are deemed to be subject) to Hold Orders. The rate per
annum at which dividends are payable on shares of TAPS Series TH as
determined pursuant to this Section 2(c)(i) shall be the "Applicable Rate."
(ii) A "Default Period" will commence on the applicable date
set forth below if the Fund fails to (A) declare prior to the close of
business on the second Business Day preceding any Dividend Payment Date,
for payment on or (to the extent permitted as described below) within two
Business Days after such Dividend Payment Date to the persons who held
shares as of 12:00 noon, New York City time, on the Business Day preceding
such Dividend Payment Date, the full amount of any dividend payable on such
Dividend Payment Date, (B) deposit, irrevocably in trust, in same-day
funds, with the Paying Agent by 12:00 noon, New York City time, (I) on or
(to the extent permitted as described below) within two Business Days after
any Dividend Payment Date the full amount of any declared dividend on TAPS
Series TH payable on such Dividend Payment Date (together with the failure
to timely declare dividends described in (A) above, hereinafter referred to
as a "Dividend Default") or (II) on or (to the extent permitted as
described below) within two Business Days after any date fixed for
redemption of shares of TAPS Series TH called for redemption, the
applicable redemption price (a "Redemption Default") or (C) maintain the
"aaa" Credit Rating unless the "aaa" Credit Rating is restored by the
Dividend Payment Date next following the date on which the Fund fails to
maintain the "aaa" Credit Rating (a "Rating Default" and, together with a
Dividend Default and a Redemption Default, hereinafter referred to as a
"Default"). Holders of two-thirds of the TAPS then outstanding may waive
any Dividend Default, Redemption Default or Rating Default. A Default
Period with respect to a Dividend Default or a Redemption Default will
consist of the period commencing on and including the aforementioned
Dividend Payment Date or redemption date, as the case may be, and ending on
and including the Business Day on which, by 12:00 noon, New York City time,
all unpaid dividends and unpaid redemption price shall have been so
deposited or shall have otherwise been made available to the applicable
holders in same-day funds. A Default Period with respect to a Rating
Default shall commence as of the date on which the Fund fails to maintain
the "aaa" Credit Rating (provided that such Rating Default shall be deemed
not to have occurred and such Default Period shall not commence if such
Rating Default is cured by the next succeeding Dividend Payment Date) and
shall end on the earlier of the date on which such default is cured as
provided herein or the date on which TAPS Series TH is mandatorily redeemed
as provided herein. The Applicable Rate for each Default Period, and each
Dividend Period commencing during a Default Period, will be equal to the
Default Rate; and each subsequent Dividend Period commencing after the
beginning of a Default Period shall be a Standard Rate Period; provided,
however, that the commencement of a Default Period will not by itself cause
the commencement of a new Dividend Period. No Auction shall be held during
a Default Period. Any dividend due on any Dividend Payment Date (if, prior
to 12:00 noon, New York City time, on such Dividend Payment Date, the Fund
has declared such dividend payable on or within two Business Days after
such Dividend Payment Date to the persons who held such shares as of 12:00
noon, New York City time, on the Business Day preceding such Dividend
Payment Date) or redemption price with respect to such shares not paid to
such Persons when due may (if such default is not solely due to the willful
failure of the Fund) be paid to such persons in the same form of funds by
12:00 noon, New York City time, on any of the first two Business Days after
such Dividend Payment Date or due date, as the case may be, provided that
such amount is accompanied by an additional amount for such period of
non-payment at the Default Rate applied to the amount of such non-payment
based on the actual number of days comprising such period divided by 365.
For the purposes of the foregoing, payment to a person in same-day funds
made on or before 12:00 noon New York City time on any Business Day at any
time will be considered equivalent to payment to that person in New York
Clearing House (next-day) funds at the same time on the preceding Business
Day, and any payment made after 12:00 noon, New York City time, on any
Business Day shall be considered to have been made instead
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in the same form of funds and to the same person before 12:00 noon, New
York City time, on the next Business Day. The Default Rate is equal to the
Reference Rate multiplied by three.
(iii) The amount of dividends per share payable (if declared)
on each Dividend Payment Date of each Dividend Period of less than one (1)
year (or in respect of dividends on another date in connection with a
redemption during such Dividend Period) shall be computed by multiplying
the Applicable Rate (or the Default Rate) for such Dividend Period (or a
portion thereof) by a fraction, the numerator of which will be the number
of days in such Dividend Period (or portion thereof) that such share was
Outstanding and for which the Applicable Rate or the Default Rate was
applicable and the denominator of which will be 365, multiplying the amount
so obtained by $25,000, and rounding the amount so obtained to the nearest
cent. During any Dividend Period of one (1) year or more, the amount of
dividends per share payable on any Dividend Payment Date (or in respect of
dividends on another date in connection with a redemption during such
Dividend Period) shall be computed as described in the preceding sentence,
except that it will be determined on the basis of a year consisting of
twelve 30-day months.
(d) Any dividend payment made on shares of TAPS Series TH
shall first be credited against the earliest accumulated but unpaid dividends
due with respect to TAPS Series TH.
(e) For so long as the shares of the TAPS are Outstanding,
except as contemplated by Sections 3(j) and 7(e), the Fund will not declare, pay
or set apart for payment any dividend or other distribution (other than a
dividend or distribution paid in shares of, or options, warrants or rights to
subscribe for or purchase, Common Shares or other shares, if any, ranking junior
to the TAPS as to dividends or upon liquidation) in respect to Common Shares or
any other shares of the Fund ranking junior to or on a parity with the TAPS as
to dividends or upon liquidation, or call for redemption, redeem, purchase or
otherwise acquire for consideration any Common Shares or any other such junior
shares (except by conversion into or exchange for shares of the Fund ranking
junior to the TAPS as to dividends and upon liquidation) or any such parity
shares (except by conversion into or exchange for shares of the Fund ranking
junior to or on a parity with the TAPS as to dividends and upon liquidation),
unless (i) immediately after such transaction, the Fund would have Eligible
Assets with an aggregate Discounted Value at least equal to the TAPS Basic
Maintenance Amount and the 1940 Act TAPS Asset Coverage would be achieved, (ii)
full cumulative dividends on the TAPS due on or prior to the date of the
transaction have been declared and paid and (iii) the Fund has redeemed the full
number of shares of the TAPS required to be redeemed by any provision for
mandatory redemption contained in Section 3(a)(ii).
(f) The Fund will not declare, pay or set apart for payment
any dividend or other distribution in respect to the TAPS Series TH unless (i)
there is not an event of default under indebtedness senior to the TAPS Series
TH, if any, or (ii) immediately after such transaction, the Fund would have
eligible portfolio holdings with an aggregate discounted value at least equal to
the asset coverage requirements under the indebtedness senior to the TAPS Series
TH.
3. Redemption.
(a) (i) After the initial Dividend Period, subject to the
provisions of this Section 3 and to the extent permitted under the 1940
Act and Massachusetts law, the Fund may, at its option, redeem in whole
or in part out of funds legally available therefor shares of TAPS
Series TH herein designated as (A) having a Dividend Period of one year
or less, on the Business Day after the last day of such Dividend Period
by delivering a notice of redemption not less than 15 days and not more
than 40 days prior to such redemption, at a redemption price per share
equal to $25,000, plus an amount equal to accumulated but unpaid
dividends thereon (whether or not earned or declared) to the date fixed
for redemption ("Redemption Price"), or (B) having a Dividend Period of
more than one year, on any Business Day prior to the end of the
relevant Dividend Period by delivering a notice of redemption not less
than 15 days and not more than 40 days prior to the date fixed for
such redemption, at the Redemption Price, plus a redemption premium,
if any, determined by the Board of Trustees after consultation with
the Broker-Dealers and set forth in any applicable Specific Redemption
Provisions at the time of the designation of such Dividend Period as
set forth in Section 4 of this Statement; provided, however, that
during a Dividend Period of more than one year no shares of TAPS
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Series TH will be subject to optional redemption except in accordance with
any Specific Redemption Provisions approved by the Board of Trustees after
consultation with the Broker-Dealers at the time of the designation of such
Dividend Period. Notwithstanding the foregoing, the Fund shall not give a
notice of or effect any redemption pursuant to this Section 3(a)(i) unless,
on the date on which the Fund intends to give such notice and on the date
of redemption (a) the Fund has available certain Deposit Securities with
maturity or tender dates not later than the day preceding the applicable
redemption date and having a value not less than the amount (including any
applicable premium) due to Holders of TAPS Series TH by reason of the
redemption of TAPS Series TH on such date fixed for the redemption and (b)
the Fund would have Eligible Assets with an aggregate Discounted Value at
least equal the TAPS Basic Maintenance Amount immediately subsequent to
such redemption, if such redemption were to occur on such date, it being
understood that the provisions of paragraph (d) of this Section 3 shall be
applicable in such circumstances in the event the Fund makes the deposit
and takes the other action required thereby.
(ii) If the Fund fails to maintain, as of any Valuation
Date, Eligible Assets with an aggregate Discounted Value at least equal to
the TAPS Basic Maintenance Amount or, as of the last Business Day of any
month, the 1940 Act TAPS Asset Coverage, and such failure is not cured
within the last Business Day of the following month as of such last
Business Day (each an "Asset Coverage Cure Date"), the TAPS will be subject
to mandatory redemption out of funds legally available therefor. The number
of shares of TAPS to be redeemed in such circumstances will be equal to the
lesser of (A) the minimum number of shares of TAPS the redemption of which,
if deemed to have occurred immediately prior to the opening of business on
the relevant Asset Coverage Cure Date, would result in the Fund having
Eligible Assets with an aggregate Discounted Value at least equal to the
TAPS Basic Maintenance Amount, or sufficient to satisfy 1940 Act TAPS Asset
Coverage, as the case may be, in either case as of the relevant Asset
Coverage Cure Date (provided that, if there is no such minimum number of
shares the redemption of which would have such result, all shares of TAPS
then Outstanding will be redeemed), and (B) the maximum number of shares of
TAPS that can be redeemed out of funds expected to be available therefor on
the Mandatory Redemption Date at the Mandatory Redemption Price set forth
in subparagraph (a)(iv) of this Section 3.
(iii) If the Fund at any time fails to maintain the "aaa"
credit rating and the Fund is unable to restore the "aaa" credit rating
within 90 calendar days thereafter (the "Rating Default Cure Date"), all
shares of the TAPS will be subject to mandatory redemption out of funds
legally available therefor, on the Mandatory Redemption Date at the
Mandatory Redemption Price set forth in subparagraph (a)(iv) of this
Section 3.
(iv) In determining the shares of the TAPS required to be
redeemed in accordance with the foregoing Section 3(a)(ii), the Fund shall
allocate the number of shares required to be redeemed to satisfy the TAPS
Basic Maintenance Amount or the 1940 Act TAPS Asset Coverage, as the case
may be, pro rata among the Holders of shares of the TAPS in proportion to
the number of shares they hold and shares of other Preferred Shares subject
to mandatory redemption provisions similar to those contained in this
Section 3, subject to the further provisions of this subparagraph (iv). The
Fund shall effect any required mandatory redemption pursuant to
subparagraph (a)(ii) or (a)(iii) of this Section 3 no later than 30 days
after the Asset Coverage Cure Date or the Rating Default Cure Date, as the
case may be (the "Mandatory Redemption Date"), except that if the Fund does
not have funds legally available for the redemption of, or is not otherwise
legally permitted to redeem, the number of shares of the TAPS which would
be required to be redeemed by the Fund under clause (A) of subparagraph
(a)(ii) or subparagraph (a)(iii) of this Section 3 if sufficient funds were
available, together with shares of other Preferred Shares which are subject
to mandatory redemption under provisions similar to those contained in this
Section 3, or the Fund otherwise is unable to effect such redemption on or
prior to such Mandatory Redemption Date, the Fund shall redeem those shares
of the TAPS, and shares of other Preferred Shares which it was unable to
redeem, on the earliest practicable date on which the Fund will have such
funds available, upon notice pursuant to Section 3(b) to record owners of
shares of the TAPS to be redeemed and the Paying Agent. The Fund will
deposit with the Paying Agent funds sufficient to redeem the specified
number of shares of the TAPS with respect to a redemption required under
subparagraph (a)(ii) or subparagraph (a)(iii) of this Section 3, by 1:00
p.m., New York City time, of the Business Day immediately preceding the
Mandatory Redemption Date. If fewer than all of the Outstanding
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shares of the TAPS are to be redeemed pursuant to this Section 3(a)(iv),
the number of shares to be redeemed shall be redeemed pro rata from the
Holders of such shares in proportion to the number of such shares held by
such Holders, by lot or by such other method as the Fund shall deem fair
and equitable, subject, however, to the terms of any applicable Specific
Redemption Provisions. "Mandatory Redemption Price" means the Redemption
Price plus (in the case of a Dividend Period of one year or more only) a
redemption premium, if any, determined by the Board of Trustees after
consultation with the Broker-Dealers and set forth in any applicable
Specific Redemption Provisions.
(b) In the event of a redemption pursuant to Section 3(a), the
Fund will file a notice of its intention to redeem with the Securities and
Exchange Commission so as to provide at least the minimum notice required under
Rule 23c-2 under the 1940 Act or any successor provision. In addition, the Fund
shall deliver a notice of redemption to the Auction Agent (the "Notice of
Redemption") containing the information set forth below (i) in the case of an
optional redemption pursuant to subparagraph (a)(i) above, one Business Day
prior to the giving of notice to the Holders, (ii) in the case of a mandatory
redemption pursuant to subparagraph (a)(ii) or subparagraph (a)(iii) above, on
or prior to the 30th day preceding the Mandatory Redemption Date. The Auction
Agent will use its reasonable efforts to provide telephonic notice to each
Holder of shares of TAPS Series TH called for redemption not later than the
close of business on the Business Day immediately following the day on which the
Auction Agent determines the shares to be redeemed (or, during a Default Period
with respect to such shares, not later than the close of business on the
Business Day immediately following the day on which the Auction Agent receives
Notice of Redemption from the Fund). The Auction Agent shall confirm such
telephonic notice in writing not later than the close of business on the third
Business Day preceding the date fixed for redemption by providing the Notice of
Redemption to each Holder of shares called for redemption, the Paying Agent (if
different from the Auction Agent) and the Securities Depository. Notice of
Redemption will be addressed to the registered owners of TAPS Series TH at their
addresses appearing on the share records of the Fund. Such Notice of Redemption
will set forth (i) the date fixed for redemption, (ii) the number and identity
of shares of TAPS Series TH to be redeemed, (iii) the redemption price
(specifying the amount of accumulated dividends to be included therein), (iv)
that dividends on the shares to be redeemed will cease to accumulate on such
date fixed for redemption, and (v) the provision under which redemption shall be
made. No defect in the Notice of Redemption or in the transmittal or mailing
thereof will affect the validity of the redemption proceedings, except as
required by applicable law. If fewer than all shares held by any Holder are to
be redeemed, the Notice of Redemption mailed to such Holder shall also specify
the number of shares to be redeemed from such Holder.
(c) Notwithstanding the provisions of paragraph (a) of this
Section 3, but subject to Section 7(e), no shares of the TAPS may be redeemed
unless all dividends in arrears on the Outstanding shares of the TAPS and all
capital stock of the Fund ranking on a parity with the TAPS with respect to
payment of dividends or upon liquidation, have been or are being
contemporaneously paid or set aside for payment; provided, however, that the
foregoing shall not prevent the purchase or acquisition of all Outstanding
shares of the TAPS pursuant to the successful completion of an otherwise lawful
purchase or exchange offer made on the same terms to, and accepted by, Holders
of all Outstanding shares of the TAPS.
(d) Upon the deposit of funds sufficient to redeem shares of
TAPS Series TH with the Paying Agent and the giving of the Notice of Redemption
to the Auction Agent under paragraph (b) of this Section 3, dividends on such
shares shall cease to accumulate and such shares shall no longer be deemed to be
Outstanding for any purpose (including, without limitation, for purposes of
calculating whether the Fund has maintained the requisite TAPS Basic Maintenance
Amount or the 1940 Act TAPS Asset Coverage), and all rights of the holder of the
shares so called for redemption shall cease and terminate, except the right of
such holder to receive the redemption price specified herein, but without any
interest or other additional amount. Such redemption price shall be paid by the
Paying Agent to the nominee of the Securities Depository. The Fund shall be
entitled to receive from the Paying Agent, promptly after the date fixed for
redemption, any cash deposited with the Paying Agent in excess of (i) the
aggregate redemption price of the shares of TAPS Series TH called for redemption
on such date and (ii) such other amounts, if any, to which Holders of shares of
TAPS Series TH called for redemption may be entitled. Any funds so deposited
that are unclaimed at the end of two years from such redemption date shall, to
the extent permitted by law, be paid to the Fund, after which time the Holders
of shares of TAPS Series TH so called for redemption may look only to the Fund
for payment of the redemption price and all other amounts, if any, to which they
may be entitled. The Fund shall be entitled to receive, from time to time after
the date fixed for redemption, any interest earned on the funds so deposited.
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(e) To the extent that any redemption for which Notice of
Redemption has been given is not made by reason of the absence of legally
available funds therefor, or is otherwise prohibited, such redemption shall be
made as soon as practicable to the extent such funds become legally available or
such redemption is no longer otherwise prohibited. Failure to redeem shares of
TAPS Series TH shall be deemed to exist at any time after the date specified for
redemption in a Notice of Redemption when the Fund shall have failed, for any
reason whatsoever, to deposit in trust with the Paying Agent the redemption
price with respect to any shares for which such Notice of Redemption has been
given. Notwithstanding the fact that the Fund may not have redeemed shares of
TAPS Series TH for which a Notice of Redemption has been given, dividends may be
declared and paid on shares of TAPS Series TH and shall include those shares of
TAPS Series TH for which Notice of Redemption has been given but for which
deposit of funds has not been made.
(f) All moneys paid to the Paying Agent for payment of the
redemption price of shares of TAPS Series TH called for redemption shall be held
in trust by the Paying Agent for the benefit of holders of shares so to be
redeemed.
(g) So long as any shares of TAPS Series TH are held of record
by the nominee of the Securities Depository, the redemption price for such
shares will be paid on the date fixed for redemption to the nominee of the
Securities Depository for distribution to Agent Members for distribution to the
persons for whom they are acting as agent.
(h) Except for the provisions described above, nothing contained
in this Statement limits any right of the Fund to purchase or otherwise acquire
any shares of TAPS Series TH outside of an Auction at any price, whether higher
or lower than the price that would be paid in connection with an optional or
mandatory redemption, so long as, at the time of any such purchase, there is no
arrearage in the payment of dividends on, or the mandatory or optional
redemption price with respect to, any shares of TAPS Series TH for which Notice
of Redemption has been given and the Fund is in compliance with the 1940 Act
TAPS Asset Coverage and has Eligible Assets with an aggregate Discounted Value
at least equal to the TAPS Basic Maintenance Amount after giving effect to such
purchase or acquisition on the date thereof. Any shares which are purchased,
redeemed or otherwise acquired by the Fund shall have no voting rights. If fewer
than all the Outstanding shares of TAPS Series TH are redeemed or otherwise
acquired by the Fund, the Fund shall give notice of such transaction to the
Auction Agent, in accordance with the procedures agreed upon by the Board of
Trustees.
(i) In the case of any redemption pursuant to this Section 3,
only whole shares of TAPS Series TH shall be redeemed, and in the event that any
provision of the Declaration would require redemption of a fractional share, the
Auction Agent shall be authorized to round up so that only whole shares are
redeemed.
(j) Notwithstanding anything herein to the contrary, including,
without limitation, Sections 2(e), 6(g) and 12 of Part I hereof, the
Board of Trustees may authorize, create or issue any class or series of stock
ranking prior to or on a parity with the TAPS with respect to the payment of
dividends or the distribution of assets upon dissolution, liquidation or winding
up of the affairs of the Fund, to the extent permitted by the 1940 Act, as
amended, if, upon issuance, the net proceeds from the sale of such stock (or
such portion thereof needed to redeem or repurchase the Outstanding TAPS) are
deposited with the Auction Agent in accordance with Section 3(d) of Part I
hereof, Notice of Redemption as contemplated by Section 3(b) of Part I hereof
has been delivered prior thereto or is sent promptly thereafter, and such
proceeds are used to redeem all Outstanding TAPS.
4. Designation of Dividend Period.
(a) The initial Dividend Period for TAPS Series TH is as set
forth under "Designation" above. The Fund will designate the duration of
subsequent Dividend Periods of TAPS Series TH; provided, however, that no such
designation is necessary for a Standard Rate Period and, provided further, that
any designation of a Special Rate Period shall be effective only if (i) notice
thereof shall have been given as provided herein, (ii) any failure to pay in a
timely manner to the Auction Agent the full amount of any dividend on, or the
redemption price of, TAPS Series TH shall have been cured as provided above,
(iii) Sufficient Clearing Orders shall have existed in an Auction held on the
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Auction Date immediately preceding the first day of such proposed Special Rate
Period, (iv) if the Fund shall have mailed a Notice of Redemption with respect
to any shares, the redemption price with respect to such shares shall have been
deposited with the Paying Agent, and (v) in the case of the designation of an
Special Rate Period, the Fund has confirmed that as of the Auction Date next
preceding the first day of such Special Rate Period, it has Eligible Assets with
an aggregate Discounted Value at least equal to the TAPS Basic Maintenance
Amount, and the Fund has consulted with the Broker-Dealers and has provided
notice of such designation and an TAPS Basic Maintenance Certificate to Moody's
(if Moody's is than rating the TAPS) and any Other Rating Agency which is then
rating the TAPS and so requires.
(b) If the Fund proposes to designate any Special Rate Period,
not fewer than 7 (or two Business Days in the event the duration of the Dividend
Period prior to such Special Rate Period is fewer than 8 days) nor more than 30
Business Days prior to the first day of such Special Rate Period, notice shall
be (i) made by press release and (ii) communicated by the Fund by telephonic or
other means to the Auction Agent and confirmed in writing promptly thereafter.
Each such notice shall state (A) that the Fund proposes to exercise its option
to designate a succeeding Special Rate Period, specifying the first and last
days thereof and (B) that the Fund will by 3:00 p.m., New York City time, on the
second Business Day next preceding the first day of such Special Rate Period,
notify the Auction Agent, who will promptly notify the Broker-Dealers, of either
(x) its determination, subject to certain conditions, to proceed with such
Special Rate Period, subject to the terms of any Specific Redemption Provisions,
or (y) its determination not to proceed with such Special Rate Period, in which
latter event the succeeding Dividend Period shall be a Standard Rate Period.
No later than 3:00 p.m., New York City time, on the second Business Day
next preceding the first day of any proposed Special Rate Period, the Fund shall
deliver to the Auction Agent, who will promptly deliver to the Broker- Dealers
and Existing Holders, either:
(i) a notice stating (A) that the Fund has determined
to designate the next succeeding Dividend Period as an Special Rate
Period, specifying the first and last days thereof and (B) the terms of
any Specific Redemption Provisions; or
(ii) a notice stating that the Fund has determined not to
exercise its option to designate a Special Rate Period.
If the Fund fails to deliver either such notice with respect to any designation
of any proposed Special Rate Period to the Auction Agent or is unable to make
the confirmation provided in clause (v) of Paragraph (a) of this Section 4 by
3:00 p.m., New York City time, on the second Business Day next preceding the
first day of such proposed Special Rate Period, the Fund shall be deemed to have
delivered a notice to the Auction Agent with respect to such Dividend Period to
the effect set forth in clause (ii) above, thereby resulting in a Standard Rate
Period.
5. Restrictions on Transfer. Shares of TAPS Series TH may be
transferred only (a) pursuant to an order placed in an Auction, (b) to or
through a Broker-Dealer or (c) to the Fund or any Affiliate. Notwithstanding the
foregoing, a transfer other than pursuant to an Auction will not be effective
unless the selling Existing Holder or the Agent Member of such Existing Holder,
in the case of an Existing Holder whose shares are listed in its own name on the
books of the Auction Agent, or the Broker-Dealer or Agent Member of such
Broker-Dealer, in the case of a transfer
between persons holding shares of TAPS Series TH through different
Broker-Dealers, advises the Auction Agent of such transfer. The certificates
representing the shares of TAPS Series TH issued to the Securities Depository
will bear legends with respect to the restrictions described above and
stop-transfer instructions will be issued to the Transfer Agent and/or
Registrar.
6. Voting Rights.
(a) Except as otherwise provided in the Declaration or as
otherwise required by applicable law, (i) each Holder of shares of TAPS Series
TH shall be entitled to one vote for each share of TAPS Series TH held on each
matter submitted to a vote of shareholders of the Fund, and (ii) the holders of
Outstanding shares of Preferred Shares, including TAPS Series TH, and shares of
Common Shares shall vote together as a single class; provided, however, that,
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at any meeting of the shareholders of the Fund held for the election of
trustees, the holders of Outstanding shares of Preferred Shares, including TAPS
Series TH, represented in person or by proxy at said meeting, shall be entitled,
as a class, to the exclusion of the holders of all other securities and classes
of capital stock of the Fund, to elect two trustees of the Fund, each share of
Preferred Shares, including TAPS Series TH, entitling the holder thereof to one
vote. Subject to paragraph (b) of this Section 6, the holders of Outstanding
shares of Common Shares and Preferred Shares, including TAPS Series TH, voting
together as a single class, shall elect the balance of the trustees.
(b) During any period in which any one or more of the
conditions described below shall exist (such period being referred to herein as
a "Voting Period"), the number of trustees constituting the Board of Trustees
shall be automatically increased by the smallest number that, when added to the
two trustees elected exclusively by the holders of shares of Preferred Shares,
including TAPS Series TH, would constitute a majority of the Board of Trustees
as so increased by such smallest number; and the holders of shares of Preferred
Shares, including TAPS Series TH, shall be entitled, voting as a class on a
one-vote-per-share basis (to the exclusion of the holders of all other
securities and classes of capital stock of the Fund), to elect such smallest
number of additional trustees, together with the two trustees that such holders
are in any event entitled to elect. A Voting Period shall commence:
(i) if at the close of business on any Dividend Payment Date
accumulated dividends (whether or not earned or declared) on Preferred
Shares, including TAPS Series TH, equal to at least two full years'
dividends shall be due and unpaid; or
(ii) if at any time holders of any other shares of
Preferred Shares are entitled under the 1940 Act to elect a majority of
the trustees of the Fund.
Upon the termination of a Voting Period, the voting rights described in this
paragraph (b) of Section 6 shall cease, subject always, however, to the
revesting of such voting rights in the Holders of shares of Preferred Shares,
including TAPS Series TH, upon the further occurrence of any of the events
described in this paragraph (b) of Section 6.
(c) As soon as practicable after the accrual of any right of
the holders of shares of Preferred Shares, including TAPS Series TH, to elect
additional trustees as described in paragraph (b) of this Section 6, the Fund
shall notify the Auction Agent, and the Auction Agent shall call a special
meeting of such holders, by mailing a notice of such special meeting to such
holders, such meeting to be held not less than 10 nor more than 30 days after
the date of mailing of such notice. If the Fund fails to send such notice to the
Auction Agent or if the Auction Agent does not call such a special meeting, it
may be called by any such holder on like notice. The record date for determining
the holders entitled to notice of and to vote at such special meeting shall be
the close of business on the fifth Business Day preceding the day on which such
notice is mailed. At any such special meeting and at each meeting of holders of
shares of Preferred Shares, including TAPS Series TH, held during a Voting
Period at which trustees are to be elected, such holders, voting together as a
class (to the exclusion of the holders of all other securities and classes of
capital stock of the Fund), shall be entitled to elect the number of trustees
prescribed in paragraph (b) of this Section 6 on a one-vote-per-share basis.
(d) The terms of office of all persons who are directors of
the Fund at the time of a special meeting of holders of the TAPS and holders of
other Preferred Shares to elect trustees shall continue, notwithstanding the
election at such meeting by the holders and such other holders of the number of
trustees that they are entitled to elect, and the persons so elected by such
holders, together with the two incumbent trustees elected by such holders and
the remaining incumbent trustees elected by the holders of the Common Shares and
Preferred Shares, shall constitute the duly elected trustees of the Fund.
(e) Simultaneously with the termination of a Voting Period,
the terms of office of the additional directors elected by the Holders of the
TAPS and holders of other Preferred Shares pursuant to paragraph (b) of this
Section 6 shall terminate, the remaining trustees shall constitute the trustees
of the Fund and the voting rights of such holders to elect additional trustees
pursuant to paragraph (b) of this Section 6 shall cease, subject to the
provisions of the last sentence of paragraph (b) of this Section 6.
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(f) So long as any of the shares of Preferred Shares,
including TAPS Series TH, are Outstanding, the Fund will not, without the
affirmative vote of the holders of a majority of the Outstanding shares of
Preferred Shares determined with reference to a "majority of outstanding voting
securities" as that term is defined in Section 2(a)(42) of the 1940 Act, voting
as a separate class, (i) amend, alter or repeal any of the preferences, rights
or powers of such class so as to affect materially and adversely such
preferences, rights or powers; (ii) increase the authorized number of shares of
Preferred Shares; (iii) create, authorize or issue shares of any class of
capital stock ranking senior to or on a parity with the Preferred Shares with
respect to the payment of dividends or the distribution of assets, or any
securities convertible into, or warrants, options or similar rights to purchase,
acquire or receive, such shares of capital stock ranking senior to or on a
parity with the Preferred Shares or reclassify any authorized shares of capital
stock of the Fund into any shares ranking senior to or on a parity with the
Preferred Shares (except that, notwithstanding the foregoing, but subject to the
provisions of either Section 3(j) or 12, as applicable, the Board of Trustees,
without the vote or consent of the holders of the Preferred Shares, may from
time to time authorize, create and classify, and the Fund may from time to time
issue, shares or series of Preferred Shares including other series of TAPS
ranking on a parity with the TAPS with respect to the payment of dividends and
the distribution of assets upon dissolution, liquidation or winding up to the
affairs of the Fund, and may authorize, reclassify and/or issue any additional
shares of the TAPS Series TH, including shares previously purchased or redeemed
by the Fund, subject to continuing compliance by the Fund with 1940 Act TAPS
Asset Coverage and TAPS Basic Maintenance Amount requirements); (iv) institute
any proceedings to be adjudicated bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against it, or file a
petition seeking or consenting to reorganization or relief under any applicable
federal or state law relating to bankruptcy or insolvency, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Fund or a substantial part of its property, or make any
assignment for the benefit of creditors, or, except as may be required by
applicable law, admit in writing its inability to pay its debts generally as
they become due or take any corporate action in furtherance of any such action;
(v) create, incur or suffer to exist, or agree to create, incur or suffer to
exist, or consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any material
lien, mortgage, pledge, charge, security interest, security agreement,
conditional sale or trust receipt or other material encumbrance of any kind upon
any of the Fund's assets as a whole, except (A) liens the validity of which are
being contested in good faith by appropriate proceedings, (B) liens for taxes
that are not then due and payable or that can be paid thereafter without
penalty, (C) liens, pledges, charges, security interests, security agreements or
other encumbrances arising in connection with any indebtedness senior to the
TAPS, (D) liens, pledges, charges, security interests, security agreements or
other encumbrances arising in connection with any indebtedness permitted under
clause (vi) below and (E) liens to secure payment for services rendered
including, without limitation, services rendered by the Fund's custodian and the
Auction Agent; or (vi) create, authorize, issue, incur or suffer to exist any
indebtedness for borrowed money or any direct or indirect guarantee of such
indebtedness for borrowed money or any direct or indirect guarantee of such
indebtedness, except the Fund may borrow as may be permitted by the Fund's
investment restrictions; provided, however, that transfers of assets by the Fund
subject to an obligation to repurchase shall not be deemed to be indebtedness
for purposes of this provision to the extent that after any such transaction the
Fund has Eligible Assets with an aggregate Discounted Value at least equal to
the TAPS Basic Maintenance Amount as of the immediately preceding Valuation
Date.
(g) The affirmative vote of the holders of a majority of the
Outstanding shares of Preferred Shares, including TAPS Series TH, voting as a
separate class, shall be required to approve any plan of reorganization (as such
term is used in the 1940 Act) adversely affecting such shares or any action
requiring a vote of security holders of the Fund under Section 13(a) of the 1940
Act. In the event a vote of holders of shares of Preferred Shares is required
pursuant to the provisions of Section 13(a) of the 1940 Act, the Fund shall, not
later than ten Business Days prior to the date on which such vote is to be
taken, notify Moody's (if Moody's is then rating TAPS Series TH) and any Other
Rating Agency which is then rating TAPS Series TH and which so requires that
such vote is to be taken and the nature of the action with respect to which such
vote is to be taken and shall, not later than ten Business Days after the date
on which such vote is taken, notify Moody's and any such Other Rating Agency, as
applicable, of the results of such vote.
(h) The affirmative vote of the holders of a majority of the
Outstanding shares of TAPS Series TH, voting separately from any other series,
shall be required with respect to any matter that materially and adversely
affects the rights, preferences, or powers of TAPS Series TH in a manner
different from that of other series of classes of the Fund's shares of capital
stock. For purposes of the foregoing, no matter shall be deemed to adversely
affect any right, preference or power unless such matter (i) alters or abolishes
any preferential right of such series;
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(ii) creates, alters or abolishes any right in respect of redemption of such
series; or (iii) creates or alters (other than to abolish) any restriction on
transfer applicable to such series. The vote of holders of TAPS Series TH
described in this Section 6(i) will in each case be in addition to a separate
vote of the requisite percentage of Common Shares and/or TAPS necessary to
authorize the action in question.
(i) The Board of Trustees, without the vote or consent of any
Holder of the Preferred Shares, including TAPS Series TH, or any other
shareholder of the Fund, may from time to time amend, alter or repeal any or all
of the definitions of the terms or provisions listed below, and any such
amendment, alteration or repeal will not be deemed to affect the preferences,
rights or powers of shares of TAPS or the Holders thereof, provided that the
Board of Trustees receives written confirmation from Moody's (if Moody's is then
rating TAPS Series TH) (with such confirmation in no event being required to be
obtained from a particular rating agency in the case of the definitions relevant
only to and adopted in connection with the rating of TAPS Series TH, if any, by
any other rating agency) that such amendment, alteration or repeal would not
impair the rating then assigned by Moody's. In addition, the Board of Trustees,
without the vote or consent of any Holder of the Preferred Shares, including
TAPS Series TH, or any other shareholder of the Fund, may from time to time
adopt, amend, alter or repeal any or all of any additional or other definitions
or add covenants and other obligations of the Fund (e.g., maintenance of minimum
liquidity level) or confirm the applicability of covenants and other obligations
set forth herein in connection with obtaining or maintaining the rating of
Moody's or any Other Rating Agency with respect to TAPS Series TH, and any such
amendment, alteration or repeal will not be deemed to affect the preferences,
rights or powers of TAPS Series TH or the Holders thereof, provided the Board of
Trustees receives written confirmation from the relevant rating agency (such
confirmation in no event being required to be obtained from a particular rating
agency with respect to definitions or other provisions relevant only to another
rating agency's rating) that any such amendment, alteration or repeal would not
adversely affect the rating then assigned by such rating agency.
Definitions and Provisions Subject to Change by Trustee Action:
Asset Coverage Cure Date Moody's Eligible Assets
Deposit Securities Moody's Industry Classification
Discounted Value 1940 Act Asset Coverage Cure Date
Exposure Period 1940 Act TAPS Asset Coverage
Market Value (including Short Term Money Market Instruments
certain provisions relevant to TAPS Basic Maintenance Amount
futures and options) TAPS Basic Maintenance Certificate
Maximum Rate Volatility Factor
Minimum Rate Last Paragraph of Section 12 (discussing
Moody's Discount Factor valuation of certain option provisions)
In addition, subject to compliance with applicable law, the Board of
Trustees may amend the definition of Maximum Rate to increase the percentage
amount by which the Reference Rate is multiplied to determine the Maximum Rate
shown therein without the vote or consent of the holders of the shares of the
Preferred Shares, including TAPS Series TH, or any other shareholder of the
Fund, and without receiving any confirmation from any rating agency after
consultation with the Broker-Dealers, provided that immediately following any
such increase the Fund would be in compliance with the TAPS Basic Maintenance
Amount.
(j) Unless otherwise required by law, holders of shares of
TAPS Series TH shall not have any relative rights or preferences or other
special rights other than those specifically set forth herein. The holders of
shares of TAPS Series TH shall have no rights to cumulative voting. In the event
that the Fund fails to pay any dividends on the shares of TAPS Series TH, the
exclusive remedy of the holders shall be the right to vote for trustees pursuant
to the provisions of this Section 6.
(k) The foregoing voting provisions will not apply with
respect to TAPS Series TH if, at or prior to the time when a vote is required,
such shares have been (i) redeemed or (ii) called for redemption and sufficient
funds shall have been deposited in trust to effect such redemption.
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7. Liquidation Rights.
(a) Upon the dissolution, liquidation or winding up of the
affairs of the Fund, whether voluntary or involuntary, the holders of TAPS
Series TH then Outstanding, together with holders of shares of any class of
stock ranking on a parity with TAPS Series TH upon dissolution, liquidation or
winding up, shall be entitled to receive and to be paid out of the assets of the
Fund (or the proceeds thereof) available for distribution to its shareholders
after satisfaction of claims of creditors of the Fund an amount equal to the
liquidation preference with respect to such shares. The liquidation preference
for shares of TAPS Series TH shall be $25,000 per share, plus an amount equal to
all accumulated dividends thereon (whether or not earned or declared but without
interest) to the date payment of such distribution is made in full or a sum
sufficient for the payment thereof is set apart with the Paying Agent. No
redemption premium shall be paid upon any liquidation even if such redemption
premium would be paid upon optional or mandatory redemption of the relevant
shares.
(b) Upon the dissolution, liquidation or winding up of the
affairs of the Fund, whether voluntary or involuntary, until payment in full is
made to the holders of TAPS Series TH of the liquidation distribution to which
they are entitled, no dividend or other distribution shall be made to the
holders of shares of Common Shares or any other class of stock of the Fund
ranking junior to TAPS Series TH upon dissolution, liquidation or winding up and
no purchase, redemption or other acquisition for any consideration by the Fund
shall be made in respect of the shares of Common Shares or any other class of
stock of the Fund ranking junior to TAPS Series TH upon dissolution, liquidation
or winding up.
(c) A consolidation, reorganization or merger of the Fund with
or into any other trust or company, or a sale, lease or exchange of all or
substantially all of the assets of the Fund in consideration for the issuance of
equity securities of another trustor company shall not be deemed to be a
liquidation, dissolution or winding up, whether voluntary or involuntary, for
the purposes of this Section 7.
(d) After the payment to the Holders of TAPS Series TH of the
full preferential amounts provided for in this Section 7, the holders of TAPS
Series TH as such shall have no right or claim to any of the remaining assets of
the Fund.
(e) In the event the assets of the Fund or proceeds thereof
available for distribution to the Holders of TAPS Series TH, upon any
dissolution, liquidation or winding up of the affairs of the Fund, whether
voluntary or involuntary, shall be insufficient to pay in full all amounts to
which such holders are entitled pursuant to paragraph (a) of this Section 7, no
such distribution shall be made on account of any shares of any other class or
series of Preferred Shares ranking on a parity with TAPS Series TH with respect
to the distribution of assets upon such dissolution, liquidation or winding up
unless proportionate distributive amounts shall be paid on account of the shares
of TAPS Series TH, ratably, in proportion to the full distributable amounts to
which holders of all such parity shares are entitled upon such dissolution,
liquidation or winding up.
(f) Subject to the rights of the holders of shares of any series
or class or classes of stock ranking on a parity with TAPS Series TH with
respect to the distribution of assets upon dissolution, liquidation or winding
up of the affairs of the Fund, after payment shall have been made in full to the
holders of the shares of TAPS Series TH as provided in paragraph (a) of this
Section 7, but not prior thereto, any other series or class or classes of stock
ranking junior to TAPS Series TH with respect to the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the Fund shall, subject
to any respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the shares of TAPS Series TH shall not be entitled to share therein.
8. Auction Agent. For so long as any shares of TAPS Series TH are
Outstanding, the Auction Agent, duly appointed by the Fund to so act, shall be
in each case a commercial bank, trust company or other financial institution
independent of the Fund and its Affiliates (which, however, may engage or have
engaged in business transactions with the Fund or its Affiliates) and at no time
shall the Fund or any of its Affiliates act as the Auction Agent
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in connection with the Auction Procedures. If the Auction Agent resigns or for
any reason its appointment is terminated during any period that any shares of
TAPS Series TH are Outstanding, the Fund shall use its best efforts promptly
thereafter to appoint another qualified commercial bank, trust company or
financial institution to act as the Auction Agent.
9. 1940 Act TAPS Asset Coverage. The Fund shall maintain, as of the
last Business Day of each month in which any shares of the TAPS are Outstanding,
asset coverage with respect to the TAPS which is equal to or greater than the
1940 Act TAPS Asset Coverage; provided, however, that Section 3(a)(ii) shall be
the sole remedy in the event the Fund fails to do so.
10. TAPS Basic Maintenance Amount. So long as shares of the TAPS are
Outstanding and Moody's or any Other Rating Agency which so requires is then
rating the shares of the TAPS, the Fund shall maintain, as of each Valuation
Date, Moody's Eligible Assets (if Moody's is then rating the TAPS) and (if
applicable) Other Rating Agency Eligible Assets having an aggregate Discounted
Value equal to or greater than the TAPS Basic Maintenance Amount; provided,
however, that Section 3(a)(ii) shall be the sole remedy in the event the Fund
fails to do so.
11. [Reserved]
12. Certain Other Restrictions. For so long as any shares of TAPS
Series TH are Outstanding and Moody's or any Other Rating Agency which so
requires is then rating such shares, the Fund will not, unless it has received
written confirmation from Moody's (if Moody's is then rating TAPS Series TH) and
(if applicable) such Other Rating Agency that any such action would not impair
the rating then assigned by such rating agency to TAPS Series TH, engage in any
one or more of the following transactions:
(a) purchase or sell futures contracts or options thereon
with respect to portfolio securities or write unsecured put or uncovered call
options on portfolio securities;
(b) issue additional shares of TAPS Series TH or any class or
series of shares ranking prior to or on a parity with TAPS Series TH with
respect to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up of the Fund, or reissue any shares of
TAPS Series TH previously purchased or redeemed by the Fund;
(c) engage in any short sales of securities;
(d) lend portfolio securities; or
(e) merge or consolidate into or with any other corporation.
For purposes of valuation of Moody's Eligible Assets: (A) if the Fund
writes a call option, the underlying asset will be valued as follows: (1) if the
option is exchange-traded and may be offset readily or if the option expires
before the earliest possible redemption of TAPS Series TH, at the lower of the
Discounted Value of the underlying security of the option and the exercise price
of the option or (2) otherwise, it has no value; (B) if the Fund writes a put
option, the underlying asset will be valued as follows: the lesser of (1)
exercise price and (2) the Discounted Value of the underlying security; and (C)
call or put option contracts which the Fund buys have no value. For so long as
TAPS Series TH is rated by Moody's: (A) the Fund will not engage in options
transactions for leveraging or speculative purposes; (B) the Fund will not write
or sell any anticipatory contracts pursuant to which the Fund hedges the
anticipated purchase of an asset prior to completion of such purchase; (C) the
Fund will not enter into an option transaction with respect to portfolio
securities unless, after giving effect thereto, the Fund would continue to have
Eligible Assets with an aggregate Discounted Value equal to or greater than the
TAPS Basic Maintenance Amount; (D) the Fund will not enter into an option
transaction with respect to portfolio securities unless after giving effect to
such transaction the Fund would continue to be in compliance with the provisions
relating to the TAPS Basic Maintenance Amount; (E) for purposes of the TAPS
Basic Maintenance Amount assets in margin accounts are not Eligible Assets; (F)
the Fund shall write only exchange-traded options on exchanges approved by
Moody's; (G) where delivery may be made to the Fund
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with any of a class of securities, the Fund shall assume for purposes of the
TAPS Basic Maintenance Amount that it takes delivery of that security which
yields it the least value; (H) the Fund will not engage in forward contracts;
and (I) there shall be a quarterly audit made of the Fund's options transactions
by the Fund's independent accountants to confirm that the Fund is in compliance
with these standards.
13. Compliance Procedures for Asset Maintenance Tests. For so long
as any shares of TAPS Series TH are Outstanding and Moody's or any Other Rating
Agency which so requires is then rating such shares:
(a) As of each Valuation Date, the Fund shall determine in
accordance with the procedures specified herein (i) the Market Value of each
Eligible Asset owned by the Fund on that date, (ii) the Discounted Value of each
such Eligible Asset using the Discount Factors, (iii) whether the TAPS Basic
Maintenance Amount is met as of that date, (iv) the value of the total assets of
the Fund, less all liabilities, and (v) whether the 1940 Act TAPS Asset Coverage
is met as of that date.
(b) Upon any failure to maintain the required TAPS Basic
Maintenance Amount or 1940 Act TAPS Asset Coverage on any Valuation Date, the
Fund may use reasonable commercial efforts (including, without limitation,
altering the composition of its portfolio, purchasing shares of the TAPS outside
of an Auction or in the event of a failure to file a certificate on a timely
basis, submitting the requisite certificate), subject to the fiduciary
obligations of the Board of Trustees, to reattain (or certify in the case of a
failure to file on a timely basis, as the case may be) the required TAPS Basic
Maintenance Amount or 1940 Act TAPS Asset Coverage on or prior to the Asset
Coverage Cure Date.
(c) Compliance with the TAPS Basic Maintenance Amount and 1940
Act TAPS Asset Coverage tests shall be determined with reference to those shares
of the TAPS which are deemed to be Outstanding hereunder.
(d) The Fund shall deliver a certificate which sets forth a
determination of items (i)-(iii) of paragraph (a) of this Section 13 (an "TAPS
Basic Maintenance Certificate") (i) to the Auction Agent, Moody's (if Moody's is
then rating TAPS Series TH) and any Other Rating Agency which is then rating
TAPS Series TH and which so requires as of (A) the Business Day preceding the
Date of Original Issue and (B) any Valuation Date on which the Fund fails to
have Eligible Assets with an aggregate Discounted Value at least equal to 115%
of the TAPS Basic Maintenance Amount, (ii) to the Auction Agent, Moody's (if
Moody's is then rating TAPS Series TH) and any Other Rating Agency which is then
rating TAPS Series TH and which so requires (A) as of every fourth Valuation
Date after the Date of Original Issue for the first year following the Date of
Original Issue, (B) if the Fund fails to have Eligible Assets with an aggregate
Discounted Value at least equal to TAPS Basic Maintenance Amount, and (C) on
request by Moody's or such Other Rating Agency, as applicable, (iii) to the
Auction Agent, Moody's (if Moody's is then rating TAPS Series TH) and any Other
Rating Agency which is then rating TAPS Series TH and which so requires as of
the last Valuation Date of each fiscal quarter and a Valuation Date during such
fiscal quarter randomly selected by the Fund's independent accountants as
provided in Section 10(g), and (iv) to the Auction Agent, Moody's (if Moody's is
then rating TAPS Series TH) and any Other Rating Agency which is then rating
TAPS Series TH and which so requires as of a Business Day on or before any Asset
Coverage Cure Date relating to the Fund's cure of a failure to have Eligible
Assets with an aggregate Discounted Value at least equal to the TAPS Basic
Maintenance Amount. Such TAPS Basic Maintenance Certificate shall be delivered
in the case of clause (i)(A) on the Date of Original Issue and in the case of
clauses (i)(B), (ii), (iii) and (iv) above on or before the third Business Day
after the relevant Valuation Date or Asset Coverage Cure Date.
(e) The Fund shall deliver to the Auction Agent, Moody's (if
Moody's is then rating TAPS Series TH) and any Other Rating Agency which is then
rating TAPS Series TH and which so requires a certificate with respect to the
calculation of the 1940 Act TAPS Asset Coverage and the value of the portfolio
holdings of the Fund (a "1940 Act TAPS Asset Coverage Certificate") (i) as of
the Business Day preceding the Date of Original Issue, and (ii) as of (A) the
last Valuation Date of each quarter thereafter, and (B) as of the Business Day
on or before the Asset Coverage Cure Date relating to the failure to satisfy the
1940 Act TAPS Asset Coverage. Such 1940 Act TAPS Asset Coverage
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Certificate shall be delivered in the case of clause (i) on the Date of Original
Issue and in the case of clause (ii) on or before the third Business Day after
the relevant Valuation Date or the Asset Coverage Cure Date.
(f) [Reserved]
(g) On the Date of Original Issue, the Fund shall deliver to
the Auction Agent, Moody's (if Moody's is then rating TAPS Series TH) and any
Other Rating Agency which is then rating TAPS Series TH and which so requires a
letter prepared by the Fund's independent accountants (an "Accountant's
Certificate") regarding the accuracy of the calculations made by the Fund in the
TAPS Basic Maintenance Certificate and the 1940 Act TAPS Asset Coverage
Certificate required to be delivered by the Fund as of the Date of Original
Issue. Within eight Business Days after the last Valuation Date of each fiscal
quarter of the Fund on which an TAPS Basic Maintenance Certificate is required
to be delivered, the Fund (x) will deliver to the Auction Agent, Moody's (if
Moody's is then rating TAPS Series TH) and any Other Rating Agency which is then
rating TAPS Series TH and which so requires an Accountant's Certificate
regarding the accuracy of the calculations made by the Fund in such TAPS Basic
Maintenance Certificate and in any other TAPS Basic Maintenance Certificate
randomly selected by the Fund's independent accountants during such fiscal
quarter. Within eight Business Days after the last Valuation Date of each fiscal
quarter of the Fund on which a 1940 Act TAPS Asset Coverage Certificate is
required to be delivered, the Fund will deliver to the Auction Agent, Moody's
(if Moody's is then rating TAPS Series TH) and any Other Rating Agency which is
then rating TAPS Series TH and which so requires an Accountant's Certificate
regarding the accuracy of the calculations made by the Fund in such 1940 Act
TAPS Asset Coverage Certificate. In addition, the Fund will deliver to the
relevant persons specified in the preceding sentence an Accountant's Certificate
regarding the accuracy of the calculations made by the Fund on each TAPS Basic
Maintenance Certificate and 1940 Act TAPS Asset Coverage Certificate delivered
pursuant to clause (iv) of paragraph (d) or clause (ii)(B) of paragraph (e) of
this Section 13, as the case may be, within five days after the relevant Asset
Coverage Cure Date. If an Accountant's Certificate delivered with respect to an
Asset Coverage Cure Date shows an error was made in the Fund's report with
respect to such Asset Coverage Cure Date, the calculation or determination made
by the Fund's independent accountants will be conclusive and binding on the Fund
with respect to such reports. If any other Accountant's Certificate shows that
an error was made in any such report, the calculation or determination made by
the Fund's independent accountants will be conclusive and binding on the Fund;
provided, however, any errors shown in the Accountant's Certificate filed on a
quarterly basis shall not be deemed to be a failure to maintain the TAPS Basic
Maintenance Amount on any prior Valuation Dates.
(h) The Accountant's Certificates referred to in paragraph (g)
will confirm, based upon the independent accountant's review, (i) the
mathematical accuracy of the calculations reflected in the related TAPS Basic
Maintenance Amount and 1940 Act TAPS Asset Coverage Certificates, as the case
may be, and (ii) that the Fund determined whether the Fund had, at such
Valuation Date, Eligible Assets with an aggregate Discounted Value at least
equal to the Basic Maintenance Amount in accordance with the Declaration.
(i) In the event that an TAPS Basic Maintenance Certificate or
1940 Act TAPS Asset Coverage Certificate with respect to an applicable Valuation
Date is not delivered within the time periods specified in this Section 13, the
Fund shall be deemed to have failed to maintain the TAPS Basic Maintenance
Amount or the 1940 Act TAPS Asset Coverage, as the case may be, on such
Valuation Date for purposes of Section 13(b). In the event that an TAPS Basic
Maintenance Certificate or 1940 Act TAPS Asset Coverage Certificate or the
applicable Accountant's Certificates with respect to an applicable Asset
Coverage Cure Date are not delivered within the time periods specified herein,
the Fund shall be deemed to have failed to have Eligible Assets with an
aggregate Discounted Value at least equal to the TAPS Basic Maintenance Amount
or the 1940 TAPS Asset Coverage, as the case may be, as of the related Valuation
Date, and such failure shall be deemed not to have been cured as of such Asset
Coverage Cure Date for purposes of the mandatory redemption provisions.
14. [Reserved]
15. Notice. All notices or communications hereunder, unless otherwise
specified in this Statement, shall be sufficiently given if in writing and
delivered in person, by telecopier or mailed by first-class mail, postage
prepaid. Notices delivered pursuant to this Section 15 shall be deemed given on
the earlier of the date received or the date five days after which such notice
is mailed.
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16. Waiver. Holders of at least two-thirds of the Outstanding shares
of TAPS, acting collectively, or the TAPS Series TH, acting as a separate
series, may waive any provision hereof intended for their respective benefit in
accordance with such procedures as may from time to time be established by the
Board of Trustees.
17. Termination. In the event that no shares of TAPS Series TH are
Outstanding, all rights and preferences of such shares established and
designated hereunder shall cease and terminate, and all obligations of the Fund
under this Statement, shall terminate.
18. Amendment. Subject to the provisions of Section 12 of this Part
I, the Board of Trustees may, by resolution duly adopted without shareholder
approval (except as otherwise provided by this Statement or required by
applicable law), amend this Statement to (1) reflect any amendments hereto which
the Board of Trustees is entitled to adopt pursuant to the terms of this
Statement without shareholder approval or (2) add additional shares of TAPS
Series TH (and terms relating thereto). All such additional shares shall be
governed by the terms of this Statement. To the extent permitted by applicable
law, the Board of Trustees may interpret, amend or adjust the provisions of this
Statement to resolve any inconsistency or ambiguity or to remedy any formal
defect.
19. Definitions. As used in Part I and Part II of this Statement,
the following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
(a) ""aaa" Credit Rating" means a credit rating in the highest
category of a nationally recognized statistical rating organization (as used in
the rules and regulations under the Securities Exchange Act of 1934) which shall
be Moody's.
(b) "AA Composite Commercial Paper Rate" on any date means (i)
the interest equivalent of the 30-day rate, in the case of a Dividend Period
which is a Standard Rate Period or shorter, or the 180-day rate, in the case of
all other Dividend Periods, on commercial paper on behalf of issuers whose
corporate bonds are rated AA by S&P, or the equivalent of such rating by another
nationally recognized rating agency, as announced by the Federal Reserve Bank of
New York for the close of business on the Business Day immediately preceding
such date; or (ii) if the Federal Reserve Bank of New York does not make
available such a rate, then the arithmetic average of the interest equivalent of
such rates on commercial paper placed on behalf of such issuers, as quoted on a
discount basis or otherwise by the Commercial Paper Dealers to the Auction Agent
for the close of business on the Business Day immediately preceding such date
(rounded to the next highest .001 of 1%). If any Commercial Paper Dealer does
not quote a rate required to determine the AA Composite Commercial Paper Rate,
such rate shall be determined on the basis of the quotations (or quotation)
furnished by the remaining Commercial Paper Dealers (or Dealer), if any, or, if
there are no such Commercial Paper Dealers, by the Auction Agent. For purposes
of this definition, (A) "Commercial Paper Dealers" shall mean (1) Lehman
Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Goldman
Sachs & Co.; (2) in lieu of any thereof, its respective Affiliate or successor;
and (3) in the event that any of the foregoing shall cease to quote rates for
commercial paper of issuers of the sort described above, in substitution
therefor, a nationally recognized dealer in commercial paper of such issuers
then making such quotations selected by the Fund, and (B) "interest equivalent"
of a rate stated on a discount basis for commercial paper of a given number of
days' maturity shall mean a number equal to the quotient (rounded upward to the
next higher one-thousandth of 1%) of (1) such rate expressed as a decimal,
divided by (2) the difference between (x) 1.00 and (y) a fraction, the numerator
of which shall be the product of such rate expressed as a decimal, multiplied by
the number of days in which such commercial paper shall mature and the
denominator of which shall be 360.
(c) "Accountant's Certificate" has the meaning set forth in
Section 13(g) of this Part I.
(d) "Affiliate" means any person controlled by, in control of
or under common control with the Fund; provided that no Broker-Dealer controlled
by, in control of or under common control with the Fund shall be deemed to be an
Affiliate nor shall any corporation or any person controlled by, in control of
or under common control with such corporation one of the trustees, directors or
executive officers of which is also a trustee of the Fund be deemed to be an
Affiliate solely because such trustee, director or executive officer is also a
trustee of the Fund.
(e) "Agent Member" means a member of or participant in the
Securities Depository that will act on behalf of a Bidder.
(f) "All Hold Rate" means for Rate Periods of 8 days or fewer,
the 7 day London Inter-Bank Offered Rate ("LIBOR"); for Rate Periods greater
than 8 days but less than or equal to 31 days, the 30-day LIBOR; for Rate
Periods greater than 31 days but less than or equal to 61 days, the 60-day
LIBOR; for Rate Periods greater than 61 days but less than or equal to 91 days,
the 90 day LIBOR; for Rate Periods greater than 91 days but less than or equal
to 120 days, the 120 day LIBOR; for Rate Periods greater than 121 days but less
than or equal to 151 days, the 150 day LIBOR; for Rate Periods greater than 151
days but less than or equal to 181 days, the 180 day LIBOR; for Rate Periods
greater than 181 days but less than or equal to 211 days, the 210 day LIBOR; for
Rate Periods greater than 211 days but less than or equal to 241 days, the 240
day LIBOR; for Rate Periods greater than 240 days but less than or equal to 271
days, the 270 day LIBOR; for Rate Periods greater than 271 days but less than or
equal to 301 days, the 300 day LIBOR; for Rate Periods greater than 301 days but
less than or equal to 331 days, the 330 day LIBOR; for Rate Periods greater than
331 days but less than or equal to 361 days, the 360 day LIBOR; for Rate Periods
greater than 360 days, the Treasury Index Rate.
(g) "Applicable Rate" means, with respect to TAPS Series TH
for each Dividend Period (i) if Sufficient Clearing Orders exist for the Auction
in respect thereof, the Winning Bid Rate, (ii) if Sufficient Clearing Orders do
not exist for the Auction in respect thereof, the Maximum Applicable Rate and
(iii) in the case where
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all the shares of TAPS Series TH are the subject of Hold Orders for the Auction
in respect thereof, the All Hold Rate.
(h) "Approved Dealer" means Bank of America, Bank of Montreal,
The Bank of New York, Bank of Nova Scotia, Bankers Trust Company, Canadian
Imperial Bank of Commerce, Chase Bank of Texas, The Chase Manhattan Bank, CIBC,
Citibank, Citicorp USA, Credit Lyonnais, Credit Suisse First Boston, Deutsche
Bank Securities, DLJ Capital Funding, Fleet National Bank, Goldman Sachs, Harris
Trust and Savings Bank, IBJ Whitehall Bank & Trust Company, JP Morgan, Lehman,
Merrill Lynch, Morgan Guaranty Trust Company of New York, Nationsbank, Summit
Bank, Toronto Dominion, U.S. Bank National Association, USB AG or any other
broker-dealer designated in writing by the Fund provided that Moody's has not
objected, in its reasonable discretion, in writing to the Fund within three
business days of receipt of the Fund's written notice.
(i) "Approved Exchange" means, with respect to any security,
any major securities or options exchange, the NASDAQ or any other exchange or
quotation system providing regularly published securities prices designated by
the Fund in writing provided that Moody's has not objected, in its reasonable
discretion, in writing to the Fund within three business days of receipt of the
Fund's written notice.
(j) "Approved Price" means the price of Unquoted Investments,
including prices determined by the Fund in accordance with procedures adopted by
the Board of Trustees; provided, however, that the price of an Unquoted
Investment will be considered an Approved Price only to the extent the total
value of such securities does not exceed 6% of the Fund's total assets.
(k) "Approved Pricing Service" means DLJ Capital Funding, Inc.,
Merrill Lynch, Chase Securities, Inc. and/or CIBC Oppenheimer or any other
quotation service designated in writing by the Fund provided that Moody's has
not objected, in its reasonable discretion, in writing to the Fund within three
business days of receipt of the Fund's written notice.
(l) "Approved Source" means any of (i) two Approved Dealers,
(ii) an Approved Exchange or (iii) an Approved Pricing Service.
(m) "Asset Coverage Cure Date" has the meaning set forth in
Section 3(a)(ii).
(n) "Auction" means each periodic operation of the procedures set
forth under "Auction Procedures."
(o) "Auction Agent" means Bankers Trust Company unless and
until another commercial bank, trust company, or other financial institution
appointed by a resolution of the Board of Trustees enters into an agreement with
the Fund to follow the Auction Procedures for the purpose of determining the
Applicable Rate.
(p) "Auction Date" means the first Business Day next preceding
the first day of a Dividend Period for TAPS Series TH.
(q) "Auction Procedures" means the procedures for conducting
Auctions set forth in Part II hereof.
(r) "Board of Trustees" means the Board of Trustees of the
Fund or any duly authorized committee thereof as permitted by applicable law.
(s) "Beneficial Owner," with respect to shares of a series of
TAPS Series TH, means a customer of a Broker-Dealer who is listed on the records
of that Broker-Dealer (or, if applicable, the Auction Agent) as a holder of
shares of such series.
(t) "Bid" shall have the meaning specified in paragraph (a) of
Section 1 of Part II of this Statement.
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<PAGE> 112
(u) "Bidder" shall have the meaning specified in paragraph (a)
of Section 1 of Part II of this Statement; provided, however, that neither the
Fund nor any affiliate thereof shall be permitted to be a Bidder in an Auction,
except that any Broker-Dealer that is an affiliate of the Fund may be a Bidder
in an Auction, but only if the Orders placed by such Broker-Dealer are not for
its own account.
(v) "Broker-Dealer" means any broker-dealer or broker-dealers,
or other entity permitted by law to perform the functions required of a
Broker-Dealer by the Auction Procedures, that has been selected by the Fund and
has entered into a Broker-Dealer Agreement that remains effective.
(w) "Broker-Dealer Agreement" means an agreement among the
Auction Agent and a Broker- Dealer, pursuant to which such Broker-Dealer agrees
to follow the Auction Procedures.
(x) "Business Day" means a day on which the New York Stock
Exchange is open for trading and which is not a Saturday, Sunday or other day on
which banks in the City of New York, New York are authorized or obligated by law
to close.
(y) "Code" means the Internal Revenue Code of 1986, as amended.
(z) "Commercial Paper Dealers" has the meaning set forth in the
definition of AA Composite Commercial Paper Rate.
(aa) "Commission" means the Securities and Exchange Commission.
(bb) "Common Share" means the shares of beneficial interest, par
value $.01 per share, of the Fund.
(cc) "Date of Original Issue" means the date on which TAPS Series
TH is originally issued by the Fund.
(dd) "Default Period" has the meaning set forth in Section 2(c)
(ii) of this Part I.
(ee) "Default Rate" means the Reference Rate multiplied by
three (3).
(ff) "Deposit Securities" means cash and any obligations or
securities, including Short Term Money Market Instruments that are Eligible
Assets, rated at least AAA, A-1+ or SP-1+ by S&P, except that, for purposes of
section 3(a)(i) of this Part I, such obligations or securities shall be
considered "Deposit Securities" only if they are also rated at least P-1 by
Moody's.
(gg) "Dividend Default" has the meaning set forth in Section
2(c)(iii) of this Part I.
(hh) "Dividend Period" means, with respect to TAPS Series TH,
the period commencing on the Date of Original Issue thereof and ending on the
date specified for such series on the Date of Original Issue thereof and
thereafter, as to such series, the period commencing on the day following each
Dividend Period for such series and ending on the day established for such
series by the Fund.
(ii) "Eligible Assets" means Moody's Eligible Assets (if
Moody's is then rating the TAPS) and/or Other Rating Agency Eligible Assets if
any Other Rating Agency is then rating the TAPS, whichever is applicable.
(jj) "Existing Holder," with respect to shares of a series of
TAPS, shall mean a Broker-Dealer (or any such other Person as may be permitted
by the Fund) that is listed on the records of the Auction Agent as a holder of
shares of such series.
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<PAGE> 113
(kk) "Exposure Period" means the period commencing on (and
including) a given Valuation Date and ending 41 days thereafter.
(ll) "Holder" means, with respect to TAPS Series TH, the
registered holder of shares of TAPS Series TH as the same appears on the share
ledger or share records of the Fund.
(mm) "Hold Order" shall have the meaning specified in paragraph
(a) of Section 1 of Part II of this Statement.
(nn) "Mandatory Redemption Date" has the meaning set forth in
Section 3(a)(iv) of this Part I.
(oo) "Mandatory Redemption Price" has the meaning set forth in
Section 3(a)(iv) of this Part I.
(pp) "Market Value" means the product of (i) the Market Value
Price for each unit of such Moody's Eligible Asset on such date multiplied by
(ii) the number of units of such Moody's Eligible Asset held by the Fund.
(qq) "Market Value Price" means the price for each unit of
Moody's Eligible Asset at such date (a) obtained from an Approved Source,
including (i) in the case of an Approved Exchange, the closing price as of the
most recent Determination Date on such Approved Exchange, or if such Approved
Exchange is NASDAQ, the closing bid price at such date (or if such Approved
Exchange is closed for business at such date, then the most recent available
closing price or closing bid price, as the case may be), (ii) the average of the
bid prices at such date quoted by two Approved Dealers, or (iii) the price
obtained at such date from an Approved Pricing Service; (b) that constitutes an
Approved Price or (c) that constitutes a Non-Approved Price.
(rr) "Maximum Rate" means, on any date on which the Applicable
Rate is determined, the rate equal to 150% of the applicable Reference Rate,
subject to upward but not downward adjustment in the discretion of the Board of
Trustees after consultation with the Broker-Dealers, provided that immediately
following any such increase the Fund would be in compliance with the TAPS Basic
Maintenance Amount.
(ss) "Minimum Rate" means, on any Auction Date with respect to
a Dividend Period of 28 days or fewer, 70% of the AA Composite Commercial Paper
Rate at the close of business on the Business Day next preceding such Auction
Date. There shall be no Minimum Rate on any Auction Date with respect to a
Dividend Period of more than 28 days.
(tt) "Moody's" means Moody's Investors Service, Inc. and its
successors at law.
(uu) "Moody's Advance Amount" means, as of any date of
determination under the TAPS Basic Maintenance Amount, an amount equal to the
sum of (1) the Market Value of each Moody's Eligible Asset multiplied by (2) the
Moody's Advance Rate applicable to such Moody's Eligible Asset under the TAPS
Basic Maintenance Amount.
(vv) "Moody's Advance Rate" means, for the purposes of
determining the TAPS Basic Maintenance Amount, the percentage determined below:
(i) Senior Loans: for each Moody's Asset Category, the
percentage specified in the table below opposite such Moody's Asset
Category.
Asset Category Advance Rate
-------------- ------------
A 84.5%
B 73%
C 62%
D 45%
E 45%
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For the purpose of determining the Advance Rate applicable to
Senior Loan Participations at any time during the 60-day time
period described below under Moody's Eligible Assets, the Advance
Rate will be 90% of the Advance Rate calculated for such Senior
Loan pursuant to the Advance Rate table above.
(ii) Corporate Debt Securities: the percentage determined
by reference to the rating on such asset (which percentage is based
upon the Exposure Period) with reference to the remaining term to
maturity of such assets, in accordance with the table set forth below:
Moody's Advance Rate -- Corporate Debt Securities Rating Category
Maturity
of Collateral Aaa Aa A Baa Ba B Caa Unrated*
- ------------- --- -- - --- -- - --- --------
1 year - 15 years 67% 65% 63% 61% 59% 55% 49% 38%
Above 15 years - 20
years 62% 59% 56% 54% 50% 47% 38% 38%
Above 20 years 62% 59% 56% 54% 50% 46% 38% 38%
- ---------------
* If a security is unrated by Moody's but is rated by S&P, a rating two
numeric ratings below the S&P rating will be used, e.g., where the S&P
rating is AAA, a Moody's rating of Aa2 will be used; where the S&P
rating is AA+ a Moody's rating of Aa3 will be used. If a security is
unrated by either Moody's or S&P, the Fund will use the percentage set
forth under "Unrated" in this table.
For purposes of determining the Advance Rate applicable to Rule 144A
Corporate Debt Securities, the Advance Rate will be 120% of the Advance Rate
calculated for such Corporate Debt Securities pursuant to the Advance Rate table
above.
(iii) Short Term Money Market Instruments: The Moody's
Advance Rate applied to short-term portfolio securities will be (A)
97%, so long as such portfolio securities mature or have a demand
feature at par exercisable within the Exposure Period, (B) 90%, so
long as such portfolio securities mature or have a demand feature at
par not exercisable within the Exposure Period, and (C) 83%, if such
securities are not rated by Moody's, so long as such portfolio
securities are rated at least A-2/AA or SP-2/AA by S&P and mature or
have a demand feature at par exercisable within the Exposure Period. A
Moody's Advance Rate of 100% will be applied to cash.
(iv) U.S. Government Securities: the Moody's Advance Rate
applied to U.S. Government Securities (a) with a maturity at the time
of acquisition by the Fund of two years or less will be 93%, (b) with
a maturity at the time of acquisition by the Fund of more than two
years (but not more than 10 years) will be 85% and (c) with a maturity
at the time of acquisition by the Fund of more than 10 years will be
83%.
(v) Structured Notes: the Moody's Advance Rate applied to
Structured Notes will be 45%.
(ww) "Moody's Asset Category" means, for the purposes of the
TAPS Basic Maintenance Amount, the category in which the Fund shall assign each
Senior Loan that is a Moody's Eligible Asset to one of the following five
categories commencing upon the initial acquisition thereof (and, for purposes of
this categorization, the Market Value Price of a Moody's Eligible Asset trading
at par is equal to $1.00).
(xx) "Moody's Asset Category A Investments" means Performing
Senior Loans priced by an Approved Source having a Market Value Price greater
than or equal to $.90 or at an Approved Price having a Market Value Price
greater than or equal to $.90.
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<PAGE> 115
(yy) "Moody's Asset Category B Investments" means:
(i) Senior Loans which: (a) are Performing, (b) are priced
by an Approved Source or at an Approved Price and (c) have a Market
Value Price of greater than or equal to $.80 but less than $.90.
(ii) Senior Loans which: (a) are non-Performing, (b) are
priced by an Approved Source or at an Approved Price and (c) have a
Market Value Price greater than or equal to $.85.
(zz) "Moody's Asset Category C Investments" means:
(i) Senior Loans which: (a) are Performing, (b) are priced
by an Approved Source or at an Approved Price and (c) have a Market
Value Price greater than or equal to $.70 but less than $.80.
(ii) Senior Loans which: (a) are non-Performing, (b) are
priced by an Approved Source or at an Approved Price and (c) have a
Market Value Price greater than or equal to $.75 but less than $.85.
(aaa) "Moody's Asset Category D Investments" means Senior Loans
which are priced by an Approved Source or at an Approved Price but are not
described above; provided, however, that Senior Loans under Moody's Asset
Category D Investments will not exceed 20% of the Fund's total assets.
(bbb) "Moody's Asset Category E Investments" means Senior
Loans which are Unquoted Investments but are priced at a Non-Approved Price.
Notwithstanding any other provision contained above, for purposes of
determining whether a Moody's Eligible Asset falls within a specific Moody's
Asset Category, to the extent that any Moody's Eligible Asset would fall in more
than one of the five Moody's Asset Categories, such Moody's Eligible Asset shall
be deemed to fall into the Moody's Asset Category with the highest specified
Moody's Advance Rate.
(ccc) "Moody's Discount Factor" means
(ddd) "Moody's Eligible Assets" means:
(i) Senior Loans; provided, however, that Senior Loan
Participations held by the Fund for more than 60 consecutive days
during any period while any bank or other institution that sold such
participation has a long-term debt-rating of below "A-" by Fitch or S&P
or below "A3" by Moody's (unless the obligation of such bank or other
institution are guaranteed by an entity whose long-term debt
obligations are rated "A-" or better by Fitch or S&P or "A3" or better
by Moody's) will not qualify as Moody's Eligible Assets. Unquoted
Investments held by the Fund and valued at a Non-Approved Price will
qualify as Moody's Eligible Assets only up to a maximum of 20% of the
Fund's total assets.
(ii) Corporate Debt Securities will be included in
Moody's Eligible Assets if (a) such securities provide for the periodic
payment of interest in cash in U.S. dollars; (b) such securities do not
provide for conversion or exchange into equity capital at any time over
their lives; (c) for debt securities rated Ba1 and below, no more than
10% of the original amount of such issue may constitute Moody's
Eligible Assets; and (d) such securities have been registered under the
Securities Act or are restricted as to resale under federal securities
laws but are eligible for resale pursuant to Rule 144A under the
Securities Act as determined by the Fund's adviser acting subject to
the supervision of the Fund's Board of Trustees, provided that any such
Rule 144A securities are eligible to be registered within one year.
(iii) Cash (including, for this purpose, interest and
dividends due on assets rated (a) Baa3 or higher by Moody's if the
payment date is within five Business Days of the Valuation Date, (b)
A2 or higher if the payment date is within thirty days of the
Valuation Date, and (c) A1 or higher if the payment date is within the
Moody's Exposure Period) and receivables for Moody's Eligible Assets
sold if the receivable is due
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within five Business Days of the Valuation Date, and if the trades
which generated such receivables are (1) settled through clearing
house firms with respect to which the Fund has received prior written
authorization from Moody's or (2) (A) with counterparties having a
Moody's long-term debt rating of at least Baa3 or (B) with
counterparties having a Moody's Short-Term Money Market Instrument
rating of at least P-1.
(iv) Short-Term Money Market Instruments so long as
(a) such securities are rated at least P-2, (b) in the case of demand
deposits, time deposits and overnight funds, the supporting entity is
rated at least A2, or (c) in all other cases, the supporting entity (1)
is rated A2 and the security matures within one month, (2) is rated A2
and the security matures within three months or (3) is rated at least
Aa3 and the security matures within six months; provided, however, that
for purposes of this definition, such instruments (other than
commercial paper rated by S&P and not rated by Moody's) need not meet
any otherwise applicable S&P rating criteria.
(v) Structured Notes, provided that (a) payments of
interest and principal are not denominated in, nor determined by
reference to, a foreign currency, (b) the Structured Notes are rated by
Moody's or Standard & Poors, (c) such Structured Notes are not junior
to any other Structured Notes of such issuer and (d) all such
Structured Notes will not exceed 5% of the Fund's total assets.
(vi) In addition, portfolio holdings must be within
the following diversification requirements: (a) no more than 25% of the
Fund's total assets (taken at current value) can be invested in the
securities of borrowers and other issuers having their principal
business activities in the same Moody's Industry Classification (the
electric, gas, water and telephone utility industries, commercial
banks, thrift institutions and finance companies being treated as
separate industries for purposes of this restriction); provided, that
this limitation shall not apply with respect to obligations issued or
guaranteed by the U.S. Government or by its agencies or
instrumentalities and provided further that for purposes of this
subsection (a), the term "issuer" shall not include a lender selling a
participation to the Fund together with any other person
interpositioned between such lender and the Fund with respect to a
participation and (b) no more that 10% of the Fund's total assets can
be invested in securities of a single issuer or if as a result the Fund
would hold more than 10% of the outstanding voting securities of any
single issuer; provided that, with respect to 50% of the Fund's total
assets, the Fund may invest up to 25% of its total assets in the
securities of any one issuer. For purposes of this subsection (b), the
term "issuer" includes both the borrower under a loan agreement and the
lender selling a participation to the Fund together with any other
persons interpositioned between such lender and the Fund with respect
to a participation.
(eee) "Moody's Industry Classification" means, , for the
purposes of determining Moody's Eligible Assets, each of the following industry
classifications:
1. Aerospace and Defense: Major Contractor, Subsystems, Research,
Aircraft Manufacturing, Arms, Ammunition
2. Automobile: Automobile Equipment, Auto-Manufacturing, Auto Parts
Manufacturing, Personal Use Trailers, Motor Homes, Dealers
3. Banking: Bank Holding, Savings and Loans, Consumer Credit, Small
Loan, Agency, Factoring, Receivables
4. Beverage, Food and Tobacco: Beer and Ale, Distillers, Wines and
Liquors, Distributors, Soft Drink Syrup, Bottlers, Bakery, Mill
Sugar, Canned Foods, Corn Refiners, Dairy Products, Meat
Products, Poultry Products, Snacks, Packaged Foods, Distributors,
Candy, Gum, Seafood, Frozen Food, Cigarettes, Cigars, Leaf/Snuff,
Vegetable Oil
5. Buildings and Real Estate: Brick, Cement, Climate Controls,
Contracting, Engineering, Construction, Hardware, Forest Products
(building-related only), Plumbing, Roofing, Wallboard, Real
Estate, Real Estate Development, REITs, Land Development
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<PAGE> 117
6. Chemicals, Plastics and Rubber: Chemicals (non-agriculture),
Industrial Gases, Sulphur, Plastics, Plastic Products, Abrasives,
Coatings, Paints, Varnish, Fabricating
7. Containers, Packaging and Glass: Glass, Fiberglass, Containers
made of: Glass, Metal, Paper, Plastic, Wood or Fiberglass
8. Personal and Non-Durable Consumer Products (Manufacturing Only):
Scaps, Perfumes, Cosmetics, Toiletries, Cleaning Supplies, School
Supplies
9. Diversified/Conglomerate Manufacturing
10. Diversified/Conglomerate Service
11. Diversified Natural Resources, Precious Metals and Minerals:
Fabricating, Distribution, Mining and Sales
12. Ecological: Pollution Control, Waste Removal, Waste Treatment
and Waste Disposal
13. Electronics: Computer Hardware, Electric Equipment, Components,
Controllers, Motors, Household Appliances, Information Service
Communicating Systems, Radios, TVS, Tape Machines, Speakers,
Printers, Drivers, Technology
14. Finance: Investment Brokerage, Leasing, Syndication, Securities
15. Farming and Agriculture: Livestock, Grains, Produce, Agriculture
Chemicals, Agricultural Equipment, Fertilizers
16. Grocery: Grocery Stores, Convenience Food Stores
17. Healthcare, Education and Childcare: Ethical Drugs, Proprietary
Drugs, Research, Health Care Centers, Nursing Homes, HMOs,
Hospitals, Hospital Supplies, Medical Equipment
18. Home and Office Furnishings, Housewares, and Durable Consumer
Products: Carpets, Floor Coverings, Furniture, Cooking, Ranges
19. Hotels, Motels, Inns and Gaming
20. Insurance: Life, Property and Casualty, Broker, Agent, Surety
21. Leisure, Amusement, Entertainment: Boating, Bowling, Billiards,
Musical Instruments, Fishing, Photo Equipment, Records, Tapes,
Sports, Outdoor Equipment (Camping), Tourism, Resorts, Games, Toy
Manufacturing
22. Machinery (Non-Agriculture, Non-Construction, Non-Electronic):
Industrial, Machine Tools, Steam Generators
23. Mining, Steel, Iron and Non-Precious Metals: Coal, Copper, Lead,
Uranium, Zinc, Aluminum, Stainless Steel, Integrated Steel, Ore
Production, Refractories, Steel Mill Machinery, Mini-Mills,
Fabricating, Distribution and Sales
24. Oil and Gas: Crude Producer, Retailer, Well Supply, Service and
Drilling
25. Personal, Food and Miscellaneous
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26. Printing and Publishing: Graphic Arts, Paper, Paper Products,
Business Forms, Magazines, Books, Periodicals, Newspapers,
Textbooks
27. Cargo Transport: Rail, Shipping, Railroads, Rail-car Builders,
Ship Builders, Containers, Container Builders, Parts, Overnight
Mail, Trucking, Truck Manufacturing, Trailer Manufacturing, Air
Cargo, Transport
28. Retail Stores: Apparel, Toy, Variety, Drugs, Department, Mail
Order Catalog, Showroom
29. Cellular
30. Data and Internet Services
31. Satellite
32. Telecommunications Equipment
33. Other Telecommunications
34. Textiles and Leather: Producer, Synthetic Fiber, Apparel
Manufacturer, Leather Shoes
35. Utilities: Electric, Water, Hydro Power, Gas, Diversified
36. Radio and TV Broadcasting
37. North American Cable
38. Foreign Cable, Foreign TV, Radio and Equipment
39. Other Broadcasting and Entertainment
The Fund will use its discretion in determining which industry
classification is applicable to a particular investment in consultation with the
independent auditor and the rating agencies, as necessary.
(fff) "1940 Act TAPS Asset Coverage" means asset coverage, as
determined in accordance with Section 18(h) of the 1940 Act, of at least 200%
with respect to all outstanding senior securities of the Fund which are stock,
including all Outstanding TAPS (or such other asset coverage as may in the
future be specified in or under the 1940 Act as the minimum asset coverage for
senior securities which are stock of a closed-end investment company as
a condition of declaring dividends on its common shares), determined on the
basis of values calculated as of a time within 48 hours next preceding the time
of such determination.
(ggg) "1940 Act" means the Investment Company Act of 1940, as
amended from time to time.
(hhh) "1940 Act TAPS Asset Coverage Certificate" means the
certificate required to be delivered by the Fund pursuant to Section 13(e) of
this Part I.
(iii) "Non-Approved Price" means the price of Unquoted
Investments, including prices determined by the Fund in accordance with
procedures adopted by the Board of Trustees; provided, however, that the Fund
will receive a quotation from an Approved Source at least quarterly.
(jjj) "Notice of Redemption" means any notice with respect to
the redemption of shares of TAPS pursuant to Section 3.
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(kkk) "Order" shall have the meaning specified in paragraph (a)
of Section 1 of Part II of this Statement.
(lll) "Other Rating Agency" means any rating agency other than
Moody's then providing a rating for the TAPS pursuant to the request of the
Fund.
(mmm) "Other Rating Agency Eligible Assets" means assets of
the Fund designated by any Other Rating Agency as eligible for inclusion in
calculating the discounted value of the Fund's assets in connection with such
Other Rating Agency's rating of TAPS Series TH.
(nnn) "Outstanding" or "outstanding" means, as of any date,
shares of TAPS theretofore issued by the Fund except, without duplication, (i)
any shares of TAPS theretofore canceled, redeemed or repurchased by the Fund, or
delivered to the Auction Agent for cancellation or with respect to which the
Fund has given notice of redemption and irrevocably deposited with the Paying
Agent sufficient funds to redeem such shares of TAPS and (ii) any shares of TAPS
represented by any certificate in lieu of which a new certificate has been
executed and delivered by the Fund. Notwithstanding the foregoing, (A) for
purposes of voting rights (including the determination of the number of shares
required to constitute a quorum), any shares of the TAPS to which the Fund or
any Affiliate of the Fund shall be the Existing Holder shall be disregarded and
not deemed Outstanding; (B) in connection with any Auction, any shares of the
TAPS Series TH as to which the Fund or any person known to the Auction Agent to
be an Affiliate of the Fund shall be the Existing Holder thereof shall be
disregarded and deemed not to be Outstanding; and (C) for purposes of
determining the TAPS Basic Maintenance Amount, shares of TAPS held by the Fund
shall be disregarded and not deemed Outstanding but shares held by any Affiliate
of the Fund shall be deemed Outstanding.
(ooo) "Paying Agent" means Bankers Trust Company unless and
until another entity appointed by a resolution of the Board of Trustees enters
into an agreement with the Fund to serve as paying agent, which paying agent may
be the same as the Auction Agent.
(ppp) "Performing" means the issuer of such Senior Loans is
not in default of any payment obligation in respect thereof.
(qqq) "Person" or "person" means and includes an individual, a
partnership, a Fund, a trust, an unincorporated association, a joint venture or
other entity or a government or any agency or political subdivision thereof.
(rrr) "Potential Beneficial Owner," with respect to shares of
a series of TAPS, shall mean a customer of a Broker-Dealer that is not a
Beneficial Owner of shares of such series but that wishes to purchase shares of
such series, or that is a Beneficial Owner of shares of such series that wishes
to purchase additional shares of such series.
(sss) "Preferred Share" means the preferred shares of beneficial
interest, par value $.01 per share, including the TAPS of the Fund from time to
time.
(ttt) "Rating Default" has the meaning set forth in Section
2(c)(ii) of Part I of this Statement.
(uuu) "Rating Default Cure Date" has the meaning set forth in
Section 3(a)(iii) of this Part I.
(vvv) "Redemption Default" has the meaning set forth in
Section 2(c)(ii) of this Part I.
(www) "Redemption Price" has the meaning set forth in Section
3(a)(i) of this Part I.
(xxx) "Reference Rate" means, with respect to the
determination of the Maximum Rate, the applicable AA Composite Commercial Paper
Rate (for a Dividend Period of fewer than 184 days) or the applicable Treasury
Index Rate (for a Dividend Period of 184 days or more).
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(yyy) "Rule 144A Securities" means securities which are
restricted as to resale under federal securities laws but are eligible for
resale pursuant to Rule 144A under the Securities Act as determined by the
Fund's adviser acting subject to the supervision of the Fund's Board of
Trustees.
(zzz) "S&P" means Standard & Poor's Fund and its successors
at law.
(aaaa) "Securities Act" means the Securities Act of 1933, as
amended from time to time.
(bbbb) "Securities Depository" means The Depository Trust
Company and its successors and assigns or any successor securities depository
selected by the Fund that agrees to follow the procedures required to be
followed by such securities depository in connection with the shares of TAPS
Series TH.
(cccc) "Sell Order" shall have the meaning specified in paragraph
(a) of Section 1 of Part II of this Statement.
(dddd) "Senior Loan" means direct purchases of, assignments of,
participation in and other interests in adjustable rate, U.S. dollar-denominated
senior loans.
(eeee) "Senior Loan Participations" means participations by
the Fund in a lender's portion of Senior Loans where the Fund has a contractual
relationship with such lender and not the borrower.
(ffff) "Short-Term Money Market Instrument" means the following
types of instruments if, on the date of purchase or other acquisition thereof by
the Fund, the remaining terms to maturity thereof are not in excess of 180 days
for instruments rated at least Aa3 or 270 days for instruments rated at least
Aaa for purposes of determining Moody's Eligible Assets:
(i) commercial paper that is rated as of each Valuation
Date P-2 by Moody's and either F-2 by Fitch or A-2 by S&P,
respectively;
(ii) demand or time deposits in, certificates of
deposit of (A) a depository institution or trust company incorporated
under the laws of the United States of America or any state thereof or
the District of Columbia or (B) a United States branch office or agency
of a foreign depository institution (provided that such branch office
or agency is subject to banking regulation under the laws of the United
States, any state thereof or the District of Columbia) if, in each
case, the certificates of deposit, if any, and the long-term unsecured
debt obligations (other than such obligations the ratings of which are
based on the credit of a person or entity other than such depository
institution or trust company) of such depository institution or trust
company that have (1) credit ratings on each Valuation Date of at least
P-2 from Moody's and either F-2 from Fitch or A-2 from S&P, in the case
of commercial paper or certificates of deposit, and (2) credit ratings
on each Valuation Date of at least Aa3 from Moody's and either AA- from
Fitch or AA- from S&P, in the case of long-term unsecured debt
obligations; provided, however, that in the case of any such investment
that matures in no more than one Business Day from the date of purchase
or other acquisition by the Fund, all of the foregoing requirements
shall be applicable except that the required long-term unsecured debt
credit rating of such depository institution or trust company from
Moody's, Fitch and S&P shall be at least A2, A and A, respectively; and
provided further, however, that the foregoing credit rating
requirements shall be deemed to be met with respect to a depository
institution or trust company if (1) such depository institution or
trust company is the principal depository institution in a holding
company system, (2) the certificates of deposit, if any, of such
depository institution or trust company are not rated on any Valuation
Date below P-2 by Moody's, F-2 by Fitch or A-2 by S&P and there is no
long-term rating, and (3) the holding company shall meet all of the
foregoing credit rating requirements (including the preceding proviso
in the case of investments that mature in no more than one Business Day
from the date of purchase or other acquisition by the Fund);
(iii) next-day federal funds; and
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(iv) Eurodollar demand or time deposits in, or
certificates of deposit of, the head office or the London branch office
of a depository institution or trust company meeting the credit rating
requirements of commercial paper and long-term unsecured debt
obligations specified in clause (ii) above, provided that the interest
receivable by the Fund shall not be subject to any withholding or
similar taxes.
(gggg) "Special Rate Period" means a Dividend Period that
is not a Standard Rate Period.
(hhhh) "Specific Redemption Provisions" means, with respect
to any Special Rate Period of more than one year, either, or any combination of
(i) a period (a "Non-Call Period") determined by the Board of Trustees after
consultation with the Broker-Dealers, during which the shares subject to such
Special Rate Period are not subject to redemption at the option of the Fund
pursuant to Section 3(a)(i) and/or Section 3(a)(ii) and/or 3(a)(iii) and (ii) a
period (a "Premium Call Period"), consisting of a number of whole years as
determined by the Board of Trustees after consultation with the Broker-Dealers,
during each year of which the shares subject to such Special Rate Period shall
be redeemable at the Fund's option pursuant to Section 3(a)(i) and/or in
connection with any mandatory redemption pursuant to Section 3(a)(ii) and/or
3(a)(iii) at a price per share equal to $25,000 plus accumulated but unpaid
dividends plus a premium expressed as a percentage or percentages of $25,000 or
expressed as a formula using specified variables as determined by the Board of
Trustees after consultation with the Broker-Dealers.
(iiii) "Standard Rate Period" means a Dividend Period of 28
days, unless such 28th day is not a Business Day, then the number of days ending
on the Business Day next preceding such 28th day.
(jjjj) "Structured Notes" mean privately negotiated debt
obligations with rates of return determined by reference to the total rate of
return on one or more Senior Loans referenced in such notes.
(kkkk) "Submission Deadline" means 1:30 P.M., New York City
time, on any Auction Date or such other time on any Auction Date by which
Broker-Dealers are required to submit Orders to the Auction Agent as specified
by the Auction Agent from time to time.
(llll) "Submitted Bid" shall have the meaning specified in
paragraph (a) of Section 3 of Part II of this Statement.
(mmmm) "Submitted Hold Order" shall have the meaning specified
in paragraph (a) of Section 3 of Part II of this Statement.
(nnnn) "Submitted Order" shall have the meaning specified in
paragraph (a) of Section 3 of Part II of this Statement.
(oooo) "Submitted Sell Order" shall have the meaning specified
in paragraph (a) of Section 3 of Part II of this Statement.
(pppp) "Sufficient Clearing Bids" shall have the meaning
specified in paragraph (a) of Section 3 of Part II of this Statement.
(qqqq) "TAPS" means Taxable Auctioned Preferred Shares,
liquidation preference $25,000 per share, Series TH of the Fund or any other
series of Preferred Shares heretofore or hereinafter designated "Taxable
Auctioned Preferred Shares" by a Statement.
(rrrr) "TAPS Basic Maintenance Amount" as of any Valuation
Date means the dollar amount equal to the sum of
(i) (A) the sum of the products resulting from multiplying
the number of Outstanding shares of each series of TAPS on such date
by the liquidation preference per share of such series; (B) the
aggregate amount of dividends that will have accumulated at the
Applicable Rate (whether or not earned or declared) to and including
the first following Dividend Payment Date for each share of TAPS
Outstanding that
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follows such Valuation Date (or to the 42nd day after such Valuation
Date, if such 42nd day occurs before the first following Dividend
Payment Date); (C) the aggregate amount of dividends that would
accumulate at the then current Maximum Rate for a Standard Rate Period
multiplied by the Volatility Factor on any shares of TAPS Outstanding
from the first day following the Dividend Payment Date referred to in
(B) above through the 42nd day after such Valuation Date, only if such
42nd day occurs after the first day following the Dividend Payment
Date, except that if such Valuation Date occurs during a Default
Period, the dividend for purposes of the calculation would accumulate
at the Default Rate; (D) the amount of anticipated Fund expenses for
the 90 days subsequent to such Valuation Date; (E) any current
liabilities, including, without limitation, any indebtedness service to
the TAPS and indebtedness due within one year and any redemption
premium due with respect to shares of TAPS for which a Notice of
Redemption has been given, as of such Valuation Date to the extent not
reflected in any of (i)(A) through (i)(D); and (F) without duplication,
10% of the exercise price of any call option written by the Fund and
the exercise price of any put option written by the Fund; less
(ii) the sum of any cash or the Moody's Advance Amount for
Fund assets irrevocably deposited by the Fund for the payment of any
of (i)(B) through (i)(F) (except that if the security matures prior to
the relevant redemption payment date and is either fully guaranteed by
the U.S. Government or is rated P2 by Moody's and A2 by S&P, it will
be valued at its face value).
(ssss) "TAPS Basic Maintenance Certificate" has the meaning set
forth in Section 13(d) of this Part I.
(tttt) "TAPS Series TH" means the shares of Series TH of the
TAPS or any other shares of Preferred Stock hereinafter designated as shares of
Series TH of the TAPS.
(uuuu) "Treasury Index Rate" means the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest rate
securities having the same number of 30-day periods to maturity as the length of
the applicable Dividend Period, determined, to the extent necessary, by linear
interpolation based upon the yield for such securities having the next shorter
and next longer number of 30-day periods to maturity treating all Dividend
Periods with a length greater than the longest maturity for such securities as
having a length equal to such longest maturity, in all cases based upon data set
forth in the most recent weekly statistical release published by the Board of
Governors of the Federal Reserve System (currently in H.15(519)); provided,
however, if the most recent such statistical release shall not have been
published during the 15 days preceding the date of computation, the foregoing
computations shall be based upon the average of comparable data as quoted to the
Fund by at least three recognized dealers in U.S. Government securities selected
by the Fund.
(vvvv) "Unquoted Investment" means Senior Loans for which the
Market Value Price has not been obtained from an Approved Source and which are
valued in accordance with the Fund's registration statement.
(wwww) "U.S. Government Securities" mean securities that are
direct obligations of, and obligations the timely payment of principal and
interest on which is fully guaranteed by, the United States of America or any
agency or instrumentality of the United States of America, the obligations of
which are backed by the full faith and credit of the United States of America
and in the form of conventional bills, bonds and notes.
(xxxx) "Valuation Date" means every Friday, or, if such day is
not a Business Day, the next preceding Business Day; provided, however, that the
first Valuation Date may occur on any other date established by the Fund;
provided, further, however, that such date shall be not more than one week from
the date on which TAPS Series TH initially is issued.
(yyyy) "Volatility Factor" means [1.89].
(zzzz) "Winning Bid Rate" has the meaning set forth in Section
3(a)(iii) of Part II of this Statement.
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20. Interpretation. References to sections, subsections, clauses,
sub-clauses, paragraphs and subparagraphs are to such sections, subsections,
clauses, sub-clauses, paragraphs and subparagraphs contained in this Part I or
Part II hereof, as the case may be, unless specifically identified otherwise.
PART II: AUCTION PROCEDURES
1. Orders
(a) Prior to the Submission Deadline on each Auction Date for
shares of a series of TAPS:
(i) each Beneficial Owner of shares of such series may
submit to its Broker-Dealer by telephone or otherwise information
as to:
(A) the number of Outstanding shares, if any, of such
series held by such Beneficial Owner which such Beneficial Owner
desires to continue to hold without regard to the Applicable Rate for
shares of such series for the next succeeding Rate Period of such
shares;
(B) the number of Outstanding shares, if any, of such
series held by such Beneficial Owner which such Beneficial Owner
offers to sell if the Applicable Rate for shares of such series for
the next succeeding Rate Period of shares of such series shall be less
than the rate per annum specified by such Beneficial Owner; and/or
(C) the number of Outstanding shares, if any, of such
series held by such Beneficial Owner which such Beneficial Owner offers
to sell without regard to the Applicable Rate for shares of such series
for the next succeeding Rate Period of shares of such series;
and
(ii) one or more Broker-Dealers, using lists of Potential
Beneficial Owners, shall in good faith for the purpose of conducting a
competitive Auction in a commercially reasonable manner, contact
Potential Beneficial Owners (by telephone or otherwise), including
Persons that are not Beneficial Owners, on such lists to determine the
number of shares, if any, of such series which each such Potential
Beneficial Owner offers to purchase if the Applicable Rate for shares
of such series for the next succeeding Rate Period of shares of such
series shall not be less than the rate per annum specified by such
Potential Beneficial Owner.
For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the
Auction Agent, of information referred to in clause (i) (A) (i), (B), (i) (C) or
(ii) of this paragraph (a) is hereinafter referred to as an "Order" and
collectively as "Orders" and each Beneficial Owner and each Potential Beneficial
Owner placing an Order with a Broker-Dealer, and such Broker-Dealer placing an
Order with the Auction Agent, is hereinafter referred to as a "Bidder" and
collectively as "Bidders"; an Order containing the information referred to in
clause (i)(A) of this paragraph (a) is hereinafter referred to as a "Hold Order"
and collectively as "Hold Orders"; an Order containing the information referred
to in clause (i)(B) or (ii) of this paragraph (a) is hereinafter referred to as
a "Bid" and collectively as "Bids"; and an Order containing the information
referred to in clause (i)(C) of this paragraph (a) is hereinafter referred to as
a "Sell Order" and collectively as "Sell Orders."
(b) (i) A Bid by a Beneficial Owner or an Existing Holder of
shares of a series of TAPS subject to an Auction on any Auction Date
shall constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of such series
specified in such Bid if the Applicable Rate for shares of such
series determined on such Auction Date shall be less than the
rate specified therein;
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(B) such number or a lesser number of Outstanding shares
of such series to be determined as set forth in clause (iv) of
paragraph (a) of Section 4 of this Part II if the Applicable Rate
for shares of such series determined on such Auction Date shall
be equal to the rate specified therein; or
(C) the number of Outstanding shares of such series
specified in such Bid if the rate specified therein shall be
higher than the Maximum Rate for shares of such series, or such
number or a lesser number of Outstanding shares of such series to
be determined as set forth in clause (iii) of paragraph (b) of
Section 4 of this Part II if the rate specified therein shall be
higher than the Maximum Rate for shares of such series and
Sufficient Clearing Bids for shares of such series do not exist.
(ii) A Sell Order by a Beneficial Owner or an
Existing Holder of shares of a series of TAPS subject to an Auction on
any Auction Date shall constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of such series
specified in such Sell Order; or
(B) such number or a lesser number of Outstanding shares
of such series as set forth in clause (iii) of paragraph (b) of
Section 4 of this Part II if Sufficient Clearing Bids for shares
of such series do not exist;
PROVIDED, HOWEVER, that a Broker-Dealer that is an Existing Holder with respect
to shares of a series of TAPS shall not be liable to any Person for failing to
sell such shares pursuant to a Sell Order described in the proviso to paragraph
(c) of Section 2 of this Part II if (1) such shares were transferred by the
Beneficial Owner thereof without compliance by such Beneficial Owner or its
transferee Broker-Dealer (or other transferee person, if permitted by the Fund)
with the provisions of Section 7 of this Part II or (2) such Broker-Dealer has
informed the Auction Agent pursuant to the terms of its Broker-Dealer Agreement
that, according to such Broker-Dealer's records, such Broker-Dealer believes it
is not the Existing Holder of such shares.
(iii) A Bid by a Potential Beneficial Holder or a
Potential Holder of shares of a series of TAPS subject to an Auction on
any Auction Date shall constitute an irrevocable offer to purchase:
(A) the number of Outstanding shares of such series
specified in such Bid if the Applicable Rate for shares of such
series determined on such Auction Date shall be higher than the
rate specified therein; or
(B) such number or a lesser number of Outstanding
shares of such series as set forth in clause (v) of paragraph (a)
of Section 4 of this Part II if the Applicable Rate for shares of
such series determined on such Auction Date shall be equal to the
rate specified therein.
(c) No Order for any number of shares of TAPS other than whole
shares shall be valid.
2. Submission of Orders by Broker-Dealers to Auction Agent
(a) Each Broker-Dealer shall submit in writing to the Auction
Agent prior to the Submission Deadline on each Auction Date all Orders for
shares of TAPS of a series subject to an Auction on such Auction Date obtained
by such Broker-Dealer, designating itself (unless otherwise permitted by the
Fund) as an Existing Holder in respect of shares subject to Orders submitted or
deemed submitted to it by Beneficial Owners and as a Potential Holder in respect
of shares subject to Orders submitted to it by Potential Beneficial Owners, and
shall specify with respect to each Order for such shares:
(i) the name of the Bidder placing such Order (which
shall be the Broker-Dealer unless otherwise permitted by the Fund);
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(ii) the aggregate number of shares of such series that
are the subject of such Order;
(iii) to the extent that such Bidder is an Existing Holder
of shares of such series:
(A) the number of shares, if any, of such series
subject to any Hold Order of such Existing Holder;
(B) the number of shares, if any, of such series
subject to any Bid of such Existing Holder and the rate specified
in such Bid; and
(C) the number of shares, if any, of such series
subject to any Sell Order of such Existing Holder; and
(iv) to the extent such Bidder is a Potential Holder
of shares of such series, the rate and number of shares of such series
specified in such Potential Holder's Bid.
(b) If any rate specified in any Bid contains more than three
figures to the right of the decimal point, the Auction Agent shall round such
rate up to the next highest one thousandth (.001) of 1%.
(c) If an Order or Orders covering all of the Outstanding
shares of TAPS of a series held by any Existing Holder is not submitted to the
Auction Agent prior to the Submission Deadline, the Auction Agent shall deem a
Hold Order to have been submitted by or on behalf of such Existing Holder
covering the number of Outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent; PROVIDED,
HOWEVER, that if an Order or Orders covering all of the Outstanding shares of
such series held by any Existing Holder is not submitted to the Auction Agent
prior to the Submission Deadline for an Auction relating to a Special Rate
Period consisting of more than 28 Rate Period Days, the Auction Agent shall deem
a Sell Order to have been submitted by or on behalf of such Existing Holder
covering the number of outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent.
(d) If one or more Orders of an Existing Holder is submitted
to the Auction Agent covering in the aggregate more than the number of
Outstanding shares of TAPS of a series subject to an Auction held by such
Existing Holder, such Orders shall be considered valid in the following order of
priority:
(i) all Hold Orders for shares of such series shall
be considered valid, but only up to and including in the aggregate the
number of Outstanding shares of such series held by such Existing
Holder, and if the number of shares of such series subject to such
Hold Orders exceeds the number of Outstanding shares of such series
held by such Existing Holder, the number of shares subject to each
such Hold Order shall be reduced pro rata to cover the number of
Outstanding shares of such series held by such Existing Holder;
(ii) (A) any Bid for shares of such series shall be
considered valid up to and including the excess of the number of
Outstanding shares of such series held by such Existing Holder over the
number of shares of such series subject to any Hold Orders referred to
in clause (i) above;
(B) subject to subclause (A), if more than one Bid of
an Existing Holder for shares of such series is submitted to the
Auction Agent with the same rate and the number of Outstanding
shares of such series subject to such Bids is greater than such
excess, such Bids shall be considered valid up to and including
the amount of such excess, and the number of shares of such
series subject to each Bid with the same rate shall be reduced
pro rata to cover the number of shares of such series equal to
such excess;
(C) subject to subclauses (A) and (B), if more than
one Bid of an Existing Holder for shares of such series is
submitted to the Auction Agent with different rates, such Bids
shall
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be considered valid in the ascending order of their respective
rates up to and including the amount of such excess; and
(D) in any such event, the number, if any, of such
Outstanding shares of such series subject to any portion of Bids
considered not valid in whole or in part under this clause (ii)
shall be treated as the subject of a Bid for shares of such
series by or on behalf of a Potential Holder at the rate therein
specified; and
(iii) all Sell Orders for shares of such series shall
be considered valid up to and including the excess of the number of
Outstanding shares of such series held by such Existing Holder over the
sum of shares of such series subject to valid Hold Orders referred to
in clause (i) above and valid Bids referred to in clause (ii) above.
(e) If more than one Bid for one or more shares of a series of
TAPS is submitted to the Auction Agent by or on behalf of any Potential Holder,
each such Bid submitted shall be a separate Bid with the rate and number of
shares therein specified.
(f) Any Order submitted by a Beneficial Owner or a Potential
Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction
Agent, prior to the Submission Deadline on any Auction Date, shall be
irrevocable.
3. Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate
(a) Not earlier than the Submission Deadline on each Auction
Date for shares of a series of TAPS, the Auction Agent shall assemble all valid
Orders submitted or deemed submitted to it by the Broker-Dealers in respect of
shares of such series (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Hold
Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as
a "Submitted Order" and collectively as "Submitted Hold Orders," "Submitted
Bids" or "Submitted Sell Orders," as the case may be, or as "Submitted Orders")
and shall determine for such series:
(i) the excess of the number of Outstanding shares of
such series over the number of Outstanding shares of such series
subject to Submitted Hold Orders (such excess being hereinafter
referred to as the "Available TAPS" of such series);
(ii) from the Submitted Orders for shares of such series
whether:
(A) the number of Outstanding shares of such series
subject to Submitted Bids of Potential Holders specifying one or
more rates between the Minimum Rate (for Standard Rate Periods or
less, only) and the Maximum Rate (for All Rate Periods) for
shares of such series;
exceeds or is equal to the sum of:
(B) the number of Outstanding shares of such series
subject to Submitted Bids of Existing Holders specifying one or
more rates between the Minimum Rate (for Standard Rate Periods or
less, only) and the Maximum Rate (for all Rate Periods) for
shares of such series; and
(C) the number of Outstanding shares of such series
subject to Submitted Sell Orders
(in the event such excess or such equality exists (other than because
the number of shares of such series in subclauses (B) and (C) above is
zero because all of the Outstanding shares of such series are subject
to Submitted Hold Orders), such Submitted Bids in subclause (A) above
being hereinafter referred to collectively as "Sufficient Clearing
Bids" for shares of such series); and
A-32
<PAGE> 127
(iii) if Sufficient Clearing Bids for shares of such
series exist, the lowest rate specified in such Submitted Bids (the
"Winning Bid Rate" for shares of such series) which if:
(A) (I) each such Submitted Bid of Existing Holders
specifying such lowest rate and (II) all other such Submitted
Bids of Existing Holders specifying lower rates were rejected,
thus entitling such Existing Holders to continue to hold the
shares of such series that are subject to such Submitted Bids;
and
(B) (I) each such Submitted Bid of Potential Holders
specifying such lowest rate and (II) all other such Submitted
Bids of Potential Holders specifying lower rates were accepted;
would result in such Existing Holders described in subclause (A) above
continuing to hold an aggregate number of Outstanding shares of such
series which, when added to the number of Outstanding shares of such
series to be purchased by such Potential Holders described in subclause
(B) above, would equal not less than the Available TAPS of such series.
(b) Promptly after the Auction Agent has made the determinations
pursuant to paragraph (a) of this Section 3, the Auction Agent shall advise the
Fund of the Minimum Rate and Maximum Rate for shares of the series of TAPS for
which an Auction is being held on the Auction Date and, based on such
determination, the Applicable Rate for shares of such series for the next
succeeding Rate Period thereof as follows:
(i) if Sufficient Clearing Bids for shares of such
series exist, that the Applicable Rate for all shares of such series
for the next succeeding Rate Period thereof shall be equal to the
Winning Bid Rate for shares of such series so determined;
(ii) if Sufficient Clearing Bids for shares of such
series do not exist (other than because all of the Outstanding shares
of such series are subject to Submitted Hold Orders), that the
Applicable Rate for all shares of such series for the next succeeding
Rate Period thereof shall be equal to the Maximum Rate for shares of
such series; or
(iii) if all of the Outstanding shares of such series
are subject to Submitted Hold Orders, that the Applicable Rate for all
shares of such series for the next succeeding Rate Period thereof shall
be All Hold Rate.
4. Acceptance and Rejection of Submitted Bids and Submitted Sell
Orders and Allocation of Shares
Existing Holders shall continue to hold the shares of TAPS that are
subject to Submitted Hold Orders, and, based on the determinations made pursuant
to paragraph (a) of Section 3 of this Part II, the Submitted Bids and Submitted
Sell Orders shall be accepted or rejected by the Auction Agent and the Auction
Agent shall take such other action as set forth below:
(a) If Sufficient Clearing Bids for shares of a series of TAPS
have been made, all Submitted Sell Orders with respect to shares of such series
shall be accepted and, subject to the provisions of paragraphs (d) and (e) of
this Section 4, Submitted Bids with respect to shares of such series shall be
accepted or rejected as follows in the following order of priority and all other
Submitted Bids with respect to shares of such series shall be rejected:
(i) Existing Holders' Submitted Bids for shares of
such series specifying any rate that is higher than the Winning Bid
Rate for shares of such series shall be accepted, thus requiring each
such Existing Holder to sell the shares of TAPS subject to such
Submitted Bids;
(ii) Existing Holders' Submitted Bids for shares of
such series specifying any rate that is lower than the Winning Bid Rate
for shares of such series shall be rejected, thus entitling each such
Existing Holder to continue to hold the shares of TAPS subject to such
Submitted Bids;
A-33
<PAGE> 128
(iii) Potential Holders' Submitted Bids for shares of
such series specifying any rate that is lower than the Winning Bid Rate
for shares of such series shall be accepted;
(iv) each Existing Holder's Submitted Bid for shares
of such series specifying a rate that is equal to the Winning Bid Rate
for shares of such series shall be rejected, thus entitling such
Existing Holder to continue to hold the shares of TAPS subject to such
Submitted Bid, unless the number of Outstanding shares of TAPS subject
to all such Submitted Bids shall be greater than the number of shares
of TAPS ("remaining shares") in the excess of the Available TAPS of
such series over the number of shares of TAPS subject to Submitted Bids
described in clauses (ii) and (iii) of this paragraph (a), in which
event such Submitted Bid of such Existing Holder shall be rejected in
part, and such Existing Holder shall be entitled to continue to hold
shares of TAPS subject to such Submitted Bid, but only in an amount
equal to the number of shares of TAPS of such series obtained by
multiplying the number of remaining shares by a fraction, the numerator
of which shall be the number of Outstanding shares of TAPS held by such
Existing Holder subject to such Submitted Bid and the denominator of
which shall be the aggregate number of Outstanding shares of TAPS
subject to such Submitted Bids made by all such Existing Holders that
specified a rate equal to the Winning Bid Rate for shares of such
series; and
(v) each Potential Holder's Submitted Bid for shares
of such series specifying a rate that is equal to the Winning Bid Rate
for shares of such series shall be accepted but only in an amount equal
to the number of shares of such series obtained by multiplying the
number of shares in the excess of the Available TAPS of such series
over the number of shares of TAPS subject to Submitted Bids described
in clauses (ii) through (iv) of this paragraph (a) by a fraction, the
numerator of which shall be the number of Outstanding shares of TAPS
subject to such Submitted Bid and the denominator of which shall be the
aggregate number of Outstanding shares of TAPS subject to such
Submitted Bids made by all such Potential Holders that specified a rate
equal to the Winning Bid Rate for shares of such series.
(b) If Sufficient Clearing Bids for shares of a series of TAPS
have not been made (other than because all of the Outstanding shares of such
series are subject to Submitted Hold Orders), subject to the provisions of
paragraph (d) of this Section 4, Submitted Orders for shares of such series
shall be accepted or rejected as follows in the following order of priority and
all other Submitted Bids for shares of such series shall be rejected:
(i) Existing Holders' Submitted Bids for shares of
such series specifying any rate that is equal to or lower than the
Maximum Rate for shares of such series shall be rejected, thus
entitling such Existing Holders to continue to hold the shares of TAPS
subject to such Submitted Bids;
(ii) Potential Holders' Submitted Bids for shares of
such series specifying any rate that is equal to or lower than the
Maximum Rate for shares of such series shall be accepted; and
(iii) Each Existing Holder's Submitted Bid for shares
of such series specifying any rate that is higher than the Maximum
Rate for shares of such series and the Submitted Sell Orders for
shares of such series of each Existing Holder shall be accepted, thus
entitling each Existing Holder that submitted or on whose behalf was
submitted any such Submitted Bid or Submitted Sell Order to sell the
shares of such series subject to such Submitted Bid or Submitted Sell
Order, but in both cases only in an amount equal to the number of
shares of such series obtained by multiplying the number of shares of
such series subject to Submitted Bids described in clause (ii) of this
paragraph (b) by a fraction, the numerator of which shall be the
number of Outstanding shares of such series held by such Existing
Holder subject to such Submitted Bid or Submitted Sell Order and the
denominator of which shall be the aggregate number of Outstanding
shares of such series subject to all such Submitted Bids and Submitted
Sell Orders.
(c) If all of the Outstanding shares of a series of TAPS are
subject to Submitted Hold Orders, all Submitted Bids for shares of such series
shall be rejected.
(d) If, as a result of the procedures described in clause (iv)
or (v) of paragraph (a) or clause (iii) of paragraph (b) of this Section 4, any
Existing Holder
A-34
<PAGE> 129
would be entitled or required to sell, or any Potential Holder would be entitled
or required to purchase, a fraction of a share of a series of TAPS on any
Auction Date, the Auction Agent shall, in such manner as it shall determine in
its sole discretion, round up or down the number of shares of TAPS of such
series to be purchased or sold by any Existing Holder or Potential Holder on
such Auction Date as a result of such procedures so that the number of shares so
purchased or sold by each Existing Holder or Potential Holder on such Auction
Date shall be whole shares of TAPS.
(e) If, as a result of the procedures described in clause (v)
of paragraph (a) of this Section 4, any Potential Holder would be entitled or
required to purchase less than a whole share of a series of TAPS on any Auction
Date, the Auction Agent shall, in such manner as it shall determine in its sole
discretion, allocate shares of TAPS of such series for purchase among Potential
Holders so that only whole shares of TAPS of such series are purchased on such
Auction Date as a result of such procedures by any Potential Holder, even if
such allocation results in one or more Potential Holders not purchasing shares
of TAPS of such series on such Auction Date.
(f) Based on the results of each Auction for shares of a
series of TAPS, the Auction Agent shall determine the aggregate number of shares
of such series to be purchased and the aggregate number of shares of such series
to be sold by Potential Holders and Existing Holders and, with respect to each
Potential Holder and Existing Holder, to the extent that such aggregate number
of shares to be purchased and such aggregate number of shares to be sold differ,
determine to which other Potential Holder(s) or Existing Holder(s) they shall
deliver, or from which other Potential Holder(s) or Existing Holder(s) they
shall receive, as the case may be, shares of TAPS of such series.
Notwithstanding any provision of the Auction Procedures or the Settlement
Procedures to the contrary, in the event an Existing Holder or Beneficial Owner
of shares of a series of TAPS with respect to whom a Broker-Dealer submitted a
Bid to the Auction Agent for such shares that was accepted in whole or in part,
or submitted or is deemed to have submitted a Sell Order for such shares that
was accepted in whole or in part, fails to instruct its Agent Member to deliver
such shares against payment therefor, partial deliveries of shares of TAPS that
have been made in respect of Potential Holders' or Potential Beneficial Owners'
Submitted Bids for shares of such series that have been accepted in whole or in
part shall constitute good delivery to such Potential Holders and Potential
Beneficial Owners.
(g) Neither the Fund nor the Auction Agent nor any affiliate
of either shall have any responsibility or liability with respect to the failure
of an Existing Holder, a Potential Holder, a Beneficial Owner, a Potential
Beneficial Owner or its respective Agent Member to deliver shares of TAPS of any
series or to pay for shares of TAPS of any series sold or purchased pursuant to
the Auction Procedures or otherwise.
IN WITNESS WHEREOF, NUVEEN SENIOR INCOME FUND has caused thesepresents
to be signed in its name and on its behalf by its Vice-President, and its
corporate seal to be hereunto affixed and attested by its Assistant
Secretary. The Fund's Declaration of Trust is on file with the Secretary of
State of the Commonwealth of Massachusetts, and the said officers of the Fund
have executed this Statement as officers and not individually, and the
obligations and rights set forth in this Statement are not binding upon any such
officers, or the Trustees or shareholders of the Fund, individually, but are
binding only upon the assets and property of the Fund.
NUVEEN SENIOR INCOME FUND
By:
-------------------------------------
Gifford R. Zimmerman, Vice President
ATTEST:
- ---------------------------------------
Assistant Secretary
A-35
<PAGE> 130
PART C - OTHER INFORMATION
Item 24: Financial Statements and Exhibits
1. Financial Statements:
Statement of Net Assets, October 14, 1999 (audited)
Statement of Net Assets, January 31, 2000 (unaudited)
Statement of Operations from October 29, 1999 (commencement of operations)
through January 31, 2000 (unaudited)
Statement of Changes in Net Assets from October 29, 1999 (commencement of
operations) through January 31, 2000 (unaudited)
Portfolio of Investments, January 31, 2000 (unaudited)
2. Exhibits:
a. Declaration of Trust dated August 13, 1999.(1)
b. By-Laws of Registrant.(1)
c. None.
d. Form of Share Certificate.*
e. Terms and Conditions of the Dividend Reinvestment Plan.(3)
f. None.
g. Form of Investment Management Agreement between Registrant and Nuveen
Senior Loan Asset Management Inc.(2)
h. Form of Underwriting Agreement.*
i. Nuveen Open-End and Closed-End Funds Deferred Compensation Plan for
Independent Directors and Trustees.(3)
j. Form of Exchange Traded Fund Custody Agreement between Registrant and
Chase Bank of Texas.(4)
k.1 Form of Shareholder Transfer Agency Agreement between Registrant and
The Chase Manhattan Bank.(4)
k.2 Form of Expense Reimbursement Agreement between Registrant and Nuveen
Senior Loan Asset Management Inc.(2)
k.3 Form of Auction Agency Agreement between the Registrant and Bankers
Trust Company as to the Registrant's TAPS Shares.*
k.4 Form of Broker-Dealer Agreement as to the Registrant's TAPS Shares.*
k.5 Form of DTC Representations Letter as to the Registrant's TAPS
Shares.*
k.6 Credit Agreement dated December 14, 1999 among Registrant, Lenders and
Deutsche Bank AG.*
k.7 Form of Credit Agreement among Registrant,[SPV] and Deutsche Bank
AG.*
k.8 Form of Liquidity Agreement among Registrant, Lenders and Deutsche Bank
Securities Inc.*
l.1 Opinion and consent of Vedder, Price, Kaufman & Kammholz.*
l.2 Opinion and consent of Bingham Dana LLP.*
m. None.
n. Consent of KPMG LLP.*
Part C-1
<PAGE> 131
o. None.
p. Subscription Agreement of Nuveen Senior Loan Asset Management Inc.
dated October 12, 1999.(3)
q. None.
r. Code of Ethics*
s.1 Power of Attorney of Timothy R. Schwertfeger.(1)
s.2 Powers of Attorney of Trustees (other than Timothy R. Schwertfeger).(2)
- ----------------------
(1) Incorporated herein by reference to the Registrant's initial
Registration Statement on Form N-2, File No. 333-86619, filed on
September 7, 1999.
(2) Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-2, File No. 333-86619,
filed on September 24, 1999.
(3) Incorporated herein by reference to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-2, File No. 333-86619,
filed on October 18, 1999.
(4) Incorporated herein by reference to Pre-Effective Amendment No. 3 to
Registrant's Registration Statement on Form N-2, File No. 333-86619,
filed on October 26, 1999.
* Filed herewith.
Item 25: Marketing Arrangements
See Sections 2 and 7 of the Underwriting Agreement filed as Exhibit h
to Registrant's Registration Statement.
Item 26: Other Expenses of Issuance and Distribution
Securities and Exchange Commission fees...... $ 12,788
Printing and engraving expenses.............. 60,000
Legal Fees................................... 50,000
Accounting expenses.......................... 5,000
Rating Agency fees........................... 25,000
Miscellaneous expenses....................... 7,500
--------
Total..................................... $160,288
========
Item 27: Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 28: Number of Holders of Securities
At April 30, 2000
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
- -------------- ------------------------
<S> <C>
Common Shares, $.01 par value 10,673
</TABLE>
Part C-2
<PAGE> 132
Item 29: Indemnification
Section 4 of Article XII of the Registrant's Declaration of Trust
provides as follows:
Subject to the exceptions and limitations contained in this Section 4,
every person who is, or has been, a Trustee, officer, employee or agent
of the Trust, including persons who serve at the request of the Trust
as directors, trustees, officers, employees or agents of another
organization in which the Trust has an interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person"),
shall be indemnified by the Trust to the fullest extent permitted by
law against liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue of his
being or having been such a trustee, director, officer, employee or
agent and against amounts paid or incurred by him in settlement
thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by
reason of a final adjudication by the court or other body
before which the proceeding was brought that he engaged in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office;
(b) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the
reasonable belief that his action was in the best interests of
the Trust; or
(c) in the event of a settlement or other disposition not
involving a final adjudication (as provided in paragraph (a)
or (b)) and resulting in a payment by a Covered Person, unless
there has been either a determination that such Covered Person
did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office by the court or other body approving the
settlement or other disposition or a reasonable determination,
based on a review of readily available facts (as opposed to a
full trial-type inquiry), that he did not engage in such
conduct:
(i) by a vote of a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the
Disinterested Trustees then in office act on the
matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect
any other rights to which any Covered Person may now or hereafter be
entitled, shall continue as to a person who has ceased to be such a
Covered Person and shall inure to the benefit of the heirs, executors
and administrators of such a person. Nothing contained herein shall
affect any rights to indemnification to which Trust personnel other
than Covered Persons may be entitled by contract or otherwise under
law.
Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding subject to a claim for indemnification under
this Section 4 shall be advanced by the Trust prior to final
disposition thereof upon receipt of an undertaking by or on behalf of
the recipient to repay such amount if it is ultimately determined that
he is not entitled to indemnification under this Section 4, provided
that either:
(a) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against
losses arising out of any such advances; or
(b) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then
in office act on the matter) or independent legal counsel in a
written opinion shall determine, based upon a review of the
readily available facts (as opposed to a full trial-type
Part C-3
<PAGE> 133
inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is
not an Interested Person of the Trust (including, as such Disinterested
Trustee, anyone who has been exempted from being an Interested Person
by any rule, regulation or order of the Commission), and (y) against
whom none of such actions, suits or other proceedings or another
action, suit or other proceeding on the same or similar grounds is then
or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or
"proceeding" shall apply to all claims, actions, suits, proceedings
(civil, criminal, administrative or other, including appeals), actual
or threatened; and the words "liability" and "expenses" shall include
without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
The trustees and officers of the Registrant are covered by Investment
Trust Errors and Omission policies in the aggregate amount of
$40,000,000 (with a maximum deductible of $500,000) against liability
and expenses of claims of wrongful acts arising out of their position
with the Registrant, except for matters which involve willful acts, bad
faith, gross negligence and willful disregard of duty (i.e., where the
insured did not act in good faith for a purpose he or she reasonably
believed to be in the best interest of Registrant or where he or she
had reasonable cause to believe this conduct was unlawful).
Section 8 of the Underwriting Agreement filed as Exhibit h.1 to this
Registration Statement provides for each of the parties thereto,
including the Registrant and the Underwriters, to indemnify the others,
their trustees, directors, certain of their officers, trustees,
directors and persons who control them against certain liabilities in
connection with the offering described herein, including liabilities
under the federal securities laws.
Item 30: Business and Other Connections of Investment Adviser
As of the date hereof, Nuveen Senior Loan Asset Management Inc. acts as
investment adviser for the Nuveen Floating Rate Fund and the Nuveen Senior
Income Fund. For a description of other business, profession, vocation or
employment of a substantial nature in which any director or officer of the
investment adviser has engaged during the last two years for his account or in
the capacity of director, officer, employee, partner or trustee, see the
descriptions under "Management of the Fund" in Part B of this Registration
Statement.
Part C-4
<PAGE> 134
Item 31: Location of Accounts and Records
Nuveen Senior Loan Asset Management Inc., 333 West Wacker Drive,
Chicago, Illinois 60606, maintains the Declaration of Trust, By-Laws, minutes of
trustees and shareholders meetings and contracts of the Registrant and all
advisory material of the investment adviser at 333 West Wacker Drive, Chicago,
Illinois 60606 or 820 Jorie Blvd. Oakbrook, Illinois 60523.
Chase Bank of Texas, National Association, 600 Travis Street, Houston,
Texas 77002, is the Fund's custodian and will maintain all general and
subsidiary ledgers, journals, trial balances, records of all portfolio purchases
and sales, and all other required records not maintained by Nuveen Senior Loan
Asset Management Inc.
The Chase Manhattan Bank, 4 New York Plaza, New York, New York 10004
maintains all the required records in its capacity as transfer and dividend
paying agent for the Registrant.
Item 32: Management Services
Not applicable.
Item 33: Undertakings
1. Registrant undertakes to suspend the offering of its shares
until it amends its prospectus if (1) subsequent to the
effective date of its Registration Statement, the net asset
value declines more than 10 percent from its net asset value
as of the effective date of the Registration Statement, or (2)
the net asset value increases to an amount greater than its
net proceeds as stated in the prospectus.
2. Not applicable.
3. Not applicable.
4. Not applicable.
5. The Registrant undertakes that:
a. For purposes of determining any liability under the
Securities Act of 1933, the information omitted from
the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the
Registrant under Rule 497(h) under the Securities Act
of 1933 shall be deemed to be part of the
Registration Statement as of the time it was declared
effective.
b. For the purpose of determining any liability under
the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to
the securities offered therein, and the offering of
the securities at that time shall be deemed to be the
initial bona fide offering thereof.
6. The Registrant undertakes to send by first class mail or other
means designed to ensure equally prompt delivery within two
business days of receipt of a written or oral request, any
Statement of Additional Information.
Part C-5
<PAGE> 135
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Chicago, and State of Illinois, on the 19th day of
May, 2000.
NUVEEN SENIOR INCOME FUND
/s/ GIFFORD R. ZIMMERMAN
----------------------------
Gifford R. Zimmerman,
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ STEPHEN D. FOY Vice President and May 19, 2000
- ----------------------------- Controller (Principal
Stephen D. Foy Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman of the Board, )
President and Trustee )
Principal Executive )
Officer )
)
James E. Bacon Trustee ) By:
) /s/ GIFFORD R. ZIMMERMAN
Jack B. Evans Trustee ) -------------------------
) Gifford R. Zimmerman
William L. Kissick Trustee ) Attorney-In-Fact
) May 19, 2000
Thomas E. Leafstrand Trustee )
)
Shiela W. Wellington Trustee )
</TABLE>
Original powers of attorney authorizing Alan G. Berkshire and Gifford
R. Zimmerman, among others, to execute this Registration Statement, and
Amendments to this Registration Statement, for each trustee of Registrant on
whose behalf this Registration Statement is filed, have been executed and
previously filed as an exhibit.
<PAGE> 136
EXHIBIT INDEX
d. Form of Share Certificate.
h. Form of Underwriting Agreement.
k.3 Form of Auction Agency Agreement between the Registrant and Bankers Trust
Company as to the Registrant's TAPS Shares.
k.4 Form of Broker Dealer Agreement as to the Registrant's TAPS Shares.
k.5 Form of DTC Representations Letter as to the Registrant's TAPS Shares.
k.6 Credit Agreement dated December 14, 1999 among Registrant, Lenders and
Deutsche Bank AG.
k.7 Form of Credit Agreement among Registrant, [SPV] and Deutsche Bank AG.
k.8 Form of Liquidity Agreement among Registrant, Lenders and Deutsche Bank
Securities Inc.
1.1 Opinion and consent of Vedder, Price, Kaufman & Kammholz.
1.2 Opinion and consent of Bingham Dana LLP.
n. Consent of KPMG LLP.
r. Code of Ethics.
<PAGE> 1
EXHIBIT D
CERTIFICATE NUMBER OF
NUMBER SHARES 1,840
1 -----
---
NUVEEN SENIOR INCOME FUND
Organized Under the Laws of the Commonwealth of Massachusetts
Taxable Auctioned Preferred Shares, Series TH
$.01 Par Value Per Share
$ 25,000 Liquidation Preference Per Share
CUSIP NO. 670 67Y 203
-----------
This Certifies that CEDE & CO. is the owner of One Thousand Eight Hundred Forty
fully paid and non-assessable shares of Taxable Auctioned Preferred Shares,
Series TH, $.01 par value per share, $25,000 liquidation preference per share,
of Nuveen Senior Income Fund (the "Fund") transferable only on the books of the
Fund by the holder thereof in person or by duly authorized Attorney upon
surrender of this Certificate properly endorsed. This Certificate is not valid
unless countersigned by the transfer agent and registrar.
A statement in full, of all the designations, preferences, qualifications,
limitations, restrictions and special or relative rights of the shares of each
class authorized to be issued, will be furnished by the Fund to any shareholder
upon request and without charge. The Fund is organized as a Massachusetts
business trust.
This Certificate is executed on behalf of the Fund by the officers as officers
and not individually and the obligations hereof are not binding upon any of the
trustees, officers, or shareholders individually but are binding only upon the
assets and property of the Fund.
IN WITNESS WHEREOF, the Fund has caused this Certificate to be signed by its
duly authorized officers this __ day of May, 2000 A.D.
BANKERS TRUST COMPANY NUVEEN SENIOR INCOME FUND
As Transfer Agent and Registrar
By: By:
--------------------------- --------------------------
Authorized Signature Vice President
Attest:
-----------------------
Assistant Secretary
<PAGE> 2
FOR VALUE RECEIVED, _____ hereby sell, assign and transfer unto________________
Shares of beneficial interest represented by the within Certificate, and do
hereby irrevocably constitute and appoint ________________ Attorney to transfer
the said Shares on the books of the within named Fund with full power of
substitution in the premises.
Dated _____________, _____
In presence of
____________________ ___________________
Shares of Taxable Auctioned Preferred Shares evidenced by
this Certificate may be sold, transferred, or otherwise
disposed of only pursuant to the provisions of the Fund's
Statement Establishing and Fixing the Rights and Preferences
of such Shares, copies of which will be furnished by the
Fund to any shareholders upon request and without charge.
The Fund will furnish to any shareholder, upon request and
without charge, a full statement of the designations,
preferences, limitations and relative rights of the shares
of each class or series of the Fund authorized to be issued,
so far as they have been determined, and the authority of
the Board of Trustees to determine the relative rights and
preferences of subsequent classes or series. Any such
request should be addressed to the Secretary of the Fund.
<PAGE> 1
EXHIBIT h
NUVEEN SENIOR INCOME FUND
1,840 TAXABLE AUCTIONED PREFERRED SHARES
UNDERWRITING AGREEMENT
May , 2000
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
Nuveen Senior Income Fund, a Massachusetts business trust (the "Fund"),
proposes to issue and sell to the underwriters named in Schedule 1 hereto (the
"Underwriters") an aggregate of 1,840 preferred shares of beneficial interest,
par value $0.01 per share, designated Taxable Auctioned Preferred Shares, Series
of the Fund, each with a liquidation preference of $25,000 per share
(collectively, the "TAPS").
Nuveen Senior Loan Asset Management Inc., a Delaware corporation (the
"Investment Adviser") and a wholly-owned subsidiary of The John Nuveen Company,
is the Fund's investment adviser pursuant to an Investment Management Agreement
by and between the Fund and the Investment Adviser, dated as of October 19, 1999
(the "Investment Management Agreement"). In addition, the Fund and the
Investment Adviser have entered into an Expense Reimbursement Agreement, dated
as of October 19, 1999 (the "Expense Reimbursement Agreement") and a
Subscription Agreement dated as of October 12, 1999 (the "Subscription
Agreement"). Chase Bank of Texas, National Association acts as the custodian
(the "Custodian") of the Fund's cash and portfolio assets pursuant to a Custody
Agreement between the Fund and the Custodian, effective as of October 26, 1999
(the "Custody Agreement"). The Chase Manhattan Bank will act as the Fund's
transfer agent and dividend disbursing agent (the "Transfer Agent") pursuant to
a transfer agency agreement between the Fund and the Transfer Agent, dated as of
October 26, 1999 (the "Transfer Agency Agreement"). The Investment Adviser has
entered into a letter agreement relating to pricing services (the "Pricing
Services Agreement") dated as of October 26, 1999 with DLJ Capital Funding, Inc.
Deutsche Bank Group will act as the Trust's auction agent (the "Auction Agent")
pursuant to an Auction Agency Agreement, dated as of May , 2000 (the "Auction
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Agency Agreement"). The Fund has entered into a Letter Agreement, dated as of
May , 2000 with the Depository Trust Company (the "DTC Agreement").
The Fund and the Investment Adviser each hereby confirms as follows their
agreements with the Underwriters.
1. Sale and Purchase; Compensation
(a) The Fund will issue and sell to each Underwriter, and each
Underwriter will purchase from the Fund, the number of TAPS set forth opposite
such Underwriter's name in Schedule 1 hereto, at the purchase price of $24,750
per share.
(b) The obligations of the Underwriters under this Underwriting
Agreement are several and not joint and are undertaken on the basis of the
representations and are subject to the conditions set forth in this
Underwriting Agreement.
2. Payment and Delivery. Delivery by the Fund of the TAPS to the
Underwriters against payment of the purchase price by wire transfer of Federal
Funds or similar same day funds to the Fund for the TAPS, will take place at the
offices of Vedder, price, Kaufman & Kammholz, 222 N. LaSalle St., Chicago,
Illinois, or such other location as is agreed upon by the parties hereto, or
through the facilities of the Depository Trust Company or another mutually
agreeable facility, at 9:00 a.m., central standard time, on the third business
day following the date of this Underwriting Agreement, or at such time on such
other date, not later than ten business days after the date of this Underwriting
Agreement, as may be agreed upon by the Fund and the PaineWebber Incorporated
(the "Managing Representative") (the "TAPS Closing Date").
A certificate evidencing each series of TAPS in definitive form and
registered in the name of Cede & Co., as nominee of the Depository Trust Company
("DTC"), shall be delivered by or on behalf of the Fund to DTC for the account
of the Underwriters.
3. Registration Statement and Prospectus; Public Offering. The Fund has
filed with the Securities and Exchange Commission (the "Commission"), pursuant
to the Securities Act of 1933, as amended (the "Securities Act"), the Investment
Company Act of 1940, as amended (the "Investment Company Act"), and the
published rules and regulations adopted by the Commission under the Securities
Act (the "Securities Act Rules") and the Investment Company Act (the "Investment
Company Act Rules"), a Notification of Registration on Form N-8A (the
"Notification") pursuant to Section 8 of the Investment Company Act and a
registration statement on Form N-2
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(File Nos. 333- and 811-09571) relating to the TAPS (the "registration
statement"), including a preliminary prospectus (including any preliminary
statement of additional information), and such amendments to such registration
statement as may have been required to the date of this Underwriting Agreement.
The preliminary prospectus (including any preliminary statement of additional
information) is to be used in connection with the offering and sale of the TAPS.
The term "Preliminary Prospectus" as used herein means any preliminary
prospectus (including any preliminary statement of additional information)
included at any time as a part of the registration statement and any
advertisement or sales material deemed to be a prospectus under Section 10(b) of
the Securities Act pursuant to Rule 482 of the Securities Act Rules.
The Fund has furnished the Managing Representative copies of such
registration statement, each amendment to such registration statement filed by
the Fund with the Commission and the Preliminary Prospectus filed by the Fund
with the Commission or used by the Fund. If the registration statement has not
become effective, a further amendment (the "Final Amendment") to such
registration statement, including the forms of final prospectus (including any
final statement of additional information), necessary to permit such
registration statement to become effective will promptly be filed by the Fund
with the Commission. If such registration statement has become effective and any
prospectus (including any statement of additional information) contained therein
omits certain information at the time of effectiveness pursuant to Rule 430A of
the Securities Act Rules, a final prospectus (the "Rule 430A Prospectus")
containing such omitted information will be filed by the Fund with the
Commission in accordance with Rule 497(h) of the Securities Act Rules. The
registration statement as amended at the time it becomes or became effective
(the "Effective Date"), including financial statements and all exhibits, and any
information deemed to be included by Rule 430A, is called the "Registration
Statement." The term "Prospectus" means the prospectus (including any statement
of additional information) in the form in which it is first filed with the
Commission pursuant to Rule 497(b), (h) or (j) of the Securities Act Rules, as
the case may be.
The Fund and the Investment Adviser understand that the Underwriters
propose to make a public offering of the TAPS, as described in the Prospectus,
as soon after the Effective Date (or, if later, after the date this Underwriting
Agreement is signed) as the Managing Representative deems advisable. The Fund
confirms that the Underwriters and dealers have been authorized to distribute
the Preliminary Prospectus relating to the TAPS included in Pre-Effective
Amendment No. 1 of the registration statement and are authorized to distribute
the Prospectus and any amendments or supplements thereto.
4. Representations.
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(a) Each of the Fund and the Investment Adviser jointly and severally
represents to each Underwriter as follows:
(i) On (A) the Effective Date and the date on which the
Prospectus is first filed with the Commission pursuant to Rule 497(b), (h) or
(j) of the Securities Act Rules, as the case may be and (B) the date on which
any post-effective amendment to the Registration Statement (except any
post-effective amendment which is filed with the Commission after the later of
(x) one year from the date of this Under writing Agreement or (y) the date on
which the distribution of the TAPS is completed) became or becomes effective
or any amendment or supplement to the Prospectus was or is filed with the
Commission, the Registration Statement, the Prospectus and any such amendment
or supplement thereto and the Notification complied or will comply in all
material respects with the requirements of the Securities Act, the Investment
Company Act, the Securities Act Rules and the Investment Company Act Rules, as
the case may be. On the Effective Date and on the date that any post-effective
amendment to the Registration Statement (except any post-effective amendment
which is filed with the Commission after the later of (x) one year from the
date of this Underwriting Agreement or (y) the date on which the distribution
of the TAPS is completed) became or becomes effective, neither the
Registration Statement nor any such amendment did or will contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in it or necessary to make the statements in it not misleading. At the
Effective Date and, if applicable, the date the Prospectus or any amendment or
supplement to the Prospectus was or is filed with the Commission and at the
TAPS Closing Date, the Prospectus did not or will not, as the case may be,
contain any untrue statement of a material fact or omit to state a material
fact required to be stated in it or necessary to make the statements in it, in
light of the circumstances under which they were made, not misleading. The
foregoing representations in this Section 4(a)(i) do not apply to statements
or omissions relating to the Underwriters made in reliance on and in
conformity with information furnished in writing to the Fund by the
Underwriters expressly for use in the Registration Statement, the Prospectus,
or any amendments or supplements thereto, as described in Section 7(f) hereof.
(ii) The Fund has been duly formed, is validly existing as a
voluntary association with transferable shares of beneficial interest commonly
referred to as a "Massachusetts business trust" under
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the laws of The Commonwealth of Massachusetts; the Declaration of Trust of
the Fund, as amended through the date hereof (the "Declaration of Trust")
and the Statement Establishing and Fixing the Rights and Preferences of
Taxable Auctioned Preferred Shares (the "Statement") confer upon the Fund
full power and authority to conduct all the activities conducted by it, to
own or lease all assets owned or leased by it and to conduct its business
as described in the Registration Statement and Prospectus, and the Fund is
duly licensed and qualified to do business and in good standing in each
jurisdiction in which its ownership or leasing of property or its
conducting of business requires such qualification, except where the
failure to be so qualified or be in good standing would not have a material
adverse effect on the Fund, and the Fund owns, possesses or has obtained
and currently maintains all material governmental licenses, permits,
consents, orders, approvals and other authorizations, whether foreign or
domestic, necessary to carry on its business as contemplated in the
Prospectus. The Fund has no subsidiaries.
(iii) The capitalization of the Fund is as set forth in the
Registration Statement and the Prospectus. The common shares of beneficial
interest of the Fund, par value $0.01 per share (the "Common Shares"), and
the TAPS conform in all material respects to the description of them in the
Prospectus. All the outstanding Common Shares have been duly authorized and
are validly issued, fully paid and nonassessable (except that shareholders
of a Massachusetts business trust may in certain circumstances be held
personally liable for its obligations). The TAPS to be issued and delivered
to and paid for by the Underwriters in accordance with this Underwriting
Agreement against payment therefor as provided by this Underwriting
Agreement have been duly authorized and when issued and delivered to the
Underwriters will have been validly issued and will be fully paid and
nonassessable (except that shareholders of a Massachusetts business trust
may in certain circumstances be held personally liable for its
obligations). No person is entitled to any preemptive or other similar
rights in connection with the issuance of the TAPS.
(iv) The Fund is duly registered with the Commission under the
Investment Company Act as a non-diversified, closed-end management
investment company, and, subject to the filing of the Final Amendment, if
not already filed, all action under the Securities Act, the Investment
Company Act, the Securities Act Rules
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and the Investment Company Act Rules, as the case may be, necessary to make
the public offering and consummate the sale of the TAPS as provided in this
Underwriting Agreement has or will have been taken by the Fund.
(v) The Fund has full power and authority to enter into each
of this Underwriting Agreement, the Investment Management Agreement, the
Custody Agreement, the Transfer Agency Agreement, the Expense Reimbursement
Agreement, the Subscription Agreement, the Auction Agency Agreement and the
DTC Agreement (collectively, the "Fund Agreements") and to perform all of
the terms and provisions hereof and thereof to be carried out by it and (A)
each Fund Agreement has been duly and validly authorized, executed and
delivered by or on behalf of the Fund, (B) each Fund Agreement does not
violate in any material respect any of the applicable provisions of the
Investment Company Act, the Investment Advisers Act of 1940 (the "Advisers
Act"), the Investment Company Act Rules and the rules and regulations
adopted by the Commission under the Advisers Act (the "Advisers Act
Rules"), as the case may be, and (C) assuming due authorization, execution
and delivery by the other parties thereto, each Fund Agreement constitutes
the legal, valid and binding obligation of the Fund enforceable in
accordance with its terms, (1) subject, as to enforcement, to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
generally and to general equitable principles (regardless of whether
enforcement is sought in a proceeding in equity or at law) and (2) with
respect to this Underwriting Agreement, except as rights to indemnity
hereunder may be limited by federal or state securities laws.
(vi) None of (A) the execution and delivery by the Fund of the
Fund Agreements, (B) the issue and sale by the Fund of the TAPS as
contemplated by this Underwriting Agreement and (C) the performance by the
Fund of its obligations under any of the Fund Agreements or consummation by
the Fund of the other transactions contemplated by the Fund Agreements
conflicts or will conflict with, or results or will result in a breach of,
the Declaration of Trust, the By-laws or the Statement of the Fund or a
material breach of any material agreement or instrument to which the Fund
is a party or by which the Fund is bound, or any law, rule or regulation,
or order of any court, governmental instrumentality, securities exchange or
association or arbitrator, whether foreign or domestic, applicable to the
Fund (which breach, either individually or in the aggregate, would have a
material
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adverse effect on the Fund), other than state securities or "blue sky" laws
applicable in connection with the purchase and distribution of the TAPS by
the Underwriters pursuant to this Underwriting Agreement.
(vii) The Fund is not currently in material breach of, or in
material default under, any material written agreement or instrument to
which it is a party or by which it or its property is bound or affected.
(viii) No person has any right to the registration of any
securities of the Fund because of the filing of the registration statement.
(ix) No consent, approval, authorization or order of any court
or governmental agency or body or securities exchange or association,
whether foreign or domestic, is required by the Fund for the consummation
by the Fund of the transactions to be performed by the Fund or the
performance by the Fund of all the terms and provisions to be performed by
or on behalf of it in each case as contemplated in the Fund Agreements,
except such as (A) the absence of which, either individually or in the
aggregate, would not have a material adverse effect on the Fund (B) have
been obtained under the Securities Act, the Securites Exchange Act of 1934,
as amended (the "Exchange Act"), the Investment Company Act, the Advisers
Act, the Securities Act Rules, the published rules and regulations adopted
by the Commission under the Exchange Act (the "Exchange Act Rules"), the
Investment Company Act Rules, and the Advisers Act Rules, and (C) may be
required by the New York Stock Exchange or under state securities or "blue
sky" laws, in connection with the purchase and distribution of the TAPS by
the Underwriters pursuant to this Underwriting Agreement.
(x) KPMG LLP, whose report appears in the Prospectus, are
independent public accountants with respect to the Fund as required by the
Securities Act, the Investment Company Act, the Securities Act Rules and
the Investment Company Act Rules.
(xi) The financial statements included in the Registration
Statement and the Prospectus present fairly in all material respects, in
accordance with generally accepted accounting principles in the United
States applied on a consistent basis (except as otherwise
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noted in any footnotes thereto), the financial position of the Fund as of
the dates and for the periods indicated.
(xii) The Fund will maintain a system of internal accounting
controls sufficient to provide reasonable assurances that (A) transactions
are executed in accordance with management's general or specific
authorization; (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (C) access
to assets is permitted only in accordance with management's general or
specific authorization; and (D) the recorded accountability for assets is
compared with existing assets through an asset reconciliation procedure or
otherwise at reasonable intervals and appropriate action is taken with
respect to any differences.
(xiii) Other than as set forth in the Prospectus, subsequent
to the date of the unaudited financial statements in the Registration
Statement and Prospectus up to the TAPS Closing Date, (A) the Fund has not
incurred any liabilities or obligations, direct or contingent (whether or
not in the ordinary course of business), or entered into any transactions,
not in the ordinary course of business, that are material to the Fund, (B)
there has not been any material change in the Common Shares or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the Fund, that
might materially and adversely affect the property or assets thereof, (C)
there has been no dividend or distribution paid or declared in respect of
any class of the Fund's shares of beneficial interest other than regularly
scheduled dividends and distributions as disclosed in the prospectus
relating to the common shares of the Fund, and (D) the Fund has not
incurred any material debt or issued any senior security;
(xiv) There is no action, suit or proceeding before or by any
court, commission, regulatory body, administrative agency or other
governmental agency or body, foreign or domestic, now pending, or, to the
knowledge of the Fund, threatened against or affecting the Fund, which (A)
could reasonably be expected to result in any material adverse change in
the condition, financial or otherwise or business affairs of the Fund or
could reasonably be expected to materially adversely affect the properties
or assets of the Fund or (B) is of a
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character required to be described in the Registration Statement or the
Prospectus and is not so described as required; and there are no contracts,
franchises or other documents that are of a character required to be
described in, or that are required to be filed as exhibits to, the
Registration Statement that have not been described or filed as required.
(xv) The Fund intends to direct the investment of the proceeds
of the offering of the TAPS in such a manner as to comply with the
requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code").
(xvi) The Common Shares are listed on the New York Stock
Exchange.
(xvii) The TAPS have been, or prior to the TAPS Closing Date
will be, assigned a rating of "aaa" by Moody's Investors Services, Inc.
("Moody's).
(xviii) All advertisements and other sales literature
(collectively, "sales materials") authorized in writing or prepared by the
Fund for use in connection with the public offering of the TAPS complied
and comply with the requirements of the Securities Act, the Securities Act
Rules and the rules and interpretations of the National Association of
Securities Dealers, Inc. ("NASD") and no such sales materials contained or
contain any untrue statement of a material fact or omitted or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein not misleading in light of the circumstances in
which they were made, including the Securities Act and the Securities Act
Rules.
(b) The Investment Adviser represents to each Underwriter as follows:
(i) The Investment Adviser has been duly formed, is validly
existing as a corporation under the laws of Delaware with full power and
authority to conduct all of the activities conducted by it, to own or lease
all of the assets owned or leased by it and to conduct its business as
described in the Registration Statement and Prospectus, and the Investment
Adviser is duly licensed and qualified to do business and in good standing
in each jurisdiction in which it is required to be so qualified, except to
the extent that failure to be so qualified or be in good
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standing would not have a material adverse affect on the Investment
Adviser; and the Investment Adviser owns, possesses or has obtained and
currently maintains all governmental licenses, permits, consents, orders,
approvals and other authorizations, whether foreign or domestic, necessary
to carry on its business as contemplated in the Registration Statement and
the Prospectus except those the absence of which, either individually or in
the aggregate, would not have a material adverse effect on the Investment
Adviser.
(ii) The Investment Adviser is (A) duly registered as an
investment adviser under the Advisers Act and (B) not prohibited by the
Advisers Act, the Investment Company Act, the Advisers Act Rules or the
Investment Company Act Rules from acting as the investment adviser for the
Fund as contemplated by the Investment Advisory Agreement, the Registration
Statement and the Prospectus.
(iii) The Investment Adviser has full power and authority to
enter into each of this Underwriting Agreement, the Investment Management
Agreement, the Expense Reimbursement Agreement, the Subscription Agreement
and the Pricing Services Agreement (together, such agreements being
referred to as the "Investment Adviser Agreements") and to carry out all
the terms and provisions hereof and thereof to be carried out by it; and
each Investment Adviser Agreement has been duly and validly authorized,
executed and delivered by the Investment Adviser; none of the Investment
Adviser Agreements violate in any material respect any of the applicable
provisions of the Investment Company Act, the Advisers Act, the Investment
Company Act Rules and the Advisers Act Rules; and assuming due
authorization, execution and delivery by the other parties thereto, each
Investment Adviser Agreement constitutes a legal, valid and binding
obligation of the Investment Adviser, enforceable in accordance with its
terms, (1) subject, as to enforcement, to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and to general
equitable principles (regardless of whether enforcement is sought in a
proceeding in equity or at law) and (2) with respect to this Under writing
Agreement, except as rights to indemnity hereunder may be limited by
federal or state securities laws.
(iv) Neither (A) the execution and delivery by the Investment
Adviser of any Investment Adviser Agreement by the Investment Adviser nor
(B) the consummation by the Investment
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Adviser of the transactions contemplated by, or the performance of its
obligations under any Investment Adviser Agreement conflicts or will
conflict with, or results or will result in a breach of, the Certificate of
Incorporation or By-Laws of the Investment Adviser or any material
agreement or instrument to which the Investment Adviser is a party or by
which the Investment Adviser is bound, or any law, rule or regulation, or
order of any court, governmental instrumentality, securities exchange or
association or arbitrator, whether foreign or domestic, applicable to the
Investment Adviser which conflict or breach, either individually or in the
aggregate, would have a material adverse effect on the Investment Adviser.
(v) No consent, approval, authorization or order of any court,
governmental agency or body or securities exchange or association, whether
foreign or domestic, is required for the consummation of the transactions
contemplated in, or the performance by the Investment Adviser of its
obligations under, any Investment Adviser Agreement, as the case may be,
except such as (A) have been obtained under the Investment Company Act, the
Advisers Act, the Securities Act, the Investment Company Act Rules, the
Advisers Act Rules and the Securities Act Rules, and (B) may be required
under state securities or "blue sky" laws, in connection with the purchase
and distribution of the TAPS by the Underwriters pursuant to this
Underwriting Agreement.
(vi) The description of the Investment Adviser and its
business, and the statements attributed to the Investment Adviser, in the
Registration Statement and the Prospectus comply in all material respects
with the requirements of the Securities Act, the Investment Company Act,
the Securities Act Rules and the Investment Company Act Rules and, with
respect to the Prospectus, do not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(vii) Except as set forth in the Registration Statement and
Prospectus, there is no action, suit or proceeding before or by any court,
commission, regulatory body, administrative agency or other governmental
agency or body, foreign or domestic, now pending or, to the knowledge of
the Investment Adviser, threatened, against or affecting the Investment
Adviser of a nature required to be disclosed in the Registration Statement
or Prospectus or that could reasonably be
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expected to result in any material adverse change in the condition,
financial or otherwise, business affairs or business prospects of the
Investment Adviser or the ability of the Investment Adviser to fulfill its
respective obligations under any Investment Adviser Agreement.
(viii) In the event that the Fund or the Investment Adviser
makes available any sales materials or other promotional materials in
connection with the public sale of the TAPS intended for use only by
qualified broker-dealers and registered representatives thereof by means of
an Internet web site or similar electronic means, the Investment Adviser
will install and maintain pre-qualification and password-protection or
similar procedures which are designed and reasonably expected to
effectively prohibit access to such promotional materials by persons other
than qualified broker-dealers and registered representatives thereof.
5. Agreements of the Parties.
(a) If the registration statement relating to the TAPS
has not yet become effective, the Fund will promptly file the Final Amendment,
if not previously filed, with the Commission, and will use its commercially
reasonable best efforts to cause such registration statement to become effective
and, as soon as the Fund is advised, will advise the Managing Representative
when the Registration Statement or any amendment thereto has become effective.
If the Registration Statement has become effective and the Prospectus contained
therein omits certain information at the time of effectiveness pursuant to Rule
430A of the Securities Act Rules, the Fund will file a 430A Prospectus pursuant
to Rule 497(h) of the Securities Act Rules as promptly as practicable, but no
later than the second business day following the earlier of the date of the
determination of the offering price of the TAPS or the date the Prospectus is
first used after the Effective Date. If the Registration Statement has become
effective and the Prospectus contained therein does not so omit such
information, the Fund will file a Prospectus pursuant to Rule 497(b) or (j) of
the Securities Act Rules as promptly as practicable, but no later than the fifth
business day following the date of the later of the Effective Date or the
commencement of the public offering of the TAPS after the Effective Date. In
either case, the Fund will provide the Managing Representative satisfactory
evidence of the filing. The Fund will not file with the Commission any
Prospectus or any other amendment (except any post-effective amendment which is
filed with the Commission after the later of (x) one year from the date of this
Underwriting Agreement or (y) the date on which distribution of the TAPS is
completed) or supplement to the Registration Statement or the Prospectus unless
a copy has first been submitted to the Managing Representative a reasonable time
before its filing and the
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Managing Representative has not objected to it in writing within a
reasonable time after receiving the copy.
(b) For the period of three years from the date hereof, the
Fund will advise the Managing Representative promptly (1) of the issuance
by the Commission of any order in respect of the Fund or the Investment
Adviser which relates to the Fund, or which relates to any material
arrangements or proposed material arrangements involving the Fund or the
Investment Adviser, (2) of the initiation or threatening in writing of any
proceedings for, or receipt by the Fund of any written notice with respect
to, the suspension of the qualification of the TAPS for sale in any
jurisdiction or the issuance of any order by the Commission suspending the
effectiveness of the Registration Statement, (3) of receipt by the Fund, or
any representative or attorney of the Fund, of any other communication from
the Commission relating in any material way to the Fund, the Registration
Statement, the Notification, any Preliminary Prospectus, the Prospectus or
to the transactions contemplated by this Underwriting Agreement and (4) the
issuance by any court, regulatory body, administrative agency or other
governmental agency or body, whether foreign or domestic, of any order,
ruling or decree, or the threat in writing to initiate any proceedings with
respect thereto, regarding the Fund, which relates in any material way to
the Fund or any material arrangements or proposed material arrangements
involving the Fund. The Fund will make every reasonable effort to prevent
the issuance of any order suspending the effectiveness of the Registration
Statement and, if any such order is issued, to obtain its lifting as soon
as practicable.
(c) If not delivered prior to the date of this Underwriting
Agreement, the Fund will deliver to the Managing Representative, without
charge, a signed copy of the registration statement and the Notification
and of any amendments (except any post-effective amendment which is filed
with the Commission after the later of (x) one year from the date of this
Underwriting Agreement or (y) the date on which the distribution of the
TAPS is completed) to either the Registration Statement or the Notification
(including all exhibits filed with any such document) and as many conformed
copies of the registration statement and any amendments thereto (except any
post-effective amendment which is filed with the Commission after the later
of (x) one year from the date of this Underwriting Agreement or (y) the
date on which the distribution of the TAPS is completed) (excluding
exhibits) as the Managing Representative may reasonably request.
(d) During such period as a prospectus is required by law to
be delivered by an underwriter or a dealer, the Fund will deliver, without
charge, to the Underwriters and any dealers, at such office or offices as
the Underwriters may designate, as many copies of the Prospectus as the
Underwriters may reasonably request,
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and, if any event occurs during such period as a result of which it is
necessary to amend or supplement the Prospectus, in order to make the
statements therein, in light of the circumstances existing when such
Prospectus is delivered to a purchaser of TAPS, not misleading in any
material respect, or if during such period it is necessary to amend or
supplement the Prospectus to comply with the Securities Act, the Investment
Company Act, the Securities Act Rules or the Investment Company Act Rules,
the Fund promptly will prepare, submit to the Managing Representative, file
with the Commission and deliver, without charge, to the Underwriters and to
dealers (whose names and addresses the Managing Representative will furnish
to the Fund) to whom TAPS may have been sold by the Underwriters, and to
other dealers on request, amendments or supplements to the Prospectus so
that the statements in such Prospectus, as so amended or supplemented, will
not, in light of the circumstances existing when such Prospectus is
delivered to a purchaser, be misleading in any material respect and will
comply with the Securities Act, the Investment Company Act, the Securities
Act Rules and the Investment Company Act Rules. Delivery by the
Underwriters of any such amendments or supplements to the Prospectus will
not constitute a waiver of any of the conditions in Section 6 hereof.
(e) The Fund will make generally available to holders of the
Fund's securities, as soon as practicable but in no event later than the
last day of the 18th full calendar month following the calendar quarter in
which the Effective Date falls, an earnings statement, if applicable,
satisfying the provisions of Section 11(a) of the Securities Act and, at
the option of the Fund, Rule 158 of the Securities Act Rules.
(f) The Fund will take such actions as the Managing Representa
tive reasonably requests in order to qualify the TAPS for offer and sale
under the securities or "blue sky" laws of such jurisdictions as the
Managing Representative reasonably designates; provided that the Fund shall
not be required in connection therewith or as a condition thereof to
qualify as a foreign corporation or to execute a general consent to service
of process in any jurisdiction.
(g) The Fund will pay or cause to be paid the following: (i)
the fees, disbursements and expenses of the Fund's counsel and accountants
in connection with the registration of the TAPS and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus and the Prospectus and amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the cost of printing or reproducing this
Underwriting Agreement and any other documents in connection with the
offering, purchase, sale and delivery of the TAPS (including advertising
expenses of the Underwriters, if any); (iii) the cost of preparing share
certificates; (iv) the expenses (including, but not limited to, travel,
hotels and other accommodations)
14
<PAGE> 15
incurred by the Fund's or the Investment Adviser's directors, officers,
employees and other personnel in connection with meetings held with
registered brokers in connection with the offering of the TAPS, the
preparing to market and the marketing of the TAPS; (v) any fees charged by
securities rating services for rating the TAPS; (vi) the fees and expenses
of DTC and its nominee, the Custodian and the Auction Agent; and (vii) all
other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for. It is
understood, however, that, except as provided in this Section 5 and in
Section 7 hereof, the Underwriters will pay all of their own costs and
expenses, including the fees of their counsel and stock transfer taxes, if
any, on resale of any of the TAPS by them, except any advertising expenses
connected with any offers they may make.
(h) If the transactions contemplated by this Underwriting
Agreement are not consummated, except as otherwise provided herein, no
party will be under any liability to any other party, except that (1) if
this Underwriting Agreement is terminated by (x) the Fund or the Investment
Adviser pursuant to any of the provisions hereof (otherwise than pursuant
to Section 8 hereof) or (y) the Underwriters because of any inability,
failure or refusal on the part of the Fund or the Investment Adviser to
comply with any material terms or because any of the conditions in Section
6 are not satisfied, the Investment Adviser and the Fund, jointly and
severally, will reimburse the Underwriters for all out-of-pocket expenses
(including the reasonable fees, disbursements and other charges of their
counsel) reasonably incurred by them in connection with the proposed
purchase and sale of the TAPS (provided, however, that the Fund and the
Investment Adviser shall not be liable for any loss of anticipated profits
or speculative or consequential or similar damages for such termination)
and (2) no Underwriter who has failed or refused to purchase the TAPS
agreed to be purchased by it under this Underwriting Agreement, in breach
of its obligations pursuant to this Underwriting Agreement, will be
relieved of liability to the Fund and the Investment Adviser and the other
Underwriters for damages occasioned by its default.
(i) Without the prior written consent of the Managing Represen
tative, the Fund will not offer, sell or register with the Commission, or
announce an offering of, any equity securities of the Fund, within 180 days
after the Effective Date, except for the TAPS as described in the
Prospectus and any issuances of Common Shares pursuant to the dividend
reinvestment plan established by the Fund.
(j) The Fund will direct the investment of the net proceeds of
the offering of the TAPS in such a manner as to comply with the investment
objective and policies of the Fund as described in the Prospectus.
15
<PAGE> 16
(j) No later than the TAPS Closing Date, the Underwriters will
provide, and will cause any selling group member to whom they have sold
TAPS to provide, the Auction Agent with a list of the record names of the
persons to whom they have sold TAPS, the number of TAPS sold to each such
person, and the number of TAPS they are holding as of the TAPS Closing
Date; provided that in lieu of thereof, an Underwriter may provide the
Auction Agent with a list indicating itself as the sole holder of all the
TAPS sold by such Underwriter.
6. Conditions of the Underwriters' Obligations. The
obligations of the Underwriters to purchase the TAPS are subject to the
accuracy on the date of this Underwriting Agreement, and on the TAPS
Closing Date, of the representations of the Fund and the Investment Adviser
in this Underwriting Agreement, to the accuracy and completeness of all
statements made by the Fund or the Investment Adviser or any of their
respective officers in any certificate delivered to the Managing
Representative or its counsel pursuant to this Underwriting Agreement, to
performance by the Fund and the Investment Adviser of their respective
obligations under this Underwriting Agreement and to each of the following
additional conditions:
(a) The registration statement must have become
effective by 5:30 p.m., New York City time, on the date of this
Underwriting Agreement or such later date and time as the Managing
Representative consents to in writing. The Prospectus must have been filed
in accordance with Rule 497(b), (h) or (j), as the case may be, of the
Securities Act Rules.
(b) No order suspending the effectiveness of the
Registration Statement may be in effect and no proceedings for such purpose
may be pending before or, to the knowledge of counsel to the Underwriters,
threatened by the Commission, and any requests for additional information
on the part of the Commission (to be included in the Registration Statement
or the Prospectus or otherwise) must be complied with or waived to the
reasonable satisfaction of the Managing Representative.
(c) Since the dates as of which information is given in
the Registration Statement and the Prospectus, (1) there must not have been
any material change in the Common Shares, the TAPS or the liabilities of
the Fund except as set forth in or contemplated by the Prospectus; (2)
there must not have been any material adverse change in the general
affairs, prospects, management, business, financial condition or results of
operations of the Fund or the Investment Adviser whether or not arising
from transactions in the ordinary course of business as set forth in or
contemplated by the Prospectus (other than, in the case of the Fund, as a
result of changes in the markets for senior secured corporate loans
generally); (3) the Fund must not have sustained any material loss or
interference with its business from any court or from legislative or other
16
<PAGE> 17
governmental action, order or decree, whether foreign or domestic, or from
any other occurrence not described in the Registration Statement and
Prospectus; and (4) there must not have occurred any event that makes
untrue or incorrect in any material respect any statement or information
contained in the Registration Statement or Prospectus or that is not
reflected in the Registration Statement or Prospectus but should be
reflected therein in order to make the statements or information therein
(in the case of the Prospectus, in light of the circumstances in which they
were made) not misleading in any material respect; if, in the judgment of
the Managing Representative, any such development referred to in clause
(1), (2), (3) or (4) of this paragraph (c) makes it impracticable or
inadvisable to consummate the sale and delivery of the TAPS pursuant to
this Underwriting Agreement by the Underwriters, at the initial public
offering price of the TAPS.
(d) The Managing Representative must have received on the TAPS
Closing Date a certificate, dated such date, of the President or a
Vice-President and the chief financial or accounting officer or controller
or treasurer of each of the Fund and the Investment Adviser certifying that
(1) the signers have carefully examined the Registration Statement, the
Prospectus, and this Underwriting Agreement, (2) the representations of the
Fund (with respect to the certificates from such Fund officers) and the
representations of the Investment Adviser (with respect to the certificates
from such officers of the Investment Adviser) in this Underwriting
Agreement are accurate on and as of the date of the certificate, (3) there
has not been any material adverse change in the general affairs, prospects,
management, business, financial condition or results of operations of the
Fund (with respect to the certificates from such Fund officers) or the
Investment Adviser (with respect to the certificates from such officers of
the Investment Adviser), which change would materially and adversely affect
the ability of the Fund or the Investment Adviser, as the case may be, to
fulfill its obligations under this Underwriting Agreement or the Investment
Advisory Agreement, whether or not arising from transactions in the
ordinary course of business (other than, with respect to the certificates
from such Fund officers, as a result of changes in the markets for senior
secured corporate loans generally), (4) with respect to the Fund only, to
the knowledge of such officers, no order suspending the effectiveness of
the Registration Statement, prohibiting the sale of any of the TAPS or
otherwise having a material adverse effect on the Fund has been issued and
no proceedings for any such purpose are pending before or threatened by the
Commission or any other regulatory body, whether foreign or domestic, (5)
to the knowledge of the officers of the Investment Adviser, after
reasonable investigation, no order having a material adverse effect on the
ability of the Investment Adviser to fulfill its obligations under this
Underwriting Agreement or the Investment Advisory Agreement, as the case
may be, has been issued and no proceedings for any such purpose are pending
before or threatened by the Commission or any other regulatory body,
whether foreign or domestic, and (6) each of the Fund
17
<PAGE> 18
(with respect to the certificates from such Fund officers) and the
Investment Adviser (with respect to the certificates from such officers of
the Investment Adviser) has performed all of its respective agreements that
this Underwriting Agreement requires it to perform by the TAPS Closing Date
(to the extent not waived in writing by the Managing Representative).
(e) The Underwriters must receive on the TAPS Closing Date the
opinions dated such date substantially in the form of Annexes A and B to
this Underwriting Agreement from the counsel identified in each such
Annex.
(f) The Underwriters must receive on the TAPS Closing Date
from Skadden, Arps, Slate, Meagher & Flom LLP and its affiliated entities,
their counsel, an opinion dated such date with respect to the Fund, the
TAPS, the Registration Statement and the Prospectus, this Underwriting
Agreement and the form and sufficiency of all proceedings taken in
connection with the sale and delivery of the TAPS. Such opinion and
proceedings shall fulfill the requirements of this Section 6(f) only if
such opinion and proceedings are satisfactory in all respects to the
Managing Representative. The Fund and the Investment Adviser must have
furnished to such counsel such documents as counsel may reasonably request
for the purpose of enabling them to render such opinion.
(g) The Underwriters must receive on the date this
Underwriting Agreement is signed and delivered by the Underwriters a signed
letter, dated such date, substantially in the form of Annex C to this
Underwriting Agreement from the firm of accountants designated in such
Annex. The Underwriters also must receive on the TAPS Closing Date a signed
letter from such accountants, dated as of such date, confirming on the
basis of a review in accordance with the procedures set forth in their
earlier letter that nothing has come to their attention during the period
from a date not more than five business days before the date of this
Underwriting Agreement, specified in the letter, to a date not more than
five business days before such date, that would require any change in their
letter referred to in the foregoing sentence.
(h) The TAPS shall have been accorded a rating of "aaa" by
Moody's and a letter to such effect, dated the TAPS Closing Date, shall
have been delivered to the Managing Representative.
(i) As of the TAPS Closing Date and assuming the receipt of
the net proceeds from the sale of the TAPS, the 1940 Act TAPS Asset
Coverage and the TAPS Basic Maintenance Amount (each as defined in the
Prospectus) each will be met.
18
<PAGE> 19
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Underwriting Agreement will comply only if they
are in form and scope reasonably satisfactory to counsel for the
Underwriters, provided that any such documents, forms of which are annexed
hereto, shall be deemed satisfactory to such counsel if substantially in
such form.
7. Indemnification and Contribution.
(a) Each of the Fund and the Investment Adviser, jointly and
severally, will indemnify and hold harmless each Underwriter, the
directors, officers, employees and agents of such Underwriter and each
person, if any, who controls such Underwriter within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act from and
against any and all losses, claims, liabilities, expenses and damages
(including, but not limited to, any and all investigative, legal and other
expenses reasonably incurred in connection with, and any and all amounts
paid in settlement (in compliance herewith) of, any action, suit or
proceeding between any of the indemnified parties and any indemnifying
parties or between any indemnified party and any third party, or otherwise,
or any claim asserted), to which such Underwriter or any such person, or
any of them, may become subject under the Securities Act, the Exchange Act,
the Investment Company Act, the Advisers Act or other federal or state
statutory law or regulation, at common law or otherwise, whether foreign or
domestic, insofar as such losses, claims, liabilities, expenses or damages
arise out of or are based on (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the
Preliminary Prospectus, the Prospectus, the sales materials, or any
amendment or supplement to the Registration Statement, the Preliminary
Prospectus, the Prospectus, the sales materials or in any documents filed
under the Exchange Act and deemed to be incorporated by reference into the
Registration Statement, the Preliminary Prospectus, the Prospectus, or in
any application or other document executed by or on behalf of the Fund or
based on written information furnished by or on behalf of the Fund filed in
any jurisdiction in order to qualify the TAPS under the securities laws
thereof or filed with the Commission, (ii) the omission or alleged omission
to state, in any or all such documents, a material fact required to be
stated therein or necessary to make the statements therein not misleading
or (iii) any act or failure to act or any alleged act or failure to act by
such Underwriter in connection with, or relating in any manner to, the TAPS
or the offering contemplated hereby, and which is included as part of or
referred to in any loss, claim, liability, expense or damage arising out of
or based upon matters covered by clause (i) or (ii) above (provided,
however, that neither of the Fund nor the Investment Adviser shall be
liable under this clause (iii) to the extent it is finally judicially
determined by a court of competent jurisdiction that such loss, claim,
liability, expense or damage resulted directly from any such acts or
failures to act undertaken or omitted to be taken by such indemnified party
19
<PAGE> 20
through its gross negligence, bad faith or willful misconduct); provided
that neither the Fund nor the Investment Adviser will be liable to the
extent that such losses, claims, liabilities, expenses or damages arise
from the sale of the TAPS in the public offering to any person by an
underwriter, including an Underwriter, pursuant to this Agreement and are
based on an untrue statement or omission or alleged untrue statement or
omission (1) made in reliance on and in conformity with information
relating to any Underwriter furnished in writing to the Fund by the
Managing Representative on behalf of Underwriters expressly for inclusion
in the Registration Statement, the Preliminary Prospectus or the Prospectus
or (2) if a copy of the Prospectus was not sent or given to such person at
or before the confirmation of the sale to such person in any case where
such delivery is required by the Securities Act, unless such failure to
deliver such Prospectus was a result of noncompliance by the Fund with
Section 5(d) hereof or (3) made in any preliminary prospectus which untrue
statement or omission or alleged untrue statement or omission was corrected
in all material respects in the Prospectus (as then amended or
supplemented) if the Fund and/or the Investment Adviser, as the case may
be, shall sustain the burden of proving that the Underwriters sold TAPS to
the person alleging such loss, claim, liability, expense or damage without
sending or giving, at or prior to the written confirmation of such sale, a
copy of the Prospectus (as then amended or supplemented) if the Fund had
previously furnished copies thereof to the Underwriters in accordance with
this Agreement, and the Underwriters failed to deliver the corrected
Prospectus, if required by law to have so delivered it and if delivered
would have been a complete defense against the person asserting such loss,
claim, liability, expense or damage. This indemnity agreement will be in
addition to any liability that the Fund and the Investment Adviser might
otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Fund
and the Investment Adviser, each person, if any, who controls the Fund or
the Investment Adviser within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, each trustee of the Fund and each
officer of the Fund who signs the Registration Statement to the same extent
as the foregoing indemnity from the Fund or the Investment Adviser to the
Underwriter, but only insofar as losses, claims, liabilities, expenses or
damages arise out of or are based on any untrue statement or omission or
alleged untrue statement or omission of a material fact made in reliance on
and in conformity with information relating to such Underwriter furnished
in writing to the Fund by such Underwriter expressly for use in the
Registration Statement, the Preliminary Prospectus or Prospectus. This
indemnity will be in addition to any liability that such Underwriter might
otherwise have; provided, however, that in no case shall such Underwriter
be liable or responsible hereunder for any amount in excess of the fees and
commissions received by such Underwriter.
20
<PAGE> 21
(c) Any party that proposes to assert the right to be
indemnified under this Section 7 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim
is to be made against an indemnifying party or parties under this Section
7, notify each such indemnifying party of the commencement of such action,
enclosing a copy of all papers served, but the omission to so notify such
indemnifying party will not relieve it from any liability that it may have
to any indemnified party under the foregoing provision of this Section 7
unless, and only to the extent that, such omission results in the
forfeiture of substantive rights or defenses by the indemnifying party. If
any such action is brought against any indemnified party and it notifies
the indemnifying party of its commencement, the indemnifying party will be
entitled to participate in and, to the extent that it elects by delivering
written notice to the indemnified party promptly after receiving notice of
the commencement of the action from the indemnified party, jointly with any
other indemnifying party similarly notified, to assume the defense of the
action, with counsel reasonably satisfactory to the indemnified party, and
after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable
to the indemnified party for any legal or other expenses except as provided
below and except for the reasonable costs of investigation subsequently
incurred by the indemnified party in connection with the defense. The
indemnified party will have the right to employ its own counsel in any such
action, but the fees, disbursements and other charges of such counsel will
be at the expense of such indemnified party unless (1) the employment of
counsel by the indemnified party has been authorized in writing by the
indemnifying party, (2) the indemnified party has reasonably concluded
(based on the advice of counsel) that there may be legal defenses available
to it or other indemnified parties that are different from or in addition
to those available to the indemnifying party (3) a conflict or potential
conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such
action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases
the reasonable fees disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. Subject to the
requirements of Investment Company Act Release No. 11330, all such fees,
disbursements and other charges will be reimbursed by the indemnifying
party promptly as they are incurred. 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 (in addition
to local counsel) admitted to practice in such jurisdiction at any one time
for all such indemnified party or parties. An indemnifying party will not
be liable for any settlement of any action or claim
21
<PAGE> 22
effected without its written consent (which consent will not be
unreasonably withheld). No indemnifying party shall, without the prior
written consent of such indemnified party, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action or
proceeding relating to the matters contemplated by this Section 7 (whether
or not any indemnified party is a party thereto), unless such settlement,
compromise or consent includes an unconditional release of such indemnified
party from all liability to such claimants arising or that may arise out of
such claim, action or proceeding.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 7
is applicable but for any reason is held to be unavailable from the Fund,
the Investment Adviser, or the Underwriters, the Fund, the Investment
Adviser and the Underwriters will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and
other expenses reasonably incurred in connection with, and any amount paid
in settlement (in compliance herewith) of, any action, suit or proceeding
or any claim asserted, but after deducting any contribution received by the
Fund and the Investment Adviser from persons other than the Underwriters,
such as persons who control the Fund and the Investment Adviser within the
meaning of the Securities Act or the Exchange Act, officers of the Fund who
signed the Registration Statement and directors of the Fund, who may also
be liable for contribution) to which the Fund, the Investment Adviser and
the Underwriters may be subject in such proportion as shall be appropriate
to reflect the relative benefits received by the Fund and the Investment
Adviser on the one hand and the Underwriters on the other. The relative
benefits received by the Fund and the Investment Adviser (treated jointly
for this purpose as one person) on the one hand and the Underwriters on the
other hand shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Fund
bear to the total fees and commissions received by the Underwriters. If,
but only if, the allocation provided by the foregoing sentence is not
permitted by applicable law, the allocation of contribution shall be made
in such proportion as is appropriate to reflect not only such relative
benefits referred to in the foregoing sentence but also the relative fault
of the Fund and the Investment Adviser (treated jointly for this purpose as
one person) on the one hand and the Underwriters on the other hand in
connection with respect to the statements or omissions or alleged
statements or omissions that resulted in the losses, claims, liabilities,
expenses or damages (including any investigative, legal or other expenses
reasonably incurred in connection with, and any amount paid in settlement
of, any action, suit or proceeding or any claim asserted), as well as any
other relevant equitable considerations appropriate in the circumstances.
Such relative fault of the parties shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Fund, the Investment Adviser or
22
<PAGE> 23
the Underwriters, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement
or omission and any other equitable considerations appropriate in the
circumstances. The Fund, the Investment Adviser and the Underwriters agree
that it would not be just and equitable if contributions pursuant to this
Section 7(d) were to be determined by pro rata allocation or by any other
method of allocation which 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, liability, expense or
damage , or action in respect thereof, referred to above in this Section
7(d) shall be deemed to include, for purposes of this Section 7(d) any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding any other provisions of this Section 7(d), the Underwriters
shall not be required to contribute any amount in excess of the fees and
commissions received by them and no person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) will be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 7(d), any
person who controls a party to this Agreement within the meaning of the
Securities Act will have the same rights to contribution as that party, and
each trustee of the Fund and each officer of the Fund who signed the
Registration Statement will have the same rights to contribution as the
Fund, subject in each case to the provisions hereof. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action against such party in respect of which a claim for contribution may
be made under this Section 7(d), notify such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve
the party or parties from whom contribution may be sought from any other
obligation it or they may have under this Section 7(d). No party will be
liable for contribution with respect to any action or claim settled without
its written consent (which consent shall not be unreasonably withheld). The
Underwriter's obligations to contribute pursuant to this Section 7 are
several in proportion to the respective number of TAPS set forth opposite
their names in Schedule 1 (or such number of TAPS as determined pursuant to
Section 9 hereof) and not joint.
(e) Notwithstanding any other provisions in this Section 7, no
person shall be entitled to indemnification or contribution under this
Agreement against any loss, claim, liability, expense or damage arising by
reason of such person's willful misfeasance, bad faith or gross negligence
in the performance of its duties hereunder, or by reason of such person's
reckless disregard of such person's obligations and duties hereunder.
(f) The Fund and the Investment Adviser acknowledge that the
statements with respect to (1) the sales load with respect to the sale of
the TAPS as set
23
<PAGE> 24
forth on the cover page of the Prospectus and (2) the (i) list of
Underwriters and the number of TAPS allocated to each and (ii) the
disclosure in the first two paragraphs under the caption "Underwriting" in
the Prospectus, constitute the only information furnished in writing to
the Fund by the Managing Representative on behalf of the Underwriters
expressly for use in such document. The Underwriters severally confirm that
these statements are correct in all material respects and were so furnished
by or on behalf of the Underwriters severally for use in the Prospectus.
8. Termination. This Underwriting Agreement may be terminated
by the Managing Representative by notifying the Fund at any time:
(a) before the later of the effectiveness of the
Registration Statement and the time when any of the TAPS are first
generally offered pursuant to this Underwriting Agreement by the Managing
Representative to dealers by letter or telegram;
(b) at or before the TAPS Closing Date if, in the sole
judgment of the Managing Representative, payment for and delivery of any
TAPS is rendered impracticable or inadvisable because (1) trading in the
TAPS or the Common Shares of the Fund is suspended by the Commission or
trading in the Common Shares is suspended by the principal exchange that
lists the Common Shares, (2) trading in securities generally on the New
York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market
shall have been suspended or limited or minimum or maximum prices shall
have been generally established on such exchange or over-the-counter
market, or, (3) additional material governmental restrictions, not in force
on the date of this Underwriting Agreement, have been imposed upon trading
in securities or trading has been suspended on any U.S. securities
exchange, (4) a general banking moratorium has been established by U.S.
federal or New York authorities or (5) any material adverse change in the
financial or securities markets in the United States or in political,
financial or economic conditions in the United States or any outbreak or
material escalation of hostilities or declaration by the United States of a
national emergency or war or other calamity or crisis shall have occurred
the effect of any of which is such as to make it, in the sole judgment of
the Managing Representative, impracticable or inadvisable to market the
TAPS on the terms and in the manner contemplated by the Prospectus; or
(c) at or before the TAPS Closing Date, if any of the
conditions specified in Section 6 have not been fulfilled when and as
required by this Underwriting Agreement.
24
<PAGE> 25
9. Substitution of Underwriters. If one or more of the
Underwriters fails to purchase on the TAPS Closing Date the TAPS agreed to
be purchased on such date by such Underwriter or Underwriters and this
Underwriting Agreement has not been terminated, the Managing Representative
may find one or more substitute underwriters to purchase such TAPS or make
such other arrangements as the Managing Representative deems advisable, or
one or more of the remaining Underwriters may agree to purchase such TAPS
in such proportions as may be approved by the Managing Representative, in
each case upon the terms set forth in this Underwriting Agreement. If no
such arrangements have been made within 36 hours after such date, and
(a) the number of TAPS to be purchased by the
defaulting Underwriters on the TAPS Closing Date does not exceed 10% of the
TAPS that the Underwriters are obligated to purchase on the TAPS Closing
Date, each of the nondefaulting Underwriters will be obligated to purchase
such TAPS on the terms set forth in this Underwriting Agreement in
proportion to their respective obligations under this Underwriting
Agreement, or
(b) the number of TAPS to be purchased by the
defaulting Underwriters on the TAPS Closing Date exceeds 10% of the TAPS to
be purchased by all the Underwriters on such date, the Fund will be
entitled to an additional period of 24 hours within which to find one or
more substitute underwriters reasonably satisfactory to the Managing
Representative to purchase such TAPS on the terms set forth in this
Underwriting Agreement.
In any such case, either the Managing Representative or the
Fund will have the right to postpone the TAPS Closing Date for not more
than five business days in order that necessary changes and arrangements
(including any necessary amendments or supplements to the Registration
Statement or the Prospectus) may be effected by the Managing Representative
and the Fund. If the number of TAPS to be purchased on such TAPS Closing
Date by such defaulting Underwriter or Underwriters exceeds 10% of the TAPS
that the Underwriters are obligated to purchase on such date, and none of
the nondefaulting Underwriters or the Fund makes arrangements pursuant to
this Section within the period stated for the purchase of the TAPS that the
defaulting Underwriters agreed to purchase, this Underwriting Agreement
will terminate without liability on the part of any nondefaulting
Underwriter, the Fund or the Investment Adviser, except as provided in
Sections 5(g) and 7 hereof. This Section 9 will not affect the liability of
any defaulting Underwriter to the Fund or the Adviser or the nondefaulting
Underwriters arising out of such default. A substitute underwriter will
become an Underwriter for all purposes of this Underwriting Agreement.
10. Miscellaneous.
25
<PAGE> 26
(a) The reimbursement, indemnification and contribution
agreements in Sections 5(g) and 7 hereof and the representations of the
Fund, the Investment Adviser and the Underwriters in this Underwriting
Agreement will remain in full force and effect regardless of any
termination of this Underwriting Agreement. The reimbursement,
indemnification and contribution agreements in Sections 5(g) and 7 hereof
and the representations and agreements of the Fund, the Investment Adviser
and the Underwriters in this Underwriting Agreement shall survive the TAPS
Closing Date and shall remain in full force and effect regardless of any
investigation made by or on behalf of any Underwriter, the Fund, the
Investment Adviser or any controlling person and delivery of and payment
for the TAPS.
(b) This Underwriting Agreement is for the benefit of the
Underwriters, the Fund, the Investment Adviser and their successors and
assigns, and, to the extent expressed in this Underwriting Agreement, for
the benefit of persons controlling any of the Underwriters, the Fund, the
Investment Adviser and directors and officers of the Fund, the Investment
Adviser, and their respective successors and assigns, and no other person,
partnership, association or corporation will acquire or have any right
under or by virtue of this Underwriting Agreement. The term "successors and
assigns" does not include any purchaser of the TAPS from any Underwriter
merely because of such purchase.
(c) All notices and communications under this Underwriting
Agreement will be in writing, effective only on receipt and mailed or
delivered, by messenger, facsimile transmission or otherwise, to the
Underwriters in care of PaineWebber Incorporated, Attn.: Financial
Institutions Group, 1285 Avenue of the Americas, New York, New York 10019,
to the Fund or the Investment Adviser at 333 West Wacker Drive, Chicago,
Illinois 60606, Attn.: Chief Legal Officer.
(d) This Underwriting Agreement may be signed in multiple
counterparts that taken as a whole constitute one agreement.
(e) This Underwriting Agreement will be governed by and
construed in accordance with the laws of the State of New York without
reference to choice of law principles thereof (except Section 10(f) below,
which will be governed by Massachusetts law).
(f) A copy of the Agreement and Declaration of Trust of the
Fund is on file with the Secretary of The Commonwealth of Massachusetts,
and notice hereby is given that this Underwriting Agreement is executed on
behalf of the Fund and that the obligations of the Fund arising out of this
Underwriting Agreement are not binding upon
26
<PAGE> 27
any of the Trustees or shareholders of the Fund individually but are
binding only upon the assets and properties of the Fund.
All representations, warranties, and agreements of the Fund
and the Investment Adviser contained herein or in certificates or other
instruments delivered pursuant hereto, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of
any Underwriter or any of its controlling persons and shall survive
delivery of and payment for the TAPS hereunder.
In case any provision in this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
The Fund, the Investment Adviser and the Underwriters each
hereby irrevocably waive any right they may have to a trial by jury in
respect of any claim based upon or arising out of this Agreement or the
transactions contemplated hereby.
This Agreement may not be amended or otherwise modified or any
provision hereof waived except by an instrument in writing signed by the
Managing Representative, the Fund and the Investment Adviser.
27
<PAGE> 28
Please confirm that the foregoing correctly sets forth the agreement
among the Fund, the Investment Adviser and the several Underwriters.
Very truly yours,
Nuveen Senior Income Trust
By:
-------------------------------
Name: Gifford R. Zimmerman
Title: Vice President
Nuveen Senior Loan Asset Management Inc.
By:
-------------------------------
Name: Alan G. Berkshire
Title: Vice President
Confirmed:
PaineWebber Incorporated
As Managing Representative of the Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
By: PaineWebber Incorporated
By: Acting on behalf of itself and
------------------------- and the Underwriters named in Schedule 1
Name: Todd A. Reit
Title: Director
<PAGE> 29
SCHEDULE 1
NUMBER OF TAPS
NAME TO BE PURCHASED
PaineWebber Incorporated
Total
<PAGE> 30
ANNEX A
Form of VPKK Opinion
, 2000
PAINE WEBBER INCORPORATED
[Underwriters]
c/o PAINE WEBBER INCORPORATED
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
We have acted as counsel to Nuveen Senior Income Fund (the "Fund"), in
connection with (i) the authorization of shares and the issuance and
sale by the Fund of shares of the Fund's Series Taxable Auctioned
Preferred Shares, par value $.01 per share, with a liquidation preference of
$25,000 per share (the "Shares"), pursuant to the Underwriting Agreement dated
, 2000, (the "Underwriting Agreement"), by and among you (the
"Underwriters"), the Fund and Nuveen Senior Loan Asset Management, Inc. (the
"Adviser"), and (ii) the registration of the Shares under the Securities Act of
1933, as amended (the "1933 Act"). This opinion is provided to you pursuant to
Section of the Underwriting Agreement. Capitalized terms not otherwise
defined herein are defined as set forth in the Underwriting Agreement.
In rendering this opinion, we have examined:
a. the Underwriting Agreement;
b. the Declaration of Trust (the "Declaration") and By-Laws
("By-Laws") of the Fund, including all amendments thereto (collectively, the
"Organizational Documents");
c. the Fund's registration statement on Form N-2 (Registration
Nos. 333- and 811- ) and pre-effective amendments No. 1 and No. 2
thereto, as filed with the Securities and Exchange Commission (the "Commission")
(such registration statement as finally amended at the time it became effective
under the 1933 Act, being herein referred to as the "Registration Statement"),
the exhibits to the Registration Statement as filed with the Commission, and the
prospectus and statement of additional information included in the Registration
Statement in the
<PAGE> 31
VEDDER PRICE
Page 2
form filed by the Fund pursuant to the Rules and Regulations (herein referred to
collectively as the "Prospectus");
d. the Fund's Statement Establishing and Fixing the Rights and
Preferences of the Shares (the "Statement");
e. the Auction Agency Agreement, the Investment Management Agreement,
the Custodian Agreement, and the Fund Accounting Agreement (collectively, the
"Fund Agreements") and the Letter of Representations relating to the Shares;
f. a copy, certified by the Secretary of the Fund, of the minutes of
the meeting of the Board of Trustees of the Fund held on and , at
which all Trustees were present and at which they unanimously adopted
resolutions to authorize the Statement, the issuance and sale of the Shares and
the execution, delivery and performance of the Underwriting Agreement and the
Fund Agreements;
g. the certificates and documents being delivered on the date hereof at
the closing of the sale of the Shares pursuant to the Underwriting Agreement;
and
h. such other documents as we, in our professional judgment, have
deemed necessary or appropriate as a basis for the opinions set forth below
(items (a) - (e) are referred to herein collectively as the "Transaction
Documents").
In examining the Transaction Documents, we have assumed the genuineness of
all signatures, the legal capacity of all natural persons, the authenticity of
documents purporting to be originals and the conformity to originals of all
documents submitted to us as copies. As to questions of fact material to our
opinion, we have relied (without investigation) upon certificates and written
statements of officers and employees of, and the accountants for, the Fund and
of officers and employees of the Adviser and certain public officials. We have
also assumed that each of the Transaction Documents has been duly authorized,
executed and delivered by, and constitutes the legal and valid obligation of
each party thereto (other than the Fund) and is enforceable against each such
party (other than the Fund) in accordance with its terms. With respect to
matters based on our knowledge, our opinion is based on such information as has
come to the actual attention of the attorneys in our firm who have represented
the Fund in connection with the transactions contemplated by the Transaction
Documents.
We express no opinion as to the laws of any jurisdiction other than the
federal law of the United States, and the laws of the States of Illinois (except
that we express no opinion as to any choice of law provisions thereof) and the
Commonwealth of Massachusetts. Insofar as this opinion pertains to matters
involving the laws of the Commonwealth of Massachusetts, we are relying, with
your consent, solely upon the opinion of Bingham Dana LLP, special Massachusetts
counsel to the
<PAGE> 32
VEDDER PRICE
Page 3
Fund, dated , 2000, which is satisfactory in substance and form to
us and may be relied upon by us and by the Underwriters and counsel for the
Underwriters.
Based upon and subject to the qualifications, assumptions and
limitations set forth herein, we are of the opinion that:
(1) The Fund is duly organized and existing under the Fund's
Declaration and the laws of the Commonwealth of Massachusetts as a voluntary
association with transferable shares of beneficial interest, commonly referred
to as a "Massachusetts business trust, with full power and authority to own,
lease and operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus (and any amendments or supplements to
either of them), and is duly registered and qualified to conduct its business
and is in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure to so register or so qualify does not
have a material, adverse effect on the condition (financial or other), business
properties, net assets or results of operations of the Fund;
(2) To the best of our knowledge, the Fund has no subsidiaries.
(3) To the best of our knowledge, the capitalization of the Fund
is as set forth in the Registration Statement. All of the outstanding common
shares of the Fund have been duly authorized and validly issued, are fully paid
and nonassessable, except that as set forth in the Registration Statement,
shareholders of a Massachusetts business trust may under certain circumstances
be held liable for its obligations, and are free of any statutory preemptive or,
to the best of our knowledge, similar rights that entitle any person to acquire
any such shares upon the issuance thereof by the Fund pursuant to any agreement
known to us to which the Fund is a party. No person is entitled to any
preemptive or similar rights in connection with the issuance of the TAPS.
(4) The Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor in accordance with the
terms of the Underwriting Agreement, will be validly issued, fully paid and
nonassessable, except that as set forth in the Registration Statement,
shareholders of a Massachusetts business trust may under certain circumstances
be held liable for its obligations. Except as set forth in the Declaration and
the Statement, there are no restrictions upon the transfer of any Shares
pursuant to the Declaration or By-Laws of the Fund or any agreement or other
outstanding instrument to which the Fund is a party; and the certificate
evidencing the Shares complies as to form with all requirements of Massachusetts
law;
(5) The Shares conform in all material respects to the description
thereof in the Registration Statement and the Prospectus (and any amendment or
supplement to either of them) and the shares of beneficial interest of the Fund
conforms in all material respects to the description
<PAGE> 33
VEDDER PRICE
Page 4
thereof in the Registration Statement and the Prospectus (and any amendment or
supplement to either of them); and the authorized and outstanding shares of
beneficial interest of the Fund are as set forth in the Prospectus;
(6) The Registration Statement is effective under the 1933 Act and
the 1940 Act; any required filing of the Prospectus pursuant to Rule 497 of the
Rules and Regulations has been made within the time periods required by Rule
497; no stop-order suspending the effectiveness of the Registration Statement or
order pursuant to Section 8(e) of the 1940 Act has been issued and no proceeding
for any such purpose has been instituted or is pending or to the best of our
knowledge, threatened in writing by the Commission;
(7) The Fund's notification of registration as an investment
company under the 1940 Act on Form N-8A (the "1940 Act Notification"), the
Registration Statement and the Prospectus and each amendment or supplement to
the Registration Statement and the Prospectus as of their respective issue dates
(except the financial statements and other financial data contained therein, as
to which we express no opinion) complied as to form in all material respects
with the requirements of the 1933 Act, the 1940 Act and the Rules and
Regulations;
(8) The statements made in the Prospectus under the captions "The
Auction" and "Description of TAPS", insofar as they purport to summarize the
provisions of the Statement or other documents or agreements specifically
referred to therein, constitute accurate summaries of the terms of such
documents, in all material respects;
(9) The statements made in the Prospectus under the caption
"Prospectus Summary-Federal Income Taxes" and both captions entitled "Federal
Taxation" and "Tax Matters", insofar as they constitute matters of law or legal
conclusions, have been reviewed by us and constitute accurate statements of any
such matters of law or legal conclusions, and fairly present the information
called for with respect thereto by Form N-2, in all material respects;
(10) To the best of our knowledge, there are no legal or
governmental proceedings pending or threatened in writing against the Fund, or
to which the Fund or any of its properties is subject, that are required to be
described in the Registration Statement or the Prospectus (and any amendment or
supplement to either of them), but are not described as required;
(11) The Underwriting Agreement and the Fund Agreements have each
been duly and validly authorized, executed and delivered by the Fund, each
complies with all applicable provisions of the 1940 Act and the rules and
regulations thereunder and the Advisers Act and the rules and regulations
thereunder and each constitutes the valid and binding agreement of the Fund,
enforceable against the Fund in accordance with its terms;
<PAGE> 34
VEDDER PRICE
Page 5
(12) The Fund is registered under the 1940 Act as a closed-end
non-diversified management investment company; the provisions of the
Declaration, Statement and By-Laws of the Fund and the investment policies and
restrictions described in the Prospectus under the caption "Prospectus
Summary--Investment Objective and Policies", "The Fund", "Principal Investment
Risks", captions entitled "The Fund's Investments", "Investment Objectives and
Policies" and "Investment Policies and Techniques," comply with the requirements
of the 1940 Act, in all material respects;
(13) To the best of our knowledge, no person is serving or acting
as an officer, director 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 Investment Advisers Act of 1940 ("Advisers Act") and the Advisers Act Rules
and Regulations;
(14) Neither the issuance and sale of the Shares by the Fund
pursuant to the Underwriting Agreement, the execution and delivery of the
Underwriting Agreement or any of the Fund Agreements by the Fund, nor the
performance by the Fund of the transactions contemplated in the Underwriting
Agreement or any of the Fund Agreements (A) requires any consent, approval,
authorization, or other order of or registration or filing with, the Commission,
the National Association of Securities Dealers, national securities exchange,
regulatory body, administrative agency or governmental body, agency or official,
or any arbitrator, any court (except (1) the absence of which, either
individually or in the aggregate, would not have a material adverse effect on
the Fund; (2) such as may have been obtained prior to the date hereof; (3) such
as may be required for compliance with the New York Stock Exchange or state
securities or blue sky laws of various jurisdictions in accordance with the
Underwriting Agreement and (4) the filing of the Statement with the Secretary of
State of the Commonwealth of Massachusetts) or violates or will violate or
constitutes or will constitute a breach of, or a default under, the
Organizational Documents of the Fund or (B) violates or constitutes or a breach
of, or a default under, any agreement, indenture, lease or other instrument
known to us to which the Fund is party or by which it or any of its properties
may be bound, or violates any statute, law, regulation or judgment, injunction,
order or decree applicable to the Fund or any of its properties, or will result
in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Fund pursuant to the terms of any agreement or
instrument known to us to which it is a party or by which any of its property or
assets is bound. To the best of our knowledge, the Fund is not subject to any
order of any court or of any arbitrator, governmental authority or
administrative agency of the United States of America, the State of Illinois or
the Commonwealth of Massachusetts; and
(15) No holder of any security of the Fund has any right pursuant
to any agreement known to us to which the Fund is a party to require
registration of common shares, shares of TAPS or any other security of the Fund
because of the filing of the Registration Statement or consummation of the
transactions contemplated by the Underwriting Agreement.
<PAGE> 35
VEDDER PRICE
Page 6
(16) To the best of our knowledge, the Fund is not overtly in
breach of, or in default under, any material written agreement or instrument to
which it is a party or by which it is or its property is bound or affected.
(17) To the best of our knowledge, the common shares of the Fund
are listed on the New York Stock Exchange.
(18) The Fund does not require any tax or other rulings from
governmental authorities to enable it to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code.
We have participated in conferences with officers and employees of the Fund
and the Adviser, representatives of the independent accountants for the Fund,
Massachusetts counsel to the Fund, the Underwriters and counsel for the
Underwriters at which the contents of the Registration Statement and the
Prospectus and related matters were discussed and, although we are not passing
upon, and do not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Prospectus, except to the limited extent otherwise covered by paragraphs 5, 7,
8, 9, and 12, and have made no independent check or verification thereof, on the
basis of the foregoing, no facts have come to our attention that would have led
us to believe that (a) the Registration Statement or any amendment or supplement
thereto, at the time it became effective, contained an untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements contained therein not misleading,
(b) the Prospectus or any amendment or supplement thereto, as of its issue date
and as of the Closing Date, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact required to be stated
therein or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading, or (c) the 1940 Act
Notification as of _________, 1999 contains any untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading, except that in
each case we express no opinion with respect to the financial statements,
schedules and other financial information and statistical data included therein
or excluded therefrom or the exhibits to the Registration Statement.
The foregoing opinions are subject to the following qualifications:
a. The enforceability of any obligation of the Fund may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization,
rehabilitation, moratorium, marshaling or other laws affecting the enforcement
generally of creditors' rights and remedies.
b. The enforceability of any obligation of the Fund is subject to
principles of equity (regardless of whether considered and applied in a
proceeding in equity or at law), public
<PAGE> 36
VEDDER PRICE
Page 7
policy, applicable law relating to fiduciary duties, and judicial imposition of
an implied covenant of good faith and fair dealing.
c. No opinion is given herein as to the availability of specific
performance or equitable relief of any kind.
d. The opinions expressed herein relate only to laws which are
specifically referred to in this opinion and which laws, in our experience, are
normally directly applicable to transactions of the type provided for in the
Transaction Documents.
e. We express no opinion as to the validity, binding effect or
enforceability of (i) purported waivers of any statutory or other rights, court
rules or defenses to obligations or consents to any actions where such waivers
or consents (A) are against public policy or (B) constitute waivers of rights or
consents to actions which by law, regulation or judicial decision may not
otherwise be waived or given; (ii) provisions indemnifying any person against,
or relieving any person of liability for, that person's own negligent or
wrongful acts or in any other circumstances where enforcement of such provisions
would be against public policy or limited or prohibited by applicable law; (iii)
any provisions which purport to authorize or permit any person to act in a
manner which is determined not to be in good faith or commercially reasonable or
any provisions which purport to waive any rights in respect of such acts; (iv)
any provisions which purport to authorize or permit any person to exercise any
right or remedy upon any nonmaterial breach or default; (v) any forum selection
provision; (vi) any powers of attorney to the extent that they purport to grant
rights and powers that may not be granted under applicable law; (vii) any
provisions that purport to permit the exercise of "self-help" remedies,
including, without limitation, the exercise of rights of setoff or purported
rights to enter onto the property of any person or take physical possession of
any property; (viii) any right or obligation to the extent that the same may be
varied by course of dealing or performance; (ix) any provision which may provide
for the compounding of interest or the payment or accrual of interest on
interest; or (x) any provision that is subject to any mutual mistake of fact or
misunderstanding, fraud, duress or undue influence.
f. The opinions expressed herein are matters of professional
judgment and are not a guarantee of result.
This opinion is solely for the information of the addressee hereof and
is not to be quoted in whole or in part or otherwise referred to, nor is it to
be filed with any government agency or any other person, without our prior
written consent, and no one other than the addressee hereof is entitled to rely
on this opinion. This opinion is given to you as of the date hereof and we
assume no obligation to advise you of any change which may hereafter be brought
to our attention.
Very truly yours,
<PAGE> 37
ANNEX B
FORM OF OPINION OF ALAN G. BERKSHIRE
REGARDING NUVEEN SENIOR LOAN ASSET MANAGEMENT
1. The Investment Adviser has been duly organized and is validly
existing as a corporation in good standing under the laws of its jurisdiction of
incorporation with full power and authority to conduct all of the activities
conducted by it, to own or lease all of the assets owned or leased by it and to
conduct its business as described in the Registration Statement and Prospectus,
and the Investment Adviser is duly licensed and qualified as a foreign
corporation or otherwise and in good standing in each other jurisdic tion in
which it is required to be so qualified and the Investment Adviser owns,
possesses or has obtained and currently maintains all governmental licenses,
permits, consents, orders, approvals and other authorizations, whether foreign
or domestic, necessary for the Investment Adviser to carry on its business as
contemplated in the Registration Statement and the Prospectus.
2. The Investment Adviser is duly registered as an investment adviser
under the Advisers Act and is not prohibited by the Advisers Act, the Investment
Company Act, the Advisers Act Rules or the Investment Company Act Rules from
acting as investment adviser for the Fund as contemplated by the Investment
Advisory Agreement, the Registration Statement and the Prospectus.
3. The Investment Adviser has full power and authority to enter into
each of the Underwriting Agreement, the Investment Management Agreement, the
Expense Reimbursement Agreement, the Subscription Agreement and the Pricing
Agreement (together, such agreements being referred to as the "Investment
Adviser Agreements") and to carry out all the terms and provisions thereof to be
carried out by it, and each such agreement has been duly and validly authorized,
executed and delivered by he Investment Adviser; each Investment Adviser
Agreement complies in all material respects with all provisions of the
Investment Company Act, the Advisers Act, the Investment Company Act Rules and
the Advisers Act Rules; and assuming due authorization, execution and delivery
by the other parties thereto, each Investment Adviser Agreement constitutes a
legal, valid and binding obligation of the Investment Adviser, enforceable in
accordance with its terms, (1) subject, as to enforcement, to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and to general equitable principles (regardless of whether enforcement is sought
in a proceeding in equity or at law) and (2) as rights to indemnity thereunder
may be limited by federal or state securities laws.
4. Neither (A) the execution and delivery by the Investment Adviser of
any Investment Adviser Agreement nor (B) the consummation by the Investment
Adviser of the transactions contemplated by, or the performance of its
obligations under any Investment Adviser Agreement conflicts or will conflict
with, or results or will result in
<PAGE> 38
a breach of, the Certificate of Incorporation or By-Laws of the Investment
Adviser or any agreement or instrument to which the Investment Adviser is a
party or by which the Investment Adviser is bound, or any law, rule or
regulation, or order of any court, governmental instrumentality, securities
exchange or association or arbitrator, whether foreign or domestic, applicable
to the Investment Adviser.
5. No consent, approval, authorization or order of any court,
governmental agency or body or securities exchange or association, whether
foreign or domestic, is required for the consummation of the transactions
contemplated in, or the performance by the Investment Adviser of its obligations
under, any Investment Adviser Agreement, except such as have been obtained under
the Investment Company Act, the Advisers Act, the Securities Act, the Investment
Company Act Rules, the Advisers Act Rules and the Securities Act Rules.
6. The description of the Investment Adviser and its business, and the
statements attributed to the Investment Adviser, in the Registration Statement
and the Prospectus comply with the requirements of the Securities Act, the
Investment Company Act, the Securities Act Rules and the Investment Company Act
Rules and do not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading.
7. Except as disclosed in the Registration Statement and Prospectus,
there is no action, suit or proceeding before or by any court, commission,
regulatory body, administrative agency or other governmental agency or body,
foreign or domestic, now pending or, to my knowledge, threatened against or
affecting the Investment Adviser of a nature required to be disclosed in the
Registration Statement or Prospectus or that could reasonably result in any
material adverse change in the condition, financial or otherwise, business
affairs or business prospects of the Investment Adviser or the ability of the
Investment Adviser to fulfill its respective obligations under any Investment
Adviser Agreement.
8. The Registration Statement (except the financial statements and
schedules and other financial data included therein as to which I express no
view), at the time it became effective, and the Prospectus (except as
aforesaid), as of the date thereof, appeared on their face to be appropriately
responsive in all material respects to the require ments of the Securities Act,
the Investment Company Act and the rules and regulations of the Commission
thereunder.
In rendering my opinion, I have relied, as to factual matters, upon the
attached written certificates and statements of officers of the Investment
Adviser.
In connection with the registration of the Shares, I have advised the
Investment Adviser as to the requirements of the Securities Act, the Investment
Company Act and the applicable rules and regulations of the Commission
thereunder and have rendered other legal advice and assistance to the Investment
Adviser in the course of the
<PAGE> 39
preparation of the registration Statement and the Prospectus.
Rendering such assistance involved, among other things, discussions and
inquiries concerning various legal and related subjects and reviews of certain
corporate records, documents and proceedings. I also participated in conferences
with representatives of the Fund and its accountants and the Investment Adviser
at which the contents of the registration and Prospectus and related matters
were discussed. With your permission, I have not undertaken, except as otherwise
indicated herein, to determine independently, and do not assume any
responsibility for, the accuracy, completeness or fairness of the statements in
the Registration Statement or Prospectus. On the basis of the information which
was developed in the course of the performance of the services referred to
above, no information has come to my attention that has lead me to believe that
the Registration Statement, at the time it became effective, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or that the Prospectus, as of its date and as of the date hereof, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading or that any
amendment or supplement to the Prospectus, as of its respective date, and as of
the date hereof, contained any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements in the
Prospectus, in the light of the circumstances under which they were made, not
mis leading (except the financial statements, schedules and other financial data
included therein, as to which I express no view).
<PAGE> 40
ANNEX C
FORM OF ACCOUNTANT'S LETTER
March , 2000
Ladies and Gentlemen:
We have audited the statement of assets and liabilities of Nuveen
Senior Income Fund (the "Fund") as of , 2000 included in the
Registration Statement on Form N-2 filed by the Fund under the Securities Act
of 1933 (the "Act") (File No.333- ) and under the Investment Company Act of 1940
(the "1940 Act") (File No.811-09571); such statement and our report with respect
to such statement are included in the Registration Statement; we are independent
public accountants with respect to the Fund within the meaning of the Act and
the applicable rules and regulations thereunder.
1. In our opinion, the statement of assets and liabilities included in
the Registration Statement and audited by us complies as to form in all respects
with the applicable accounting requirements of the Act, the 1940 Act and the
respective rules and regulations thereunder.
2. For purposes of this letter we have read the minutes of all meetings
of the Shareholders, the Board of Trustees and all Committees of the Board of
Trustees of the Fund as set forth in the minute books at the offices of the
Fund, officials of the Fund having advised us that the minutes of all such
meetings through October , 1999, were set forth therein.
3. Fund officials have advised us that no financial statements as of
any date subsequent to , 2000, are available. We have made inquiries of
certain officials of the Fund who have responsibility for financial and
accounting matters regarding whether there was any change at , 2000, in
the capital shares or net assets of the Fund as compared with amounts shown in
the , 2000 statement of assets and liabilities included in the Registration
Statement, except for changes that the Registration Statement discloses have
occurred or may occur. On the basis of our inquiries and our reading of the
minutes as described in Paragraph 2, nothing came to our attention that caused
us to believe that there were any such changes.
The foregoing procedures do not constitute an audit made in accordance
with generally accepted auditing standards. Accordingly, we make no
representations as to the sufficiency of the foregoing procedures for your
purposes.
<PAGE> 41
4. This letter is solely for the information of the addressees and to
assist the underwriters in conducting and documenting their investigation of the
affairs of the Fund in connection with the offering of the securities covered by
the Registration Statement, and is not to be used, circulated, quoted or
otherwise referred to within or without the underwriting group for any other
purpose, including but not limited to the registration, purchase or sale of
securities, nor is it to be filed with or referred to in whole or in part in the
Registration Statement or any other document, except that reference may be made
to it in the underwriting agreement or in any list of closing documents
pertaining to the offering of the securities covered by the Registration
Statement.
Very truly yours,
<PAGE> 1
EXHIBIT k.3
================================================================================
AUCTION AGENCY AGREEMENT
between
NUVEEN SENIOR INCOME FUND
and
BANKERS TRUST COMPANY
Dated as of , 2000
Relating to
TAXABLE AUCTIONED PREFERRED SHARES
of
NUVEEN SENIOR INCOME FUND
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Definitions and Rules of Construction....................................................................1
1.1 Terms Defined by Reference to Statement.........................................................1
1.2 Terms Defined Herein............................................................................1
1.3 Rules of Construction...........................................................................2
2. The Auction..............................................................................................2
2.1 Purpose; Incorporation by Reference of Auction Procedures and Settlement Procedures.............2
2.2 Preparation of Each Auction; Maintenance of Registry of Beneficial Owners.......................2
2.3 Information Concerning Rates....................................................................4
2.4 Auction Schedule................................................................................4
2.5 Designation of Dividend Period..................................................................5
2.6 Notice of Auction Results.......................................................................5
2.7 Broker-Dealers..................................................................................6
2.8 Ownership of TAPS...............................................................................6
2.9 Access to and Maintenance of Auction Records....................................................6
2.10 Dividend and Redemption Price Deposit...........................................................6
3. The Auction Agent as Dividend and Redemption Price Disbursing Agent......................................6
4. The Auction Agent as Transfer Agent and Registrar........................................................7
4.1 Issue of Share Certificates.....................................................................7
4.2 Registration of Transfer of Shares..............................................................7
4.3 Removal of Legend on Restricted Shares..........................................................7
4.4 Lost Share Certificates.........................................................................7
4.5 Disposition of Canceled Certificates; Record Retention..........................................7
4.6 Share Transfer Books............................................................................7
4.7 Return of Funds.................................................................................7
5. Representations and Warranties of the Fund...............................................................7
6. The Auction Agent........................................................................................8
6.1 Duties and Responsibilities.....................................................................8
6.2 Rights of the Auction Agent.....................................................................8
6.3 Auction Agent's Disclaimer......................................................................9
6.4 Compensation, Expenses and Indemnification......................................................9
7. Miscellaneous............................................................................................9
7.1 Term of Agreement...............................................................................9
7.2 Communications.................................................................................10
7.3 Entire Agreement...............................................................................10
7.4 Benefits.......................................................................................10
7.5 Amendment; Waiver..............................................................................10
7.6 Successors and Assigns.........................................................................11
7.7 Severability...................................................................................11
7.8 Execution in Counterparts......................................................................11
7.9 Governing Law..................................................................................11
7.10 Declaration of Trust...........................................................................11
</TABLE>
i
<PAGE> 3
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A - Form of Broker-Dealer Agreement
EXHIBIT B - Settlement Procedures
EXHIBIT C - Form of Statement
EXHIBIT D - Form of Notice of Auction Dates
EXHIBIT E - Form of Notice of Proposed Designation of Special Rate Period
EXHIBIT F - Form of Notice of Designation of Special Rate Period
EXHIBIT G - Form of Notice of Determination Not to Designate Special Rate Period
</TABLE>
ii
<PAGE> 4
AUCTION AGENT AGREEMENT dated as of , 2000 between NUVEEN
SENIOR INCOME FUND, a Massachusetts business trust (the "Fund"), and BANKERS
TRUST COMPANY, a New York banking corporation (the "Auction Agent").
WHEREAS, the Fund proposes to issue a series of preferred shares, par value
$.01 per share, liquidation preference $25,000 per share, designated Taxable
Auctioned Preferred Shares, Series TH ("TAPS Series TH") and may in the future
designate additional series of Taxable Auctioned Preferred Shares (together with
the TAPS Series TH, referred to as the "TAPS") pursuant to the Statement (as
hereinafter defined), and desires that the Auction Agent perform certain duties
in connection with the TAPS upon the terms and subject to the conditions of this
Agreement, and hereby appoints the Auction Agent to act in the capacities set
forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Fund and the Auction Agent agree as follows:
1. Definitions and Rules of Construction.
1.1 Terms Defined by Reference to Statement. Capitalized terms not defined
herein shall have the respective meanings specified in the Statement.
1.2 Terms Defined Herein. As used herein and in the Settlement Procedures,
the following terms shall have the following meanings, unless the context
otherwise requires:
(a) "Adviser" shall mean Nuveen Senior Loan Asset Management, Inc.
(b) "Agent Member" of any Person shall mean the member of, or
participant in, the Securities Depository.
(c) "Auction" shall have the meaning specified in Section 2.1 hereof.
(d) "Auction Procedures" shall mean the auction procedures
constituting Part II of the Statement.
(e) "Authorized Officer" shall mean each Senior Vice President, Vice
President, Assistant Vice President, Assistant Treasurer and Assistant
Secretary of the Auction Agent assigned to its Corporate Trust and Agency
Group and every other officer or employee of the Auction Agent designated
as an "Authorized Officer" for purposes hereof in a communication to the
Fund.
(f) "Broker-Dealer Agreement" shall mean each agreement between the
Auction Agent as agent for the Fund and a Broker-Dealer substantially in
the form attached hereto as Exhibit A.
(g) "Fund Officer" shall mean the Chairman of the Board of Trustees of
the Fund, the President, each Vice President (whether or not designated by
a number or word or words added before or after the title "Vice
President"), the Secretary, the Treasurer, each Assistant Secretary and
each Assistant Treasurer of the Fund and every other officer or employee of
the Fund designated as a "Fund Officer" for purposes hereof in a notice to
the Auction Agent.
(h) "Person" means and includes an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or
other entity or a government or any agency or political subdivision
thereof.
(i) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit C.
(j) "Statement" shall mean the Statement Establishing and Fixing the
Rights and Preferences of Taxable Auctioned Preferred Shares (the
"Statement") designating the TAPS Series TH and any additional series of
TAPS as may be designated at some future time, attached hereto as Exhibit
C.
<PAGE> 5
(k) "Underwriter" shall mean PaineWebber Incorporated and any other
person named as an underwriter of the TAPS in the Underwriting Agreement or
any schedule thereto.
(l) "Underwriting Agreement" shall mean the Underwriting Agreement
dated , 2000 among the Fund, the Underwriter and the Adviser.
1.3 Rules of Construction. Unless the context or use indicates another or
different meaning or intent, the following rules shall apply to the construction
of this Agreement:
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for
convenience of reference and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto" and other words of similar
import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New
York City time.
2. The Auction.
2.1 Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) The Statement provide that the Applicable Rate per annum for each
series of TAPS for each Dividend Period after the initial Dividend Period
with respect to each series of TAPS shall, except under certain conditions,
be equal to the rate per annum that a bank or trust company appointed by
the Fund advises has resulted on the Business Day preceding the first day
of such Dividend Period from implementation of the Auction Procedures for
such series. Each periodic operation of the Auction Procedures is
hereinafter referred to as an "Auction." The Board of Trustees has adopted
a resolution appointing Bankers Trust Company as Auction Agent for purposes
of the Auction Procedures for each series of the TAPS. The Auction Agent
accepts such appointment and agrees to follow the procedures set forth in
this Section 2 and the Auction Procedures for the purpose of determining
the Applicable Rate for each series of TAPS for each Dividend Period
thereof for which the Applicable Rate is to be determined by an Auction.
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their
entirety and shall be deemed to be a part hereof to the same extent as if
such provisions were fully set forth herein.
2.2 Preparation of Each Auction; Maintenance of Registry of Beneficial
Owners.
(a) Not later than seven days prior to the first Auction Date for any
series of TAPS, the Fund shall provide the Auction Agent with a list of the
Broker-Dealers. Not later than seven days prior to any Auction Date for any
series of TAPS for which any change in such list of Broker-Dealers is to be
effective, the Fund will notify the Auction Agent in writing of such change
and, if any such change involves the addition of a Broker-Dealer to such
list, shall cause to be delivered to the Auction Agent for execution by the
Auction Agent a Broker-Dealer Agreement signed by such Broker-Dealer;
provided, however, that if the Fund proposes to designate any Special Rate
Period of any series of TAPS pursuant to Section 4 of Part I of the
Statement, not later than 11:00 A.M., New York City time, on the Business
Day next preceding the Auction next preceding the first day of such Special
Rate Period, upon the written request of the Auction Agent, the Fund shall
provide the Auction Agent with a list of the Broker-Dealers for such
series. The Auction Agent and the Fund shall have entered into a
Broker-Dealer Agreement with each Broker-Dealer prior to the participation
of any such Broker-Dealer in any Auction.
2
<PAGE> 6
(b) In the event that any Auction Date for any series of TAPS shall be
changed after the Auction Agent shall have given the notice referred to in
clause [(vi) (vii)] of paragraph (a) of the Settlement Procedures, or after the
notice referred to in Section 2.5(a) hereof, if applicable, the Auction Agent,
by such means as the Auction Agent deems practicable, shall give notice of such
change to the Broker-Dealers for such series not later than the earlier of 9:15
A.M. on the new Auction Date or 9:15 A.M. on the old Auction Date.
(c) (i) The Auction Agent shall maintain a registry of the beneficial
owners of the shares of each series of TAPS who shall constitute Existing
Holders of shares of such series of TAPS for purposes of Auctions and shall
indicate thereon the identity of the respective Broker-Dealer of each Existing
Holder, if any, on whose behalf such Broker-Dealer submitted the most recent
Order in any Auction which resulted in such Existing Holder continuing to hold
or purchasing shares of such series of TAPS. The Auction Agent shall keep such
registry current and accurate. The Fund shall provide or cause to be provided to
the Auction Agent at or prior to the Date of Original Issue of each series of
TAPS a list of the initial Existing Holders of the shares of each such series,
the number of shares purchased by each such Existing Holder and the respective
Broker-Dealer of each such Existing Holder or the affiliate thereof through
which each such Existing Holder purchased such shares. The Auction Agent shall
advise the Fund in writing as to whether the number of Existing Holders is 500
or more [or any Existing Holder owns 5% or more of the outstanding shares of any
series of TAPS]. The Auction Agent may rely upon, as conclusive evidence of the
identities of the Existing Holders of shares of any series of TAPS, (A) such
list, (B) the results of Auctions (C) notices from any Existing Holder, the
Agent Member of any Existing Holder or the Broker-Dealer of any Existing Holder
as described in the first sentence of Section 2.2(c)(iii) hereof and (D) the
results of any procedures approved by the Fund that have been devised for the
purpose of determining the identities of Existing Holders in situations where
shares of TAPS may have been transferred without compliance with any restriction
on the transfer thereof set forth in the Auction Procedures.
(ii) In the event of any partial redemption of any series of TAPS, the
Auction Agent shall, at least two Business Days prior to the next Auction
for such series, request each Broker-Dealer to provide the Auction Agent
with a list of Persons who such Broker-Dealer believes should remain
Existing Holders after such redemption based upon inquiries of those
Persons such Broker-Dealer believes are Beneficial Owners as a result of
the most recent Auction and with respect to each such Person, the number of
shares of TAPS of such series such Broker-Dealer believes are owned by such
Person after such redemption. In the absence of receiving any such
information from any Broker-Dealer, the Auction Agent may continue to treat
the Persons listed in its registry of Existing Holders as the beneficial
owner of the number of shares of TAPS of such series shown in such
registry.
(iii) The Auction Agent shall be required to register a transfer of
shares of TAPS of any series from an Existing Holder of such shares of TAPS
only if such transfer is to another Existing Holder, or other Person if
permitted by the Fund, and only if such transfer is made (A) pursuant to an
Auction, (B) the Auction Agent has been notified in writing (I) in a notice
substantially in the form of Exhibit C to the Broker-Dealer Agreements by a
Broker-Dealer of such transfer or (II) in a notice substantially in the
form of Exhibit D to the Broker-Dealer Agreements by the Broker-Dealer of
any Existing Holder, or other Person if permitted by the Fund, that
purchased or sold such shares of TAPS in an Auction of the failure of such
shares of TAPS to be transferred as a result of such Auction or (C)
pursuant to procedures approved by the Fund that have been devised for the
purpose of determining the identities of Existing Holders in situations
where shares of TAPS may have been transferred without compliance with any
restriction on the transfer thereof set forth in the Auction Procedures.
The Auction Agent is not required to accept any such notice for an Auction
unless it is received by the Auction Agent by 3:00 P.M. on the Business Day
preceding such Auction.
(d) The Auction Agent may request the Broker-Dealers, as set forth in the
Broker-Dealer Agreements, to provide the Auction Agent with a list of Persons
who such Broker-Dealer believes should be Existing Holders based upon inquiries
of those Persons such Broker-Dealer believes are Beneficial Owners as a result
of the most recent Auction and with respect to each such Person, the number of
shares of such series
3
<PAGE> 7
of TAPS such Broker-Dealer believes to be owned by such Person. The Auction
Agent shall keep confidential such registry of Existing Holders and shall
not disclose the identities of the Existing Holders of such shares of TAPS
to any Person other than the Fund and the Broker-Dealer that provided such
information.
2.3 Information Concerning Rates.
(a) On each Auction Date, the Auction Agent shall determine the AA
Composite Commercial Paper Rate or the Treasury Index Rate, as the case may
be, and the Minimum Rate and Maximum Rate. If the AA Composite Commercial
Paper Rate or the Treasury Index Rate, as the case may be, is not quoted on
an interest basis, if the rate obtained by the Auction Agent is quoted on a
discount basis, or if the rate obtained by the Auction Agent is quoted on
another basis the Auction Agent shall convert the quoted rate to an
interest rate after consultation with the Fund as to the method of such
conversion. Not later than 9:30 A.M. on each Auction Date the Auction Agent
shall notify the Fund and the Broker-Dealers of the Minimum Rate and
Maximum Rate so determined and the AA Composite Commercial Paper Rate or
the Treasury Index Rate, as the case may be, used to make such
determination.
(b) [If any AA Composite Commercial Paper Rate is to be based on rates
supplied by Commercial Paper Dealers and one or more of the Commercial
Paper Dealers shall not provide a quotation for the determination of such
AA Composite Commercial Paper Rate, the Auction Agent shall immediately
notify the Fund so that the Fund can determine whether to select a
substitute Commercial Paper Dealer or substitute Commercial Paper Dealers
to provide the quotation or quotations not being supplied by any Commercial
Paper Dealer or Commercial Paper Dealers. The Fund shall promptly advise
the Auction Agent of any such selection.]
(c) [If any Treasury Index Rate is to be based on rates supplied by
U.S. Government Securities Dealers and one or more of the U.S. Government
Securities Dealers shall not provide a quotation for the determination of
such Treasury Rate, the Auction Agent shall immediately notify the Fund so
that the Fund can determine whether to select a Substitute U.S. Government
Securities Dealer or Substitute U.S. Government Securities Dealers to
provide the quotation or quotations not being supplied by any U.S.
Government Securities Dealers. The Fund shall promptly advise the Auction
Agent of any such selection.]
2.4 Auction Schedule. The Auction Agent shall conduct Auctions for each
series of TAPS in accordance with the schedule set forth below. Such schedule
may be changed by the Auction Agent with the consent of the Fund, which consent
shall not be unreasonably withheld or delayed. The Auction Agent shall give
written notice of any such change to each Broker-Dealer. Such notice shall be
given prior to the close of business on the Business Day next preceding the
first Auction Date on which any such change shall be effective.
(AA)
<TABLE>
<CAPTION>
Time Event
<S> <C>
By 9:30 A.M. Auction Agent advises the Fund and Broker-Dealers of the
applicable Minimum Rate and Maximum Rate and the Reference
Rate(s) used in determining such Minimum Rate and Maximum
Rate as set forth in Section 2.3(a) hereof.
9:30 A.M. - 1:30 P.M. Auction Agent assembles information communicated to it by
Broker-Dealers as provided in Section 2(a) of the Auction
Procedures. Submission Deadline is 1:30 P.M.
Not earlier than 1:30 P.M. Auction Agent makes determinations pursuant to Section 3(a) of the
Auction Procedures.
By approximately 3:00 P.M. Auction Agent advises Fund of results of Auction as provided in
Section 3(b) of the Auction Procedures.
</TABLE>
4
<PAGE> 8
<TABLE>
Time Event
<S> <C>
Submitted Bids and Submitted Sell Orders are accepted and
rejected and shares of TAPS allocated as provided in Section 4 of
the Auction Procedures. Auction Agent gives notice of Auction
results as set forth in paragraph(a) of the Settlement Procedures.
</TABLE>
(AA)
The Auction Agent shall follow the notification procedures set forth in
paragraph (a) of the Settlement Procedures.
2.5 Designation of Dividend Period.
(a) The Statement provide that, subject to the Fund's option to
designate a Special Rate Period as referred to in paragraph (b) of this
Section 2.5, (i) the Dividend Period (other than the initial Dividend
Period) for each series of TAPS will be a Standard Rate Period. Any such
designation of a Special Rate Period shall be effective only if (i) notice
thereof shall have been given as provided herein, (ii) any failure to pay
in a timely manner to the Auction Agent the full amount of any dividend on,
or the redemption price of, the TAPS shall have been cured, (iii)
Sufficient Clearing Bids shall have existed in an Auction held on the
Auction Date immediately preceding the first day of such proposed Dividend
Period other than a Standard Rate Period, (iv) if the Fund shall have
mailed a Notice of Redemption with respect to any shares, the Redemption
Price with respect to such shares shall have been deposited with the
Auction Agent, and (v) in the case of a Special Rate Period, the Fund has
provided notice and an TAPS Basic Maintenance Report to Moody's (if Moody's
is then rating the TAPS).
(b) Pursuant to the Statement, the Fund may, at its option, designate
a Special Rate Period for any series of TAPS in the manner described below
and in Section 4 of Part I of the Statement. If the Fund proposes to
designate any succeeding Special Rate Period the Fund shall deliver to the
Auction Agent:
(i) A notice of such proposed Special Rate Period in the form of
Exhibit F hereto not less than 7 nor more than 30 days prior to the
first day of such proposed Special Rate Period. The Auction Agent on
behalf of the Fund shall deliver such notice by first-class mail,
postage prepaid, to each Existing Holder of shares of such series of
TAPS at the address set forth for such Existing Holder in the records
of the Auction Agent and to the Broker-Dealers for such series as
promptly as practicable after its receipt of such notice from the
Fund.
(ii) A notice in the form of Exhibit G hereto not later than 3:00
P.M. on the second Business Day next preceding the first day of such
proposed Special Rate Period, of either (x) its determination, subject
to certain conditions, to proceed with such Special Rate Period, in
which case the Fund shall specify the terms of the Specific Redemption
Provisions, if any, or (y) its determination not to proceed with such
Special Rate Period in which latter event the succeeding Dividend
Period shall be a Standard Rate Period. The Auction Agent shall
promptly deliver such notice to the Broker-Dealers, but in no event
later than 3:00 P.M. on the date of such notice.
(iii) If the Fund fails to deliver either such notice with
respect to any designation of any proposed Special Rate Period to the
Auction Agent by 3:00 P.M., New York City time, on the second Business
Day next preceding the first day of such proposed Special Rate Period,
the Fund shall be deemed to have delivered a notice to the Auction
Agent with respect to such Dividend Period to the effect that it has
determined not to proceed with the designation of a Special Rate
Period, thereby resulting in a Standard Rate Period.
2.6 Notice of Auction Results. On each Auction Date for any series of
TAPS, the Auction Agent shall notify Broker-Dealers of the results of the
Auction held on such date by telephone as set forth in paragraph (a) of the
Settlement Procedures.
5
<PAGE> 9
2.7 Broker-Dealers.
(a) Not later than 12:00 Noon on each Auction Date for any series of
TAPS, the Fund shall pay to the Auction Agent an amount in cash equal to
the aggregate fees payable to the Broker-Dealers for such series pursuant
to Section 2.6 of the Broker-Dealer Agreement for such series. The Auction
Agent shall apply such moneys as set forth in Section 2.6 of each such
Broker-Dealer Agreement.
(b) The Fund shall obtain the consent of the Auction Agent
prior to selecting any Person to act as a Broker-Dealer, which consent
shall not be unreasonably withheld.
(c) The Auction Agent shall terminate any Broker-Dealer Agreement as
set forth therein if so directed by the Fund.
(d) Subject to the Auction Agent's having consented to the selection
of the relevant Broker- Dealer pursuant to Section 2.8(b) hereof, the
Auction Agent shall from time to time enter into such Broker- Dealer
Agreements with one or more Broker-Dealers as the Fund shall request, and
shall enter into such schedules to any such Broker-Dealer Agreements as
the Fund shall request, which schedules, among other things, shall set
forth the series of TAPS to which such Broker-Dealer Agreement relates.
2.8 Ownership of TAPS. The Fund shall notify the Auction Agent if the Fund
or any affiliate of the Fund acquires any shares of TAPS of any series. Neither
the Fund nor any affiliate of the Fund shall submit any Order in any Auction for
TAPS, except as set forth in the next sentence. Any Broker-Dealer that is an
affiliate of the Fund may submit Orders in Auctions, but only if such Orders are
not for its own account. For purposes of this Section 2.7, a Broker-Dealer shall
not be deemed to be an affiliate of the Fund solely because one or more of the
directors or executive officers of such Broker-Dealer or of any Person
controlled by, in control of or under common control with such Broker- Dealer is
also a Director of the Fund. The Auction Agent shall have no duty or liability
with respect to enforcement of this Section 2.8.
2.9 Access to and Maintenance of Auction Records. The Auction Agent shall,
upon the receipt of prior written notice from the Fund, afford to the Fund
access at reasonable times during normal business hours to all books, records,
documents and other information concerning the conduct and results of Auctions.
The Auction Agent shall maintain records relating to an Auction for a period of
six years after such Auction and such records shall, in reasonable detail,
accurately and fairly reflect the actions taken by the Auction Agent hereunder.
2.10 Dividend and Redemption Price Deposit. The Fund shall pay to the
Auction Agent, not later than 12:00 noon, New York City time, (A) on the
Business Day next preceding any Dividend Payment Date for any series of TAPS, in
funds available on such Dividend Payment Date in The City of New York, New York,
the full amount of any dividends to be paid on such Dividend Payment Date on any
share of such series, and (B) on the Business Day next preceding any redemption
date for any series of TAPS in funds available on such redemption date for such
series in The City of New York, New York, the Redemption Price to be paid on
such redemption date for the shares of any such series after notice of
redemption is given as set forth in the Statement.
3. The Auction Agent as Dividend and Redemption Price Disbursing Agent.
The Auction Agent, as dividend and redemption price disbursing agent,
shall pay to the Holders of shares of TAPS of any series (i) on each Dividend
Payment Date for such series, dividends on the shares of TAPS of such series,
(ii) an any date fixed for redemption of shares of TAPS of any series, the
Redemption Price of any shares of such series called for redemption and (iii)
any late charge related to any payment of dividends or Redemption Price, in each
case after receipt of the necessary funds from the Fund with which to pay such
dividends, Redemption Price or late charge. The amount of dividends for any
Dividend Period for any series of TAPS to be paid by the Auction Agent to the
Holders of such shares of such series will be determined by the Fund as set
forth in Section 2 of Part I of the Statement with respect to such series. The
Redemption Price of any shares to be paid by the Auction Agent to the Holders
will be determined by the Fund as set forth in Section 3 of Part I of the
Statement with respect to such series. The Fund shall notify the Auction Agent
in writing of a decision to redeem shares of any series of TAPS as provided in
paragraph (b)
6
<PAGE> 10
of Section 3 of Part V of the Statement. Such notice by the Fund to the Auction
Agent shall contain the information required by paragraph (b) of Section 3 of
Part I of the Statement to be stated in the notice of redemption required to be
mailed by the Auction Agent to such Holders.
4. The Auction Agent as Transfer Agent and Registrar.
4.1 Issue of Share Certificates. Upon the Date of Original Issue of each
series or TAPS, one certificate representing all of the shares of each series
issued on such date shall be issued by the Fund and, at the request of the Fund,
registered in the name of Cede & Co. and countersigned by the Auction Agent.
4.2 Registration of Transfer of Shares. Shares of each series of TAPS
shall be registered solely in the name of the Securities Depository or its
nominee.
4.3 Removal of Legend on Restricted Shares. All requests for removal of
legends on shares of any series of TAPS indicating restrictions on transfer
shall be accompanied by an opinion of counsel stating that such legends may be
removed and such shares freely transferred, such opinion to be delivered under
cover of a letter from a Fund Officer authorizing the Auction Agent to remove
the legend on the basis of said opinion.
4.4 Lost Share Certificates. The Auction Agent shall issue and register
replacement certificates for certificates represented to have been lost, stolen
or destroyed upon the fulfillment of such requirements as shall be deemed
appropriate by the Fund and the Auction Agent, subject at all times to
provisions of law, the By-Laws of the Fund governing such matters and
resolutions adopted by the Fund with respect to lost securities. The Auction
Agent may issue new certificates in exchange for and upon the cancellation of
mutilated certificates. Any request by the Fund to the Auction Agent to issue a
replacement or new certificate pursuant to this Section 4.4 shall be deemed to
be a representation and warranty by the Fund to the Auction Agent that such
issuance will comply with such provisions of law and the By-Laws and resolutions
of the Fund.
4.5 Disposition of Canceled Certificates; Record Retention. The Auction
Agent shall retain all share certificates which have been cancelled in transfer
or exchange and all accompanying documentation in accordance with applicable
rules and regulations of the Securities and Exchange Commission for two calendar
years. Upon the expiration of this two-year period, the Auction Agent shall
deliver to the Fund the cancelled certificates and accompanying documentation.
The Fund also shall undertake to furnish to the Securities and Exchange
Commission and to the Board of Governors of the Federal Reserve System, upon
demand, at either the principal office or at any regional office, complete,
correct and current hard copies of any and all such records. Thereafter such
records shall not be destroyed by the Fund without the concurrence of the
Auction Agent.
4.6 Share Transfer Books. For so long as the Auction Agent is acting as
the transfer agent for any series of TAPS pursuant to this Agreement, it shall
maintain a share transfer book containing a list of the Holders of the shares of
each series of TAPS, the number of shares of each series held by such Holders
and the address of each Holder. The Auction Agent shall record in such share
transfer books any change of address of a Holder upon notice by such Holder. In
case of any request or demand for the inspection of the share transfer books of
the Fund or any other books in the possession of the Auction Agent, the Auction
Agent will notify the Fund and secure instructions as to permitting or refusing
such inspection. The Auction Agent reserves the right, however, to exhibit the
share transfer books or other books to any Person in case it is advised by its
counsel that its failure to do so would be unlawful.
4.7 Return of Funds. Any funds deposited with the Auction Agent hereunder
by the Fund for any reason, including but not limited to redemption of shares of
TAPS of any series, that remain unpaid after 90 days shall be repaid to the Fund
upon the written request of the Fund, together with interest, if any, earned
thereon.
5. Representations and Warranties of the Fund.
The Fund represents and warrants to the Auction Agent that:
7
<PAGE> 11
(a) the Fund is a duly organized and existing business trust in good
standing under the laws of the State of Massachusetts and has full corporate
power or all requisite power to execute and deliver the Agreement and to
authorize, create and issue the shares of TAPS of each series and the shares of
TAPS of each series when issued, will be duly authorized, validly issued, fully
paid and nonassessable;
(b) the Agreement has been duly and validly authorized, executed and
delivered by the Fund and constitutes the legal, valid and binding obligation of
the Fund;
(c) the form of the certificate evidencing the shares of TAPS of each
series complies or will comply with all applicable laws of the State of
Massachusetts;
(d) when issued, the shares of TAPS of each series will have been duly
registered under the Securities Act of 1933, as amended, and no further action
by or before any governmental body or authority of the United States or of any
state thereof is required in connection with the execution and delivery of the
Agreement or will have been required in connection with the issuance of the
shares of TAPS of each series; and
(e) the execution and delivery of the Agreement and the issuance and
delivery of the shares of TAPS of each series do not and will not conflict with,
violate or result in a breach of, the terms, conditions or provisions of, or
constitute a default under, the Declaration of Trust (as amended by one or more
Statements) or the By-Laws of the Fund, any law or regulation, any order or
decree of any court or public authority having jurisdiction, or any mortgage,
indenture, contract, agreement or undertaking to which the Fund is a party or by
which it is bound the effect of which conflict, violation, default or breach
would be material to the Fund or the Fund and its subsidiaries taken as a whole.
6. The Auction Agent.
6.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Fund
hereunder and owes no fiduciary duties to any other Person by reason of
this Agreement.
(b) The Auction Agent undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement and the
Broker-Dealer Agreements, and no implied covenants or obligations shall be
read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the
Auction Agent shall not be liable for any action taken, suffered, or
omitted or for any error of judgment made by it in the performance of its
duties under this Agreement except that the Auction Agent shall be liable
for any error of judgment made in good faith if the Auction Agent shall
have been negligent in ascertaining the pertinent facts.
(d) Any funds deposited with the Auction Agent hereunder by the Fund
for any reason, including the payment of dividends or the redemption of
shares of TAPS of any series, that remain with the Auction Agent after 90
days shall be repaid to the Fund as provided in Section 4.7 hereof.
6.2 Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized hereby and upon
any written instruction, notice, request, direction, consent, report,
certificate, share certificate or other instrument, paper or document
believed by it to be genuine. The Auction Agent shall not be liable for
acting upon any telephone communication authorized hereby which the
Auction Agent believes in good faith to have been given by the Fund or by
any Broker-Dealer. The Auction Agent may record telephone communications
with the Fund or with any Broker-Dealer.
8
<PAGE> 12
(b) The Auction Agent may consult with counsel reasonably
acceptable to the Fund and the advice of such counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon.
(c) The Auction Agent shall not be required to advance, expend
or risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall
not be responsible for any misconduct on the part of any agent or attorney
appointed by it with due care hereunder except as set forth above in
Section 6.1(c).
6.3 Auction Agent's Disclaimer. The Auction Agent makes no
representation as to the validity or adequacy of this Agreement (except as to
the Auction Agent's duties hereunder and that the Auction Agent hereby
represents that this Agreement has been duly authorized, executed and delivered
by the Auction Agent and constitutes a legal and binding obligation of the
Auction Agent).
6.4 Compensation, Expenses and Indemnification.
(a) The Fund shall pay the Auction Agent from time to time
reasonable compensation for all services rendered by it under this
Agreement and the Broker-Dealer Agreement in such amounts as may be agreed
to by the Fund and the Auction Agent from time to time.
(b) The Fund shall reimburse the Auction Agent upon its request for
all reasonable out-of-pocket expenses, disbursements and advances incurred
or made by the Auction Agent in accordance with any provision of this
Agreement and the Broker-Dealer Agreements (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel), except any expense or disbursement attributable to its
negligence or bad faith.
(c) The Fund shall indemnify the Auction Agent for and hold it
harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection with
its agency under this Agreement and the Broker-Dealer Agreements,
including the costs and expenses of defending itself against any claim or
liability in connection with its exercise or performance of its duties
hereunder and thereunder for which indemnification is provided by this
subsection.
7. Miscellaneous.
7.1 Term of Agreement.
(a) The term of this Agreement is unlimited unless it shall be
terminated as provided in this Section 7.1. The Fund may terminate this
Agreement any time by so notifying the Auction Agent, provided that the
Fund has entered into an agreement in substantially the form of this
Agreement with a successor auction agent. The Auction Agent may terminate
this Agreement upon written notice to the Fund, such termination to be
effective on the earlier of (i) the date specified in such notice which
shall not be earlier than 45 days after the giving of such notice or (ii)
the date on which a successor Auction Agent is appointed by the Fund
pursuant to an agreement containing substantially the same terms and
conditions as this Agreement.
(b) Except as otherwise provided in this paragraph (b), the
respective rights and duties of the Fund and the Auction Agent under this
Agreement shall cease upon termination of this Agreement. The Fund's
obligations under Section 6.4 hereof and its representations and
warranties contained in Section 5 hereof and the Auction Agent's
obligations and liabilities under Sections 2.9 and 4.5 hereof shall
survive the termination hereof. Upon termination of this Agreement, the
Auction Agent shall, at the Fund's request, promptly deliver to the Fund
copies of all books and records maintained by it in connection with its
duties hereunder.
9
<PAGE> 13
7.2 Communications. Except for (a) communications authorized to be by
telephone pursuant to this Agreement or the Auction Procedures and (b)
communications in connection with Auctions (other than those expressly required
to be in writing) and unless otherwise specified by the terms of this Agreement
all notices, requests and other communications to any party hereunder shall be
in writing (including telecopy or similar writing) given to such person at its
address or telecopy number set forth below:
(AA)
If to the Fund, addressed: Nuveen Senior Income Fund
-------------------------
-------------------------
Attention:
--------------
Telephone No.:
----------
Telecopier No.:
---------
With a copy sent to:
-------------------------
-------------------------
-------------------------
Telephone No.:
-----------
Telecopier No.:
----------
If to the Auction Agent, addressed: Bankers Trust Company
[Address]
Attention:
---------------
Telecopier No.:
Telephone No.:
(AA)
or to such other address as the party to whom the communication is addressed
shall have previously communicated to the other party. Communications shall be
given on behalf of the Fund by a Fund Officer and on behalf of the Auction Agent
by an Authorized Officer. Communications shall be effective when received at the
proper address.
7.3 Entire Agreement. This Agreement contains the entire agreement among
the parties relating to the subject matter hereof, and there are no other
representations, endorsements, promises, agreements or understandings, oral,
written or inferred, between the parties. This Agreement supersedes all prior
agreements between the parties relating to the subject matter of this Agreement.
7.4 Benefits. Nothing herein, express or implied, shall give to any Person,
other than the Fund, the Auction Agent and their respective successors and
assigns, any benefit of any legal or equitable right, remedy or claim hereunder.
7.5 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party
to be charged.
(b) Failure of either party hereto to exercise any right or remedy
hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such rights or remedies with respect to any
subsequent breach.
10
<PAGE> 14
7.6 Successors and Assigns. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by, the respective successors of each of the
Fund and the Auction Agent.
7.7 Severability. If any clause, provision or section hereof shall be ruled
invalid or unenforceable by any court of competent jurisdiction, the invalidity
or unenforceability of such clause, provision or section shall not affect any of
the remaining clauses, provisions or sections hereof.
7.8 Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
7.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
7.10 Declaration of Trust. The Fund's Declaration is on file with the
Secretary of State of the Commonwealth of Massachusetts. This Agreement has been
executed on behalf of the Fund by the Vice President and Treasurer of the Fund
acting in such capacity and not individually, and the obligations of the Fund
set forth in this Agreement are not binding upon any of the Fund's trustees,
officers or shareholders individually, but are binding only upon the assets and
property of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Auction Agent
Agreement to be duly executed and delivered by their proper authorized officers
as of the date first above written.
NUVEEN SENIOR INCOME FUND
By:
--------------------------------------------
Name:
Title:
BANKERS TRUST COMPANY
By:
--------------------------------------------
Name:
Title:
11
<PAGE> 15
EXHIBIT A
BROKER-DEALER AGREEMENT
A-1
<PAGE> 16
EXHIBIT B
SETTLEMENT PROCEDURES
B-1
<PAGE> 17
EXHIBIT C
FORM OF STATEMENT
C-1
<PAGE> 18
EXHIBIT D
NUVEEN SENIOR INCOME FUND
NOTICE OF AUCTION DATE FOR
TAXABLE AUCTIONED PREFERRED SHARES ("TAPS")
NOTICE IS HEREBY GIVEN that the Auction Date of the next Auction for the TAPS
Series TH of NUVEEN SENIOR INCOME FUND (the "Fund") is scheduled to be
and the next Dividend Payment Date for the Fund's TAPS Series TH
will be .
D-1
<PAGE> 19
EXHIBIT E
NUVEEN SENIOR INCOME FUND
NOTICE OF PROPOSED DESIGNATION OF
SPECIAL RATE PERIOD FOR
TAXABLE AUCTIONED PREFERRED SHARES
NOTICE IS HEREBY GIVEN that NUVEEN SENIOR INCOME FUND (the "Fund") proposes to
exercise its option to designate the Dividend Period of its Series TH Taxable
Auctioned Preferred Shares ("TAPS") commencing [the first day of the proposed
Special Rate Period] and ending [the last day of the proposed Special Rate
Period] as a Special Rate Period.
By 9:00 A.M., New York City time, on the Business Day next preceding the first
day of such proposed Special Rate Period, the Fund will notify the Auction Agent
for the TAPS of either (a) its determination to exercise such option,
designating the length of such Special Rate Period and the terms of the Specific
Redemption Provisions, if any, or (b) its determination not to exercise such
option.
NUVEEN SENIOR INCOME FUND
Dated:
--------------------------
E-1
<PAGE> 20
EXHIBIT F
NUVEEN SENIOR INCOME FUND
NOTICE OF DESIGNATION OF SPECIAL RATE PERIOD OF
TAXABLE AUCTIONED PREFERRED SHARES
NOTICE IS HEREBY GIVEN that NUVEEN SENIOR INCOME FUND (the "Fund") has
determined to designate the Dividend Period of its Series TH Taxable Auctioned
Preferred Shares ("TAPS") commencing on [the first day of the Special Rate
Period] and ending on (the last day of the Special Rate Period] as a Special
Rate Period.
The Special Rate Period will be [days] year(s]].
The Auction Date for the Special Rate Period is (the Business Day next preceding
the first day of such Special Rate Period].
The scheduled Dividend Payment Dates for such series of TAPS during such Special
Rate Period will be .
[Specific Redemption Provisions, if applicable.]
[The Special Rate Period shall not commence if on such Auction Date Sufficient
Clearing Bids shall not exist.]
NUVEEN SENIOR INCOME FUND
Dated:
----------------------
F-1
<PAGE> 21
EXHIBIT G
NUVEEN SENIOR INCOME FUND
NOTICE OF DETERMINATION NOT TO DESIGNATE
SPECIAL RATE PERIOD OF
TAXABLE AUCTIONED PREFERRED SHARES
NOTICE IS HEREBY GIVEN that NUVEEN SENIOR INCOME FUND (the "Fund") has
determined not to exercise its option to designate a Special Rate Period of its
Series TH Taxable Auctioned Preferred Shares. Accordingly, the next succeeding
Dividend Period of such series will be a Standard Rate Period.
NUVEEN SENIOR INCOME FUND
Dated:
--------------------
G-1
<PAGE> 1
EXHIBIT k.4
- --------------------------------------------------------------------------------
NUVEEN BROKER-DEALER AGREEMENT
BASIC TERMS FOR ACTING AS A BROKER-DEALER
Relating to
TAXABLE AUCTIONED PREFERRED SHARES
, 2000
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Definitions and Rules of Construction....................................................................1
1.1 Terms Defined by Reference to Statement.........................................................1
1.2 Terms Defined Herein............................................................................1
1.3 Rules of Construction...........................................................................2
2. The Auction..............................................................................................2
2.1 Purposes; Incorporation by Reference of Auction Procedures and Settlement Procedures............2
2.2 Preparation of Each Auction.....................................................................2
2.3 Auction Schedule; Method of Submission of Order.................................................3
2.4 Notices of Auction Results......................................................................5
2.5 Designation of Special Rate Period..............................................................5
2.6 Service Charge to be Paid to BD.................................................................5
2.7 Settlement......................................................................................6
3. The Auction Agent........................................................................................7
3.1 Duties and Responsibilities.....................................................................7
3.2 Rights of the Auction Agent.....................................................................7
3.3 Auction Agent's Disclaimer......................................................................7
4. Miscellaneous............................................................................................7
4.1 Termination.....................................................................................7
4.2 Participant in Securities Depository............................................................7
4.3 Communications..................................................................................7
4.4 Entire Agreement................................................................................8
4.5 Benefits........................................................................................8
4.6 Amendment; Waiver...............................................................................8
4.7 Successors and Assigns..........................................................................8
4.8 Severability....................................................................................8
4.9 Execution in Counterparts.......................................................................9
4.10 Governing Law...................................................................................9
4.11 Declaration of Trust............................................................................9
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A - Settlement Procedures
EXHIBIT B - Nuveen Senior Income Fund Taxable Auctioned Preferred Shares, Series TH
("TAPS") Order Form
EXHIBIT C - Nuveen Senior Income Fund Taxable Auctioned Preferred Shares, Series TH
("TAPS") Transfer Form
EXHIBIT D - Nuveen Senior Income Fund Taxable Auctioned Preferred Shares, Series TH
("TAPS") Notice of a Failure to Deliver
EXHIBIT E - Form of Broker-Dealer Request and Acceptance Letter
</TABLE>
i
<PAGE> 3
These basic terms ("Basic Terms") set forth the general terms and
conditions pursuant to which a broker-dealer identified in a Requested
Acceptance Letter (together with its successors and assigns, a "BD") will act as
a broker-dealer for Taxable Auctioned Preferenced Shares ("TAPS") issued by
investment companies, now or hereafter organized, registered under the
Investment Company Act of 1940, as amended (the "Funds"), for which Nuveen
Senior Loan Asset Management, Inc. (the "Adviser") is the investment adviser.
Each Fund has issued or may issue shares of TAPS, pursuant to its
Declaration of Trust, as amended or supplemented by the Statement of such Fund.
A bank or trust company specified in the Request and Acceptance Letter will act
as the auction agent (the "Auction Agent") of such Fund pursuant to authority
granted it in the Auction Agency Agreement.
The Statement of each Fund will provide that, for each Subsequent Rate
Period of any series of TAPS of such Fund then outstanding, the Applicable Rate
for such series for such Subsequent Rate Period shall, except under certain
conditions, be the rate per annum that the Auction Agent of such Fund advises
results from implementation of the Auction Procedures for such series. The Board
of Trustees of each Fund will adopt a resolution appointing the Auction Agent as
auction agent for purposes of the Auction Procedures for each series of TAPS of
such Fund.
The Auction Procedures of each Fund will require the participation of one
or more Broker-Dealers for each series of TAPS of such Fund. BD will act as a
Broker-Dealer for each series of TAPS of each Fund.
1. Definitions and Rules of Construction.
1.1 Terms Defined by Reference to Statement. Capitalized terms not defined
herein shall have the respective meanings specified in the Statement.
1.2 Terms Defined Herein. As used herein and in the Settlement
Procedures, the following terms shall have the following meanings, unless the
context otherwise requires:
(a) "Agreement", with respect to any Fund, shall mean the Basic Terms,
together with the Request and Acceptance Letter relating to one or more
series of TAPS of such Fund.
(b) "Auction" shall have the meaning specified in Section 2.1 hereof.
(c) "Auction Agent Agreement" shall mean the Auction Agent Agreement
between the Fund and the Auction Agent dated as of , 2000 relating to the
TAPS.
(d) "Auction Procedures" shall mean the auction procedures constituting
Part II of the Statement.
(e) "Authorized Officer" shall mean each Senior Vice President, Vice
President, Assistant Vice President, Assistant Treasurer and Assistant
Secretary of the Auction Agent assigned to its Corporate Trust and Agency
Group and every other officer or employee of the Auction Agent designated
as an "Authorized Officer" for purposes of this Agreement in a
communication to the BD.
(f) "BD Officer" shall mean each officer or employee of BD designated
as a "BD Officer" for purposes of this Agreement in a communication to the
Auction Agent.
(g) "Broker-Dealer Agreement" shall mean this Agreement and any
substantially similar agreement between the Auction Agent and a
Broker-Dealer.
(h) "Existing Holder" shall have the meaning set forth in the
Statement, and for purposes of this Broker-Dealer Agreement and with
respect to the Auction Procedures as referred to in this Agreement, shall
also include, as the circumstances may require, a Person who is listed as
the beneficial owner of TAPS in the records of a Broker-Dealer.
<PAGE> 4
(i) "Potential Holder" shall have the meaning set forth in the
Statement, and for purposes of this Broker-Dealer Agreement and with
respect to the Auction Procedures as referred to in this Agreement, shall
also include, as the circumstances may require, any other Person, including
any Existing Holder of shares of TAPS, who may be interested in acquiring
shares of TAPS (or, in the case of an Existing Holder, additional shares of
TAPS).
(j) "Request and Acceptance Letter" shall mean the letter from the
Fund, Adviser and Auction Agent to BD pursuant to which the BD is appointed
as a Broker Dealer for each series of TAPS issued by a Fund.
(k) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit A.
(l) "Statement," shall mean the Statement Establishing and Fixing the
Rights and Preferences of Taxable Auctioned Preferred Shares.
1.3 Rules of Construction. Unless the context or use indicates another or
different meaning or intent, the following rules shall apply to the construction
of this Agreement:
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for the convenience of
reference and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.
(c) The words "hereof", "herein", "hereto", and other words of
similar import refer to this agreement as a whole.
(d) All references herein to a particular time of day shall be to New
York City time.
2. The Auction.
2.1 Purposes; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) The provisions of the Auction Procedures will be followed by the
Auction Agent for the purpose of determining the Applicable Rate for any
Dividend Period of any series of TAPS for which the Applicable Rate is to
be determined by an Auction. Each periodic operation of such procedures is
hereinafter referred to as an "Auction".
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their
entirety and shall be deemed to be a part hereof to the same extent as if
such provisions were fully set forth herein.
(c) The BD agrees to act as, and assumes the obligations of, and
limitations and restrictions placed upon, a Broker-Dealer under this
Agreement for each series of TAPS. The BD understands that other Persons
meeting the requirements specified in the definition of "Broker-Dealer"
contained in the Auction Procedures may execute Broker-Dealer Agreements
and participate as Broker-Dealers in Auctions.
2.2 Preparation of Each Auction.
(a) Not later than 9:30 A.M. on each Auction Date for the TAPS, the
Auction Agent shall advise the Broker-Dealers for such series by telephone
of the Minimum Rate and Maximum Rate therefor and the AA Composite
Commercial Paper Rate(s) and the Treasury Index Rate(s), as the case may
be, used in determining the Minimum Rate and Maximum Rate.
2
<PAGE> 5
(b) In the event that any Auction Date for the TAPS shall be changed
after the Auction Agent has given the notice referred to in clause (vi) of
paragraph (a) of the Settlement Procedures, or after the notice referred to
in Section 2.5(a) hereof, if applicable, the Auction Agent, by such means
as the Auction Agent deems practicable shall give notice of such change to
the BD not later than the earlier of 9:15 A.M. on the new Auction Date or
9:15 A.M. on the old Auction Date. [Thereafter, the BD shall notify
customers of the BD who the BD believes are Existing Holders of shares of
TAPS of such change in the Auction Date.]
(c) For purposes of maintaining its list of Existing Holders, the
Auction Agent for any series of TAPS from time to time may request any
Broker-Dealer to provide such Auction Agent with a list of Persons who such
Broker-Dealer believes should be Existing Holders based upon inquiries of
those Persons such Broker-Dealer believes are Beneficial Owners as a result
of the most recent Auction and with respect to each such Person, the number
of shares of such series of TAPS such Broker-Dealer believes are owned by
such Person. BD shall comply with any such request relating to a series of
TAPS in respect of which BD was named a Broker-Dealer, and the Auction
Agent shall keep confidential any such information so provided by BD and
shall not disclose any information so provided by BD to any Person other
than the Fund and BD.
(d) BD agrees to maintain a list of customers relating to a series of
TAPS and to use its best efforts, subject to existing laws and regulations,
to contact the customers on such list whom BD believes may be interested in
participating in the Auction on each Auction Date, as a Potential Holder or
a Potential Beneficial Owner, for the purposes set forth in the Auction
Procedures. Nothing herein shall require BD to submit an Order for any
customer in any Auction.
(e) The Auction Agent's registry of Existing Holders of shares of a
series of TAPS shall be conclusive and binding on BD. BD may inquire of the
Auction Agent between 3:00 P.M. on the Business Day preceding an Auction
for shares of a series of TAPS and 9:30 A.M. on the Auction Date for such
Auction to ascertain the number of shares of such series in respect of
which the Auction Agent has determined BD to be an Existing Holder. If BD
believes it is the Existing Holder of fewer shares of such series than
specified by the Auction Agent in response to BD's inquiry, BD may so
inform the Auction Agent of that belief. BD shall not, in its capacity as
Existing Holder of shares of such series, submit Orders in such Auction in
respect of shares of such series covering in the aggregate more than the
number of shares of such series specified by the Auction Agent in response
to BD's inquiry.
2.3 Auction Schedule; Method of Submission of Order.
(a) The Auction Agent shall conduct Auctions for TAPS in accordance
with the schedule set forth below. Such schedule with respect to any series
of TAPS of the Fund may be changed by the Auction Agent for such series
with the consent of the Fund, which consent shall not be unreasonably
withheld. The Auction Agent shall give written notice of any such change to
each Broker-Dealer of such series. Such notice shall be given prior to the
close of business on the Business Day next preceding the first Auction Date
on which such change shall be effective.
<TABLE>
<CAPTION>
Time Event
---- -----
<S> <C>
By 9:30 A.M. Auction Agent for such series advises the Fund
and the Broker-Dealers for such series of the applicable
Minimum Rate and Maximum Rate and the Reference Rate(s) used
in determining such Minimum Rate and Maximum Rate as set
forth in Section 2.2(a) hereof.
9:30 A.M.-1:30 P.M. Auction Agent assembles information communicated to
it by Broker-Dealers as provided in Section 2(a)of the
Auction Procedures of the Fund. Submission Deadline is
1:30 P.M.
</TABLE>
3
<PAGE> 6
Time Event
---- -----
Not earlier than 1:30 P.M. Auction Agent makes determinations
pursuant to Section 3(a) of
the Auction Procedures.
By approximately 3:00 P.M. Auction Agent advises the Fund
of results of Auction as
provided in Section 3(b) of
the Auction Procedures.
Submitted Bids and Submitted
Sell Orders are accepted and
rejected and shares of such
series of TAPS allocated as
provided in Section 4 of the
Auction Procedures.
Auction Agent gives notice of
Auction results as set forth
in Section 2.4(a) hereof.
(b) BD shall submit Orders to the appropriate Auction Agent in writing
substantially in the form attached hereto as Exhibit B. BD shall submit a
separate Order to such Auction Agent for each Potential Holder or Existing
Holder with respect to whom BD is submitting an Order and shall not otherwise
net or aggregate such Orders prior to their submission to such Auction Agent.
(c) BD shall deliver to the appropriate Auction Agent (i) a written notice
in substantially the form attached hereto as Exhibit C of transfers of shares of
TAPS to BD from another Person other than pursuant to an Auction and (ii) a
written notice substantially in the form attached hereto as Exhibit D, of the
failure of any shares of TAPS to be transferred to or by any Person that
purchased or sold shares of TAPS through BD pursuant to an Auction. Such Auction
Agent is not required to accept any such notice described in clause (i) for an
Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business
Day preceding such Auction.
(d) BD and other Broker-Dealers may submit Orders in Auctions for their own
accounts (including Orders for their own accounts where the Order is placed
beneficially for a customer) unless the relevant Fund shall have notified BD and
all other Broker-Dealers that they may no longer do so, in which case
Broker-Dealers may continue to submit Hold Orders and Sell Orders for their own
accounts.
(e) BD agrees to handle its customers' orders in accordance with its duties
under applicable securities laws and rules.
(f) To the extent that pursuant to Section 4 of the Auction Procedures of
any Fund, BD continues to hold, sells, or purchases a number of shares that is
fewer than the number of shares in an Order submitted by BD to the Auction Agent
in which BD designated itself as an Existing Holder or Potential Holder in
respect of customer Orders, BD shall make appropriate pro rata allocations among
its customers for which it submitted Orders of similar tenor. If as a result of
such allocations, any Beneficial Owner would be entitled or required to sell, or
any Potential Beneficial Owner would be entitled or required to purchase, a
fraction of a share of TAPS on any Auction Date, BD shall, in such manner as it
shall determine in its sole discretion, round up or down the number of shares of
TAPS to be purchased or sold on such Auction Date by any Beneficial Owner or
Potential Beneficial Owner on whose behalf BD submitted an Order so that the
number of shares so purchased or sold by each such Beneficial Owner or Potential
Beneficial Owner on such Auction Date shall be whole shares of TAPS.
2.4 Notices of Auction Results.
(a) On each Auction Date for TAPS, the Auction Agent shall notify BD by
telephone of the results of the Auction as set forth in paragraph (a) of the
Settlement Procedures. By approximately 11:30 a.m.,
4
<PAGE> 7
on the Business Day next succeeding such Auction Date, the Auction Agent shall
confirm to BD in writing the disposition of all Orders submitted by BD in such
Auction.
(b) BD shall notify each Existing Holder or Potential Holder on whose
behalf BD has submitted an Order as set forth in paragraph (a) of the Settlement
Procedures and take such other action as is required of BD pursuant to the
Settlement Procedures.
2.5 Designation of Special Rate Period.
(a) If the Fund delivers to the Auction Agent a notice of the Auction Date
for any series of TAPS for a Dividend Period thereof that next succeeds a
Dividend Period that is not a Standard Rate Period in the form of Exhibit D to
the Auction Agent Agreement, the Auction Agent shall deliver such notice to BD
as promptly as practicable after its receipt of such notice from the Fund.
(b) If the Board of Trustees proposes to designate any succeeding Dividend
Period of any series of TAPS as a Special Rate Period and the Fund delivers to
the Auction Agent a notice of such proposed Special Rate Period in the form of
Exhibit D to the Auction Agent Agreement, the Auction Agent shall deliver such
notice to BD as promptly as practicable after its receipt of such notice from
the Fund.
(c) If the Board of Trustees determines to designate such succeeding
Dividend Period as a Special Rate Period and the Fund delivers to the Auction
Agent a notice of such Period in the form of Exhibit E to the Auction Agent
Agreement not later than [11:30 a.m.] [3:00 p.m.] on the second Business Day
next preceding the first day of such proposed Special Rate Period, the Auction
Agent shall deliver such notice to BD not later than 3:00 p.m. on such Business
Day.
(d) If the Fund shall deliver to the Auction Agent a notice not later than
[3:00 p.m.] on the second Business Day next preceding the first day of any
Dividend Period stating that the Fund has determined not to exercise its option
to designate such succeeding Dividend Period as a Special Rate Period, in the
form of Exhibit G to the Auction Agent Agreement, or shall fail to timely
deliver either such notice or a notice in the form of Exhibit H to the Auction
Agent Agreement, the Auction Agent shall deliver a notice in the form of Exhibit
G to the Auction Agent Agreement to BD not later than 3:00 p.m. on such Business
Day.
2.6 Service Charge to be Paid to BD.
On the Business Day next succeeding each Auction Date for any series of
TAPS of any Fund, the Auction Agent for such series shall pay to BD from moneys
received from such Fund an amount equal to the product of (a) (i) in the case of
any Auction Date immediately preceding a Rate Period of such series consisting
of 364 Rate Period Days or fewer, 1/4 of 1%, or (ii) in the case of any Auction
Date immediately preceding a Rate Period of such series consisting of more than
364 Rate Period Days, such percentage as may be agreed upon by such Fund and BD
with respect to such Rate Period, times (b) a fraction, the numerator of which
is the number of Rate Period Days in the Rate Period therefor beginning on such
Business Day and the denominator of which is 365 if such Rate Period consists of
[28] Rate Period Days and 360 for all other Rate Periods, times (c) $25,000
times (d) the sum of (i) the aggregate number of shares of such series placed by
BD in such Auction that were (A) the subject of Submitted Bids of Existing
Holders submitted by BD and continued to be held as a result of such submission
and (B) the subject of Submitted Bids of Potential Holders submitted by BD and
purchased as a result of such submission plus (ii) the aggregate number of
shares of such series subject to valid Hold Orders (determined in accordance
with paragraph (d) of Section 2 of the Auction Procedures) submitted to the
Auction Agent by BD plus (iii) the number of shares of TAPS deemed to be subject
to Hold Orders of Existing Holders pursuant to paragraph (c) of Section 2 of the
Auction Procedures of such Fund that were acquired by BD for its own account or
were acquired by BD for its customers who are Beneficial Owners.
For purposes of subclause (d)(iii) of the foregoing paragraph, if any
Existing Holder or Beneficial Owner who acquired shares of any series of TAPS
through BD transfers those shares to another Person other than pursuant to an
Auction, then the Broker-Dealer for the shares so transferred shall continue to
be BD; provided, however,
5
<PAGE> 8
that if the transfer was effected by, or if the transferee is, a Broker-Dealer
other than BD, then such Broker-Dealer shall be the Broker-Dealer for such
shares.
2.7 Settlement.
(a) If any Existing Holder or Beneficial Owner with respect to
whom BD has submitted a Bid or Sell Order for shares of TAPS of any
series that was accepted in whole or in part fails to instruct its
Agent Member to deliver the shares of TAPS subject to such Bid or Sell
Order against payment therefor, BD, if it knows the identity of such
Agent Member, shall instruct such Agent Member to deliver such shares
against payment therefor and, if such Agent Member fails to comply
with such instructions, BD may deliver to the Potential Holder or
Potential Beneficial Owner with respect to whom BD submitted a Bid for
shares of TAPS of such series that was accepted in whole or in part a
number of shares of TAPS of such series that is less than the number
of shares of TAPS of such series specified in such Bid to be purchased
by such Potential Holder or Potential Beneficial Owner.
(b) Neither the Auction Agent nor the Fund shall have any
responsibility or liability with respect to the failure of an Existing
Holder, Beneficial Owner, Potential Holder or Potential Beneficial
Owner or its respective Agent Member to deliver shares of TAPS of any
series or to pay for shares of TAPS of any series sold or purchased
pursuant to the Auction Procedures or otherwise.
(c) Notwithstanding any provision of the Auction Procedures or
the Settlement Procedures to the contrary, in the event BD is an
Existing Holder with respect to shares of a series of TAPS and the
Auction Procedures provide that BD shall be deemed to have submitted a
Sell Order in an Auction with respect to such shares if BD fails to
submit an Order in that Auction with respect to such shares, BD shall
have no liability to any Person for failing to sell such shares
pursuant to such a deemed Sell Order if (i) such shares were
transferred by the beneficial owner thereof without notification of
such transfer in compliance with the Auction Procedures or (ii) BD has
indicated to the Auction Agent pursuant to Section 2.2(e) of this
Agreement that, according BD's records, BD is not the Existing Holder
of such shares.
(d) Notwithstanding any provision of the Auction Procedures or
the Settlement Procedures to the contrary, in the event an Existing
Holder or Beneficial Owner of shares of a series of TAPS with respect
to whom a Broker-Dealer submitted a Bid to the Auction Agent for such
shares that was accepted in whole or in part, or submitted or is
deemed to have submitted a Sell Order for such shares that was
accepted in whole or in part, fails to instruct its Agent Member to
deliver such shares against payment therefor, partial deliveries of
shares of TAPS that have been made in respect of Potential Holders, or
Potential Beneficial Owners' Submitted Bids for shares of such series
that have been accepted in whole or in part shall constitute good
delivery to such Potential Holders and Potential Beneficial Owners.
(e) Notwithstanding the foregoing terms of this Section, any
delivery or non-delivery of shares of TAPS of any series which
represents any departure from the results of an Auction for shares of
such series, as determined by the Auction Agent, shall be of no effect
for purposes of the registry of Existing Holders maintained by the
Auction Agent pursuant to the Auction Agency Agreement unless and until
the Auction Agent shall have been notified of such delivery or
non-delivery.
(f) The Auction Agent shall have no duty or liability with
respect to enforcement of this Section 2.7.
3. The Auction Agent.
3.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Fund hereunder
and owes no fiduciary duties to any other Person, other than the Fund by
reason of the Auction Agency Agreement.
6
<PAGE> 9
(b) The Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the
Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered, or omitted or for
any error of judgment made by it in the performance of its duties under
this Agreement. The Auction Agent shall not be liable for any error or
judgment made in good faith unless the Auction Agent shall have been
negligent in ascertaining the pertinent facts.
3.2 Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in
acting or refraining from acting upon any communication authorized
hereby and upon any written instruction, notice, request, direction,
consent, report, certificate, share certificate or other instrument,
paper or document believed in good faith by it to be genuine. The
Auction Agent shall not be liable for acting upon any telephone
communication authorized by this Agreement which the Auction Agent
believes in good faith to have been given by the Fund or by a
Broker-Dealer. The Auction Agent may record telephone communications
with the Broker-Dealers.
(b) The Auction Agent may consult with counsel of its choice
and the advice of such counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by
it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk
its own funds or otherwise incur or become exposed to financial liability
in the performance of its duties hereunder.
3.3 Auction Agent's Disclaimer. The Auction Agent makes no representation
as to the validity or adequacy of this Agreement, the Auction Agent Agreement or
the shares of TAPS of any series.
4. Miscellaneous.
4.1 Termination. Any party to this Agreement may terminate the Agreement at
any time on five days' notice to the other parties to such Agreement, provided
that the Fund party to the Agreement shall not terminate the Agreement unless at
least one Broker-Dealer Agreement would be in effect for each series of TAPS of
the Fund after such termination. Each Agreement shall automatically terminate
with respect to any series of TAPS with respect to which the Auction Agency
Agreement has terminated.
4.2 Participant in Securities Depository. BD is, and shall remain for
the term of this Agreement, a member of, or participant in, the Securities
Depository (or an affiliate of such a member participant).
4.3 Communications. Except (i) communications authorized to be by
telephone by this Agreement or the Auction Procedures and (ii) communications in
connection with Auctions (other than those expressly required to be in writing),
all notices, requests and other communications to any party hereunder shall be
in writing (including telecopy or similar writing) and shall be given to such
party, addressed to it, at its addressed or telecopy number set forth below:
If to BD, addressed: ---------------------------
---------------------------
---------------------------
Attention:
-----------------
Telecopier No.:
------------
Telephone No.:
-------------
7
<PAGE> 10
If to the Auction Agent, addressed: Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Auction Rate/Remarketed
Securities
Telecopier No.: (212) 250-6688
Telephone No.: (212) 250-6850
If to the Fund, addressed: Nuveen Senior Income Fund
---------------------------
---------------------------
Attention:
-----------------
Telecopier No.:
------------
Telephone No.:
-------------
or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the other parties. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of
the Auction Agent by an Authorized Officer. BD may record telephone
communications with the Auction Agent.
4.4 Entire Agreement. This Agreement contains the entire agreement
among the parties hereto relating to the subject matter hereof, and there are no
other representations, endorsements, promises, agreements or understandings,
oral, written or implied, among the parties hereto relating to the subject
matter hereof. This Agreement supersedes and terminates all prior Broker-Dealer
Agreements between the parties.
4.5 Benefits. Nothing in this Agreement, express or implied, shall give to
any person, other than the Fund, the Auction Agent, BD and their respective
successors and assigns, any benefit of any legal or equitable right, remedy or
claim hereunder.
4.6 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party
to be charged.
(b) Failure of any party hereto to exercise any right or remedy
hereunder in the event of a breach hereof by any other party shall not
constitute a waiver of any such right or remedy with respect to any
subsequent breach.
4.7 Successors and Assigns. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by, the respective successors and assigns of
each of the Auction Agent and BD. This Agreement may not be assigned by either
party hereto absent the prior written consent of the other party; provided,
however, that this Agreement may be assigned by the Auction Agent to a successor
Auction Agent selected by the Fund without the consent of BD.
4.8 Severability. If any clause, provision or section hereof shall be
ruled invalid or unenforceable by any court of competent jurisdiction, the
invalidity or unenforceability of such clause, provision or section shall not
affect any of the remaining clauses, provisions or sections thereof.
4.9 Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
4.10 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to agreements
made and to be performed in said State.
8
<PAGE> 11
4.11 Declaration of Trust. The Declaration of the Fund is on file with
the Secretary of State of the Commonwealth of Massachusetts. This Agreement to
which the Fund is a party has been executed on behalf of the Fund by the Vice
President and Treasurer of such Fund acting in such capacity and not
individually, and the obligations of the Fund set forth in this Agreement are
not binding upon any of such Fund's trustees, officers or shareholders
individually, but are binding only upon the assets and property of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
BANKERS TRUST COMPANY
By:
-----------------------
Name:
Title:
---------------------------
By:
------------------------
Name:
Title:
NUVEEN SENIOR INCOME FUND
By:
------------------------
Name:
Title:
9
<PAGE> 12
EXHIBIT A
SETTLEMENT PROCEDURES
A-1
<PAGE> 13
EXHIBIT B
[Name of Fund]
$ Taxable Auctioned Preferred Shares [Stock]
Series
AUCTION DATE:
ISSUE: SERIES:
<TABLE>
<CAPTION>
THE UNDERSIGNED Broker-Dealer SUBMITS THE FOLLOWING ORDERS ON BEHALF OF THE BIDDER(S) LISTED BELOW:
====================================================================================================================================
ORDERS BY EXISTING HOLDERS- NUMBER OF SHARES OF TAPS ORDERS BY POTENTIAL HOLDERS- NUMBER OF SHARES OF TAPS
POTENTIAL HOLDER BID/RATE
<S> <C> <C> <C> <C> <C>
EXISTING HOLDER HOLD BID/RATE SELL 1. /
-------------------- ----------
1. / 2. /
------------------------- --------- ------------------ --------- -------------------- ----------
2. / 3. /
------------------------- --------- ------------------ --------- -------------------- ----------
3. / 4. /
------------------------- --------- ------------------ --------- -------------------- ----------
4. / 5. /
------------------------- --------- ------------------ --------- -------------------- ----------
5. / 6. /
------------------------- --------- ------------------ --------- -------------------- ----------
6. / 7. /
------------------------- --------- ------------------ --------- -------------------- ----------
7. / 8. /
------------------------- --------- ------------------ --------- -------------------- ----------
8. / 9. /
------------------------- --------- ------------------ --------- -------------------- ----------
9. / 10. /
------------------------- --------- ------------------ --------- -------------------- ----------
10. / 11. /
------------------------ --------- ------------------ --------- -------------------- ----------
12. /
------------------- ----------
NOTES: 13. /
------------------- ----------
14. /
------------------- ----------
1. If one or more Orders covering in the aggregate more than the number of
outstanding shares of TAPS held by any Existing holder are submitted,
such Orders shall be considered valid in the order of priority set forth in
the Auction Procedures.
2. A Hold Order or Sell Order may be placed only by an Existing Holder
covering a number of shares of TAPS not greater than the number of shares
of TAPS currently held by such Existing Holder.
3. Potential Holders may make Bids only, each of which must specify a rate. If
more than one Bid is submitted on behalf of any Potential Holder, each Bid
submitted shall be a separate Bid with the rate specified.
4. Bids may contain no more than three figures to the right of the decimal
point (.001 of 1%).
====================================================================================================================================
</TABLE>
B-1
<PAGE> 14
<TABLE>
<S> <C>
====================================================================================================================================
[AUCTION AGENT] AUCTION BID FORM NAME OF Broker-Dealer:
----------------------------------------
AUTHORIZED
Submit to: SIGNATURE:
----------------------------------------------------
TOTAL NUMBER OF ORDERS ON THIS BID FORM:
====================================================================================================================================
</TABLE>
B-2
<PAGE> 15
EXHIBIT C
(To be used only for transfers made
other than pursuant to in Auction)
NUVEEN SENIOR INCOME FUND
TAXABLE AUCTIONED PREFERRED SHARES,
SERIES TH -- ("TAPS") TRANSFER FORM
We are (check one):
The Existing Holder named below;
------
The Broker-Dealer for such Existing Holding; or
------
The Agent Member for such Existing Holder.
------
We hereby notify you that such Existing Holder has transferred shares of
the above series of TAPS to .
-----------------------------
(Name of Existing Holder)
-----------------------------
(Name of Broker-Dealer)
-----------------------------
(Name of Agent Member)
By:
--------------------------
Printed Name:
Title:
C-1
<PAGE> 16
EXHIBIT D
(To be used only for failures to
deliver shares of Taxable Auctioned Preferred Shares
sold pursuant to an Auction)
NUVEEN SENIOR INCOME FUND
TAXABLE AUCTIONED PREFERRED SHARES, SERIES TH ("TAPS")
NOTICE OF A FAILURE TO DELIVER
Complete either I or II
I. We are a Broker-Dealer for (the "Purchaser"), which purchased
shares of the above series of TAPS in the Auction held on
from the seller of such shares.
II. We are a Broker-Dealer for (the "Seller"), which sold
shares of the above series of TAPS in the Auction held on to the
purchaser of such shares.
We hereby notify you that (check one) --
- the Seller failed to deliver such shares of
TAPS to the Purchaser
- the Purchaser failed to make payment to
the Seller upon delivery of such shares
of TAPS
Name:
-----------------------------------------
(Name of Broker-Dealer)
By:
------------------------------------------
Printed Name:
Title:
D-1
<PAGE> 17
EXHIBIT E
[Form of Broker-Dealer Request and Acceptance Letter]
Nuveen Senior Loan Asset Management, Inc.
May , 2000
[Broker-Dealer]
[Address]
Ladies and Gentlemen:
Reference is made to the Nuveen Broker-Dealer Agreement-Basic Terms for
Acting as a Broker-Dealer Relating to Taxable Auction Preferred Shares dated May
, 2000, receipt of which is hereby acknowledged by you (the "Basic Terms").
For purposes of this letter ("Request and Acceptance Letter") (a) "Fund" shall
mean any closed-end investment company registered under the Investment Company
Act of 1940, as amended, for which Nuveen Senior Loan Asset Management, Inc.
acts as investment adviser; (b) except as otherwise provided below, the Basic
Terms are incorporated herein by reference, you shall be considered BD for all
purposes thereof, Bankers Trust Company shall be considered the Auction Agent
for all purposes thereof, and each Fund shall be considered a Fund for all
purposes thereof.
We hereby request that you act as a Broker-Dealer for the Taxable
Auctioned Preferred Shares ("TAPS") of each series, of each Fund. You hereby (a)
accept such appointment as a Broker-Dealer for each series of TAPS of each Fund
and (b) agree to act as BD in accordance with the Basic Terms; provided,
however, that:
(1) for purposes of the Basic Terms, and notwithstanding any
provision to the contrary, your address, telecopy number and telephone number
for communications pursuant to the Basic Terms shall be as follows:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
and the address, telecopy number and telephone number of the Auction Agent for
communications pursuant to the Basic Terms shall be as follows:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
(2) notwithstanding any provisions of the Basic Terms to the
contrary, except as otherwise set forth herein, your appointment as
Broker-Dealer extends to each series of TAPS issued by a Fund.
E-1
<PAGE> 18
You hereby acknowledge that, notwithstanding any provision of the Basic
Terms to the contrary, the Fund may (a) upon five business days' notice to the
Auction Agent and you, amend, alter or repeal any of the provisions contained in
the Basic Terms, it being understood and agreed that you shall be deemed to have
accepted any such amendment, alteration or repeal if, after the expiration of
such five business day period, you submit an Order to the Auction Agent in
respect of the shares of TAPS of a Fund or Funds to which such amendment,
alteration or repeal relates, and (b) upon two business days' notice to the
Auction Agent and you, exclude you from participating as a Broker-Dealer in any
particular Auction for any particular series of TAPS.
This Request and Acceptance Letter shall be deemed to form part of the
Basic Terms.
Capitalized Terms not defined in this Request and Acceptance Letter shall
have the meanings ascribed to them in the Basic Terms.
If the foregoing terms are acceptable to you, please so indicate in the
space provided below. This Request and Acceptance Letter may be executed in any
number of counterparts, each of which shall be an original, but all of which
shall constitute one and the same instrument.
All investment companies registered
under the Investment Company Act of
1940, as amended, for which Nuveen
Senior Loan Asset Management, Inc.
acts as investment adviser and whose
registration statements relating to
shares of Taxable Auctioned Preferred
Shares have been declared effective
by the Securities and Exchange
Commission on or prior to the date
hereof.
By:
-----------------------------
Name:
Title:
NUVEEN SENIOR LOAN ASSET MANAGEMENT, INC.
By:
------------------------------
Name:
Title:
Accepted by and Agreed to as of
the date first written above:
[Broker-Dealer]
By:
--------------------------------
Name:
Title:
BANKERS TRUST COMPANY
By:
-----------------------------
Name:
Title:
E-2
<PAGE> 1
EXHIBIT k.5
LETTER OF REPRESENTATIONS
[To be Completed by Issuer and Trust Company]
Senior Income Fund
------------------------------------------------
[Name of Issuer]
Bankers Trust Company
-----------------------
[Name of Trust Company]
May ___, 2000
-------------
[Date]
Attention: General Counsel's Office
The Depository Trust Company
55 Water Street, 49th Floor
New York, NY 10041-0099
Re: 1,840 Shares of Taxable Auctioned Preferred Shares, Series TH, par
value $.01 of Nuveen Senior Income Fund, Cusip No. 670 67Y 203
----------------------------------------------------------------------
[Issue Description, including CUSIP number]
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the above-referenced issue (the "Securities"). Trust Company will
act as transfer agent, registrar, dividend disbursing agent, and redemption
agent with respect to the Securities. The Securities will be issued pursuant to
a prospectus, private placement memorandum, or other such document authorizing
the issuance of the Securities dated _______, 2000 (the "Document"). PaineWebber
Incorporated ["Underwriter"] is distributing the Securities through The
Depository Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC, and
to act in accordance with its Rules with respect to the Securities, Issuer and
Trust Company make the following representations to DTC:
<PAGE> 2
1. Prior to closing on the Securities on __________________ 199_, there
shall be deposited with DTC one Security certificate registered in the name of
DTC's nominee, Cede & Co., which represents the total number of Securities
issued. Said certificate shall remain in DTC's custody as provided in the
Document. If, however, the aggregate principal amount of the Securities exceeds
$200 million, one certificate will be issued with respect to each $200 million
of principal amount and an additional certificate will be issued with respect to
any remaining principal amount. Each Security certificate shall bear the
following legend:
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation
("DTC"), to Issuer or its agent for registration of transfer, exchange, or
payment, and any certificate issued is registered in the name of Cede & Co.
or in such other name as is requested by an authorized representative of
DTC (and any payment is made to Cede & Co. or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
2. Issuer: (a) understands that DTC has no obligation to, and will not,
communicate to its Participants or to any person having an interest in the
Securities any information contained in the Security certificate(s); and (b)
acknowledges that neither DTC's Participants nor any person having an interest
in the Securities shall be deemed to have notice of the provisions of the
Security certificate(s) by virtue of submission of such certificate(s) to DTC.
3. In the event of any solicitation of consents from or voting by holders
of the Securities, Issuer shall establish a record date for such purposes (with
no provision for revocation of consents or votes by subsequent holders) and
shall send notice of such record date to DTC not less than 15 calendar days in
advance of such record date. Notices to DTC pursuant to this Paragraph by
telecopy shall be sent to DTC's Reorganization Department at (212) 709-6896 or
(212) 709-6897, and receipt of such notices shall be confirmed by telephoning
(212) 709-6870. Notices to DTC pursuant to this Paragraph by mail or by any
other means shall be sent to DTC's Reorganization Department as indicated in
Paragraph 5.
4. In the event of a full or partial redemption of the outstanding
Securities, Issuer or Trust Company shall send a notice to DTC specifying: (a)
the number of Securities to be redeemed; and (b) the date such notice is to be
distributed to Security holders or published (the "Publication Date"). Such
notice shall be sent to DTC by a secure means (e.g., legible telecopy,
registered or certified mail, overnight delivery) in a timely manner designed to
assure that such notice is in DTC's possession no later than the close of
business on the business day before or, if possible, two business days before
the Publication Date. Issuer or Trust Company shall forward such notice either
in a separate secure transmission for each CUSIP number or in a secure
transmission for multiple CUSIP numbers (if applicable) which includes a
manifest or list of each CUSIP number submitted in that transmission. (The party
sending such notice shall have a method to verify subsequently the use of such
means and the timeliness of such notice.) The Publication Date shall be not less
than 30 days nor more than 60 days prior to the redemption date. Notices to DTC
pursuant to this Paragraph by telecopy shall be sent to DTC's Call Notification
Department at (516) 227-4039 or (516) 227-4190.
2
<PAGE> 3
If the party sending the notice does not receive a telecopy receipt from DTC
confirming that the notice has been received, such party shall telephone (516)
227-4070. Notice to DTC pursuant to this Paragraph by ail or by any other means
shall be sent to:
Manager; Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
5. In the event of an invitation to tender the Securities (including
mandatory tenders, exchanges, and capital changes), notice by Issuer or Trust
Company to Security holders specifying the terms of the tender and the
Publication Date of such notice shall be sent to DTC by a secure means in the
manner set forth in the preceding Paragraph. Notices to DTC pursuant to this
paragraph and notices of other corporate actions by telecopy shall be sent to
DTC's Reorganization Department at (212) 709-1093 or (212) 709-1094, and receipt
of such notices shall be confirmed by telephoning (212) 709-6884. Notices to
DTC pursuant to the above by mail or by any other means shall be sent to:
Manager; Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, NY 10004-2695
6. All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities (listed on Schedule A hereto) and the accompanying
description of such Security, which, as of the date of this letter is "Taxable
Auctioned Preferred Shares, Series TH".
7. The Document indicates that the dividend rate for the Securities may
vary from time to time. Absent other existing arrangements with DTC, Issuer or
Trust Company shall give DTC notice of each such change in the dividend rate, on
the same day that the new rate is determined, by telephoning the Supervisor of
DTC's Dividend Announcement Section at (212) 709-1270, or by telecopy sent to
(212) 709-1723. Such verbal or telecopy notice shall be followed by prompt
written confirmation sent by a secure means in the manner set forth in Paragraph
4 to:
Manager; Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 10004-2695
8. The document indicates that each purchaser of Securities must sign a
purchaser's letter which contains provisions restricting transfer of the
Securities purchased. Issuer and Trust Company acknowledge that as long as Cede
& Co. is the sole record owner of the Securities, Cede & Co. shall be entitled
to all voting rights applicable to the Securities and to receive the full
3
<PAGE> 4
amount of all dividends, liquidation proceeds, and redemption proceeds payable
with respect to the Securities, even if the credits of Securities to the DTC
accounts of any DTC Participant ("Participant") result from transfers or
failures to transfer in violation of the provisions of the purchaser's letter.
Issuer and Trust Company acknowledge that DTC shall treat any Participant having
Securities credited to its DTC accounts as entitled to the full benefits of
ownership of such Securities. Without limiting the generality of the preceding
sentence, Issuer and Trust Company acknowledge that DTC shall treat any
Participant having Securities credited to its DTC accounts as entitled to
receive dividends, distributions, and voting rights, if any, in respect of
Securities and, subject to Paragraphs 12 and 13, to receive certificates
evidencing Securities if such certificates are to be issued in accordance with
Issuer's certificate of incorporation. (The treatment by DTC of the effects of
the crediting by it of Securities to the accounts of Participants described in
the preceding two sentences shall not affect the rights of Issuer, participants
in auctions relating to the Securities, purchasers, sellers, or holders of
Securities against any Participant.) DTC shall not have any responsibility to
ascertain whether any transfer of Securities is made in accordance with the
provisions of the purchaser's letter.
9. Issuer or Trust Company shall provide a written notice of dividend
payment and distribution information to a standard announcement service
subscribed to by DTC as soon as the information is available. In the unlikely
event that no such service exists, Issuer or Trust Company shall provide this
information directly to DTC electronically, as previously arranged by Issuer or
Trust Company and DTC, as soon as the information is available. If electronic
transmission has not been arranged, absent any other arrangements between Issuer
or Trust Company and DTC, such information should be sent by telecopy to DTC's
Dividend Department at (212) 709-1723 or (212) 709-1686, and receipt of such
notices shall be confirmed by telephoning (212) 709-1270. Notices to DTC
pursuant to the above by mail or by any other means shall be addressed as
follows:
Manager; Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 10004-2695
10. Issuer or Trust Company shall provide CUSIP-level detail for dividend
payments and distributions to DTC no later than noon (Eastern Time) on the
payment date.
11. Dividend payments and distributions shall be received by Cede & Co.,
as nominee of DTC, or its registered assigns in same-day funds no later than
2:30 p.m. (Eastern Time) on each payment date. Absent any other arrangements
between Issuer or Trust Company and DTC, such funds shall be wired as follows:
The Chase Manhattan Bank
ABA # 021 000 021
For credit to a/c Cede & Co.
c/o The Depository Trust Company
Dividend Deposit Account # 066-026776
4
<PAGE> 5
12. Redemption payments shall be received by Cede & Co., as nominee of
DTC, or its registered assigns in same-day funds no later than 2:30 p.m.
(Eastern Time) on the payment date. Absent any other arrangements between Issuer
or Trust Company and DTC, such funds shall be wired as follows:
The Chase Manhattan Bank
ABA # 021 000 021
For credit to a/c Cede & Co.
c/o The Depository Trust Company
Reorganization Deposit Account # 066-027306
13. Reorganization payments and CUSIP-level detail resulting from
corporate actions (such as tender offers, remarketings, or mergers) shall be
received by Cede & Co., as nominee of DTC, or its registered assigns in same-day
funds no later than 2:30 p.m. (Eastern Time) on the first payment date. Absent
any other arrangements between Issuer or Trust Company and DTC, such funds shall
be wired as follows:
The Chase Manhattan Bank
ABA # 021 000 021
For credit to a/c Cede & Co.
c/o The Depository Trust Company
Reorganization Deposit Account # 066-027608
14. DTC may direct Issuer or Trust Company to use any other number or
address as the number or address to which notices, payments of dividends,
distributions, or redemption proceeds may be sent.
15. In the event of a redemption acceleration, or any similar transaction
(e.g., tender made and accepted in response to Issuer's or Trust Company's
invitation) necessitating a reduction in the number of Securities outstanding,
or an advance refunding of part of the Securities outstanding DTC, in its
discretion: (a) may request Issuer or Trust Company to issue and authenticate a
new Security certificate; or (b) may make an appropriate notation on the
Security certificate indicating the date and amount of such reduction in the
number of Securities outstanding, except in the case of final redemption, in
which case the certificate will be presented to Issuer or Trust Company prior to
payment, if required.
16. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Trust
Company shall notify DTC of the availability of certificates. In such event,
Issuer or Trust Company shall issue, transfer, and exchange certificates in
appropriate amounts, as required by DTC and others.
17. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Trust Company (at which time DTC will confirm with Issuer or Trust Company
the aggregate principal amount of Securities outstanding). Under such
circumstances, at DTC's request Issuer and Trust Company shall
5
<PAGE> 6
cooperate fully with DTC by taking appropriate action to make available one or
more separate certificates evidencing Securities to any DTC Participant having
Securities credited to its DTC accounts.
18. Issuer hereby authorizes DTC to provide to Trust Company security
position listings of Participants with respect to the Securities from time to
time at the request of Trust Company. Issuer also authorizes DTC, in the event
of a partial redemption of Securities, to provide Trust Company, upon request,
with the names of those Participants whose positions in Securities have been
selected for redemption by DTC. DTC will use its best efforts to notify Trust
Company of those Participants whose positions in Securities have been selected
for redemption by DTC. Issuer authorizes and instructs Trust Company to provide
DTC with such signatures, examples of signatures, and authorizations to act as
may be deemed necessary or appropriate by DTC to permit DTC to discharge its
obligations to its Participants and appropriate regulatory authorities. Such
requests for security position listings shall be sent to DTC's Reorganization
Department in the manner set forth in Paragraph 5.
This authorization, unless revoked by Issuer, shall continue with respect
to the Securities while any Securities are on deposit at DTC, until and unless
Trust Company shall no longer be acting. In such event, Issuer shall provide DTC
with similar evidence, satisfactory to DTC, of the authorization of any
successor thereto so to act.
19. Nothing herein shall be deemed to require Trust Company to advance
funds on behalf of Issuer.
20. This Letter of Representations may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts together constitute but one and the same instrument.
21. This Letter of Representations is governed by, and shall be construed
in accordance with, the laws of the State of New York.
22. The following riders, attached hereto, are hereby incorporated into
this Letter of Representations:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
6
<PAGE> 7
Notes:
A. If there is a Trust Company (as defined in this Letter of Representations),
Trust Company as well as Issuer must sign this Letter. If there is no Trust
Company, in signing this Letter Issuer itself undertakes to perform all of the
obligations set forth herein.
B. Schedule B contains statements that DTC believes accurately describe DTC,
the method of effecting book-entry transfers of securities distributed through
DTC, and certain related matters.
Very truly yours,
Nuveen Senior Income Fund
- -------------------------------------
(Issuer)
By:
-----------------------------------
(Authorized Officer's Signature)
Bankers Trust Company
- -------------------------------------
(Trust Company)
By:
-----------------------------------
(Authorized Officer's Signature)
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By:
-----------------------------------
cc: Underwriter
Underwriter's Counsel
7
<PAGE> 8
SCHEDULE A
Taxable Auctioned Preferred Shares, Series TH,
par value $.01 per share of Nuveen Senior Income Fund
-----------------------------------------------------
(Describe Issue)
CUSIP Number Share Total Value ($ Amount)
- ------------ ----------- ----------------
670 674 203 1,840 $46,000,000
<PAGE> 9
SCHEDULE B
SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
(Prepared by DTC-bracketed material may be applicable only to certain issues)
1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities
will be issued as fully-registered securities registered in the name of Cede &
Co. (DTC's partnership nominee). One fully-registered Security certificate will
be issued for (each issue of) the Securities, (each) in the aggregate principal
amount of such issue, and will be deposited with DTC. If, however, the
aggregate principal amount of (any) issue exceeds $200 million, one certificate
will be issued with respect to each $200 million of principal amount and an
additional certificate will be issued with respect to any remaining principal
amount of such issue.)
2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC hold securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The Rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
3. Purchases of Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Securities on
DTC's records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial owners will not receive written confirmation
from DTC of their purchase, but Beneficial owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Securities are to be accomplished by entries made on the books
of Participants acting on behalf of Beneficial owners. Beneficial owners will
not receive certificates representing their ownership interests in Securities,
except in the event that use of the book-entry system for the Securities is
discontinued.
<PAGE> 10
4. To facilitate subsequent transfers, all Securities deposited by
Participants with DTC are registered in the name of DTC'S partnership nominee,
Cede & Co. The deposit of Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Securities; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Securities are
credited, which may or may not be the Beneficial owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
6. Redemption notices shall be sent to DTC. If less than all of the
Securities within an issue are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each Direct Participant in such issue to be
redeemed.
7. Neither DTC nor Cede & Co. will consent or vote with respect to
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
8. Redemption proceeds, distributions and dividend payments on the
Securities will be made to Cede & Co., as nominee of DTC. DTC's practice is to
credit Direct Participants accounts, upon DTC's receipt of payment and
corresponding detail information from Issuer or Trust Company on payable date in
accordance with their respective holdings shown on DTC's records. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, Trust Company, or Issuer,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of redemption proceeds, distributions and dividends to
Cede & Co. is the responsibility of Issuer or Trust Company, disbursement of
such payments to Direct Participants shall be the responsibility of DTC, and
disbursement of such payments to the Beneficial owners shall be the
responsibility of Direct and Indirect Participants.
9. (A Beneficial owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to Trust Company (or
Tender/Remarketing Agent), and shall effect delivery of such Securities by
causing the Direct Participant to transfer the Participant's interest in the
Securities, on DTC's records, to Trust Company (or Tender/Remarketing Agent).
The requirement for physical delivery of Securities in connection with an
optional tender or a mandatory purchase will be deemed satisfied when the
ownership rights in the Securities are transferred by Direct Participants on
DTC's records and followed by a book-entry credit of tendered Securities to
Trustee's (or Tender/Remarketing Agent's) DTC account.)
B-2
<PAGE> 11
10. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Trust Company. Under such circumstances, in the event that a successor
securities depository is not obtained, Security certificates are required to be
printed and delivered.
11. Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that Issuer believes to be reliable, but
Issuer takes no responsibility for the accuracy thereof.
The current address for Paragraph 9 is the same as that listed above, for
Paragraph 7.
The following additional text relates to Paragraph 10 of the Letter of
Representations:
Such information shall be conveyed by automated notification. If the
circumstances prevent the funds being paid to Cede & Co., as nominee of DTC, by
2:30 p.m. ET from equaling the dollar amount associated with detail payments by
12:00 noon ET, Issuer or Agent must provide CUSIP-level reconciliation to DTC no
later than 2:30 p.m. ET. Reconciliation may be provided by automated means or in
written format.
The following additional text relates to Paragraph 11 of the Letter of
Representations:
Issuer must remit free funds to Agent by 1:00 p.m. ET on each payment date, or
at such earlier time as required by Agent to guarantee timely credit to the
Dividend Deposit Account of Cede & Co.
The following additional text related to Paragraph 12 of the Letter of
Representations:
Issuer must remit free funds to Agent by 1:00 p.m. ET on each payment date, or
at such earlier time as required by Agent to guarantee timely credit to the
Redemption Deposit Account of Cede & Co. Issuer or Agent shall deliver
CUSIP-level detail regarding such payments to DTC no later than 2:30 p.m. ET on
each payment date.
The following additional text relates to Paragraph 13 of the Letter of
Representations:
Issuer must remit free funds to Agent by 1:00, p.m. ET on each payment date,
or at such earlier time as required by Agent to guarantee timely credit to the
Reorganization Deposit Account of Cede & Co. Issuer or Agent shall deliver
CUSIP-level detail regarding such payments to DTC no later than 2:30 p.m. ET on
each payment date.
B-3
<PAGE> 12
RIDER AMENDING DTC LETTER OF REPRESENTATIONS - BEO AUCTION-RATE/MONEY MARKET
PREFERRED/AND REMARKETED PREFERRED SECURITIES
DTC's Reorganization and Dividend Departments have relocated to 55 Water Street.
Following are revisions to the Letter of Representations including current
addresses, telephone numbers, and telecopy numbers.
Paragraph 3 of the Letter of Representations:
Old Telecopier Numbers: Current Telecopier Numbers:
(212) 709-6896 and (212) 709-6897 (212) 855-5181 AND (212) 855-5182
The confirmation number (formerly (212) 709-6870) is now (212) 855-5202.
Paragraph 5 of the Letter of Representations:
Old Telecopier Numbers: Current Telecopier Number:
(212) 709-1093 and (212) 709-1094 (212) 855-5278
The confirmation number (formerly (212) 709-6884) is now (212) 855-5280.
The current address is: Manager; Reorganization Department
Reorganization Window
The Depository Trust Company
55 WATER STREET, 50TH FLOOR
NEW YORK, NY 10041-0099
Paragraph 7 of the Letter of Representations:
Old Telecopier Number: Current Telecopier Number:
(212) 709-1723 (212) 855-4555
The confirmation number (formerly (212) 709-1270) is now (212) 855-4550.
The current address is: Manager; Announcements
Dividend Department
The Depository Trust Company
55 WATER STREET, 25TH FLOOR
NEW YORK, NY 10041-0099
Paragraph 9 of the Letter of Representations:
Old Telecopier Numbers: Current Telecopier Numbers:
(212) 709-1723 and (212) 709-1686 (212) 855-4555 AND (212) 855-4556
<PAGE> 13
The confirmation number (formerly (212) 709-1270) is now (212) 855-4550.
The current address for Paragraph 9 is the same as that listed above, for
Paragraph 7.
The following additional text relates to Paragraph 10 of the Letter of
Representations:
Such information shall be conveyed by automated notification. If the
circumstances prevent the funds being paid to Cede & Co., as nominee of DTC, by
2:30 p.m. ET from equaling the dollar amount associated with detail payments by
12:00 noon ET, Issuer or Agent must provide CUSIP-level reconciliation to DTC no
later than 2:30 p.m. ET. Reconciliation may be provided by automated means or in
written format.
The following additional text relates to Paragraph 11 of the Letter of
Representations:
Issuer must remit free funds to Agent by 1:00 p.m. ET on each payment date, or
at such earlier time as required by Agent to guarantee timely credit to the
Dividend Deposit Account of Cede & Co.
The following additional text relates to Paragraph 12 of the Letter of
Representations:
Issuer must remit free funds to Agent by 1:00 p.m. ET on each payment date, or
at such earlier time as required by Agent to guarantee timely credit to the
Redemption Deposit Account of Cede & Co. Issuer or Agent shall deliver
CUSIP-level detail regarding such payments to DTC no later than 2:30 p.m. ET on
each payment date.
The following additional text relates to Paragraph 13 of the Letter of
Representations:
Issuer must remit free funds to Agent by 1:00 p.m. ET on each payment date, or
at such earlier time as required by Agent to guarantee timely credit to the
Reorganization Deposit Account of Cede & Co. Issuer or Agent shall deliver
CUSIP-level detail regarding such payments to DTC no later than 2:30 p.m. ET on
each payment date.
<PAGE> 1
EXHIBIT K.6
$150,000,000
CREDIT AGREEMENT
Dated as of December 14, 1999
among
NUVEEN SENIOR INCOME FUND,
as Borrower,
THE LENDERS PARTIES HERETO,
as Lenders,
and
DEUTSCHE BANK AG, NEW YORK BRANCH
as Agent, Syndication Agent and Arranger
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS .................................. 1
Section 1.01 Certain Defined Terms ................................ 1
Section 1.02 Other Terms .......................................... 11
Section 1.03 Computation of Time Periods .......................... 11
Section 1.04 Accounting Terms ..................................... 11
ARTICLE II AMOUNTS AND TERMS OF THE LOANS ................................... 11
Section 2.01 Revolving Credit Commitments ......................... 11
Section 2.02 Revolving Notes ...................................... 12
Section 2.03 Procedure for Facility Borrowing ..................... 12
Section 2.04 Termination or, Reduction of Commitments ............. 13
Section 2.05 Optional and Mandatory Prepayments ................... 13
Section 2.06 Conversion and Captions .............................. 14
Section 2.07 Minimum Amounts of Tranches .......................... 14
Section 2.08 Interest Rates and Payment Dates ..................... 15
Section 2.09 Computation of Interest and Fees ..................... 15
Section 2.10 Inability to Determine Interest Rate ................. 15
Section 2.11 Pro Rata Treatment and Payments ...................... 16
Section 2.12 Illegality ........................................... 16
Section 2.13 Use of Proceeds ...................................... 16
Section 2.14 Requirements of Law .................................. 16
Section 2.15 Indemnity ............................................ 18
Section 2.16 Commitment Fee ....................................... 18
Section 2.17 Taxes ................................................ 18
ARTICLE III CONDITIONS OF LENDING ........................................... 20
Section 3.01 Conditions to Execution .............................. 20
Section 3.02 Conditions to Each Loan .............................. 21
ARTICLE IV REPRESENTATIONS AND WARRANTIES ................................... 22
Section 4.01 Representations and Warranties of the Borrower ....... 22
ARTICLE V COVENANTS OF THE BORROWER ......................................... 26
Section 5.01 Affirmative Covenants ................................ 26
Section 5.02 Negative Covenants ................................... 30
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VI EVENTS OF DEFAULT ................................................ 32
Section 6.01 Events of Default .................................... 32
ARTICLE VII THE AGENT ...................................................... 35
Section 7.01 Appointment .......................................... 35
Section 7.02 Delegation of Duties ................................. 35
Section 7.03 Exculpatory Provisions ............................... 35
Section 7.04 Reliance by Agent .................................... 36
Section 7.05 Notice of Default .................................... 36
Section 7.06 Credit Decisions ..................................... 36
Section 7.07 Indemnification ...................................... 37
Section 7.08 Agent in its Individual Capacity ..................... 37
Section 7.09 Successor Agent ...................................... 37
ARTICLE VIII INDEMNIFICATION ............................................... 38
Section 8.01 Indemnities by the Borrower .......................... 38
ARTICLE IX MISCELLANEOUS ................................................... 38
Section 9.02 Notices, Etc ......................................... 39
Section 9.03 No Waiver; Cumulative Remedies ....................... 39
Section 9.04 Binding Effect; Successors and Assigns; Participations 39
Section 9.05 Governing Law ........................................ 42
Section 9.06 Costs and Expenses ................................... 42
Section 9.07 Execution in Counterparts ............................ 43
Section 9.08 Waiver of Jury Trial ................................. 43
Section 9.09 Jurisdiction; Consent to Service of Process .......... 43
Section 9.10 Adjustments; Set-off ................................. 43
Section 9.11 Survival ............................................. 44
Section 9.12 Entire Agreement ..................................... 44
Section 9.13 Severability of Provisions ........................... 44
Section 9.14 Confidentiality ...................................... 44
Section 9.15 Disclaimer ........................................... 45
</TABLE>
EXHIBITS AND SCHEDULES
Exhibit A Form of Revolving Note
Exhibit B Form of Borrower Certificate
Exhibit C Form of Borrowing Request
Exhibit D Form of Assignment Agreement
Exhibit E Form of Opinion of Counsel to the Borrower
Schedule I Commitments
Schedule II List of Investment Advisory Agreement(s)
<PAGE> 4
Page
----
Schedule III List of Custodian Contract(s)
Schedule IV List of Registrar, Transfer Agency and Services Agreement(s)
<PAGE> 5
CREDIT AGREEMENT
This CREDIT AGREEMENT, dated as of December 14, 1999 (this
"Agreement"), is among NUVEEN SENIOR INCOME FUND, a Massachusetts business trust
(the "Borrower"), the banks and other financial institutions from time to time
parties to this Agreement (collectively, the "Lenders"; each a "Lender"), and
DEUTSCHE BANK AG, NEW YORK BRANCH, as administrative agent (in such capacity,
the "Agent"), syndication agent and arranger.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower is in the business of actively managing and
investing on a leveraged basis a pool of loans and participation interests in
loans;
WHEREAS, the Borrower desires to obtain a credit facility for the
purposes of funding its business activities; and
WHEREAS, the Lenders are willing, on the terms and conditions
hereinafter set forth, to make available to the Borrower the credit facilities
provided for herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, is in control of, is controlled by or is under common
control with such person or is a director or officer of such Person or of
an Affiliate of such Person. For purposes of this definition, control of a
Person shall mean the power, direct or indirect, (i) to vote 50% or more of
the securities having ordinary voting power for the election of directors
of such Person, or (ii) to direct or cause the direction of the management
and policies of such person whether by contract or otherwise.
"Agent" has the meaning set forth in the preamble to this Agreement.
"Agent-Related Persons" means the Agent and any successor agent
arising under Section 7.09, together with their respective Affiliates and
the officers, directors, employees, agents, attorneys-in-fact of such
Persons and Affiliates.
<PAGE> 6
"Applicable Margin" means, for any day with respect to each Eurodollar
Loan, fifty (50) basis points.
"Asset Coverage Ratio" means with respect to the Borrower, the ratio
which the value of the Total Assets of the Borrower (as determined by the
Borrower) less all Indebtedness thereof not represented by Senior
Securities, bears to the aggregate amount of all Senior Securities
representing Indebtedness of the Borrower.
"Assignment Agreement" has the meaning specified in Section 9.04(c).
"Available Commitment" means, as to any Lender at any time, an amount
equal to the excess, if any, of (a) the amount of such Lender's Commitment
over (b) the aggregate principal amount of all Loans made by such Lender
then outstanding.
"Bankruptcy Code" means Title 11 of the United States Code, as in
effect from time to time, and any successor statute.
"Base Rate" means for any day, the rate per annum equal to the higher
of (a) the Federal Funds Rate for such day plus one-half of one percent
(.50%), and (b) the Prime Rate for such day. Any change in the Base Rate
due to a change in the Prime Rate or the Federal Funds Rate shall be
effective on the effective date of such change in the Prime Rate or Federal
Funds Rate.
"Base Rate Loans" means Loans made at a rate of interest based upon
the Base Rate.
"Borrower" has the meaning specified in the preamble hereto.
"Borrowing Date" means any Business Day specified in a notice pursuant
to Sections 2.03 or 2.06 as a date on which the Borrower requests the
Lenders to make Loans.
"Borrowing Request" means each request by the Borrower for the Lenders
to make Revolving Loans, which shall contain the information in respect of
such Revolving Loans specified in Exhibit C and shall be delivered to the
Agent in writing or by facsimile transmission, as provided in Section 2.03.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banking institutions in the State of Illinois or the State of New
York are authorized or required to be closed.
"Closing Date" means the date on which each of the conditions set
forth in Section 3.01 shall have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated and rulings issued thereunder.
Section references to the
2
<PAGE> 7
Code are to the Code, as in effect at the date of this Agreement and any
subsequent provisions of the Code, amendatory thereof, supplemental thereto
or substituted therefor.
"Commitment" means, as to any Lender, the commitment of such Lender to
make Loans to the Borrower from time to time in accordance with the terms
of this Agreement, in an aggregate principal amount at any one time
outstanding not to exceed the amount of the "Commitment" set forth opposite
such Lender's name on Schedule I.
"Commitment Amount" means $150,000,000 as such amount may from time to
time be reduced pursuant to Section 2.04; provided, however, that at all
times on and after the Termination Date, the Commitment Amount shall be
zero.
"Commitment Fee" has the meaning specified in Section 2.16.
"Commitment Percentage" means, as to any Lender at any time, the
percentage of the aggregate Commitments then constituted by such Lender's
Commitment.
"Commitment Period" means the period from and including the Closing
Date to but excluding December 12, 2000 or such earlier date as the
Commitments shall terminate as provided herein.
"Commonly Controlled Entity" means, an entity, whether or not
incorporated, which is under common control, with the Borrower within the
meaning of Section 4001 of ERISA or is part of a group which includes the
Borrower and which is treated as a single employer under Section 414 of the
Code.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Custodian" shall have the meaning specified in the Custodian
Contract.
"Custodian Contract" means the Custodian Contract(s) set forth in
Schedule III hereto.
"Default" means any Event of Default or event that would constitute an
Event of Default but for the requirement that notice be given or time
elapse or both.
"Dollars" means the legal currency, at any relevant time hereunder, of
the United States of America.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect
at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
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"Eurocurrency Reserve Requirements" means for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day, including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other Governmental Authority having jurisdiction
with respect thereto dealing with reserve requirements prescribed for
Eurocurrency funding (currently referred to as "Eurocurrency Liabilities"
in Regulation D of such Board) maintained by a member bank of such System
or bank subject to such Governmental Authority.
"Eurodollar Base Rate" means with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, (a) the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
rate that appears with respect to such Interest Period on the Telerate Page
3750 (or such other page as may replace said page) as of 11:00 A.M., London
time, two Working Days prior to the beginning of such Interest Period. If
for any reason such rate is not available, the term "Eurodollar Base Rate"
means, for any Eurodollar Loan for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits
in Dollars at approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable to
such Interest Period; provided, however, if more than one rate is specified
on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic
mean of all such rates (rounded upwards, if necessary, to the nearest 1/100
of 1%).
"Eurodollar Loans" means Loans made at a rate of interest based upon
the Eurodollar Base Rate.
"Eurodollar Rate" means with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
--------------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default" has the meaning specified in Section 6.01.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business
Day next succeeding such day; provided that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day as so published on the
next succeeding Business Day, and (b) if no such rate is so published on
such next succeeding Business
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<PAGE> 9
Day, the Federal Funds Rate for such day shall be the average rate charged
to the Agent (in its individual capacity) on such day on such transactions
as determined by the Agent.
"Financing Lease" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with the U.S. GAAP to be capitalized on a balance sheet of the lessee.
"Fundamental Investment Policies" means, as to the Borrower, the
policies and objectives for, and limits and restrictions on, investing by
the Borrower deemed "fundamental" in the Prospectus or the Statement of
Additional Information and which policies, objectives, limits and
restrictions cannot be changed without the approval of the holders of a
majority of the Borrower's outstanding common shares.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee Obligation" means, as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of credit)
to induce the creation of which the guaranteeing person has issued a
reimbursement, counter indemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness (the "primary
obligations") of any other third Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds for the
purchase or payment of any such primary obligation, (iii) to purchase
property, securities or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or
hold harmless the owner of any such primary obligation against loss in
respect thereof; provided, however, that the term Guarantee Obligation
shall not include endorsements of instruments for deposit or collection in
the ordinary course of business. The amount of any Guarantee Obligation of
any guaranteeing person shall be deemed to be the lower of (a) an amount
equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum
amount for which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation, unless such
primary obligation and the maximum amount for which such guaranteeing
person may be liable are not stated or determinable, in which case the
amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined
by such guaranteeing person in good faith.
"Indebtedness" of any Person, means, at any date, without duplication,
(a) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices) or which is evidenced by a
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<PAGE> 10
note, bond, debenture or similar instrument, (b) all obligations of such
Person under Financing Leases or Interest Rate Agreements, (c) all
obligations of such Person in respect of banker's acceptances issued or
created for the account of such Person, (d) all obligations of such Person,
whether absolute or contingent in respect of letters of credit opened for
the account of such Person and (e) any and all other "liabilities" or other
"indebtedness" of such Person as such terms are used within the meaning of
the 1940 Act. For purposes of this definition of "Indebtedness", the amount
of any derivative instrument (including, without limitation, any swap,
Interest Rate Agreement, collar, cap, put, call, equity derivative or
mortgage-backed or debt-backed derivative) will be calculated daily on a
marked-to-market basis.
"Insolvency" means, with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.
"Interest Payment Date" means (a) as to any Base Rate Loan, the first
Business Day of each calendar month to occur while such Loan is
outstanding, (b) as to any Eurodollar Loan having an Interest Period of
three months or less, the last day of such Interest Period, and (c) as to
any Eurodollar Loan having an Interest Period longer than three months, the
day which is three months after the first day of such Interest Period and
the last day of such Interest Period and, in each case, the day on which a
Loan becomes due and is payable in full and is paid or prepaid in full.
"Interest Period" means with respect to any Eurodollar Loans:
(a) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such Eurodollar Loans and ending
one, two, three or six months thereafter, as selected by the Borrower in
its notice of borrowing as provided in Section 2.03 or its notice of
conversion as provided in Section 2.06(a) as the case may be; provided that
the Agent and Lenders may consider requests by the Borrower to provide an
initial Interest Period of less than one month; and
(b) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such Eurodollar Loans
and ending one, two, three or six months thereafter, as selected by the
Borrower by irrevocable notice to the Agent not less than three Working
Days prior to the last day of the then current Interest Period with respect
to such Eurodollar Loans;
provided that all of the foregoing provisions relating to Interest Periods
are subject to the following:
(1) if any Interest Period would otherwise end on a day which is
not a Working Day, such Interest Period shall be extended to the next
succeeding Working Day unless the result of such extension would be to
carry such Interest Period into another calendar month in which event
such Interest Period shall end on the immediately preceding Working
Day;
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<PAGE> 11
(2) any Interest Period that begins on the last Working Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Working Day of a calendar month;
(3) any Interest Period that would otherwise end after the
Termination Date shall end on the Termination Date; and
(4) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future, interest rate option, interest rate swap,
interest rate cap or other interest rate hedge or arrangement under which
the Borrower is a party.
"Investment Advisory Agreement" means the Investment Advisory
Agreement(s) set forth on Schedule II hereto.
"Investment Policies" means, as to the Borrower, the policies and
objectives for, and limits and restrictions on, investing by the Borrower
set forth in the Registration Statement, the Prospectus and the Statement
of Additional Information relating to the Borrower and as adopted by (or
generally approved by) the board of trustees of the Borrower or the
shareholders of the Borrower from time to time.
"Lender" or "Lenders" has the meaning specified in the preamble
hereto.
"Lending Office" has the meaning specified in Section 2.01(b).
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement or preferential arrangement of any
kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreements, any Financing Lease having
substantially the same economic effect as any of the foregoing, and the
filing of any financing statement under the UCC or comparable law of any
jurisdiction in respect of any of the foregoing).
"Loan Documents" means this Agreement, the Notes and any other
documents entered into in connection herewith.
"Loans" means the collective reference to the extensions of credit by
the Lenders to the Borrower under Article II.
"Majority Lenders" means, at any time, Lenders the Commitment
Percentages of which aggregate 51% or more. If the Commitments are
terminated Majority Lenders shall mean Lenders holding 51% or more of the
outstanding Loans.
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<PAGE> 12
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole, (b) the ability of the
Borrower to perform any material obligations of the Borrower under this
Agreement or the Notes, or (c) the validity or enforceability of a material
provision of this Agreement, the Notes or the material rights or remedies
of the Agent or the Lender hereunder or thereunder.
"Maturity Date" shall mean the earlier of (i) the Termination Date or
(ii) acceleration following the occurrence of an Event of Default pursuant
to Section 6.01.
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"1940 Act" means the Investment Company Act of 1940, as amended,
together with all rules and regulations promulgated from time to time
thereunder.
"Notes" means the Revolving Notes, evidencing the aggregate
obligations of the Borrower to the Lenders resulting from the Loans made by
the Lenders.
"Nuveen" means Nuveen Senior Loan Asset Management Inc., a Delaware
corporation, acting as investment advisor for the Borrower or any successor
or assign.
"Obligations" means the unpaid principal of and interest on
(including, without limitation, interest accruing after the maturity of the
Loans and interest accruing on or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) the
Loans and all other obligations and liabilities of the Borrower, whether
direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in
connection with, this Agreement, the Notes, any other Loan Document and any
other document made, delivered or given in connection herewith or
therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without
limitation, all reasonable fees and disbursements of counsel, and the
allocated cost of internal counsel, to the Agent or to the Lenders that are
required to be paid by the Borrower pursuant to the terms of this
Agreement) or otherwise.
"Participant" has the meaning set forth in Section 9.04(b).
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Permissible Investments" means loans and other investments in which
the Borrower is permitted to invest pursuant to the Prospectus, the
Registration Statement, the Statement of Additional Information, and the
Borrower's Investment Policies from time to time.
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<PAGE> 13
"Permitted Liens" means (i) Liens for taxes not yet due or which are
being contested in good faith by appropriate proceedings, provided that
adequate reserves with respect thereto are maintained on the books of the
Borrower in conformity with U.S. GAAP and to the reasonable satisfaction of
the Agent, (ii) Liens arising in connection with claims for advances made
by or payments due to any custodian under the custodian contracts set forth
in Schedule III hereto and (iii) any other Liens created, incurred, assumed
or suffered to exist in compliance with the Registration Statement or the
Investment Policies which Liens are not otherwise prohibited by any
Requirement of Law and secure Indebtedness in an aggregate amount not to
exceed $250,000.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision
or agency thereof.
"Plan" means, at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Prime Rate" means the per annum rate of interest established from
time to time by Deutsche Bank AG, New York Branch as its prime rate, which
rate may not be the lowest rate of interest charged by Deutsche Bank AG,
New York Branch to its customers.
"Prospectus" means the Prospectus of the Borrower, dated October 26,
1999.
"Purchasing Lender" has the meaning set forth in Section 9.04(c).
"Register" has the meaning specified in Section 9.04(d).
"Registrar, Transfer Agency and Services Agreement" means the
Registrar, Transfer Agency and Services Agreement(s) set forth in Schedule
IV hereto.
"Registration Statement" means the Registration Statement of the
Borrower, declared effective on October 26, 1999.
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System.
"Reorganization" means, with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
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"Replacement Lender" has the meaning specified in Section 2.18.
"Reportable Event" means an event described in Section 4043(b) of
ERISA with respect to a Plan as to which the thirty-day notice requirement
has not been waived by the PBGC.
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and Bylaws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject. With respect to
Borrower, "Requirements of Law" includes, without limitation, the
requirements of the 1940 Act, the Investment Advisers Act of 1940 and the
Securities Act of 1933, in each case as amended from time to time.
"Responsible Officer" means (x) the president or any vice president of
the Borrower, (y) with respect to financial matters, the chief financial
officer, treasurer, assistant treasurer or controller of the Borrower and
(z) as to any other matter, any other officer of the Borrower with
responsibility for such matter.
"Revolving Loans" has the meaning specified in Section 2.01(a).
"Revolving Note" has the meaning specified in Section 2.02.
"Senior Security" means any bond, debenture, note or similar
obligation or instrument constituting a security and evidencing
Indebtedness, including, without limitation, all borrowings under this
Agreement and any share of beneficial interest of the Borrower, of a class
having priority over any other class of shares of the Borrower as to
distribution of assets or payment of dividends; provided, however, that
"Senior Security" shall not include any promissory note or other evidence
of indebtedness in any case where such a loan is for temporary purposes
only and in an amount not exceeding five percent of the value of the Total
Assets of the Borrower at the time when the loan is made. A loan shall be
presumed to be for temporary purposes if it is repaid within sixty days and
is not extended or renewed; otherwise it shall be presumed not to be for
temporary purposes. Any such presumption may be rebutted by evidence to the
contrary.
"Statement of Additional Information" means the Statement of
Additional Information of the Borrower, dated October 26, 1999.
"Subsidiary" means, as to any Person at any time of determination, a
corporation, partnership or other entity (other than any Borrower or any
other investment company or similar investment entity existing under
foreign law substantially equivalent to an investment company) of which
shares of stock having ordinary voting power (other than stock or such
other ownership interests having such power only by reason of the happening
of a contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the time
owned directly or
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<PAGE> 15
indirectly through one or more intermediaries or Subsidiaries, or both, by
such Person. Unless otherwise qualified, all references to a "Subsidiary"
or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Borrower.
"Taxes" has the meaning specified in Section 2.17(a).
"Termination Date" means December 12, 2000.
"Total Assets" means, at any time, (x) all assets of the Borrower
which in accordance with U.S. GAAP would be classified as assets on the
balance sheet of the Borrower prepared as of such time less (y) the amount
of any such assets that consist of unsecured senior loans (it being
understood that for purposes of this clause (y) commercial paper and other
overnight investments will not be considered unsecured senior loans) or
participations in unsecured senior loans.
"Tranche" means the collective reference to Eurodollar Loans, the
Interest Periods of which begin on the same day and end on the same later
date (whether or not such Eurodollar Loans shall originally have been made
on the same day).
"Transferee" has the meaning specified in Section 9.04(f).
"Type" means as to any Revolving Loan, its nature as a Base Rate Loan
or a Eurodollar Loan.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the specified jurisdiction.
"U.S. GAAP" has the meaning specified in Section 1.04.
"Working Day" means any Business Day on which dealings in foreign
currencies and exchange between banks may be carried on in the city where
the Eurodollar and foreign currency and exchange operations in respect of
the Agent's Eurodollar Loans are then being conducted.
"Year 2000 Compliant" has the meaning specified in Section 4.01(s).
"Year 2000 Problem" has the meaning specified in Section 4.01(s).
Section 1.02 Other Terms. All terms used in Article 9 of the UCC in
the State of New York, and not specifically defined herein, are used herein as
defined in such Article 9.
Section 1.03 Computation of Time Periods. Unless otherwise stated in
this Agreement, in the computation of a period of time from a specified date to
a later specified date, the word "from" means "from and including" and the words
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<PAGE> 16
"to" and "until" each means "to but excluding."
Section 1.04 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles in the United States in effect from time to time ("U.S.
GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
Section 2.01 Revolving Credit Commitments. (a) On the terms and
conditions hereinafter set forth, each Lender hereby agrees to make Revolving
Loans (each, a "Revolving Loan") to the Borrower from time to time during the
Commitment Period in an aggregate principal amount not to exceed the amount of
such Lender's Commitment; provided that the aggregate principal amount of all
Revolving Loans outstanding at any one time shall not exceed the Commitment
Amount at such time. During the Commitment Period, the Borrower may use the
Commitments by borrowing, prepaying the Revolving Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof.
(b) The Revolving Loans may from time to time be (i) Eurodollar Loans,
(ii) Base Rate Loans or (iii) a combination thereof, as determined by the
Borrower and notified to the Agent in accordance with Sections 2.03 and 2.06,
provided that no Revolving Loan shall be made as a Eurodollar Loan after the day
that is one month prior to the Termination Date. Each Lender may make or
maintain its Revolving Loans to the Borrower by or through any branch, or with
the consent of the Borrower (which shall not be unreasonably withheld) any
affiliate, in each case as determined by it from time to time and notified to
the Agent (any such branch or affiliate being hereinafter called a "Lending
Office").
Section 2.02 Revolving Notes. The Revolving Loans made by each Lender
to the Borrower shall be evidenced by a promissory note of the Borrower,
substantially in the form of Exhibit A, with appropriate insertions as to payee,
date and principal amount (each a "Revolving Note"), in each case payable to the
order of such Lender and in a principal amount equal to the lesser of (a) the
amount of such Lender's Commitment and (b) the aggregate unpaid principal amount
of all Revolving Loans made by the Lender to the Borrower, as the case may be.
Each Lender is hereby authorized to record the date, type and amount of each
Revolving Loan made by such Lender to the Borrower, each continuation thereof,
each conversion of all or a portion thereof to another Type, the date and amount
of each payment or prepayment of principal thereof and, in the case of
Eurodollar Loans, the length of each Interest Period with respect thereto, on
the schedule annexed to and constituting a part of its Revolving Note made by
the Borrower or otherwise in the books and records of such Lender, and any such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded; provided, however that the failure to make any such
recordation shall not affect the obligations of the Borrower hereunder or under
any Revolving Note. Each Revolving Note shall (x) be dated the Closing Date, (y)
be stated to mature on the Termination Date and (z) provide for the payment of
interest in accordance with Section 2.08.
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Section 2.03 Procedure for Facility Borrowing. The Borrower may borrow
under the Commitments during the Commitment Period on any Working Day if the
borrowing is a Eurodollar Loan or on any Business Day if the borrowing is a Base
Rate Loan, provided that the Borrower shall give the Agent irrevocable notice in
the form of a Borrowing Request (which notice must be received by the Agent
prior to 12:00 P.M., New York City time, (a) three Working Days prior to the
requested Borrowing Date, if all or any part of any such requested Revolving
Loans are to be initially Eurodollar Loans or (b) one Business Day prior to the
requested Borrowing Date in all other cases), specifying the aggregate amount
thereof to be borrowed and the aggregate amount of Revolving Loans outstanding
after giving effect to such borrowing, the requested Borrowing Date, whether
such borrowing is to be of Eurodollar Loans, Base Rate Loans or a combination
thereof and if such borrowing is to be entirely or partly of Eurodollar Loans,
the amounts of such Type of Loan and the lengths of the initial Interest Periods
therefor. Each borrowing under the Commitments shall be in an amount equal to
(x) in the case of Base Rate Loans, $5,000,000 or a whole multiple of $1,000,000
in excess thereof (or, if the then unused portion of the applicable Commitments
is less than $5,000,000, such lesser amount) and (y) in the case of Eurodollar
Loans, $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Upon
receipt of any Borrowing Request from the Borrower, the Agent shall promptly
notify each Lender thereof. Thereafter, each Lender will make the amount of its
pro rata share of each borrowing available to the Agent for the account of the
Borrower at the office of the Agent specified in Section 9.02 prior to 1:00
P.M., New York City time, on the Borrowing Date requested by the Borrower in
funds immediately available to the Agent. Such amount will then be made
available to the Borrower by the Agent, crediting the account of the Borrower on
the books of such office with such amount made available to the Agent by the
Lenders for the Borrower and in like funds as received by the Agent. Unless the
Agent shall have received notice from a Lender prior to the Borrowing Date that
such Lender will not make available to the Agent its pro rata share of such
borrowing, the Agent may assume that such Lender has made its funds available to
the Agent on such date in accordance with this Section 2.03, and the Agent may,
in reliance upon such assumption, make available to the Borrower on such
Borrowing Date a corresponding amount. If and to the extent such Lender shall
not have so made such funds available to the Agent, such Lender agrees to repay
the Agent forthwith on demand by the Agent such corresponding amount, together
with interest thereon, for each day from date such amount is made available to
the Borrower until the date such amount is repaid to the Agent, at the greater
of the Federal Funds Rate and the rate determined by the Agent in accordance
with banking industry rules on interbank compensation. If such Lender shall
repay to the Agent such corresponding amount, such amount so repaid shall
constitute such Lender's funding of its pro rata share of such borrowing for
purposes of this Agreement. The Borrower shall reimburse the Agent for all of
such corresponding amount that remains unpaid to the Agent after the fifth
Business Day following the date such amount is made available to the Borrower.
Section 2.04 Termination or, Reduction of Commitments. (a) The Borrower
may, upon at least five Business Days' written notice to the Agent, terminate
the Commitments or from time to time reduce the amount of any thereof (in whole
or in part); provided that no such reduction or termination shall be permitted
if, after giving effect thereto and to any prepayment of the Revolving Loans
made on the effective date specified therein, the then outstanding principal
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<PAGE> 18
amount of Revolving Loans would exceed the aggregate amount of the Commitments
as so reduced.
(b) In the case of the termination or reduction of all or any of the
Commitments pursuant to this Section 2.04, interest accrued on the amount of any
prepayment relating thereto and any unpaid fees, costs and expenses accrued with
respect thereto shall be paid by the Borrower on the date of such termination or
reduction.
Section 2.05 Optional and Mandatory Prepayments. (a) Subject to Section
2.15, the Borrower may, at any time and from time to time, prepay the Revolving
Loans, in whole or in part, upon at least three Working Days' irrevocable notice
(in the case of Eurodollar Loans) and one Business Day's irrevocable notice (in
the case of Base Rate Loans) from the Borrower to the Agent specifying the date
and amount of prepayment and whether the prepayment is of Eurodollar Loans, Base
Rate Loans or a combination thereof, and, if of a combination thereof, the
amount allocable to each. Upon receipt of any such notice from the Borrower, the
Agent shall promptly notify the Lender thereof. If any such notice is given, the
amount specified in such notice shall be due and payable by the Borrower on the
date specified therein, together with accrued interest to such date on the
amount prepaid and any amounts payable pursuant to Section 2.15 in connection
with such prepayment. Partial prepayments shall be in an aggregate principal
amount of $1,000,000 or a whole multiple thereof and may only be made, if after
giving effect thereto, Section 2.07 shall not have been contravened.
(b) If, at any time and from time to time, either (i) the Asset
Coverage Ratio of the Borrower shall be less than 300%, or (ii) the aggregate
amount of Loans made to the Borrower then outstanding exceeds the borrowing
limits provided in the 1940 Act, the Borrower's Prospectus or the Registration
Statement, then, within four Business Days thereafter, the Borrower shall repay
Loans made to the Borrower to the extent necessary to ensure that (x) the Asset
Coverage Ratio of the Borrower after such payment is less than 300% or (y) the
aggregate amount of Loans made to the Borrower then outstanding does not after
such payments exceed such limits as set forth in the 1940 Act, the Borrower's
Prospectus or Registration Statement, as the case may be.
(c) Notwithstanding anything to the contrary in this Agreement, on the
Termination Date all Revolving Loans outstanding shall mature and be payable in
full, and the Commitments of the Lenders shall be reduced to zero.
Section 2.06 Conversion and Continuations. (a) The Borrower may elect
from time to time to convert Eurodollar Loans to Base Rate Loans, by giving the
Agent at least three Business Days' prior irrevocable notice of such election,
provided that any such conversion of Eurodollar Loans may only be made on the
last day of an Interest Period with respect thereto. The Borrower may elect from
time to time, provided no Default or Event of Default shall have occurred and be
continuing, to convert Base Rate Loans to Eurodollar Loans by giving the Agent
at least three Working Days' prior irrevocable notice of such election. Any such
notice of conversion to Eurodollar Loans shall specify the length of the initial
Interest Period or Interest Periods therefor. Upon receipt of any such notice
the Agent shall promptly notify each Lender thereof. All or any part of
outstanding Eurodollar Loans and Base Rate Loans may be converted
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as provided herein, provided that (i) any such conversion may only be made if,
after giving effect thereto, Section 2.07 shall not have been contravened and
(ii) no Base Rate Loan may be converted into a Eurodollar Loan after the date
that is one month prior to the Termination Date.
(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
notice to the Agent, in accordance with the applicable provisions of the
definition of "Interest Period' set forth in Section 1.01, of the length of the
next Interest Period to be applicable to such Eurodollar Loans, provided that no
Eurodollar Loan may be continued as such (i) if, after giving effect thereto,
Section 2.07 would be contravened or (ii) after the date that is one month prior
to the Termination Date and provided, further, that if the Borrower shall fail
to give any required notice as described above in this paragraph or if such
continuation is not permitted pursuant to the preceding proviso such Revolving
Loans shall be automatically converted to Base Rate Loans on the last day of
such then expiring Interest Period.
Section 2.07 Minimum Amounts of Tranches. All borrowings, conversions
and continuations of Revolving Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of the Revolving Loans comprising each Tranche shall be equal to $5,000,000 or a
whole multiple of $1,000,000 in excess thereof. There shall be no more than
seven Tranches outstanding at any one time.
Section 2.08 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.
(b) Each Base Rate Loan shall bear interest at a rate per annum equal
to the Base Rate.
(c) If all or a portion of the principal amount of any Loan or any
interest payable on the Loans shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear interest
at a rate per annum which is (x) in the case of overdue principal to the last
day of any Interest Period then applicable thereto, the rate that would
otherwise be applicable thereto pursuant to the foregoing provisions of this
subsection plus 2% or (y) otherwise, the rate described in paragraph (b) of this
Section 2.08 plus 2%, in each case from the date of such nonpayment until such
amount is paid in full (as well after as before judgment).
(d) Interest on each Eurodollar Loan and Base Rate Loan shall be
payable in arrears on each Interest Payment Date, provided that interest
accruing pursuant to paragraph (c) of this Section 2.08 shall be payable on
demand.
Section 2.09 Computation of Interest and Fees. (a) Interest on Base
Rate Loans shall be calculated on the basis of a 365 or 366-day year, as
applicable, for the actual days elapsed. Interest on Eurodollar Loans and the
Commitment Fee payable pursuant to Section 2.16 shall be calculated on the basis
of a 360-day year for the actual days elapsed. The Agent shall as
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soon as practicable notify the Borrower and the Lenders of each determination of
a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the Base Rate or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change in the
Base Rate becomes effective or such change in the Eurocurrency Reserve
Requirements becomes effective, as the case may be. The Agent shall as soon as
practicable notify the Borrower and each Lender of the effective date and the
amount of each such change in interest rate.
(b) Each determination of an interest rate by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrower and
the Lenders in the absence of manifest error. The Agent shall, at the request of
the Borrower, deliver to the Borrower a statement showing the quotations used by
the Agent in determining any interest rate pursuant to Section 2.08(a) and the
calculations made by the Agent in determining any interest rate pursuant to
Section 2.08(b).
Section 2.10 Inability to Determine Interest Rate. In the event that
prior to the first day of any Interest Period the Agent shall have determined
(which determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such Interest
Period, (x) any Eurodollar Loan requested to be made on the first day of such
Interest Period shall be made as Base Rate Loans, (y) any Base Rate Loans that
were to have been converted on the first day of such Interest Period to
Eurodollar Loans shall be converted to or continued as Base Rate Loans and (z)
any outstanding Eurodollar Loans shall be converted, on the first day of such
Interest Period, to Base Rate Loans. Until such determination has been withdrawn
by the Agent, no further Eurodollar Loans shall be made or continued as such,
nor shall the Borrower have the right to convert Base Rate Loans to Eurodollar
Loans.
Section 2.11 Pro Rata Treatment and Payments. Each borrowing of
Revolving Loans by the Borrower from the Lenders hereunder, each payment by the
Borrower of any Commitment Fee hereunder, and any reduction of the applicable
Commitments of the Lenders shall be made pro rata according to the respective
applicable Commitment Percentages of the Lenders. Each payment (including each
prepayment) by the Borrower on account of principal of and interest on the
Revolving Loans shall be made pro rata according to the respective outstanding
principal amounts of the Revolving Loans then held by the Lenders. All payments
(including prepayments) to be made by the Borrower hereunder and under the
Notes, whether on account of principal, interest, fees or otherwise, shall be
made without set off or counterclaim and shall be made prior to 12:00 Noon, New
York City time, on the due date thereof to the Agent, for the account of the
appropriate Lenders, at the Agent's office specified in Section 9.02, in Dollars
and in immediately available funds. The Agent shall distribute such payments to
such Lenders promptly upon receipt in like funds as received. If any payment
hereunder (other than payments on the Eurodollar Loans) becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. If
any payment on a Eurodollar Loan becomes due and payable on a day other than a
Working Day, the maturity thereof shall be extended to the next succeeding
Working Day unless the result of such
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extension would be to extend such payment into another calendar month, in which
event such payment shall be made on the immediately preceding Working Day.
Section 2.12 Illegality. Notwithstanding any other provision herein, if
any change in any Requirement of Law or in the interpretation or application
thereof shall make it unlawful for any Lender or Lending Office to make or
maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment
of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as
such and convert Base Rate Loans to Eurodollar Loans shall forthwith be
suspended until such time as the circumstances giving rise to such suspension
are no longer applicable and (b) the Loans of such Lender or Lending Office then
outstanding as Eurodollar Loans, if any, shall be converted automatically to
Base Rate Loans on the respective last days of the then current Interest Periods
with respect to such Loans or within such earlier period as required by law. If
any such conversion of a Eurodollar Loan occurs on a day which is not the last
day of the then current Interest Period with respect thereto, the Borrower shall
pay to the Lender such amounts, if any, as may be required pursuant to Section
2.15.
Section 2.13 Use of Proceeds. The proceeds of the Loans shall be used
by the Borrower to make Permissible Investments.
Section 2.14 Requirements of Law. (a) In the event that any change in
any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law but, if not having the force of law, generally applicable to
and complied with by lenders of the same general type as such Lender in the
relevant jurisdiction) from any central bank or other Governmental Authority
made subsequent to the Closing Date:
(i) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender or Lending Office which is not otherwise included in
the determination of the Eurodollar Rate hereunder, or
(ii) shall impose on such Lender or Lending Office any other condition;
and the result of any of the foregoing is to increase the cost to the Lender or
Lending Office, by an amount which the Lender deems to be material, of making,
converting into, continuing or maintaining Eurodollar Loans or to reduce any
amount receivable hereunder in respect thereof then, in any such case, the
Borrower shall promptly pay such Lender or Lending Office, upon its demand, any
additional amounts necessary to compensate the Lender for such increased cost or
reduced amount receivable. If any Lender becomes entitled to claim any
additional amounts pursuant to this subsection, it shall promptly notify the
Borrower, through the Agent, of the event by reason of which it has become so
entitled. A certificate as to any additional amounts payable pursuant to this
subsection submitted by such Lender or Lending Office, through the Agent, to the
Borrower shall be prima facie evidence of the accuracy of the information so
recorded. This covenant shall survive the termination of this Agreement and the
payment of the Notes and all other amounts payable hereunder for one year.
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(b) If, after the date of this Agreement, the introduction of any
applicable law, rule, regulation or guideline regarding capital adequacy, or any
change therein or any change in the interpretation or administration thereof by
any Governmental Authority charged with the interpretation or administration
thereof, affects the amount of capital required or expected to be maintained by
any Lender or any corporation controlling any Lender and such Lender (taking
into consideration such Lender's or such corporation's policies with respect to
capital adequacy) determines that the amount of capital maintained by such
Lender or such corporation which is attributable to or based upon the Loans, the
Commitments or this Agreement must be increased as a consequence of such
introduction or change, then, upon demand of the Agent at the request of such
Lender, the Borrower shall immediately pay to the Agent on behalf of such
Lender, additional amounts sufficient to compensate such Lender or such
corporation for the increased costs to such Lender or such corporation of such
increased capital. Any such demand shall be accompanied by a certificate of such
Lender setting forth in reasonable detail the computation of any such increased
costs, provided that such Lender shall not be required to disclose confidential
information. This covenant shall survive the termination of this Agreement and
the payment of the Notes and all other amounts payable hereunder for one year.
(c) Each Lender will promptly notify the Borrower, through the Agent,
of any event of which it has knowledge that will entitle such Lender to
compensation pursuant to Section 2.14(a) or (b) above. No failure by any Lender
to give (or delay in giving) such notice shall adversely affect such Lender's
rights to such compensation, except that the Borrower shall have no obligation
to compensate any Lender for any cost or reduction incurred or accrued by it
more than 180 days before such Lender gives notice of the event giving rise to
such cost or reduction as required by the preceding sentence (unless such cost
or reduction is incurred or accrued by such Lender more than 180 days before the
delivery of such notice as a result of the retroactive application by any
Governmental Authority of any Requirement of Law, applicable law, rule or
guideline referred to in Section 2.14(a) or (b)).
Section 2.15 Indemnity. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of (a) default by the Borrower in payment when
due of the principal amount of or interest on any Loan, (b) default by the
Borrower in making a borrowing or conversion into or continuation of Loans after
the Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (c) default by the Borrower in making any
prepayment after the Borrower has given a notice thereof in accordance with the
provisions of this Agreement or (d) the making by the Borrower of a prepayment
(whether such prepayment is voluntary, optional, mandatory or upon acceleration
of such Loans) of Eurodollar Loans on a day which is not the last day of an
Interest Period with respect thereto, including, without limitation, in each
case, any such loss or expense arising from the reemployment of funds (but,
otherwise, excluding in all cases consequential damages relating thereto)
obtained by it or from fees payable to terminate the deposits from which such
funds were obtained. This covenant shall survive the termination of this
Agreement and the payment of the Notes and all other amounts payable hereunder
for one year.
Section 2.16 Commitment Fee. In connection with and as consideration
for the holding available for use by Borrower the full amount of the Commitments
during the
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Commitment Period the Borrower agrees to pay to the Agent for the account of
each Lender a commitment fee (the "Commitment Fee") equal to the product of (x)
0.125% per annum multiplied by (y) the average daily amount of the Available
Commitment of such Lender during the calendar quarter for which the Commitment
Fee is being paid (or, in the case of the initial payment of the Commitment Fee,
during the period from the Closing Date to March 31, 2000). Such Commitment Fee
shall be payable quarterly in arrears on the last day of each March, June,
September and December, commencing March 31, 2000, and on the Termination Date.
Section 2.17 Net Payments; Taxes. (d) All payments made by the Borrower
hereunder, or by the Borrower under any Notes, will be made without setoff,
counterclaim or other defense. Except as provided in Section 2.17(b), all such
payments will be made free and clear of, and without deduction or withholding
for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any Governmental
Authority or by any political subdivision or taxing authority thereof or therein
with respect to such payments (but excluding, except as provided in the second
succeeding sentence, any tax imposed on or measured by the net income of a
Lender pursuant to the laws of the jurisdiction or any political subdivision or
taxing authority thereof or therein in which the principal office or applicable
lending office of such Lender is located) and all interest, penalties or similar
liabilities with respect thereto (collectively, "Taxes"). If any Taxes are so
levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and
such additional amounts as may be necessary so that every payment of all amounts
due hereunder or under any Note, after withholding or deduction for or on
account of any Taxes, will not be less than the amount provided for herein or in
such Note. If any amounts are payable in respect of Taxes pursuant to the
preceding sentence, then the Borrower shall be obligated to reimburse each
Lender, upon the written request of such Lender, for taxes imposed on or
measured by the net income of such Lender pursuant to the laws of the
Governmental Authority or any political subdivision or taxing authority thereof
or therein in which the principal office or applicable lending office of such
Lender is located as such Lender shall determine are payable by such Lender in
respect of such amounts so paid to or on behalf of such Lender pursuant to the
preceding sentence and in respect of any amounts paid to or on behalf of such
Lender pursuant to this sentence. The Borrower will furnish to the Agent within
45 days after the date of the payment of any Taxes due pursuant to applicable
law certified copies of tax receipts evidencing such payment by such Borrower.
The Borrower agrees to indemnify and hold harmless each Lender, and reimburse
such Lender upon its written request, for the amount of any Taxes so levied or
imposed and paid by such Lender.
(e) Each Lender that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower
and the Agent on or prior to the Effective Date, or in the case of a Lender that
is an assignee or transferee of an interest under this Agreement pursuant to
Section 9.04 (unless the respective Lender was already a Lender hereunder
immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Lender, (i) two accurate and complete original
signed copies of Internal Revenue Service Form W-8ECI or Form W-8BEN (with
respect to a complete exemption under an income tax treaty) (or successor forms)
certifying to such Lender's entitlement to a complete exemption from United
States withholding tax with respect to payments to be made under this Agreement
and under any Note, or (ii) if the Lender is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form W-8ECI or
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Form W-8BEN (with respect to a complete exemption under an income tax treaty)
pursuant to clause (i) above, (x) a certificate substantially in the form of
Exhibit D (any such certificate, a "Section 2.17(b)(ii) Certificate") and (y)
two accurate and complete original signed copies of Internal Revenue Service
Form W-8BEN (with respect to the portfolio interest exemption) (or successor
form) certifying to such Lender's entitlement to a complete exemption from
United States withholding tax with respect to payments of interest to be made
under this Agreement and under any Note. In addition, each Lender agrees that
from time to time after the Closing Date, when a lapse in time or change in
circumstances renders the previous certification obsolete or inaccurate in any
material respect, it will deliver to the Borrower and the Agent two new accurate
and complete original signed copies of Internal Revenue Service Form W-8ECI,
Form W-8BEN (with respect to the benefits of any income tax treaty), Form W-8BEN
(with respect to the portfolio interest exemption) and a Section 2.17(b)(ii)
Certificate, as the case may be, and such other forms as may be required in
order to confirm or establish the entitlement of such Lender to a continued
exemption from or reduction in United States withholding tax with respect to
payments under this Agreement and any Note, or it shall immediately notify the
Borrower and the Agent of its inability to deliver any such Form or Certificate,
in which case such Lender shall not be required to deliver any such form of
certificate pursuant to this Section 2.17(b). Notwithstanding anything to the
contrary contained in Section 2.17(a), but subject to the immediately succeeding
sentence, (x) the Borrower shall be entitled, to the extent it is required to do
so by law, to deduct or withhold income or similar taxes imposed by the United
States (or any political subdivision or taxing authority thereof or therein)
from interest, fees or other amounts payable hereunder for the account of any
Lender which is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that
such Lender has not provided to the Borrower U.S. Internal Revenue Service Forms
that establish a complete exemption from such deduction or withholding and (y)
the Borrower shall not be obligated pursuant to Section 2.17(a) hereof to
gross-up payments to be made to a Lender in respect of income or similar taxes
imposed by the United States if (I) such Lender has not provided the Borrower
the Internal Revenue Service Forms required to be provided the Borrower pursuant
to this Section 2.17(b) or (II) in the case of a payment, other than interest,
to a Lender described in clause (ii) above, to the extent that such forms do not
establish a complete exemption from withholding of such taxes. Notwithstanding
anything to the contrary contained in the preceding sentence or elsewhere in
this Section 2.17, the Borrower agrees to pay additional amounts and to
indemnify each Lender in the manner set forth in Section 2.17(a) (without regard
to the identity of the jurisdiction requiring the deduction or withholding) in
respect of any amounts deducted or withheld by it as described in the
immediately preceding sentence as a result of any changes after the Effective
Date in any applicable law, treaty, governmental rule, regulation, guideline or
order, or in the interpretation thereof, relating to the deducting or
withholding of income or similar Taxes.
(c) The Borrower agrees to pay any present or future stamp, recording
or documentary taxes or similar levies that arise from any payment made
hereunder or under the other Loan Documents or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or the other Loan
Documents.
Section 2.18 Replacement of Lender. If any Lender shall have required
compensation pursuant to Section 2.14 or Section 2.17, the Borrower shall have
the right, with
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the consent of the Agent (which shall not be unreasonably withheld), to
substitute such Lender with a Lender (a "Replacement Lender") satisfactory to
the Borrower and the Agent (which may be one or more of the Lenders) to assume
the Commitment of such Lender and to purchase the Note(s) held by such Lender
for an amount equal to the principal of, and accrued and unpaid interest on,
such Note(s), together with any costs reasonably incurred by such Lender in
connection with its sale of such Note(s) (without recourse to or warranty by
such Lender and subject to all amounts owing to such Lender under this Agreement
having been paid in full). Upon the exercise of such right by the Borrower and
the satisfaction of such conditions thereto, such Lender shall convey its
interest to the Replacement Lender in accordance with the procedures set forth
in Section 9.04(c).
ARTICLE III
CONDITIONS OF LENDING
Section 3.01 Conditions to Execution. The parties acknowledge that the
execution, delivery and effectiveness of this Agreement are subject to the
satisfaction of the following conditions precedent:
(a) Credit Agreement. The Agent shall have received this Agreement,
executed and delivered by a Responsible Officer of the Borrower.
(b) Incumbency Certificates. The Agent shall have received an
incumbency certificate of the Borrower, dated the Closing Date, executed by
a Responsible Officer of the Borrower and its secretary or assistant
secretary and therein containing the name, office or position and specimen
signature of each Person who is authorized by the Borrower to execute this
Agreement, the Notes and any and all other documentation to be executed by
the Borrower in connection with this Agreement.
(c) Authorization Proceedings. The Agent shall have received a copy of
the resolutions of the board of trustees of the Borrower as of the Closing
Date, certified as true and correct by the secretary of the Borrower and
authorizing (i) the execution, delivery and performance of this Agreement,
the Note and any other documents relating thereto, and naming one or more
Persons who are authorized to execute this Agreement and the Notes on
behalf of, and as the act of, the Borrower and (ii) the borrowings
contemplated hereunder, certified by the secretary or an assistant
secretary of the Borrower as of the Closing Date, which certificate states
that the resolutions thereby certified have not been amended, modified,
revoked or rescinded.
(d) Organizational and Related Documents. (i) The Agent shall have
received copies of the declaration of trust, and by-laws, or other similar
governing document, of the Borrower as of the Closing Date, certified as of
the Closing Date as complete and correct copies thereof by the secretary or
an assistant secretary of the Borrower, (ii) the Agent shall have received
true and correct copies, certified as of the Closing Date as to
authenticity by the secretary or assistant secretary of Borrower, of the
Prospectus (and the Borrower shall provide a copy of such Prospectus for
delivery to the Lender), the
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Registrar, Transfer Agency and Services Agreement(s), the Custodian
Contract, the Investment Advisory Agreement(s), the Registration Statement
and the Statement of Additional Information, all of which are current, and
such other documents or instruments as may be reasonably requested by the
Agent, including, without limitation, a copy of any debt instrument,
security agreement or other material contract to which the Borrower may be
a party (except for portfolio investments).
(e) Legal Opinion. The Agent shall have received the executed legal
opinion of Chapman & Cutler, and such legal opinion shall be substantially
in the form of Exhibit E.
(f) Notes. The Agent shall have received, for the account of each
Lender, the Notes conforming to the requirements of this Agreement and
executed by a Responsible Officer of the Borrower.
(g) No Default. The Agent shall have received a certificate signed by a
Responsible Officer of the Borrower therein certifying that no Default or
Event of Default shall have occurred and be continuing as of the Closing
Date.
(h) Representations and Warranties. All representations and warranties
contained in Article IV shall be true and correct in all material respects
on the Closing Date as if made on the Closing Date.
(i) Certain Information. The Agent shall have received the most recent
list of portfolio securities for the Borrower.
(j) Factual Disclosures. The Agent shall have received such information
regarding litigation, tax, accounting, labor, insurance, pension
liabilities (actual or contingent), real estate leases, material contracts,
debt agreements, property ownership and contingent liabilities concerning
Borrower and its Subsidiaries as the Agent may request, and all of such
information shall be satisfactory to the Agent and its counsel.
(k) Capital. The Borrower shall have equity capital in a net amount
equal to at least two times the amount of the Commitment in effect on the
Closing Date.
(l) Fees. The Agent shall have received satisfactory evidence that all
fees and expenses payable by the Borrower hereunder or in connection
herewith on or prior to the Closing Date have been paid in full.
(m) Further Assurances. The Agent shall have received such additional
documents as it may reasonably request.
Section 3.02 Conditions to Each Loan. The agreement of each Lender to
make any Loan requested to be made by it on any date is subject to the
satisfaction of the following conditions precedent:
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(a) Representations and Warranties. Each of the representations and
warranties made by the Borrower in or pursuant to the Loan Documents to
which it is a party shall be true and correct in all material respects on
and as of the date of any Loan as if made on and as of the date such Loan
is made, except to the extent any such representation and warranty
expressly relates to an earlier date.
(b) No Default. No Default or Event of Default shall have occurred and
be continuing on such date or after giving effect to the Loan requested to
be made on such date.
(c) Maximum Borrowing Limitation. After giving effect to the proposed
Loan to be made, the Asset Coverage Ratio of the Borrower shall not be less
than 300% and the Borrower shall not have violated any Requirements of Law
(except such violations as could not reasonably be expected to have a
Material Adverse Effect) or exceeded the borrowing limit set forth in its
Prospectus, the Registration Statement, the Statement of Additional
Information or the 1940 Act, as the case may be.
(d) Regulation U; Forms U-1 or G-3. The Lender shall be satisfied that
the Loan and the use of proceeds thereof in respect of the Borrower comply
in all respects with Regulation U. To the extent required by Regulation U,
the Agent shall have received a copy of either (i) Form U-1 or Form G-3,
duly executed and delivered by a Responsible Officer of the Borrower and
completed for delivery to the Lender, in form acceptable to the Agent, or
(ii) a current list of "margin stock" (as defined in Regulation U) from the
Borrower, in form acceptable to the Agent and in compliance with Section
221.3(c)(2) of Regulation U.
(e) Governmental Authority Limitation. There exists no order, judgment
or decree of any court or Governmental Authority or arbitrator which
enjoins or restrains such Lender from making Loans and no law, rule or
regulation applicable to such Lender and no request or directive (whether
or not having the force of law) from any court or Governmental Authority
with jurisdiction over such Lender, which prohibits such Lender, or
requires that such Lender refrain, from making Loans.
Each borrowing by the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date of such Loan that the
conditions contained in this Section 3.02(a), (b) and (c) have been satisfied.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) Financial Condition. The audited financial statements of the
Borrower for the fiscal year end most recently ended that have heretofore
been furnished to the Lender,
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if any, present fairly the consolidated financial condition of the Borrower
as at such date. All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with the U.S.
GAAP (except as may be disclosed otherwise therein). The Borrower did not
have, at the date of the financial statements referred to above, any
material Guarantee Obligation, material contingent liability or material
liability for taxes, or any material long-term lease or forward or
long-term commitment, including, without limitation, any material interest
rate or foreign currency swap or exchange transaction, which is not
reflected in the foregoing statements or in the notes thereto and which is
material in relation to the consolidated financial condition of the
Borrower at such date.
(b) No Change. Since the later of (x) the date of the organization of
the Borrower or (y) the date of the most recent financial statements
referred to in subsection (a) above, there has been no material adverse
change in the business, condition (financial or otherwise), assets,
properties or operation of the Borrower.
(c) Existence, Compliance with Law. The Borrower (i) is duly formed,
validly existing and in good standing under the laws of the jurisdiction of
its organization, (ii) has the power and authority and the legal right to
own its property and to conduct the business in which it is currently
engaged, (iii) is duly qualified as a Massachusetts business trust and is
in good standing under the laws of each jurisdiction where its ownership of
property or the conduct of its business requires such qualification and
(iv) is in compliance with all Requirements of Law except to the extent
that the failure to comply therewith would not, in the aggregate,
reasonably be expected to have a Material Adverse Effect. The shares of the
Borrower have been duly authorized.
(d) Power; Authorization; Enforceable Obligations. The Borrower has the
power and authority, and the legal right, to make, deliver and perform the
Loan Documents to which it is a party and to borrow hereunder and has taken
all necessary action to authorize (i) the borrowings on the terms and
conditions of this Agreement and the Notes and (ii) the execution, delivery
and performance of the Loan Documents to which it is a party. No consent or
authorization of, filing with or other act by or in respect of, any
Governmental Authority or any other Person that has not been made or
obtained is required in connection with the borrowings hereunder or with
the execution, delivery or performance by the Borrower, or the validity or
enforceability against the Borrower, of this Agreement or the Notes. This
Agreement has been, and each of the Notes will be, duly executed and
delivered by the Borrower. This Agreement constitutes, and each of the
Notes when executed and delivered will constitute, a legal, valid and
binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings
in equity or at law).
(e) No Legal Bar. The execution, delivery and performance of this
Agreement and the Notes, the borrowings hereunder and the use of the
proceeds thereof by the
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Borrower will not (i) violate any Requirement of Law or Contractual
Obligation of the Borrower, (ii) result in, or require, the creation or
imposition of any Lien on any of its properties or revenues pursuant to any
such Requirement of Law or Contractual Obligation with respect to the
Borrower, (iii) require the consent of any Governmental Authority or any
other Person with respect to the Borrower or (iv) conflict with, result in
a breach of, or constitute a default under, the organizational and
constitutive documents of the Borrower.
(f) No Material Litigation. No litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened against the Borrower or against any
of its properties or revenues or by or against any "Affiliated Person" of
the Borrower, within the meaning of the 1940 Act (i) with respect to this
Agreement or the Notes or any of the transactions contemplated hereby or
thereby, or (ii) which would reasonably be expected to have a Material
Adverse Effect.
(g) Ownership of Property; Liens. The Borrower has good record and
marketable title to all its property, and none of such property is subject
to any Liens except for Permitted Liens.
(h) No Default; Burdensome Restrictions. The Borrower is not in default
under or with respect to any of its Contractual Obligations in any respect
which would reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing. No Requirement
of Law or Contractual Obligation of the Borrower would reasonably be
expected to have a Material Adverse Effect on the Borrower.
(i) Taxes. The Borrower has timely filed all material tax returns,
statements, forms and reports required to be filed by or with respect to
the income, properties or operations of the Borrower and has paid all taxes
payable by it which have become due (other than any taxes, fees or other
charges the amount or validity of which are currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with the U.S. GAAP have been provided on the books of the
Borrower). There is no material action, suit, proceeding, investigation,
audit, or claim now pending or, to the best knowledge of the Borrower,
threatened by any authority regarding any taxes relating to the Borrower.
As of the initial Borrowing Date, the Borrower has not entered into an
agreement or waiver or been requested to enter into an agreement or waiver
extending any statute of limitations relating to the payment or collection
of taxes of the Borrower, or is aware of any circumstances that would cause
the taxable years or other taxable periods of the Borrower not to be
subject to the normally applicable statute of limitations. The Borrower has
not provided, with respect to themselves or property held by them, any
consent under Section 341 of the Code. The Borrower has not incurred, or
will not incur, any material tax liability in connection with the
transactions contemplated hereby (it being understood that the
representation contained in this sentence does not cover any future tax
liabilities of the Borrower arising as a result of the operation of their
businesses in the ordinary course of business).
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(j) Regulated Investment Company. The Borrower is a "regulated
investment company" as defined in the Code.
(k) Code Compliance. The Borrower has complied with all requirements of
the Code applicable to regulated investment companies, so as to be relieved
of federal income tax on net investment income and net capital gains
distributed by it.
(l) Federal Regulations. The Borrower has and will furnish to the Agent
and each Lender statements in conformity with the requirements of FR Form
U-1 or FR Form G-3 referred to in Regulation U. The Borrower is not subject
to regulation under any Federal or State statute or regulation (other than
Regulation T, U and X of the Board of Governors of the Federal Reserve
System and the 1940 Act) which limits its ability to incur Indebtedness.
(m) ERISA. Neither the Borrower nor any Commonly Controlled Entity has
currently or has had at any time any liability or obligation under ERISA or
the Code with respect to any Plan.
(n) Subsidiaries. The Borrower has no Subsidiaries and no equity
investment or interest in any other Person (other than portfolio
investments permitted by its Investment Policies).
(o) Purpose of Loans. The proceeds of the Loans shall be used solely to
finance the purchase and holding of portfolio assets of the Borrower
consisting of Permissible Investments and for other lawful corporate
purposes in the usual and normal course of the Borrower's business.
(p) Registration of the Borrower. The Borrower is registered as a
non-diversified, closed-end management investment company under the 1940
Act.
(q) Offering in Compliance with Securities Laws. The Borrower has
issued its common shares of beneficial interests pursuant to the
Registration Statement, which was declared an effective registration
statement on Form N-2 on October 26, 1999 and such issuance materially
complied with all Federal and State securities laws applicable thereto.
(r) Investment Policies, Prospectus. The Borrower is in compliance in
all material respects with all of its Investment Policies, and is permitted
to borrow hereunder pursuant to the limits and restrictions set forth in
its Prospectus, the Registration Statement and the Statement of Additional
Information.
(s) Year 2000. The Borrower has (i) initiated a review and assessment
of all areas within its business operations (including those affected by
suppliers, vendors, customers and service providers) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by the Borrower (or suppliers, vendors and
service providers) may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan and time line for
addressing the Year 2000 Problem on a timely basis,
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and (iii) to date, implemented that plan in accordance with that timetable.
Based on the foregoing, the Borrower believes that all computer
applications (including those of its suppliers, vendors and service
providers) that are material to its business and operations are reasonably
expected on a timely basis to be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000 (that is, be "Year
2000 Compliant"), except to the extent that, in any such case, a failure to
do so would not reasonably be expected to have a Material Adverse Effect.
(t) Accuracy and Completeness of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of the Borrower
in writing to the Agent or any Lender for purposes of or in connection with
this Agreement or any transaction contemplated hereby (in each case, as
amended, superseded, supplemented or otherwise modified in good faith with
the knowledge of the Agent or such Lender) is (except for projections and
forward looking statements), and all other such factual information
hereafter furnished by or on behalf of the Borrower to the Agent or any
Lender (in each case, as amended, superseded, supplemented or otherwise
modified in good faith with the knowledge of the Agent or such Lender) will
be (except for projections and forward looking statements), true and
accurate in every material respect under the circumstances on the date as
of which such information is dated or certified, and such information is
not, or shall not be, as the case may be, incomplete by omitting to state
any material fact necessary to make such information not misleading under
the circumstances on the date as of which such information is dated or
certified.
(u) Affiliated Persons. To the best knowledge of the Borrower, the
Borrower, together with its Affiliates is not an "Affiliated Person" (as
defined in the 1940 Act) of the Agent or any Lender.
(v) Affiliations. As of the Closing Date, the common shares of the
Borrower are listed on the New York Stock Exchange.
ARTICLE V
COVENANTS OF THE BORROWER
Section 5.01 Affirmative Covenants. Until the later of the Termination
Date and the date on which no Loans shall be outstanding and all Obligations of
the Borrower shall be paid in full, the Borrower agrees to the following from
and after the Closing Date:
(a) Financial Statements. The Borrower shall furnish to the Agent:
(i) as soon as available and in any event within ninety days after
the end of each fiscal year of the Borrower, a statement of assets and
liabilities of the Borrower as at the end of such fiscal year, a
statement of operations for such fiscal year, if any, a statement of
changes in net assets for such fiscal year and the preceding fiscal
year, a portfolio of investments as at the end of such fiscal year and
the per share and other data
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for such fiscal year prepared in accordance with U.S. GAAP (as
consistently applied) and all regulatory requirements, and all
presented in a manner acceptable to the Securities and Exchange
Commission or any successor or analogous Governmental Authority by KPMG
LLP or other independent certified public accountants of recognized
standing, all audited by KPMG LLP or other independent certified public
accountants of recognized standing and accompanied by a report of such
accountants, without material qualification;
(ii) as soon as available and in any event within seventy-five
days after the close of the first six-month period of each fiscal year
of the Borrower, a statement of assets and liabilities as at the end of
such six-month period, a statement of operations for such six-month
period, a statement of changes in net assets for such six-month period
and a portfolio of investments as at the end of such six-month period,
all prepared in accordance with regulatory requirements and all
certified (subject to normal year end adjustments) as to fairness of
presentation, U.S. GAAP (as consistently applied) and consistency by a
Responsible Officer of the Borrower; and
(iii) as soon as available, but in any event not later than
fifteen days after the end of each month of each fiscal year of the
Borrower, the net asset value sheet of the Borrower as at the end of
such month, in the form and detail similar to those customarily
prepared by the Borrower's management for internal use, certified by a
Responsible Officer of the Borrower as being fairly stated in all
material respects; provided, however, that if the Borrower has Loans
outstanding, the Borrower shall provide the Agent (which may be done by
facsimile) with (x) such net asset value sheet described above in this
subsection and (y) a certificate of a Responsible Officer of the
Borrower showing in reasonable detail the calculations supporting the
Borrower's compliance with Section 5.02(a), within fifteen days after
the end of each calendar month so long as any Loans to the Borrower
remain outstanding;
all such financial statements fairly present the financial condition of the
Borrower and are complete and correct in all material respects (subject to
normal year end adjustments) and shall be prepared in reasonable detail and in
accordance with U.S. GAAP applied consistently throughout the periods reflected
therein and with prior periods (except as approved by such accountants or
officer, as the case may be, and disclosed therein).
(b) Certificates; Other Information. The Borrower shall furnish to the
Agent (with a copy to be delivered to each Lender:
(i) concurrently with the delivery of the financial statements referred
to in Section 5.01(a)(i), (ii) and (iii), a certificate of a Responsible
Officer, in substantially the form of Exhibit B hereto, stating that, to
the best of such Responsible Officer's of the Borrower knowledge, the
Borrower during such period has observed or performed all of its covenants
and other agreements, and satisfied every other condition, contained in
this Agreement and the other Loan Documents to be observed, performed or
satisfied by it, and that no Default or Event of Default has occurred and
is continuing except as specified in such certificate;
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(ii) within five Business Days after the same are mailed to, or filed
with, the Securities and Exchange Commission or any successor or analogous
Governmental Authority, copies of each Registration Statement and any
amendments thereto, each revised Prospectus or Statement of Additional
Information and the annual and semi-annual financial reports to
shareholders;
(iii) as soon as available, but in any event not later than
seventy-five days after the end of each six-month period, a certificate of
a Responsible Officer of the Borrower stating that the list of the
Borrower's portfolio securities attached to such certificate is true and
correct;
(iv) within 30 days following the end of each quarter, a list setting
forth each of the senior loan assets held by the Borrower and the value
thereof, in each case as of the last day of such quarter; and
(v) promptly, such additional financial and other information as the
Agent may from time to time reasonably request, including, but not limited
to, copies of all changes to the Prospectus and Registration Statement.
(c) Payment of Obligations. The Borrower shall pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent as the case may
be, all its material Indebtedness (except for an aggregate amount outstanding at
any one time of up to $2,000,000) of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves with respect thereto have been provided on the books of
the Borrower to the reasonable satisfaction of the Agent.
(d) Conduct of Business and Maintenance of Existence. The Borrower shall
continue to engage in its investment business in accordance with its Investment
Policies, Prospectus and the Registration Statement and preserve, renew and keep
in full force and effect its existence; take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the normal
conduct of its business except for any such rights, privileges and franchises
which the failure to maintain, individually or in the aggregate, will not have a
Material Adverse Effect; comply in all material respects with all Contractual
Obligations and Requirements of Law; maintain at all times its status as a
regulated investment company registered under the 1940 Act; and comply with all
requirements of the Code applicable to regulated investment companies, so as to
be relieved of federal income tax on net investment income and net capital gains
distributed by it.
(e) Maintenance of Insurance. The Borrower shall keep all property used and
useful and necessary in its business, if any, in good working order and
condition; maintain with financially sound and reputable insurance companies
insurance on all its property in at least such amounts and against at least such
risks as are usually insured against in the same general area by entities
engaged in the same or similar business or as may otherwise be required by the
Securities and Exchange Commission or any successor or analogous Governmental
Authority (including, without limitation, (i) fidelity bond coverage as shall be
required by Rule 17g-1 promulgated
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under the 1940 Act or any successor provision and (ii) errors and omissions
insurance); and furnish to the Agent, upon written request, full information as
to the insurance carried.
(f) Inspection of Property; Books and Records; Discussions. The Borrower
shall keep proper books of records and account in which full, true and correct
entries in conformity with U.S. GAAP and all Requirements of Law shall be made
of all dealings and transactions in relation to its business and activities; and
permit representatives of the Agent, upon prior notice to the Borrower, to visit
and inspect any of its properties (except to the extent the Borrower is
prohibited from allowing any such inspection pursuant to a written
confidentiality agreement or is otherwise prohibited pursuant to industry
standards) and examine and make abstracts from any of its books and records at
any reasonable time and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other condition of the
Borrower with officers and employees of the Borrower and with its independent
certified public accountants; provided, however, that, in the absence of any
Default or Event of Default, the Agent will be permitted to make no more than
one such inspection in any calendar year.
(g) Notices. The Borrower shall promptly give notice to the Agent of:
(i) any Responsible Officer of the Borrower becoming aware of the
occurrence of any Default or Event of Default;
(ii) any (x) default or event of default under any Contractual
Obligation of the Borrower or (y) litigation, investigation or proceeding
which may exist at any time between the Borrower or any of its Subsidiaries
and any Governmental Authority, which in either case, would reasonably be
expected to have a Material Adverse Effect;
(iii) any litigation or proceeding affecting the Borrower which would
reasonably be expected to have a Material Adverse Effect;
(iv) any material investigation or proceedings undertaken or
instituted by any Governmental Authority with respect to the Borrower or
its Subsidiaries;
(v) any material communication with respect to the Borrower made to
or received from any Governmental Authority involved with the regulation of
securities matters;
(vi) the following events, as soon as possible and in any event
within thirty days after a Responsible Officer of the Borrower obtains
knowledge thereof: (x) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan, or any withdrawal from, or the
termination, Reorganization or Insolvency of any Multiemployer Plan or (y)
the institution of proceedings or the making of any other action by the
PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer
Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan;
(vii) those time periods in which 20% or more of the assets of the
Borrower constitute "margin stock" as defined in Regulation U;
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(viii) material changes in the Borrower's Registration Statement; and
(ix) a development or event which, in the judgment of the Borrower,
could reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer of the Borrower setting forth details of the occurrence
referred to therein and stating what action the Borrower proposes to take with
respect thereto.
(h) Purpose of Loans. The Borrower shall use the proceeds of the Loans
solely to finance the purchase and holding of portfolio assets of the Borrower
consisting of Permissible Investments or other lawful corporate purpose in the
usual and normal course of the Borrower's business. Without limiting the
foregoing, the Borrower will not, directly or indirectly, use any part of such
proceeds for any purpose which would violate any provision of its Prospectus or
the Registration Statement of the Borrower or any applicable statute,
regulation, order or restrictions, including, without limitation, Regulations T,
U and X and the Borrower shall not purchase securities in connection with the
hostile acquisition of the issuer of such securities.
(i) Compliance with Requirements of Law and Regulatory Authorities. The
Borrower shall comply in all material respects with all applicable Requirements
of Law, including, without limitation, Regulations T, U and X, other applicable
regulations of the Board of Governors of the Federal Reserve System, and, so
long as registered, all rules and regulations of the New York Stock Exchange.
(j) Payment of Taxes. The Borrower will pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties would otherwise attach thereto, and all lawful claims which, if
unpaid, might become a lien or charge upon any properties of the Borrower not
otherwise permitted under this Agreement; provided that the Borrower shall not
be required to pay any such tax, assessment, charge, levy or claim which is
being contested in good faith and by proper proceedings if it has maintained
adequate reserves with respect thereto in accordance with generally accepted
accounting principles.
(k) Maintenance of Registration Statement. The Borrower will maintain the
effectiveness of the Registration Statement under all applicable Requirements of
Law.
(l) Year 2000 Compliance. The Borrower will promptly notify the Agent in
the event the Borrower discovers or determines that any computer application
(including those of its suppliers, vendors and service providers) that is
material to its or any of its Subsidiaries' business and operations will not be
Year 2000 Compliant, except to the extent that such failure could not reasonably
be expected to have a Material Adverse Effect.
Section 5.02 Negative Covenants. Until the later of the Termination
Date and the date on which no Loans shall be outstanding and all Obligations of
the Borrower shall be repaid in full, the Borrower agrees to the following, from
and after the Closing Date:
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(a) Financial Condition Covenants. The Borrower shall not permit (i) the
Asset Coverage Ratio of the Borrower (with all borrowings under this Agreement
deemed to be Senior Securities under the 1940 Act) to be less than (x) 300% for
more than four consecutive Business Days or (y) 275% at any time, or (ii) allow
borrowings of the Borrower to exceed the limits set forth in the Borrower's
Prospectus, the Statement of Additional Information, the Registration Statement
or the 1940 Act.
(b) Limitation on Indebtedness; Derivatives; and Guarantee Obligations.
(i) The Borrower shall not create, incur, assume or suffer to exist any
Indebtedness except Indebtedness of the Borrower incurred (1) under this
Agreement and the Notes, (2) in the ordinary course of business of the Borrower
so long as such Indebtedness is not for borrowed money and is in compliance with
the terms of the Borrower's Investment Policies and the 1940 Act, (3) for
temporary purposes, in an amount not exceeding five percent (5%) of the
Borrower's Total Assets at the time any such Indebtedness is incurred or (4) in
the form of reverse repurchase transactions, short sales of securities,
securities loans or other transactions entered into primarily for investment
purposes which have, or may be deemed to have, the effect of borrowing, and, in
each case, which is (x) not otherwise prohibited by law or in contravention of
the Borrower's Prospectus, the Statement of Additional Information or
Registration Statement, (y) in the ordinary course of business of the Borrower
and (z) appropriately reflected in the calculation of Asset Coverage Ratio;
provided, however, that in no event shall the Borrower be permitted to incur
Indebtedness (other than under this Agreement) which either (x) is secured by,
or encumbers (except for monies in a segregated account in connection with
hedging arrangements), assets of the Borrower, or (y) by its terms is senior or
prior in payment to the Loans or the other Obligations.
(ii) The Borrower shall not invest in, or incur Indebtedness or other
liability to any Person with respect to, any derivative instrument (including
without limitation any swap, collar, cap, puts, calls, equity derivative or
mortgage-backed or debt-backed derivative) unless each of the following is true:
(x) such derivative instrument is marked-to-market on a daily basis; (y) for
purposes of the calculation of Asset Coverage Ratio, such derivative instrument
is valued at its fair market value as of the date of such calculation, and any
liability thereunder on a marked-to-market basis is subtracted as a liability,
and (z) the purpose of the investment in such derivative instrument is to
augment capital appreciation or current income of the Borrower or for hedging
purposes and is otherwise in compliance with the Borrower's Prospectus, the
Statement of Additional Information, the Registration Statement and the 1940
Act.
(iii) The Borrower shall not create, incur, assume or suffer to exist
any Guarantee Obligations of the Borrower in an aggregate amount outstanding at
any one time of more than $2,000,000.
(c) Limitation on Liens. The Borrower shall not create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired, except for Permitted Liens.
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(d) Limitations on Fundamental Changes; Subsidiaries. The Borrower shall
not enter into any merger, consolidation or amalgamation, or liquidate, wind up
or dissolve the Borrower (or suffer any liquidation or dissolution), or convey,
sell, lease, assign, transfer or otherwise dispose of all, or substantially all,
of the property, business or assets of the Borrower in a single transaction or
in related transactions and shall not engage in any business activity except as
an investment company. The Borrower shall not establish any Subsidiaries without
the prior written consent of the Majority Lenders.
(e) Limitation on Distributions. The Borrower shall not, during the
occurrence and continuation of an Event of Default, or if a distribution would
(with the giving of notice or passage of time or both) cause the occurrence of
an Event of Default, make or effect (by means of purchase of capital stock or
otherwise) any distribution to the shareholders of the Borrower (including,
without limitation, any dividend or coupon payment or other distribution to any
holders of preferred stock of the Borrower), whether now or hereafter existing,
either directly or indirectly, whether in cash or property or in obligations of
the Borrower; provided, that distributions may be made to the extent that such
distributions are required to (i) enable the Borrower to continue to qualify as
a "regulated investment company" under Sections 851-855 of the Code and (ii)
prevent the Borrower from incurring any federal income or excise taxes as a
"regulated investment company" under Subchapter M of the Code.
(f) Limitation on Investments, Loans and Advances. The Borrower shall not
make any advance, loan, extension of credit or capital contribution to, or
purchase any stock, bonds, notes, debentures or other securities of or any
assets constituting a business unit of or make any other investment in, any
Person, except those consistent with the Borrower's Fundamental Investment
Policies and other Permissible Investments.
(g) Limitation on Transactions with Affiliates. The Borrower shall not
enter into any transaction, including, without limitation, any purchase, sale,
lease or exchange of property or the rendering of any service, with any
Affiliate unless such transaction is not otherwise prohibited under this
Agreement and such transaction is not in violation of the 1940 Act, including,
without limitation, Section 17 thereof.
(h) Limitation on Negative Pledge Clauses. The Borrower shall not enter
into with any Person any agreement, other than this Agreement or the other Loan
Documents, which prohibits or limits the ability of the Borrower to create,
incur, assume or suffer to exist any Lien upon any of its property, assets or
revenues, whether now owed or hereafter acquired.
(i) Limitation on Changes to Investment Policies. Except as may be required
by law, the Borrower shall not make any change to its Fundamental Investment
Policies without the consent of the Majority Lenders, which consent shall not be
unreasonably withheld or delayed.
(j) Change of Custodian. There will be no change of the Custodian for
Borrower unless any such successor custodian is a bank or trust company
organized under the laws of the United States or a political subdivision thereof
having assets of at least $10,000,000,000 and a long-term debt or deposit rating
of at least "A2" from Moody's Investors Service and, after giving effect to such
change, no Default or Event of Default shall have occurred and be continuing.
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ARTICLE VI
EVENTS OF DEFAULT
Section 6.01 Events of Default. If any of the following events (each,
an "Event of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan when due
in accordance with the terms hereof, or the Borrower shall fail to pay any
interest on any Loan, or any other expense, fee or other amount payable
hereunder or under any document entered in connection herewith, within
three Business Days after any such interest or other amount becomes due in
accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by the Borrower
herein or in any other Loan Document to which it is a party or which is
contained in any certificate, document or financial or other statement
furnished by or on behalf of the Borrower at any time under or in
connection with this Agreement shall prove to have been incorrect in any
material respect on or as of the date made or deemed made; or
(c) The Borrower shall default in the observance or performance of any
agreement contained in Section 5.02; or
(d) The Borrower shall default in the observance or performance of any
other agreement contained in this Agreement or the Notes (other than as
provided in paragraphs (a) through (c) of this Section), and such default
shall continue unremedied for a period of five days in the case of any such
default under Section 5.01(g)(i) or thirty days in the case of any other
such default; or
(e) The Borrower shall (i) default in (A) any payment of principal or
interest, regardless of the amount, due in respect of any single
Indebtedness (other than the Notes) and/or derivative instrument
(including, without limitation any swap, collar, cap, puts, calls, equity,
derivative or mortgage-backed or debt-backed derivative) issued under a
single indenture or other agreement, of $2,000,000 or greater, (B) any
payment of principal or interest, regardless of amount, due in respect of
Indebtedness and/or derivative instrument (including without limitation any
swap, collar, cap, puts, calls, equity, derivative or backed or debt-backed
derivative) of any individual amount but which in the aggregate exceeds
$2,000,000 or (C) the payment of any Guarantee Obligation with respect to
an amount of $2,000,000 or greater, beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness or
Guarantee Obligation was created; or (ii) default in the observance or
performance of any other agreement or condition, beyond the period of
grace, relating to any such Indebtedness and/or derivative instrument
(including without limitation any swap, collar, cap, puts, calls, equity
derivative or mortgage-backed or debt-backed derivative) or Guarantee
Obligation or contained in any instrument or agreement evidencing, securing
or relating thereto, or any other event shall occur or condition exist, the
effect of which default or other event or condition is to cause, or to
permit the holder or holders of such
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Indebtedness and/or derivative instrument (including without limitation any
swap, collar, cap, puts, calls, equity derivative or mortgage-backed or
debt-back derivative) or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity or
such Guarantee Obligation to become payable; or
(f) (i) The Borrower shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets,
or the Borrower shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Borrower any case,
proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged,
unstayed or unbonded for a period of sixty days; or (iii) there shall be
commenced against the Borrower any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in
the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within sixty days
from the entry thereof; or (iv) the Borrower shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence
in any of the acts set forth in clause (i), (ii), or (iii) above; or (v)
the Borrower shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or
(g) Either the Borrower or any Commonly Controlled Entity of the
Borrower incurs any liability to any Plan which could reasonably be
expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against the
Borrower involving in the aggregate a liability of $2,000,000 or more in
excess of any applicable insurance coverage and all such judgments or
decrees shall not have been vacated, discharged, stayed or bonded pending
appeal within thirty days from the entry thereof; or
(i) Without the prior written consent of the Majority Lenders, which
consent shall not be unreasonably withheld, Nuveen or a Person directly
controlling, controlled by, or under common control with Nuveen shall no
longer act as investment manager for or advisor to the Borrower; or
(j) The Borrower's registration under the 1940 Act shall lapse or be
suspended; or
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(k) The Borrower shall fail to comply with the 1940 Act in a manner
which could have a Material Adverse Effect; or
(l) The Borrower shall fail to comply in all material respects with
its Fundamental Investment Policies;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of subsection (f) above with respect to the Borrower,
automatically the Commitments to the Borrower shall immediately terminate and
the Loans made to the Borrower hereunder (with accrued interest thereon and all
other amounts owing by the Borrower under this Agreement and the Notes shall
immediately and automatically become due and payable, and (B) if such event is
any other Event of Default, either or all of the following actions may be taken:
(i) the Agent may, or upon the request of the Majority Lenders, the Agent shall,
by notice to the Borrower declare the Commitments to the Borrower to be
terminated forthwith, whereupon such Commitments shall immediately terminate;
(ii) the Agent may, or upon the request of the Majority Lenders, the Agent
shall, by notice of default to the Borrower, declare the Loans hereunder made
(with accrued interest thereon and all other amounts owing by the Borrower under
this Agreement and the Notes of the Borrower to be due and payable forthwith,
whereupon the same shall immediately become due and payable; and (iii) the Agent
may, or upon the request of the Majority Lenders, the Agent shall, exercise any
and all rights or other remedies available to the Lenders at law or in equity,
including without limitation, any rights and remedies available under the 1940
Act. Except as expressly provided above in this Article, presentment, demand,
protest, notice of intent to accelerate, notice of acceleration and all other
notices of any kind are hereby expressly waived.
ARTICLE VII
THE AGENT
Section 7.01 Appointment. Each Lender hereby irrevocably designates
and appoints the Agent to take such action on its behalf under the provisions of
this Agreement, the Notes and the Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement, the Notes and the other Loan Documents, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere or in this Agreement, the Agent shall not have any duties
or responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent in
such capacity.
Section 7.02 Delegation of Duties. The Agent may execute any of its
duties under this Agreement or any other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible to any
Lender for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
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Section 7.03 Exculpatory Provisions. None of the Agent-Related Persons
shall be (i) liable to any Lender for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for it or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any Lender for any
recitals, statements, representations or warranties made by the Borrower or any
officer thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness (other than its
own due execution), genuineness, enforceability or sufficiency of this Agreement
or the Notes or for any failure of the Borrower to perform its obligations
hereunder or thereunder. The Agent-Related Persons shall be under no obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the properties, books or records of the
Borrower.
Section 7.04 Reliance by Agent. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, or
telecopy message, statement, order or other document or conversation believed in
good faith by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower), independent
accountants and other experts selected by such Agent. The Agent may deem and
treat the payee of the Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Agent. The Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any other Loan Document unless it
shall first receive such advice or concurrence of the Majority Lenders as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement and the Note in accordance with a request of the Majority Lenders, and
such request and any action taken or failure to act pursuant thereto shall be
binding upon the Lenders, and all future holders of the Note.
Section 7.05 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". The Agent will notify the
Lenders as soon as is reasonably practicable of its receipt of any such notice.
The Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Majority Lenders; provided, that
unless and until the Agent shall have received such direction, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interest of the Lenders.
Section 7.06 Credit Decisions. Each Lender expressly acknowledges that
none of the Agent-Related Persons has made any representations or warranties to
it and that no act by the
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Agent hereinafter taken, including any review of the affairs of the Borrower,
shall be deemed to constitute any representation or warranty by any
Agent-Related Person to such Lender. Each Lender represents to the Agent that it
has, independently and without reliance upon the Agent, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, operations, property, financial and
other condition and creditworthiness of the Borrower and made its own decision
to make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the Agent, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the Note, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide the Lenders with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Agent or any of its Agent-Related Persons.
Section 7.07 Indemnification. The Lenders agree to indemnify the Agent
in its capacity as such (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according to
the respective amounts of their Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs (including, without limitation, the allocated cost of internal counsel),
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Agent in any way relating to
or arising out of this Agreement, the Notes or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
or any action taken or omitted by such Agent or any of them under or in
connection with any of the foregoing; provided that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of the Agent resulting solely from the Agent's gross negligence or willful
misconduct. The agreements in this subsection shall survive the payment of the
Notes and all other amounts payable hereunder.
Section 7.08 Agent in its Individual Capacity. The Agent and its
Agent-Related Persons may make loans to, accept deposits from and generally
engage in any kind of business with the Borrower as though the Agent and its
Agent-Related Persons were not an Agent hereunder and under the Note. With
respect to the Loans made or renewed by the Agent and the Note issued to the
Agent, the Agent shall have the same rights and powers under this Agreement and
the Note as the Lenders and may exercise the same as though it were not an Agent
and the term "Lender" shall include the Agent in its individual capacity.
Section 7.09 Successor Agent. The Agent may resign its capacity as an
Agent upon thirty days' notice to the Lenders and the appointment of a successor
Agent. If the Agent shall resign as an Agent under this Agreement and the Note,
then the Majority Lenders (with, unless an Even of Default shall have occurred
and be continuing, the prior written consent of the Borrower,
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which consent shall not be unreasonably withheld) shall appoint a successor
agent for the Lenders. If no successor Agent shall have been so appointed within
thirty days of the retiring Agent's giving of notice of resignation, then such
retiring Agent may appoint a successor Agent which shall be a commercial bank
organized under the laws of the United States of America or any State thereof
and having a combined capital and surplus of at least $100 million. Any
successor agent shall succeed to the rights, powers and duties of such retiring
Agent and the term "Agent" shall mean such successor agent effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent or any of the parties to this Agreement or any holder of the Note. After
the retiring Agent's resignation as an Agent, the provisions of this subsection
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was an Agent under this Agreement and the Note.
ARTICLE VIII
INDEMNIFICATION
Section 8.01 Indemnities by the Borrower. Without limiting any other
rights which each Lender or the Agent or any Affiliate of any thereof, as well
as their respective directors, officers, employees and agents (each, an
"Indemnified Party") may have hereunder or under applicable law, the Borrower
hereby agrees to indemnify each Indemnified Party from and against any and all
claims, losses and liabilities (including reasonable attorneys' fees), other
than any present or future income, franchise or similar taxes, now or hereafter
imposed, levied, collected, withheld or assessed (all of the foregoing
non-excluded items being collectively referred to as "Indemnified Amounts"),
arising out of or resulting from (but excluding, in any event, Indemnified
Amounts to the extent resulting from gross negligence, willful misconduct or bad
faith on the part of such Indemnified Party):
(i) reliance on any representation or warranty or statement made
or deemed made by the Borrower (or any of its officers) under or in
connection with any Loan Document to which the Borrower is a party
which shall have been incorrect in any material respect when made;
(ii) the execution, delivery, performance, and enforcement of
this Agreement.
(iii) any failure of the Borrower to perform its duties or
obligations in accordance with the provisions of this Agreement;
(iv) any investigation, litigation or proceeding related to this
Agreement, the Borrower or the use of proceeds of Loans; or
(v) the use by the Borrower of the proceeds of the Loans.
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ARTICLE IX
MISCELLANEOUS
Section 9.01 Amendments and Waivers. Neither this Agreement, any Note,
nor any terms hereof or thereof may be amended, supplemented or modified except
in accordance with the provisions of this subsection. With the written consent
of the Majority Lenders, the Agent and the Borrower may, from time to time,
enter into written amendments, supplements or modifications hereto and to the
Notes for the purpose of adding any provisions to this Agreement or the Notes or
changing in any manner the rights of the Lenders or the Borrower hereunder or
thereunder or waiving, on such terms and conditions as the Agent may specify in
such instrument, any of the requirements of this Agreement or the Notes or any
Default or Event of Default and its consequences; provided, however, that no
such waiver and no such amendment, supplement or modification shall (a) forgive
or reduce the amount or extend the maturity of any Note, or reduce the rate or
extend the time of payment of interest thereon, or forgive or reduce, or extend
the date of payment of, any fee payable to any Lender hereunder, or change the
amount of any Lender's Commitment, in each case without the written consent of
the Lender affected thereby, or (b) reduce the minimum Asset Coverage Ratio as
required by Section 5.02(a), or (c) amend, modify or waive any provision of this
subsection or reduce the percentage specified in the definition of Majority
Lenders, or consent to the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement and the Notes, in each case without
the written consent of all the Lenders, or amend, modify or waive any provision
of Section 7 without the written consent of the Agent. Any such waiver and any
such amendment, supplement or modification shall apply equally to each of the
Lenders and shall be binding upon the Borrower, the Lenders, the Agent and all
future holders of the Notes. In the case of any waiver, the Borrower, the
Lenders and the Agent shall be restored to their former position and rights
hereunder and under the outstanding Notes, and any Default or Event of Default
waived shall be deemed to be cured and not continuing, but no such waiver shall
extend to any subsequent or other Default or Event of Default, or impair any
right consequent thereon.
Section 9.02 Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including telecopier) and mailed, telecopied, delivered by nationally
recognized overnight courier or hand delivered, if to the Borrower, the Lenders
or the Agent, at its address set forth under its name on the signature pages
hereof, or at such other address as shall be designated by such Person to each
other party hereto in a written notice. All such notices and communications
shall, when mailed or delivered, be effective when deposited in the mails,
delivered to the courier or hand delivered, respectively, and, when telecopied,
be effective upon receipt of confirmation that telecopy has been received,
except that notices and communications to the Agent or the Lenders pursuant to
Article II shall not be effective in any case until received by such Person.
Section 9.03 No Waiver; Cumulative Remedies. No failure on the part of
the Agent or any Lender to exercise, and no delay in exercising, any right under
any Loan Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
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Section 9.04 Binding Effect; Successors and Assigns; Participations.
(a) This Agreement shall become effective when it shall have been executed by
the Borrower, the Lenders and the Agent. From and after the date this Agreement
shall have so become effective, this Agreement shall be binding upon and inure
to the benefit of the Borrower, the Lenders and the Agent and their respective
successors and assigns; provided that the Borrower shall not be permitted to
assign its rights hereunder or interest herein to any Person without the prior
written consent of the Agent and each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any Loan
owing to such Lender, any Note held by such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder and under the Notes. In
the event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any such Note for all purposes under this Agreement and the Notes and the
Borrower and each Agent shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and the other Loan Documents. The Borrower agrees that if amounts
outstanding under this Agreement and the Notes are due or unpaid, or shall have
been declared or shall have become due and payable upon the occurrence of an
Event of Default, to the extent permitted by law, each Participant shall be
deemed to have the right of setoff in respect of its participating interest in
amounts owing under this Agreement and any Note to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement or any Note, provided that such Participant shall only be
entitled to such right of setoff if it shall have agreed in the agreement
pursuant to which it shall have acquired its participating interest to share
with the Lenders the proceeds thereof as provided in Section 9.10. The Borrower
also agrees that to the extent permitted by law each Participant shall be
entitled to the benefits of Sections 2.14, 2.15, 2.17 and 9.06 with respect to
its participation in the Commitments and the Loans outstanding from time to
time; provided, that no Participant shall be entitled to receive any greater
amount pursuant to such Sections than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred by
such transferor Lender to such Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to any
Affiliate of such Lender or to any Lender or any affiliate thereof, and, with
the consent of the Borrower and the Administrative Agent (which in each case
shall not be unreasonably withheld), to one or more additional banks or
financial institutions ("Purchasing Lenders") all or any part of its rights and
obligations under this Agreement and the Notes pursuant to an Assignment
Agreement, substantially in the form of Exhibit D (an "Assignment Agreement"),
executed by such Purchasing Lender, such transferor Lender (and, in the case of
a Purchasing Lender that is not then a Lender or an affiliate thereof, by the
Borrower and the Administrative Agent) and delivered to the Administrative Agent
for its acceptance and for recording in the Register. Upon such execution,
delivery, acceptance and recording, from and after the effective date of such
assignment determined pursuant to such Assignment Agreement, (x) the Purchasing
Lender thereunder shall be a party hereto and, to the
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extent provided in such Assignment Agreement, have the rights and obligations of
a Lender hereunder with a Commitment as set forth therein, and (y) the
transferor Lender thereunder shall, to the extent provided in such Assignment
Agreement, be released from its obligations (other than obligations, if any,
relating to confidentiality) under this Agreement (and, in the case of a
Assignment Agreement covering all or the remaining portion of a transferor
Lender's rights and obligations under this Agreement, such transferor Lender
shall cease to be a party hereto). Such Assignment Agreement shall be deemed to
amend this Agreement to the extent, and only to the extent, necessary to reflect
the addition of such Purchasing Lender and the resulting adjustment of
Commitment Percentages arising from the purchase by such Purchasing Lender of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement and the Notes. On or prior to the effective date of such
Assignment Agreement, the Borrower, at its own expense, shall execute and
deliver to the Agent in exchange for the surrendered Note a new Note to the
order of such Purchasing Lender in an amount equal to the Commitment assumed by
it pursuant to such Assignment Agreement and, if the transferor Lender has
retained a Commitment hereunder, new Notes to the order of the transferor Lender
in an amount equal to the Commitment retained by it hereunder. Such new Notes
shall be dated the Closing Date and shall otherwise be in the form of the Notes
replaced thereby. The Notes surrendered by the transferor Lender shall be
returned by the Agent to such Borrower marked "canceled."
(d) The Agent shall maintain, a copy of each Assignment Agreement
delivered to it and a register (the "Register") for the recordation of the names
and addresses of the Lenders and the Commitment of, and principal amount of the
Revolving Loans owing to, each Lender from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Agent and the Lenders may treat each Person whose name is recorded
in the Register as the owner of the Loans recorded therein for all purposes of
this Agreement. The Register shall be available for inspection by the Borrower
and each Lender at any reasonable time and from time to time upon reasonable
prior notice.
(e) Upon its receipt of an Assignment Agreement executed by a
transferor Lender and Purchasing Lender (and, in the case of a Purchasing Lender
that is not then a Lender or an affiliate thereof, by the Borrower and the
Administrative Agent) together with payment to the Agent by the transferor
Lender (or, if so agreed by it, the Purchasing Lender) of a registration and
processing fee of $3,500, the Agent shall (i) promptly accept such Assignment
Agreement and (ii) on the effective date determined pursuant thereto record the
information contained therein in the Register and give notice of such acceptance
and recordation to the Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to any Participant
or Purchasing Lender (each, a "Transferee") and any prospective Transferee any
and all financial information in such Lender's possession concerning the
Borrower and its affiliates which has been delivered to such Lender by or on
behalf of the Borrower pursuant to this Agreement or which has been delivered to
such Lender by or on behalf of the Borrower in connection with such Lender's
credit evaluation of the Borrower prior to becoming a party to this Agreement;
provided that such Transferee or prospective Transferee agrees, prior to
receiving any financial information to maintain the confidentiality of such
information in accordance with Section 9.14.
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(g) If, pursuant to this subsection any interest in this Agreement or
any Note is transferred to any Transferee which is organized under the laws of
any jurisdiction other than the United States or any state thereof, the
transferor Lender shall cause such Transferee, concurrently with the
effectiveness of such transfer, (i) to represent to the transferor Lender (for
the benefit of the transferor Lender, the Agent and the Borrower) that under
applicable law and treaties no taxes will be required to be withheld by the
Agent, the Borrower or the transferor Lender with respect to any payments to be
made to such Transferee in respect of the Loans, (ii) to furnish to the
transferor Lender (and, in the case of any Purchasing Lender registered in the
Register, the Agent and the Borrower) either U.S. Internal Revenue Service Form
W-8BEN or W-8ECI (wherein such Transferee claims entitlement to complete
exemption from U.S. federal withholding tax on all interest payments hereunder)
and (iii) to agree (for the benefit of the transferor Lender, the Agent and the
Borrower) to provide the transferor Lender (and, in the case of any Purchasing
Lender registered in the Register, the Agent and the Borrower) a new Form W-8BEN
or W-8ECI upon the expiration or obsolescence of any previously delivered form
and comparable statements in accordance with applicable U.S. laws and
regulations and amendments duly executed and completed by such Transferee and to
comply from time to time with all applicable U.S. laws and regulations with
regard to such withholding tax exemption.
(h) Nothing set forth herein shall prohibit any Lender from pledging
or assigning any Note and its rights hereunder to any lender affiliated with the
Federal Reserve System in accordance with applicable law and the regulations of
the Board of Governors of the Federal Reserve System.
(i) The minimum amount that may be assigned or participated by any
Lender pursuant to this Section 9.04 is the lesser of (x) $5,000,000 and (y) all
of such Lender's rights and obligations under this Agreement and the Notes.
Section 9.05 Governing Law. This Agreement and the Note shall be
governed by, and construed in accordance with, the laws of the State of New
York.
Section 9.06 Costs and Expenses. Whether or not the transactions
contemplated hereby are consummated, in addition to the rights of
indemnification granted to the Indemnified Parties under Article VIII hereof,
the Borrower agrees to pay on demand all reasonable costs and expenses
(excluding any present or future taxes, now or hereafter imposed, levied,
collected, withheld or assessed) in connection with the preparation, execution,
delivery, modification, amendment, administration and monitoring of the Loan
Documents and the other documents to be delivered thereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Agent, and of local counsel who may be retained by the Agent, with respect
thereto and with respect to advising the Lenders and the Agent as to their
rights and remedies under the Loan Documents. The Borrower further agrees to pay
on demand all costs and expenses of the Agent and the Lenders, if any
(including, without limitation, reasonable fees and expenses of counsel to the
Agent and of counsel to the several Lenders), in connection with the enforcement
(whether through negotiations, workout, legal proceedings or otherwise) of, or
preservation of rights under, the Loan Documents and the other documents to be
delivered thereunder, including, without limitation, reasonable counsel fees and
expenses in connection with the enforcement of rights under this Section 9.06.
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Section 9.07 Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
Section 9.08 Waiver of Jury Trial. THE BORROWER, EACH LENDER AND THE
AGENT EACH AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including without limitation, contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims. The Borrower, each Lender
and the Agent each acknowledges that this waiver is a material inducement for
such party to enter into a business relationship, that the Borrower, each Lender
and the Agent have already relied on the waiver in entering into this Agreement
and that each will continue to rely on the waiver in their related future
dealings. The Borrower, each Lender and the Agent further warrant and represent
that each has reviewed this waiver with its legal counsel, and that each
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
Section 9.09 Jurisdiction; Consent to Service of Process. (a) The
Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the non-exclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City; and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition of
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that any
Lender or the Agent may otherwise have to bring any action or proceeding
relating to this Agreement or the other Loan Documents against the Borrower or
its properties in the courts of any jurisdiction.
(b) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or the other Loan Documents in any New York
State or Federal court sitting in New York City. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
Section 9.10 Adjustments; Set-off. (a) If any Lender (a "benefited
Lender") shall at any time receive any payment of a or part of its Loans, or
interest thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off or otherwise), in a greater proportion
than any such payment to or collateral received by any other Lender, if any, in
44
<PAGE> 49
respect of such other Lender's Loans, or interest thereon, such benefited Lender
shall purchase for cash from the other Lenders such portion of each such other
Lender's Loans, or shall provide such other Lenders with the benefits of any
such collateral or the proceeds thereof, as shall be necessary to cause such
benefited Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders; provided, however, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
benefited Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. The
Borrower agrees that each Lender so purchasing a portion of another Lender's
Loan may exercise all rights of payment (including, without limitation, rights
of set-off) with respect to such portion as fully as if such Lender were the
direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, exercisable following the acceleration of
the obligations of the Borrower owing in connection with this Agreement, without
prior notice to the Borrower, any such notice being expressly waived by the
Borrower to the extent permitted by applicable law, to set-off and appropriate
and apply against any such obligations any and all deposits (general or special,
time or demand, provisional or final), in any currency, and any other credits,
Indebtedness or claims, in any currency, in each case whether direct or indirect
absolute or contingent, matured or unmatured, at any time held or owing by such
Lender or any branch or agency thereof to or for the credit or the account of
the Borrower. Each Lender agrees promptly to notify the Borrower and each Agent
after any such set-off and application made by such Lender, provided that the
failure to give such notice shall not affect the validity of such set-off and
application.
Section 9.11 Survival. The Borrower's obligations pursuant to Sections
2.14, 2.15, 2.17, 8.01 and 9.06 shall survive the repayment of the Loans and the
termination of the Commitment.
Section 9.12 Entire Agreement. This Agreement, together with the other
Loan Documents, constitute the entire understanding among the parties hereto
with respect to the subject matter hereof and supersede any prior agreements,
written or oral, with respect thereto.
Section 9.13 Severability of Provisions. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 9.14 Confidentiality. The Agent and each Lender agrees to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its and its Affiliates' directors, officers,
employees and agents, including without limitation accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and will
have agreed to keep such Information confidential), (b) to the extent required
by any legal or regulatory authority, (c) to the extent required by applicable
laws or regulations or by any subpoena or similar legal process, (d) to any
other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or the enforcement of rights hereunder, provided, however, that such Information
may
45
<PAGE> 50
only be disclosed to the extent necessary and material to the prosecution or
defense of such suit, action or proceeding for the enforcement of rights
hereunder, (f) subject to an agreement containing provisions substantially the
same as those of this subsection, to any assignee of or participant in, or any
prospective assignee of or participant in, any of its rights under this
Agreement, (g) with the consent of the Borrower, (h) to the extent such
Information becomes (i) publicly available other than as a result of a breach of
this Section 9.14, or (ii) becomes available to the Agent or any Lender on a
nonconfidential basis from a source other than the Borrower, the Agent, or any
Lender. For purposes of this Section, "Information" means all information
received from the Borrower relating to the Borrower or its business, other than
any such information that is available to any Agent or any Lender on a
nonconfidential basis prior to disclosure by the Borrower.
Section 9.15 Disclaimer. None of the shareholders, trustees, officers,
employees and other agents of the Borrower shall be personally bound by or
liable for any indebtedness, liability or obligation hereunder or under the
Notes, nor shall resort be had to their personal property for the satisfaction
of any obligation or claim hereunder or in connection with any Loan Document.
46
<PAGE> 51
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
NUVEEN SENIOR INCOME FUND,
as Borrower
By_________________________________
Name:
Title:
Attention: Jeffrey W. Maillet
Telephone No.: (312) 917-7927
Telecopier No.: (312) 917-8347
DEUTSCHE BANK, AG, NEW YORK BRANCH,
as Lender
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
31 West 52nd Street
New York, New York 10019
Attention: Lynn Sweeney
Telephone No.: (212) 469-4098
Telecopier No.: (212) 469-4138
47
<PAGE> 52
DEUTSCHE BANK AG, NEW YORK BRANCH,
as Agent
By_________________________________
Name:
Title:
By_________________________________
Name:
Title:
31 West 52nd Street
New York, New York 10019
Attention: Lynn Sweeney
Telephone No.: (212) 469-4098
Telecopier No.: (212) 469-4138
48
<PAGE> 53
EXHIBIT A
FORM OF REVOLVING LOAN NOTE
U.S. $________________ Dated: December ___, 1999
FOR VALUE RECEIVED, the undersigned, NUVEEN SENIOR INCOME FUND, a
Massachusetts business trust (the "Borrower"), hereby promises to pay to the
order of _________________________ (the "Lender"), for the Lender's account the
amount first stated above or, if less, the aggregate unpaid principal amount of
all Loans (as defined below) made by the Lender to the Borrower pursuant to the
Credit Agreement (as defined below) on the Termination Date (as defined in the
Credit Agreement).
The Borrower promises to pay interest on the unpaid principal amount
of the Loans from the date of the initial Loan until such principal amount is
paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Deutsche Bank AG, New York Branch, as Agent, at 31 West
52nd Street, New York, New York, 10019 in immediately available funds.
The holder of this Note is authorized to record the date and amount of each
Revolving Loan made pursuant to subsection 2.01 of the Credit Agreement, its
character as a Base Rate Loan or Eurodollar Loan, the date and amount of each
payment or prepayment of principal with respect thereto, the length of each
Interest Period with respect to the portion of such Revolving Loan made and/or
maintained as a Eurodollar Loan, the Eurodollar Rate with respect thereto and
each conversion made pursuant to subsection 2.06 of the Credit Agreement, on the
schedules annexed hereto and made a part hereof, or on a continuation thereof
which shall be attached hereto and made a part hereof, which recordation shall
constitute prima facie evidence of the accuracy of the information so recorded;
provided that failure by the Lender to make any such recordation on this Note
shall not affect the obligations of the Borrower under this Note or under the
Credit Agreement.
This Note is the Note referred to in, and is entitled to the benefits
of, the Credit Agreement dated as of December 14, 1999 (the "Credit Agreement";
the terms defined therein and not otherwise defined herein are being used herein
as therein defined) among the Borrower, the banks and other financial
institutions parties thereto and Deutsche Bank AG, New York Branch, as Agent.
The Credit Agreement, among other things, (i) provides for the making of Loans
(the "Loans") by the Lender to the Borrower in an amount not to exceed the U.S.
dollar amount first above mentioned, the indebtedness of the Borrower resulting
from such Loans being evidenced by this Note, and (ii) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
(including, without limitation, the failure of the Borrower
49
<PAGE> 54
to pay when due the obligations of the Borrower) and also for prepayments of
principal of the Loans prior to the maturity hereof upon the terms and
conditions therein specified.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
The Borrower promises to pay all costs and expenses, including
reasonable attorney's fees, all as provided in subsection 9.06 of the Credit
Agreement, incurred in the collection and enforcement of this Note. The Borrower
and endorsers of this Note consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind.
NUVEEN SENIOR INCOME FUND
By_________________________________
Name:
Title:
50
<PAGE> 55
SCHEDULE A
to Form of Revolving Loan Note
LOANS, CONVERSIONS AND
PAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
Amount of Amount of
Base Rate Eurodollar
Loans Interest Period Loans Unpaid
Converted and Eurodollar Converted Principal
into Rate with into Balance of
Amount Eurodollar Respect Base Rate Eurodollar Notation
Date of Loan Loans Thereto Loans Loans Made by
- ---- ------- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
- --------- --------- ----------- --------------- ----------- ---------- --------
- --------- --------- ----------- --------------- ----------- ---------- --------
- --------- --------- ----------- --------------- ----------- ---------- --------
- --------- --------- ----------- --------------- ----------- ---------- --------
- --------- --------- ----------- --------------- ----------- ---------- --------
- --------- --------- ----------- --------------- ----------- ---------- --------
- --------- --------- ----------- --------------- ----------- ---------- --------
- --------- --------- ----------- --------------- ----------- ---------- --------
- --------- --------- ----------- --------------- ----------- ---------- --------
- --------- --------- ----------- --------------- ----------- ---------- --------
- --------- --------- ----------- --------------- ----------- ---------- --------
- --------- --------- ----------- --------------- ----------- ---------- --------
- --------- --------- ----------- --------------- ----------- ---------- --------
- --------- --------- ----------- --------------- ----------- ---------- --------
- --------- --------- ----------- --------------- ----------- ---------- --------
- --------- --------- ----------- --------------- ----------- ---------- --------
- --------- --------- ----------- --------------- ----------- ---------- --------
</TABLE>
<PAGE> 56
EXHIBIT B
FORM OF BORROWER CERTIFICATE
To: Deutsche Bank AG, New York Branch as
Agent under the Credit Agreement referred
to below.
Reference is hereby made to the Credit Agreement (as in effect on the date
of this certificate, the "Credit Agreement"), dated as of December 14, 1999, by
and among Nuveen Senior Income Fund, as Borrower, the banks and other financial
institutions from time to time parties thereto (each a "Lender" and
collectively, the "Lenders") and Deutsche Bank AG, New York Branch as Agent.
Capitalized terms used herein and not defined herein shall have the meanings
provided therefor in the Credit Agreement.
Pursuant to Section [5.01(a)(i)][5.01(a)(ii)][5.01(a)(iii)][5.01(b)(iii)]of
the Credit Agreement, we are delivering to you on the date hereof our [annual]
[semi-annual] [monthly] [financial statements] [semi-annual report] for the
fiscal [year] [six month period] [quarter] [month] ended _______ __, ____ (such
period, the "Fiscal Period").
As required by Section 5.01(b)(i) of the Credit Agreement, the undersigned,
as a Responsible Officer of the Borrower, hereby certifies that to the best of
such Responsible Officer's knowledge:
1. As of the date hereof, [no Default or Event of Default has occurred or
is continuing] [the following Default or Event of Default exists and set forth
below with respect to each such Default a description of the details thereof and
what action the Borrower proposes to take in respect thereof.]
2. During the Fiscal Period, the Borrower has observed or performed all of
its covenants and other agreements, and satisfied every other condition
contained in the Credit Agreement and the other Loan Documents to be observed,
performed or satisfied by it.
[ADD ADDITIONAL INFORMATION AS TO DEFAULTS, IF ANY]
<PAGE> 57
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
executed as of the ___ day of _______, ____.
NUVEEN SENIOR INCOME FUND
By:___________________________________
Name:
Title:
<PAGE> 58
EXHIBIT C
FORM OF BORROWING REQUEST
Deutsche Bank AG,
New York Branch
31 West 52nd Street
New York, NY 10019
Attention: _____________
Re: Nuveen Senior Income Fund
Ladies and Gentlemen:
This Borrowing Request is delivered to you pursuant to Section 2.03 of
the Credit Agreement, dated as of December 14, 1999 (together with all
amendments, if any, from time to time made thereto, the "Credit Agreement"),
among NUVEEN SENIOR INCOME FUND, a Massachusetts business trust (the
"Borrower"), the banks and other financial institutions from time to time
parties thereto (each a lender and collectively, the "Lenders"), and Deutsche
Bank AG, New York Branch, as administrative agent (in such capacity, the
"Agent"). All capitalized terms used but not defined herein shall have the
meanings set forth in the Credit Agreement.
Pursuant to Section 2.03 of the Credit Agreement, the undersigned
hereby gives you irrevocable notice that the undersigned hereby requests a Loan
under the Credit Agreement, and in that connection sets forth below the
information relating to such Loan (the "Proposed Loan") as required by Section
2.03 of the Credit Agreement:
(i) The aggregate principal amount of the Proposed Loan is $______.(1)
(ii) The Proposed Loan is to be a [Eurodollar Loan][Base Rate Loan].
(iii) The [Working Day/ Business Day](2) of the Proposed Loan is
[Date].(3)
- ------------------------
(1) The desired amount must be at least $5,000,000 and must be in integral
multiples of $1,000,000.
(2) The Borrower may borrow under the Commitments during the Commitment Period
on any Working Day if the borrowing is a Eurodollar Loan or on any Business
Day if the borrowing is a Base Rate Loan.
(3) A written request for a Loan in the form of this Exhibit C shall be
received by the Agent no later than 12:00 P.M., New York Time, (a) three
Working Days prior to the requested Borrowing Date, if all or any part of
any such requested Revolving Loans are to be initially Eurodollar Loans or
(b) one Business Day prior to the requested Borrowing Date in all other
cases.
<PAGE> 59
(iii) The Interest Period for the Proposed Loan is _________.
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed Loan:
A. the representations and warranties contained in Article IV of the
Credit Agreement and in the Loan Documents are and will be true and correct in
all material respects, both before and after giving effect to the Proposed Loan
and to the application of the proceeds thereof, as though made on such date,
unless stated to relate to a specific earlier date, in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date;
B. no Default or Event of Default has occurred and is continuing, or
would result from such Proposed Loan or from the application of the proceeds
thereof; and
C. after giving effect to the Loan, the Asset Coverage Ratio of the
Borrower shall not be less than 300% and the Borrower shall not have violated
any Requirements of Law (except such violations as could not reasonably be
expected to have a Material Adverse Effect) or exceeded the borrowing limit set
forth in the Prospectus, the Registration Statement, the Statement of Additional
Information or the 1940 Act, as the case may be.
The undersigned hereby acknowledges that, pursuant to Section 2.03 of
the Credit Agreement, each of the delivery of this Borrowing Request and the
acceptance by the undersigned of the proceeds of the Loans requested hereby
constitute a representation and warranty by the undersigned that, on the date of
such Loan, and before and after giving effect thereto and to the application of
the proceeds therefrom, all applicable conditions contained in Article III of
the Credit Agreement shall, both before and after giving effect to the Proposed
Loan, have been satisfied.
The undersigned agrees that if, prior to the time of the Proposed
Loan, any matter certified to herein by it will not be true and correct at such
time as if then made, it will immediately so notify the Agent. Unless the Agent
shall have received written notice to the contrary from the undersigned prior to
the time of the Proposed Loan, each matter certified to herein shall be deemed
once again to be certified as true and correct at the date of the Proposed Loan
as if then made.
NUVEEN SENIOR INCOME FUND
By:___________________________________
Name:
Title:
<PAGE> 60
EXHIBIT D
FORM OF ASSIGNMENT AGREEMENT
ASSIGNMENT AGREEMENT, dated as of the date set forth in Item I of Schedule
I hereto, among the Transferor Lender set forth in Item 2 of Schedule I hereto
(the "Transferor Lender"), each Purchasing Lender set forth in Item 3 of
Schedule I hereto (each, a "Purchasing Lender") and Deutsche Bank AG, New York
Branch, as Agent.
WITNESSETH:
WHEREAS, this Assignment Agreement is being executed and delivered in
accordance with subsection 9.04 of the Credit Agreement dated as of December 14,
1999 among Nuveen Senior Income Fund, a Massachusetts business trust (the
"Borrower"), the Transferor Lender, the other Lenders and the Agent (as from
time to time amended, supplemented or otherwise modified in accordance with the
terms thereof, the "Credit Agreement": terms defined therein being used herein
as therein defined);
WHEREAS, each Purchasing Lender (if it is not already a Lender party to the
Credit Agreement) wishes to become a Lender party to the Credit Agreement; and
WHEREAS, the Transferor Lender is selling and assigning to each Purchasing
Lender, rights, obligations and commitments under the Credit Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Upon receipt by the Agent of five (5) counterparts of this Assignment
Agreement, to each of which is attached a fully completed Schedule I and
Schedule II, and each of which has been executed by the Transferor Lender, each
Purchasing Lender (and any other person required by the Credit Agreement to
execute this Assignment Agreement), the Agent will transmit to the Borrower, the
Transferor Lender and each Purchasing Lender an Assignment Effective Notice,
substantially in the form of Schedule III to this Assignment Agreement (an
"Assignment Effective Notice"). Such Assignment Effective Notice shall set
forth, inter alia, the date on which the assignment effected by this Assignment
Agreement shall become effective (the "Assignment Effective Dates"), which date
shall be the fifth Business Day following the date of such Assignment Effective
Notice. From and after the Assignment Effective Date each Purchasing Lender
shall be a Lender party to the Credit Agreement for all purposes thereof.
2. At or before 12:00 Noon, local time of the Tranferor Lender, on the
Assignment Effective Date, each Purchasing Lender shall pay to the Transferor
Lender, in immediately available funds, an amount equal to the purchase price,
as agreed between the Transferor Lender and such Purchasing Lender (the
"Purchase Price"), of the portion being purchased by such Purchasing Lender
(such Purchasing Lender's "Purchased Percentage") of the outstanding
<PAGE> 61
Revolving Loans and other amounts owing to the Transferor Lender under the
Credit Agreement and the Transferor Lender's Revolving Notes. Effective upon
receipt by the Transferor Lender of the Purchase Price from a Purchasing Lender,
the Transferor Lender hereby irrevocably sells, assigns and transfers to such
Purchasing Lender, without recourse, representation or warranty, and each
Purchasing Lender hereby irrevocably purchases, takes and assumes from the
Transferor Lender, such Purchasing Lenders Purchased Percentage of the
Commitments and the presently outstanding Revolving Loans and other amounts
owing to the Transferor Lender's under the Credit Agreement and the Transferor
Lender's Revolving Notes together with all instruments, documents and collateral
security, if any, pertaining thereto.
3. The Transferor Lender has made arrangements with each Purchasing Lender
with respect to (i) the portion, if any, to be paid, and the date or dates for
payment, by the Transferor Lender to such Purchasing Lender of any fees
heretofore received by the Transferor Lender pursuant to the Credit Agreement
prior to the Assignment Effective Date and (ii) the portion, if any, to be paid,
and the date or dates for payment, by such Purchasing Lender to the Transferor
Lender of fees or interest received by such Purchasing Lender pursuant to the
Credit Agreement from and after the Assignment Effective Date.
4. (a) All principal payments to be made with respect to the Revolving
Loans that would otherwise be payable from and after the Assignment Effective
Date to or for the account of the Transferor Lender pursuant to the Credit
Agreement and the Revolving Notes shall, instead, be payable to or for the
account of the Transferor Lender and the Purchasing Lenders, as the case may be,
in accordance with their respective interests as reflected in this Assignment
Agreement.
(b) All interest, fees and other amounts that would otherwise accrue for
the account of the Transferor Lender from and after the Assignment Effective
Date pursuant to the Credit Agreement and the Notes shall, instead, accrue for
the account of, and be payable to, the Transferor Lender and the Purchasing
Lenders, as the case may be, in accordance with their respective interests as
reflected in this Assignment Agreement. In the event that any amount of
interest, fees or other amounts accruing prior to the Assignment Effective Date
was included in the Purchase Price paid by any Purchasing Lender, the Transferor
Lender and each Purchasing Lender will make appropriate arrangements for payment
by the Transferor Lender to such Purchasing Lender of such amount upon receipt
thereof from any of the Borrowers.
5. On or prior to the Assignment Effective Date, the Transferor Lender will
deliver to the Agent its Notes. On or prior to the Assignment Effective Date,
the Borrower will deliver or cause to be delivered to the Agent Revolving Notes
for each Purchasing Lender and the Transferor Lender, in each case in principal
amounts reflecting, in accordance with the Credit Agreement, their Commitments
(as adjusted pursuant to this Assignment Agreement). As provided in subsection
9.04(c) of the Credit Agreement, each such new Note shall be dated the Closing
Date. Promptly after the Assignment Effective Date, the Agent will send to each
of the Transferor Lender and the Purchasing Lenders its new Revolving Notes and
will send to the Borrower the superseded Notes of the Transferor Lender, marked
"Canceled".
6. Concurrently with the execution and delivery hereof, the Transferor
Lender will provide to each Purchasing Lender (if it is not already a Lender
party to the Credit Agreement)
<PAGE> 62
conformed copies of all documents delivered to such Transferor Lender on the
Closing Date in satisfaction of the conditions precedent set forth in the Credit
Agreement referred to in the first recital hereto.
7. Each of the parties to this Assignment Agreement agrees that at any
time and from time to time upon the written request of any other party, it will
execute and deliver such further documents and do such further acts and things
as such other party may reasonably request in order to effect the purposes of
this Assignment Agreement.
8. By executing and delivering this Assignment Agreement, the Transferor
Lender and each Purchasing Lender confirm to and agree with each other, the
Agent and the Lenders as follows: (i) other than the representation and warranty
that it is the legal and beneficial owner of the interest being assigned hereby
free and clear of any adverse claim, the Transferor Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the Notes or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement, the
Notes, or any other instrument or documents furnished pursuant thereto, (ii) the
Transferor Lender makes no representation or warranty and assumes no
responsibility, with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under the
Credit Agreement, the Notes or any other instrument or document furnished
pursuant hereto; (iii) each Purchasing Lender confirms that it has received a
copy of the Credit Agreement, together with copies of the financial statements
referred to in subsection 5.01 of the Credit Agreement and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement; (iv) each Purchasing Lender
will independently and without reliance upon the Agent, the Transferor Lender or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement and the other Loan Documents; (v)
each Purchasing Lender appoints and authorizes the Agent to take such action as
the Agent on its behalf and to exercise such powers under the Credit Agreement
and the other Loan Documents as are delegated to the Agent by the terms thereof
together with such powers as are reasonably incidental thereto, all in
accordance with Article VII of the Credit Agreement; and (vi) each Purchasing
Lender agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement and the other Loan
Documents are required to be performed by it as a Lender.
9. Each party hereto represents and warrants to and agrees with the Agent
that it is aware of and will comply with the provision of subsection 9.04(g) of
the Credit Agreement.
10. Schedule II hereto sets forth the revised Commitments and Commitment
Percentages of the Transferor Lender and each Purchasing Lender as well as
administrative information with respect to each Purchasing Lender.
11. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 63
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective duly authorized officers on
Schedule I hereto as of the date set forth in Item I of Schedule I hereto.
_____________________________________, as a
Purchasing Lender
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
_____________________________________, as a
Transferor Lender
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
CONSENTED TO AND ACKNOWLEDGED:
NUVEEN SENIOR INCOME FUND
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
DEUTSCHE BANK AG, NEW YORK BRANCH,
as Agent
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
<PAGE> 64
SCHEDULE I
TO ASSIGNMENT AGREEMENT
COMPLETION OF INFORMATION AND
SIGNATURES FOR ASSIGNMENT AGREEMENT
Re: Credit Agreement dated as of December ___, 1999, with
Nuveen Senior Income Fund
<TABLE>
<S> <C>
Item 1 (Date of Assignment Agreement): [Insert date of Assignment Agreement]
Item 2 (Transferor Lender): [Insert name of Transferor Lender]
Item 3 (Purchasing Lender[s]): [Insert name of Transferor Lender]
Item 4 (Signatures of parties to Assignment
Agreement):
</TABLE>
_____________________________________, as a
Transferor Lender
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
_____________________________________, as a
Purchasing Lender
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
<PAGE> 65
SCHEDULE II
TO ASSIGNMENT AGREEMENT
ADDRESSES FOR NOTICES
AND COMMITMENT AMOUNTS
[Name of Transferor Lender] Revised Commitment $_____________
Amount:
Revised Commitment
Percentage:
[Name of Purchasing Lender] New Commitment $_____________
Amount:
Address for Notices: New Commitment $_____________
[Address] Percentage:
Attention: _______________
Telex: ___________________
Answer back: _____________
Telephone: _______________
Telecopier: ______________
<PAGE> 66
SCHEDULE III
TO ASSIGNMENT AGREEMENT
[FORM OF ASSIGNMENT EFFECTIVE NOTICE]
To: [NUVEEN SENIOR INCOME FUND]
[TRANSFEROR LENDER]
[PURCHASING LENDER]
The undersigned, as agent (the "Agent") under the Credit Agreement dated as
of December___, 1999 among Nuveen Senior Income Fund, the banks and other
financial institutions from time to time parties thereto, and Deutsche Bank AG,
New York Branch, as Agent, acknowledges receipt of five (5) executed
counterparts of a completed Assignment Agreement, as described in Schedule I
hereto. [Note: attach copy of Schedule I from Assignment Agreement.] Terms
defined in such Assignment Agreement are used herein as therein defined.
1. Pursuant to such Assignment Agreement, you are advised that the
Assignment Agreement Effective Date will be ______________________ [Insert fifth
business day following date of Assignment Effective Notice].
2. Pursuant to such Assignment Agreement, the Transferor Bank is required
to deliver to the Agent on or before the Assignment Effective Date its Notes.
3. Pursuant to such Assignment Agreement, the Borrower is required to
deliver to the Agent on or before the Assignment Effective Date the following
Notes, each dated ______________________ [Insert Closing Date].
[Describe each new Assignment Note for Transferor Lender and Purchasing
Lender as to principal amount, payee and payor.]
<PAGE> 67
4. Pursuant to such Assignment Agreement each Purchasing Lender is required
to pay its Purchase Price to the Transferor Lender at or before 12:00 Noon on
the Assignment Effective Date in immediately available funds.
Very truly yours,
Deutsche Bank AG, New York Branch
as Agent
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
<PAGE> 68
EXHIBIT E
FORM OF OPINION OF COUNSEL TO THE BORROWER
December __, 1999
The Persons on the Attached Schedule I
Re: Credit Agreement dated as of December 14, 1999,
among Nuveen Senior Income Fund, as Borrower,
the Lenders party thereto and Deutsche Bank AG,
New York Branch, as Agent, Syndication Agent and Arranger
- --------------------------------------------------------------
Dear Ladies and Gentlemen:
We have acted as special counsel to Nuveen Senior Income Fund, a
Massachusets business trust (the "Borrower"), and its affiliates in connection
with the transactions contemplated by the Credit Agreement (the "Credit
Agreement"), dated as of December 14, 1999, among the Borrower, the Lenders
party thereto and Deutsche Bank AG, New York Branch, as Agent, Syndication Agent
and Arranger. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Credit Agreement.
In rendering the opinions set forth herein, we have examined and
relied on originals or copies, certified or otherwise identified to our
satisfaction, of the following:
(p) the Credit Agreement;
(q) the Note;
(c) certified copy of the Declaration of Trust of the Borrower, dated
_____, ___, (the "Declaration of Trust").
The documents referred to in paragraphs (a) and (b) above are
hereinafter referred to as the "Transaction Documents."
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such copies. As to any facts material to this
<PAGE> 69
opinion which we did not independently establish or verify, we have relied upon
statements and representations of the Borrower and its officers and other
representatives and of public officials.
With your approval, we have further assumed, without independent
investigation:
(1) that all parties to the Credit Agreement, other than the Borrower,
are duly organized and in good standing in the jurisdictions in which they were
organized;
(2) that all parties to the Credit Agreement, other than the Borrower,
are duly qualified to transact business as foreign corporations or other
entities and are in good standing in the jurisdictions in which they transact
business or are otherwise required to be so qualified;
(3) the due authorization of the Credit Agreement by all parties
thereto, other than the Borrower;
(4) the due execution and delivery of the Credit Agreement by all
parties thereto, other than the Borrower;
(5) the full legal power and authority of all parties to the Credit
Agreement, other than the Borrower, to execute, deliver and perform their
obligations thereunder;
(6) the legality, validity, binding effect and enforceability of the
Credit Agreement against all the parties thereto, other than the Borrower; and
(7) the legal capacity of all natural persons.
Based upon the foregoing and subject to the limitations,
qualification, exceptions and assumptions set forth herein, we are of the
opinion that:
1. The Borrower is duly organized and validly subsisting as a
Massachusetts Business Trust and has the power and authority to own its property
and assets and to transact the business in which it is currently engaged.
2. The execution and delivery of each of the Transaction Documents and
the consummation by the Borrower of the transactions contemplated thereby are
within the powers set forth in the Declaration of Trust and have been duly
authorized by all requisite action on the part of the Borrower. Each of the
Transaction Documents has been duly executed and delivered by the Borrower.
3. Each of the Transaction Documents constitutes the valid and binding
obligation of the Borrower enforceable against the Borrower in accordance with
its terms under the laws of the State of New York except (i) as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles (regardless of whether the issue of
enforceability is considered in a proceeding in equity or at law) and (ii) that
we express no opinion as to the enforceability of any rights to indemnification
which are violative of the public policy underlying any law, rule or regulation.
<PAGE> 70
4. The execution and delivery by the Borrower of each of the
Transaction Documents and the performance by the Borrower of its obligations
under each of the Transaction Documents, each in accordance with its terms, do
not (i) conflict with the Declaration of Trust or By-laws of the Borrower, (ii)
constitute a violation of, or a default under, any indenture, contract,
agreement, note or instrument to which the Borrower is a party or by which the
Borrower or by which it or any of its property is bound or (iii) cause the
creation of any security interest or lien upon any of the property of the
Borrower pursuant to any indenture, contract, agreement, note or instrument to
which the Borrower is a party or by which the Borrower or by which it or any of
its property is bound.
5. Neither the execution, delivery or performance by the Borrower of
the Transaction Documents nor the compliance by the Borrower with the terms and
provisions thereof will contravene, violate or constitute a default under any
provision of any Federal, New York State or Commonwealth of Massachusetts law,
rule or regulation or any order, writ, judgment or decree of which we are aware
of any Federal, New York State or Commonwealth of Massachusetts court or
governmental authority binding upon the Borrower.
6. The execution, delivery and performance by the Borrower of each of
the Transaction Documents and the consummation by the Borrower of the applicable
transactions provided for therein, do not and will not require any
authorization, consent, approval, license or other action by or in respect of,
or notice to or filing with, any Federal, New York State or Commonwealth of
Massachusetts governmental, legislative, judicial, administrative or regulatory
body, agency or official (each a "Governmental Approval") that has not been
obtained or taken and is not in full force and effect.
7. The Borrower is a registered closed-end investment company under
the Investment Company Act of 1940.
<PAGE> 71
We do not purport to be experts on the law of any jurisdiction other
than, and the opinions expressed above are limited to questions arising under,
the Federal law of the United States, the law of the State of New York and the
law of the Commonwealth of Massachusetts.
This opinion is for the sole benefit of the named addressees and for
the benefit of their successors and permitted assigns and may not be relied upon
by any other person without our prior written consent.
Very truly yours,
<PAGE> 72
SCHEDULE I
COMMITMENTS
Lender Commitment
- ------ ----------
Deutsche Bank AG, $150,000,000
New York Branch
31 West 52nd Street
New York, New York 10019
<PAGE> 73
SCHEDULE II
LIST OF INVESTMENT ADVISORY AGREEMENT(S)
None.
<PAGE> 74
SCHEDULE III
LIST OF CUSTODIAN CONTRACT(S)
1. Custody and Fund Accounting Services Agreement, dated as of October
26, 1999, by and among the Nuveen Senior Income Fund, the Chase Bank
of Texas, National Association, and the Chase Global Funds Services
Company.
<PAGE> 75
SCHEDULE IV
LIST OF REGISTRAR, TRANSFER AGENCY AND SERVICES AGREEMENT(S)
1. Closed-End Mutual Funds Services Agreement for Transfer Agency
Services, dated as of October 26, 1999 by and between the Nuveen
Senior Income Fund and the Chase Manhattan Bank.
2. Management Agreement, dated as of October 19, 1999, by and between the
Nuveen Senior Income Fund and the Nuveen Senior Loan Asset Management
Inc.
<PAGE> 1
EXHIBIT K.7
$150,000,000
CREDIT AGREEMENT
Dated as of ________ __, 2000
among
NUVEEN SENIOR INCOME FUND,
as Borrower,
[SPV],
as Lender,
and
DEUTSCHE BANK AG, NEW YORK BRANCH,
as Agent
<PAGE> 2
CREDIT AGREEMENT
This CREDIT AGREEMENT, dated as of , 2000 (this
"Agreement"), is among NUVEEN SENIOR INCOME FUND, a Massachusetts business trust
(the "Borrower"), [SPV], a Delaware limited liability company (the "Lender"),
and DEUTSCHE BANK AG, NEW YORK BRANCH, as Agent (in such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower is in the business of actively managing and
investing on a leveraged basis a pool of loans and participation interests in
loans;
WHEREAS, the Borrower desires to obtain Advances (as defined
below) from the Lender, subject to the terms and conditions set forth herein, in
a maximum aggregate principal amount not to exceed at any time the lesser of (i)
the Commitment Amount (as defined below) then in effect or (ii) the funds
available to the Lender for such purpose from the issuance of Commercial Paper
(as defined below) and borrowings under the Liquidity Agreement (as defined
below);
WHEREAS, the Lender is willing, on the terms and conditions
hereinafter set forth, to make Advances to the Borrower from the proceeds of the
issuance of the Commercial Paper or, in the event that the Lender is unable to
issue Commercial Paper, from borrowings by the Lender under the Liquidity
Agreement;
WHEREAS, simultaneously herewith, the Lender will enter into the
Liquidity Agreement with one or more Liquidity Lenders (as defined below)
pursuant to which the Liquidity Lenders will agree to make loans to the Lender,
the proceeds of which will be used to make Advances to the Borrower pursuant to
this Agreement, and to make payments in respect of Lender's Commercial Paper;
and
WHEREAS, the Borrower has agreed to secure its Obligations (as
defined below) to the Lender in connection with the Advances by granting to the
Collateral Agent (as defined below) (for the benefit of the Lender, the Agent,
the Liquidity Lenders, the Liquidity Agent, the Depositary and the holders of
Commercial Paper) a first priority, perfected security interest in substantially
all of its assets pursuant to the Security Agreement (as defined below).
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01 Certain Defined Terms. As used in this Agreement, the
following
<PAGE> 3
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Administration Fee" has the meaning set forth in Section 2.07.
"Advance" shall have the meaning set forth in Section 2.01.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by or is under
common control with such person or is a director or officer of such
Person or of an Affiliate of such Person. For purposes of this
definition, control of a Person shall mean the power, direct or
indirect, (i) to vote 50% or more of the securities having ordinary
voting power for the election of directors of such Person, or (ii) to
direct or cause the direction of the management and policies of such
person whether by contract or otherwise.
"Agent" has the meaning set forth in the preamble to this
Agreement.
"Agent-Related Persons" means the Agent and any successor agent
arising under Section 7.08, together with their respective Affiliates
and the officers, directors, employees, agents, attorneys-in-fact of
such Persons and Affiliates.
"Aggregate Interest Component" means, with respect to any calendar
month, the sum for all Commercial Paper outstanding at any time during
such calendar month of an amount with respect to each Commercial Paper
Note outstanding at any time during such calendar month equal to the
product of (x) the Interest Component of such Commercial Paper Note
multiplied by (y) a fraction the numerator of which is the number of
days during such calendar month that such Commercial Paper Note was
outstanding and the denominator of which is the total number of days
such Commercial Paper Note was or is scheduled to be outstanding, as
the case may be.
"Asset Coverage Ratio" means with respect to the Borrower, the
ratio which the value of the Total Assets of the Borrower (as
determined by the Borrower) less all Indebtedness thereof not
represented by Senior Securities, bears to the aggregate amount of all
Senior Securities representing Indebtedness of the Borrower.
"Bankruptcy Code" means Title 11 of the United States Code, as in
effect from time to time, and any successor statute.
"Borrower Account" means the account of the Borrower initially
held at __________, or such other bank as the Borrower may designate by
notice to the Collateral Agent and the Agent.
"Borrower Collateral" has the meaning specified in the Security
Agreement.
"Borrowing Request" has the meaning specified in Section 2.02.
"Business Day" means any day other than a Saturday, a Sunday or a
day on which
3
<PAGE> 4
banking institutions in the State of Illinois or the State of New York
are authorized or required to be closed.
"Cash Equivalents" means (i) securities with maturities of sixty
days or less (but in no event shall the maturity of such securities
prevent the proceeds thereof from being available to pay maturing
Commercial Paper) from the date of acquisition issued or fully
guaranteed or insured by the United States Government or any agency
thereof, (ii) certificates of deposit, eurodollar time deposits,
overnight bank deposits, bankers' acceptances and re-purchase
agreements of any commercial bank whose short-term obligations are
rated "P-1" by Moody's and, if rated by Fitch, "F-1+" by Fitch having
maturities of sixty days or less from the date of acquisition, (iii)
commercial paper having maturities of sixty days or less from the date
of acquisition, rated at least "P-1" by Moody's and, if rated by Fitch,
"F-1+" by Fitch and (iv) money market funds rated at least "P-1" by
Moody's and, if rated by Fitch, "F-1+" by Fitch.
"Closing Date" means the date of the initial Advance hereunder.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in
effect at the date of this Agreement and any subsequent provisions of
the Code, amendatory thereof, supplemental thereto or substituted
therefor.
"Collateral" has the meaning specified in the Security Agreement.
"Collateral Agent" means [Deutsche Bank AG, New York Branch], as
Lender Collateral Agent and Borrower Collateral Agent under the
Security Agreement.
"Commercial Paper" means the short-term promissory notes of the
Lender issued for the purpose of funding or maintaining Advances made
to the Borrower.
"Commercial Paper Note" means any single short-term promissory
note of the Lender which constitutes Commercial Paper.
"Commitment" means the commitment of the Lender to make Advances
to the Borrower from time to time in accordance with the terms of this
Agreement.
"Commitment Amount" means $150,000,000 as such amount may from
time to time be reduced pursuant to Section 2.03; provided, however,
that at all times on and after the Commitment Termination Date, the
Commitment Amount shall be zero.
"Commitment Termination Date" means the earliest of (i) _________,
2001 [364 days from the Closing Date] as such date may be extended in
accordance with Section 2.15, (ii) the date of the termination of the
Commitment pursuant to Section 2.03 or (iii) the Maturity Date.
"Contractual Obligation" means, as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which
4
<PAGE> 5
such Person is a party or by which it or any of its property is bound.
"Control Agreement" means the Control Agreement, dated as the date
hereof, among the Custodian, the Borrower, the Lender and the
Collateral Agent in the form attached as Exhibit C hereto, as such
agreement may be amended from time to time.
"CP Documents" means, collectively, the Commercial Paper Notes,
the Liquidity Agreement, the Depositary Agreement, the Management
Agreement, the Loan Notes and the Dealer Agreement.
"Custodian" shall have the meaning specified in the Custodian
Contract.
"Custodian Contract" means the Custodian Contract, dated as of
October 26, 1999, between Chase Bank of Texas, National Association, as
Custodian, and each fund listed in Appendix A thereto, a copy of which
is attached hereto as Exhibit G.
"Dealer" means Deutsche Bank Securities Inc. and each other person
appointed by the Lender from time to time to act as a dealer for the
Commercial Paper.
"Dealer Agreement" means the Commercial Paper Dealer Agreement
dated as of ________ __, 2000 between the Lender and Deutsche Bank
Securities Inc., as such agreement may be amended from time to time.
"Default" means any Event of Default or event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Default Rate" means a rate of interest per annum equal to 2% per
annum above the rate that would otherwise be applicable thereto.
"Depositary" has the meaning specified in the Liquidity Agreement.
"Depositary Agreement" has the meaning specified in the Liquidity
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as
in effect at the date of this Agreement and any subsequent provisions
of ERISA, amendatory thereof, supplemental thereto or substituted
therefor.
"ERISA Affiliate" means each person (as defined in Section 3(9) of
ERISA) which together with the Borrower or a Subsidiary of the Borrower
would be deemed to be a "single employer" (i) within the meaning of
Section 414(b),(c), (m) or (o) of the Code or (ii) as a result of the
Borrower or a Subsidiary of the Borrower being or having been a general
partner of such person.
"Event of Default" has the meaning specified in Section 6.01.
5
<PAGE> 6
"Facility Documents" means this Agreement, the Security Agreement,
the Note, the Control Agreement and the CP Documents.
"Financing Lease" means any lease of property, real or personal,
the obligations of the lessee in respect of which are required in
accordance with the U.S. GAAP to be capitalized on a balance sheet of
the lessee.
"Fitch" shall mean Fitch IBCA.
"Fundamental Investment Policies" means, as to the Borrower, the
policies and objectives for, and limits and restrictions on, investing
by the Borrower deemed "fundamental" in the Prospectus or the Statement
of Additional Information and which policies, objectives, limits and
restrictions cannot be changed without the approval of the holders of a
majority of the Borrower's outstanding common shares.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guarantee Obligation" means, as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a reimbursement, counter indemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness
(the "primary obligations") of any other third Person (the "primary
obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of the guaranteeing person, whether
or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to
advance or supply funds for the purchase or payment of any such primary
obligation, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall
not include endorsements of instruments for deposit or collection in
the ordinary course of business. The amount of any Guarantee Obligation
of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made and
(b) the maximum amount for which such guaranteeing person may be liable
pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for
which such guaranteeing person may be liable are not stated or
determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated
liability in respect thereof as determined by such guaranteeing person
in good faith.
"Indebtedness" of any Person, means, at any date, without
duplication, (a) all
6
<PAGE> 7
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices) or which is evidenced by a note,
bond, debenture or similar instrument, (b) all obligations of such
Person under Financing Leases or Interest Rate Agreements, (c) all
obligations of such Person in respect of banker's acceptances issued or
created for the account of such Person, (d) all obligations of such
Person, whether absolute or contingent in respect of letters of credit
opened for the account of such Person and (e) any and all other
"liabilities" or other "indebtedness" of such Person as such terms are
used within the meaning of the 1940 Act. For purposes of this
definition of "Indebtedness", the amount of any derivative instrument
(including, without limitation, any swap, Interest Rate Agreement,
collar, cap, put, call, equity derivative or mortgage-backed or
debt-backed derivative) will be calculated daily on a marked-to-market
basis.
"Indemnified Amounts" has the meaning specified in Section 8.01.
"Indemnified Party" has the meaning specified in Section 8.01.
"Interest" shall mean with respect to each calendar month, an
amount equal to the sum of (i) the Aggregate Interest Component for
such calendar month, (ii) the amount of interest accrued during such
month on all Loans outstanding during such calendar month, (iii) the
Liquidity Fee payable during such calendar month and (iv) all other
fees, costs and expenses payable by the Lender pursuant to the Facility
Documents that became due during such calendar month; provided,
however, that no provision of this Agreement or the Note shall require
the payment or permit the collection of Interest in excess of the
maximum permitted by applicable law and Interest shall not be
considered paid by any distribution if at any time such distribution is
rescinded or must otherwise be returned for any reason.
"Interest Component" means the portion of the face amount of
Commercial Paper issued on a discount basis representing the discount
incurred in respect thereof.
"Interest Period" means, for each Advance, (x) if such Advance is
funded by the issuance of Commercial Paper, a period commencing on the
date of such Advance and ending on the last day of a period of from 1
to 180 days specified by the Borrower pursuant to the terms of Section
2.02 and (y) if such Advance is funded with the proceeds of Loans, the
period commencing on the date of such Advance and ending on the date
such Advance is repaid; provided, that in no event shall any Interest
Period end subsequent to the Commitment Termination Date.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future, interest rate option, interest rate
swap, interest rate cap or other interest rate hedge or arrangement
under which the Borrower is a party.
"Investment Advisory Agreement" means the Investment Advisory
Agreement(s) set forth on Schedule II hereto.
7
<PAGE> 8
"Investment Policies" means, as to the Borrower, the policies and
objectives for, and limits and restrictions on, investing by the
Borrower set forth in the Registration Statement, the Prospectus and
the Statement of Additional Information relating to the Borrower and as
adopted by (or generally approved by) the board of trustees of the
Borrower or the shareholders of the Borrower from time to time.
"Lender's Account" means the account of the Lender established and
maintained with Bankers Trust Company, pursuant to the Depositary
Agreement.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreements,
any Financing Lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under
the UCC or comparable law of any jurisdiction in respect of any of the
foregoing).
"Liquidity Agent" shall mean Deutsche Bank AG, New York Branch, as
agent for the Liquidity Lenders, and any successor agent.
"Liquidity Agreement" means the Liquidity Agreement dated as of
________ __, 2000 among the Lender, the Liquidity Lenders and the
Liquidity Agent pursuant to which the Liquidity Lenders have committed
to make Loans to the Lender the proceeds of which shall be used by the
Lender to (i) make Advances to the Borrower or (ii) make payments in
respect of maturing Commercial Paper, as such agreement may be amended,
supplemented or otherwise modified from time to time.
"Liquidity Bank" has the meaning specified in the Liquidity
Agreement.
"Liquidity Commitment" has the meaning specified in the Liquidity
Agreement.
"Liquidity Fee" has the meaning specified in the Liquidity
Agreement.
"Liquidity Lenders" has the meaning specified in the Liquidity
Agreement.
"Liquidity Termination Date" has the meaning specified in the
Liquidity Agreement.
"Loan Notes" has the meaning specified in the Liquidity Agreement.
"Loans" means the Revolving Loans and the Refunding Loans, in each
case incurred by the Lender to fund or maintain Advances made to the
Borrower.
"Management Agreement" means the Management Agreement between the
Lender and Global Securitization Services, LLC, substantially in the
form of Exhibit C to the Liquidity Agreement.
8
<PAGE> 9
"Material Adverse Effect" means a material adverse effect on (a)
the business, operations, property or financial condition of the
Borrower and its Subsidiaries taken as a whole, (b) the ability of the
Borrower to perform any material obligations of the Borrower under this
Agreement or the Note, or (c) the validity or enforceability of a
material provision of this Agreement, the Note or the material rights
or remedies of the Agent or the Lender hereunder or thereunder.
"Maturity Date" shall mean the earlier of (i) ___________, 2002
[the date which is the second anniversary of the Closing Date], or such
later date as shall apply pursuant to Section 2.15 hereof, or (ii)
acceleration following the occurrence of an Event of Default pursuant
to Section 6.01.
"Moody's" means Moody's Investors Service, Inc.
"1940 Act" means the Investment Company Act of 1940, as amended,
together with all rules and regulations promulgated from time to time
thereunder.
"Note" means the promissory note made by the Borrower in favor of
the Lender, in substantially the form of Exhibit A hereto, evidencing
the aggregate obligations of the Borrower to the Lender resulting from
the Advances made by the Lender.
"Nuveen" means Nuveen Senior Loan Asset Management Inc., a
Delaware corporation, acting as investment advisor for the Borrower or
any successor or assign.
"Obligations" means the unpaid Principal of and Interest on
(including, without limitation, interest accruing after the maturity of
the Advances and interest accruing on or after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or
not a claim for post-filing or post-petition interest is allowed in
such proceeding) the Advances and all other obligations and liabilities
of the Borrower, whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may
arise under, out of, or in connection with, this Agreement, the Note,
any other Facility Document and any other document made, delivered or
given in connection herewith or therewith, whether on account of
principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses (including, without limitation, all reasonable fees and
disbursements of counsel, and the allocated cost of internal counsel,
to the Agent, the Lender or the Liquidity Lenders that are required to
be paid by the Borrower pursuant to the terms of this Agreement) or
otherwise.
"Other Taxes" has the meaning specified in Section 2.12(b).
"Permissible Investments" means loans and other investments in
which the Borrower is permitted to invest pursuant to the Prospectus,
the Registration Statement, the Statement of Additional Information,
and the Borrower's Investment Policies from time to time.
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"Permitted Liens" means (i) Liens for taxes not yet due or which
are being contested in good faith by appropriate proceedings, provided
that adequate reserves with respect thereto are maintained on the books
of the Borrower in conformity with U.S. GAAP and to the reasonable
satisfaction of the Agent, (ii) Liens arising in connection with claims
for advances made by or payments due to any custodian under the
custodian contracts set forth in Schedule III hereto, (iii) any other
Liens created, incurred, assumed or suffered to exist in compliance
with the Registration Statement or the Investment Policies which Liens
are not otherwise prohibited by any Requirement of Law, do not apply to
the Collateral and secure Indebtedness in an aggregate amount not to
exceed $250,000, (iv) Liens created under the Security Agreement, (v)
restrictions on the transfer, assignment or other disposition of
Permissible Investments that arise under the documents relating to such
Permissible Investments and (vi) Liens arising in connection with
secured derivative transactions, provided that (x) such derivative
transactions do not violate the Borrower's Investment Policies, (y) the
pledged assets subject to such Liens are not maintained in the
Custodial Account and (z) for all purposes under this Agreement and the
Liquidity Agreement, the Asset Coverage Ratio of the Borrower is
calculated without taking into account the value of such pledged
assets.
"Person" means an individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any
political subdivision or agency thereof.
"Plan" means any "employee benefit plan" as defined in Section
3(3) of ERISA subject to Title I of ERISA or any "plan" subject to
Section 4975 of the Code.
"Principal" of any Advance means the original amount advanced to
the Borrower pursuant to Sections 2.01 and 2.02, reduced from time to
time by payments in respect thereof; provided, however, that if such
Principal of such Advance shall have been reduced by any payment and
thereafter such payment is rescinded or must otherwise be returned for
any reason, such Principal of such Advance shall be increased by the
amount of such payment, all as though such payment had not been made.
"Prospectus" means the Prospectus of the Borrower, dated October
26, 1999.
"Refunding Loans" shall mean the Refunding Loans made to the
Lender by the Liquidity Lenders pursuant to Section 3.03(a) of the
Liquidity Agreement.
"Registrar, Transfer Agency and Services Agreement" means the
Registrar, Transfer Agency and Services Agreement(s) set forth in
Schedule I hereto.
"Registration Statement" means the Registration Statement of the
Borrower, declared effective on October 26, 1999.
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System.
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"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System.
"Required Liquidity Lenders" has the meaning specified in the
Liquidity Agreement.
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and Bylaws or other organizational or governing documents
of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject. With respect to Borrower, "Requirements of Law" includes,
without limitation, the requirements of the 1940 Act, the Investment
Advisers Act of 1940 and the Securities Act of 1933, in each case as
amended from time to time.
"Responsible Officer" means (x) the president or any vice
president of the Borrower, or (y) with respect to financial matters,
the chief financial officer, treasurer, assistant treasurer or
controller of the Borrower and (z) as to any other matter, any other
officer of the Borrower with responsibility for such matter.
"Revolving Loans" shall mean the Revolving Loans made to the
Lender by the Liquidity Lenders pursuant to Section 3.02(a) of the
Liquidity Agreement.
"Security Agreement" means the Security Agreement dated as of the
Closing Date among the Borrower, the Lender, the Agent, the Liquidity
Agent and the Collateral Agent, substantially in the form of Exhibit B
hereto, as such agreement may be amended from time to time.
"Senior Security" means any bond, debenture, note or similar
obligation or instrument constituting a security and evidencing
Indebtedness, including, without limitation, all borrowings under this
Agreement and any share of beneficial interest of the Borrower, of a
class having priority over any other class of shares of the Borrower as
to distribution of assets or payment of dividends; provided, however,
that "Senior Security" shall not include any promissory note or other
evidence of indebtedness in any case where such a loan is for temporary
purposes only and in an amount not exceeding five percent of the value
of the Total Assets of the Borrower at the time when the loan is made.
A loan shall be presumed to be for temporary purposes if it is repaid
within sixty days and is not extended or renewed; otherwise it shall be
presumed not to be for temporary purposes. Any such presumption may be
rebutted by evidence to the contrary.
"Statement of Additional Information" means the Statement of
Additional Information of the Borrower, dated October 26, 1999.
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"Subsidiary" means, as to any Person at any time of determination,
a corporation, partnership or other entity (other than any Borrower or
any other investment company or similar investment entity existing
under foreign law substantially equivalent to an investment company) of
which shares of stock having ordinary voting power (other than stock or
such other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other
entity are at the time owned directly or indirectly through one or more
intermediaries or Subsidiaries, or both, by such Person. Unless
otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Borrower.
"Taxes" has the meaning specified in Section 2.12(a).
"Total Assets" means, at any time, (x) all assets of the Borrower
which in accordance with U.S. GAAP would be classified as assets on the
balance sheet of the Borrower prepared as of such time less (y) the
amount of any such assets that consist of unsecured senior loans (it
being understood that for purposes of this clause (y) commercial paper
and other overnight investments will not be considered unsecured senior
loans) or participations in unsecured senior loans.
"UCC" means the Uniform Commercial Code as from time to time in
effect in the specified jurisdiction.
"U.S. GAAP" has the meaning specified in Section 1.04.
Section 1.02 Other Terms. All terms used in Article 9 of the UCC
in the State of New York, and not specifically defined herein, are used herein
as defined in such Article 9.
Section 1.03 Computation of Time Periods. Unless otherwise stated
in this Agreement, in the computation of a period of time from a specified date
to a later specified date, the word "from" means "from and including" and the
words "to" and "until" each means "to but excluding."
Section 1.04 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles in the United States in effect from time to time
("U.S. GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
Section 2.01 Commitment. On the terms and conditions hereinafter
set forth, the Lender hereby agrees to make advances (each, an "Advance") to the
Borrower from time to time on any Business Day during the period from the date
hereof to the Commitment Termination Date. Under no circumstances shall the
Lender make any Advance if (i) after giving effect to
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such Advance, the aggregate outstanding Principal of Advances would exceed the
Commitment Amount or (ii) the amount of such Advance would exceed the funds
available to the Lender for such purpose from the issuance of Commercial Paper
and borrowings from the Liquidity Lenders under the Liquidity Agreement. Each
Advance shall be secured by the Borrower Collateral and repaid pursuant to the
terms hereof.
Section 2.02 Making the Advances. Each Advance shall be made on
notice, given not later than 12:00 p.m. (New York City time) on the Business Day
prior to the date of the proposed Advance, by the Borrower to the Agent provided
that in the case of the initial Advance hereunder such notice shall be given not
later than 11:30 a.m. (New York City time) on the second Business Day preceding
the date of such initial Advance. Such notice shall be set forth in a form of a
borrowing request (the "Borrowing Request") substantially in the form of Exhibit
E to this Agreement, and shall specify (i) the desired amount which shall be at
least $5,000,000 and shall be an integral multiple of $1,000,000, (ii) the date
for such Advance and (iii) the duration of the Interest Period for such Advance.
Subject to the provisions of Section 2.01 of the Liquidity Agreement, the
Borrower shall provide to the Agent and the Manager instructions regarding the
amount and maturity of Commercial Paper to be issued, from time to time, in
order to pay any maturing Commercial Paper obligations. The Agent shall promptly
notify the Borrower if the Lender is unable to obtain sufficient funding for the
Advance through the issuance of Commercial Paper having a maturity of the
specified duration of such Interest Period, and the Borrower shall revise its
request as the Borrower and the Agent shall agree. In the event that the Lender
is unable to obtain sufficient funding for the Advance through the issuance of
Commercial Paper, then the Agent shall so notify the Borrower by 11:00 a.m. (New
York City time) on the date for such Advance. In the event that upon receiving
such notice the Borrower shall still wish to obtain the requested Advance, the
Borrower shall so notify the Agent by 11:45 a.m. (New York City time) specifying
in any such notice the Interest Period, if any, applicable to such Advance. In
such event the Lender shall request a Revolving Loan in accordance with the
terms of the Liquidity Agreement (no later than 12:30 p.m. New York City time)
to fund such Advance. On the date of any Advance and upon satisfaction of the
applicable conditions set forth in Article III, the Lender shall make available
to the Borrower the amount of such Advance by deposit of such amount in lawful
money of the United States in immediately available funds to the Borrower
Account.
Section 2.03 Termination or Reduction of the Commitment Amount.
The Borrower may, upon at least five Business Days' written notice to the Agent,
terminate in whole or permanently reduce in part the unused portion of the
Commitment Amount; provided, that (i) the Commitment Amount may not be
terminated unless the outstanding Principal of Advances has been reduced to zero
and (ii) in no event may the Commitment Amount be reduced in part to an amount
that is less than the outstanding Principal of Advances on the date of such
reduction; provided, further, that each partial reduction shall be in an amount
equal to $5,000,000 or a whole multiple of $1,000,000 in excess thereof. In the
case of the termination or reduction of the Commitment Amount pursuant to this
Section 2.03, Interest accrued or to accrue on the amount of any prepayment
relating thereto and any unpaid fees, costs and expenses accrued with respect
thereto shall be paid by the Borrower on the date of such termination or
reduction.
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Section 2.04 Prepayments. (a) Optional. The Borrower may, upon at
least three Business Days' written notice to the Agent, prepay the outstanding
Principal of one or more Advances, in whole or in part, together with, in the
case of a prepayment in full of all outstanding Advances, Interest accrued to
the date of such prepayment and any Interest that will accrue in respect of any
related outstanding Commercial Paper through the date of maturity and Loans
through the date of the repayment thereof, and all accrued and unpaid fees,
costs and expenses then due and payable by the Borrower under the Facility
Documents (including any breakage costs relating to the Loans used to fund the
Advances being prepaid).
(b) Mandatory. If, at any time and from time to time, either (i)
the Asset Coverage Ratio of the Borrower shall be less than 300%, or (ii) the
aggregate amount of Advances made to the Borrower then outstanding exceeds the
borrowing limits provided in the 1940 Act, the Borrower's Prospectus or the
Registration Statement, then, within four Business Days thereafter, the Borrower
shall repay the Advances made to the Borrower to the extent necessary to ensure
that (x) the Asset Coverage Ratio of the Borrower after such payment is at least
300% and (y) the aggregate principal of Advances made to the Borrower then
outstanding does not after such payments exceed such limits as set forth in the
1940 Act, the Borrower's Prospectus or the Registration Statement, as the case
may be.
(c) Investments in Lender's Account. On each Business Day the
Agent shall, to the extent practicable, cause funds on deposit in the Lender's
Account not being used on such day to make payments in respect of maturing
Commercial Paper, Refunding Loans, Revolving Loans or other obligations of the
Lender or the Borrower then due and payable under the Facility Documents to be
invested in Cash Equivalents. Unless and until a Default shall have occurred and
be continuing, any amounts earned in respect of such investments in Cash
Equivalents shall be paid to the Borrower by means of a transfer to the Borrower
Account. During the continuance of a Default or an Event of Default, any such
amounts shall be retained by the Lender and applied to the amounts due
hereunder.
Section 2.05 Payment of Interest. The Borrower shall pay Interest
with respect to the outstanding Advances from the date of the first such Advance
until the Principal amount of all such Advances shall be paid in full, such
Interest to be due and payable on the fifth Business Day of each calendar month
(in respect of the Interest accrued during the preceding calendar month), upon
the prepayment or payment in full of all outstanding Advances and on the
Commitment Termination Date. The Agent shall provide the Borrower with a notice
setting forth the Interest accrued with respect to each calendar month not later
than the third Business Day of the immediately succeeding calendar month.
Section 2.06 Repayment on Commitment Termination Date. On the
Commitment Termination Date all Advances outstanding shall mature and be payable
in full, the Commitment of the Lender shall be reduced to zero and the Borrower
shall repay to the Agent, for the account of the Lender, all outstanding
Principal of and unpaid Interest accrued (and to accrue through the repayment
date of the related Commercial Paper and Loans) on the Advances. Commencing on
the Commitment Termination Date, all amounts on deposit with the Custodian or in
the Borrower Account shall be applied to pay Principal and Interest on the
outstanding Advances and the other Obligations of the Borrower under the
Facility Documents. Such
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payments shall be applied in accordance with the order of priority set forth in
Section 14 of the Security Agreement.
Section 2.07 Fees. The Borrower shall pay to the Lender for the
account of the Agent an administration fee in the amount of $______ per fiscal
quarter (the "Administration Fee"). The Administration Fee shall be payable (in
arrears) on the fifth Business Day of each fiscal quarter during the term of
this Agreement in respect of the immediately preceding fiscal quarter.
Section 2.08 Payments and Computations, Etc. (a) All amounts to be
paid or deposited by the Borrower hereunder shall be paid or deposited in
accordance with the terms hereof no later than 1:00 P.M. (New York City time) on
the day when due in lawful money of the United States of America in immediately
available funds to the Lender's Account. Amounts received by the Agent after
1:00 P.M. (New York City time) on any Business Day shall be deemed to have been
received on the next Business Day. The Borrower shall, to the extent permitted
by law, pay to the Agent interest on all amounts not paid or deposited when due
and payable hereunder at the Default Rate, payable on demand; provided, however,
that such Default Rate shall not at any time exceed the maximum interest rate
permitted by applicable law.
(b) Each determination by the Agent of an interest rate hereunder
shall be conclusive and binding for all purposes, absent manifest error. The
Lender shall, at the request of the Borrower, deliver to the Borrower a
statement showing the basis for calculation of any Interest owing pursuant to
Section 2.05.
(c) Whenever any payment hereunder or under the Note shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of Interest.
Section 2.09 Evidence of Advances. (a) The Borrower's obligation
to pay resulting from each Advance made hereunder by the Lender shall be
evidenced by the Note, delivered pursuant to Article III. The Lender shall note
on its internal records each Advance made by it and payment thereon; provided
that failure to make any such notation shall not adversely affect the Lender's
rights with respect to any Advance.
(b) Although the Note shall be dated the date of this Agreement,
Interest shall be payable only for the period during which Advances are
outstanding thereunder. In addition, although the stated principal amount of the
Note shall be equal to the Commitment Amount, such Note shall be enforceable
with respect to the Borrower's obligations to pay the Principal thereof only to
the extent of the unpaid Principal amount of the Advances outstanding thereunder
at the time such enforcement shall be sought.
Section 2.10 Requirements of Law. (a) In the event that any change
in any Requirement of Law or in the interpretation or application thereof or
compliance by the Lender or any Liquidity Lender under the Liquidity Agreement
with any request or directive (whether or not having the force of law but, if
not having the force of law, generally applicable to and
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complied with by lenders of the same general type as the Lender and the
Liquidity Lender in the relevant jurisdiction) from any central bank or other
Governmental Authority made subsequent to the Closing Date:
(i) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans
or other extensions of credit by, or any other acquisition of funds by,
the Lender or any Liquidity Lender, or
(ii) shall impose on the Lender or any Liquidity Lender, or any
other condition;
and the result of any of the foregoing is to increase the cost to the Lender, by
an amount which the Lender deems to be material, of making, converting into,
continuing or maintaining Advances or to reduce any amount receivable hereunder
in respect thereof then, in any such case, the Borrower shall promptly pay the
Lender, upon its demand, any additional amounts necessary to compensate the
Lender for such increased cost or reduced amount receivable. If the Lender
becomes entitled to claim any additional amounts pursuant to this subsection, it
shall promptly notify the Borrower, through the Agent, of the event by reason of
which it has become so entitled. A certificate as to any additional amounts
payable pursuant to this subsection submitted by the Lender, through the Agent,
to the Borrower shall be prima facie evidence of the accuracy of the information
so recorded. This covenant shall survive the termination of this Agreement and
the payment of the Note and all other amounts payable hereunder for one year.
(b) If, after the date of this Agreement, the introduction of any
applicable law, rule, regulation or guideline regarding capital adequacy, or any
change therein or any change in the interpretation or administration thereof by
any Governmental Authority charged with the interpretation or administration
thereof, affects the amount of capital required or expected to be maintained by
the Lender or any Liquidity Lender, or any corporation controlling the Lender or
any Liquidity Lender, and the Lender, the Liquidity Lender or such corporation
(taking into consideration the Lender's or Liquidity Lender's or such
corporation's policies with respect to capital adequacy) determines that the
amount of capital maintained by the Lender or the Liquidity Lender or such
corporation which is attributable to or based upon the Advances, the Commitment
or this Agreement must be increased as a consequence of such introduction or
change, then, upon demand of the Agent at the request of the Lender, the
Borrower shall immediately pay to the Agent on behalf of the Lender or the
Liquidity Lender, additional amounts sufficient to compensate the Lender, the
Liquidity Lender or such corporation for the increased costs to the Lender, the
Liquidity Lender or such corporation of such increased capital. Any such demand
shall be accompanied by a certificate of the Lender or the Liquidity Lender
setting forth in reasonable detail the computation of any such increased costs,
provided that the Lender or the Liquidity Lender shall not be required to
disclose confidential information. This covenant shall survive the termination
of this Agreement and the payment of the Note and all other amounts payable
hereunder for one year.
(c) The Lender will promptly notify the Borrower, through the
Agent, of any event of which it has knowledge that will entitle the Lender or
any Liquidity Lender to compensation pursuant to Section 2.10(a) or (b) above.
No failure by the Lender or any
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Liquidity Lender to give (or delay in giving) such notice shall adversely affect
the Lender's or Liquidity Lender's rights to such compensation, except that the
Borrower shall have no obligation to compensate the Lender or any Liquidity
Lender for any cost or reduction incurred or accrued by it more than one year
before the Lender or any Liquidity Lender gives notice of the event giving rise
to such cost or reduction as required by the preceding sentence (unless such
cost or reduction is incurred or accrued by the Lender or any Liquidity Lender
more than 180 days before the delivery of such notice as a result of the
retroactive application by any Governmental Authority of any Requirement of Law,
applicable law, rule or guideline referred to in Section 2.10(a) or (b)).
Section 2.11 Indemnity. The Borrower agrees to indemnify the
Lender and to hold the Lender harmless from any loss or expense which the Lender
may sustain or incur as a consequence of (a) default by the Borrower in payment
when due of the principal amount of or interest on any Advance, (b) default by
the Borrower in making a borrowing of Advances after the Borrower has given a
notice requesting the same in accordance with the provisions of this Agreement,
(c) default by the Borrower in making any prepayment after the Borrower has
given a notice thereof in accordance with the provisions of this Agreement or
(d) the making by the Borrower of a prepayment (whether such prepayment is
voluntary, optional, mandatory or upon acceleration of such Advances) of
Advances on a day which is not the last day of an Interest Period with respect
thereto, including, without limitation, in each case, any such loss or expense
arising from the reemployment of funds (but, otherwise, excluding in all cases
consequential damages and loss of profits relating thereto) obtained by it or
from fees payable to terminate the deposits from which such funds were obtained.
This covenant shall survive the termination of this Agreement and the payment of
the Note and all other amounts payable hereunder for one year.
Section 2.12 Net Payments; Taxes. (a) All payments made by the
Borrower hereunder or under the Note will be made without setoff, counterclaim
or defense. All such payments will be made free and clear of, and without
deduction or withholding for or on account of, any present or future taxes,
levies, imposts, duties, fees, assessments and other charges of whatever nature
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority or any political subdivision or taxing authority thereof
or therein with respect to such payments (but excluding, except as provided in
the second succeeding sentence, in the case of the Agent net income or profits
taxes and capital taxes and franchise taxes (imposed in lieu of net income
taxes) imposed on the Agent by any Governmental Authority or any political
subdivision or taxing authority thereof or therein in which the principal office
of the Agent is located) and all interest, penalties or similar liabilities with
respect to such non-excluded taxes, levies, imposts, duties, fees, assessments
or other charges (all such non-excluded taxes, levies, imposts, duties, charges
and fees being hereinafter called "Taxes"). If any Taxes shall be required by
law to be deducted or withheld from or in respect of any sum payable hereunder
or under any other Facility Document to the Lender or the Agent (i) the sum
payable by the Borrower shall be increased to the extent necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.12), the Lender
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or the Agent receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law. If any amounts
are payable in respect of Taxes pursuant to the preceding sentence, the Borrower
agrees to reimburse the Lender, upon the written request of the Lender, for net
income or profits taxes or net profit taxes and capital taxes and franchise
taxes (imposed in lieu of net income taxes) imposed on the Lender by any
Governmental Authority or any political subdivision or taxing authority thereof
or therein in which the principal office or applicable lending office of the
Lender is located and for any withholding of taxes as the Lender shall determine
are payable by, or withheld from, the Lender, in respect of such amounts so paid
to or on behalf of the Lender pursuant to the preceding sentence and in respect
of any amounts paid to or on behalf of the Lender pursuant to this sentence. If
any additional amounts are due to the Liquidity Lenders under the Liquidity
Agreement, such amounts shall be paid by the Borrower to the Lender.
(b) The Borrower agrees to pay any present or future stamp,
recording or documentary taxes or similar levies that arise from any payment
made hereunder or under the other Facility Documents or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or the
other Facility Documents (hereinafter referred to as "Other Taxes").
(c) Within thirty days after the date on which the payment of any
Taxes is due pursuant to the applicable law, the Borrower will furnish to the
Lender, at its address referred to in Section 9.02, the original or a certified
copy of a receipt or other documents reasonably acceptable to the Lender
evidencing payment thereof.
Section 2.13 Use of Proceeds. The proceeds of the Advances shall
be used by the Borrower to make Permissible Investments.
Section 2.14 Order of Payments by Lender. The Lender shall apply
prepayments or repayments of Advances and Interest thereon received in the
Lender's Account prior to the occurrence of an Event of Default under this
Agreement or an "event of default" under the Liquidity Agreement in the
following order: first, to the payment of principal and interest on Loans, and
second, to the payment of maturing Commercial Paper.
Section 2.15 Extension of Commitment Termination Date. The Lender
agrees that if the Borrower shall request the Lender to seek an extension of the
Liquidity Termination Date in accordance with the terms of Section 4.03 of the
Liquidity Agreement, the Lender shall request such extension. If the Liquidity
Termination Date is at any time extended pursuant to Section 4.03 of the
Liquidity Agreement, then (x) the date set forth in clause (i) of the definition
of Commitment Termination Date contained herein shall automatically be extended
to the date which is the fifth day prior to the date to which the Liquidity
Termination Date has been extended and (y) the date set forth in clause (i) of
the definition of Maturity Date contained herein shall automatically be extended
to the date which is one year after the date to which the Liquidity Termination
Date has been extended.
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ARTICLE III
CONDITIONS OF LENDING
Section 3.01 Conditions to Execution. The parties acknowledge that
the execution, delivery and effectiveness of this Agreement are subject to the
satisfaction of the following conditions precedent:
(a) Credit Agreement. The Agent shall have received this
Agreement, executed and delivered by a Responsible Officer of the
Borrower.
(b) Other Agreements. The Agent shall have received the Security
Agreement (along with acknowledged copies (or other evidence
satisfactory to the Agent and its counsel) of financing statements duly
filed under the UCC in all jurisdictions necessary or, in the opinion
of the Agent, desirable to perfect the security interests created or
purported to be created by the Security Agreement), the Liquidity
Agreement, the Control Agreement, the Depositary Agreement and the
Management Agreement duly executed and delivered by the parties
thereto.
(c) Incumbency Certificates. The Agent shall have received an
incumbency certificate of the Borrower as of the Closing Date, dated
the Closing Date, executed by a Responsible Officer of the Borrower and
its secretary or assistant secretary and therein containing the name,
office or position and specimen signature of each Person who is
authorized by the Borrower to execute this Agreement, the Note and any
and all other documentation to be executed by the Borrower in
connection with this Agreement.
(d) Authorization Proceedings. The Agent shall have received a
copy of the resolutions of the board of directors or trustees of the
Borrower as of the Closing Date, certified as true and correct by the
secretary of the Borrower and authorizing (i) the execution, delivery
and performance of this Agreement, the Note and any other documents
relating thereto, and naming one or more Persons who are authorized to
execute this Agreement and the Note on behalf of, and as the act of,
the Borrower and (ii) the borrowings contemplated hereunder, certified
by the secretary or an assistant secretary of the Borrower as of the
Closing Date, which certificate states that the resolutions thereby
certified have not been amended, modified, revoked or rescinded.
(e) Organizational and Related Documents. (i) The Agent shall have
received copies of the declaration of trust, and by-laws, or other
similar governing document, of the Borrower as of the Closing Date,
certified as of the Closing Date as complete and correct copies thereof
by the secretary or an assistant secretary of the Borrower, (ii) the
Agent shall have received true and correct copies, certified as of the
Closing Date as to authenticity by the secretary or assistant secretary
of Borrower, of the Prospectus (and the Borrower shall provide a copy
of such Prospectus for delivery to the Lender), the Registrar, Transfer
Agency and Services Agreement(s), the Custodian Contract, the
Investment Advisory Agreement(s), the Registration Statement and the
Statement of Additional Information, all of which are current, and such
other documents or instruments
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as may be reasonably requested by the Agent, including, without
limitation, a copy of any debt instrument, security agreement or other
material contract to which the Borrower may be a party (except for
portfolio investments).
(f) Legal Opinion. The Agent shall have received the executed
legal opinion(s) of Chapman and Cutler substantially in the form of
Exhibit F hereto, and such legal opinion(s) shall be satisfactory in
form and substance to the Agent and its counsel.
(g) Note. The Agent shall have received, for the account of the
Lender, the Note conforming to the requirements of this Agreement and
executed by a Responsible Officer of the Borrower.
(h) No Default. The Agent shall have received a certificate signed
by a Responsible Officer of the Borrower therein certifying that no
Default or Event of Default shall have occurred and be continuing as of
the Closing Date.
(i) Representations and Warranties. All representations and
warranties contained in Article IV shall be true and correct in all
material respects on the Closing Date as if made on the Closing Date.
(j) Financial Information. The Agent shall have received, with a
copy for the Lender and each Liquidity Lender, the most recent publicly
available financial information (which includes a list of portfolio
securities) for the Borrower.
(k) Factual Disclosures. The Agent shall have received such
information regarding litigation, tax, accounting, labor, insurance,
pension liabilities (actual or contingent), real estate leases,
material contracts, debt agreements, property ownership and contingent
liabilities concerning Borrower and its Subsidiaries as the Agent may
request, and all of such information shall be satisfactory to the Agent
and its counsel.
(l) Capital. The Borrower shall have equity capital in a net
amount equal to at least two times the amount of the Commitment in
effect on the Closing Date.
(m) Fees. The Agent shall have received satisfactory evidence that
all fees and expenses payable by the Borrower hereunder or in
connection herewith on or prior to the Closing Date have been paid in
full.
(n) Further Assurances. The Agent shall have received such
additional documents as it may reasonably request.
Section 3.02 Conditions to Each Advance. The agreement of the
Lender to make any Advance requested to be made by it on any date is subject to
the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations
and warranties made by the Borrower in or pursuant to the Facility
Documents to which it is a party shall be true and correct in all
material respects on and as of the date of any
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Advance as if made on and as of the date such Advance is made, except
to the extent any such representation and warranty expressly relates to
an earlier date.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the Advance
requested to be made on such date.
(c) Maximum Borrowing Limitation. After giving effect to the
proposed Advance to be made, the Asset Coverage Ratio of the Borrower
shall not be less than 300% and the Borrower shall not have violated
any Requirements of Law (except such violations as could not reasonably
be expected to have a Material Adverse Effect) or exceeded the
borrowing limit set forth in its Prospectus, the Registration
Statement, the Statement of Additional Information or the 1940 Act, as
the case may be.
(d) Regulation U; Forms U-1 or G-3. The Lender shall be satisfied
that the Advance and the use of proceeds thereof in respect of the
Borrower comply in all respects with Regulation U. To the extent
required by Regulation U, the Agent shall have received a copy of
either (i) Form U-1 or Form G-3, duly executed and delivered by a
Responsible Officer of the Borrower and completed for delivery to the
Lender, in form acceptable to the Agent, or (ii) a current list of
"margin stock" (as defined in Regulation U) from the Borrower, in form
acceptable to the Agent and in compliance with Section 221.3(c)(2) of
Regulation U.
(e) The Liquidity Agreement. The Liquidity Agreement is valid and
binding on and enforceable against the Liquidity Lenders and after
giving effect to such Advance, the Liquidity Commitment is at least
1.03 times the aggregate Principal amount of all outstanding Advances.
(f) Availability of Funds. The Lender has sufficient funds
available to it to make such Advance, such funds having been obtained
through the issuance of Commercial Paper or the borrowing of such funds
from the Liquidity Lenders.
(g) Governmental Authority Limitation. There exists no order,
judgment or decree of any court or Governmental Authority or arbitrator
which enjoins or restrains the Lender from making Advances and no law,
rule or regulation applicable to the Lender and no request or directive
(whether or not having the force of law) from any court or Governmental
Authority with jurisdiction over the Lender, which prohibits the
Lender, or requires that the Lender refrain, from making Advances.
Each borrowing by the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date of such Advance that
the conditions contained in this Section 3.02(a), (b) and (c) have been
satisfied.
ARTICLE IV
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REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations and Warranties of the Borrower.
The Borrower represents and warrants as follows:
(a) Financial Condition. The audited financial statements of
the Borrower for the fiscal year end most recently ended that have
heretofore been furnished to the Lender, if any, present fairly the
consolidated financial condition of the Borrower as at such date. All
such financial statements, including the related schedules and notes
thereto, have been prepared in accordance with the U.S. GAAP (except as
may be disclosed otherwise therein). The Borrower did not have, at the
date of the financial statements referred to above, any material
Guarantee Obligation, material contingent liability or material
liability for taxes, or any material long-term lease or forward or
long-term commitment, including, without limitation, any material
interest rate or foreign currency swap or exchange transaction, which
is not reflected in the foregoing statements or in the notes thereto
and which is material in relation to the consolidated financial
condition of the Borrower at such date.
(b) No Change. Since the later of (x) the date of the
organization of the Borrower or (y) the date of the most recent
financial statements referred to in subsection (a) above to the Closing
Date, there has been no material adverse change in the business,
financial condition, assets, properties or operation of the Borrower.
(c) Existence, Compliance with Law. The Borrower (i) is duly
formed, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has the power and authority and
the legal right to own its property and to conduct the business in
which it is currently engaged, (iii) is duly qualified as a
Massachusetts business trust and is in good standing under the laws of
each jurisdiction where its ownership of property or the conduct of its
business requires such qualification and (iv) is in compliance with all
Requirements of Law except to the extent that the failure to comply
therewith would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect. The shares of the Borrower have been duly
authorized.
(d) Power; Authorization; Enforceable Obligations. The
Borrower has the power and authority, and the legal right, to make,
deliver and perform the Facility Documents to which it is a party and
to borrow hereunder and has taken all necessary action to authorize (i)
the borrowings on the terms and conditions of this Agreement and the
Notes and (ii) the execution, delivery and performance of the Facility
Documents to which it is a party. No consent or authorization of,
filing with or other act by or in respect of, any Governmental
Authority or any other Person that has not been made or obtained is
required in connection with the borrowings hereunder or with the
execution, delivery or performance by the Borrower, or the validity or
enforceability against the Borrower, of this Agreement or the other
Facility Documents. This Agreement and each of the other Facility
Documents to which the Borrower is a party has been, and the Note will
be, duly executed and delivered by the Borrower. This Agreement and
each of the other Facility Documents to which the Borrower is a party
constitutes, and the Note when
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executed and delivered will constitute, a legal, valid and binding
obligation of the Borrower enforceable against the Borrower in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law).
(e) No Legal Bar. The execution, delivery and performance of
this Agreement and the other Facility Documents by the Borrower, the
borrowings hereunder and the use of the proceeds thereof by the
Borrower will not (i) violate any Requirement of Law or Contractual
Obligation of the Borrower, (ii) result in, or require, the creation or
imposition of any Lien on any of its properties or revenues pursuant to
any such Requirement of Law or Contractual Obligation with respect to
the Borrower, (iii) require the consent of any Governmental Authority
or any other Person with respect to the Borrower or (iv) conflict with,
result in a breach of, or constitute a default under, the
organizational and constitutive documents of the Borrower.
(f) No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is
pending or, to the knowledge of the Borrower, threatened against the
Borrower or against any of its properties or revenues or by or against
any "Affiliated Person" of the Borrower, within the meaning of the 1940
Act (i) with respect to this Agreement or the other Facility Documents
or any of the transactions contemplated hereby or thereby, or (ii)
which would reasonably be expected to have a Material Adverse Effect.
(g) Ownership of Property; Liens. The Borrower has good record
and marketable title to all its property, and none of such property is
subject to any Liens except for Permitted Liens.
(h) No Default; Burdensome Restrictions. The Borrower is not
in default under or with respect to any of its Contractual Obligations
in any respect which would reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is
continuing. No Requirement of Law or Contractual Obligation of the
Borrower would reasonably be expected to have a Material Adverse Effect
on the Borrower.
(i) Taxes. The Borrower has timely filed all federal income
tax returns and all material tax returns, statements, forms and reports domestic
and foreign required to be filed by it and has paid all material taxes assessed
and payable by it which have become due (other than any taxes, fees or other
charges the amount or validity of which are currently being contested in good
faith by appropriate proceedings and fully provided for on the financial
statements of the Borrower in accordance with U.S. GAAP). The Borrower has at
all times paid, or has provided adequate reserves (in the good faith judgment of
the management of the Borrower) for the payment of, all federal, state and
foreign income taxes applicable for all prior fiscal years and for the current
fiscal year to date. There is no material action, suit, proceeding,
investigation, audit, or claim now pending or, to the knowledge of the Borrower,
threatened by
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any authority regarding any taxes relating to the Borrower. The Borrower has not
entered into an agreement or waiver or been requested to enter into an agreement
or waiver extending any statute of limitations relating to the payment or
collection of taxes of the Borrower, or is aware of any circumstances that would
cause the taxable years or other taxable periods of the Borrower not to be
subject to the normally applicable statute of limitations.
(j) Regulated Investment Company. The Borrower is a "regulated
investment company" as defined in the Code.
(k) Code Compliance. The Borrower has complied with all
requirements of the Code applicable to regulated investment companies,
so as to be relieved of federal income tax on net investment income and
net capital gains distributed by it.
(l) Federal Regulations. The Borrower has and will furnish to
the Agent and the Lender statements in conformity with the requirements
of FR Form U-1 or FR Form G-3 referred to in Regulation U. The Borrower
is not subject to regulation under any Federal or State statute or
regulation (other than Regulation T, U and X of the Board of Governors
of the Federal Reserve System and the 1940 Act) which limits its
ability to incur Indebtedness.
(m) No ERISA Plans. Neither the Borrower nor any Subsidiary of
the Borrower nor any ERISA Affiliate has ever maintained or contributed
to (or had an obligation to contribute to) any Plan.
(n) Subsidiaries. The Borrower has no Subsidiaries and no
equity investment or interest in any other Person (other than portfolio
investments permitted by its Investment Policies).
(o) Purpose of Advances. The proceeds of the Advances shall be
used solely to finance the purchase and holding of portfolio assets of
the Borrower consisting of Permissible Investments and for other lawful
corporate purposes in the usual and normal course of the Borrower's
business.
(p) Registration of the Borrower. The Borrower is registered
as a non-diversified, closed-end management investment company under
the 1940 Act.
(q) Offering in Compliance with Securities Laws. The Borrower
has issued its common shares of beneficial interests pursuant to the
Registration Statement, which was declared an effective registration
statement on Form N-2 on October 26, 1999, and such issuance materially
complied with all Federal and State securities laws applicable thereto.
(r) Investment Policies, Prospectus. The Borrower is in
compliance in all material respects with all of its Investment
Policies, and is permitted to borrow hereunder pursuant to the limits
and restrictions set forth in its Prospectus, the Registration
Statement and the Statement of Additional Information.
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(s) Accuracy and Completeness of Information. All factual
information heretofore or contemporaneously furnished by or on behalf
of the Borrower in writing to the Agent, the Lender or the Liquidity
Lenders for purposes of or in connection with this Agreement or any
transaction contemplated hereby (in each case, as amended, superseded,
supplemented or otherwise modified in good faith with the knowledge of
the Agent, the Lender or the Liquidity Lenders) is (except for
projections and forward looking statements), and all other such factual
information hereafter furnished by or on behalf of the Borrower to the
Agent, the Lender or the Liquidity Lenders (in each case, as amended,
superseded, supplemented or otherwise modified in good faith with the
knowledge of the Agent, the Lender or the Liquidity Lenders) will be
(except for projections and forward looking statements), true and
accurate in every material respect under the circumstances on the date
as of which such information is dated or certified, and such
information is not, or shall not be, as the case may be, incomplete by
omitting to state any material fact necessary to make such information
(taken as a whole) not misleading under the circumstances on the date
as of which such information is dated or certified.
(t) Affiliated Persons. To the best knowledge of the Borrower,
the Borrower, together with its Affiliates is not an "Affiliated
Person" (as defined in the 1940 Act) of the Agent, the Lender or any
Liquidity Lender.
(u) Affiliations. As of the Closing Date, the common shares of
the Borrower are listed on the New York Stock Exchange.
ARTICLE V
COVENANTS OF THE BORROWER
Section 5.01 Affirmative Covenants. Until the later of the
Commitment Termination Date and the date on which no Advances shall be
outstanding and all Obligations of the Borrower shall be paid in full, the
Borrower agrees to the following from and after the Closing Date:
(a) Financial Statements. The Borrower shall furnish to the Agent
(with copies for the Lender and each Liquidity Lender):
(i) as soon as available and in any event within ninety days
after the end of each fiscal year of the Borrower, a statement of
assets and liabilities of the Borrower as at the end of such fiscal
year, a statement of operations for such fiscal year, if any, a
statement of changes in net assets for such fiscal year and the
preceding fiscal year, a portfolio of investments as at the end of such
fiscal year and the per share and other data for such fiscal year
prepared in accordance with U.S. GAAP (as consistently applied) and all
regulatory requirements, and all presented in a manner acceptable to
the Securities and Exchange Commission or any successor or analogous
Governmental Authority by KPMG Peat Marwick LLP or other independent
certified public accountants of recognized
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standing, all audited by KPMG Peat Marwick LLP or other independent
certified public accountants of recognized standing and accompanied by
a report of such accountants, without material qualification;
(ii) as soon as available and in any event within seventy-five
days after the close of the first six-month period of each fiscal year
of the Borrower, a statement of assets and liabilities as at the end of
such six-month period, a statement of operations for such six-month
period, a statement of changes in net assets for such six-month period
and a portfolio of investments as at the end of such six-month period,
all prepared in accordance with regulatory requirements and all
certified (subject to normal year end adjustments) as to fairness of
presentation, U.S. GAAP (as consistently applied) and consistency by a
Responsible Officer of the Borrower; and
(iii) as soon as available, but in any event not later than
fifteen days after the end of each month of each fiscal year of the
Borrower, the net asset value sheet of the Borrower as at the end of
such month, in the form and detail similar to those customarily
prepared by the Borrower's management for internal use, certified by a
Responsible Officer of the Borrower as being fairly stated in all
material respects; provided, however, that if the Borrower has Advances
outstanding, the Borrower shall provide the Lender (which may be done
by facsimile) with (x) such net asset value sheet described above in
this subsection and (y) a certificate of a Responsible Officer of the
Borrower showing in reasonable detail the calculations supporting the
Borrower's compliance with Section 5.02(a), within fifteen days after
the end of each calendar month so long as any Advances to the Borrower
remain outstanding;
all such financial statements fairly present the financial condition of the
Borrower and are complete and correct in all material respects (subject to
normal year end adjustments) and shall be prepared in reasonable detail and in
accordance with U.S. GAAP applied consistently throughout the periods reflected
therein and with prior periods (except as approved by such accountants or
officer, as the case may be, and disclosed therein).
(b) Certificates; Other Information. The Borrower shall furnish to the
Agent (with a copy to be delivered to the Lender, the Rating Agencies and each
Liquidity Lender):
(i) concurrently with the delivery of the financial statements
referred to in Section 5.01(a)(i), (ii) and (iii) and the semi-annual
report in Section 5.01(b)(iii), a certificate of a Responsible Officer,
in substantially the form of Exhibit D hereto, stating that, to the
best of such Responsible Officer's of the Borrower knowledge, the
Borrower during such period has observed or performed all of its
covenants and other agreements, and satisfied every other condition,
contained in this Agreement and the other Facility Documents to be
observed, performed or satisfied by it, and that no Default or Event of
Default has occurred and is continuing except as specified in such
certificate;
(ii) within five Business Days after the same are mailed to, or
filed with, the Securities and Exchange Commission or any successor or
analogous Governmental Authority, copies of each Registration Statement
and any amendments thereto, each
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revised Prospectus or Statement of Additional Information and the
annual and semi-annual financial reports to shareholders;
(iii) as soon as available, but in any event not later than
seventy-five days after the end of each six-month period, a certificate
of a Responsible Officer of the Borrower stating that the list of the
Borrower's portfolio investments attached to such certificate is true
and correct;
(iv) within 30 days following the end of each quarter, a list
setting forth each of the senior loan assets held by the Borrower and
the value thereof, in each case as of the last day of such quarter; and
(v) promptly, such additional financial and other
information as the Lender may from time to time reasonably request,
including, but not limited to, copies of all changes to the Prospectus
and Registration Statement and information reasonably required by the
Manager to perform its services in accordance with the Management
Agreement.
(c) Payment of Obligations. The Borrower shall pay, discharge or
otherwise satisfy at or before maturity or before they become delinquent as the
case may be, all its material Indebtedness (except for an aggregate amount
outstanding at any one time of up to $2,000,000) of whatever nature, except
where the amount or validity thereof is currently being contested in good faith
by appropriate proceedings and reserves with respect thereto have been provided
on the books of the Borrower to the reasonable satisfaction of the Agent.
(d) Conduct of Business and Maintenance of Existence. The Borrower
shall continue to engage in its investment business in accordance with its
Investment Policies, Prospectus and the Registration Statement of the Borrower
and preserve, renew and keep in full force and effect its existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business except for any such rights,
privileges and franchises which the failure to maintain, individually or in the
aggregate, will not have a Material Adverse Effect; comply in all material
respects with all Contractual Obligations and Requirements of Law; maintain at
all times its status as a regulated investment company registered under the 1940
Act; and comply with all requirements of the Code applicable to regulated
investment companies, so as to be relieved of federal income tax on net
investment income and net capital gains distributed by it.
(e) Maintenance of Insurance. The Borrower shall keep all property
used and useful and necessary in its business, if any, in good working order and
condition; maintain with financially sound and reputable insurance companies
insurance on all its property in at least such amounts and against at least such
risks as are usually insured against in the same general area by entities
engaged in the same or similar business or as may otherwise be required by the
Securities and Exchange Commission or any successor or analogous Governmental
Authority (including, without limitation, (i) fidelity bond coverage as shall be
required by Rule 17g-1 promulgated under the 1940 Act or any successor provision
and (ii) errors and omissions insurance); and furnish to the Agent, upon written
request, full information as to the insurance carried.
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(f) Inspection of Property; Books and Records; Discussions. The
Borrower shall keep proper books of records and account in which full, true and
correct entries in conformity with U.S. GAAP and all Requirements of Law shall
be made of all dealings and transactions in relation to its business and
activities; and (except to the extent the Borrower is prohibited from allowing
any such inspection pursuant to a written confidentiality agreement or is
otherwise prohibited pursuant to industry standards) permit representatives of
the Agent, upon prior notice to the Borrower, to visit and inspect any of its
properties and examine and make abstracts from any of its books and records at
any reasonable time and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other condition of the
Borrower with officers and employees of the Borrower and with its independent
certified public accountants; provided, however, that, in the absence of any
Default or Event of Default, the Agent will be permitted to make no more than
one such inspection in any calendar year.
(g) Notices. The Borrower shall promptly give notice to the Agent and
the Lender of:
(i) any Responsible Officer of the Borrower becoming aware of
the occurrence of any Default or Event of Default;
(ii) any (x) default or event of default under any Contractual
Obligation of the Borrower or (y) litigation, investigation or
proceeding which may exist at any time between the Borrower or any of
its Subsidiaries and any Governmental Authority, which in either case,
would reasonably be expected to have a Material Adverse Effect;
(iii) any litigation or proceeding affecting the Borrower which
would reasonably be expected to have a Material Adverse Effect;
(iv) any material investigation or proceedings undertaken or
instituted by any Governmental Authority with respect to the Borrower
or its Subsidiaries;
(v) any material written communication with respect to the
Borrower made to or received from any Governmental Authority involved
with the regulation of securities matters;
(vi) those time periods in which 20% or more of the assets of
the Borrower constitute "margin stock" as defined in Regulation U;
(vii) material changes in the Borrower's Registration Statement;
and
(viii) a development or event which, in the judgment of the
Borrower, could reasonably be expected to have a Material Adverse
Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer of the Borrower setting forth details of the occurrence
referred to therein and stating what action the Borrower proposes to take with
respect thereto.
(h) Purpose of Advances. The Borrower shall use the proceeds of the
Advances solely to finance the purchase and holding of portfolio assets of the
Borrower consisting of
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Permissible Investments or other lawful corporate purpose in the usual and
normal course of the Borrower's business. Without limiting the foregoing, the
Borrower will not, directly or indirectly, use any part of such proceeds for any
purpose which would violate any provision of its Prospectus or the Registration
Statement of the Borrower or any applicable statute, regulation, order or
restrictions, including, without limitation, Regulations T, U and X and the
Borrower shall not purchase securities in connection with the hostile
acquisition of the issuer of such securities.
(i) Compliance with Requirements of Law & Regulatory Authorities. The
Borrower shall comply in all material respects with all applicable Requirements
of Law, including, without limitation, Regulations T, U and X, other applicable
regulations of the Board of Governors of the Federal Reserve System, and, so
long as registered, all rules and regulations of the New York Stock Exchange.
(j) Payment of Taxes. The Borrower will pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties would otherwise attach thereto, and all lawful claims which, if
unpaid, might become a lien or charge upon any properties of the Borrower not
otherwise permitted under this Agreement; provided that the Borrower shall not
be required to pay any such tax, assessment, charge, levy or claim which is
being contested in good faith and by proper proceedings if it has maintained
adequate reserves with respect thereto in accordance with generally accepted
accounting principles.
(k) Maintenance of Registration Statement. The Borrower will maintain
the effectiveness of the Registration Statement under all applicable
Requirements of Law.
(l) Delivery; Further Assurances. The Borrower shall, at its expense:
(i) execute and deliver any and all instruments necessary or as the
Agent may reasonably request to grant and perfect a first priority Lien
on all of the Borrower Collateral; and
(ii) upon request of the Agent, forthwith execute and deliver or
cause to be executed by the Borrower and delivered to the Agent, in due
form for filing or recording (and pay the cost of filing or recording
the same in all public offices deemed necessary by the Agent), such
security agreements, pledge agreements, consents, waivers, financing
statements, stock or bond powers, and other documents, and do such
other acts and things, all as the Agent may from time to time
reasonably request, to establish and maintain to the reasonable
satisfaction of the Agent valid perfected Liens of the first priority
in all the Borrower Collateral (free of all other Liens, claims, and
rights of third parties whatsoever, except for Permitted Liens).
(n) ERISA. The Borrower covenants and agrees that neither the
Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate will
maintain or contribute to (or have an obligation to contribute to) a Plan.
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Section 5.02 Negative Covenants. Until the later of the
Commitment Termination Date and the date on which no Advances shall be
outstanding and all Obligations of the Borrower shall be repaid in full, the
Borrower agrees to the following, from and after the Closing Date:
(a) Financial Condition Covenants. The Borrower shall not permit (i)
the Asset Coverage Ratio of the Borrower (with all borrowings under this
Agreement deemed to be Senior Securities under the 1940 Act) to be less than (x)
300% for more than four consecutive Business Days or (y) 275% at any time, or
(ii) allow borrowings of the Borrower to exceed the limits set forth in the
Borrower's Prospectus, the Statement of Additional Information, the Registration
Statement or the 1940 Act.
(b) Limitation on Indebtedness; Derivatives; and Guarantee Obligations.
(i) The Borrower shall not create, incur, assume or suffer to
exist any Indebtedness except Indebtedness of the Borrower incurred (1) under
this Agreement and the Note, (2) in the ordinary course of business of the
Borrower so long as such Indebtedness is not for borrowed money and is in
compliance with the terms of the Borrower's Investment Policies and the 1940
Act, (3) for temporary purposes, in an amount not exceeding five percent (5%) of
the Borrower's Total Assets at the time any such Indebtedness is incurred or (4)
in the form of reverse repurchase transactions, short sales of securities,
securities loans or other transactions entered into primarily for investment
purposes which have, or may be deemed to have, the effect of borrowing, and, in
each case, which is (x) not otherwise prohibited by law or in contravention of
the Borrower's Prospectus, the Statement of Additional Information or
Registration Statement, (y) in the ordinary course of business of the Borrower
and (z) appropriately reflected in the calculation of Asset Coverage Ratio;
provided, however, that in no event shall the Borrower be permitted to incur
Indebtedness (other than under this Agreement) which either (x) is secured by,
or encumbers (except for monies in a segregated account in connection with
hedging arrangements), assets of the Borrower, or (y) by its terms is senior or
prior in payment to the Advances or the other Obligations.
(ii) The Borrower shall not invest in, or incur Indebtedness or
other liability to any Person with respect to, any derivative instrument
(including without limitation any swap, collar, cap, puts, calls, equity
derivative or mortgage-backed or debt-backed derivative) unless each of the
following is true: (x) such derivative instrument is marked-to-market on a daily
basis; (y) for purposes of the calculation of Asset Coverage Ratio, such
derivative instrument is valued at its fair market value as of the date of such
calculation, and any liability thereunder on a marked-to-market basis is
subtracted as a liability, and (z) the purpose of the investment in such
derivative instrument is to augment capital appreciation or current income of
the Borrower or for hedging purposes and is otherwise in compliance with the
Borrower's Prospectus, the Statement of Additional Information, the Registration
Statement and the 1940 Act.
(iii) The Borrower shall not create, incur, assume or suffer
to exist any Guarantee Obligations of the Borrower in an aggregate amount
outstanding at any one time of more than $2,000,000.
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(c) Limitation on Liens. The Borrower shall not create, incur, assume
or suffer to exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, except for Permitted Liens.
(d) Limitations on Fundamental Changes; Subsidiaries. The Borrower
shall not enter into any merger, consolidation or amalgamation, or liquidate,
wind up or dissolve the Borrower (or suffer any liquidation or dissolution), or
convey, sell, lease, assign, transfer or otherwise dispose of all, or
substantially all, of the property, business or assets of the Borrower in a
single transaction or in related transactions and shall not engage in any
business activity except as an investment company. The Borrower shall not
establish any Subsidiaries without the prior written consent of the Lender.
(e) Limitation on Distributions. The Borrower shall not, during the
occurrence and continuation of an Event of Default, or if a distribution would
(with the giving of notice or passage of time or both) cause the occurrence of
an Event of Default, make or effect (by means of purchase of capital stock or
otherwise) any distribution to the shareholders of the Borrower (including,
without limitation, any dividend or coupon payment or other distribution to any
holders of preferred stock of the Borrower), whether now or hereafter existing,
either directly or indirectly, whether in cash or property or in obligations of
the Borrower; provided, that distributions may be made to the extent that such
distributions are required to (i) enable the Borrower to continue to qualify as
a "regulated investment company" under Sections 851-855 of the Code and (ii)
prevent the Borrower from incurring any federal income or excise taxes as a
"regulated investment company" under Subchapter M of the Code.
(f) Limitation on Investments, Loans and Advances. The Borrower shall
not make any advance, loan, extension of credit or capital contribution to, or
purchase any stock, bonds, notes, debentures or other securities of or any
assets constituting a business unit of or make any other investment in, any
Person, except those consistent with the Borrower's Fundamental Investment
Policies and other Permissible Investments.
(g) Limitation on Transactions with Affiliates. The Borrower shall not
enter into any transaction, including, without limitation, any purchase, sale,
lease or exchange of property or the rendering of any service, with any
Affiliate unless such transaction is not otherwise prohibited under this
Agreement and such transaction is not in violation of the 1940 Act, including,
without limitation, Section 17 thereof.
(h) Limitation on Negative Pledge Clauses. The Borrower shall not enter
into with any Person any agreement, other than this Agreement or the other
Facility Documents, which prohibits or limits the ability of the Borrower to
create, incur, assume or suffer to exist any Lien upon any of its property,
assets or revenues, whether now owed or hereafter acquired.
(i) Limitation on Changes to Investment Policies. Except as may be
required by law, the Borrower shall not make any change to its Fundamental
Investment Policies without the consent of the Lender, which consent shall not
be unreasonably withheld or delayed.
(j) Change of Custodian. There will be no change of the Custodian for
Borrower
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unless any such successor custodian is a bank or trust company organized under
the laws of the United States or a political subdivision thereof having assets
of at least $10,000,000,000 and a long-term debt or deposit rating of at least
"A" from Fitch or "A2" from Moody's and, (x) after giving effect to such change,
no Default or Event of Default shall have occurred and be continuing and (y) the
Lender shall have received an opinion of counsel to the effect that after such
change, the Collateral Agent shall continue to have a first priority perfected
security interest in the Collateral.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01 Events of Default. If any of the following
events (each, an "Event of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any Principal of any
Advance when due in accordance with the terms hereof, or the Borrower
shall fail to pay any Interest on any Advance, or any other expense,
fee or other amount payable hereunder or under any document entered in
connection herewith, within three Business Days after any such interest
or other amount becomes due in accordance with the terms thereof or
hereof; or
(b) Any representation or warranty made or deemed made by the
Borrower herein or in any other Facility Document to which it is a
party or which is contained in any certificate, document or financial
or other statement furnished by or on behalf of the Borrower at any
time under or in connection with this Agreement shall prove to have
been incorrect in any material respect on or as of the date made or
deemed made; or
(c) The Borrower shall default in the observance or
performance of any agreement contained in Section 5.02; or
(d) The Borrower shall default in the observance or
performance of any other agreement contained in this Agreement or the
Note (other than as provided in paragraphs (a) through (c) of this
Section), and such default shall continue unremedied for a period of
five days in the case of any such default under Section 5.01(g)(i) or
thirty days in the case of any other such default; or
(e) The Borrower shall (i) default in (A) any payment of
principal or interest, regardless of the amount, due in respect of any
single Indebtedness (other than the Note) and/or derivative instrument
(including, without limitation any swap, collar, cap, puts, calls,
equity, derivative or mortgage-backed or debt-backed derivative) issued
under a single indenture or other agreement, of $2,000,000 or greater,
(B) any payment of principal or interest, regardless of amount, due in
respect of Indebtedness and/or derivative instrument (including without
limitation any swap, collar, cap, puts, calls, equity, derivative or
backed or debt-backed derivative) of any individual amount but which in
the aggregate exceeds $2,000,000 or (C) the payment of any Guarantee
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Obligation with respect to an amount of $2,000,000 or greater, beyond
the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness or Guarantee Obligation was created; or
(ii) default in the observance or performance of any other agreement or
condition, beyond the period of grace, relating to any such
Indebtedness and/or derivative instrument (including without limitation
any swap, collar, cap, puts, calls, equity derivative or
mortgage-backed or debt-backed derivative) or Guarantee Obligation or
contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or
to permit the holder or holders of such Indebtedness and/or derivative
instrument (including without limitation any swap, collar, cap, puts,
calls, equity derivative or mortgage-backed or debt-back derivative) or
beneficiary or beneficiaries of such Guarantee Obligation (or a trustee
or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or such
Guarantee Obligation to become payable; or
(f) (i) The Borrower shall commence any case, proceeding or
other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization
or relief of debtors, seeking to have an order for relief entered with
respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to
it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any
substantial part of its assets, or the Borrower shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Borrower any case, proceeding or other action of
a nature referred to in clause (i) above which (A) results in the entry
of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged, unstayed or unbonded for a period of
sixty days; or (iii) there shall be commenced against the Borrower any
case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order
for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within sixty days from the entry
thereof; or (iv) the Borrower shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in any of
the acts set forth in clause (i), (ii), or (iii) above; or (v) the
Borrower shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or
(g) One or more judgments or decrees shall be entered against
the Borrower involving in the aggregate a liability of $2,000,000 or
more in excess of any applicable insurance coverage and all such
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within thirty days from the entry thereof; or
(h) Without the prior written consent of the Required
Liquidity Lenders, which consent shall not be unreasonably withheld,
Nuveen or a Person directly controlling, controlled by, or under common
control with Nuveen shall no longer act as
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investment manager for or advisor to the Borrower; or
(i) The Borrower's registration under the 1940 Act shall lapse
or be suspended; or
(j) The Borrower shall fail to comply with the 1940 Act in a
manner which could reasonably be expected to have a Material Adverse
Effect; or
(k) The Borrower shall fail to comply in all material respects
with its Fundamental Investment Policies; or
(l) The Security Agreement or the Control Agreement shall
cease to be in full force and effect, or the enforceability of either
thereof shall be contested by the Borrower, or the Lien on the
Collateral in favor of the Collateral Agent shall at any time cease to
be a valid and perfected first-priority Lien, subject only to Permitted
Liens;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of subsection (f) above with respect to the Borrower,
automatically the Commitment to the Borrower shall immediately terminate and the
Advances made to the Borrower hereunder (with accrued interest thereon and, with
respect to Commercial Paper, with interest accrued and to accrue through the
maturity date) and all other amounts owing by the Borrower under this Agreement
and the Note shall immediately and automatically become due and payable, and (B)
if such event is any other Event of Default, either or all of the following
actions may be taken: (i) the Agent may, or upon the request of the Required
Liquidity Lenders, the Agent shall, by notice to the Borrower declare the
Commitment to the Borrower to be terminated forthwith, whereupon such Commitment
shall immediately terminate; (ii) the Agent may, or upon the request of the
Required Liquidity Lenders, the Agent shall, by notice of default to the
Borrower, declare the Advances hereunder made (with accrued interest thereon and
with respect to Commercial Paper, with interest accrued and to accrue through
maturity date) and all other amounts owing by the Borrower under this Agreement
and the Note of the Borrower to be due and payable forthwith, whereupon the same
shall immediately become due and payable; and (iii) the Agent may, or upon the
request of the Required Liquidity Lenders, the Agent shall, exercise any and all
rights or other remedies available to the Lender at law or in equity, including
without limitation, any rights and remedies available under the 1940 Act. Except
as expressly provided above in this Article, presentment, demand, protest,
notice of intent to accelerate, notice of acceleration and all other notices of
any kind are hereby expressly waived.
ARTICLE VII
THE AGENT
Section 7.01 Appointment. The Lender hereby irrevocably
designates and appoints the Agent to take such action on its behalf under the
provisions of this Agreement, the Note and the Facility Documents and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement, the Note and the other Facility
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Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere or in this Agreement,
the Agent shall not have any duties or responsibilities, except those expressly
set forth herein, or any fiduciary relationship with the Lender or the Liquidity
Lenders, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other
Facility Document or otherwise exist against the Agent in such capacity.
Section 7.02 Delegation of Duties. The Agent may execute any
of its duties under this Agreement or any other Facility Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible to the Lender for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
Section 7.03 Exculpatory Provisions. None of the Agent-Related
Persons shall be (i) liable to the Lender or the Liquidity Lenders for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or any other Facility Document (except for it or
such Person's own gross negligence or willful misconduct) or (ii) responsible in
any manner to the Lender or the Liquidity Lenders for any recitals, statements,
representations or warranties made by the Borrower or any officer thereof
contained in this Agreement or any other Facility Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Facility Document or for the value, validity, effectiveness (other than
its own due execution), genuineness, enforceability or sufficiency of this
Agreement or the Note or for any failure of the Borrower to perform its
obligations hereunder or thereunder. The Agent-Related Persons shall be under no
obligation to the Lender or the Liquidity Lenders to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Facility Document, or to inspect the
properties, books or records of the Borrower.
Section 7.04 Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, or telecopy message, statement, order or other document or
conversation believed in good faith by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by such Agent. The
Agent may deem and treat the payee of the Note as the owner thereof for all
purposes unless a written notice of assignment, negotiation or transfer thereof
shall have been filed with the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other
Facility Document unless it shall first receive such advice from the Lender or
the Required Liquidity Lenders as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lender or the Liquidity Lenders against
any and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
and the Note in accordance with a request of the Lender or the Required
Liquidity Lenders, and such request and any action taken or failure to act
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pursuant thereto shall be binding upon the Lender, the Liquidity Lenders and all
future holders of the Note.
Section 7.05 Notice of Default. The Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from the Lender, the Liquidity
Lenders or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". The
Agent will notify the Lender and the Liquidity Lenders as soon as is reasonably
practicable of its receipt of any such notice. The Agent shall take such action,
with respect to such Default or Event of Default as shall be reasonably directed
by the Lender or the Required Liquidity Lenders; provided, that unless and until
the Agent shall have received such direction, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interest of the Lender.
Section 7.06 Credit Decisions. The Lender expressly
acknowledges that none of the Agent-Related Persons has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to the Lender. The Lender
represents to the Agent that it has, independently and without reliance upon the
Agent, and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, operations,
property, financial and other condition and creditworthiness of the Borrower and
made its own decision to make its Advances hereunder and enter into this
Agreement. The Lender also represents that it will, independently and without
reliance upon the Agent, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the Note, and to make such investigation as it deems necessary to inform itself
as to the business, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Lender by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide the
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Borrower which may come into the possession of the Agent or any of its
Agent-Related Persons.
Section 7.07 Agent in its Individual Capacity. The Agent and
its Agent-Related Persons may make loans to, accept deposits from and generally
engage in any kind of business with the Borrower as though the Agent and its
Agent-Related Persons were not an Agent hereunder and under the Note. With
respect to the Advances made or renewed by the Agent and the Note issued to the
Agent, the Agent shall have the same rights and powers under this Agreement and
the Note as the Lender and may exercise the same as though it were not an Agent
and the term "Lender" shall include the Agent in its individual capacity.
Section 7.08 Successor Agent. The Agent may resign its
capacity as an Agent upon thirty days' notice to the Lender and the appointment
of a successor Agent. If the Agent shall resign as an Agent under this Agreement
and the Note, then the Lender shall appoint a
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successor agent for the Lender, which successor agent shall be approved by the
Borrower. If no successor Agent shall have been so appointed within thirty days
of the retiring Agent's giving of notice of resignation, then such retiring
Agent may appoint a successor Agent which shall be a commercial bank organized
under the laws of the United States of America or any State thereof and having a
combined capital and surplus of at least $100 million. Any successor agent shall
succeed to the rights, powers and duties of such retiring Agent and the term
"Agent" shall mean such successor agent effective upon its appointment, and the
former Agent's rights, powers and duties as Agent shall be terminated, without
any other or further act or deed on the part of such former Agent or any of the
parties to this Agreement or any holder of the Note. After the retiring Agent's
resignation as an Agent, the provisions of this subsection shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was an
Agent under this Agreement and the Note.
ARTICLE VIII
INDEMNIFICATION
Section 8.01 Indemnities by the Borrower. Without limiting any
other rights which the Lender, the Agent, the Liquidity Agent, the Liquidity
Lenders, the Collateral Agent, the Depositary, the Dealer or any Affiliate of
any thereof, as well as their respective directors, officers, employees and
agents (each, an "Indemnified Party") may have hereunder or under applicable
law, the Borrower hereby agrees to indemnify each Indemnified Party from and
against any and all claims, losses and liabilities (including reasonable
attorneys' fees), other than any present or future income, capital, franchise or
similar taxes, now or hereafter imposed, levied, collected, withheld or assessed
(all of the foregoing non-excluded items being collectively referred to as
"Indemnified Amounts"), arising out of or resulting from (but excluding, in any
event, Indemnified Amounts to the extent resulting from gross negligence,
willful misconduct or bad faith on the part of such Indemnified Party):
(i) reliance on any representation or warranty or statement
made or deemed made by the Borrower (or any of its officers) under or
in connection with any Facility Document to which the Borrower is a
party which shall have been incorrect in any material respect when
made;
(ii) the execution, delivery, performance, and enforcement of
this Agreement;
(iii) any failure of the Borrower to perform its duties or
obligations in accordance with the provisions of this Agreement or the
Security Agreement;
(iv) any investigation, litigation or proceeding related to
this Agreement, the Borrower or the use of proceeds of Advances or in
respect of the Borrower Collateral;
(v) the use by the Borrower of the proceeds of the Advances;
(vi) the failure by the Borrower or any of its agents to
comply with any
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Requirement of Law with respect to the Borrower Collateral;
(vii) the failure at any time to vest in the Collateral Agent
under the Security Agreement a perfected, first-priority security
interest in the Borrower Collateral, except as otherwise permitted by
this Agreement; or
(viii) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws with
respect to the Borrower Collateral, whether at the time of any Advance
or at any subsequent time.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Amendments, Etc. No amendment or waiver of any
provision of any Facility Document, and no consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Lender and the Agent, and then such amendment, waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
Section 9.02 Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise stated herein, be
in writing (including telecopier) and mailed, telecopied, delivered by
nationally recognized overnight courier or hand delivered, if to the Borrower,
the Lender or the Agent, at its address set forth under its name on the
signature pages hereof, or at such other address as shall be designated by such
Person to each other party hereto in a written notice. All such notices and
communications shall, when mailed or delivered, be effective three days after
the date deposited in the mails, delivered to the courier or hand delivered,
respectively, and, when telecopied, be effective upon receipt of confirmation
that telecopy has been received, except that notices and communications to the
Agent or the Lender pursuant to Article II shall not be effective in any case
until received by such Person.
Section 9.03 No Waiver; Cumulative Remedies. No failure on the
part of the Agent or the Lender to exercise, and no delay in exercising, any
right under any Facility Document shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 9.04 Binding Effect; Assignability. This Agreement
shall become effective when it shall have been executed by the Borrower, the
Lender and the Agent. From and after the date this Agreement shall have so
become effective, this Agreement shall be binding upon and inure to the benefit
of the Borrower, the Lender and the Agent and their respective successors and
assigns; provided that the Borrower shall not be permitted to assign its rights
hereunder or interest herein to any Person without the consent of the Agent and
the Lender.
Section 9.05 Governing Law. This Agreement and the Note shall
be governed
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by, and construed in accordance with, the laws of the State of New York.
Section 9.06 Costs and Expenses. (a) Whether or not the
transactions contemplated hereby are consummated, in addition to the rights of
indemnification granted to the Indemnified Parties under Article VIII hereof,
the Borrower agrees to pay on demand all reasonable costs and expenses in
connection with the preparation, execution, delivery, modification, amendment,
administration and monitoring of the Facility Documents and the other documents
to be delivered thereunder (including the costs in respect of the perfection and
maintenance of the security interests), including, without limitation, the
reasonable fees and expenses of counsel to the Lender and counsel to the Agent,
and of local counsel who may be retained by the Lender and the Agent, with
respect thereto and with respect to advising the Lender and the Agent as to
their respective rights and remedies under the Facility Documents. The Borrower
further agrees to pay on demand all costs and expenses of the Agent and Lender
(including, without limitation, the reasonable fees and expenses of counsel to
the Agent and of counsel to the Lender and of local counsel who may be retained
by the Agent and the Lender), in connection with the enforcement (whether
through negotiations, workout, legal proceedings or otherwise) of, or
preservation of rights under, the Facility Documents and the other documents to
be delivered thereunder, including, without limitation, reasonable counsel fees
and expenses in connection with the enforcement of rights under this Section
9.06(a).
(b) In addition, whether or not the transactions contemplated
hereby are consummated, Borrower shall pay on demand all other reasonable costs
and expenses incurred by the Lender pursuant to the Facility Documents,
including, without limitation, the cost of rating the Lender's commercial paper
by independent financial rating agencies, the costs of the Lender's auditors
auditing the Borrower's books, records and procedures, the cost of auditing the
Lender's books, the fees, costs and expenses of and indemnities to the
Depositary, the Collateral Agent, the Administrator, the Dealer and the
Liquidity Lenders (including all fees, costs, expenses and indemnities payable
to the Liquidity Lenders under Sections 3.08, 3.09, 3.10, 3.11 or 10.04 of the
Liquidity Agreement) and the reasonable fees and expenses of counsel for the
Lender and the Agent with respect to advising the Lender and the Agent as to
matters relating to the Lender's operations.
Section 9.07 Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
Section 9.08 Waiver of Jury Trial. THE BORROWER, THE LENDER
AND THE AGENT EACH AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope
of this waiver is intended to be all-encompassing of any and all disputes that
may be filed in any court and that relate to the subject matter of this
transaction, including without limitation, contract claims, tort claims, breach
of duty claims, and all other common law and statutory claims. The Borrower, the
Lender and the Agent each acknowledges that this waiver is a material inducement
for such party to enter into a business relationship, that the Borrower, the
Lender and the Agent have already relied on the waiver in entering into this
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Agreement and that each will continue to rely on the waiver in their related
future dealings. The Borrower, the Lender and the Agent further warrant and
represent that each has reviewed this waiver with its legal counsel, and that
each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
In the event of litigation, this Agreement may be filed as a written consent to
a trial by the court.
Section 9.09 Jurisdiction; Consent to Service of Process. (a)
The Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the non-exclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City; and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Facility Documents, or for recognition
of enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New York State or, to
the extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Lender or the Agent may otherwise have to bring any action or
proceeding relating to this Agreement or the other Facility Documents against
the Borrower or its properties in the courts of any jurisdiction.
(b) The Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the other
Facility Documents in any New York State or Federal court sitting in New York
City. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
Section 9.10 No Proceedings. The Borrower hereby covenants and
agrees that, prior to the date which is one year and one day after the payment
in full of all outstanding Commercial Paper, it will not institute against, or
join any other Person in instituting against, the Lender any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any state of the
United States.
Section 9.11 Survival. The Borrower's obligations pursuant to
Sections 2.10, 2.11, 2.12, 8.01, 9.01, 9.06 and 9.10 shall survive the repayment
of the Advances and the termination of the Commitment.
Section 9.12 Entire Agreement. This Agreement, together with
the other Facility Documents, constitute the entire understanding among the
parties hereto with respect to the subject matter hereof and supersede any prior
agreements, written or oral, with respect thereto.
Section 9.13 Severability of Provisions. In case any provision
of this Agreement
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shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 9.14 Confidentiality. Each of the Agent and the Lender
agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its, its Affiliates', the
Liquidity Banks' and the Liquidity Banks' Affiliates' directors, officers,
employees and agents, including without limitation accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and will
have agreed to keep such Information confidential), (b) to the extent required
by any legal or regulatory authority, (c) to the extent required by applicable
laws or regulations or by any subpoena or similar legal process, (d) to any
other party to this Agreement and to the Dealer(s), (e) in connection with the
exercise of any remedies hereunder or any suit, action or proceeding relating to
this Agreement or the enforcement of rights hereunder; provided, however, that
such Information may only be disclosed to the extent necessary and material to
the prosecution or defense of such suit, action or proceeding for the
enforcement of rights hereunder, (f) subject to an agreement containing
provisions substantially the same as those of this subsection, to any assignee
of or participant in, or any prospective assignee of or participant in, any of
its rights under this Agreement or the Liquidity Agreement, (g) with the consent
of the Borrower, (h) to the extent such Information becomes (i) publicly
available other than as a result of a breach of this Section 9.14, or (ii)
becomes available to the Agent, the Lender or any Liquidity Lender on a
non-confidential basis from a source other than the Borrower, the Agent, the
Lender or any Liquidity Lender. For purposes of this Section, "Information"
means all information received from the Borrower relating to the Borrower or its
business, other than any such information that is available to any Agent or the
Lender on a non-confidential basis prior to disclosure by the Borrower.
Section 9.15 Disclaimer. None of the shareholders, trustees,
officers, employees and other agents of the Borrower shall be personally bound
by or liable for any indebtedness, liability or obligation hereunder or under
the Note, nor shall resort be had to their personal property for the
satisfaction of any obligation or claim hereunder or in connection with any
Facility Document.
Section 9.16 Covenants of the Lender. The Lender covenants to the
Borrower that, until the later of the Commitment Termination Date and the date
on which no Advances shall be outstanding and all Obligations of the Borrower
shall be paid in full:
(i) the Lender shall not engage in any business or activity
other than entering into the Facility Documents to which it is a party and
performing any actions incidental thereto or required by such Facility
Documents;
(ii) so long as no Event of Default occurs and is continuing
under this Agreement, the Lender shall not, without the prior consent of the
Borrower, consent to any amendment or waive any of the terms of the Liquidity
Agreement or terminate any Liquidity Commitments thereunder; and
41
<PAGE> 42
(iii) the Lender shall promptly forward to the Borrower copies
of all notices it receives from the Liquidity Lenders pursuant to the Liquidity
Agreement.
42
<PAGE> 43
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.
NUVEEN SENIOR INCOME FUND,
as Borrower
By
Name:
Title:
820 Jorie Boulevard
Suite 420
Oak Brook, IL 60523
Attention: Jeffrey W. Maillet
Telephone No.: (312) 917-7927
Telecopier No.: (312) 917-8347
[SPV],
as Lender
By
Name:
Title:
-----------------------
-----------------------
-----------------------
Attention:
--------------------
Telephone No.:
----------------
Fax No.:
----------------------
With a copy to:
GLOBAL SECURITIZATION SERVICES, LLC
114 West 47th Street
Suite 1715
New York, NY 10036
Attention:
--------------------
43
<PAGE> 44
Telephone No.: (212) 302-5151
Telecopier No.: (212) 302-8767
and a copy to:
DEUTSCHE BANK AG, NEW YORK BRANCH,
as Agent
at the address set forth below
DEUTSCHE BANK AG, NEW YORK BRANCH,
as Agent
By
Name:
Title:
By
Name:
Title:
31 West 52nd Street
New York, New York 10019
Attention: Lynn Sweeney
Telephone No.: (212) 469-4098
Telecopier No.: (212) 469-4138
44
<PAGE> 45
Schedule I
LIST OF REGISTRAR, TRANSFER AGENCY AND SERVICES AGREEMENT(S)
<PAGE> 46
Schedule II
Page 46
LIST OF INVESTMENT ADVISORY AGREEMENT(S)
1. Management Agreement, dated October 19, 1999, between Nuveen Senior Income
Fund and Nuveen Senior Loan Asset Management Inc.
<PAGE> 47
Schedule IV
Page 47
LIST OF CUSTODIAN CONTRACT(S)
1. Custody and Fund Accounting Services Agreement, dated October 26, 1999,
between each fund or series of a fund listed on Schedule D to the above
agreement and Chase Bank of Texas, National Association.
<PAGE> 48
EXHIBIT A
Page 48
FORM OF PROMISSORY NOTE
U.S. $150,000,000 Dated: , 2000
FOR VALUE RECEIVED, the undersigned, NUVEEN SENIOR INCOME FUND, a
Massachusetts business trust (the "Borrower"), hereby promises to pay to the
order of [SPV], a Delaware limited liability company (the "Lender"), for the
Lender's account the amount first stated above or, if less, the aggregate unpaid
principal amount of all Advances (as defined below) made by the Lender to the
Borrower pursuant to the Credit Agreement (as defined below) on the Commitment
Termination Date (as defined in the Credit Agreement). All capitalized terms
used but not defined herein shall have the meanings set forth in the Credit
Agreement.
The Borrower promises to pay interest on the unpaid principal amount of
the Advances from the date of the initial Advance until such principal amount is
paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Deutsche Bank AG, New York Branch, as Agent, at 31 West
52nd Street, New York, New York, 10019, Attention: [Peter Bassler] in
immediately available funds.
This Note is the Note referred to in, and is entitled to the benefits
of, the Credit Agreement dated as of , 2000 (the "Credit Agreement";
the terms defined therein and not otherwise defined herein are being used herein
as therein defined) among the Borrower, the Lender and Deutsche Bank AG, New
York Branch, as Agent for the Lender. The Credit Agreement, among other things,
(i) provides for the making of Advances (the "Advances") by the Lender to the
Borrower in an amount not to exceed the U.S. dollar amount first above
mentioned, the indebtedness of the Borrower resulting from such Advances being
evidenced by this Note, and (ii) contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events (including, without
limitation, the failure of the Borrower to pay when due the obligations of the
Borrower) and also for prepayments of principal of the Advances prior to the
maturity hereof upon the terms and conditions therein specified. Without
limitation of the foregoing, payment of the obligations of the Borrower
hereunder and under the Credit Agreement are secured by the collateral described
in, and are entitled to the ratable benefit of, the Security Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
The Borrower promises to pay all costs and expenses, including
reasonable attorney's fees, all as provided in subsection 9.06 of the Credit
Agreement, incurred in the collection and enforcement of this Note. The Borrower
and endorsers of this Note consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive
<PAGE> 49
EXHIBIT A
Page 49
diligence, presentment, protest, demand and notice of every kind.
NUVEEN SENIOR INCOME FUND
By
Name:
Title:
<PAGE> 50
EXHIBIT B
FORM OF SECURITY AGREEMENT
<PAGE> 51
EXHIBIT C
FORM OF CONTROL AGREEMENT
<PAGE> 52
Exhibit D
Page 52
FORM OF BORROWER COMPLIANCE CERTIFICATE
To: Deutsche Bank AG, New York Branch,
as Agent under the Credit Agreement
referred to below.
Reference is hereby made to the Credit Agreement (as in effect on the
date of this certificate, the "Credit Agreement"), dated as of ,
2000, by and among Nuveen Senior Income Fund, as Borrower, [SPV], as Lender and
Deutsche Bank AG, New York Branch, as Agent. Capitalized terms used herein and
not defined herein shall have the meanings provided therefor in the Credit
Agreement.
Pursuant to Section [5.01(a)(i)][5.01(a)(ii)][5.01(a)(iii)][5.01(b)(iii)]of
the Credit Agreement, we are delivering to you on the date hereof our [annual]
[semi-annual] [monthly] [financial statements] [semi-annual report] for the
fiscal [year] [six month period] [month] ended , (such period,
the "Fiscal Period").
As required by Section 5.01(b)(i) of the Credit Agreement, the
undersigned, as a Responsible Officer of the Borrower, hereby certifies that to
the best of such Responsible Officer's knowledge:
1. As of the date hereof, [no Default or Event of Default has occurred or
is continuing] [the following Default or Event of Default exists and set forth
below with respect to each such Default a description of the details thereof and
what action the Borrower proposes to take in respect thereof.]
2. During the Fiscal Period, the Borrower has observed or performed all of
its covenants and other agreements, and satisfied every other condition
contained in the Credit Agreement and the other Facility Documents to be
observed, performed or satisfied by it.
[ADD ADDITIONAL INFORMATION AS TO DEFAULTS, IF ANY]
<PAGE> 53
EXHIBIT D
PAGE 53
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
executed as of the day of , .
NUVEEN SENIOR INCOME FUND
By:
-----------------------------------
Name:
Title:
<PAGE> 54
Exhibit E
FORM OF BORROWING REQUEST
Deutsche Bank AG,
New York Branch
31 West 52nd Street
New York, NY 10019
Attention:
----------------
Re: Nuveen Senior Income Fund
Ladies and Gentlemen:
This Borrowing Request is delivered to you pursuant to Section 2.02 of the
Credit Agreement, dated as of , 2000 (together with all amendments,
if any, from time to time made thereto, the "Credit Agreement"), among NUVEEN
SENIOR INCOME FUND, a Massachusetts business trust (the "Borrower"), [SPV], a
Delaware limited liability company (the "Lender") and Deutsche Bank AG, New York
Branch (the "Agent"). All capitalized terms used but not defined herein shall
have the meanings set forth in the Credit Agreement.
Pursuant to Section 2.02 of the Credit Agreement, the undersigned hereby
gives you irrevocable notice that the undersigned hereby requests an Advance
under the Credit Agreement, and in that connection sets forth below the
information relating to such Advance (the "Proposed Advance") as required by
Section 2.02 of the Credit Agreement:
(i) The aggregate principal amount of the Proposed Advance is
$ .(1)
(ii) The Business Day of the Proposed Advance is [Date].(2) A written
or telephonic request for an Advance shall be received by the Agent no later
than (x) 10:00 a.m. (New York City time) on the Business Day of the Proposed
Advance or (y) in the case of the initial Advance, no later than 11:30 a.m. (New
York City time) on the second Business Day preceding the date of such Advance.
- ------------------
(1) The desired amount must be at least $5,000,000 and must be in integral
multiples of $1,000,000.
(2) A written or telephonic request for an Advance shall be received by the
Agent no later than (x) 10:00 a.m. (New York City time) on the Business
Day of the Proposed Advance or (y) in the case of the initial Advance, no
later than 11:30 a.m. (New York City time) on the second Business Day
preceding the date of such Advance.
<PAGE> 55
EXHIBIT E
Page 55
2
(iii) The Interest Period for the Proposed Advance is .
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed Advance:
A. the representations and warranties contained in Article IV of the
Credit Agreement and in the Facility Documents are and will be true and correct
in all material respects, both before and after giving effect to the Proposed
Advance and to the application of the proceeds thereof, as though made on such
date, unless stated to relate to a specific earlier date, in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date;
B. no Default or Event of Default has occurred and is continuing, or
would result from such Proposed Advance or from the application of the proceeds
thereof; and
C. after giving effect to the Advance, the Asset Coverage Ratio for
all borrowings of the Borrower shall not be less than 300% and the Borrower
shall not have violated any Requirements of Law (except such violations as could
not reasonably be expected to have a Material Adverse Effect) or exceeded the
borrowing limit set forth in the Prospectus, the Registration Statement, the
Statement of Additional Information or the 1940 Act, as the case may be.
The undersigned hereby acknowledges that, pursuant to Section 2.02 of
the Credit Agreement, each of the delivery of this Borrowing Request and the
acceptance by the undersigned of the proceeds of the Advances requested hereby
constitute a representation and warranty by the undersigned that, on the date of
such Advance, and before and after giving effect thereto and to the application
of the proceeds therefrom, all applicable conditions contained in Article III of
the Credit Agreement shall, both before and after giving effect to the Proposed
Advance, have been satisfied.
The undersigned agrees that if, prior to the time of the Proposed
Advance, any matter certified to herein by it will not be true and correct at
such time as if then made, it will immediately so notify the Agent. Unless the
Agent shall have received written notice to the contrary from the undersigned
prior to the time of the Proposed Advance, each matter certified to herein shall
be deemed once again to be certified as true and correct at the date of the
Proposed Advance as if then made.
NUVEEN SENIOR INCOME FUND
By:
---------------------------
Name:
Title:
<PAGE> 56
Exhibit E
Page 56
<PAGE> 57
EXHIBIT f
FORM OF OPINION OF COUNSEL TO BORROWER
<PAGE> 58
Exhibit J
Page 58
COPY OF CUSTODIAN CONTRACT
<PAGE> 59
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS..........................................................................2
Section 1.01 Certain Defined Terms........................................................................2
Section 1.02 Other Terms.................................................................................11
Section 1.03 Computation of Time Periods.................................................................11
Section 1.04 Accounting Terms............................................................................11
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES........................................................................12
Section 2.01 Commitment..................................................................................12
Section 2.02 Making the Advances.........................................................................12
Section 2.03 Termination or Reduction of the Commitment Amount...........................................12
Section 2.04 Prepayments.................................................................................13
Section 2.05 Payment of Interest.........................................................................13
Section 2.06 Repayment on Commitment Termination Date....................................................13
Section 2.07 Fees........................................................................................14
Section 2.08 Payments and Computations, Etc..............................................................14
Section 2.09 Evidence of Advances........................................................................14
Section 2.10 Requirements of Law.........................................................................15
Section 2.11 Indemnity...................................................................................16
Section 2.12 Net Payments; Taxes.........................................................................16
Section 2.13 Use of Proceeds.............................................................................17
Section 2.14 Order of Payments by Lender.................................................................17
Section 2.15 Extension of Commitment Termination Date....................................................17
ARTICLE III
CONDITIONS OF LENDING....................................................................................18
Section 3.01 Conditions to Execution.....................................................................18
Section 3.02 Conditions to Each Advance..................................................................19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES...........................................................................21
Section 4.01 Representations and Warranties of the Borrower..............................................21
ARTICLE V
</TABLE>
<PAGE> 60
<TABLE>
<CAPTION>
Page
----
<S> <C>
COVENANTS OF THE BORROWER................................................................................24
Section 5.01 Affirmative Covenants.......................................................................24
Section 5.02 Negative Covenants..........................................................................29
ARTICLE VI
EVENTS OF DEFAULT........................................................................................31
Section 6.01 Events of Default...........................................................................31
ARTICLE VII
THE AGENT................................................................................................33
Section 7.01 Appointment.................................................................................33
Section 7.02 Delegation of Duties........................................................................34
Section 7.03 Exculpatory Provisions......................................................................34
Section 7.04 Reliance by Agent...........................................................................34
Section 7.05 Notice of Default...........................................................................35
Section 7.06 Credit Decisions............................................................................35
Section 7.07 Agent in its Individual Capacity............................................................35
Section 7.08 Successor Agent.............................................................................35
ARTICLE VIII
INDEMNIFICATION..........................................................................................36
Section 8.01 Indemnities by the Borrower.................................................................36
ARTICLE IX
MISCELLANEOUS............................................................................................37
Section 9.01 Amendments, Etc.............................................................................37
Section 9.02 Notices, Etc................................................................................37
Section 9.03 No Waiver; Cumulative Remedies..............................................................37
Section 9.04 Binding Effect; Assignability...............................................................37
Section 9.05 Governing Law...............................................................................37
Section 9.06 Costs and Expenses..........................................................................38
Section 9.07 Execution in Counterparts...................................................................38
Section 9.08 Waiver of Jury Trial........................................................................38
Section 9.09 Jurisdiction; Consent to Service of Process.................................................39
Section 9.10 No Proceedings..............................................................................39
Section 9.11 Survival....................................................................................39
Section 9.12 Entire Agreement............................................................................39
Section 9.13 Severability of Provisions..................................................................39
Section 9.14 Confidentiality.............................................................................40
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 9.15 Disclaimer .................................................................................40
</TABLE>
SCHEDULES AND EXHIBITS
Schedule I List of Registrar, Transfer Agency and Services Agreement(s)
Schedule II List of Investment Advisory Agreement(s)
Schedule III List of Custodian Contract(s)
Exhibit A Form of Promissory Note
Exhibit B Form of Security Agreement
Exhibit C Form of Control Agreement
Exhibit D Form of Borrower Compliance Certificate
Exhibit E Form of Borrowing Request
Exhibit F Form of Opinion of Counsel to Borrower
Exhibit G Copy of Custodian Contract
<PAGE> 1
Exhibit k.8
LIQUIDITY AGREEMENT
Dated as of _________ __, 2000
among
[SPV],
THE LIQUIDITY LENDERS PARTIES HERETO,
DEUTSCHE BANK AG, NEW YORK BRANCH
as Liquidity Agent,
and
DEUTSCHE BANK SECURITIES INC.
as Arranger and Syndication Agent
<PAGE> 2
LIQUIDITY AGREEMENT
LIQUIDITY AGREEMENT, dated as of _________ __, 2000, among
_________________, a Delaware limited liability company (hereinafter, together
with its successors and assigns, called the "Company"), the liquidity lenders
parties hereto (hereinafter each, together with its successors and assigns, a
"Liquidity Lender", and collectively, together with their successors and
assigns, the "Liquidity Lenders"), DEUTSCHE BANK AG, NEW YORK BRANCH, as agent
for the Liquidity Lenders (hereinafter, together with its successors and assigns
in such capacity, the "Liquidity Agent"), and DEUTSCHE BANK SECURITIES INC., as
arranger (in such capacity, the "Arranger") and syndication agent (in such
capacity, the "Syndication Agent").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue and sell its promissory
notes in the United States commercial paper market and lend the net proceeds
thereof to Nuveen Senior Income Fund (the "Borrower"), pursuant to the Credit
Agreement dated as of _________ __, 2000, among the Company, the Borrower and
Deutsche Bank AG, New York Branch, as Agent (as the same may be amended or
modified from time to time, the "Credit Agreement");
WHEREAS, the Company has made application to the Liquidity
Lenders for the commitment of the Liquidity Lenders to make loans in an
aggregate principal amount not to exceed $155,000,000 at any one time to the
Company, the proceeds of which shall be used to (i) make Advances (as defined in
the Credit Agreement) to the Borrower in accordance with the terms of the Credit
Agreement and (ii) make payments in respect of the Company's Commercial Paper
(as defined below); and
WHEREAS, subject to the terms and conditions set forth herein,
the Liquidity Lenders are willing to make loans to the Company.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 General. For all purposes of this Agreement,
except as otherwise expressly provided herein or unless the context otherwise
requires, capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement which definitions are
incorporated by reference herein.
SECTION 1.02 Definitions. As used herein the following terms
shall have the
-2-
<PAGE> 3
meanings herein specified and shall include in the singular number the plural
and in the plural number the singular:
"Advance Deficit" shall have the meaning specified in Section
3.02(a) hereof.
"Agent" shall mean Deutsche Bank AG, New York Branch in its
capacity as agent for the Company under the Credit Agreement.
"Aggregate CP Matured Value" shall mean, on any date, the sum
of the CP Matured Values of all Commercial Paper outstanding on such date.
"Agreement" shall mean this Liquidity Agreement as it may from
time to time be amended, supplemented or otherwise modified in accordance with
the terms hereof.
"Applicable Margin" shall mean: (a) with respect to Base Rate
Loans, 0% per annum, and (b) with respect to Eurodollar Rate Loans, 0.50% per
annum.
"Arranger" shall mean Deutsche Bank Securities Inc. in
its capacity as arranger under this Agreement.
"Available Liquidity Commitment" shall mean, as to any
Liquidity Lender at any time, an amount equal to the excess, if any, of (a) the
amount of such Liquidity Lender's Commitment over (b) the aggregate principal
amount of all Loans made by such Liquidity Lender then outstanding;
collectively, as to all the Liquidity Lenders, the "Available Liquidity
Commitments."
"Base Rate" shall mean, for any day, the rate per annum equal
to the higher of (a) the Federal Funds Rate for such day plus one-half of one
percent (.50%), and (b) the Prime Rate for such day. Any change in the Base Rate
due to a change in the Prime Rate or the Federal Funds Rate shall be effective
on the effective date of such change in the Prime Rate or Federal Funds Rate.
"Base Rate Loan" shall mean a Loan bearing interest at a
fluctuating rate determined by reference to the Base Rate.
"Benefited Liquidity Lender" shall have the meaning specified
in Section 10.11(b).
"Borrower" shall have the meaning specified in the first
Whereas clause of this Agreement.
"Borrowing" shall mean the incurrence of a Loan from the
Liquidity Lenders on a given date pursuant to Section 3.01 of this Agreement.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in New York or Illinois are
authorized or obligated by law or executive order to be closed.
-3-
<PAGE> 4
"Commercial Paper" or "Commercial Paper Note" shall mean the
short-term promissory notes of the Company issued for the purpose of funding or
maintaining Advances made to the Borrower.
"Commercial Paper Account" shall have the meaning specified in
Section 2.02 hereof.
"Commercial Paper Deficit" shall have the meaning specified in
Section 3.03(a) hereof.
"Company" shall have the meaning specified in the introductory
paragraph of this Agreement.
"CP Matured Value" shall mean, with respect to any commercial
paper, the sum of the Interest Component thereof plus the Principal Component
thereof.
"Credit Agreement" shall have the meaning specified in the
first Whereas clause of this Agreement.
"Credit Utilization" shall have the meaning specified in
Section 6.02 hereof.
"Default" shall mean an event which, upon the giving of notice
or the passage of time, or both, would become an Event of Default hereunder.
"Depositary" shall mean Bankers Trust Company, a New York
banking corporation, or such other banking institution headquartered in The City
of New York as the Company shall appoint, with the prior written consent of the
Required Liquidity Lenders, as issuing and paying agent for Commercial Paper
under the Depositary Agreement and as fiduciary for the holders of Commercial
Paper.
"Depositary Agreement" shall mean the Depositary Agreement
entered into by the Company and the Depositary substantially in the form set
forth in Exhibit B attached hereto, as the same at any time may be amended or
modified from time to time with the prior written consent of the Agent.
"Designated Liquidity Lender" shall mean a special purpose
corporation that is identified as such on the signature pages hereto next to the
caption "Designated Lender" as well as each special purpose corporation that (a)
shall have become a party to this Agreement pursuant to Section 10.05(g) and (b)
is not otherwise a Liquidity Lender.
"Designated Liquidity Lender Note" shall mean a promissory
note of the Company, substantially in the form of Exhibit G attached hereto,
evidencing the obligation of the Company to repay Loans made by a Designated
Liquidity Lender, and "Designated Liquidity Lender Notes" means any such
promissory notes issued hereunder.
"Designating Liquidity Lender" shall mean each Liquidity
Lender that is identified as such on the signature pages hereto next to the
caption "Designating Liquidity
-4-
<PAGE> 5
Lender" and immediately below the signature of its Designated Liquidity Lender
as well as each Liquidity Lender that shall designate a Designated Liquidity
Lender pursuant to Section 10.05(g) hereof.
"Designation Agreement" shall mean a designation agreement in
substantially the form of Exhibit H attached hereto, entered into by a Liquidity
Lender and a Designated Liquidity Lender and accepted by the Company and the
Liquidity Agent.
"Dollars" means the legal currency, at any relevant time
hereunder, of the United States of America.
"Effective Date" shall have the meaning specified in Section ]
6.01 hereof.
"Eurocurrency Reserve Requirements" shall mean for any day as
applied to a Eurodollar Rate Loan, the aggregate (without duplication) of the
rates (expressed as a decimal fraction) of reserve requirements in effect on
such day, including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other Governmental Authority having jurisdiction with
respect thereto dealing with reserve requirements prescribed for Eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
such Board) maintained by a member bank of such System or bank subject to such
Governmental Authority.
"Eurodollar Base Rate" shall mean with respect to each day
during each Interest Period pertaining to a Eurodollar Rate Loan, the rate per
annum (rounded upwards, if necessary, to the nearest one-hundred-thousandth of
1%) equal to the rate that appears with respect to such Interest Period on the
Telerate Page 3750 (or such other page as may replace said page) as of 11:00
A.M., London time, two Working Days prior to the beginning of such Interest
Period. If for any reason such rate is not available, the term "Eurodollar Base
Rate" means, for any Eurodollar Rate Loan for any Interest Period, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two Working Days prior to the
first day of such Interest Period for a term comparable to such Interest Period;
provided, however, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic mean of all such rates
(rounded upwards, if necessary, to the nearest 1/100 of 1%).
"Eurodollar Rate" shall mean, with respect to each day during
each Interest Period pertaining to a Eurodollar Rate Loan, a rate per annum
determined for such day in accordance with the following formula (rounded upward
to the nearest 1/100th of 1%):
Eurodollar Base Rate
-----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Rate Loan" shall mean a Loan bearing interest at a
fluctuating rate determined by reference to the Eurodollar Rate.
-5-
<PAGE> 6
"Event of Default" shall mean each of the Events of Default
specified in Section 8.01 hereof.
"Federal Funds Rate" shall mean, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided that (a) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate charged to
the Liquidity Agent (in its individual capacity) on such day on such
transactions as determined by the Liquidity Agent.
"Financing Lease" shall mean any lease of property, real or
personal, the obligations of the lessee in respect of which are required in
accordance with the U.S. GAAP to be capitalized on a balance sheet of the
lessee.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Highest Short-Term Rating Category" shall mean (x) with
respect to Moodys, P-1, (y) with respect to Fitch, [F-1+] and (z) with respect
to S&P, [A-1+].
"Indemnified Liabilities" shall have the meaning set forth in
Section 10.04(b).
"Indemnified Parties" shall have the meaning set forth in
Section 10.04(b).
"Information" shall have the meaning set forth in Section
10.19.
"Interest Component" shall mean when used with respect to
Commercial Paper the portion of the face amount of Commercial Paper issued on a
discount basis representing the discount incurred in respect thereof.
"Interest Payment Date" shall mean (a) as to any Base Rate
Loan, the first day of each month, (b) as to any Eurodollar Rate Loan, the last
day of the applicable Interest Period, and, in each case, the day on which a
Loan becomes due and is payable in full and is paid or prepaid in full.
"Interest Period" shall mean with respect to any Eurodollar
Rate Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Rate Loans and ending one, two, three or six months thereafter, as
selected by (x) the Company in its Notice of Borrowing as provided in
Section 3.02 or its notice of conversion as provided in Section 5.05,
as the case may be or (y) by the Company, or the Depositary or the
Collateral Agent, in either case as
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attorney-in-fact for the Company, in a Notice of Borrowing as provided
in Section 3.03; provided that the Liquidity Agent and Liquidity
Lenders may consider requests by the Company to provide an initial
Interest Period of less than one month; and
(ii) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such Eurodollar
Rate Loan and ending one, two, three or six months thereafter, as
selected by the Company by irrevocable notice to the Liquidity Agent
not less than three Working Days prior to the last day of the then
current Interest Period with respect to such Eurodollar Rate Loan;
provided that, all of the foregoing provisions relating to Interest Periods are
subject to the following:
(1) if any Interest Period pertaining to a Eurodollar Rate
Loan would otherwise end on a day which is not a Working Day, such
Interest Period shall be extended to the next succeeding Working Day
unless the result of such extension would be to carry such Interest
Period into another calendar month in which event such Interest Period
shall end on the immediately preceding Working Day;
(2) any Interest Period pertaining to a Eurodollar Rate Loan
that begins on the last Working Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last Working
Day of a calendar month;
(3) any Interest Period that would otherwise end after the
Liquidity Termination Date shall end on the Liquidity Termination Date;
and
(4) the Company shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Rate Loan during an
Interest Period for such Loan.
"Lending Office" shall mean the lending office of each
Liquidity Lender, which may be a branch or affiliate of such Liquidity Lender,
by or through which the Loans are made hereunder and as notified to the
Liquidity Agent in writing by the Liquidity Lenders.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreements, any Financing Lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the UCC or comparable law of any jurisdiction
in respect of any of the foregoing).
"Liquidity Agent" shall have the meaning specified in the
introductory paragraph of this Agreement.
"Liquidity Bank" shall mean for any Designated Liquidity
Lender, at any date of
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determination, the collective reference to the financial institutions which at
such date are providing liquidity credit support facilities to or for the
account of such Designated Liquidity Lender to fund such Designated Liquidity
Lender's obligations hereunder or to support the securities, if any, issued by
such Designated Liquidity Lender to fund such obligations.
"Liquidity Commitment" shall mean the obligation of the
Liquidity Lenders to make Loans in a maximum principal amount at any one time
outstanding equal to [$155,000,000].
"Liquidity Commitment Fee Rate" shall mean 0.125% (12.5 basis
points) per annum.
"Liquidity Commitment Period" shall mean the period from and
including the Effective Date to but excluding the Liquidity Termination Date or
such earlier date as the Liquidity Commitments shall terminate as provided
herein.
"Liquidity Fee" shall have the meaning specified in Section
4.01.
"Liquidity Lender" shall have the meaning specified in the
introductory paragraph of this Agreement.
"Liquidity Termination Date" shall mean the later of (i)
__________, 2001 [364 days from the Effective Date] or, if said day is not a
Business Day, the Business Day next preceding such day and (ii) the last day of
any extension of such date pursuant to Section 4.03 hereof, or, if said day is
not a Business Day, the Business Day next preceding such day.
"Loan Notes" or "Notes" shall mean the Revolving Loan Notes
and the Refunding Loan Notes.
"Loans" shall mean the Revolving Loans and the Refunding
Loans.
"Manager" shall mean Global Securitization Services, LLC, a
limited liability company organized and existing under the laws of the State of
Delaware, as the Manager under the Management Agreement, dated as of ____, 2000,
between such Manager and the Company.
"Notice of Borrowing" shall have the meaning specified in
Section 3.02(a).
"Notice Office" shall mean the offices of the Liquidity Agent
at 31 West 52nd Street, New York, New York, 10019, Attention: ___________, or
such other offices as the Liquidity Agent may designate in writing to the
Company and the Liquidity Lenders.
"Payment Office" shall mean the account of the Liquidity Agent
at 31 West 52nd Street, New York, New York, 10019 or such other office as the
Liquidity Agent may designate in writing to the Company and the Liquidity
Lenders.
"Percentage" shall mean for each Liquidity Lender the
percentage set forth opposite the name of such Liquidity Lender on the signature
pages hereto, as such percentage
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may be adjusted from time to time upon sale, transfer or assignment pursuant to
Section 3.14, Section 4.03(c) or Section 10.05 hereof.
"Permitted Liens" means (i) Liens for taxes not yet due or
which are being contested in good faith by appropriate proceedings, provided
that adequate reserves with respect thereto are maintained on the books of the
Company in conformity with U.S. GAAP and to the reasonable satisfaction of the
Liquidity Agent, (ii) Liens created under the Security Agreement and (iii)
restrictions on the transfer, assignment or other disposition of Permissible
Investments that arise under the documents relating to such Permissible
Investments.
"Prime Rate" shall mean the per annum rate of interest
established from time to time by the Liquidity Agent as its prime rate for
Dollar denominated loans, which rate may not be the lowest rate of interest
charged by the Liquidity Agent to its customers.
"Principal Component" shall mean, when used with respect to
each Commercial Paper Note, the excess of the face amount of such Commercial
Paper Note over the Interest Component thereof.
"Rating Agency" shall mean each credit rating agency that the
Company shall have requested to provide a credit rating with respect to the
Commercial Paper and which is then providing such a credit rating.
"Refunding Loan" shall mean a Loan made in accordance with
Section 3.03 hereof the proceeds of which are to be used by the Company to make
payments of its maturing Commercial Paper.
"Refunding Loan Note" shall have the meaning specified in
Section 3.05(c) hereof.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor thereto.
"Replacement Lender" shall have the meaning set forth in
Section 3.16(b).
"Required Liquidity Lenders" shall mean Liquidity Lenders
whose Percentages are, in the aggregate, equal to or more than 51% of all of the
Percentages.
"Restricted Payment" shall have the meaning specified in
Section 7.02.
"Revolving Loan" shall mean a Loan made in accordance with
Section 3.02 hereof.
"Revolving Loan Note" shall have the meaning specified in
Section 3.05(a) hereof.
"S&P" shall mean Standard & Poor's Ratings Services, a
division of The McGraw Hill Companies, Inc., a New York corporation, or any
successor thereto.
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"Syndication Agent" shall mean Deutsche Bank Securities Inc.
"Taxes" shall have the meaning specified in Section 3.11.
"Working Day" shall mean any Business Day on which dealings in
foreign currencies and exchange between banks may be carried on in the city
where the Eurodollar and foreign currency and exchange operations in respect of
the Liquidity Agent's Eurodollar Rate Loans are then being conducted.
"written" or "in writing" shall mean any form of written
communication or a communication by means of telex, telecopier device, telegraph
or cable.
ARTICLE II
COMMERCIAL PAPER OPERATIONS
SECTION 2.01 Issuance of Commercial Paper. (a) Subject to the
provisions of this Section 2.01 and Article VI hereof, so long as the Company
and the Depositary are not in receipt of instructions then in effect from the
Liquidity Agent, given in accordance with this Section 2.01(a), not to issue or
deliver Commercial Paper because (i) the Company shall have terminated the
Liquidity Commitment hereunder pursuant to Section 4.02 hereof, or (ii) any of
the conditions specified in clauses (d) or (e) of Section 6.02 hereof are not
satisfied, or (iii) the issuance of Commercial Paper is prohibited by the
provisions of Section 5.03 hereof, or (iv) the rating by any Rating Agency on
the Commercial Paper shall be withdrawn or reduced below the Highest Short-Term
Rating Category of such Rating Agency (provided that if such reduction or
withdrawal occurs after the withdrawal or downgrading of a Liquidity Lender's
rating by any Rating Agency, the Company shall not be prohibited from issuing
Commercial Paper unless the Company shall not have replaced such downgraded
Liquidity Lender or reduced such downgraded Liquidity Lender's Percentage of the
Liquidity Commitment pursuant to Section 3.14 hereof, resulting in the
Commercial Paper being rated in the Highest Short-Term Rating Category of each
Rating Agency by the ninetieth day after the first date on which such rating of
a Liquidity Lender was withdrawn or downgraded) or (v) any of the conditions set
forth in clauses (a) or (b) of Section 6.02 hereof has not been satisfied, the
Company shall have the right from time to time prior to the Liquidity
Termination Date, and from time to time on and after the Effective Date, to
issue and sell Commercial Paper pursuant to this Agreement and the Depositary
Agreement. Any instructions from the Liquidity Agent to the Company and the
Depositary in accordance with this Section 2.01(a) shall specify one or more of
the events described in clauses (i) through (v) as being the reason(s) to cease
issuing and delivering Commercial Paper. The Liquidity Agent agrees that it
shall instruct the Company and the Depositary not to issue and sell Commercial
Paper if there shall have occurred one or more of the events described in
clauses (i) through (iii) of this Section 2.01(a). If the Liquidity Agent shall,
as provided in this Section 2.01(a), instruct the Company and the Depositary not
to issue or deliver Commercial Paper, the Company shall not thereafter issue or
sell any Commercial Paper. Concurrently with the giving of any such instructions
to the Company and the Depositary, the Liquidity Agent shall give notice thereof
to the Agent, each Rating Agency and each Dealer, but
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failure to do so shall not impair the effect of such instructions.
(b) The Company agrees that each Commercial Paper Note shall
(i) be in the form of Exhibit A or Exhibit B to the Depositary Agreement and be
completed in accordance with this Agreement and the Depositary Agreement, (ii)
be dated the date of issuance thereof, (iii) be made payable to the order of a
named payee or bearer, (iv) have a maturity date which shall not be later than
the fifth day prior to the Liquidity Termination Date in effect on the date of
issuance thereof, (v) be issued on a discount basis, and (vi) be in a face
amount of $250,000 or an integral multiple of $1,000 in excess of $250,000;
provided that (1) no issuance of Commercial Paper shall be made if, after giving
effect to such issuance and the use of the proceeds thereof, the sum of the
Aggregate CP Matured Value and the outstanding principal amount of all Loans
hereunder would exceed the amount of the Liquidity Commitment prior to such
issuance; and (2) no Commercial Paper shall have a maturity date later than the
180th day next succeeding the date of issuance of such Commercial Paper. Subject
to the provisions of the Depositary Agreement, all Commercial Paper shall be
delivered and issued against payment therefor in collected funds which are
immediately available on the date of issuance, and otherwise in accordance with
the terms of this Agreement and the Depositary Agreement.
SECTION 2.02 Commercial Paper Account; Payment of Commercial
Paper. Pursuant to the Depositary Agreement, the Depositary shall establish with
its Corporate Trust and Agency Group in New York a segregated trust account for
the exclusive benefit of the holders of the outstanding Commercial Paper (said
account being referred to herein and in the Depositary Agreement as the
"Commercial Paper Account"), over which the Depositary shall have exclusive
control and sole right of withdrawal. Proceeds of the sale of Commercial Paper
shall be deposited in the Commercial Paper Account only to the extent necessary
to pay matured and concurrently maturing Commercial Paper, whether or not
presented to the Depositary for payment; otherwise proceeds of the sale of
Commercial Paper shall be applied to the payment of any outstanding Loans to the
extent thereof and the balance shall be transferred to the Lender's Account, in
each case solely to the extent directed by the Collateral Agent.
ARTICLE III
REVOLVING CREDIT
SECTION 3.01 The Revolving Loans and the Refunding Loans. (a)
Subject to and upon the terms and conditions herein set forth, each Liquidity
Lender severally agrees from time to time on a revolving basis prior to the
Liquidity Termination Date, to make Revolving Loans and Refunding Loans to the
Company, which Revolving Loans and Refunding Loans may be repaid and reborrowed
in accordance with the provisions hereof and shall be made by the Liquidity
Lenders pro rata on the basis of their respective Percentages.
(b) No Liquidity Lender shall be obligated to make any Loan to
the Company if, and to the extent that, after giving effect to such Loan, the
aggregate principal amount of Loans made by such Liquidity Lender would exceed
such Liquidity Lender's Percentage of the Liquidity Commitment.
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SECTION 3.02 Revolving Loans. (a) If, on any Business Day on which the
Company has been requested to make an Advance under the Credit Agreement, the
Company is unable to issue Commercial Paper in an aggregate net amount
sufficient to make such Advance (the excess of the amount required to make such
Advance over the net amount obtained by the issuance of Commercial Paper on such
day, an "Advance Deficit"), the Company may request a Borrowing consisting of
Revolving Loans in an aggregate principal amount equal to the excess of (x) the
Advance Deficit over (y) amounts in the Lender's Account available to make such
Advance, by giving the Liquidity Agent at the Notice Office written notice or
telephonic notice (confirmed in writing promptly thereafter) of such Borrowing
(each a "Notice of Borrowing") no later than the time specified in the next
sentence. A written or telephonic Notice of Borrowing shall be received by the
Liquidity Agent no later than (x) 12:00 p.m. (New York City time) not less than
three Working Days preceding the date of the requested Revolving Loans, in the
case of Eurodollar Rate Loans and (y) 12:30 p.m. (New York City time) on the
date of the requested Revolving Loans, in the case of Base Rate Loans. The
Liquidity Agent shall promptly give each Liquidity Lender telephonic notice
(confirmed in writing promptly thereafter) of such Notice of Borrowing. Each
such Notice of Borrowing shall specify (1) whether the requested Revolving Loans
are Eurodollar Rate Loans or Base Rate Loans, (2) the principal amount the
Company desires to borrow hereunder, which shall be no greater than the entire
unused portion of the Liquidity Commitment, (3) the date of borrowing (which
shall be a Business Day , in the case of Base Rate Loans, or a Working Day, in
the case of Eurodollar Rate Loans) and (4) in the case of Eurodollar Rate Loans,
the Interest Period applicable thereto. Subject to the limitations imposed by
Section 3.01(b) and Section 6.02 hereof, the Liquidity Lenders shall make
Revolving Loans in an aggregate principal amount equal to the amount requested
in such Notice of Borrowing.
(b) Each Revolving Loan shall mature on the earlier of (i) the
Liquidity Termination Date or (ii) acceleration following the occurrence of an
Event of Default.
SECTION 3.03 Refunding Loans. (a) If, on any Business Day that
Commercial Paper matures, the Company is unable to issue additional Commercial
Paper in an aggregate net amount sufficient to repay in full all Commercial
Paper maturing on such day (the excess of the amount required to pay in full all
Commercial Paper maturing on such day over the net amount obtained by the
issuance of Commercial Paper on such day, a "Commercial Paper Deficit"), the
Liquidity Lenders shall, upon the request of the Company, or the Depositary or
the Collateral Agent, in either case as attorney-in-fact for the Company, in
accordance with Section 3.03(b) hereof, and subject to the limitations imposed
by Section 3.01(b) and Section 6.03 hereof, make Refunding Loans in an aggregate
principal amount equal to the excess of (x) the Commercial Paper Deficit over
(y) the sum of the aggregate amount, if any, applied or to be applied on such
Business Day to the Commercial Paper Deficit from disbursements with respect to
such maturing Commercial Paper from the Commercial Paper Account and amounts in
the Lender's Account, in each case designated for payment of the maturing
Commercial Paper.
(b) The Company, or the Depositary or the Collateral Agent, in
either case, as attorney-in-fact for the Company, shall give the Liquidity Agent
at the Notice Office written or telephonic Notice of Borrowing (confirmed in
writing promptly thereafter) specifying (1) that the requested Refunding Loans
are Base Rate Loans, (2) the aggregate principal amount of the
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Refunding Loans requested pursuant to Section 3.03(a),which shall be no greater
than the entire unused portion of the Liquidity Commitment, and (3) the date of
the borrowing (which shall be a Business Day). A written or telephonic Notice of
Borrowing shall be received by the Liquidity Agent no later than 1:00 p.m. (New
York City time) on the borrowing date of the requested Refunding Loans. The
Liquidity Agent will promptly give each Liquidity Lender telephonic notice
(confirmed in writing promptly thereafter) of such request. If such written
telephonic notice is received by the Liquidity Agent prior to the time specified
in the preceding sentence, the requested Refunding Loans will be made on the
requested Business Day, pro rata by the Liquidity Lenders in accordance with
their respective Percentages. If such telephonic notice is not received prior to
the time specified above, the requested Refunding Loans will be made pro rata by
the Liquidity Lenders in accordance with their respective Percentages on the
Business Day next succeeding the Business Day listed as the borrowing date in
the Notice of Borrowing.
(c) Each Refunding Loan shall mature on the earlier of (i)
Liquidity Termination Date or (ii) acceleration following the occurrence of an
Event of Default.
SECTION 3.04 Disbursement of Funds. (a) Not later than 3:30
p.m. (New York City time) on the date specified in each Notice of Borrowing for
a Revolving Loan, each Liquidity Lender will make available in freely
transferable U.S. dollars and in immediately available funds its Percentage of
the Revolving Loans required to be made on such date at the Payment Office of
the Liquidity Agent. The Liquidity Agent will remit the aggregate of the amounts
so made available by the Liquidity Lenders to the Borrower Account, on the
Business Day such amounts are received.
(b) Not later than 3:00 p.m. (New York City time) on the date
for a Refunding Loan, each Liquidity Lender will make available in freely
transferable U.S. dollars and in immediately available funds its Percentage of
the Refunding Loans required to be made on such date at the Payment Office of
the Liquidity Agent. The Liquidity Agent will remit the aggregate amount of such
funds made available by the Liquidity Lenders to the Commercial Paper Account on
the Business Day such amount is received.
(c) In the event that any Liquidity Lender shall not fund a
Loan as described in Section 3.04(b), then the Liquidity Agent shall notify each
of the other Liquidity Lenders which are committed to lend on such day not later
than 3:30 p.m. (New York City time) on such Business Day, and each of such other
Liquidity Lenders shall, before 4:30 p.m. (New York City time) on such Business
Day, make available to the Liquidity Agent in immediately available funds, a
Refunding Loan in a principal amount equal to the lesser of (i) such un-funded
amount multiplied by a fraction, the numerator of which is the commitment of
such Liquidity Lender and the denominator of which is the aggregate commitments
with respect to the Liquidity Lenders committed to lend on such day (less the
commitments of the non-performing Liquidity Lenders) and (ii) the Available
Liquidity Commitment of such Liquidity Lender. After the Liquidity Agent's
receipt of such funds, the Liquidity Agent will transfer such funds to the
Commercial Paper Account. If the Liquidity Lender which shall have so failed to
fund shall subsequently pay such amount, the Liquidity Agent shall apply such
amount to repay the additional Refunding Loans made by the other Liquidity
Lenders pursuant to such subsequent notice from the Liquidity Agent.
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(d) In the event that any Liquidity Lender shall not fund a
Loan as described in Section 3.04(a), Section 3.04(b) or Section 3.04(c), the
Liquidity Agent shall have no obligation to fund such Liquidity Lender's pro
rata share of such Loan. Unless the Liquidity Agent shall have received notice
from a Liquidity Lender prior to the time such Liquidity Lender is required to
make funds available to the Liquidity Agent pursuant to Section 3.04(a), Section
3.04(b) or Section 3.04(c), as the case may be, that such Liquidity Lender will
not make available to the Liquidity Agent such Liquidity Lender's pro rata share
of such payment, the Liquidity Agent may (but in no event shall be required to)
assume that such Liquidity Lender has made such pro rata share available to the
Liquidity Agent on the date of such payment in accordance with Section 3.04(a),
Section 3.04(b) or Section 3.04(c), as the case may be, and the Liquidity Agent
may (but in no event shall be required to), in reliance upon such assumption,
make such payment as provided for in this Section 3.04(d). If and to the extent
such Liquidity Lender shall not have so made such pro rata share of such payment
available to the Liquidity Agent, such Liquidity Lender irrevocably and
unconditionally agrees to repay to the Liquidity Agent, forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such payment is made by the Liquidity Agent until the date such amount is repaid
to the Liquidity Agent, at a rate per annum equal to the greater of the Federal
Funds Rate and the rate determined by the Liquidity Agent in accordance with
banking industry rules on interbank compensation.
SECTION 3.05 The Loan Notes. (a) The Company's obligation to
pay the principal of and interest on each Revolving Loan made by each Liquidity
Lender shall be evidenced by a single note of the Company with respect to each
such Liquidity Lender (each, a "Revolving Loan Note" and collectively, the
"Revolving Loan Notes") which shall: (1) be dated the Effective Date; (2)
collectively be in an aggregate principal amount equal to the Liquidity
Commitment and individually be in the stated principal amount equal to such
Liquidity Lender's Percentage of the Liquidity Commitment; (3) mature on the
Liquidity Termination Date; (4) bear interest as provided in Section 3.06; (5)
be payable to the order of such Liquidity Lender; (6) be entitled to the
benefits of this Agreement and the Security Agreement; and (7) be substantially
in the form of Exhibit A-1 to this Agreement with blanks appropriately completed
in conformity herewith. Each Liquidity Lender shall, and is hereby authorized
to, make a notation on the schedule attached to its Revolving Loan Note of the
date and the amount of such Revolving Loan and the date and amount of the
payment of principal thereon and, prior to any transfer of its Revolving Loan
Note, such Liquidity Lender shall endorse the outstanding principal amount of
such Revolving Loan Note on the schedule attached thereto; provided, however,
that failure to make such notation shall not adversely affect such Liquidity
Lender's rights with respect to any Revolving Loan.
(b) Although each Revolving Loan Note shall be dated the
Effective Date, interest in respect thereof shall be payable only for the
periods during which Revolving Loans are outstanding thereunder. In addition,
although the stated principal amount of each Liquidity Lender's Revolving Loan
Note shall be equal to such Liquidity Lender's Percentage of the Liquidity
Commitment, such Revolving Loan Note shall be enforceable with respect to the
Company's obligation to pay the principal thereof only to the extent of the
unpaid principal amount of the Revolving Loans outstanding thereunder at the
time such enforcement shall be
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sought.
(c) The Company's obligation to pay the principal of and
interest on the Refunding Loans made by each Liquidity Lender shall be evidenced
by a single note of the Company with respect to each such Liquidity Lender
(each, a "Refunding Loan Note" and collectively, the "Refunding Loan Notes")
which shall: (1) be dated the Effective Date; (2) collectively be in an
aggregate principal amount equal to the Liquidity Commitment and individually be
in the stated principal amount equal to such Liquidity Lender's Percentage of
the Liquidity Commitment; (3) mature on the Liquidity Termination Date; (4) bear
interest as provided in Section 3.06; (5) be payable to the order of such
Liquidity Lender; (6) be entitled to the benefits of this Agreement and the
Security Agreement; and (7) be substantially in the form of Exhibit A-2 to this
Agreement with blanks appropriately completed in conformity herewith. Each
Liquidity Lender shall, and is hereby authorized to, make a notation on the
schedule attached to its Refunding Loan Note of the date and amount of such
Refunding Loan and the date and amount of the payment of principal thereon and,
prior to any transfer of its Refunding Loan Note, such Liquidity Lender shall
endorse the outstanding principal amount of such Refunding Loan Note on the
schedule attached thereto; provided, however, that failure to make such notation
shall not adversely affect such Liquidity Lender's rights with respect to the
Refunding Loans.
(d) Although each Refunding Loan Note shall be dated the
Effective Date, interest in respect thereof shall be payable only for the
periods during which Refunding Loans are outstanding thereunder. In addition,
although the stated principal amount of each Liquidity Lender's Refunding Loan
Note shall be equal to such Liquidity Lender's Percentage of the Liquidity
Commitment, each Refunding Loan Note shall be enforceable with respect to the
Company's obligation to pay the principal thereof only to the extent of the
unpaid principal amount of the Refunding Loans outstanding thereunder at the
time such enforcement shall be sought.
SECTION 3.06 Interest Rates and Payment Dates. (a) Each
Eurodollar Rate Loan shall bear interest for each day during each Interest
Period (including the first day but excluding the last day) with respect thereto
at a rate per annum equal to the Eurodollar Rate determined for such day plus
the Applicable Margin.
(b) Each Base Rate Loan shall bear interest at a rate per
annum equal to the Base Rate plus the Applicable Margin.
(c) If (i) the Asset Coverage Ratio is less than 300% or (ii) all or a portion
of the principal amount of any Loan or any interest payable on the Loans shall
not be paid when due (whether at the stated maturity, by acceleration or
otherwise), then in the case of clause (i) for so long as the Asset Coverage
Ratio is less than 300%, the Loans and, in the case of clause (ii) from the date
of such nonpayment until such amount is paid in full, such overdue amount, shall
bear interest at a rate per annum which is equal to the greater of (x) the Base
Rate plus 2%, and (y) the rate which is 2% in excess of the rate then applicable
to the relevant Loan.
(d) Interest on each Eurodollar Rate Loan and Base Rate Loan
shall be payable in
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arrears on each Interest Payment Date therefor, provided, in each case, that
interest accruing pursuant to subsection (c) of this Section shall be payable on
demand.
SECTION 3.07 Computation of Interest and Fees. (a) Interest on
Base Rate Loans shall be calculated on the basis of a 365-day year for the
actual days elapsed. Interest on Eurodollar Rate Loans and the Liquidity Fee
payable pursuant to Section 4.01 shall be calculated on the basis of a 360-day
year for the actual days elapsed. The Liquidity Agent shall as soon as
practicable notify the Company and the Liquidity Lenders of each determination
of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the Base Rate or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change in the
Base Rate becomes effective or such change in the Eurocurrency Reserve
Requirements becomes effective, as the case may be. The Liquidity Agent shall as
soon as practicable notify the Company and the Liquidity Lenders of the
effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Liquidity
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Company and the Liquidity Lenders in the absence of manifest
error. The Liquidity Agent shall, at the request of the Company, deliver to the
Company a statement showing the quotations used by the Liquidity Agent in
determining any interest rate pursuant to Section 3.06(a) and the calculations
made by the Liquidity Agent in determining any interest rate pursuant to Section
3.06(b).
SECTION 3.08 Inability to Determine Interest Rate. In the
event that prior to the first day of any Interest Period the Liquidity Agent
shall have determined (which determination shall be conclusive and binding upon
the Company) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period, (x) any Eurodollar Rate Loan requested to be made on
the first day of such Interest Period shall be made as Base Rate Loan and (y)
any Base Rate Loans that were to have been converted on the first day of such
Interest Period to Eurodollar Rate Loans shall be converted to or continued as
Base Rate Loans. Until such determination has been withdrawn by the Liquidity
Agent, no further Eurodollar Rate Loans shall be made or continued as such, nor
shall the Company have the right to convert Base Rate Loans to Eurodollar Rate
Loans.
SECTION 3.09 Illegality. Notwithstanding any other provision
herein, if any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Liquidity Lender or Lending
Office to make or maintain Eurodollar Loans as contemplated by this Agreement,
(a) the commitment of such Liquidity Lender hereunder to make Eurodollar Loans,
continue Eurodollar Loans as such and convert Base Rate Loans to Eurodollar
Loans shall forthwith be suspended until such time as the circumstances giving
rise to such suspension are no longer applicable and (b) the Loans of such
Liquidity Lender or Lending Office then outstanding as Eurodollar Loans, if any,
shall be converted automatically to Base Rate Loans on the respective last days
of the then current Interest Periods with respect to such Loans or within such
earlier period as required by law. If any such conversion of a Eurodollar Loan
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, the Company shall pay to such Liquidity Lender such
amounts, if any, as may be required pursuant to Section 3.12.
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SECTION 3.10 Requirements of Law. (a) In the event that any
change in any Requirement of Law or in the interpretation or application thereof
or compliance by any Liquidity Lender with any request or directive (whether or
not having the force of law but, if not having the force of law, generally
applicable to and complied with by banks of the same general type as such
Liquidity Lender in the relevant jurisdiction) from any central bank or other
Governmental Authority made subsequent to the Closing Date:
(i) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Liquidity Lender or Lending
Office which is not otherwise included in the determination of the
Eurodollar Rate hereunder, or
(ii) shall impose on such Liquidity Lender or Lending Office
any other condition; and the result of any of the foregoing is to
increase the cost to such Liquidity Lender or Lending Office, by an
amount which such Liquidity Lender deems to be material, of making,
converting into, continuing or maintaining Eurodollar Loans or to
reduce any amount receivable hereunder in respect thereof then, in any
such case, the Company shall promptly pay such Liquidity Lender or
Lending Office, upon its demand, any additional amounts necessary to
compensate such Liquidity Lender for such increased cost or reduced
amount receivable. If any Liquidity Lender or any Lending Office
becomes entitled to claim any additional amounts pursuant to this
subsection, it shall promptly notify the Company, through the Liquidity
Agent, of the event by reason of which it has become so entitled. A
certificate as to any additional amounts payable pursuant to this
subsection submitted by such Liquidity Lender or Lending Office,
through the Liquidity Agent, to the Company shall be prima facie
evidence of the accuracy of the information so recorded. This covenant
shall survive the termination of this Agreement and the payment of the
Notes and all other amounts payable hereunder for one year.
(b) If, after the date of this Agreement, the introduction of
any applicable law, rule, regulation or guideline regarding capital adequacy, or
any change therein or any change in the interpretation or administration thereof
by any Governmental Authority charged with the interpretation or administration
thereof, affects the amount of capital required or expected to be maintained by
any Liquidity Lender or any corporation controlling any Liquidity Lender, and
such Liquidity Lender (taking into consideration such Liquidity Lender's or such
corporation's policies with respect to capital adequacy) determines that the
amount of capital maintained by such Liquidity Lender or such corporation which
is attributable to or based upon the Loans, the Liquidity Commitments or this
Agreement must be increased as a consequence of such introduction or change,
then, upon demand of the Liquidity Agent at the request of such Liquidity
Lender, the Company shall immediately pay to the Liquidity Agent on behalf of
such Liquidity Lender, additional amounts sufficient to compensate such
Liquidity Lender or such corporation for the increased costs to such Liquidity
Lender or corporation of such increased capital. Any such demand shall be
accompanied by a certificate of such Liquidity Lender setting forth in
reasonable detail the computation of any such increased costs, provided that
such Liquidity Lender shall not be required to disclose confidential
information. This covenant shall
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survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder for one year.
(c) Each Liquidity Lender will promptly notify the Company,
through the Liquidity Agent, of any event of which it has knowledge that will
entitle such Liquidity Lender to compensation pursuant to Section 3.10(a) or (b)
above. No failure by any Liquidity Lender to give (or delay in giving) such
notice shall adversely affect such Liquidity Lender's rights to such
compensation, except that the Company shall have no obligation to compensate any
Liquidity Lender for any cost or reduction incurred or accrued by it more than
180 days before such Liquidity Lender gives notice of the event giving rise to
such cost or reduction as required by the preceding sentence (unless such cost
or reduction is incurred or accrued by such Liquidity Lender more than 180 days
before the delivery of such notice as a result of the retroactive application by
any Governmental Authority of any Requirement of Law, applicable law, rule or
guideline referred to in Section 3.10(a) or (b)).
SECTION 3.11 Taxes. (a) Except as otherwise provided herein,
payments made by the Company under this Agreement and the Notes shall be made
free and clear of, and without deduction or withholding for or on account of,
any present or future taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority or any political subdivision
or taxing authority thereof or therein with respect to such payments (but,
excluding, except as provided in the second succeeding sentence, in the case of
the Liquidity Agent, each Liquidity Lender and each Lending Office, net income
on the Liquidity Agent or such Liquidity Lender or Lending Office, as the case
may be, or profit taxes and capital taxes and franchise taxes (imposed in lieu
of net income taxes) imposed by any Governmental Authority, or any political
subdivision or taxing authority thereof or therein, in which the principal
office of the Liquidity Agent or such Liquidity Lender is located and all
interest, penalties or similar liabilities with respect to such non-excluded
taxes, levies, imposts, duties, fees, assessments or other charges (all such
non-excluded taxes, levies, imposts, duties, charges and fees, being hereinafter
called "Taxes"). If any Taxes are required to be withheld from any amounts
payable to the Liquidity Agent or any Liquidity Lender hereunder or under the
Notes, the amounts so payable to the Liquidity Agent or Liquidity Lender shall
be increased to the extent necessary to yield to the Liquidity Agent or such
Liquidity Lender (after making all required deductions for all Taxes) interest
or any such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement and the Notes had no such withholding occurred. If
any amounts are payable in respect of Taxes pursuant to the preceding sentence,
the Company agrees to reimburse each Liquidity Lender, upon the written request
of such Liquidity Lender, for taxes imposed on or measured by the net income or
net profits of such Liquidity Lender pursuant to the laws of the jurisdiction in
which such Liquidity Lender is organized or in which the principal office or
applicable lending office of such Liquidity Lender is located or under the laws
of any political subdivision or taxing authority of any such jurisdiction in
which the principal office of such Liquidity Lender is located and for any
withholding of taxes as such Liquidity Lender shall determine are payable by, or
withheld from, such Liquidity Lender, in respect of such amounts so paid to or
on behalf of such Liquidity Lender pursuant to the preceding sentence and in
respect of any amounts paid to or on behalf of such Liquidity Lender pursuant to
this sentence. Whenever any Taxes are payable by the
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Company, within 45 days after the date the payment of any Taxes is due pursuant
to the applicable law the Company shall send to the Liquidity Agent, for its own
account or for the account of such Liquidity Lender, as the case may be, a
certified copy of an original official receipt received by the Company showing
payment thereof. If the Company fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Liquidity Agent the
required receipts or other required documentary evidence, the Company shall
indemnify the Liquidity Agent and the Liquidity Lenders for any incremental
Taxes, interest or penalties that may become payable by the Liquidity Agent or
any Liquidity Lender as a result of any such failure. The agreements in this
subsection shall survive the termination of this Agreement and the payment of
the Notes and all other amounts payable hereunder.
(b) Each Liquidity Lender that is not a United States person
(as such term is defined in Section 7701(a)(30) of the Code) for U.S. federal
income tax purposes agrees that it will deliver to the Company and the Liquidity
Agent (i) two accurate and completed original signed copies of United States
Internal Revenue Service Form W-8ECI or W-8BEN (with respect to a complete or
partial exemption under an income tax treaty) (or successor form) certifying in
each case to such Liquidity Lender's entitlement as of such date to a complete
or partial exemption from United States withholding tax with respect to payments
under this Agreement and the Notes payable to it or (ii) if the Liquidity Lender
is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and
cannot deliver either Internal Revenue Service Form W-8ECI or Form W-8BEN (with
respect to a complete exemption under an income tax treaty) pursuant to clause
(i) above, (x) a certificate substantially in the form of Exhibit I (any such
certificate, a "Section 3.11(b)(ii) Certificate") and (y) two accurate and
complete original signed copies of Internal Revenue Service Form W-8BEN (with
respect to the portfolio interest exemption)(or successor form) certifying to
such Liquidity Lender's entitlement to a complete exemption from United States
withholding tax with respect to payments of interest to be made under this
Agreement and under any Note. Each such Liquidity Lender also agrees to deliver
to the Company and the Liquidity Agent two further copies of the said Form W8ECI
or W-8BEN (with respect to a compete or partial exemption under an income tax
treaty) or W-8BEN (with respect to the portfolio exemption), or successor forms
or other manner of certification, as the case may be, on or before the date that
any such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by it to the
Company, and such extensions or renewals thereof as may reasonably be requested
by the Company or the Liquidity Agent unless in any such case an event
(including, without limitation, any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Liquidity Lender from duly completing and delivering any such form with respect
to it and such Liquidity Lender so advises the Company and the Liquidity Agent,
in which case such Liquidity Lender shall not be required to deliver such Form
or Certificate pursuant to this Section 3.11(a). Each Liquidity Lender shall
certify in the case of a Form W-8ECI or Form W-8BEN (with respect to a complete
or partial exemption under an income tax treaty) or successor form, that it is
entitled to receive payments under this Agreement without, or at a reduced rate
of, deduction or withholding of any United States federal income Taxes.
(c) The Company shall not be required to pay any additional
amounts to any
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Person in respect of United States or other withholding tax pursuant to Section
3.11(a) if the obligation to pay such additional amounts would not have arisen
but for a failure by such Person to comply with the requirements of Section
3.11(b) or 10.05(e); provided, that if such Liquidity Lender shall have
satisfied such requirements on the Closing Date (in the case of each Liquidity
Lender listed on the signature pages hereof) or on the effective date of the
assignment pursuant to which it became a Liquidity Lender (in the case of each
other Liquidity Lender), nothing in this subsection shall relieve the Company of
its obligation to pay any additional amounts pursuant to Section 3.11(a) in the
event that, as a result of any change in applicable law, such Liquidity Lender
is no longer properly entitled to deliver certificates, documents or other
evidence at a subsequent date establishing the fact that such Liquidity Lender
is not subject to withholding as described in Section 3.11(b).
(d) If the Company pays any additional amount under this
Section 3.11 to a Liquidity Lender and such Liquidity Lender determines in its
sole discretion that it has actually received or realized in connection
therewith any refund or any reduction of, or credit against, its Tax liabilities
in or with respect to the taxable year in which the additional amount is paid (a
"Tax Benefit"), such Liquidity Lender shall pay to Company an amount that the
Liquidity Lender shall, in its sole discretion, determine is equal to the net
benefit, after tax, which was obtained by the Liquidity Lender in such year as a
consequence of such Tax Benefit; provided, however, that (i) any Liquidity
Lender may determine in its sole discretion consistent with the policies of such
Liquidity Lender whether to seek a Tax Benefit; (ii) any Taxes that are imposed
on a Liquidity Lender as a result of a disallowance or reduction (including
through the expiration of any tax carryover or carryback of such Liquidity
Lender that otherwise would not have expired) of any Tax Benefit with respect to
which such Liquidity Lender has made a payment to the Company pursuant to this
Section 3.11(d) shall be treated as a Tax for which the Company is obligated to
indemnify such Liquidity Lender pursuant to this Section 3.11 without any
exclusions or defenses; and (iii) nothing in this Section 3.11(d) shall require
a Liquidity Lender to disclose any confidential information to the Company
(including, without limitation, its tax returns).
SECTION 3.12 Indemnity. The Company agrees to indemnify each
Liquidity Lender and to hold each Liquidity Lender harmless from any loss or
expense (other than any present or future taxes, now or hereafter imposed,
levied, collected, withheld or assessed) which such Liquidity Lender may sustain
or incur as a consequence of (a) default by the Company in payment when due of
the principal amount of or interest on any Eurodollar Loan, (b) default by the
Company in making a borrowing of, conversion into or continuation of Eurodollar
Loans after the Company has given a notice requesting the same in accordance
with the provisions of this Agreement, (c) default by the Company in making any
prepayment after the Company has given a notice thereof in accordance with the
provisions of this Agreement or (d) the making by the Company of a prepayment
(whether such prepayment is voluntary, optional, mandatory or upon acceleration
of such Loans) of Eurodollar Loans on a day which is not the last day of an
Interest Period with respect thereto, including, without limitation, in each
case, any such loss or expense arising from the reemployment of funds (but,
otherwise, excluding in all cases consequential damages and loss of profits
relating thereto) obtained by it or from fees payable to terminate the deposits
from which such funds were obtained. This covenant shall survive the
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termination of this Agreement and the payment of the Notes and all other amounts
payable hereunder for one year.
SECTION 3.13 Pro Rata Borrowings. All Loans under this
Agreement shall be made by the Liquidity Lenders simultaneously and in such
amount as necessary so that after giving effect thereto, to the extent possible,
the outstanding Loans of each Liquidity Lender shall bear the same proportion to
all outstanding Loans of all Liquidity Lenders as such Liquidity Lender's
Percentage bears to 100%. Except as provided in Section 3.04 (c), it is
understood that no Liquidity Lender shall be responsible for any default by any
other Liquidity Lender in its obligations to make Loans hereunder and that each
Liquidity Lender shall be obligated to make the Loans provided to be made by it
hereunder, regardless of the failure of any other Liquidity Lender to fulfill
its commitment hereunder.
SECTION 3.14 Downgrading of Liquidity Lenders. If at any time
the credit rating assigned to any Liquidity Lender by any Rating Agency is
withdrawn or downgraded below the Highest Short-Term Rating Category of such
Rating Agency, the Company may, upon five days' prior written notice given to
the Liquidity Agent and such affected Liquidity Lender, either (i) replace such
affected Liquidity Lender with a lender approved in advance in writing by the
Agent (which lender shall sign such documents and instruments as shall be
appropriate to assume the obligations of such affected Liquidity Lender
hereunder) and having short-term ratings in the Highest Short-Term Rating
Category from each Rating Agency or with a Liquidity Lender already a party to
this Agreement, provided that no such replacement pursuant to this clause (i)
shall be effective unless each Rating Agency shall have confirmed in writing to
the Company and Liquidity Agent that such replacement would not result in a
withdrawal or reduction of the rating by such Rating Agency of the Commercial
Paper below the Highest Short-Term Rating Category of such Rating Agency; or
(ii) terminate such affected Liquidity Lender's Percentage of the Liquidity
Commitment and reduce the Liquidity Commitment by such amount (subject to the
prior execution and delivery of an amendment to this Agreement changing the
Percentages of the Liquidity Lenders remaining so as to equal 100% in the
aggregate); provided that in no event shall any such action under this clause
(ii) be effective hereunder if (x) the sum of the Aggregate CP Matured Value and
the outstanding principal amount of all Loans hereunder would exceed (y) the
Liquidity Commitment as so reduced; provided, however, that, until such time as
one of the actions required by clause (i) or (ii) hereof is completed, the
affected Liquidity Lender's Percentage of the Liquidity Commitment shall not be
terminated (except pursuant to Section 4.02 or Article VIII hereof).
SECTION 3.15 Subordination. The Liquidity Agent and the
Liquidity Lenders agree that the obligations of the Company set forth in
Sections 3.09, 3.10, 3.11, 3.12 and 10.04 hereof shall be subordinate to the
obligation of the Company to make payments of principal of and interest on the
Loans and the Commercial Paper, and shall constitute claims against the Company
only to the extent (if any) that the assets of the Company are sufficient for
the payment thereof.
SECTION 3.16 Mitigation of Costs; Replacement of Liquidity
Lender. (a) If any Liquidity Lender, by changing its Lending Office can mitigate
any adverse effect on the Company under subsections 3.09, 3.10, 3.11 or 3.12,
such Liquidity Lender will, if requested by
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the Company, use reasonable efforts (subject to overall policy considerations of
such Liquidity Lender) to designate another lending office for any Loans
affected by such event; provided that the Liquidity Lender shall determine in
its sole discretion that such designation is made on such terms that such
Liquidity Lender and its lending office suffer no material economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of any such Section.
(b) If any Liquidity Lender (x) shall have required
compensation pursuant to subsection 3.09, 3.10 or subsection 3.11, (y) shall
have failed to fund a Loan in accordance with Section 3.04, and/or (z) shall
have refused to consent to a proposed change, waiver, discharge or termination
in connection with this Agreement which has been approved by the Required
Liquidity Lenders pursuant to Section 10.03, the Company shall have the right,
with the consent of the Liquidity Agent (which shall not be unreasonably
withheld), to substitute such Liquidity Lender with a Liquidity Lender (a
"Replacement Lender") satisfactory to the Company and the Liquidity Agent (which
may be one or more of the Liquidity Lenders) to assume the Liquidity Commitment
of such Liquidity Lender and to purchase the Notes held by such Liquidity Lender
for an amount equal to the principal of, and accrued and unpaid interest on,
such Notes, together with any costs reasonably incurred by such Liquidity Lender
in connection with its sale of such Notes (without recourse to or warranty by
such Liquidity Lender and subject to all amounts owing to such Liquidity Lender
under this Agreement having been paid in full); provided that such successor
Liquidity Lender (x) shall have a short-term rating in the Highest Shot-Term
Rating Category from each Rating Agency and (y) shall have delivered to the
Liquidity Agent an opinion substantially in the form of Exhibit D attached
hereto. Upon the exercise of such right by the Company and the satisfaction of
such conditions thereto, such Liquidity Lender shall convey its interest to the
Replacement Lender in accordance with the procedures set forth in Section 10.05.
SECTION 3.17 Loans by Designated Liquidity Lenders. For any
Liquidity Lender which is a Designating Liquidity Lender, any Loan to be made by
such Liquidity Lender may from time to time be made by its Designated Liquidity
Lender in such Designated Liquidity Lender's sole discretion, and nothing herein
shall constitute a commitment to make Loans by such Designated Liquidity Lender
provided that if any Designated Liquidity Lender elects not to, or fails to,
make any such Loan, its Designating Liquidity Lender hereby agrees that it shall
make such Loan pursuant to the terms hereof. Any Loan actually funded by a
Designated Liquidity Lender shall constitute a utilization of the Liquidity
Commitment of the Designating Liquidity Lender for all purposes hereunder.
ARTICLE IV
OTHER CREDIT TERMS
SECTION 4.01 Liquidity Fee. In connection with and as
consideration for the holding available for use by the Company the full amount
of the Liquidity Commitments during the Liquidity Commitment Period the Company
agrees to pay to the Liquidity Agent for the account of each Liquidity Lender a
commitment fee (the "Liquidity Fee") equal to the sum of the
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product of (x) the Liquidity Commitment Fee Rate multiplied by (y) the average
daily amount of the Available Liquidity Commitment of such Liquidity Lender
during the calendar quarter preceding the calendar quarter in which the
Liquidity Fee is paid multiplied by (z) a fraction the numerator of which is the
number of days in the calendar quarter preceding the calendar quarter in which
the Liquidity Fee is paid and the denominator of which is 360. Such Liquidity
Fee shall be payable quarterly in arrears on the fifth Business Day of each
calendar quarter (in respect of the Liquidity Fee accrued during the preceding
calendar quarter), commencing _____ __, 2000 and on the Liquidity Termination
Date.
SECTION 4.02 Termination of Liquidity Commitment. (a) The
Company may irrevocably terminate the Liquidity Commitment on or after the first
date on which (i) the Company shall have permanently ceased issuing Commercial
Paper and (ii) no Commercial Paper or Loans are outstanding.
(b) After giving notice of termination pursuant to Section
4.02(a) hereof, the Company shall not make any further Advances to the Borrower
pursuant to the Credit Agreement.
SECTION 4.03 Expiration of Liquidity Commitment; Extension of
Liquidity Commitment. (a) Subject to subsection (b) of this Section 4.03 and
other provisions of this Agreement permitting earlier termination hereof, the
Liquidity Commitment (but not this Agreement) shall terminate on the Liquidity
Termination Date. The Liquidity Agent shall provide a written notice thereof to
the Rating Agencies.
(b) On any Business Day which is at least 30 and not more than
45 days prior to the Liquidity Termination Date then in effect, the Company may
notify the Liquidity Agent of its desire to extend the Liquidity Termination
Date for the period specified in such notice, whereupon the Liquidity Agent
shall notify each Liquidity Lender of such request. Not later than the 30th day
next following notice of such request, but in no event earlier than the 45th day
prior to he Liquidation Termination Date then in effect, each Liquidity Lender
will notify the Liquidity Agent whether it consents to such extension, provided
that in the event that a Liquidity Lender does not respond to such request such
Liquidity Lender shall be deemed to have denied its consent to such request. The
Liquidity Agent shall notify the Company in writing of the decisions of the
Liquidity Lenders not later than thirty days (or, if such day is not a Business
Day, the next succeeding Business Day) after the date on which the Liquidity
Agent shall have received such notice from the Company. If all of the Liquidity
Lenders consent to extend the Liquidity Termination Date for the specified
period as evidenced by a notice from the Liquidity Agent to the Company, the
Liquidity Termination Date shall be so extended on the date of such notice and
the Liquidity Agent shall provide a written notice thereof to the Rating
Agencies.
(c) If any Liquidity Lender does not consent to the extension
of the Liquidity Termination Date pursuant to subsection (b) of this Section
4.03, the Company may, upon such failure to extend, (A) request each Liquidity
Lender that is willing to extend the Liquidity Termination Date to assume all or
a portion of the non-extending Liquidity Lender's Percentage of the Liquidity
Commitment and (B) after first making the request pursuant to clause (A), as to
any portion of the non-extending Liquidity Lender's Percentage of the Liquidity
Commitment
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not assumed pursuant to such clause within fifteen days after the
date of such request, obtain a qualified successor lender or lenders having (in
each case) short-term ratings in the Highest Short-Term Rating Category from
each Rating Agency to assume such non-extending Liquidity Lender's Percentage of
the Liquidity Commitment. If such a successor lender or lenders are obtained
prior to the Liquidity Termination Date then in effect, the Company, the
Liquidity Lenders willing to extend the Liquidity Termination Date, the
Liquidity Agent and such successor lender or lenders shall sign such documents
and instruments as shall be appropriate to evidence the extension of the
Liquidity Termination Date and such successor lender's or lenders' assumption of
such non-extending Liquidity Lender's Percentage of the Liquidity Commitment
(including, without limitation, any adjustment to the Percentages) and the
successor lender shall deliver an opinion substantially in the form of Exhibit D
attached hereto. Upon the execution and delivery of such documents and
instruments and the payment of any fees which may be payable in connection
therewith, the Liquidity Termination Date shall as of the date of such delivery
be extended for the specified period. Each such successor Liquidity Lender shall
be deemed to be a "Liquidity Lender" for all purposes hereunder, and the
non-extending Liquidity Lender shall have no further obligations hereunder.
SECTION 4.04 Use of Proceeds. (a) The proceeds of the
Revolving Loans shall be used by the Company only to make Advances to the
Borrower pursuant to the Credit Agreement. The proceeds of Refunding Loans shall
be used by the Company solely to pay maturing Commercial Paper.
(b) The proceeds of Commercial Paper shall be used by the
Company only to (i) make Advances to the Borrower pursuant to the Credit
Agreement and (ii) repay maturing Commercial Paper or Loans.
ARTICLE V
PAYMENTS
SECTION 5.01 Payments on Non-Business Days. Whenever any
payment to be made hereunder or under a Loan Note (other than payments on the
Eurodollar Rate Loans) shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day and interest and fees shall be payable at the applicable rate
through and including the day immediately preceding such Business Day. If any
payment on a Eurodollar Rate Loan becomes due and payable on a day other than a
Working Day, the maturity thereof shall be extended to the next succeeding
Working Day unless the result of such extension would be to extend such payment
into another calendar month, in which event such payment shall be made on the
immediately preceding Working Day.
SECTION 5.02 Prepayments. (a) The Company may, at any time and
from time to time, prepay the Loans, in whole or in part, without premium or
penalty, upon at least three Working Days' irrevocable notice (in the case of
Eurodollar Rate Loans) and one Business Day's irrevocable notice (in the case of
Base Rate Loans) from the Company to the Liquidity Agent specifying the date and
amount of prepayment and whether the prepayment is of Eurodollar Rate
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Loans, Base Rate Loans or a combination thereof, and, if of a combination
thereof, the amount allocable to each. Upon receipt of any such notice from the
Company, the Liquidity Agent shall promptly notify each Liquidity Lenders
thereof. If any such notice is given, the amount specified in such notice shall
be due and payable by the Company on the date specified therein, together with
accrued interest to such date on the amount prepaid. Partial prepayments shall
be in an aggregate principal amount of $5,000,000 or a whole multiple thereof.
(b) On any Business Day on which any Loan is outstanding and
the Company is able to sell Commercial Paper, the Company shall be obligated to
prepay Loans in an amount equal to the lesser of (x) the aggregate amount of
Loans outstanding and (y) the proceeds from the sale of the maximum amount of
Commercial Paper that the Company is able to sell on such day in excess of the
proceeds needed to pay Commercial Paper maturing on such day.
(c) If on any Business Day on which any Loan is outstanding,
the Company shall have received prepayments of Advances from the Borrower, then
the Company shall on such Business Day prepay the Loans to the extent of such
amounts.
(d) Notwithstanding anything to the contrary in this
Agreement, on the Liquidity Termination Date (i) all Loans outstanding shall
mature and be payable in full, and the Liquidity Commitment of each Liquidity
Lender shall be reduced to zero, (ii) the Company shall have permanently ceased
issuing Commercial Paper, and (iii) the Company shall not make any further
Advances to the Borrower pursuant to the Credit Agreement.
SECTION 5.03 Attachments. Anything herein to the contrary
notwithstanding, the Company shall not be permitted to issue or sell Commercial
Paper after the Company has received notice that the Commercial Paper Account or
any funds on deposit in, or otherwise to the credit of, the Commercial Paper
Account are or have become subject to any stay, writ, judgment, warrant of
attachment, execution or similar process, unless such stay, writ, judgment,
warrant or attachment, execution or similar process does not, in the reasonable
opinion of the Required Liquidity Lenders, materially impair the fulfillment of
the transactions contemplated by this Agreement.
SECTION 5.04 Method and Place of Payment, etc. (a) All
payments by the Company under this Agreement and the Loan Notes owing to the
Liquidity Lenders shall be made to the Liquidity Agent for the pro rata account
of each Liquidity Lender, without setoff or counterclaim, not later than 2:00
p.m. (New York City time) on the date when due and shall be made in freely
transferable U.S. dollars and in immediately available funds at the Liquidity
Agent's Payment Office. Payments by the Company shall be distributed by the
Liquidity Agent to the Liquidity Lenders (i) on account of principal of and
interest on the Loans made by the Liquidity Lenders, pro rata according to the
respective outstanding principal amounts of the Loans held by each Liquidity
Lender and (ii) on account of the Liquidity Fee in accordance with each
Liquidity Lender's respective Percentage prior to the close of business on the
day on which received.
(b) On any date on which a payment by the Company of any
amount owing by it hereunder is due and payable, the Liquidity Agent may (but in
no event shall be required to)
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assume that the Company has made such payment available to the Liquidity Agent
on the date of such payment in accordance with Section 5.04 hereof, and the
Liquidity Agent may (but in no event shall be required to), in reliance upon
such assumption, make payment to the Liquidity Lenders accordingly. If and to
the extent the Company shall not have so made such payment available to the
Liquidity Agent, each Liquidity Lender irrevocably and unconditionally agrees to
repay to the Liquidity Agent forthwith on demand the amount of such payment
received by such Liquidity Lender together with interest thereon, for each day
from the date such payment is made by the Liquidity Agent until the date such
amount is repaid to the Liquidity Agent, at a rate per annum equal to the
Federal Funds Rate.
(c) Any payments received after 2:00 p.m. (New York City time)
on the date when due shall be deemed for purposes of calculating interest
pursuant to Section 3.06 hereof to have been paid on the next succeeding
Business Day, and interest shall be payable at the applicable rate through and
including the day immediately preceding such Business Day.
SECTION 5.05 Conversion and Continuations. (a) The Company may
elect from time to time to convert Eurodollar Rate Loans to Base Rate Loans, by
giving the Liquidity Agent at least two Business Days' prior irrevocable notice
of such election; provided that any such conversion of Eurodollar Rate Loans may
only be made on the last day of an Interest Period with respect thereto. The
Company may elect from time to time, provided no Default or Event of Default
shall have occurred and be continuing, to convert Base Rate Loans to Eurodollar
Rate Loans by giving the Liquidity Agent at least three Working Days' prior
irrevocable notice of such election. Any such notice of conversion to Eurodollar
Rate Loans shall specify the length of the initial Interest Period or Interest
Periods therefor. Upon receipt of any such notice the Liquidity Agent shall
promptly notify each Liquidity Lender thereof. All or any part of outstanding
Eurodollar Rate Loans and Base Rate Loans may be converted as provided herein;
provided that no Loan may be converted into a Eurodollar Rate Loan after the
date that is one month prior to the Liquidity Termination Date.
(b) Any Eurodollar Rate Loans may be continued as such upon
the expiration of the then current Interest Period with respect thereto by the
Company giving notice to the Liquidity Agent, in accordance with the applicable
provisions of the definition of "Interest Period" set forth in Section 1.02, of
the length of the next Interest Period to be applicable to such Eurodollar Rate
Loans; provided that no Eurodollar Rate Loan may be continued as such after the
date that is one month prior to the Liquidity Termination Date; and provided,
further, that if the Company shall fail to give any required notice as described
above in this subsection or if such continuation is not permitted pursuant to
the preceding proviso such Loans shall be automatically converted to Base Rate
Loans on the last day of such then expiring Interest Period.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01 Conditions to Effectiveness. This Agreement shall
become effective on the date (the "Effective Date") which shall be the first day
on which all of the
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following conditions have been satisfied:
(a) Agreement. Each Liquidity Lender, the Liquidity Agent and
the Company shall have signed a counterpart copy of this Agreement and
delivered the same to the Liquidity Agent.
(b) The Revolving Loan Notes and the Refunding Loan Notes.
There shall have been delivered to the Liquidity Agent for the account
of each Liquidity Lender the appropriate Revolving Loan Note and
Refunding Loan Note payable to the order of such Liquidity Lender in
the amount and as otherwise provided for in Article III.
(c) Credit Agreement. The Company, the Borrower and the Agent
shall have executed and delivered the Credit Agreement, and the
Liquidity Agent shall have received a fully executed counterpart
thereof.
(d) Security Agreement. The Company, the Collateral Agent, the
Liquidity Agent, the Agent, the Depositary and the Borrower shall have
executed and delivered to the Collateral Agent the Security Agreement,
which shall be in full force and effect, and the Liquidity Agent shall
have received a fully executed counterpart thereof.
(e) Control Agreement. The Custodian, the Company, the
Borrower and the Collateral Agent shall have executed and delivered the
Control Agreement and the Liquidity Agent shall have received a fully
executed counterpart thereof.
(f) Depositary Agreement. The Company and the Depositary shall
have executed and delivered the Depositary Agreement, the Collateral
Agent shall have consented thereto and the Liquidity Agent shall have
received a fully executed counterpart thereof.
(g) Other Agreements. The Company shall have executed and
delivered each other Facility Document to which it is a party and the
Liquidity Agent shall have received a fully executed counterpart of
each such document.
(h) No Default. After giving effect to the effectiveness of
this Agreement, there shall exist no Default or Event of Default under
this Agreement or the Credit Agreement.
(i) Representations and Warranties. All representations and
warranties of (i) the Company contained in this Agreement and in the
other Facility Documents to which it is a party or in any document,
certificate or financial or other statement delivered in connection
herewith or therewith, and (ii) the Borrower contained in the Facility
Documents to which it is a party, shall (in each case) be true and
correct in all material respects and with the same force and effect as
though such representations and warranties had been made as of such
time, except to the extent any such representations and warranties
relate solely to an earlier date.
(j) Opinions of Counsel. The Liquidity Agent shall have
received, in sufficient quantities for each Liquidity Lender, the
Liquidity Agent and the Company, favorable
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opinions dated the Effective Date covering the matters set forth in
Exhibits E and F attached hereto and such other matters as the
Liquidity Agent shall reasonably request from (i) Chapman and Cutler
as to certain matters regarding the Borrower and (ii) from
__________________ and White & Case LLP as to certain matters
regarding the Company.
(k) Closing Certificates. The Liquidity Agent shall have
received in sufficient quantities for each Liquidity Lender a
certificate, dated the Effective Date and executed by the president,
treasurer, assistant treasurer or other authorized officer of each of
the Company and the Borrower, stating that all of the conditions
specified in Sections 6.01(h) and (i) as applicable to it are then
satisfied.
(l) Filings, etc. All filings (including, without limitation,
pursuant to the UCC) and recordings shall have been completed in such
jurisdictions as may be required or permitted by law to establish,
perfect, protect and preserve the rights, titles, interests, remedies,
powers, privileges, liens and security interests of the Company and of
the Collateral Agent in the collateral covered by the Security
Agreement and any giving of notice or the taking of any other action to
such end (whether similar or dissimilar) required or permitted by law
shall have been given or taken. On or prior to the Effective Date, the
Company, the Agent and the Collateral Agent shall have received
satisfactory evidence as to any such filing, recording, registration,
giving of notice or other action so taken or made.
(m) Documentation and Proceedings. The Liquidity Agent shall
have received (i) copies of the certificate of formation and the
limited liability company agreement of the Company and copies of the
declaration of trust and by-laws, or other similar governing document,
of the Borrower, (ii) Board of Directors resolutions of the Company and
the resolutions of the Board of Trustees of the Borrower in respect of
the Facility Documents to which it is a party, and (iii) incumbency
certificates of the Company and the Borrower, all certified on the
Effective Date by appropriate corporate authorities and reasonably
satisfactory in form and substance to the Liquidity Agent.
(n) Rating Letter. The Commercial Paper shall have been given
a rating of at least [A-1+/F-1+/P-1] from S&P, Fitch and Moody's
respectively, which ratings shall be in full force and effect.
SECTION 6.02 Conditions to Each Credit Utilization. The
obligation of each Liquidity Lender to make each Revolving Loan hereunder and
the right of the Company to issue Commercial Paper other than to continue the
funding of outstanding Advances (any of the foregoing, a "Credit Utilization")
are subject at the time of such Credit Utilization to the satisfaction of the
following conditions; provided that the condition specified in Section 6.02(c)
shall be applicable only in respect of the making of Revolving Loans. Each
Credit Utilization shall constitute a representation and warranty by the Company
that the conditions specified in Sections 6.02(a) and (b) below are then
satisfied.
(a) No Default. At the time of such Credit Utilization and
after giving effect
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thereto, there shall exist no Default or Event of Default under this Agreement
and no "default" or "event of default" under the Credit Agreement.
(b) Representations and Warranties. At the date of such Credit
Utilization and after giving effect thereto, all representations and warranties
of (i) the Company contained in this Agreement and in other Facility Documents
to which it is a party or in any document, certificate or financial or other
statement delivered in connection herewith or therewith and (ii) to the
Company's knowledge, the Borrower contained in the Facility Documents to which
it is a party or in any document, certificate or financial or other statement
delivered in connection therewith, in each case shall be true and correct in all
material respects with the same force and effect as though such representations
and warranties had been made as of such date, except to the extent any such
representations and warranties relate solely to an earlier date.
(c) Commercial Paper Unavailable. The Company shall have
determined in good faith that the Company is unable to issue Commercial Paper at
maturities up to 180 days in an amount sufficient to enable the Company to fund
an Advance requested by the Borrower under the Credit Agreement on the date
requested.
(d) No Bankruptcy Proceeding. The Company shall not have
voluntarily commenced any proceeding or filed any petition under any bankruptcy,
insolvency or similar law seeking the dissolution, liquidation or reorganization
of the Company or taken any corporate action for the purpose of effectuating any
of the foregoing, and no involuntary proceedings or involuntary petition shall
have been commenced or filed against the Company by any Person under any
bankruptcy, insolvency or similar law seeking the dissolution, liquidation or
reorganization of the Company that shall not have been dismissed.
(e) Asset Coverage Ratio. The Asset Coverage Ratio of
the Borrower shall not be less than 300%.
SECTION 6.03 Conditions Precedent to the Making of Each
Refunding Loan. In addition to the requirements of Section 3.01, the Liquidity
Lenders shall not be required to make Refunding Loans if at or prior to the time
of making of such Refunding Loan (i) an order for relief shall be entered in a
case under the Bankruptcy Code in which the Company is a debtor or the Company
shall have voluntarily commenced any proceeding or filed any petition under any
bankruptcy, insolvency or similar law seeking the dissolution, liquidation or
reorganization of the Company or taken any corporate action for the purpose of
effectuating any of the foregoing or seeking the appointment of a receiver,
trustee, custodian or liquidator for itself or a substantial portion of its
property, assets or business, (ii) involuntary proceedings or an involuntary
petition shall have been commenced or filed against the Company by any Person
other than the Collateral Agent under any bankruptcy, insolvency of similar law
seeking the dissolution, liquidation or reorganization of the Company or seeking
the appointment of a receiver, trustee, custodian or liquidation for itself or a
substantial portion of its property, assets or business and such proceeding or
petition shall continue undismissed for sixty days after the commencement or
filing thereof or (iii) the Asset Coverage Ratio of the Borrower shall be less
than 225%.
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ARTICLE VII
COVENANTS
---------
While this Agreement is in effect and until all indebtedness hereunder
and under the Commercial Paper and the Loan Notes shall have been paid in full
and the Liquidity Lenders no longer have any Liquidity Commitment hereunder, the
Company agrees that:
SECTION 7.01 Affirmative Covenants. Each of the Company and the
Borrower will pay and discharge all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits, or upon any properties
belonging to it, prior to the date on which penalties attach thereto, and all
lawful claims for sums that have become due and payable which, if unpaid, might
become a Lien not otherwise permitted under this Agreement; provided, that the
Borrower or the Company, as the case may be, shall not be required to pay any
such tax, assessment, charge, levy or claim which is being contested in good
faith and by proper proceedings if it has maintained adequate reserves with
respect thereto in accordance with U.S. GAAP. The Company will (w) promptly
provide the Liquidity Agent and the Manager with all financial and operational
information which the Company receives under the Facility Documents and such
additional information as the Liquidity Agent or the Manager may reasonably
request and permit the Liquidity Agent, each Liquidity Lender and its agents,
upon prior notice to the Company, to inspect any of the Company's assets
(including its books and records) at any time that the Liquidity Agent
reasonably so requests; provided, however, that, in the absence of a Default or
Event of Default, the Liquidity Agent will be permitted to make no more than one
such inspection in any calendar year; (x) comply in all material respects with
obligations it assumes under the Facility Documents; (y) not take any action
which would permit the Borrower to have the right to refuse to perform any of
its obligations under any of the Facility Documents to which the Company is a
party and (z) provide the Manager with all of the information it reasonably
requires to perform its services under the Management Agreement. The Company
will provide a monthly statement to the Rating Agencies setting forth the
information reasonably requested by the Rating Agencies.
SECTION 7.02 Dividend Limitation. The Company will not declare or pay
any dividend in respect of, or make any distribution in respect of, or
redemption or purchase of, any shares of its capital stock ("Restricted
Payments"); provided that the Company may make Restricted Payments in an amount
in any one year not to exceed $5,000 in each case on a basis subordinated to the
prior payment in full of all amounts due and owing in respect of Commercial
Paper and Loans.
SECTION 7.03 Liens. The Company will not contract for, create, incur,
assume or suffer to exist any Lien, security interest, charge or other
encumbrance of any nature upon any of its property or assets, whether now owned
or hereafter acquired except for any Permitted Liens.
SECTION 7.04 Other Debt; Receivables. The Company will not create,
incur, assume or suffer to exist any indebtedness, whether current or funded, or
any other liability except (i) indebtedness evidenced by the Commercial Paper,
(ii) indebtedness evidenced by the
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Loan Notes, (iii) indebtedness of the Company representing fees, expenses and
indemnities payable pursuant to the Facility Documents, and (iv) trade payables
for necessary services supplied or furnished to the Company.
SECTION 7.05 Guarantees, Loans, Advances and Other Liabilities. Except
as contemplated by the Credit Agreement, the Company will not make any loan or
advance or credit to, or guarantee (directly or indirectly or by an instrument
having the effect of assuring another's payment or performance on any obligation
or capability of so doing or otherwise), endorse or otherwise become
contingently liable, directly or indirectly, in connection with the obligations,
stocks or dividends of, or own, purchase, repurchase or acquire (or agree
contingently to do so) any assets, stock, obligations or securities of, or any
other interest in, or make any capital contribution to, any other Person.
SECTION 7.06 Consolidation, Merger and Sale of Assets. The Company
will not enter into any merger, consolidation, joint venture, syndicate or other
form of combination with any Person or sell, lease or transfer or otherwise
dispose of any of its assets or receivables or purchase any asset or engage in
any other transaction which would result in a change of control of the Company.
SECTION 7.07 Certain Amendments and Waivers. Without the prior written
approval of the Required Liquidity Lenders, the Company will not execute or
consent to any amendment or waiver of any Facility Document.
SECTION 7.08 Capital Expenditures. The Company will not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(both realty and personalty).
SECTION 7.09 Other Business. The Company will not engage in any
business or enterprise or enter into any material transaction other than as
contemplated by the Facility Documents.
SECTION 7.10 Amendment of Certificate of Incorporation or By-Laws. The
Company will not amend its certificate of formation or limited liability company
agreement if such amendment would have a material adverse effect on the
Liquidity Lenders or the holders of the Commercial Paper.
SECTION 7.11 Good Standing. The Company will maintain its existence as
a limited liability company validly existing and in good standing under the laws
of the State of Delaware.
SECTION 7.12 Restriction on Advances. The Company will not make any
Advances on or after the Liquidity Termination Date.
SECTION 7.13 Separate Existence. The Company will:
(i) maintain in full effect its existence, rights and franchises as a
limited liability
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company under the laws of the state of its organization and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and each Facility Document to which it is a
party and each other instrument or agreement necessary or appropriate for the
proper administration hereof and permit and effectuate the transactions
contemplated hereby;
(ii) maintain its own deposit account or accounts, separate from those
of the Borrower or any of its Affiliates, with commercial banking institutions.
The funds of the Company will not be diverted to any other Person or for other
than the use of the Company and the funds of the Company shall not be commingled
with those of the Borrower or any of its Affiliates;
(iii) to the extent that the Company contracts or does business with
vendors or service providers where the goods and services provided are partially
for the benefit of any other Person, the costs incurred in so doing shall be
fairly allocated to or among the Company and such entities for whose benefit the
goods and services are provided, and the Company and each such entity shall bear
its fair share of such costs. All material transactions between the Company and
any of its Affiliates shall be only on an arm's-length basis;
(iv) maintain a principal executive and administrative office through
which its business is conducted and a telephone number separate from the
Borrower and its Affiliates;
(v) conduct its affairs strictly in accordance with its certificate of
formation and observe all necessary, appropriate and customary formalities
relating to limited liability companies, including, but not limited to, holding
all regular and special members' and managers' meetings appropriate to authorize
all action of the Company, keeping separate and accurate minutes of such
meetings, passing all resolutions or consents necessary to authorize actions
taken or to be taken, and maintaining accurate and separate books, records and
accounts, including, but not limited to, inter-company transaction accounts.
Regular members' and managers' meetings shall be held at least annually;
(vi) ensure that decisions with respect to its business and daily
operations shall be independently made by the Company (although the officer
making any particular decision may also be an employee, officer or director of a
member or any of its Affiliates) and shall not be dictated by the Borrower or
any of its Affiliates;
(vii) act solely in its own name and through its own authorized
officers and agents. The Company shall at all times use its own stationery;
(viii) ensure that neither the Borrower nor any of its Affiliates
shall advance funds to the Company, other than as is otherwise provided herein
or in the other Facility Documents, and neither the Borrower nor any of its
Affiliates will otherwise supply funds to, or guaranty debts of, the Company;
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(ix) other than organizational expenses and as expressly provided
herein, pay all expenses, indebtedness and other obligations incurred by it;
(x) not (A) enter into any guaranty, or otherwise become liable, or
hold itself out as responsible with respect to any obligation of any member of
the Company, the Borrower or any of their respective Affiliates or (B) seek to
obtain credit or incur any obligation to any third party based upon the assets
of any member of the Company, the Borrower or any of their respective Affiliates
and induce any such third party to reasonably rely on the credit-worthiness of
any member of the Company, the Borrower or any of their respective Affiliates;
(xi) maintain books and records adequate for the preparation of
separate financial statements of the Company and ensure that any financial
statements required of the Company shall be issued separately from any
statements for any member of the Company, the Borrower or any of their
respective Affiliates;
(xii) ensure that at all times it is adequately capitalized to engage
in the transactions contemplated in its limited liability company agreement;
(xiii) ensure that the financial statements and books and records of
Company, on the one hand, and each member of the company, the Borrower and their
respective Affiliates, on the other hand, reflect the separate existence of the
Company; and
(xiv) not act as agent for any member of the Company, the Borrower or
any of its Affiliates, but instead present itself to the public as a company
separate from each such corporation and independently engaged in the business
specified in the Facility Documents.
SECTION 7.14 Notice of Default. The Company shall give to the
Liquidity Agent, the Liquidity Lenders and the Depositary prompt written notice
of (i) any Default or Event of Default hereunder and (ii) any "default" or
"event of default" under the Credit Agreement.
ARTICLE VIII
EVENTS OF DEFAULT
-----------------
SECTION 8.01 Event of Default. Upon the occurrence of any of the
following events (each an "Event of Default"), and so long as such Event of
Default shall continue unremedied:
(a) Payments. (x) failure by the Company to pay the principal of a
Loan or any amount in respect of Commercial Paper when due, or (y) to pay any
interest on the Loans or any Liquidity Fee or any other amount payable to the
Liquidity Agent or the Liquidity Lenders hereunder within three Business Days
after such amount becomes due; or
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(b) Representations. Any representation or warranty or statement made
or deemed made by the Company in this Agreement or in any other Facility
Document or in any document entered into in connection herewith or therewith or
in any document, certificate or financial or other statement delivered in
connection therewith shall prove to have been incorrect when made or deemed to
have been made in any material respect; or
(c) Covenants. Failure by the Company to observe or perform in all
material respects (i) any of the covenants or agreements in Sections 7.02, 7.03,
7.04, 7.05, 7.06, 7.07, 7.08, 7.09, 7.10 or 7.12 of this Agreement, or (ii) any
other covenant or agreement contained herein or in any other Facility Document
and not constituting an Event of Default under any other clause of this Article
VIII; provided, that in the case of clause (ii), such failure shall have
continued for thirty days after the Company shall have become aware of such
failure; or
(d) Voluntary Bankruptcy Proceedings of the Company. Either (i) the
Company shall become insolvent or generally fail to pay, or admit in writing its
inability to pay, its debts as they become due, or shall voluntarily commence
any proceeding or file any petition under any bankruptcy, insolvency or similar
law or seeking dissolution or reorganization or the appointment of a receiver,
trustee, custodian or liquidator for itself or a substantial portion of its
property, assets or business or to effect a plan or other arrangement with its
creditors, or shall file any answer admitting the jurisdiction of the court and
the material allegations of an involuntary petition filed against it in any
bankruptcy, insolvency or similar proceeding, or shall be adjudicated bankrupt,
or shall make a general assignment for the benefit of creditors, or shall
consent to or acquiesce in the appointment of a receiver, trustee, custodian or
liquidator for itself or a substantial portion of its property, assets or
business or (ii) action shall be taken by the Company for the purpose of
effectuating any of the foregoing; or
(e) Involuntary Bankruptcy Proceedings against the Company. If
involuntary proceedings or an involuntary petition shall be commenced or filed
against the Company under any bankruptcy, insolvency or similar law or seeking
the dissolution or reorganization of the Company or the appointment of a
receiver, trustee, custodian or liquidator for the Company or of a substantial
part of the property, assets or business of the Company, or any writ, order,
judgment, warrant of attachment, execution or similar process shall be issued or
levied against a substantial part of the property, assets or business of the
Company, and such proceeding or petition shall not be dismissed, or such
execution or similar process shall not be released, vacated or fully bonded,
within sixty days after commencement, filing or levy, as the case may be; or
(f) Security Interest. The Security Agreement shall cease to be in
full force and effect, or the enforceability thereof shall be contested by the
Company, or the Lien on the Collateral in favor of the Collateral Agent shall at
any time cease to be a valid and perfected first priority Lien, subject only to
Permitted Liens; or
(g) Judgments. Any final judgments or orders (not subject to appeal)
by one or more courts of competent jurisdiction for the payment of money in an
aggregate amount
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in excess of $50,000 (after giving effect to insurance, if any, available
with respect thereto) shall be rendered against the Company, and the same
shall remain unsatisfied, unvacated, unbonded or unstayed for a period of
thirty days after the date on which the right to appeal has expired;
then, at any time during the continuance of any Event of Default, the Liquidity
Agent may, and shall at the written request of the Required Liquidity Lenders,
by written notice to the Company, the Collateral Agent and the Depositary (i)
declare the principal of and accrued interest in respect of the Loan Notes to
be, whereupon the same shall become, forthwith due and payable without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Company, anything contained herein or in any Loan
Note to the contrary notwithstanding, and/or (ii) declare the Liquidity
Commitment terminated, whereupon the Liquidity Commitment and the obligation of
the Liquidity Lenders to make new Loans hereunder, with the exception of
Refunding Loans with respect to Commercial Paper issued and delivered by the
Depositary prior to the Depositary's receipt of instructions from the Liquidity
Agent to cease issuing Commercial Paper as provided in Section 2.01(a) hereof,
shall terminate immediately and any accrued fees or premiums shall forthwith
become due and payable without any further notice of any kind; provided that if
an Event of Default described in clauses (d) or (e) above shall occur in respect
of the Company, the result which would otherwise occur only upon the giving of
written notice by the Liquidity Agent to the Company, the Collateral Agent and
the Depositary as specified in clauses (i) and (ii) above shall occur
automatically, without the giving of any such notice. Anything herein to the
contrary notwithstanding, no declaration or termination of the Liquidity
Commitment pursuant to the foregoing provisions of this Article VIII shall
affect the obligation of the Liquidity Lenders to make Refunding Loans with
respect to Commercial Paper issued, and delivered by the Depositary prior to the
Depositary's receipt of instructions from the Liquidity Agent to cease issuing
Commercial Paper as provided in Section 2.01(a) hereof, provided the conditions
set forth in Section 6.03 hereof are satisfied at the time of the making of any
such Refunding Loan. Subject to Sections 10.13 and 10.14 hereof, upon the
occurrence of an Event of Default the Liquidity Lenders may proceed to enforce
their rights and remedies as permitted by applicable law and the Security
Agreement, including bringing an action for specific performance by the Company
of any of the Company's obligations under the Facility Documents.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Liquidity Lenders to enter into this Agreement
and to provide the credit facilities provided for herein, the Company makes the
following representations and warranties to the Liquidity Lenders:
SECTION 9.01 Existence. The Company is duly organized, validly
existing and in good standing under the laws of the State of Delaware, has the
power to own its assets and to transact the business in which it is now engaged
and is duly qualified as a foreign limited liability company and in good
standing under the laws of each jurisdiction in which its business or
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activities requires such qualification. The Company has no Subsidiaries.
SECTION 9.02 Corporate Power; Authorization; Enforceable Obligation.
The Company has the power, authority and legal right to execute, deliver and
perform the Facility Documents to which it is a party and to borrow hereunder
and has taken all necessary action to authorize the borrowings on the terms and
conditions hereof and the execution, delivery and performance of such Facility
Documents. No consent, license, permit, approval or authorization of, exemption
by, notice or report to, or registration, filing or declaration with, any
governmental authority is required for the execution, delivery and performance
by the Company of the Facility Documents to which it is a party which has not
been obtained, made, given or accomplished. This Agreement, the Credit
Agreement, the Security Agreement, the Depositary Agreement, the Control
Agreement and the Loan Notes have been executed and delivered by a duly
authorized officer of the Company, and each of such Agreements constitutes and,
in the case of Commercial Paper, when executed and issued in accordance with the
provisions hereof and of the Depositary Agreement, will constitute, a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except that the enforceability thereof may be subject
to the effects of any applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights and may be limited by general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
SECTION 9.03 No Legal Bar. The execution, delivery and performance by
the Company of the Facility Documents to which it is a party will not violate
any provision of any existing law or regulation applicable to the Company, or of
any order, judgment, award or decree of any court, arbitrator or Governmental
Authority applicable to the Company or the Certificate of Incorporation or
By-Laws of the Company or any mortgage, indenture, lease, contract or other
agreement, instrument or undertaking to which the Company is a party or by which
the Company or any of its assets may be bound, and will not, except as otherwise
provided herein or under any of the other Facility Documents, result in, or
require, the creation or imposition of any Lien on any of its property, assets
or revenues pursuant to the provisions of any such mortgage, indenture, lease,
contract or other agreement, instrument or undertaking.
SECTION 9.04 No Material Litigation. No litigation, investigation or
administrative proceeding of or before any court, arbitrator or Governmental
Authority is pending or, to the Company's knowledge, threatened against the
Company or any of its assets (a) with respect to the Facility Documents or the
Borrowings hereunder or (b) that would have a material adverse effect on the
business, operations, assets or financial or other condition of the Company.
SECTION 9.05 Margin Regulations. No part of the proceeds of the Loans
or any Commercial Paper shall be used to purchase or carry any margin stock (as
such terms are defined in Regulation U of the Board of Governors of the Federal
Reserve System). The Company is not engaged, principally or as one of its
important primary activities, in the business of extending credit for the
purpose of purchasing or carrying any margin stock.
SECTION 9.06 Security Interest. (a)(i) No effective financing
statement listing
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the Company as debtor (other than any which may have been filed on behalf of the
Collateral Agent) covering any of the Lender Collateral (as defined in the
Security Agreement) is on file in any public office; and (ii) at the date of
each deposit of funds in the Lender's Account, the Company was, is or will then
be the lawful owner of, and had, has or will then have good title to, such funds
free and clear of all Liens; and
(b) The Company has not created any security interest which remains in
effect in the Lender Collateral and will keep the Lender Collateral and every
part thereof free and clear of all Liens except Permitted Liens and the lien and
security interest granted pursuant to the Security Agreement in favor of the
Collateral Agent.
SECTION 9.07 Commercial Paper; Investment Company Act. All Commercial
Paper shall either be sold in an exempt transaction under Section 4(2) of the
Securities Act of 1933, as amended, or shall constitute exempt securities under
Section 3 of the Securities Act of 1933, as amended, and neither registration of
Commercial Paper under such Act, nor qualification of an indenture with respect
to Commercial Paper under the Trust Indenture Act of 1939, as amended, will be
required in connection with the offer, issuance, sale or delivery of Commercial
Paper. The Company is not an "investment company" required to register as such
under the Investment Company Act of 1940, as amended.
SECTION 9.08 Parent of the Company. is the registered
owner of % of the issued and outstanding membership interests of the Company,
all of which membership interests have been validly issued, are fully paid and
non-assessable and are owned of record by , free and clear of
all mortgages, assignments, pledges, security interests, warrants, options and
rights to purchase. The Company owns no capital stock of, or other interest in,
any Person.
SECTION 9.09 Special Purpose Company. The Company has been
organized solely for the purposes of consummating the transactions contemplated
by this Agreement and the other Facility Documents.
SECTION 9.10 Tax Returns and Payments. The Company and the Borrower
have filed all federal income tax returns and all other material tax returns,
domestic and foreign, required to be filed by them and have paid all material
taxes and assessments payable by them which have become due, except for those
contested in good faith and adequately disclosed and fully provided for on the
financial statements of the Company or the Borrower, as the case may be, in
accordance with generally accepted accounting principles. The Company and the
Borrower have at all times paid, or have provided adequate reserves (in the good
faith judgment of the management of the Company or the Borrower) for the payment
of, all federal, state and foreign income taxes applicable for all prior fiscal
years and for the current fiscal year to date. There is no material action,
suit, proceeding, investigation, audit, or claim now pending or, to the
knowledge of the Company or the Borrower, threatened by any authority regarding
any taxes relating to the Company or the Borrower. Neither the Company nor the
Borrower has entered into an agreement or waiver or been requested to enter into
an agreement or waiver extending any statute of limitations relating to the
payment or collection of taxes of the Company or the
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Borrower, as the case may be, or is aware of any circumstances that would cause
the taxable years or other taxable periods of the Company or the Borrower not to
be subject to the normally applicable statute of limitations.
ARTICLE X
MISCELLANEOUS
-------------
SECTION 10.01 Descriptive Headings. The descriptive headings of the
various sections of this Agreement are inserted for convenience of reference
only and shall not be deemed to affect the meaning or construction of any of the
provisions hereof.
SECTION 10.02 Exercise of Rights. No failure or delay on the part of
the Liquidity Agent or any Liquidity Lender to exercise any right, power or
privilege under this Agreement and no course of dealing between the Company and
the Liquidity Agent or any Liquidity Lender shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege under
this Agreement preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. The rights and remedies herein expressly
provided are cumulative and not exclusive of any rights or remedies which the
Liquidity Agent or the Liquidity Lenders would otherwise have pursuant to law or
equity. No notice to or demand on any party in any case shall entitle such party
to any other or further notice or demand in similar or other circumstances, or
constitute a waiver of the right of the other party to any other or further
action in any circumstances without notice or demand.
SECTION 10.03 Amendment and Waiver. No provision of this Agreement,
the Notes, the Security Agreement or the Control Agreement may be amended,
waived, supplemented, restated, discharged or terminated unless the Required
Liquidity Lenders and the Company (and, to the extent that the rights of the
Liquidity Agent are affected, the Liquidity Agent) shall have given written
consent thereto; provided that no such amendment, waiver, supplement,
restatement, discharge or termination shall (a) forgive or reduce the amount or
extend the maturity of any Note (except pursuant to Section 4.03), or reduce the
rate or extend the time of payment of interest thereon, or forgive or reduce, or
extend the date of payment of, any fee payable to any Liquidity Lender
hereunder, or, except as provided in Sections 4.02 and 4.03, increase the amount
of any Liquidity Lender's Commitment, in each case without the written consent
of the Liquidity Lender affected thereby, or (b) reduce the minimum Asset
Coverage Ratio, (c) amend, modify or waive any provision of this Section 10.03
or reduce the percentage specified in the definition of Required Liquidity
Lenders, or consent to the assignment or transfer by the Company of any of its
rights and obligations under this Agreement and the Notes, or (d) release all or
a substantial portion of the Collateral (as defined in the Security Agreement)
in each case without the written consent of all the Liquidity Lenders. Any such
waiver and any such amendment, supplement, restatement, discharge or termination
shall apply equally to each of the Liquidity Lenders and shall be binding upon
the Company, the Liquidity Lenders, the Liquidity Agent and all future holders
of the Notes. In the case of any waiver, the Company, the Liquidity Lenders and
the Liquidity Agent shall be restored to their former position and rights
hereunder and under the outstanding Notes, and any Default or Event of Default
waived shall be deemed to be cured and not continuing, but no such waiver shall
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extend to any subsequent or other Default or Event of Default, or impair any
right consequent thereon. The Rating Agencies shall be given prior written
notice of each amendment of, or waiver with respect to, any Facility Document
and such amendment or waiver shall not cause any rating by the Rating Agencies
on the Commercial Paper to be withdrawn or reduced.
SECTION 10.04 Expenses and Indemnification. (a) The Company agrees (i)
to pay or reimburse the Liquidity Agent for all of its reasonable costs and
expenses incurred in connection with the development, preparation and execution
of, and any amendment, supplement or modification to, this Agreement, the Notes
and any other documents and agreements prepared in connection herewith or
therewith to which the Company is a party, and the consummation and
administration of the transactions contemplated hereby and thereby, including,
without limitation, the reasonable fees and expenses of its counsel, and (ii)
after the occurrence of an Event of Default, to pay or reimburse each Liquidity
Lender and the Liquidity Agent for all of its reasonable costs and expenses
incurred in connection with the enforcement or preservation of any rights under
this Agreement, the Notes, and any such other documents or agreements prepared
in connection herewith or therewith, including without limitation, fees and
disbursements of counsel.
(b) The Company agrees to (i) pay, indemnify, and hold each Liquidity
Lender and the Liquidity Agent harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, recording, documentary and other similar taxes, if any, which may
be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the Notes and any other
documents or agreements prepared in connection herewith or therewith, and (ii)
to pay, indemnify, and hold the Liquidity Agent and each Liquidity Lender (and
their respective affiliates, officers, directors, employees, agents and
attorneys-in-fact; collectively with each Liquidity Lender and Liquidity Agent,
the "Indemnified Parties") harmless from and against any and all other
liabilities, obligations, loans, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements (including, without limitation, fees and
disbursements of counsel of any kind or nature whatsoever in any way arising out
of or related to (x) the execution, delivery, enforcement, performance and
administration of this Agreement, the Notes and any such other documents to
which the Company is a party, (y) any use or proposed use of the Loans or any
portion thereof, or (z) any litigation, proceeding or investigation instituted
or conducted by any agency or instrumentality or any other Person with respect
to any aspect of, or any transaction contemplated by, or referred to in, or any
matter related to, this Agreement, the Notes or any such other documents
contemplated hereby to which the Company is a party, whether or not the
Indemnified Parties are a party thereto, and claims alleging any contravention
or breach by the Company of the securities laws of any Governmental Authority
(all the foregoing non-excluded items, collectively, the "Indemnified
Liabilities"); provided that the Company shall have no obligation hereunder to
any Indemnified Party with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of such Indemnified Party. If any action
is brought against the Liquidity Agent, any Liquidity Lender or any other
Indemnified Party, the Company shall, if requested by the Liquidity Agent,
resist and defend such action, suit or proceeding or cause the same to be
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resisted and defended by counsel reasonably satisfactory to such Indemnified
Party. Each Indemnified Party shall, unless the Liquidity Agent, a Liquidity
Lender or other Indemnified Party has made the request described in the
preceding sentence and such request has been complied with, have the right to
employ its own counsel to investigate and control the defense of any matter
covered by such indemnity and the reasonable fees and expenses of such counsel
shall be at the expense of the Company.
(c) All obligations provided for in this Section 10.04 shall survive
any termination of this Agreement.
SECTION 10.05 Successors and Assigns. (a) This Agreement shall bind,
and the benefits hereof shall inure to, the Company, the Liquidity Agent and the
Liquidity Lenders and their respective successors and assigns; provided that the
Company may not transfer or assign any or all of its rights and obligations
hereunder without the prior written consent of each Liquidity Lender.
(b) Any Liquidity Lender may sell, transfer or assign all or any
portion of its obligation to make Loans hereunder; provided that (i) the lender
proposing to purchase such obligation has short-term ratings in the Highest
Short-Term Rating Category from each Rating Agency and the Borrower shall have
consented in writing to such purchase (which consent shall not be unreasonably
withheld) and (ii) the lender proposing to purchase such obligation delivers
opinions of counsel in the form of Exhibit D hereto. Any such assignee shall
agree to be bound by the provisions of Section 10.19 hereof and the minimum
amount of any assignment will be $5,000,000.
(c) Each Liquidity Lender may sell participations in all or any part
of any Loan or Loans or its obligations to make Loans hereunder to another bank
or other entity, in which event the participant shall not have any rights under
the Facility Documents (the participant's rights against such Liquidity Lender
in respect of participation to be those set forth in the agreement executed by
such Liquidity Lender in favor of the participant relating thereto) and all
amounts payable by the Company hereunder shall be determined as if such
Liquidity Lender had not sold such participation; provided that any such
participant shall be entitled to the benefits of the payments required to be
made by the Company pursuant to Sections 3.09, 3.10, 3.11, 3.12 and 10.04 hereof
to the extent that such Liquidity Lender would be entitled to such benefits if
the participation had not been entered into or sold; and provided, further, that
no Liquidity Lender shall transfer, grant or assign any participation under
which the participant shall have rights to approve any amendment to or waiver of
this Agreement or any other Facility Document except to the extent such
amendment or waiver would (x) extend the final scheduled maturity of any Loan or
Loan Note in which such participant is participating, or reduce the rate or
extend the time of payment of interest or fees thereon (except in connection
with a waiver of the applicability of any post-default increase in interest
rates), or reduce the principal amount thereof, or increase such participant's
participating interest in any Commitment over the amount thereof then in effect
(it being understood that a waiver of any Default or Event of Default or a
mandatory prepayment, shall not constitute a change in the terms of any
Commitment), (y) release all or substantially all of the Collateral, or (z)
permit the assignment or transfer by the Company of any of its rights and
obligations under this Agreement. The Company agrees that if
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amounts outstanding under this Agreement and the Notes are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, to the extent permitted by law, each
participant shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement and any Note to the
same extent as if the amount of its participating interest were owing directly
to it as a Liquidity Lender under this Agreement or any Note; provided that such
participant shall only be entitled to such right of setoff if it shall have
agreed in the agreement pursuant to which it shall have acquired its
participating interest to share with the Liquidity Lenders the proceeds thereof
as provided in Section 10.11. In the event of any such sale by a Liquidity
Lender of participating interests to a participant, such Liquidity Lender's
obligations under this Agreement shall remain unchanged, such Liquidity Lender
shall remain solely responsible for the performance thereof, such Liquidity
Lender shall remain the holder of any such Loan Note for all purposes under this
Agreement, and the Company and the Liquidity Agent shall continue to deal solely
and directly with such Liquidity Lender in connection with such Liquidity
Lender's rights and obligations under this Agreement.
(d) Each Liquidity Lender may furnish any information concerning the
Company or the Borrower, in the possession of such Liquidity Lender from time to
time to assignees and participants (including the prospective assignees and
participants); provided, however, that any such assignee or participant shall
agree to be bound by the provisions of Section 10.19 hereof.
(e) If any interest in this Agreement or any Note is transferred,
pursuant to subsection (b) or (c), above to any transferee which is not already
a Liquidity Lender hereunder and which is not a United States person (as such
term is defined in Section 7701(a)(30) of the Code) for federal income tax
purposes, the respective assignee Liquidity Lender shall provide to the Company
and the Liquidity Agent the appropriate Internal Revenue Service Forms described
in Section 3.11(b).
(f) Nothing herein shall prohibit any Liquidity Lender from pledging
or assigning any Note and its rights hereunder to any lender affiliated with the
Federal Reserve System in accordance with applicable law and the regulations of
the Board of Governors of the Federal Reserve System.
(g) Any Designating Liquidity Lender may at any time designate not
more than one Designated Liquidity Lender to fund Loans on behalf of such
Designating Liquidity Lender subject to the terms of this Section 10.05. No
Designating Liquidity Lender may have more than one Designated Liquidity Lender
at any time. Such designation may occur either by the execution of the signature
pages hereof by such Designating Liquidity Lender and Designated Liquidity
Lender next to the appropriate "Designating Liquidity Lender" and "Designated
Liquidity Lender" captions, or by execution by such parties of a Designation
Agreement subsequent to the date hereof; provided that any Designating Liquidity
Lender and its Designated Liquidity Lender executing the signatures pages hereof
as "Designating Liquidity Lender" and "Designated Liquidity Lender",
respectively, on the date hereof shall be deemed to have executed a Designation
Agreement, and shall be bound by the respective representations, warranties and
covenants contained therein, and such designation shall be conclusively deemed
to be accepted by the Company and the Liquidity Agent. The parties to each such
designation
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occurring subsequent to the execution date hereof shall execute and
deliver to the Liquidity Agent and the Company for their acceptance a
Designation Agreement. Upon such receipt of an appropriately completed
Designation Agreement executed by a Designating Liquidity Lender and a designee
representing that it is a Designated Liquidity Lender and consented to by the
Company, the Liquidity Agent will accept such Designation Agreement and will
give prompt notice thereof to the Company and the other Liquidity Lenders,
whereupon, (i) the Company shall execute and deliver to the Designating
Liquidity Lender a Designated Liquidity Lender Note payable to the order of the
Designated Liquidity Lender, (ii) from and after the effective date specified in
the Designation Agreement, the Designated Liquidity Lender shall become a party
to this Agreement with a right to make Loans on behalf of its Designating
Liquidity Lender pursuant to Section 3.17, and (iii) the Designated Liquidity
Lender shall not be required to make payments with respect to any obligations in
this Agreement except to the extent of excess cash flow of such Designated
Liquidity Lender which is not otherwise required to repay obligations of such
Designated Liquidity Lender which are then due and payable; provided, however,
that regardless of such designation and assumption by the Designated Liquidity
Lender, the Designating Liquidity Lender shall be and remain obligated to the
Company, the Liquidity Agent and the Liquidity Lenders for each and every of the
obligations of the Designating Liquidity Lender and its related Designated
Liquidity Lender with respect to this Agreement, including, without limitation,
any indemnification obligations under this Agreement and any sums otherwise
payable to the Company by the Designated Liquidity Lender. Each Designating
Liquidity Lender, or a specified branch or affiliate thereof, shall serve as the
administrative agent of its Designated Liquidity Lender and shall on behalf of
its Designated Liquidity Lender: (i) receive any and all payments made for the
benefit of such Designated Liquidity Lender and (ii) give and receive all
communications and notices and take all actions hereunder, including, without
limitation, votes, approvals, waivers, consents and amendments under or relating
to this Agreement and the other Facility Documents. Any such notice,
communications, vote, approval, waiver, consent or amendment shall be signed by
a Designating Liquidity Lender, or specified branch or affiliate thereof, as
administrative agent for its Designated Liquidity Lender and need not be signed
by such Designated Liquidity Lender on its own behalf. The Company, the
Liquidity Agent and the Liquidity Lenders may rely thereon without any
requirement that the Designated Liquidity Lender sign or acknowledge the same.
No Designated Liquidity Lender may assign or transfer all or any portion of its
interest hereunder or under any other Facility Document, other than via an
assignment to its Designating Liquidity Lender or Liquidity Bank, if any.
SECTION 10.06 Notices, Requests, Demands. Except where telephonic
instructions or notices are authorized herein to be given, all notices, demands,
instructions and other communications required or permitted to be given to or
made upon any party hereto shall be in writing and shall be personally delivered
or sent by registered, certified or express mail, postage prepaid, return
receipt requested, or by nationally recognized overnight courier, or by
facsimile transmission (with telephonic confirmation of receipt) and shall be
deemed to be given for purposes of this Agreement on the day that such writing
is delivered to the intended recipient thereof in accordance with the provisions
of this Section. Unless otherwise specified in a notice sent or delivered in
accordance with the foregoing provisions of this Section, notices, demands,
instructions and other communications in writing shall be given to or made upon
the respective
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parties hereto at their respective addresses (or to their respective facsimile
transmission numbers) indicated below, and, in the case of telephonic
instructions or notices, by calling the telephone number or numbers indicated
for such party below, or at any other address (including any other facsimile
transmission numbers) or telephone number or numbers, as the case may be, as any
party hereto may notify to the other parties hereto in accordance with the
provisions of this Section 10.06.
If to the Company:
[SPV]
Attention:
Telephone. No.
Telecopier No.
with a copy to:
Global Secutirization Services, LLD
Telephone No.: (212) 302-5151
Telecopier No.: (212) 302-8767
If to the Borrower:
Nuveen Senior Income Fund
820 Jorie Boulevard
Oak Brook, Illinois 60523
Attention: Jeffrey W. Maillet
Telephone No. (312) 917-7927
Telecopier No. (312) 917-8347
If to the Liquidity Agent:
Deutsche Bank AG, New York Branch
31 West 52nd Street
New York, New York, 10019
Attention: Dan Moyers
Telephone No. (212) 469-8000
Telecopier No. (212) 469-7753
If to the Liquidity Lenders, to the respective addresses set
forth underneath their respective names on the signature pages
hereto.
If to Fitch:
Fitch, IBCA
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1 State Street Plaza
New York, New York 10004
Attention: Asset CP Group
Telephone No. (212) 908-0682
Telecopier No.(212) 553-0573
If to Moody's:
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention:
-------------------
Telephone No. (212)
-----------
Telecopier No.(212)
-----------
If to S&P's:
Standard & Poor's
55 Water Street
New York, New York 10041
Attention:
------------------
Telephone No. (212)
----------
Telecopier No.(212)
----------
SECTION 10.07 Survival of Representations and Warranties. All
representations and warranties contained in Article IX shall survive the
execution and delivery of this Agreement and the Loan Notes and shall continue
only so long as and until such time as all indebtedness hereunder and under the
Commercial Paper and the Loan Notes shall have been paid in full and the
Liquidity Lenders no longer have any Liquidity Commitment hereunder.
SECTION 10.08 Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND UNDER THE LOAN NOTES SHALL
BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
SECTION 10.09 Waiver of Jury Trial. EACH OF THE COMPANY, THE LIQUIDITY
AGENT AND THE LIQUIDITY LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY
OF THE FACILITY DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
SECTION 10.10 Counterparts. This Agreement may be executed in any
number of copies, and by the different parties hereto on the same or separate
counterparts, each of which shall be deemed to be an original instrument.
Complete counterparts of this Agreement shall be lodged with the Company and the
Liquidity Agent.
SECTION 10.11 Adjustments. If any Liquidity Lender (a "Benefited
Liquidity
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Lender") shall at any time receive any payment of all or part of its
Loans, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily) in a greater proportion than any such
payment to and collateral received by any other Liquidity Lender, if any, in
respect of such other Liquidity Lender's Loans, or interest thereon, such
Benefited Liquidity Lender shall immediately purchase for cash from the other
Liquidity Lenders such portion of each such other Liquidity Lender's Loan, or
shall provide such other Liquidity Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
Benefited Liquidity Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Liquidity Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such Benefited Liquidity Lender, such purchase shall
be rescinded, and the purchase price and benefits returned, to the extent of
such recovery, but without interest. The Company agrees, to the extent it may do
so under applicable law, that each Liquidity Lender so purchasing a portion of
another Liquidity Lender's Loan may exercise all rights of payment with respect
to such portion as fully as if such Liquidity Lender were the direct holder of
such portion.
SECTION 10.12 Further Assurances. The Company agrees to do such
further acts and things and to execute and deliver to the Liquidity Agent such
additional assignments, agreements, powers and instruments, as the Liquidity
Agent may require or deem advisable to carry into effect the purposes of this
Agreement or to better assure and confirm unto the Liquidity Agent its rights,
powers and remedies hereunder.
SECTION 10.13 No Bankruptcy Petition Against the Company. Each
Liquidity Lender and the Liquidity Agent severally and not jointly, hereby
covenants and agrees that, prior to the date which is one year and one day after
the payment in full of all outstanding Commercial Paper, it will not institute
against, or join any other Person in instituting against, the Company any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under the laws of the United States or any state of
the United States.
SECTION 10.14 No Recourse. The obligations of the Company under this
Agreement, the Loan Notes, the Depositary Agreement, the Security Agreement, the
Control Agreement and all other Facility Documents are solely the corporate
obligations of the Company. No recourse shall be had for the payment of any
amount owing in respect of Loans or for the payment of any fee hereunder or any
other obligation or claim arising out of or based upon this Agreement, the Loan
Notes, the Depositary Agreement, the Security Agreement, the Control Agreement
or any other Facility Document against any shareholder, employee, officer,
director, agent or incorporator of the Company.
SECTION 10.15 Appointment of the Liquidity Agent. (a) Each Liquidity
Lender hereby irrevocably appoints Deutsche Bank AG, New York Branch, as its
Liquidity Agent hereunder, under the Depositary Agreement, the Control Agreement
and under the Security Agreement and hereby authorizes the Liquidity Agent to
take such action on its behalf and to exercise such rights, remedies, powers and
privileges hereunder or thereunder as are specifically authorized to be
exercised by the Liquidity Agent by the terms hereof or thereof, together with
such rights, remedies, powers and privileges as are reasonably incidental
thereto. The Liquidity Agent may execute any of its duties hereunder, under the
Depositary Agreement,
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the Control Agreement and under the Security Agreement, by or through agents or
employees. The relationship between the Liquidity Agent and each Liquidity
Lender is that of agent and principal only, and nothing herein shall be deemed
to constitute the Liquidity Agent a trustee for any Liquidity Lender or impose
on the Liquidity Agent any obligation other than those for which express
provision is made herein or in the Security Agreement, the Control Agreement or
the Depositary Agreement.
(b) Except as required by the specific terms of this Agreement, the
Depositary Agreement, the Control Agreement and the Security Agreement, the
Liquidity Agent shall not have any duty to exercise any right, power, remedy or
privilege granted to it hereby or thereby, or to take any affirmative action or
exercise any discretion hereunder or thereunder, including, without limitation,
the right of the Liquidity Agent to instruct the Depositary not to issue or
deliver Commercial Paper under the provisions of Section 2.01(a) hereof and the
Depositary Agreement, unless directed to do so by the Required Liquidity Lenders
(and shall be fully protected in acting or refraining from acting pursuant to
such directions which shall be binding upon the Liquidity Lenders), and shall
not, without the prior approval of the Required Liquidity Lenders (or, to the
extent provided in Section 10.03, the prior approval of all Liquidity Lenders),
consent to any material departure by the Company or the Depositary from the
terms hereof or thereof, waive any default on the part of any such party under
any such agreement or instrument or amend, modify, supplement or terminate, or
agree to any surrender of, any such agreement or instrument; provided that the
foregoing limitation on the authority of the Liquidity Agent is for the benefit
of the Liquidity Lenders and shall not impose any obligation on the Depositary
or the Company to investigate or inquire into the authority of the Liquidity
Agent in any circumstances, and the Depositary and the Company shall be fully
protected in carrying out any request, direction or instruction made or given to
the Depositary or the Company by the Liquidity Agent in the exercise of any
right, power, remedy or privilege granted to the Liquidity Agent hereby or by
the terms of the Depositary Agreement or the Security Agreement, receiving or
acting upon any consent or waiver granted to the Company or the Depositary
hereunder or thereunder by the Liquidity Agent, or entering into any amendment
or modification of, or supplement to, this Agreement, the Depositary Agreement,
the Control Agreement or the Security Agreement, and neither the Depositary nor
the Company shall be subject to the claims of any Liquidity Lender by reason of
the lack of authority of the Liquidity Agent to take any such action nor shall
the lack of authority on the part of the Liquidity Agent in any circumstance
give rise to any claim on the part of the Depositary or the Company against any
Liquidity Lender; and provided further, that the Liquidity Agent shall not be
required to take any action which exposes the Liquidity Agent to personal
liability or which is contrary to this Agreement, the Depositary Agreement, the
Security Agreement, the Control Agreement or applicable law.
(c) Neither the Liquidity Agent nor any Liquidity Lender, or any of
its or their respective directors, officers, agents or employees, shall be
liable to the Liquidity Agent, any other Liquidity Lender, the Depositary or the
Company, as the case may be, for any action taken or omitted to be taken by it
or them hereunder, under the Depositary Agreement, the Security Agreement, the
Control Agreement or in connection herewith or therewith, except for its or
their own gross negligence or willful misconduct; nor shall the Liquidity Agent
or any Liquidity Lender be responsible to the Liquidity Agent or any other
Liquidity Lender, as the case may be,
-46-
<PAGE> 47
for the validity, effectiveness, value, sufficiency or enforceability against
the account debtors, the Company, the Depositary, the Collateral Agent or the
Borrower of the Collateral, this Agreement, the Depositary Agreement, the
Security Agreement, the Control Agreement, the Loan Notes or any other document
furnished pursuant hereto or thereto or in connection herewith or therewith.
Without limitation of the generality of the foregoing, the Liquidity Agent: (i)
may consult with legal counsel (including counsel for the Company), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (ii) makes no warranty or
representation to any Liquidity Lender and shall not be responsible to any
Liquidity Lender for any statements, warranties or representations made in or in
connection with this Agreement, the Depositary Agreement, the Security
Agreement, the Control Agreement, any other document furnished pursuant hereto
or thereto or in connection herewith or therewith; (iii) shall not have any duty
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement, the Depositary Agreement, the
Security Agreement, the Control Agreement or the Loan Notes, on the part of any
party hereto or thereto or to inspect the property (including the books and
records) of the Company; (iv) shall not be responsible to any Liquidity Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, the Depositary Agreement, the Security
Agreement, the Control Agreement, the Loan Notes, or any other instrument or
document furnished pursuant hereto or thereto; and (v) shall incur no liability
under or in respect of this Agreement, the Depositary Agreement, the Control
Agreement or the Security Agreement by acting upon any notice, consent,
certificate or other instrument or writing (which may be by facsimile
transmission or telex) or telephonic instruction, or notices to the extent
authorized herein or therein believed by it to be genuine and signed or sent by
the proper party or parties.
(d) Each Liquidity Lender hereby agrees, in the ratio that such
Liquidity Lender's Percentage of the Liquidity Commitment hereunder bears to the
Liquidity Commitment, to indemnify and hold harmless the Liquidity Agent, from
and against any and all losses, liabilities (including liabilities for
penalties), actions, suits, judgments, demands, damages, costs and expenses of
any kind whatsoever (including, without limitation, fees and expenses of
attorneys, accountants and experts) incurred or suffered by the Liquidity Agent
in its capacity as Liquidity Agent hereunder as a result of any action taken or
omitted to be taken by the Liquidity Agent in such capacity or otherwise
incurred or suffered by, made upon, or assessed against the Liquidity Agent in
such capacity; provided that no Liquidity Lender shall be liable for any portion
of any such losses, liabilities (including liabilities for penalties), actions,
suits, judgments, demands, damages, costs or expenses resulting from or
attributable to gross negligence or willful misconduct on the part of the
Liquidity Agent or its officers, employees or agents. Without limiting the
generality of the foregoing, each Liquidity Lender hereby agrees, in the ratio
aforesaid, to reimburse the Liquidity Agent promptly following its demand for
any out-of-pocket expenses (including, without limitation, attorneys' fees and
expenses) incurred by the Liquidity Agent hereunder, under the Depositary
Agreement, the Control Agreement or the Security Agreement, and not promptly
reimbursed to the Liquidity Agent by the Company. Each Liquidity Lender's
obligations under this paragraph shall survive the termination of this Agreement
and the discharge of the Company's obligations hereunder.
-47-
<PAGE> 48
(e) The Liquidity Lenders agree that with respect to their obligation
to lend under this Agreement, the Loans made by them and the Loan Note issued to
such Liquidity Lenders, the Liquidity Agent shall have the same rights and
powers hereunder as any other Liquidity Lender or holder of a Loan Note and may
exercise the same as though it were not performing the duties specified herein;
and the terms "Liquidity Lenders," "holders of Notes," or any similar terms
shall, unless the context clearly otherwise indicates, include the Liquidity
Agent in its individual capacity. The Liquidity Agent may accept deposits from,
lend money to, and generally engage in any kind of banking, trust or other
business with the Company, the Borrower or any of their affiliates as if it were
not performing the duties specified herein, and may accept fees and other
consideration from the Company, or any of their affiliates for services in
connection with this Agreement and otherwise without having to account for the
same to any Liquidity Lender.
(f) Each Liquidity Lender expressly agrees that the Liquidity Agent
shall enter into the Security Agreement on its behalf, and expressly consents to
the priority of payments set forth in Section 5 and Section 13 of the Security
Agreement.
SECTION 10.16 Resignation by the Liquidity Agent. The Liquidity Agent
may resign as such at any time upon at least thirty days' prior written notice
to the Borrower, the Company, the Depositary, the Collateral Agent and the
Liquidity Lenders; provided, however, that the resignation of the Liquidity
Agent shall not be effective until the Liquidity Lenders shall have agreed to
the appointment of another Liquidity Lender to perform the duties of the
Liquidity Agent hereunder and the Company shall have consented to such
appointment, which consent shall not be unreasonably withheld. In the event of
such resignation, the Required Liquidity Lenders shall as promptly as
practicable appoint a successor agent to replace the Liquidity Agent.
Notwithstanding the resignation of the Liquidity Agent hereunder, the provisions
of Section 10.15 shall continue to inure to the benefit of the Liquidity Agent
in respect of any action taken or omitted to be taken by the Liquidity Agent in
its capacity as such while it was such under this Agreement.
SECTION 10.17 Knowledge of Company. The Company shall be entitled to
assume that no Event of Default or Default shall have occurred and be
continuing, unless an officer or a director of the Company has actual knowledge
thereof or the Company has received notice from any Person that such Person
considers that such an Event of Default or Default has occurred and is
continuing.
SECTION 10.18 Opinion of Counsel of the Liquidity Lenders. Each
Liquidity Lender shall provide to the Company an opinion of counsel,
substantially in the form of Exhibit D hereto, or such other document as shall
be acceptable to the Rating Agencies, to the effect that this Agreement is a
legal and validly binding obligation of such Liquidity Lender and is enforceable
against such Liquidity Lender in accordance with its terms.
SECTION 10.19 Confidentiality. The Liquidity Agent and each Liquidity
Lender agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its and its Affiliates'
directors, officers, employees and agents, including without limitation
accountants, legal counsel and other advisors (it being
-48-
<PAGE> 49
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and will have agreed to keep such
Information confidential), (b) to the extent required by any legal or regulatory
authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement,
(e) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or the enforcement of rights
hereunder, provided, however, that such Information may only be disclosed to the
extent necessary and material to the prosecution or defense of such suit, action
or proceeding for the enforcement of rights hereunder, (f) subject to an
agreement containing provisions substantially the same as those of this
subsection, to any assignee of or participant in, or any prospective assignee of
or participant in, any of its rights under this Agreement, (g) with the consent
of the Company, (h) to the extent such Information becomes (i) publicly
available other than as a result of a breach of this Section, or (ii) becomes
available to the Liquidity Agent or any Liquidity Lender on a non-confidential
basis from a source other than the Company, the Liquidity Agent or any Liquidity
Lender. Notwithstanding the foregoing provisions of this Section, the Company
hereby consents to the disclosure of any non-public information with respect to
it which is related to this transaction by any Designated Liquidity Lender to
any rating agency, commercial paper dealer, or provider of a surety, guaranty or
credit or liquidity enhancement to such Designated Liquidity Lender. For
purposes of this Section, "Information" means all information received from the
Company relating to the Company or its business, other than any such information
that is available to the Liquidity Agent or any Liquidity Lender on a
non-confidential basis prior to disclosure by the Company.
-49-
<PAGE> 50
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
[SPV]
By:
--------------------------------
Name:
Title:
DEUTSCHE BANK AG, NEW YORK BRANCH
as Liquidity Agent
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
DEUTSCHE BANK SECURITIES INC.
as Syndication Agent
<PAGE> 51
EXHIBIT A-1
FORM OF REVOLVING LOAN NOTE
$___________(1) New York, New York
____________, 2000
On the Liquidity Termination Date (as defined in the Liquidity
Agreement hereinafter referred to) the undersigned, a Delaware limited liability
company (the "Company"), FOR VALUE RECEIVED, promises to pay to the order of
________________(2) (the "Liquidity Lender"), at the office of Deutsche Bank AG,
New York Branch (the "Liquidity Agent") at 31 West 52nd Street, New York, New
York 10019, the principal sum of ____________(3) United States Dollars (U.S.
$_________(1)) or, if less, the aggregate unpaid principal amount of all
Revolving Loans made by the Liquidity Lender to the Company pursuant to the
Liquidity Agreement.
The Company also promises to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) at the rates per annum specified in
Section 3.06 of the Liquidity Agreement and, after maturity, until paid, at the
rates per annum specified in Section 3.06 of the Liquidity Agreement, said
interest to be payable to the Liquidity Lender at the aforesaid office of the
Liquidity Agent on such dates as are specified in the Liquidity Agreement, and
at maturity (whether by acceleration or otherwise).
Payments of both principal and interest are to be made in lawful money
of the United States of America and in immediately available funds.
This Revolving Loan Note evidences indebtedness incurred under, and is
subject to the terms and provisions of and entitled to the benefits of, a
Liquidity Agreement, dated as of ____________, 2000, as from time to time
amended (the "Liquidity Agreement"), among the Company, certain lenders
(including the Liquidity Lender) and the Liquidity Agent. Reference is hereby
made to the Liquidity Agreement for a statement of its terms and provisions,
including those under which this Revolving Loan Note may be paid prior to its
due date or its due date accelerated.
This Revolving Loan Note is entitled to the benefits of the Security
Agreement,
- ----------
1 Insert amount equal to appropriate Liquidity Lender's Percentage of the
Liquidity Commitment in figures.
2 Insert name of Liquidity Lender.
3 Insert amount equal to appropriate Liquidity Lender's Percentage of
Liquidity Commitment in words.
<PAGE> 52
EXHIBIT A-1
PAGE 52
dated as of ____________, 2000 as from time to time amended, among the Company,
the Borrower and the Collateral Agent.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
THIS REVOLVING LOAN NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER
THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
[SPV]
By:__________________________________
Name:
Title:
<PAGE> 53
EXHIBIT A-1
PAGE 53
Amount of Amount of Unpaid Principal Name of Person
Date Notation Revolving Loan Principal Paid Balance of Note Making
- ------------- -------------- -------------- --------------- --------------
<PAGE> 54
EXHIBIT A-2
FORM OF REFUNDING LOAN NOTE
$_______________1 New York, New York
____________, 2000
On the Liquidity Termination Date (as defined in the Liquidity
Agreement hereinafter referred to), the undersigned, a Delaware limited
liability company (the "Company"), FOR VALUE RECEIVED, promises to pay to the
order of ____________________________(2) (the "Liquidity Lender"), at the office
of Deutsche Bank AG, New York Branch (the "Liquidity Agent") at 31 West 52nd
Street, New York, New York 10019, the principal sum of _______________(3) United
States Dollars (U.S. $_________(1)) or, if less, the aggregate unpaid principal
amount of all Refunding Loans made by the Liquidity Lender to the Company
pursuant to the Liquidity Agreement.
The Company also promises to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) at the rate per annum specified in
Section 3.06 of the Liquidity Agreement and, after maturity, until paid, at the
rate per annum specified in Section 3.06 of the Liquidity Agreement, said
interest to be payable to the Liquidity Lender at the aforesaid office of the
Liquidity Agent on such dates as are specified in the Liquidity Agreement, and
at maturity (whether by acceleration or otherwise).
Payments of both principal and interest are to be made in lawful money
of the United States of America and in immediately available funds.
This Refunding Loan Note evidences indebtedness incurred under, and is
subject to the terms and provisions of and entitled to the benefits of, a
Liquidity Agreement, dated as of ____________, 2000, as from time to time
amended (the "Liquidity Agreement"), among the Company, certain lenders
(including the Liquidity Lender) and the Liquidity Agent. Reference is hereby
made to the Liquidity Agreement for a statement of its terms and provisions,
including those under which this Refunding Loan Note may be paid prior to its
due date or its due date accelerated.
This Refunding Loan Note is entitled to the benefits of the Security
Agreement,
- ----------
1 Insert amount equal to Percentage of Liquidity Commitment of appropriate
Liquidity Lender in figures.
2 Insert name of Liquidity Lender.
3 Insert amount equal to Percentage of Liquidity Commitment of appropriate
Liguidity Lender in words.
<PAGE> 55
EXHIBIT A-2
PAGE 55
dated as of _________ __, 2000 as from time to time amended, among the Company,
the Borrower and the Collateral Agent.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
THIS REFUNDING LOAN NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER
THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
[SPV]
By:___________________________________
Name:
Title:
<PAGE> 56
EXHIBIT A-2
PAGE 56
Amount of Amount of Unpaid Principal Name of Person
Date Notation Revolving Loan Principal Paid Balance of Note Making
- ------------- -------------- -------------- --------------- --------------
<PAGE> 57
EXHIBIT B
COPY OF DEPOSITARY AGREEMENT
<PAGE> 58
EXHIBIT A-2
PAGE 58
COPY OF MANAGEMENT AGREEMENT
<PAGE> 59
EXHIBIT D-1
PAGE 59
FORM OF U.S. LIQUIDITY LENDER COUNSEL OPINION
____________, 2000
To The Persons Listed
On Schedule I Hereto
Dear Sirs:
We have acted as special counsel to [name of lender] ("Lender"), in
connection with the preparation, execution and delivery of the Liquidity
Agreement dated as of _________ __, 2000 (the "Liquidity Agreement") by and
among [SPV], a Delaware limited liability company (the "Company"), the lenders
parties thereto (the "Liquidity Lenders"), Deutsche Bank AG, New York Branch, as
Liquidity Agent, ___________, as Documentation Agent and Deutsche Bank
Securities Inc., as Arranger and Syndication Agent. All defined terms used
herein shall have the meaning assigned to them in the Liquidity Agreement unless
otherwise provided herein.
In this connection, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such instruments, documents and
records as we have deemed relevant and necessary for purposes of our opinion
hereinafter set forth. As to certain factual matters involved in this opinion
which were not independently established, we have relied, to the extent we have
deemed such reliance proper, on certificates or other documents obtained from
public officials or officers of the Lender setting forth such matters.
Based upon, and subject to, the foregoing, we are of the opinion that:
1. The Lender has been duly incorporated and is validly existing and in
good standing under the laws of the State of ___________ with the corporate
power and authority to own its assets and to transact the business in which it
is now engaged.
2. The obligation of the Lender to make Loans under the Liquidity
Agreement is an obligation which the Lender is permitted to undertake under
applicable law.
3. The Liquidity Agreement has been duly authorized, executed and
delivered by the Lender.
We express no opinion with respect to enforceability by the Company of
its right to receive Loans in the event of the Company's bankruptcy.
We express no opinion as to any laws other than the laws of the State
of New
<PAGE> 60
EXHIBIT D-1
PAGE 60
York and the federal laws of the United States.
We are furnishing this opinion to you solely for your benefit and this
opinion is not to be used, circulated, quoted or otherwise referred to for any
purpose without our prior written approval in each instance.
Very truly yours,
<PAGE> 61
SCHEDULE I
TO EXHIBIT D-1
<PAGE> 62
EXHIBIT D-2
FORM OF FOREIGN LIQUIDITY LENDER
NEW YORK COUNSEL OPINION
____________, 2000
To The Persons Listed
On Schedule I Hereto
Dear Sirs:
We have acted as special New York counsel to [Name of Lender]
("Lender"), in connection with the preparation, execution and delivery of the
Liquidity Agreement dated as of _________ __, 2000 (the "Liquidity Agreement")
among [SPV], a Delaware limited liability company (the "Company"), the lenders
parties thereto (the "Liquidity Lenders," including, without limitation, the
[New York] Branch of Lender ("Branch")), Deutsche Bank AG, New York Branch, as
Liquidity Agent, __________, as Documentation Agent and Deutsche Bank Securities
Inc., as Arranger and Syndication Agent. All defined terms used herein shall
have the meanings assigned to them in the Liquidity Agreement unless otherwise
provided herein.
In this connection, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such instruments, documents and
records as we have deemed relevant and necessary for purposes of our opinion
hereinafter set forth. As to certain factual matters involved in this opinion
which were not independently established, we have relied, to the extent we have
deemed such reliance proper, on certificates or other documents obtained from
public officials or officers of Lender setting forth such matters.
With your permission, based upon an opinion of _____________, [local]
counsel to Lender (a copy of which is annexed hereto as Annex I), and a
certificate of the Branch (a copy of which is annexed hereto as Annex II), we
have assumed that:
(a) Lender has been duly organized and is validly existing under the
laws of _______________________;
(b) Lender, acting through the Branch, has all requisite corporate
power and authority under the laws of ______________ to execute, deliver and
perform the Liquidity Agreement;
(c) the Liquidity Agreement has been duly authorized, executed and
delivered by Lender acting through the Branch; and
(d) the Liquidity Agreement, including the obligation of Lender, acting
through the Branch, to make Loans thereunder in accordance with the terms
thereof, constitutes a valid and legally binding obligation of Lender, acting
through the Branch, under the laws of
<PAGE> 63
EXHIBIT D-2
PAGE 63
________________.
Based upon the foregoing and subject to the qualifications set forth
herein, it is our opinion that under the laws of the State of [New York] and the
United States:
1. The Branch is licensed by [the Superintendent of Banks of the State
of New York] and authorized to transact business as a [New York] branch of
Lender in accordance with the provision of Article V of the Banking Law of the
State of New York.]
2. The Branch has the power and authority under [the Banking Law of the
State of New York] to make Loans under the Liquidity Agreement.
3. The Liquidity Agreement, including the obligation of the Branch to
make Loans thereunder in accordance with the terms thereof, constitutes the
valid and binding obligation of the Branch, enforceable against the Branch in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or liquidation, moratorium or other
similar laws affecting the enforcement of creditors' rights in general as such
laws would apply in the event of the bankruptcy, insolvency, reorganization or
liquidation of, or similar occurrence with respect to, the Branch or Lender, or
in the event of any moratorium or similar occurrence affecting the Branch or
Lender or by general principles of equity.
Our opinion with respect to the enforceability of the obligation of the
Branch to make Loans under the Liquidity Agreement relates only to the
enforceability of the same against such Branch. We express no opinion as to the
enforceability by the Company of its right to receive Loans in the event of the
Company's bankruptcy.
We do not express any opinion herein concerning any other law than the
law of the State of New York and the federal law of the United States of
America.
This opinion is not to be used or relied upon by or published or
communicated to any other party for any other purpose whatsoever without our
prior written approval in each instance.
Very truly yours,
<PAGE> 64
SCHEDULE I
TO EXHIBIT D-2
<PAGE> 65
EXHIBIT D-3
FORM OF FOREIGN LIQUIDITY LENDER LOCAL COUNSEL OPINION
____________, 2000
To The Persons Listed
On Schedule I Hereto
Dear Sirs:
We have acted as counsel to [Name of Lender] ("Lender"), in connection
with the preparation, execution and delivery of the Liquidity Agreement dated as
of _________ __, 2000 (the "Liquidity Agreement") among [SPV], a Delaware
limited liability company (the "Company"), the lenders parties thereto (the
"Liquidity Lenders," including, without limitation, Lender acting through its
[New York] Branch (the "Branch"), Deutsche Bank AG, New York Branch, as
Liquidity Agent, ___________, as Documentation Agent and Deutsche Bank
Securities Inc., as Syndication Agent. All defined terms used herein shall have
the meanings assigned to them in the Liquidity Agreement unless otherwise
provided herein.
In this connection, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such instruments, documents and
records as we have deemed relevant and necessary for purposes of our opinion
hereinafter set forth. As to certain factual matters involved in this opinion
which were not independently established, we have relied, to the extent we have
deemed such reliance proper, on certificates or other documents obtained from
public officials or officers of Lender setting forth such matters.
Based upon, and subject to, the foregoing, we are of the opinion that:
1. Lender has been duly organized and is validly existing as a bank
under the laws of [specify foreign jurisdiction] and has full power and
authority under the laws of [specify foreign jurisdiction] to maintain the
Branch in [New York], New York].
2. Lender has all requisite corporate power to execute, deliver and
perform its obligations under the Liquidity Agreement and all transactions
contemplated thereby.
3. The Liquidity Agreement has been duly authorized, executed and
delivered by Lender. Assuming that the Liquidity Agreement constitutes the
legal, valid and binding obligation of Lender under the laws of the State
of [New York] by which it is governed, the Liquidity Agreement will
constitute the legal, valid and binding obligation of Lender, enforceable
against Lender in accordance with its terms under the laws of [specify
foreign jurisdiction], except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, liquidation, readjustment of debt
or other similar laws affecting the enforcement of creditors' rights as
they may be applied in the event of the bankruptcy, insolvency,
reorganization, liquidation, readjustment of debt or similar event of
Lender, or (ii) a moratorium or similar occurrence affecting Lender.
4. No license, consent or approval of, or registration with, any
governmental department, agency commission or regulatory authority of
[specify foreign jurisdiction] is
<PAGE> 66
EXHIBIT D-3
PAGE 66
required in connection with the execution or performance of the
Liquidity Agreement by Lender to make the Liquidity Agreement fully
enforceable in accordance with its terms.
5. Neither the execution, delivery or performance by Lender of the
Liquidity Agreement, nor compliance by Lender with the terms and
provisions thereof, will (i) contravene any provision of any law of
[specify foreign jurisdiction] or any applicable rules or regulations
thereunder, (ii) violate any provision of the [organizational documents]
of Lender, (iii) violate the provisions of any order, decree or judgment
of any court or governmental agency or (iv) result in the breach of, or
constitute a default or require any consent under, or result in the
creation of any lien upon any property of Lender pursuant to, any
indenture, agreement or instrument to which Lender is a party or by which
Lender or its property may be bound.
6. The choice of the laws of the State of New York to govern the
Liquidity Agreement is valid under the laws of [specify foreign
jurisdiction] and would be given effect in any proceedings brought against
Lender in the courts of [specify foreign jurisdiction] provided that
[specify conditions, if any].
7. Any final and conclusive judgment obtained under the Liquidity
Agreement in a federal court of the United States sitting in the State of
[New York] or a court of the State of [New York] of competent jurisdiction
will be recognized by and be enforceable against Lender in an action
brought against Lender in [specify foreign jurisdiction], provided that
[specify conditions, if any].
8. The obligations of Lender to perform its obligations under the
Liquidity Agreement in accordance with the terms thereof will rank pari
passu with the deposit liabilities of Lender and other unsecured
obligations, whether now or hereafter outstanding, other than subordinated
obligations, if any, of Lender.
We express no opinion as to any matters governed by any laws other than
the laws of [specify foreign jurisdiction].
Very truly yours,
<PAGE> 67
SCHEDULE I
TO EXHIBIT D-3
<PAGE> 68
EXHIBIT E
COPY OF COMPANY COUNSEL OPINIONS
<PAGE> 69
EXHIBIT D-3
PAGE 69
COPY OF BORROWER COUNSEL OPINION
<PAGE> 70
EXHIBIT G
PAGE 70
FORM OF DESIGNATED LIQUIDITY LENDER NOTE
$__________ ____________, 2000
FOR VALUE RECEIVED, the undersigned, [SPV] (the "Borrower"), hereby
unconditionally promises to pay on the Liquidity Termination Date to the order
of _______________________ (the "Designated Liquidity Lender") at the office of
_________ located at _______________ in lawful money of the United States of
America and in immediately available funds, the principal amount of the lesser
of (a) _______________________ ($___________) and (b) the aggregate unpaid
principal amount of all Loans made by the Designated Liquidity Lender to the
undersigned pursuant to Sections 3.17 and 10.05 of the Liquidity Agreement
referred to below.
The undersigned further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time from the Closing
Date at the applicable rates per annum set forth in Section 3.06 of the
Liquidity Agreement referred to below until any such amount shall become due and
payable (whether at the stated maturity, by acceleration or otherwise), and
thereafter on such overdue amount at the rate per annum set forth in Section
3.06(c) of the Liquidity Agreement until paid in full (both before and after
judgment). Interest shall be payable in arrears on each applicable Interest
Payment Date, commencing on the first such date to occur after the date hereof
and terminating upon payment (including prepayment) in full of the unpaid
principal amount hereof; provided that interest accruing on any overdue amount
shall be payable on demand.
The holder of this Designated Liquidity Lender Note is authorized to
record the date and amount of each Loan made pursuant to Article III of the
Liquidity Agreement, its character as a Revolving Loan or Refunding Loan, the
date and amount of each payment or prepayment of principal with respect thereto,
the length of each Interest Period with respect to the portion of such Loan made
and/or maintained as a Eurodollar Rate Loan, the Eurodollar Rate with respect
thereto and each conversion made pursuant to Section 5.05 of the Liquidity
Agreement, on the schedules annexed hereto and made a part hereof, or on a
continuation thereof which shall be attached hereto and made a part hereof,
which recordation shall constitute prima facie evidence of the accuracy of the
information so recorded; provided that failure by the Designated Liquidity
Lender to make any such recordation on this Designated Liquidity Lender Note
shall not affect the obligations of the Borrower under this Designated Liquidity
Lender Note or under the Liquidity Agreement.
This Designated Liquidity Lender Note is one of the Designated
Liquidity Lender Notes referred to in the Liquidity Agreement dated as of
_________ __, 2000 (as amended, supplemented or otherwise modified from time to
time, the "Liquidity Agreement"), among the Borrower, Liquidity Lenders parties
thereto, Deutsche Bank AG, New York Branch, as Liquidity Agent, ___________, as
Documentation Agent, and Deutsche Bank Securities Inc., as Arranger and
Syndication Agent is entitled to the benefits of the Liquidity Agreement and is
subject to optional and mandatory prepayment in whole or in part as provided in
the Liquidity Agreement. Terms used herein which are defined in the Liquidity
Agreement shall have such defined
<PAGE> 71
EXHIBIT G
PAGE 71
meanings unless otherwise defined herein or unless the context otherwise
requires.
Upon the occurrence of any one or more of the Events of Default
specified in the Liquidity Agreement, and subject to compliance with the terms
of Article VIII of the Liquidity Agreement, all amounts then remaining unpaid on
this Designated Liquidity Lender Note shall become, or may be declared to be,
immediately due and payable, all as provided therein.
Except as otherwise provided in Article VIII of the Liquidity
Agreement, all parties now and hereafter liable with respect to this Designated
Liquidity Lender Note, whether maker, principal, surety, guarantor, endorser or
otherwise, hereby waive presentment, demand, protest and all other notices of
any kind.
None of the shareholders, trustees, officers, employees and other
agents of the Borrower shall be personally bound by or liable for any
indebtedness, liability or obligation hereunder, nor shall resort be had to
their personal property for the satisfaction of any obligation or claim
hereunder.
THIS DESIGNATED LIQUIDITY LENDER NOTE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
[SPV]
By:
Name:
Title:
<PAGE> 72
FORM OF DESIGNATION AGREEMENT
Dated ____________, 2000
Reference is made to that certain Liquidity Agreement dated as of
____________, 2000 (as amended, supplemented or otherwise modified from time to
time, the "Liquidity Agreement") by and among [SPV] (the "Borrower"), the
Liquidity Lenders parties hereto, Deutsche Bank AG, New York Branch, as
Liquidity Agent (the "Liquidity Agent) _________, as Documentation Agent (the
"Documentation Agent") and Deutsche Bank Securities Inc., as Arranger and
Syndication Agent. Terms defined in the Liquidity Agreement are used herein with
the same meaning.
[NAME OF DESIGNATING LIQUIDITY LENDER] (the "Designating Liquidity
Lender"), [NAME OF DESIGNEE] (the "Designee"), the Liquidity Agent and Borrower
agree as follows:
1. Pursuant to 10.05(g) of the Liquidity Agreement, the Designating
Liquidity Lender hereby designates the Designee, and the Designee hereby accepts
such designation, to have a right to make Loans pursuant to Article III of the
Liquidity Agreement. Any assignment by Designating Liquidity Lender to Designee
of its rights to make a Loan pursuant to such Article III shall be effective at
the time of the funding of such Loan and not before such time.
2. Except as set forth in Section 7 below, the Designating Liquidity
Lender makes no representation or warranty and assumes no responsibility
pursuant to this Designation Agreement with respect to (a) any statements,
warranties or representations made in or in connection with any Facility
Document or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of any Facility Document or any other instrument or
document furnished pursuant thereto and (b) the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under any Facility Document or any other instrument or document
furnished pursuant thereto.
3. The Designee (a) confirms that it has received a copy of each
Facility Document, together with copies of the financial statements referred to
in Section 7.01 of the Liquidity Agreement and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Designation Agreement; (b) agrees that it will
independently and without reliance upon the Liquidity Agent, the Designating
Liquidity Lender or any other Liquidity Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under any Facility Document; (c)
confirms that it is a Designated Liquidity Lender; (d) appoints and authorizes
the Liquidity Agent to take such action as Liquidity Agent on its behalf and to
exercise such powers and discretion under any Facility Document as are delegated
to the Liquidity Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; and (e) agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of any Facility Document are required to be performed by it as a Liquidity
Lender.
(72)
<PAGE> 73
PAGE
4. The Designee hereby appoints [DESIGNATING LIQUIDITY LENDER OR A
SPECIFIED BRANCH OR AFFILIATE OF DESIGNATING LIQUIDITY LENDER] as Designee's
agent and attorney in fact and grants to [DESIGNATING LIQUIDITY LENDER OR A
SPECIFIED BRANCH OR AFFILIATE OF DESIGNATING LIQUIDITY LENDER] an irrevocable
power of attorney to receive payments made for the benefit of Designee under the
Liquidity Agreement, to deliver and receive all communications and notices under
the Liquidity Agreement and other Facility Documents and to exercise on
Designee's behalf all rights to vote and to grant and make approvals, waivers,
consents or amendments to or under the Liquidity Agreement or other Facility
Documents. Any documents executed by such Designating Liquidity Lender on the
Designee's behalf in connection with the Liquidity Agreement or other Facility
Documents shall be binding on the Designee. The Borrower, the Liquidity Agent
and each of the Liquidity Lenders may rely on and are beneficiaries of the
preceding provisions.
5. Following the execution of this Designation Agreement by the
Designating Liquidity Lender, its Designee and the Borrower, it will be
delivered to the Liquidity Agent for acceptance and recording by the Liquidity
Agent. The effective date for this Designation Agreement (the "Effective Date")
shall be the date of acceptance hereof by the Liquidity Agent, unless otherwise
specified on the signature page thereto.
6. Each of the Borrower, the Designating Liquidity Lender and the
Liquidity Agent hereby (i) acknowledges that the Designee is relying on the
non-petition provisions of Section 10.13 of the Liquidity Agreement as agreed to
by all signatories thereto and (ii) reaffirms that it will not institute against
the Designee or join any other Person in instituting against the Designee any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
under any federal or state bankruptcy or similar law for one year and one day
after the payment in full of the latest maturing commercial paper note issued by
the Designee.
7. The Designating Liquidity Lender unconditionally agrees to pay or
reimburse the Designee and save the Designee harmless against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
or asserted by any of the parties to the Facility Documents against the
Designee, in its capacity as such, in any way relating to or arising out of this
Agreement or any other Facility Documents or any action taken or omitted by the
Designee hereunder or thereunder, provided that the Designating Liquidity Lender
shall not be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
if the same results from the Designee's gross negligence or willful misconduct.
8. Upon such acceptance and recording by the Liquidity Agent, as of the
Effective Date, the Designee shall be a party to the Liquidity Agreement with
the right to make Loans as a Designated Liquidity Lender pursuant to Section
3.17 of the Liquidity Agreement and the rights and obligations of a Designated
Liquidity Lender related thereto; provided, however, that the Designee shall not
be required to make payments with respect to such obligations except to the
extent of excess cash flow of the Designee which is not otherwise required to
repay obligations of the Designated Liquidity Lender which are then due and
payable. Notwithstanding the foregoing, the [DESIGNATING LIQUIDITY LENDER OR A
SPECIFIED BRANCH OR AFFILIATE OF DESIGNATING LIQUIDITY LENDER], as
administrative agent for the Designee, shall be and remain
(73)
<PAGE> 74
obligated to the Borrower, the Liquidity Agent and the Liquidity Lenders for
each and every of the obligations of the Designee and the Designating Liquidity
Lender with respect to the Liquidity Agreement, including, without limitation,
any indemnification obligations under the Liquidity Agreement and any sums
otherwise payable to the Borrower by the Designee.
9. This Designation Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
10. This Designation Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Designation Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
of this Designation Agreement.
IN WITNESS WHEREOF, the Designating Liquidity Lender and the Designee
intending to be legally bound, have caused this Designation Agreement to be
executed by their officers thereunto duly authorized as of the date first above
written.
[NAME OF DESIGNATING
LIQUIDITY LENDER]
as Designating Liquidity Lender
By:
Title:
[NAME OF DESIGNEE], as Designee
By:
Title:
Lending Office (and address for
notices):
[SPV], as Borrower
By:
Title:
Accepted this ______ day
of _______________, ____ Effective Date:
Deutsche Bank AG, New York Branch,
as Liquidity Agent
By:
Title:
(74)
<PAGE> 75
EXHIBIT I
FORM OF SECTION 3.11(b)(ii) CERTIFICATE
Reference is hereby made to the Liquidity Agreement, dated as of ____
___, 2000, among [SPV], as Borrower, the liquidity lenders parties thereto, as
Lenders, Deutsche Bank AG, New York Branch, as Liquidity Agent, ___________, as
Documentation Agent, and Deutsche Bank Securities Inc., as Arranger and
Syndication Agent, (as amended from time to time, the "Agreement"). Pursuant to
the provisions of Section 3.11(b) of the Agreement, the undersigned hereby
certifies that it is not a "bank" as such term is used in Section 881(c)(3)(A)
of the Internal Revenue Code of 1986, as amended.
[NAME OF BANK]
By: _________________________
Name
Title:
<PAGE> 76
<TABLE>
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TABLE OF CONTENTS
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<S> <C>
ARTICLE I
DEFINITIONS 1
SECTION 1.01 General 1
SECTION 1.02 Definitions 2
ARTICLE II
COMMERCIAL PAPER OPERATIONS 9
SECTION 2.01 Issuance of Commercial Paper 9
SECTION 2.02 Commercial Paper Account; Payment of Commercial Paper 10
ARTICLE III
REVOLVING CREDIT 10
SECTION 3.01 The Revolving Loans and the Refunding Loans 10
SECTION 3.02 Revolving Loans 10
SECTION 3.03 Refunding Loans 11
SECTION 3.04 Disbursement of Funds 12
SECTION 3.05 The Loan Notes 13
SECTION 3.06 Interest Rates and Payment Dates 14
SECTION 3.07 Computation of Interest and Fees 14
SECTION 3.08 Inability to Determine Interest Rate 15
SECTION 3.09 Illegality 15
SECTION 3.10 Requirements of Law 15
SECTION 3.11 Taxes 17
SECTION 3.12 Indemnity 19
SECTION 3.13 Pro Rata Borrowings 19
SECTION 3.14 Downgrading of Liquidity Lenders 19
SECTION 3.15 Subordination 20
SECTION 3.16 Mitigation of Costs; Replacement of Liquidity Lender 20
SECTION 3.17 Loans by Designated Liquidity Lenders 21
ARTICLE IV
OTHER CREDIT TERMS 21
SECTION 4.01 Liquidity Fee 21
SECTION 4.02 Termination of Liquidity Commitment 21
SECTION 4.03 Expiration of Liquidity Commitment; Extension of Liquidity
</TABLE>
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<PAGE> 77
<TABLE>
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<S> <C>
Commitment 22
SECTION 4.04 Use of Proceeds 23
ARTICLE V
PAYMENTS 23
SECTION 5.01 Payments on Non-Business Days 23
SECTION 5.02 Prepayments 23
SECTION 5.03 Attachments 24
SECTION 5.04 Method and Place of Payment, etc 24
SECTION 5.05 Conversion and Continuations 24
ARTICLE VI
CONDITIONS PRECEDENT 25
SECTION 6.01 Conditions to Effectiveness 25
(a) Agreement 25
(b) The Revolving Loan Notes and the Refunding Loan Notes 25
(c) Credit Agreement 25
(d) Security Agreement 25
(e) Control Agreement 26
(f) Depositary Agreement 26
(g) Other Agreements 26
(h) No Default 26
(i) Representations and Warranties 26
(j) Opinions of Counsel 26
(k) Closing Certificates 26
(l) Filings, etc 26
(m) Documentation and Proceedings 27
(n) Rating Letter 27
SECTION 6.02 Conditions to Each Credit Utilization 27
(a) No Default 27
(b) Representations and Warranties 27
(c) Commercial Paper Unavailable 27
(d) No Bankruptcy Proceeding 28
(e) Asset Coverage Ratio 28
SECTION 6.03 Conditions Precedent to the Making of Each Refunding Loan 28
ARTICLE VII
COVENANTS 28
SECTION 7.01 Affirmative Covenants 28
SECTION 7.02 Dividend Limitation 29
SECTION 7.03 Liens 29
SECTION 7.04 Other Debt; Receivables 29
</TABLE>
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<PAGE> 78
<TABLE>
<CAPTION>
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<S> <C>
SECTION 7.05 Guarantees, Loans, Advances and Other Liabilities 29
SECTION 7.06 Consolidation, Merger and Sale of Assets 29
SECTION 7.07 Certain Amendments and Waivers 30
SECTION 7.08 Capital Expenditures 30
SECTION 7.09 Other Business 30
SECTION 7.10 Amendment of Certificate of Incorporation or By-Laws 30
SECTION 7.11 Good Standing 30
SECTION 7.12 Restriction on Advances 30
SECTION 7.13 Separate Existence 30
SECTION 7.14 Notice of Default 32
ARTICLE VIII
EVENTS OF DEFAULT 32
SECTION 8.01 Event of Default 32
(a) Payments 32
(b) Representations 32
(c) Covenants 32
(d) Voluntary Bankruptcy Proceedings of the Company 32
(e) Involuntary Bankruptcy Proceedings against the Company 33
(f) Security Interest 33
(g) Judgments 33
ARTICLE IX
REPRESENTATIONS AND WARRANTIES 34
SECTION 9.01 Existence 34
SECTION 9.02 Corporate Power; Authorization; Enforceable Obligation 34
SECTION 9.03 No Legal Bar 35
SECTION 9.04 No Material Litigation 35
SECTION 9.05 Margin Regulations 35
SECTION 9.06 Security Interest 35
SECTION 9.07 Commercial Paper; Investment Company Act 35
SECTION 9.08 Parent of the Company 35
SECTION 9.09 Special Purpose Company 36
SECTION 9.10 Tax Returns and Payments 36
ARTICLE X
MISCELLANEOUS 36
SECTION 10.01 Descriptive Headings 36
SECTION 10.02 Exercise of Rights 36
SECTION 10.03 Amendment and Waiver 37
SECTION 10.04 Expenses and Indemnification 37
SECTION 10.05 Successors and Assigns 38
</TABLE>
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<PAGE> 79
<TABLE>
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<S> <C>
SECTION 10.06 Notices, Requests, Demands 41
SECTION 10.07 Survival of Representations and Warranties 43
SECTION 10.08 Governing Law 43
SECTION 10.09 Waiver of Jury Trial 43
SECTION 10.10 Counterparts 43
SECTION 10.11 Adjustments 43
SECTION 10.12 Further Assurances 44
SECTION 10.13 No Bankruptcy Petition Against the Company 44
SECTION 10.14 No Recourse 44
SECTION 10.15 Appointment of the Liquidity Agent 44
SECTION 10.16 Resignation by the Liquidity Agent 47
SECTION 10.17 Knowledge of Company 47
SECTION 10.18 Opinion of Counsel of the Liquidity Lenders 47
SECTION 10.19 Confidentiality 47
EXHIBIT A-1 Form of Revolving Loan Note
EXHIBIT A-2 Form of Refunding Loan Note
EXHIBIT B Copy of Depositary Agreement
EXHIBIT C Copy of Management Agreement
EXHIBIT D-1 Form of U.S. Liquidity Lender Counsel Opinion
EXHIBIT D-2 Form of Foreign Liquidity Lender New York Counsel Opinion
EXHIBIT D-3 Form of Foreign Liquidity Lender Local Counsel Opinion
EXHIBIT E Copy of Company Counsel Opinions
EXHIBIT F Copy of Borrower Counsel Opinion
EXHIBIT G Form of Designated Liquidity Lender Note
EXHIBIT H Form of Designation Agreement
EXHIBIT I Form of Section 3.11(b)(ii) Certificate
</TABLE>
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<PAGE> 1
EXHIBIT l.1
May 19, 2000
Nuveen Senior Income Fund
333 West Wacker Drive
Chicago, Illinois 60606
Re: Nuveen Senior Income Fund
Taxable Auctioned Preferred Shares
to be Issued Pursuant to the Underwriting Agreement
(File No. 333-95423)
Ladies and Gentlemen:
We are acting as counsel to Nuveen Senior Income Fund, a Massachusetts
business trust (the "Trust"), in connection with the Trust's filing of a
registration statement on Form N-2 (the "Registration Statement") with the
Securities and Exchange Commission covering the registration, authorization and
proposed issuance of up to 1,840 shares of its Taxable Auctioned Preferred
Shares ("TAPS"), Series TH liquidation preference of $25,000 per share ("Series
TH Shares"). In that capacity, we have examined such corporate records,
certificates and other documents, and have made such other factual and legal
investigations as we have deemed necessary and appropriate for the purposes of
this opinion. Insofar as this opinion pertains to matters governed by the laws
of the Commonwealth of Massachusetts, we are relying with your consent, upon the
opinion of Bingham Dana LLP dated May 19, 2000, which opinion is satisfactory in
substance and form to us.
We have assumed that the Registration Statement, the Underwriting
Agreement and the Statement Establishing and Fixing the Rights and Preferences
of Taxable Auctioned Preferred Shares (the "Statement") will be duly completed,
executed and delivered and in accordance with the resolutions of the Trustees
attached to a certificate of the Secretary of the Fund, certifying as to, and
attaching copies of, the Fund's Declaration, Statement, By-Laws, and certain
resolutions adopted by the Trustees of the Fund and that the Statement will be
duly filed with the Office of the Secretary of State of Massachusetts.
Based upon the foregoing, it is our opinion that:
(1) The Trust is duly organized and existing under the Fund's
Declaration and laws of the Commonwealth of Massachusetts as a
voluntary association with shares of beneficial interest,
commonly referred to as a "Massachusetts business trust."
(2) The Shares, when issued and sold in accordance with the
Trust's Declaration of Trust, Statement and By-Laws and for
the consideration described in the Underwriting Agreement,
will be legally issued, fully paid and non-assessable, except
that, as set forth in the Registration Statement, shareholders
of the Trust may under certain circumstances be held
personally liable for its obligations.
<PAGE> 2
We hereby consent to the filing of this opinion as Exhibit l.1 to the
Registration Statement and to the reference to us under the caption "Legal
Opinions" in the prospectus contained in the Registration Statement.
Very truly yours,
Vedder, Price, Kaufman & Kammholz
<PAGE> 1
EXHIBIT l.2
May 19, 2000
Vedder Price Kaufman & Kammholz
222 N. LaSalle Street
Chicago, Illinois 60601
RE: Nuveen Senior Income Fund
Ladies and Gentlemen:
We have acted as special Massachusetts counsel to Nuveen Senior Income
Fund, a Massachusetts business trust (the "Fund"), in connection with the
Fund's Registration Statement on Form N-2 filed with the Securities and Exchange
Commission (the "Commission") on January 26, 2000 (the "Initial Filing") as
such Registration Statement is proposed to be amended by Pre-Effective Amendment
No. 1 thereto to be filed with the Commission on or about May 19, 2000 (as
proposed to be amended, the "Registration Statement") with respect to 1,840
Shares of the Fund's Taxable Auctioned Preferred Shares, Series TH Liquidation
Preference $25,000 per share (the "Shares"). You have requested that we deliver
this opinion to you, as special counsel to the Fund, for use by you in
connection with your opinion to the Fund with respect to the Shares.
In connection with the furnishing of this opinion, we have examined the
following documents:
(a) a certificate dated a recent date of the Secretary of State of the
Commonwealth of Massachusetts as to the existence of the Fund;
(b) copies, certified by the Secretary of State of the Commonwealth of
Massachusetts, of the Fund's Declaration of Trust and of all amendments thereto
(the "Declaration") on file in the office of the Secretary of State;
(c) a draft of the Fund's Statement Establishing and Fixing the Rights
<PAGE> 2
Vedder Price Kaufman & Kammholz
May 19, 2000
Page 2
and Preference of Taxable Auctioned Preferred Shares attached as Appendix A to
the Statement of Additional Information included in the draft of the Amendment
referred to in (f) below (the "Statement");
(d) a certificate of the Secretary of the Fund, certifying as to, and
attaching copies of, the Fund's Declaration, Statement, By-Laws, and certain
resolutions adopted by the Trustees of the Fund;
(e) a conformed copy of the Initial Filing;
(f) a printer's proof, which we received from the printer on May 3,
2000, of Pre-Effective Amendment No. 1 to the Initial Filing to be filed with
the Securities and Exchange Commission (the "Amendment"); and
(g) a draft received on May 15, 2000 of the Underwriting Agreement to
be entered into by the Fund and PaineWebber Incorporated, as Managing
Representative of the several underwriters named therein providing for the
purchase and sale of the Shares (the "Underwriting Agreement").
In such examination, we have assumed the genuineness of all signatures, the
conformity to the originals of all of the documents reviewed by us as copies,
the authenticity and completeness of all original documents reviewed by us in
original or copy form and the legal competence of each individual executing any
document.
We have assumed that the Amendment, the Underwriting Agreement and the
Statement will be duly completed, executed and delivered in substantially the
forms of the printer's proof and drafts referred to above and in accordance with
the resolutions of the Trustees attached to the certificate referred to in (d)
above, and that the Statement will be duly filed with the Office of the
Secretary of State of Massachusetts.
This opinion is based entirely on our review of the documents listed above
and such investigation of law as we have deemed necessary or appropriate. We
have made no other review or investigation of any kind whatsoever, and we have
assumed, without independent inquiry, the accuracy of the information set forth
in such documents.
This opinion is limited solely to the laws of the Commonwealth of
Massachusetts as applied by courts located in such Commonwealth, except that
<PAGE> 3
Vedder Price Kaufman & Kammholz
May 19, 2000
Page 3
we express no opinion as to any Massachusetts securities law.
We understand that all of the foregoing assumptions and limitations are
acceptable to you.
Based upon and subject to the foregoing, please be advised that it is our
opinion that:
1. The Fund is duly organized and existing under the Fund's
Declaration and the laws of the Commonwealth of Massachusetts as a voluntary
association with transferable shares of beneficial interest commonly referred to
as a "Massachusetts business trust."
2. The Shares, when issued and sold in accordance with the Fund's
Declaration, Statement and By-Laws and for the consideration described in the
Underwriting Agreement, will be legally issued, fully paid and non-assessable,
except that, as set forth in the Registration Statement, shareholders of the
Fund may under certain circumstances be held personally liable for its
obligations.
We hereby consent to your reliance on this opinion in connection with
your opinion to the Fund with respect to the Shares, to the reliance by the Fund
on this opinion, to the reference to our name in the Registration Statement and
in the prospectus forming a part thereof under the heading "Legal Opinions" and
to the filing of this opinion as an exhibit to the Registration Statement.
Very truly yours,
Bingham Dana LLP
<PAGE> 1
EXHIBIT 99.N
CONSENT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholder
Nuveen Senior Income Fund:
We consent to the use of our report and the reference to our firm under the
heading "Experts" in the Statement of Additional Information.
Chicago, Illinois
May 19, 2000
<PAGE> 1
EXHIBIT R
5/15/00
NUVEEN MUTUAL FUNDS
NUVEEN EXCHANGE-TRADED FUNDS
NUVEEN DEFINED PORTFOLIOS
NUVEEN ADVISORY CORP.
NUVEEN INSTITUTIONAL ADVISORY CORP.
NUVEEN ASSET MANAGEMENT INC.
NUVEEN SENIOR LOAN ASSET MANAGEMENT INC.
JOHN NUVEEN & CO. INCORPORATED
CODE OF ETHICS
AND
REPORTING REQUIREMENTS
LEGAL BACKGROUND
In accordance with the rules and requirements of the Investment Company Act
of 1940 and the Investment Advisers Act of 1940, John Nuveen & Co.
Incorporated, and each of its affiliated companies, has adopted this Code
of Ethics and Reporting Requirements (the "Code") to guard against
violations of the standards set forth in the above rules. In addition, the
Code establishes guidelines for the conduct of persons who
(1) may obtain material non-public information concerning securities held
by or considered for purchase or sale by any series of
Nuveen-sponsored registered managed funds (open-end and closed-end
funds), Nuveen defined portfolios (unit investment trusts) and any
managed accounts to which Nuveen Advisory Corp., Nuveen Asset
Management Inc., Nuveen Institutional Advisory Corp., Nuveen Senior
Loan Asset Management Inc. or Rittenhouse Financial Services, Inc. act
as investment advisers; or
(2) may make any recommendation or participate in the determination of
which recommendation shall be made concerning the purchase or sale of
any securities by a Nuveen managed fund, defined portfolio or managed
account. Persons subject to this Code are also subject to Nuveen's
Policies and Procedures Designed to Prevent Insider Trading.
<PAGE> 2
I. PURPOSE OF THE CODE
A. The Code establishes guidelines for Nuveen employees, officers,
directors and members of their immediate families in the conduct of their
personal investments and is designed to:
- forbid transactions that the Securities and Exchange Commission
or other regulatory bodies would view as illegal, such as
front-running;
- avoid situations where Nuveen employees, officers, directors or
members of their immediate family, and any Nuveen managed fund,
defined portfolio or managed account, had personally benefited, or
appeared to benefit, at the expense of a managed fund, defined
portfolio or managed account shareholder or client, or taken
inappropriate advantage of their fiduciary positions; and
- prevent, as well as detect, the misuse of material, non-public
information.
B. Employees, officers and directors should be aware that Nuveen's
reputation could be adversely affected as the result of even a single
transaction considered questionable in light of the fiduciary duties we owe
to Nuveen's managed funds, defined portfolios and managed accounts. It
bears emphasis that technical compliance with the Code's procedures will
not automatically insulate from scrutiny transactions which show a pattern
of abuse of the individual's fiduciary duties to a managed fund, defined
portfolio or managed account. In addition, a violation of the general
principles of the Code may subject an individual to sanctions.
II. Definitions
A. "Access Person" -
1. You are an Access Person if your job normally involves any of the
following:
1.
- The purchase or sale of "Covered Securities" (as defined below)
for Nuveen managed funds, defined portfolios or managed accounts.
- In connection with your regular functions or duties, you make,
participate in, or obtain information regarding the purchase or sale
of Covered Securities by a managed fund, defined portfolio or managed
account, or your functions relate to the making of any recommendations
with respect to the purchases or sale of such Covered Securities.
- You have access to information regarding the purchase or sale of
Covered
2
<PAGE> 3
Securities for managed funds, defined portfolios or managed accounts.
In addition, you are an Access Person if you are any of the following:
- An officer or director of Nuveen Advisory Corp., Nuveen Institutional
Advisory Corp., Nuveen Asset Management or Nuveen Senior Loan Asset
Management Inc.
- "Investment Personnel" or a "Portfolio Manager" as defined below.
(NOTE: A list of persons deemed to be Access Persons of the various
entities subject to
this Code is attached as Exhibit A)
B. "Investment Personnel" - Investment Personnel are portfolio managers,
financial analysts,
C. investment analysts, traders and other employees of Nuveen
Advisory Corp., Nuveen Institutional Advisory Corp., Nuveen Asset
Management Inc., Nuveen Senior Loan Asset Management Inc. or John
Nuveen and Co. Incorporated who provide information or advice to a
portfolio management team or who execute or help execute the portfolio
management team's decisions. Investment Personnel are also deemed
Access Persons by definition.
(A listing of all categories of Access Persons is attached as Exhibit A)
C. "Portfolio Manager" - Portfolio Managers are those employees of Nuveen
Advisory Corp., Nuveen Institutional Advisory Corp., Nuveen Asset
Management Inc., Nuveen Senior Loan Asset Management Inc. or John
Nuveen & Co. Incorporated entrusted with direct responsibility and
authority to make investment decisions affecting a managed fund,
defined portfolio or a managed account. Portfolio Managers are also
deemed Investment Personnel and Access Persons by definition.
(A listing of all categories of Access Persons is attached as Exhibit A)
3
<PAGE> 4
D. "Interested Director" - An Interested Director of a fund is a director
who has a material business relationship or professional relationship
with a managed fund, investment adviser or underwriter of the fund.
Generally, Interested Directors are those that are employed by any one
of the above entities. (See Investment Company Act, Section 2(a)(19).)
E. "Covered Security" - A Covered Security is any stock, bond, debenture,
evidence of indebtedness or in general any other instrument defined as
a security in Section 2(a)(36) of the Investment Company Act of 1940
except that it does not include:
1) Direct obligation of the Government of the United States or
of agencies of the U.S. Government that are backed by the
full faith and credit of the U.S. Government;
2) Bankers' acceptances, bank certificates of deposit,
commercial paper and high quality short-term debt
instruments, including repurchase agreements; and
3) Shares issued by open-end investment companies.
F. "Purchase or Sale" - includes any transaction in
2. which a beneficial interest in a security is acquired or disposed of,
including, but not limited to, the writing of an option to purchase or
sell a security.
G. "Beneficial Ownership"
1) Generally: Beneficial Owner means any person who, directly or
indirectly, through any contract, arrangement, understanding,
relationship or otherwise has or shares a direct or indirect pecuniary
interest in a security. The term pecuniary interest means the
opportunity, directly or indirectly, to profit or share in any profit
derived from a transaction in the subject securities.
(Rule 16a-1(a)(2) under the Securities Exchange Act of 1934)
The pecuniary interest standard looks beyond the record owner of
securities. As a result, the definition of Beneficial Ownership is
extremely broad and encompasses many situations which might not
ordinarily be thought to confer a "pecuniary interest" in, or
"ownership" of securities.
2) Family Holdings: As a general rule, you are regarded as the
Beneficial Owner of securities not only in your name but held in the
name of members of your Immediate Family.
Immediate Family includes:
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- your spouse or domestic partner;
- your minor children;
- a relative who shares your home or, although not living in your
home, is economically dependent upon you; or
- any other person if you obtain from such securities benefits
substantially similar to those of ownership.
3) Partnership and Corporate Holdings: A general partner of a general
or limited partnership will generally be deemed to Beneficially Own
securities held by the partnership, so long as the partner has direct
or indirect influence or control over the management and affairs of
the partnership. A limited partner will generally not be deemed to
Beneficially Own securities held by a limited partnership, provided he
or she does not own a controlling voting interest in the partnership.
If a corporation is your "alter ego" or "personal holding company",
the corporation's holdings of securities will be attributable to you.
4) Investment Clubs: You are deemed to Beneficially Own securities
held by an investment club of which you or a member of your immediate
family (as defined above) is a member.
5) Trusts: You are deemed to Beneficially Own securities held in trust
if any of the following is true:
- You are a trustee and either you or members of your immediate family
(as defined above) have a monetary interest in the trust, whether as
to principal or income;
- You have a vested beneficial interest in the trust; or
- You are settlor of the trust and you have the power to revoke the
trust without obtaining the consent of all the beneficiaries.
See Rule 16a-1(a)(2) under the Securities Exchange Act of 1934)
Securities Deemed not to be "Beneficially Owned"
Beneficial Ownership does not include:
- securities held in the portfolio of a registered investment
company solely by reason of an individual's ownership of shares or
units of such registered investment company;
- securities purchased via an automatic dividend reinvestment plan;
- securities purchased via a rights of accumulation plan;
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- securities held by a pension or retirement plan holding
securities of an issuer whose employees generally are the
beneficiaries of the plan. However, your participation in a pension or
retirement plan is considered Beneficial Ownership of the portfolio
securities if you can withdraw and trade the securities without
withdrawing from the plan.
H. "Security Held or to be Acquired" by a managed fund, defined
9. portfolio or managed account means:
1. Any Covered Security which, within the most recent 15 days:
a) is or has been held by the managed fund, defined
portfolio or managed account; or
b) is being or has been considered by the managed fund,
defined portfolio or managed account; and
2. Any option to purchase or sell, and any security convertible
into or exchangeable for, a Covered Security.
III. Exempted Transactions (applicable to all employees)
The trading prohibitions or restrictions listed in Section IV below of this
Code shall not apply to the following transactions:
A. Nuveen open-end fund purchases or redemptions.
B. Purchases or redemptions of shares of investment companies from
sponsors other than Nuveen.
C. Purchases or sales of direct obligations of the U.S. Government
or Government agencies; bankers' acceptances, bank certificates of
deposit, commercial paper and high quality short-term debt
instruments, including repurchase agreements.
D. Purchases or sales effected in any account over which the party
has no direct or indirect influence or control (e.g., assignment of
management discretion in writing to another party). Employees will be
assumed to have influence or control over transactions in managed
accounts they Beneficially Own unless they have certified otherwise in
their Initial Holdings, Quarterly Transaction and Annual Holdings
Reports.
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E. Purchases or sales which are non-volitional on the part of either
the individual involved or a managed fund or managed account client,
for example, securities obtained through inheritance or gift.
F. Purchases which are part of an automatic dividend reinvestment
plan or similar automatic periodic investment process or when issued
pro rata to all holders of a class of securities, such as stock
splits, stock dividends or the exercise of rights, warrants or tender
offers. However, these transactions should be reported by Access
Persons in their Quarterly Transaction and Annual Holdings reports
once acknowledgement of the transaction is received.
G. Purchases or sales of equity securities issued by companies with
an equity market capitalization of at least $1 billion, unless such
securities appear on an applicable blackout list. However, these
transactions should be reported by Access Persons in their Quarterly
Transaction and Annual Holdings reports once acknowledgement of the
transaction is received. Transactions in securities of The John Nuveen
Company are NOT exempted transactions under this section.
NOTE: The fiduciary principles set forth in Section I apply to all of
the above-described transactions.
IV. Prohibited or Restricted Purchases and Sales
A. All Nuveen Employees
1. Prohibition of purchases of IPOs. No employee may purchase any
securities in an initial public offering (IPO) other than an offering
of municipal securities or U.S. Government securities.
2. Pre-clearance of certain transactions. Unless previously
pre-cleared in the manner described in Section VI below, no employee
may purchase or sell the following securities for his or her own
account or for any account in which he or she has any Beneficial
Ownership:
(a) securities offered in a private placement;
(b) securities of The John Nuveen Company;
(a) common
(c) shares of Nuveen-sponsored exchange-traded funds.
B. Access Persons (including Portfolio Managers and Investment Personnel)
In addition to the requirements set out in paragraph A above, Access
Persons of the types specified in each paragraph are subject to the
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following additional requirements:
1. No Trades When A Managed Fund or Managed Account has Pending
"Buy" or "Sell" Order.
No Portfolio Manager or Investment Personnel shall execute a
securities transaction on a day during which a managed fund or
managed account of a type identified on Exhibit A or B for that
individual has a pending "buy" or "sell" order in that same
security until that order is executed or withdrawn. No other
Access Person shall execute a securities transaction on a day
during which a managed fund or managed account has a pending
"buy" or "sell" order in that same security until that order is
executed or withdrawn, if that person knows, or reasonably should
have known, an order is pending. The preceding two sentences do
not apply to securities transactions involving a security held by
a managed fund or managed account and invested and managed under
a sub-advisory agreement unless the person has actual knowledge
that the fund or account has a pending "buy" or "sell" order
involving such security.
2. No Trades within Seven Days of Managed Fund or Managed Account
Trades.
No Portfolio Manager or Investment Personnel of a managed fund or
managed account may purchase or sell any security within seven
calendar days before or after the managed fund or managed account
of a type identified on Exhibit A for that individual trades or
considers to purchase or sell such security. This prohibition
does not apply to securities that are invested or managed under a
sub-advisory agreement unless the person has actual knowledge
that the fund or account has traded or is considering a trade
involving such security.
3. No Trades in Securities on the Defined Portfolio Blackout List.
No Access Person for Defined Portfolios shall execute a
securities transaction in any security contained on the blackout
list for Defined Portfolios in effect from time to time. The
blackout list for a portfolio will be issued approximately two
weeks prior to the deposit date (or such later time the portfolio
is set) and will remain in effect until seven days following the
deposit date. A second blackout list will be issued approximately
two weeks prior to the termination date for a portfolio and will
remain in effect until the
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close of business on the termination date.
4. Pre-clearance of Trades in Securities Identified as Eligible for
Purchase.
Portfolio Managers and Investment Personnel of Nuveen managed
funds and managed accounts must pre-clear, prior to purchase or
sale, fixed-income and equity securities identified as eligible
for purchase or sale for a fund or product for which they
individually have some significant responsibility.
5. Profits on Purchases and Sales within 60 Days.
Portfolio Managers and Investment Personnel may not profit as a
result of a purchase and sale, or sale and purchase, within a
period of 60 calendar days, of the same (or equivalent) security,
if such security is held by a managed fund or managed account for
which they individually have some significant responsibility.
C. Non-Interested Fund Directors
Non-interested directors (as defined in the Investment Company Act of
1940) of the Funds are:
- permitted to purchase or sell securities in IPOs and private
placements;
- prohibited from purchasing securities of The John Nuveen Company or
its parent, The St. Paul Companies; and
- subject to the pre-clearance requirements of Section VI
below regarding purchases or sales of 1) equity securities with public
equity market capitalization less than $1 billion, if such director
has actual knowledge that such securities are being considered for
purchase or sale by a Fund; and 2) shares of a Nuveen-sponsored
exchange-traded fund for which they serve as a director or trustee.
V. Additional Prohibited Activities
A. Acceptance of Gifts:
Nuveen employees should not accept any gift from any person or entity
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that does business with or on behalf of a managed fund, defined
portfolio or managed account. For purposes of this prohibition, "gift"
has the same meaning as that expressed in Rule 2830 of the National
Association of Securities Dealers Conduct Rules. Therefore, a gift may
not have a market value of more than $100. Employees are not
prohibited from accepting non-cash compensation in the way of
entertainment, including meals and tickets to cultural and sporting
events within certain limits. Please refer to Nuveen's policies and
procedures located on the Legal/Compliance website for more
information concerning the receipt of cash and non-cash compensation.
B. Service as Directors:
Access Persons are prohibited from serving on boards of directors of
publicly traded companies absent prior authorization from an attorney
in the Legal Department based upon a determination that the board
service would be consistent with the interests of defined portfolios,
managed funds or managed accounts. Access Persons who receive
authorization to serve as board members must be isolated through
"Chinese Wall" procedures from those investment personnel making
investment decisions regarding securities issued by the entity
involved.
VI. Pre-Clearance of Securities Transactions:
A. In General:
As noted in Section IV above, certain securities transactions require
pre-clearance prior to purchase or sale, or prior to the placement or
rescission of a self-executing order. The affected employee may obtain
pre-clearance from the paralegal responsible for reviewing personal
securities trading (currently, Ginny Johnson) or an attorney in the Legal
Department. The request for pre-clearance may be made orally or in writing.
Requests for pre-clearance must include the following information:
- issue name;
- ticker symbol or CUSIP number;
- type of security (bond, stock, note, etc.);
- maximum expected dollar amount of proposed transaction;
- nature of the transaction (purchase, sale or self-executing order)
The paralegal or attorney reviewing the transaction will make note of the
outcome in a written or electronic report. If authorization is granted, Legal
will provide the employee with a written record in the form attached as
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Exhibit B.
The affected employee will have three business days to execute an
approved transaction at market, or to place or cancel a self-executing
order. Failure to execute the approved transaction within three
business days will require the person to re-submit their pre-clearance
request as described above. The automatic execution of an order does
not require additional pre-clearance.
B. Private Placements:
Requests from employees for approval to purchase securities offered in
a private placement must be submitted in writing to an attorney in the
Legal Department prior to placing an order to purchase the securities.
Unless specifically exempt under section III above, no such
transaction may be effected without prior clearance. The attorney
reviewing the transaction will take into account, among other factors,
whether the investment opportunity should be reserved for a defined
portfolio, managed fund or managed account and whether the opportunity
is being offered to an individual by virtue of his or her position.
C. JNC Stock:
Employees must pre-clear all trades in JNC stock with an attorney in
the Legal Department. The following procedures also apply:
1. Blackout period. Employees may not trade in JNC stock during
the period from the first day of any calendar quarter until two
full business days have passed following the public release of
earnings for the prior quarter.
2. Short-term trading. Employees may not engage in short-term
trading activity in JNC stock. Jumping in and out of the market
may create the appearance of insider trading.
3. Options and short selling. Employees may not engage in option
transactions related to JNC stock (other than JNC-issued
options), and may not engage in any transactions where they would
profit if the value of JNC shares fell, such as short sales.
4. Encouraging others' trades. Employees should not in any way
encourage others to engage in transactions in which the employees
cannot engage.
VII. Reporting Requirements
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A. All Employees:
All employees must instruct their broker-dealer to send duplicate
confirmations and copies of periodic statements (quarterly reports) of
all securities transactions in their accounts, with the exception of
those transactions exempt under Section III. A form of letter of
instruction for broker-dealers to direct the duplicate confirmation is
attached as Exhibit C, or may be obtained from the designated
paralegal (currently, Ginny Johnson) in the Legal Department.
Please note that a "broker-dealer" includes both of the
following:
A broker or dealer with whom a securities brokerage account
is maintained in the employee's name; AND
A broker or dealer who maintains an account for a person
whose trades an employee must report as a Beneficial Owner of
the securities.
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B. Additional Requirements for Nuveen Access Persons
1. Initial Holdings Reports -
Each Access Person must provide an Initial Holdings Report to the
Legal Department listing all securities Beneficially Owned by the
Access Person no later than 10 days after he or she becomes an
Access Person.
The Initial Holdings Report must include the following
information:
- list of all securities accounts maintained with a broker,
dealer or bank;
- a list of all securities Beneficially Owned by the Access
Person with the exception of those exempt securities
outlined in Section III above ;
- the number of shares held in each security; and
- the principal amount (dollar value of initial investment) of
each security Beneficially Owned.
A sample copy is attached as Exhibit D.
2. Quarterly Securities Transaction Reports -
Each Access Person is responsible for reporting to the Legal
Department quarterly all securities purchased or sold in any
account in which the Access Person has direct or indirect
Beneficial Ownership. This quarterly reporting can be either in
the form of broker, dealer or bank statements, or in the form of
a Quarterly Securities Transaction Report, and must be received
by the Legal Department within 10 days after the end of each
calendar quarter. A form of Quarterly Transaction Report is sent
to all Access Persons by the designated paralegal (currently,
Ginny Johnson) in the Legal Department. If you are an Access
Person and did not receive a Quarterly Transaction Report, it is
your responsibility to obtain it from Legal.
The Quarterly Transaction Report must contain the following
information:
- the date of each transaction, the description and number of
shares, and the principal amount of each security involved;
- the nature of each transaction, that is, purchase, sale or
any other
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type of acquisition or disposition;
- the transaction price for each transaction; AND
- the name of the broker, dealer or bank through whom each
transaction was effected.
A sample copy is attached as Exhibit E.
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3. Annual Holdings Reports -
In addition to the Initial Holdings Report and Quarterly
Securities Transaction Reports, each Access Person is required to
file an Annual Holdings Report with the Legal Department. Such
reports must be filed within 30 days after December 31st.
The Annual Holdings Report must contain the following
information:
- A list of all securities accounts maintained with a broker,
dealer or bank;
- a list of all securities Beneficially Owned by the Access
Person with the exception of those exempt securities described in
Section III above;
- the number of shares held in each security; and
- the principal amount (dollar value of initial investment) of
each security Beneficially Owned.
A sample copy is attached as Exhibit F.
- -
- -
C. Securities Transaction Reports of "Non-interested Directors":
Non-interested Directors of a Fund need only report a personal
securities transaction if such Director, at the time of that
transaction, knew that during the 15-day period immediately preceding
or subsequent to the date of the transaction by the Director, such
security was purchased or sold by a Fund or was being considered for
purchase or sale by a Fund.
Non-interested Directors must report securities transactions meeting
the requirements of the paragraph above within 10 days after the end
of each
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calendar quarter. Such reports should be forwarded to the designated
paralegal (currently, Ginny Johnson) in the Legal Department for
review.
VIII.
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Sanctions for Violation of the Code:
Nuveen employees may be subject to sanctions for violations of the
specific provisions or the general principles provided by the Code.
Violations will be reviewed and sanctions determined by the General
Counsel and the Director of Compliance.
A. Sanctions which may be imposed include:
- formal warning;
- restriction of trading privileges;
- disgorgement of trading profits;
- fines; AND/OR
- suspension or termination of employment.
B. Sanction Factors
The factors that may be considered when determining the
appropriate sanctions include, but are not limited to:
- the harm to a Fund's or client's interest;
- the extent of unjust enrichment;
- the frequency of occurrence;
- the degree to which there is personal benefit from unique
knowledge obtained through employment with a Fund,
investment adviser or underwriter,
- the degree of perception of a conflict of interest;
- evidence of fraud, violation of law, or reckless disregard
of a regulatory requirement; and/or o the level of accurate,
honest and timely cooperation from the person subject to the
Code.
IX. Annual Certification of Compliance with the Code
As a condition of employment, all Access Persons will be asked to
certify annually that they:
- have read and understood the Code;
- agree that they are legally bound by it;
- have complied and will comply with its requirements; and
- have reported all personal securities transactions
required to be disclosed.
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A sample copy of the certification is attached as Exhibit G.
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X. Additional Procedures
A. The Legal Department shall review the reports, statements and
confirms received and compare them with the pre-clearance
authorization provided and report any trading or reporting
violations to fund management.
B. Fund management, at least once a year, must provide the fund
boards of directors with a written report that
1) describes issues that arose during the previous year under
the Code or procedures applicable to the Code, including,
but not limited to, information about material Code or
procedures violations and sanctions imposed in response to
those material violations and
2) certifies to the fund boards of directors that the funds and
their affiliated investment advisers and underwriters have
adopted procedures reasonably necessary to prevent their
employees from violating the Code.
C. This Code, a copy of employee and internal reports hereunder, and
a list of all persons required to make reports hereunder shall be
preserved with the records of the fund or investment adviser for
the periods required by Rule 17j-1(f) of the Investment Company
Act of 1940 or Rule 204-2 under the Investment Advisers Act of
1940.
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