File No. 811-8984
As filed with the Securities and Exchange Commission on May 22, 1995
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
(X) REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940
BLACKROCK ASSET INVESTORS
(Exact Name of Registrant as Specified in Charter)
345 PARK AVENUE
NEW YORK, NEW YORK 10154
(Address of Principal Executive Offices) (Zip Code)
(212) 754-5560
(Registrant's Telephone Number, including Area Code)
RALPH L. SCHLOSSTEIN, PRESIDENT
BLACKROCK ASSET INVESTORS
345 PARK AVENUE
NEW YORK, NEW YORK 10154
(Name and Address of Agent for Service)
Copies to:
RICHARD T. PRINS, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
BLACKROCK ASSET INVESTORS
FORM N-2
CROSS REFERENCE SHEET
Part A
Item No. Caption Prospectus Caption
1. Cover Page . . . . . . . . . Not Applicable
2. Inside Front and Outside Back
Cover Page . . . . . . . . . Not Applicable
3. Fee Table and Synopsis . . . Fee Table and
Synopsis; Expense
Information
4. Financial Highlights . . . . Not Applicable
5. Plan of Distribution . . . . Not Applicable
6. Selling Shareholders . . . . Not Applicable
7. Use of Proceeds . . . . . . . Not Applicable
8. General Description of the
Registrant . . . . . . . . . General Description of
the Registrant;
General; Investment
Objectives and
Policies; Risk
Factors; Other
Policies
9. Management . . . . . . . . . Management; General
10. Capital Stock, Long-Term
Debt, and Other Securities . Capital Stock, Long-
Term Debt, and Other
Securities; Capital
Stock; Long-Term Debt;
General; Taxes;
Outstanding
Securities; Securities
Ratings
11. Defaults and Arrears on
Senior Securities . . . . . . Not Applicable
12. Legal Proceedings . . . . . . Not Applicable
13. Table of Contents of
Statement of Additional
Information . . . . . . . . . Not Applicable
Part B Statement of
Item No. Additional Infor-
mation Caption
14. Cover Page . . . . . . . . . Not Applicable
15. Table of Contents . . . . . . Not Applicable
16. General Information and
History . . . . . . . . . . . General Description
of the Registrant
17. Investment Objective and
Policies . . . . . . . . . . Investment Objective
and Policies;
Investment
Restrictions
18. Management . . . . . . . . . Management of the
Trust; Officers and
Directors
19. Control Persons and Principal
Holders of Securities . . . . Control Persons;
Affiliated
Subscriptions
20. Investment Advisory and Other
Services . . . . . . . . . . Management of the
Trust
21. Brokerage Allocation and Other
Practices . . . . . . . . . . Management of the
Trust
22. Tax Status . . . . . . . . . Taxation of the
Trust
23. Financial Statements . . . . Not Applicable
Part C
Item No.
Information required to be included in Part C is set forth, under
the appropriate item so numbered, in Part C of this registration
statement.
PART A
ITEM 1. COVER PAGE
Not Applicable.
ITEM 2. INSIDE FRONT AND OUTSIDE BACK COVER PAGE
Not Applicable.
ITEM 3. FEE TABLE AND SYNOPSIS
1. Expense Information
Annual Expenses
Management Fees* . . . . . . . . . . . . 0.75%
Interest Payments on Borrowed Funds . . . 0.00%
Other Expenses. . . . . . . . . . . . . . 0.09%
Total Annual Expenses . . . . . . . . . . 0.84%
1 3 5 10
year years years years
Example
You would pay the following
expenses on a $1,000 investment, $9 $27 $47 $104
assuming a 5% annual return:
The purpose of the preceding table is to assist the investor
in understanding the various costs and expenses that an investor
in BlackRock Asset Investors (the "Trust") will bear directly or
indirectly, and do not include expenses of BlackRock Capital
Finance L.P. ("BCF") or other mortgage affiliates that are not
investment companies.
*The "Management Fee" is composed of two distinctive
components: (1) a fee for management (also referred to as a
Management Fee) and (2) a Performance Fee. The fee for
management is initially derived from 0.75% of aggregate capital
commitments rather than net assets and is reduced after the
capital commitment period to 0.50% of weighted average capital.
The "Performance Fee" is derived from a complex formula which is
summarized in Item 9 - Management, herein.
"Other Expenses" are based on estimated amounts for the
current fiscal year. The example above should not be considered
a representation of future expenses, which may be higher or
lower.
2. Not Applicable.
3. Not Applicable.
ITEM 4. FINANCIAL HIGHLIGHTS
Not Applicable.
ITEM 5. PLAN OF DISTRIBUTION
Not Applicable.
ITEM 6. SELLING SHAREHOLDERS
Not Applicable.
ITEM 7. USE OF PROCEEDS
Not Applicable.
ITEM 8. GENERAL DESCRIPTION OF THE REGISTRANT
8.1. General. The Trust was formed by its trustees as a
business trust under the laws of the State of Delaware on
December 21, 1994, and is a non-diversified closed-end management
investment company. Unless terminated earlier, the Trust shall
terminate on the seventh anniversary of the initial closing of a
private placement, which occurred on January 17, 1995, subject to
no more than two separate one-year extensions approved by holders
of a majority of the Trust's shares. The Trust has accepted
binding subscription agreements from three shareholders (each, a
"Shareholder" and collectively, the "Shareholders"). Each
Shareholder is a registered investment company that has itself
accepted subscription agreements from various investors and
invests solely in the Trust. The Trust has obtained approximately
$513 million in capital commitments ("Capital Commitments") in the
form of subscription agreements from the Shareholders, which in turn
have obtained such commitments from institutional and high net worth
investors.
The commitment period will expire on the third anniversary of the
initial closing; provided, however, that BlackRock Financial
Management, Inc. ("BlackRock" or the "Advisor"), upon approval by
holders of a majority of the Trust's shares, may extend the
commitment period for up to one additional year if (i) at least
50% of the Capital Commitments have been drawn down and invested
prior to such expiration date and (ii) the Advisor determines, in
its reasonable judgment, that sufficient opportunities exist to
deploy the unused Capital Commitments during the extension
period.
During the commitment period, the Trust will draw down capital
from time to time to make investments in accordance with its
investment objective and policies and to fund its expenses. Each
capital call effected by the Trust will be expressed as a pro
rata percentage of each Shareholder's undrawn Capital Commitment
to the Trust. Upon settlement of each such capital call and at
each subsequent closing to the extent that capital has been drawn
down on or prior to the date of such closing, the Trust will
issue shares at net asset value ("NAV") per share as calculated
within 48 hours prior to issuance (exclusive of Sundays and
holidays). Unfunded Capital Commitments may be called by the
Trust at any time during the commitment period in any amount not
less than $10 million in aggregate (unless in connection with a
subsequent closing) on not less than 14 days prior written notice
in accordance with the terms thereof. Investors who fail to pay
a capital call within 14 days after receiving a second notice
from the Fund will be subject to having their Shares repurchased,
retired and canceled by the Fund at 50% of the NAV of such
Shares, and the Fund will be subject to having that amount of its
shares of the Trust repurchased, retired and canceled by the
Trust at the same repurchase price as that paid by the Fund.
Other than in connection with the preceding sentence, the Trust
will not be permitted to purchase, redeem or otherwise acquire
its shares. The Trust may issue shares only to the Shareholders
and not to any other third parties.
8.2. Investment Objectives and Policies. Over its term,
the Trust expects to invest primarily in subordinated commercial
mortgage-backed securities ("CMBS"). The Trust will seek to
achieve high total returns primarily from its investments in
subordinated CMBS and other investment securities and from the
profits of its wholly-owned affiliate, BCF, and other mortgage
affiliates, which will engage primarily in the businesses of
acquiring, pooling and repackaging performing commercial mortgage
loans as CMBS for distribution to the Trust and an unaffiliated
coinvestor in commercial real estate (described below) and for
sale in the capital markets, and acquiring and working out
distressed commercial and residential mortgage loans. No
assurance can be given that the Trust will achieve its investment
objectives.
In addition, the Trust will utilize Treasury, mortgage,
Eurodollar and currency futures and options (on cash and futures)
and interest rate, currency and mortgage swaps, caps and floors
and other financial instruments, provided that the Trust may
utilize these instruments solely for the purpose of hedging the
investment risks of individual securities (including mortgage
loans) and the portfolio as a whole ("Hedging") and not for
speculative purposes, and will utilize financing agreements, such
as reverse repurchase agreements and dollar rolls, subject to the
leverage limitations set forth below. The Trust may also invest,
consistent with the Trust's investment objectives, in other
assets (as specified in Item 8.4, herein) or as approved by a
majority of the Board of Trustees of the Trust (the "Trustees")
and each of the Trustees who is not a director, officer or
employee of the Advisor and who has been designated by an
investor of one of the Shareholders (collectively, the "Investor
Trustees").
In addition, the Trust may acquire securities on a when-issued,
forward commitment or delayed delivery basis for settlement
beyond the time frame customary for securities of the type being
purchased and may make short sales solely for Hedging purposes.
Initially, the Trust will invest substantially all of its assets
in BCF, which will use its capital to acquire performing
commercial mortgage loans and to acquire and work out distressed
commercial and residential mortgage loans. BCF will then pool
and repackage its performing mortgage loans as mortgage-backed
securities, utilizing one or more bankruptcy remote securities
issuance affiliates as depositors for the issuance and sale of
such mortgage-backed securities. Contemporaneously with such
sales, BCF will distribute to the Trust any of the subordinated
classes of such mortgage-backed securities that the Trust desires
to retain in its investment portfolio; provided that BCF's
coinvestor in the underlying mortgage loans will receive its
proportional interest in such subordinated classes. The balance
of the securities issued will be sold to capital markets
participants through various underwriters and dealers or
otherwise liquidated. Pursuant to its investment policies,
neither the Trust nor BCF may hold "residual interests"
("Residuals") of real estate mortgage investment conduits
("REMICs"), as such terms are defined in Sections 860D and 860G
of the Internal Revenue Code of 1986, as amended (the "Code").
BCF will also distribute cash to the Trust in an amount
sufficient to enable the Trust to pay its expenses and any
distributions that the Trust is required to make in order to
maintain its federal tax status as a regulated investment company
(a "RIC"), with the effect of reducing the Trust's investment in
BCF. After the expiration of the commitment period, the Trust
will cease making new investments in BCF.
BCF will acquire performing commercial and distressed commercial
and residential real estate debt in bulk and on a wholesale basis
from mortgage originators and investors; provided, however, that
BCF may acquire real estate debt only with its coinvestor, as set
forth below. BCF will utilize leverage for the sole purposes of
financing acquisitions, paying expenses contemplated in its
budget and making distributions to the Trust and not for the
purpose of speculating on anticipated changes in interest rates.
None of BCF's leverage will be recourse to the Trust.
BCF expects to enter into strategic relationships with respect to
its commercial and distressed residential mortgage loan
investment activities. An element of each strategic relationship
is a coinvestment agreement which will ensure coincident economic
returns to the parties by providing that neither the Trust nor
BCF will be permitted to acquire any commercial or residential
mortgage asset (other than as permitted in Item 8.4, herein)
unless a coinvestor in the relevant asset class coinvests in such
asset. A coinvestor may be approved if the Trust and BCF
receive the approval of a majority of the Trustees and all of the
Investor Trustees. In addition, if the coinvestment agreement is
terminated, prior to acquiring any additional assets in the
relevant asset class, the Trust and BCF will be required to
obtain the approval of a majority of the Trustees and all of the
Investor Trustees with respect to the identity of and
arrangements with an alternative coinvestor. Affiliates of such
coinvestors may be affiliates of the Advisor and have minority
investments.
The Trust and BCF have obtained a strategic commitment in the
commercial real estate debt financing area from RMB Realty, Inc.
("Keystone") and is seeking such a strategic commitment in the
distressed residential real estate debt financing area from GE
Capital Mortgage Services, Inc. ("GECMSI"). Keystone has
substantial experience in acquiring and managing commercial
mortgage loans and will provide BCF and the Trust with loan
underwriting, work-out and information processing services that
complement BlackRock's capabilities. As coinvestors, it is
expected that Keystone will make a minimum 10% coinvestment in
each commercial mortgage acquired by BCF and the Trust and GECMSI
will, subject to receipt of applicable regulatory approvals, make
a minimum 10% coinvestment in each residential mortgage acquired
by BCF and the Trust. Additional strategic relationships are
being sought.
It is anticipated that certain servicing functions for commercial
mortgage loans and CMBS will be performed by Brazos Advisors, LLC
("Brazos"), a Keystone affiliate in which affiliates of the
Advisor will acquire a minority interest and will grant to each
equity investor certain appreciation rights.
8.3. Risk Factors. Investment in the Trust may involve
certain risk factors and special considerations, including those
arising from the Trust's investment securities, policies and
practices, from the Trust's investment strategy, and from the
structure of the Trust and restrictions applicable to its shares.
The Trust may invest without limit in CMBS, including
subordinated tranches of such securities, provided that the Trust
will not invest in any Residuals. In general, the risks
associated with an investment in CMBS include those arising from
investment in the underlying pool of commercial mortgage loans
and the risks of investing in fixed income instruments with
positive duration. As an investor in subordinated CMBS in
particular, the Trust will be the first in line among the debt
holders to bear the risk of loss from delinquencies and defaults
experienced on the collateral.
The value of the CMBS and other securities in which the Trust may
invest generally will have an inverse relationship with interest
rates. In addition, to the extent that the mortgage loans
underlying specific mortgage-backed securities are prepayable,
the value of such mortgage securities may be negatively affected
by increasing prepayments, which generally occur when interest
rates decline. Typically, commercial mortgage loans are not
prepayable or are subject to prepayment penalties, while the
principal on most residential mortgage loans generally may be
prepaid at any time without penalty.
The value of BCF's commercial mortgage loans and the Trust's CMBS
will be influenced by the rate of delinquencies and defaults
experienced on the commercial mortgage loans and by the severity
of loss incurred as a result of such defaults. The factors
influencing delinquencies, defaults and loss severity include (i)
economic and real estate market conditions, (ii) the term
structure of the mortgage loans, and (iii) any limits to legal
and financial recourse upon a default under the terms of the
mortgage loan.
An investor should recognize that the lower-rated or non-rated
CMBS in which the Trust will invest have speculative
characteristics and involve substantial financial risk. The
prices of lower credit quality securities, which are commonly
referred to as "junk bonds," have been found to be less sensitive
to interest rate changes than more highly rated investments, but
more sensitive to adverse economic conditions or individual
issuer developments. Securities rated lower than B by the rating
organizations, including securities rated as low as D, can be
regarded as having extremely poor prospects of ever attaining any
real investment standing and may be in default. Existing credit
supports and the owner's equity in the property may be
insufficient to protect the Trust from loss.
The Trust expects that most of its investments will be in
securities which are illiquid because they are subject to legal
or contractual restrictions on disposition or lack a secondary
trading market. Illiquid securities, such as subordinated CMBS,
may be difficult or require a substantial period of time to sell
and may be salable only at a discount from comparable, more
liquid investments. Illiquid securities may also be more
difficult to value.
Futures transactions, options, swaps and other negotiated
derivative transactions, as well as short sales, typically
involve one or more of the following risks: (i) imperfect
correlation between the performance and value of the instrument
and the value of the Trust's securities or other objective of the
Advisor; (ii) possible lack of a secondary market for closing out
a position in such instrument; (iii) losses resulting from
interest rate or other market movements not anticipated by the
Advisor; and (iv) the possible obligation to meet additional
margin or other payment requirements, all of which could worsen
the Trust's position.
The Trust may borrow up to 33 1/3% of its total assets (including
the amount borrowed). Without regard to the foregoing
limitation, the Trust may also borrow, if reasonably necessary,
on a short-term basis, up to an additional 5% of its total assets
for temporary purposes such as clearance of portfolio
transactions. The Trust may borrow from banking institutions,
through the capital markets or in the commercial paper markets.
The Trust expects to utilize leverage principally by entering
into reverse repurchase agreements in which it will sell
portfolio securities at a stated price and agree to repurchase
them at a later date at a price reflecting an imputed interest
cost. The Trust may also use dollar rolls and other investment
techniques that have similar leveraging effects to reverse
repurchase agreements. These leveraging techniques as well as
when-issued, delayed delivery and forward purchase commitments,
will be treated as "senior securities" subject to the Trust's
borrowing restrictions, to the extent that the Trust's potential
obligations are not covered in accordance with requirements
imposed by the Securities and Exchange Commission (the "SEC")
under the Investment Company Act of 1940 (the "1940 Act").
Although limited, the use of leverage by the Trust creates
certain risks. In particular, if the Trust leverages on a short-
term basis and invests the proceeds in longer-term securities, an
increase in short-term interest rates may reduce, eliminate or
reverse the interest rate differential usually available between
short-term and long-term rates, thereby reducing the Trust's net
investment income or causing loss. Conversely, an increase in
long-term interest rates may reduce the value of the Trust's
leveraged long-term securities by more than the yield advantage
from the leverage and may cause substantial loss in the Trust's
NAV. Leverage also magnifies gains and losses attributable to
other investment policies and practices, such as investing in
lower credit quality securities. The Trust will only borrow or
use leverage in accordance with its investment policies and when
the Advisor reasonably believes that such activities will benefit
the Trust.
The risks described above are generally applicable to the
operations of both the Trust and BCF. Additional risks
associated with BCF include: (1) operation on a significantly
more leveraged basis than the Trust, which will create additional
exposure to increases in interest rates; (2) investment of a
portion of its assets in mortgage loans that are in default or
require restructuring before they can be repackaged into mortgage
securities or otherwise liquidated, potentially requiring
substantial time and expense or additional equity investments in
the underlying property by third parties and may result in
economic loss; (3) the ability of BCF to repackage its mortgage
loans profitably depending on not only on the terms of such
loans, but also on the interest of investors in such mortgage
securities; (4) BCF's ability to find sufficient mortgage loans
with suitable investment characteristics in a competitive market;
(5) the staff, and the ability of BCF to attract and retain
qualified personnel; and (6) BCF's ability to attract and retain
qualified coinvestors.
As a result of concentrating its investments in commercial real
estate debt, the Trust will be a non-diversified investment
company and, therefore, more susceptible than a more widely
diversified fund to any single economic, political or regulatory
occurrence. In particular, developments in the commercial real
estate debt financing and mortgage securitization industries may
affect the value of BCF's commercial mortgage loan holdings and
the Trust's CMBS investments, as well as the ability of the Trust
and BCF to conduct their operations. Moreover, shares of the
Trust may be transferred only with the prior written consent of
the Trust. There will be no trading market for the shares and
investors may be required to bear the economic risks of their
investment until termination of the Trust. Neither the Trust nor
BCF has previously conducted any business or identified specific
investments, although principals of the Advisor and BCF's
strategic parties have managed businesses similar to those of the
Trust and BCF. The businesses of the Trust and BCF rely on the
services of key personnel of the Advisor. There can be no
assurance that the Advisor will be able to retain its key
personnel. The formula pursuant to which the Performance Fee is
calculated may create an incentive to make investments that are
more risky or speculative than would be the case in the absence
of such a formula. In certain circumstances, any Investor
Trustee may veto the ability of the Trust and BCF to continue
investment operations even if the other Trustees and investors
would prefer to conduct operations.
8.4. Other Policies. Consistent with its investment
objectives, policies and restrictions, the Trust may also invest
in the following types of assets: (1) U.S. Government securities
that have an effective duration at the time of purchase no
greater than the effective duration of the two-year U.S. Treasury
note, including U.S. Treasury securities and securities issued by
agencies or instrumentalities of the U.S. Government; (2) asset-
backed securities that have an effective duration at the time of
purchase no greater than the effective duration of the two-year
U.S. Treasury note and that are rated in one of the four highest
rating categories by a nationally recognized rating agency; (3)
corporate debt securities that have an effective duration at the
time of purchase no greater than the effective duration of the
two-year U.S. Treasury note and that are rated in one of the four
highest rating categories by a nationally recognized rating
agency; and (4) short-term investments that have a remaining term
to maturity at the time of purchase of no greater than one year,
including commercial paper rated not lower than A-1 P-1 and other
money market instruments of similar credit standing, non-
contingent interest bearing deposits in banks chartered by or
within the United States with long-term ratings at least A-, and
money market mutual funds.
8.5. Not Applicable.
8.6. Not Applicable.
ITEM 9. MANAGEMENT
(1) General.
(a) Board of Trustees. The Trustees set broad policies for
the Trust and choose its officers. The Advisor manages the day-
to-day operations of the Trust and supplies officers to the Trust
for this purpose. The Board of Trustees of the Trust shall
consist at all times of no less than seven (7) Trustees, no more
than 60% of whom are "interested persons" of the Trust as defined
in Section 2(a)(19) of the 1940 Act.
(b) Investment Advisor. The Advisor, BlackRock Financial
Management, Inc., is located at 345 Park Avenue, New York, New
York 10154. The Advisor currently serves as the investment
advisor to institutional and individual fixed income investors in
the U.S. and overseas through a number of funds and separately
managed accounts with combined total assets in excess of $27
billion.
Pursuant to an Investment Advisory Agreement (the "Advisory
Agreement"), the Trust has retained the Advisor to manage the
investment of its assets, to provide such investment research,
advice and supervision, in conformity with its investment
objective and policies, as may be necessary for the operations of
the Trust and to supervise the operations of BCF and any other
mortgage affiliates utilized by the Trust and/or BCF. The
Advisory Agreement was approved by the Trustees on December 21,
1994 and by the Trust's sole shareholder on March 29, 1995.
On June 16, 1994, the Advisor's predecessor's partners entered
into a definitive agreement to sell all of the interests in such
predecessor to PNC Bank, N.A., the eleventh largest bank in the
U.S. The transaction closed on February 28, 1995. In connection
with the acquisition, all of the Advisor's Managing Directors
signed long-term employment contracts with PNC Bank, N.A. and
continue to be responsible for managing the day-to-day affairs of
the Advisor, including carrying out its responsibilities with
respect to the Trust and its affiliates.
As compensation for its services rendered to the Trust, the
Advisor will be entitled to receive a Management Fee directly
from the Trust. The Management Fee payable by the Trust during
and after the commitment period shall be calculated and paid
semiannually in arrears, commencing April 30, 1995, and will be
equal to the amount shown below.
During Commitment Period After Commitment Period
% of aggregate Capital % of weighted average capital
Commitments invested during the relevant period
0.75% 0.50%
In addition to its Management Fee, the Trust will pay to the
Advisor as of the first anniversary of the commencement of the
Trust's operations, as of each October 31 thereafter and as of
the termination date, a Performance Fee. The following paragraph
summarizes the provisions of the Performance Fee, which are set
forth in greater detail in the Advisory Agreement. On each
payment date prior to the termination date that is (i) prior to
the final expiration of the commitment period, or (ii) prior to
the time at which aggregate distributions are equal to or greater
than the sum of (A) the amount of Capital Commitments drawn down
by the Trust at the final expiration of the commitment period,
plus (B) the preferred return as of the relevant payment date,
the Advisor will be entitled to receive a Performance Fee from
the Trust equal to the lesser of (x) 25% of the Base Performance
Figure as of the relevant payment date and (y) 50% of the
cumulative amount of Management Fees paid or payable by the Trust
from inception through the relevant payment date, minus the
cumulative amount of Performance Fees paid with respect to prior
payment dates.
On each other payment date prior to the termination date, the
Advisor will be entitled to receive a Performance Fee from the
Trust equal to 50% of the Base Performance Figure (as defined
below) as of the relevant payment date, minus the cumulative
amount of Performance Fees paid with respect to prior Payment
Dates.
On the payment date that is as of the termination date, the
Advisor will be entitled to receive a Performance Fee from the
Trust equal to (i) the Base Performance Figure as of the
termination date minus the cumulative amount of Performance Fees
paid with respect to prior payment dates, plus (ii) the True-Up
(as defined below); provided that nothing herein shall be deemed
to obligate the Advisor to make any payment to the Trust as of
the termination date in respect of the Performance Fee other than
as described below under the definition of the True-Up.
The "Base Performance Figure" as of each payment date will be
equal to, if the annualized cumulative return as of the relevant
payment date is (i) less than or equal to 10%, $0; (ii) greater
than 10% but less than or equal to 20%, 40% of the remainder of
(A) the lesser of (x) the product of two and the preferred return
as of the relevant payment date and (y) the cumulative net
distributions as of the relevant payment date, minus (B) the
preferred return as of the relevant payment date; and (iii)
greater than 20%, the product of 20% and the cumulative net
distributions as of the relevant payment date.
The "True-Up" will be equal to the sum of, for all preceding
payment dates, the product of (i) 3-month LIBOR (as quoted on
Reuters) as of the relevant payment date, (ii) the Base
Performance Figure as of the relevant payment date, minus the
cumulative amount of Performance Fees paid as of that payment
date, and (iii) the number of days from the relevant payment date
to the next succeeding payment date (assuming 12 30-day months
per year), divided by 360; provided that, (A) if the difference
described in clause (ii) as of any payment date is a negative
number, the product of clauses (i), (ii) and (iii) with respect
to that payment date shall be taken into account as a negative
adjustment to the True-Up, and (B) if the True-Up is a negative
dollar amount, the Advisor shall pay (either in cash or by
waiving fees and expenses then otherwise due to the Advisor) such
amount to the Trust, subject to a maximum payment by the Advisor
equal to the aggregate Management Fees paid or payable to the
Advisor by the Trust with respect to the immediately preceding 12
months.
(c) Portfolio Management. The Trust's portfolio manager
will be Wesley R. Edens, who managed the commercial and non-
agency residential mortgage-backed securities businesses of
Lehman Brothers Inc. prior to joining the Advisor in October
1993.
(d) Administration Agreement. Under an Administration
Agreement with the Trust, State Street Bank & Trust Company
("State Street"), 1776 Heritage Drive, North Quincy, MA,
administers the Trust's corporate affairs subject to the
supervision of the Trustees and furnishes the Trust with office
facilities and ordinary clerical and bookkeeping services.
(e) Custodian, Transfer Agent, Dividend Disbursing Agent
and Registrar. State Street will serve as custodian for the
Trust's portfolio securities and cash and as Transfer Agent,
Dividend Disbursing Agent and Registrar for the shares, and in
those capacities, maintains certain financial and accounting
books and records pursuant to agreements with the Trust. The
Trust may also periodically enter into arrangements with other
qualified custodians with respect to certain types of securities
or other transactions. Transfer, dividend disbursing and
registrar functions have been delegated to and are being
performed by Boston Financial Data Services, Inc., an affiliate
of State Street.
(f) Expenses. The Advisory Agreement provides, among other
things, that the Advisor will bear all expenses of its employees
and overhead incurred in connection with its duties under the
Advisory Agreement, and the expense of services rendered by any
employee of the Advisor in such employee's capacity as a Trustee
or officer of the Trust.
The Advisory Agreement provides that the Trust, BCF and each of
the other mortgage affiliates will be responsible for paying all
of the expenses of their operations as outlined below. In the
case of the Trust, these expenses consist of: (a) the Management
Fee and the Performance Fee; (b) the fees and expenses of
custodians, pricing services, accounting systems, accounting
agents and auditors, external administrators and transfer and
dividend disbursement agents, counsel, Trustees, mortgage loan
servicers and mortgage pool trustees, insurance, taxes, any
required filings and registrations, proxy expenses,
communications to shareholders, SEC examinations, capital
drawdowns, and registered agents; (c) portfolio transaction
expenses, interest and, to the extent borne by the Trust and not
by BCF or the other mortgage affiliates, reasonable costs
associated with the establishment of the other mortgage
affiliates, outside consultants engaged to assist in the physical
evaluation of mortgage loan documentation and of the properties
underlying such mortgage loans and in processing data with
respect to the foregoing, and work-out of distressed portfolio
investments; (d) litigation expenses (provided that in the case
of litigation expenses of indemnified parties, such expenses will
be borne by the Trust only to the extent provided for under the
terms of written indemnifications provided to such parties by the
Trust; and (e) such other expenses as are approved from time to
time by a majority of the Trustees and a majority of the Investor
Trustees. Notwithstanding anything to the contrary, losses
incurred on the Trust's investments, whether classified as
expenses or otherwise, shall be borne by the Trust.
In the case of BCF and each of the other mortgage affiliates,
these expenses consist of the following, subject to and in
accordance with the approved budget in effect from time to time:
personnel compensation and benefits, the costs associated with
recruiting, training, travel and entertainment, communications,
publications, professional dues, research and information
services, software and analytical systems, supplies, rent,
furniture, computer equipment and other fixed assets, the fees
and expenses of custodians, pricing services, accounting systems,
accounting agents and auditors, external administrators, counsel,
mortgage loans servicers and mortgage pool trustees, insurance,
taxes, any required filings and registrations, outside
consultants engaged to assist in the physical evaluation of
mortgage loan documentation and of the properties underlying such
mortgage loans and in processing data with respect to the
foregoing; interest and other financing costs, portfolio
transaction expenses (including, without limitation, the costs of
acquiring and disposing of mortgage loans and other assets and
the costs of structuring, issuing and offering CMBS), the costs
of incomplete transactions, litigation expenses (provided that in
the case of litigation expenses of indemnified parties, such
expenses will be borne by BCF and each of the other mortgage
affiliates only to the extent provided for under the terms of
written indemnifications provided to such parties by BCF or the
other mortgage affiliates, as the case may be), and such other
expenses as are contemplated in BCF's approved budget.
Notwithstanding anything to the contrary, losses incurred on
BCF's or the other mortgage affiliates' investments, whether
classified as expenses or otherwise, shall be borne by BCF and
the other mortgage affiliates, as the case may be.
At the beginning of each year, the Advisor will submit a budget
to the Compensation Committee of the Trust's Board, with respect
to which each Investor Trustee shall be offered membership. The
budget will consist of an annual estimate of the operating
expenses in the coming year as well as a salary and estimated
bonus for each employee of BCF. Employees of BCF will be
compensated in a manner and amount consistent with the market for
comparable professionals, including the payment of a base salary
and cash bonus. At year-end, the Advisor will submit recommended
bonuses for employees to the Compensation Committee that reflect
individual employee performance, aggregate BCF performance as
well as prevailing market employment conditions. The budget as
well as the bonus pool must be approved by a majority of the
Compensation Committee. No director, officer or employee of the
Advisor or the placement agent will receive compensation from
BCF. Pursuant to the Advisory Agreement, the Advisor will assume
all other costs and expenses of managing the Trust, as well as
supervising the management of BCF and the other mortgage
affiliates.
In addition to the expenses listed above, the Trust and BCF will
bear their respective proportion of the organizational and
offering expenses of the Trust and BCF up to a maximum amount of
$750,000 in the aggregate. The Advisor will be responsible for
any of these expenses in excess of that amount.
ITEM 10. CAPITAL STOCK, LONG-TERM DEBT, AND OTHER SECURITIES
1. Capital Stock. The Trust is authorized to issue up to
200 million shares of beneficial interest (each, a "Share," and
collectively, the "Shares"). The Shares have no preemptive,
conversion, exchange or redemption rights. Each Share has equal
voting, dividend, distribution and liquidation rights.
Shareholders of the Trust have cumulative voting rights on the
election of Trustees and are entitled to one vote per share on
all other matters subject to shareholder approval. When issued
against payment therefor, the Shares will be fully paid and non-
assessable. No person has any liability for liabilities of the
Trust by reason of owning Shares, although each person that
subscribes for Shares is liable for the full amount of such
subscription in accordance with and subject to the terms of the
related subscription agreement.
2. Long-Term Debt. None.
3. General. None.
4. Taxes. The Trust and the Advisor will use their
respective best efforts to ensure that the Trust qualifies each
year and elects to be treated as a RIC for U.S. federal income
tax purposes. In order to so qualify, the Trust must satisfy
certain tests regarding the nature of its income and assets.
Since, on the foregoing basis, the Trust will qualify as a RIC
and will distribute to its shareholders at least 90% of its net
investment income, the Trust will not be subject to federal
income tax on the income so distributed. However, the Trust will
be subject to corporate income tax on any undistributed income.
In addition, the Trust will be subject to a non-deductible 4%
excise tax on the amount by which the income it distributes in
any calendar year is less than a required amount. To the extent
that the Trust realizes net capital gains, the Trust intends to
distribute such gains at least annually and designate them as
capital gain dividends. Capital gain dividends are taxable as
long-term capital gains regardless of how long the Shares have
been held. Dividends distributed by the Trust will not be
eligible for the dividends received deduction in the hands of
corporate shareholders.
5. Outstanding Securities.
Amount
Outstanding
Exclusive of
Amount Shown
Amount Held by Under
Amount Registrant or Previous Column
Title of Class Authorized for its Account
Shares of 200 million None 21,000 shares*
Beneficial shares
Interest
6. Securities Ratings. None.
ITEM 11. DEFAULTS AND ARREARS ON SENIOR SECURITIES
1. Not Applicable.
2. Not Applicable.
ITEM 12. LEGAL PROCEEDINGS
Not Applicable.
ITEM 13. TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL
INFORMATION
Not Applicable.
___________________
*In addition, the Trust has outstanding subscription agreements
pursuant to which its shareholders are obligated, subject to the
terms thereof, to acquire up to an additional $492,023,000 in
Shares at net asset value.
PART B
ITEM 14. COVER PAGE
Not Applicable.
ITEM 15. TABLE OF CONTENTS
Not Applicable.
ITEM 16. GENERAL INFORMATION AND HISTORY
The Trust has no history. See Item 8 - General Description of
the Registrant, for general information.
ITEM 17. INVESTMENT OBJECTIVE AND POLICIES
Additional information regarding the Trust's permitted investment
securities is set forth below. See Item 8 - General Description
of the Registrant, for additional information.
CMBS are generally multiple class debt or pass-through securities
backed by a mortgage loan or pool of mortgage loans secured by
commercial property. Assets underlying CMBS may relate to only a
few properties or to a single property. The commercial mortgage
loans that underlie CMBS generally are not amortizing or fully
amortizing. At their maturity date, repayment of the remaining
principal balance or "balloon" is due and is repaid through the
attainment of an additional loan or sale of the property. CMBS
have been issued in public and private transactions by a variety
of public and private issuers. A variety of structures are
available for CMBS, although the senior/subordinated structure
that BCF expects to utilize is used most frequently. In general,
CMBS are structured such that a number of classes of securities
are created with varying degrees of credit exposure, prepayment
exposure and potential total return. This is achieved primarily
by allocating principal losses on the underlying commercial
mortgage loans to the most junior class of the CMBS outstanding,
while allocating principal prepayments to the most senior class
outstanding. Other protections, which may benefit all of the
classes, including the subordinated classes in which the Trust
intends to invest, may include issuer guarantees, reserve funds,
cross-collateralization, over-collateralization, and the equity
of the owners of the underlying properties. As a result of the
stratification of the credit risk on the underlying commercial
mortgage loans, subordinated classes are subject to a
substantially greater risk of nonpayment than are senior classes
of CMBS. While prioritization of cash flows serves to enhance
the credit protection of the senior classes of mortgage-backed
securities, it also results in more cash flow and average life
stability for the subordinated classes.
The Trust may also invest in residential mortgage-backed
securities, including mortgage-backed securities issued or
guaranteed by the U.S. government or one of its agencies or
instrumentalities or by private issuers and representing
participation interests in pools of single family residential
mortgage loans originated by private mortgage originators.
Residential mortgage-backed securities have been issued using a
variety of structures, including senior/subordinated structures.
While single family mortgage loans do not typically have
prepayment penalties or restrictions, as commercial mortgage
loans often do, non-agency residential mortgage-backed securities
are often structured so that subordinated classes may be locked
out of prepayments for a period of time. However, in a period of
extremely rapid prepayments, during which senior classes may be
retired faster than expected, the subordinated classes may
receive unscheduled payments of principal and would have average
lives that, while longer than the average lives of the senior
classes, would be shorter than originally expected, which could
negatively affect the value of particular subordinated classes of
non-agency residential mortgage-backed securities.
Hedging instruments, including the use of futures, options,
swaps, caps and floors, present certain risks. With respect to
Hedging, the variable degree of correlation between price
movements of Hedging instruments and price movements in the
position being hedged creates the possibility that losses on the
hedge may be greater than gains in the value of the Trust's
position. In addition, certain instruments and markets may not
be liquid in all circumstances. As a result, in volatile
markets, the Trust may not be able to close out a transaction
without incurring losses substantially greater than the initial
deposit. Although the use of these instruments for Hedging
should tend to minimize the risk of loss due to a decline in the
value of the position, at the same time they tend to limit any
potential gain which might result from an increase in the value
of such position. The ability of the Trust to successfully
utilize these Hedging techniques will depend on the Advisor's
ability to predict pertinent market movements and sufficient
correlations, which cannot be assured. Finally, the daily
deposit requirements in futures contracts that the Trust has sold
create an ongoing greater potential financial risk than do
options transactions, where the exposure is limited to the cost
of the initial premium. Losses due to the use of Hedging
techniques will reduce NAV.
The Trust may purchase and sell put and call options on
securities and indices solely for Hedging purposes. The Trust
may also purchase and sell options on stock indices ("index
options"). The Trust is authorized to purchase and sell exchange
listed options and over-the-counter options ("OTC Options") which
are privately negotiated with the counterparty solely for Hedging
purposes. Listed options are issued by the Options Clearing
Corporation ("OCC") which guarantees the performance of the
obligations of the parties to such options. The Trust's ability
to close out its position as a purchaser or seller of an
exchange-listed put or call option is dependent upon the
existence of a liquid secondary market on option exchanges. The
hours of trading for options on debt securities may not conform
to the hours during which the underlying securities are traded.
To the extent that the option markets close before the markets
for the underlying securities, significant price and rate
movements can take place in the underlying markets that cannot be
reflected in the option markets. In addition, the Trust may sell
financial futures contracts or purchase put and call options on
such futures solely for Hedging purposes. At the time a futures
contract is purchased or sold, the Trust must allocate cash or
securities as a deposit payment ("initial margin"). It is
expected that the initial margin that the Trust will pay may
range from approximately 1% to approximately 5% of the value of
the securities or commodities underlying the contract. In
certain circumstances, however, such as periods of high
volatility, the Trust may be required by an exchange to increase
the level of its initial margin payment. Additionally, initial
margin requirements may be increased generally in the future by
regulatory action. The Trust's use of futures and options on
futures will in all cases be consistent with applicable
regulatory requirements and in particular the rules and
regulations of the CFTC. In accordance with such regulations and
the Trust's investment policies, the Trust currently may enter
into such transactions without limit for bona fide Hedging
purposes.
Futures contracts, interest rate swaps, caps, floors and collars,
short sales, reverse repurchase agreements and dollar rolls, and
listed options on securities, indices and futures contracts sold
by the Trust are generally subject to segregation and coverage
requirements of either the CFTC or the SEC, with the result that,
if the Trust does not hold the security or futures contract
underlying the instrument, the Trust may be required to segregate
on an ongoing basis with its custodian, cash, U.S. government
securities, or other liquid high grade debt obligations in an
amount at least equal to the Trust's obligations with respect to
such instruments. Such amounts fluctuate as the obligations
increase or decrease. The segregation requirement can result in
the Trust maintaining securities positions it would otherwise
liquidate, segregating assets at a time when it might be
disadvantageous to do so or otherwise restrict portfolio
management.
The Trust may make short sales of securities solely for Hedging
purposes. Short sales will be made in compliance with applicable
regulatory requirements and will be fully collateralized at all
times. In conjunction with such sales, the Trust may have to pay
a fee to borrow particular securities and is often obligated to
pay over any payments received on such borrowed securities. The
Trust's obligation to replace the borrowed security will be
secured by collateral deposited with the broker dealer, usually
cash, U.S. government securities or other high grade liquid
securities. The Trust will also be required to segregate similar
collateral with its custodian to the extent, if any, necessary so
that the aggregate collateral value is at all times at least
equal to the current market value of the security sold short.
Although the Trust's gain is limited to the price at which it
sold the security short, its potential loss is theoretically
unlimited. The Trust will not make a short sale if, after giving
effect to such sale, the market value of all securities sold
short exceeds 25% of the value of its total assets and the
Trust's aggregate short sales of a particular class of securities
exceeds 25% of the outstanding securities of that class. The
Trust may also make short sales "against the box" without respect
to such limitations. In this type of short sale, at the time of
the sale, the Trust owns or has the immediate and unconditional
right to acquire at no additional cost the identical security.
The Trust may enter into interest rate swaps and the purchase or
sale of interest rate caps and floors. The Trust will enter into
these transactions solely for Hedging purposes. The Trust will
only use these transactions as a hedge or for duration or risk
management. The Trust may enter into interest rate swaps, caps
and floors on either an asset-based or liability-based basis, and
will usually enter into interest rate swaps on a net basis, i.e.,
the two payment streams are netted out, with the Trust receiving
or paying, as the case may be, only the net amount of the two
payments on the payment dates. The Trust will accrue the net
amount of the excess, if any, of the Trust's obligations over its
entitlements with respect to each interest rate swap on a daily
basis and will segregate with a custodian an amount of cash or
liquid high grade securities having an aggregate NAV at all times
at least equal to the accrued excess. The Trust will not enter
into any interest rate swap, cap or floor transaction unless the
unsecured senior debt or the claims-paying ability of the other
party thereto is rated investment grade by at least one
nationally recognized statistical rating organization at the time
of entering into such transaction.
The Trust may invest temporarily, without limitation, in
repurchase agreements, which are agreements pursuant to which
securities are acquired by the Trust from a third party with the
understanding that they will be repurchased by the seller at a
fixed price on an agreed date. These agreements may be made with
respect to any of the portfolio securities in which the Trust is
authorized to invest. Repurchase agreements may be characterized
as loans secured by the underlying securities and will be entered
into in accordance with the requirements of the SEC. The Trust
may enter into repurchase agreements with (i) member banks of the
Federal Reserve System having total assets in excess of $500
million and (ii) securities dealers, provided that such banks or
dealers meet the creditworthiness standards established by the
Trustees ("Qualified Institutions"). The Advisor will monitor
the continued creditworthiness of Qualified Institutions, subject
to the supervision of the Trustees. The resale price reflects
the purchase price plus an agreed upon market rate of interest
which is unrelated to the coupon rate or date of maturity of the
purchased security. The collateral is marked to market daily.
Such agreements permit the Trust to keep all its assets earning
interest while retaining "overnight" flexibility in pursuit of
investments of a longer-term nature.
The Trust may also purchase securities on a "when-issued" basis
and may purchase or sell securities on a "forward commitment"
basis. When such transactions are negotiated, the price, which
is generally expressed in yield terms, is fixed at the time the
commitment is made, but delivery and payment for the securities
take place at a later date. When-issued securities and forward
commitments may be sold prior to the settlement date, but the
Trust will enter into when-issued and forward commitments only
with the intention of actually receiving or delivering the
securities, as the case may be. If the Trust disposes of the
right to acquire a when-issued security prior to its acquisition
or disposes of its right to deliver or receive against a forward
commitment, it can incur a gain or loss. At the time the Trust
enters into a transaction on a when-issued or forward commitment
basis, it will segregate with its custodian cash or other liquid
debt securities with a value not less than the value of the
when-issued or forward commitment securities or will treat the
portion not segregated as leverage. The value of these assets
will be monitored daily to ensure that their marked to market
value will at all times equal or exceed the corresponding
obligations of the Trust.
The Trust may purchase certain restricted securities ("Rule 144A
securities") eligible for sale to qualified institutional buyers
as contemplated by Rule 144A under the Securities Act of 1933
(the "1933 Act"). Rule 144A provides an exemption from the
registration requirements of the 1933 Act for the resale of
certain restricted securities to qualified institutional buyers.
No assurance can be given that a liquid market for Rule 144A
securities will develop or be maintained. The Trust's holdings
of Rule 144A securities which are liquid securities will not be
subject to its limitation on investment in illiquid securities.
The Trustees will adopt policies and procedures for the purpose
of determining whether securities that are eligible for resale
under Rule 144A are liquid or illiquid and will periodically
review the Trust's purchases and sales of Rule 144A securities.
U.S. Government securities include U.S. Treasury bills, notes and
bonds, and securities issued by agencies and instrumentalities of
the U.S. Government such as the Federal Housing Administration
(FHA), the Government National Mortgage Association (GNMA), the
Department of Housing and Urban Development, the Export-Import
Bank, the Farmers Home Administration (FmHA), the General
Services Administration, the Maritime Administration and the
Small Business Administration. Neither the value nor the yield
of the Trust's shares or of the U.S. Government securities in
which the Trust may invest are guaranteed by the U.S. Government.
Such values and yield will fluctuate with changes in prevailing
interest rates and other factors. Generally, as prevailing
interest rates rise, the value of any U.S. Government security
held by the Trust will fall. Such securities with longer
maturities generally tend to produce higher yields and are
subject to greater market fluctuation as a result of changes in
interest rates than debt securities with shorter maturities.
The Trust may invest in asset-backed securities. Various types
of assets, primarily automobile and credit card receivables, are
being securitized in structures similar to the structures used
for mortgage-backed securities described above. In general, the
collateral supporting asset-backed securities is of shorter
maturity than mortgage loans and is less likely to experience
substantial prepayments. Asset-backed securities do not have the
benefit of the same security interest in the related collateral
as mortgage-backed securities.
The Trust may invest in corporate debt securities, which include
securities issued by corporations and other entities, including
bonds and debentures, notes, certificates of deposit, banker's
acceptances, and commercial paper. These securities may have
adjustable or fixed rates of interest and may be secured or
unsecured by assets of the issuer or another party. Adjustable
rate corporate debt securities may have interest rate caps and
floors but such corporate debt securities are not subject to
prepayment risk other than through contractual call provisions,
which generally impose a penalty for prepayment during all or a
portion of the period such securities are outstanding. Fixed
rate debt securities may also be subject to call provisions.
Corporate debt securities are subject to the bankruptcy risk of
the issuer.
ITEM 18. MANAGEMENT
The following individuals are the officers and Trustees of the
Trust. A brief statement of their present positions and
principal occupations during the past five years is also
provided.
Position(s)
Name and Business Held with Principal Occupation(s)
Address Registrant During Past Five Years
Laurence D. Fink1,2 Chairman of Chairman and Director,
BlackRock Financial the Board of BlackRock
Management, Inc. Trustees
345 Park Avenue
New York, NY 10154
Wesley R. Edens1,2 Trustee and Managing Director,
BlackRock Financial Chief BlackRock; formerly
Management, Inc. Operating Managing Director, Lehman
345 Park Avenue Officer Brothers Inc. (investment
New York, NY 10154 banking)
John C. Deterding2,3 Trustee President, Deterding
Deterding Associates Associates (real estate
107 N. Waterview consultant), formerly,
Richardson, TX 75080 Senior Vice President and
General Manager, Commercial
Real Estate division,
General Electric Capital
Corporation; Chairman,
General Electric Real
Estate Investment Company,
and Director, GECC
Financial Corporation
Philip Halpern2,3 Trustee Chief Investment Officer,
Washington State Washington State Investment
Investment Board Board; formerly, Managing
2424 Heritage Court SW Director - Benefit
P.O. Box 40916 Investments, J.C. Penney
Olympia, WA 98504-0916 Corporation and Chief
Investment Officer, Public
Employee Retirement System
of Idaho
Michael E. Klehm2,3 Trustee Chief Investment Officer-
General Motors Motors Insurance
Investment Management Corporation, General Motors
Corporation Investment Management
767 Fifth Avenue Corporation; formerly,
New York, NY 10153 Director, Private Placement
Investments, General Motors
Investment Management
Corporation; formerly,
General Director, New York
Treasurer's Office, General
Motors Corporation
Donald G. Drapkin Trustee Vice Chairman and Director,
Revlon Group Inc. McAndrews & Forbes Holdings
35 East 62nd Street Inc. (diversified holding
New York, NY 10021 company), Revlon Group
Inc., Andrews Group Inc.,
Director, Revlon, Inc.,
Marvel Entertainment Group
Inc., The Coleman Company
(outdoor products)
James Grosfeld Trustee Consultant/Investor;
20500 Civil Center formerly, Chairman and
Drive, Suite 3000 Chief Executive Officer of
Southfield, MI 48076 PHM Corporation (home
building, mortgage banking
and finance)
Laurence E. Hirsch Trustee Chairman and CEO, Centex
Centex Corporation Corporation (construction
3333 Lee Parkway products)
Dallas, TX 75219
Kendrick R. Wilson, Trustee General Partner, Lazard
III Freres & Co.; formerly,
Lazard Freres & Co. President, Ranieri Wilson &
One Rockefeller Plaza Co. (investment banking)
33rd Floor
New York, NY 10022
Ralph. L. Schlosstein President President and Director,
BlackRock Financial BlackRock
Management, Inc.
345 Park Avenue
New York, NY 10154
Susan L. Wagner Secretary Managing Director,
BlackRock Financial BlackRock
Management, Inc.
345 Park Avenue
New York, NY 10154
Henry Gabbay Treasurer Chief Operating Officer and
BlackRock Financial Managing Director,
Management, Inc. BlackRock
345 Park Avenue
New York, NY 10154
John R. Herbert Vice President Principal, BlackRock;
BlackRock Financial formerly, Principal, Victor
Management, Inc. Capital Group (real estate
345 Park Avenue advisor)
New York, NY 10154
Robert I. Kauffman Vice President Principal, BlackRock;
BlackRock Financial formerly, Executive
Management, Inc. Director, Lehman Brothers
345 Park Avenue International (Europe) and
New York, NY 10154 Vice President, Lehman
Brothers
Erik P. Nygaard Vice President Principal, BlackRock;
BlackRock Financial formerly, Director, Nomura
Management, Inc. Securities International
345 Park Avenue and Vice President, Lehman
New York, NY 10154 Brothers
James Kong Asst. Principal, BlackRock;
BlackRock Financial Treasurer
Management, Inc.
345 Park Avenue
New York, NY 10154
J. Robert Small Asst. Principal and Controller,
BlackRock Financial Secretary BlackRock; formerly, Vice
Management, Inc. President, Blackstone Group
345 Park Avenue Holdings
New York, NY 10154
1 Trustees who are directors, officers or employees of the
Advisor
2 Trustees who may be deemed to be "interested persons" of
the Trust
3 Investor Trustee
Each Trustee (other than any Trustee who is a partner, director,
officer or employee of the Advisor or any affiliate thereof or
successor thereto) shall receive the following amounts for
serving as a Trustee: (i) $6,000 per year, (ii) $1,000 per
physical meeting, and (iii) $125 per telephonic meeting, subject
to a cap of $500 per year for all telephonic meetings of the
Boards of Trustees of the Funds and the Trust. The Trust also
pays (together with the Funds) each Trustee (whether or not such
person is a partner, director, officer or employee of the Advisor
or any affiliate thereof or successor thereto) for all out-of-
pocket expenses of such Trustee incurred in attending each such
meeting. Inasmuch as each Trustee is also a Trustee of the
Funds, it is anticipated that the aggregate annual compensation
to each Trustee for service to investment companies in the
BlackRock complex will be approximately $42,000, with the
exception of Mr. Grosfeld who will receive approximately $204,000
for his combined service as a director of the Funds and the Trust
and of each of the other investment companies in the BlackRock
complex. Each Trustee is entitled to one vote on each matter
requiring the Trustees to take any action or consent to the
taking of any action. However, if the aggregate funded and
unfunded capital commitment of any shareholder of a Shareholder
that has designated an Investor Trustee is less than 8.33% of the
Trust's aggregate Capital Commitments, such Investor Trustee will
not be eligible to vote in his or her capacity as an Investor
Trustee on any matter that requires the approval of a majority of
Investor Trustees, although such Investor Trustee will continue
to be eligible to vote in his or her capacity as a Trustee and as
an Investor Trustee on all matters that require the approval of
the Board and all of the Investor Trustees, respectively. In all
cases in which a Trustee vote is required, only the vote of the
Trustees present (whether in person or by telephone) and eligible
to vote with respect to such matter will be taken into
consideration in determining whether consent has been given or
withheld, except no amendment may be made which amends, alters,
changes or repeals any voting requirement applicable to Investor
Trustees or Trustees, unless the proposed amendment, alteration,
change or repeal receives the affirmative approval in the form of
a vote of the Investor Trustees (whether or not present in the
case of a provision requiring approval by all Investor Trustees),
and/or, Trustees, as the case may be, so affected. On each
matter on which Trustees vote, each Trustee may give or withhold
his or her vote as he or she deems appropriate in his or her sole
discretion.
Messrs. Fink, Gabbay and Grosfeld also serve in the same capacity
as a director and/or officer, as the case may be, of each of the
other closed end investment companies in the BlackRock fund
complex except that Mr. Schlosstein is also a director of each of
such other investment companies. In addition, the Advisor serves
as investment sub-advisor to The BlackRock Government Income
Trust, the Dean Witter Premier Income Trust and the Smith Barney
Shearson Adjustable Rate Government Income Fund, each of which
are open-end management investment companies. The Advisor also
acts as an advisor to BlackRock Institutional Trust, an open end
investment company consisting of sixteen investment portfolios.
Mr. Grosfeld additionally serves as a director and officer of
such Trust.
On June 16, 1994, the Advisor's predecessor's partners entered
into a definitive agreement to sell all of the interests in such
predecessor to PNC Bank, N.A., the eleventh largest bank in the
U.S. The transaction closed on February 28, 1995. In connection
with the acquisition, all of the Advisor's Managing Directors
signed long-term employment contracts with PNC Bank, N.A. and
continue to be responsible for managing the day-to-day affairs of
the Advisor, including carrying out its responsibilities with
respect to the Trust and its affiliates.
ITEM 19. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
1. (a) BlackRock Fund Investors I, which is organized
under the laws of the State of Delaware and has offices at 345
Park Avenue, New York, New York 10154 owns and has committed to
acquire approximately 31.5% of the Shares.
(b) BlackRock Fund Investors III, which is organized
under the laws of the State of Delaware and has offices at 345
Park Avenue, New York, New York 10154 owns and has committed to
acquire approximately 47.3% of the Shares.
2. See Item 19.1. In addition, BlackRock Fund
Investors II, located at 345 Park Avenue, New York, New York
10154 owns and has committed to acquire approximately 21.2% of
the Shares.
Pursuant to the Declaration of Trust of each Fund, each
Fund is obligated to vote its shares of the Trust in accordance
with the instructions of each Fund's shareholders on a pass-
through basis.
3. None.
ITEM 20. INVESTMENT ADVISORY AND OTHER SERVICES
1-6. See Item 9 - Management.
7. Deloitte & Touche, 2 World Financial Center, New York,
New York 10281-1431.
8. None.
ITEM 21. BROKERAGE ALLOCATION AND OTHER PRACTICES
1. See Item 9 - Management, above. From time to time, one
or more of the investment companies or accounts which the Advisor
manages may own the same investments as the Trust. Investment
decisions for the Trust are made independently from those of such
other investment companies or accounts; however, from time to
time, the same investment decision may be made for more than one
company or account; provided, however that, (i) subject to the
coinvestment requirements applicable to the Trust's strategic
partner in commercial mortgage assets, the Trust and its
strategic partner in commercial mortgage assets will have a prior
right to acquire all or such portion, if any, of the subordinated
CMBS issued from time to time by the Trust's mortgage affiliates
(other than Residuals) as the Trust or such strategic partner
respectively determines, (ii) the portion of such subordinated
CMBS, if any, not acquired by the Trust and its strategic partner
will be offered to each shareholder (or the investment entity
specified by such shareholder) that has designated an Investor
Trustee, provided that such shareholder (or such investment
entity) has obtained any necessary exemption from the SEC with
respect to relevant sections of the 1940 Act, (iii) each
subordinated CMBS acquired pursuant to clause (ii) will be
acquired concurrently with and on terms no more favorable than
those applicable to the Trust's acquisition of such subordinated
CMBS, and (iv) neither the Trust nor its mortgage affiliates will
offer any of the subordinated CMBS issued by the Trust's mortgage
affiliates to any investment company or account managed by the
Advisor other than as described in clause (ii). Subject to the
foregoing, when two or more investment companies or accounts
managed by the Advisor seek to purchase or sell the same
securities, the securities actually purchased or sold will be
allocated among the companies and accounts on a good faith
equitable basis by the Advisor in its discretion in accordance
with the accounts' various investment objectives. In some cases,
this system may adversely affect the price or size of the
position obtainable for the Trust. In other cases, however, the
ability of the Trust to participate in volume transactions may
produce better execution for the Trust. The foregoing principles
will not apply in the case of subordinated CMBS issued through
the Trust's mortgage affiliates, which will not be sold to any of
the other investment companies or accounts managed by the Advisor
and will not be sold to any other first-tier or second-tier
"affiliated" person of the Trust, except to an investment company
to an investor which is a Shareholder and which has obtained an
exemption from the SEC with respect to relevant sections of the
1940 Act.
The Advisor will, subject to the investment limitations and
restrictions set forth herein, make all decisions to buy and sell
securities for the Trust, will select dealers to effect
transactions, will negotiate prices, and will effect securities
transactions in a manner deemed fair and reasonable to
shareholders of the Trust and not according to any formula. The
Advisor's primary considerations in selecting the manner of
executing securities transactions for the Trust will be prompt
execution of orders, the size and breadth of the market for the
security, the reliability, integrity and financial condition and
execution capability of the firm, the size of and difficulty in
executing the order, and the best net price. The securities in
which the Trust will invest are traded principally in the over-
the-counter market on a "net" basis with dealers acting as
principal for their own accounts without a stated commission,
although the price of the security usually includes a mark-up to
the dealer. The Trust is expected to acquire a substantial
portion of its securities directly from BCF, in which case no
commissions or discounts will be paid. There are many instances
when, in the judgment of the Advisor, more than one firm can
offer comparable execution services. In selecting among such
firms, consideration is given to those firms which supply
research and other services in addition to execution services.
However, it is not the policy of the Advisor, absent special
circumstances, to pay higher commissions to a firm because it has
supplied such services.
The Advisor is able to fulfill its obligations to furnish a
continuous investment program to the Trust without receiving such
information from brokers; however, it considers access to such
information to be an important element of financial management.
Although such information is considered useful, its value is not
determinable, as it must be reviewed and assimilated by the
Advisor, and does not reduce the Advisor's normal research
activities in rendering investment advice under the Advisory
Agreement. It is possible that the Advisor's expenses could be
materially increased if it attempted to purchase this type of
information or generate it through its own staff.
Although the Advisory Agreement contains no restrictions on
portfolio turnover, it is not the Trust's policy to engage in
transactions with the objective of seeking profits from short-
term trading. It is expected that the annual portfolio turnover
rate of the Trust will not exceed 400% excluding securities
having a maturity of one year or less. Because it is difficult
to predict accurately portfolio turnover rates, actual turnover
may be higher or lower. The Advisor will monitor the Trust's tax
status under the Code, during periods in which the Trust's annual
turnover rate exceeds 100%. Higher portfolio turnover results in
increased Trust expenses, including brokerage commissions, dealer
mark-ups and other transaction costs on the sale of securities
and on the reinvestment in other securities. To the extent that
increased portfolio turnover results in sales at a profit of
securities held less than three months, the Trust's ability to
qualify as a RIC under the Code may be affected.
2. None.
3. See response to Item 21.1.
4. None.
5. None.
ITEM 22. TAX STATUS
The following discussion is based on the advice of Skadden, Arps,
Slate, Meagher & Flom and, except as otherwise indicated,
reflects provisions of the Code as of the date of this
Registration Statement. In addition, the following discussion is
a general summary of certain of the current federal income tax
laws regarding the Trust, the Shareholders and investors in the
shares, and does not purport to deal with all of the federal
income tax consequences or any of the state or other tax
considerations applicable to the Trust or the Shareholders, or to
all categories of investors, some of which may be subject to
special rules. Prospective investors should consult their own
tax advisors regarding the federal, state, local, foreign and
other tax consequences to them of investments in the
Shareholders, including the effects of any changes, including
proposed changes, in the tax laws.
Taxation of the Trust. The Trust and the Advisor will use their
respective best efforts to ensure that the Trust qualifies each
year and elects to be treated as a RIC for federal income tax
purposes. In order to so qualify as a RIC, the Trust must, among
other things, (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to loans of securities
and gains from the sale or other disposition of securities or
certain other related income ("Qualified Income"); (b) generally
derive less than 30% of its gross income from gains from the sale
or other disposition of securities and certain other investments
held for less than three months (the "Short Term Profit Rule");
and (c) diversify its holdings so that at the end of each fiscal
quarter (i) at least 50% of the value of the Trust's assets is
represented by cash, U.S. government securities, securities of
other RICs, and other securities which, with respect to any one
issuer, do not represent more than 5% of the value of the Trust's
assets nor more than 10% of the voting securities of such issuer,
and (ii) not more than 25% of the value of the Trust's assets is
invested in the securities of any one issuer other than U.S.
government securities or the securities of other RICs (the
"Diversification Requirements"). With respect to qualification
under the foregoing tests of several aspects of the Trust's
organization and investment, the Trust is relying on the opinion
of Skadden, Arps, Slate, Meagher & Flom. If such opinion were
incorrect, or if for any other reason the Trust did not qualify
as a RIC, the Trust would be taxable as an ordinary corporation
which would have a material adverse effect on the Trust and the
Shareholders.
Since, on the foregoing basis, the Trust will qualify as a RIC
and will distribute to its shareholders at least 90% of its net
investment income (including tax-exempt interest and net short-
term capital gain but not net capital gain, which is the excess
of net long-term capital gains over net short-term capital
losses), then the Trust will not be subject to federal tax on the
income so distributed (the "Distribution Requirement"). However,
the Trust would be subject to corporate income tax (currently at
a maximum marginal rate of 35%) on any undistributed income other
than tax-exempt income from municipal securities. In addition,
the Trust will be subject to a nondeductible 4% excise tax on the
amount by which the income it distributes in any calendar year is
less than a required amount. In order to avoid the imposition of
the 4% excise tax, the Trust must distribute, in each calendar
year, an amount equal to the sum of (a) 98% of the ordinary
income (excluding tax-exempt interest income) for such calendar
year; (b) 98% of the excess of capital gains over capital losses
for the one-year period ending on October 31 (or another date if
elected by the Trust) of such calendar year; and (c) 100% of the
undistributed ordinary income and gains from prior years. For
purposes of the excise tax, any income or capital gains retained
by, and taxed in the hands of the Trust will be treated as having
been distributed.
Any capital losses to the Trust resulting from the disposition of
securities can only be used to offset capital gains and cannot be
used to reduce the Trust's ordinary income. Such capital losses
may be carried forward by the Trust for 8 years. If any capital
losses have not been utilized at the time the Trust terminates,
the potential benefits of such capital losses will become
unusable.
The Trust may invest in zero coupon securities and other
securities having original issue discount. Each year, the Trust
will be required to accrue as income a portion of such original
issue discount even though the Trust may receive no cash payments
of interest with respect to such securities. Because, as
discussed herein, the Trust will, in general, be required to
distribute substantially all of its net investment income
(including accrued original issue discount) in order to avoid
both the corporate income tax and excise tax, the Trust may be
required in some years to distribute an amount greater than the
total cash the Trust actually receives. Accordingly, in order to
make the required distribution, the Trust will be required to
borrow or to liquidate securities. The extent to which the Trust
may liquidate securities at a gain may be limited by the Short
Term Profit Rule.
As discussed herein, the Trust is required to distribute at least
90% of its net investment income (including tax-exempt interest).
Accordingly, the Trust may retain up to 10% of its net investment
income and continue to qualify as a RIC. To the extent that any
retained income is attributable to tax-exempt interest from
municipal securities, the Trust will not be subject to the
corporate income tax or excise tax. However, when distributed to
Shareholders, the accreted income will be taxed in the same
manner as other distributions.
The Trust intends to invest in mortgages, some of which may be
non-performing at the time they are purchased and which may
require modifications of their terms in order to convert such
non-performing mortgages into performing mortgages. If
substantial modifications are made to a particular mortgage, the
Trust will be treated for federal income tax purposes as having
exchanged such mortgage for a new mortgage, and will be required
to recognize a gain or loss equal to the difference between the
fair market value of such renegotiated mortgage and the Trust's
basis therein. Such gain or loss will most likely be ordinary in
character, as it will arise in the context of the Trust's trade
or business. Any gain recognized by virtue of such a deemed
exchange will increase the amount that the Trust is required to
distribute to its shareholders in order to avoid both the
corporate income tax and the excise tax. In some years,
therefore, the Trust may be required to distribute an amount
greater than the total cash the Trust actually receives.
Accordingly, in order to make the required distributions, the
Trust may be required to borrow or to liquidate securities
(limited by the Short Term Profit Rule).
To the extent that the Trust is unable to convert any non-
performing mortgages into performing mortgages, the Trust may
foreclose on such mortgages and take title to the underlying real
property. Income arising from the rental or sale of such real
property will not be Qualified Income. To the extent that such
income exceeded 10% of the Trust's gross income for any taxable
year, the Trust would be unable to qualify as a RIC for such
taxable year.
The Trust intends to engage in various Hedging transactions.
Under various provisions of the Code, the result of such
investments and transactions may be to change the character of
recognized gains and losses, accelerate the recognition of
certain gains and losses, and defer the recognition of certain
losses. The amount of the Trust's income that must be
distributed each year to avoid corporate income tax and excise
tax, and the amount and timing of the recognition by the
shareholders of ordinary income and long-term capital gain, may
be affected by these provisions. Similarly, the extent to which
the Trust may be able to use such Hedging techniques may be
limited by the Short Term Profit Rule discussed above.
Pursuant to a provision of the Code governing the treatment of
stripped securities, an investment in a principal-only class will
result in original issue discount and, consequently, will result
in income to the Trust. Accordingly, investment by the Trust in
such instruments (or in other instruments which bear original
issue discount) would require the Trust to include such original
issue discount in its income as it accrues, prior to the receipt
of the cash attributable to such income.
Interest income from non-U.S. securities may be subject to
withholding taxes imposed by the country in which the issuer is
located and the Trust will not be able to pass through to
Shareholders foreign tax credits or deductions with respect to
these taxes.
The Trust's taxable income will in most cases be determined on
the basis of reports made to the Trust by the issuers of the
securities in which the Trust invests. The tax treatment of
certain securities in which the Trust may invest is not free from
doubt and it is possible that an Internal Revenue Service ("IRS")
examination of the issuers of such securities or of the Trust
could result in adjustments to the income of the Trust.
In the opinion of Skadden, Arps, Slate, Meagher & Flom, the Trust
will be treated, for federal income tax purposes, as owning
directly its proportionate share of the assets of BCF and
therefore the Trust's ownership of BCF should not cause the Trust
to violate the Diversification Requirements. The IRS has ruled
privately in the past that a RIC which invests in a partnership
will be treated as owning directly its proportionate share of the
assets owned by such partnership. The Trust has not and does not
intend to request such a ruling from the IRS.
The Trust will only be able to meet the Income Test and the
Diversification Requirements if the mortgages and REMIC interests
in which the Trust will be investing through BCF directly are
"securities" for federal income tax purposes. For purposes of
the rules relating to RICs, the definition of the term "security"
is controlled by the 1940 Act. In the opinion of Skadden, Arps,
Slate, Meagher & Flom, such mortgages and REMIC interests will
qualify as "securities" for federal income tax purposes.
Opinions of counsel are not binding on the IRS or the courts.
Should the Trust fail to qualify as a RIC for any taxable year,
it will be treated for federal income tax purposes as a
corporation and subject to corporate income tax (currently at a
maximum marginal rate of 35%) on its taxable income for such
taxable year. Any consequential tax liability would likely
seriously adversely effect the cash flow of the Trust available
for distributions. In addition, the Trust may be forced to
borrow or liquidate securities to meet such liability.
Consequently, failure of the Trust to qualify as a RIC would have
a material adverse effect on the Trust and the Shareholders.
Also, if the Trust fails to so qualify for a taxable year, it
will be difficult for the Trust to regain status as a RIC in
subsequent taxable years.
ITEM 23. FINANCIAL STATEMENTS
Not Applicable.
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) Not Applicable.
(2) (a) Declaration of Trust.
(b) By-Laws.
(c) None.
(d) Not Applicable.
(e) None.
(f) None.
(g) Form of Investment Advisory Agreement.
(h) Form of Placement Agent Agreement.
(i) None.
(j) Form of Custodian Agreement.
(k) (1) Form of Administration Agreement.
(2) Form of Coinvestment Agreement with BCF and
Brazos GenPar, Inc.
(3) Form of Transfer Agent Agreement.
(l) Not Applicable.
(m) None.
(n) Not Applicable.
(o) Not Applicable.
(p) Form of Subscription Agreement.
(q) None.
(r) None.
ITEM 25. MARKETING ARRANGEMENTS
None.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Not Applicable.
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
The Registrant controls BCF, a Delaware limited partnership, as a
99% general partner and controls Asset Investors, Inc., a
Delaware corporation, as the owner of 100% of its outstanding
shares of capital stock. Asset Investors, Inc. in turn owns a 1%
limited partnership interest in BCF.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
Title of Class Number of Record Holders
Shares of Beneficial 3*
Interest
ITEM 29. INDEMNIFICATION
Under the Trust's Declaration of Trust, the Trust agrees to
indemnify the Trustees or officers of the Trust (each such person
being an "indemnitee") against any liabilities and expenses,
including amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and reasonable counsel fees
reasonably incurred by such indemnitee in connection with the
defense or disposition of any action, suit or other proceeding,
whether civil or criminal, before any court or administrative or
investigative body in which he may be or may have been involved
as a party or otherwise or with which he may be or may have been
threatened, while acting in any capacity set forth above in this
Section by reason of his having acted in any such capacity,
except with respect to any matter as to which he shall not have
acted in good faith in the reasonable belief that his action was
in the best interest of the Trust or, in the case of any criminal
proceeding, as to which he shall have had reasonable cause to
believe that the conduct was unlawful, provided, however, that no
indemnitee shall be indemnified hereunder against any liability
to any person or any expense of such indemnitee arising by reason
of (i) willful misfeasance, (ii) bad faith, (iii) gross
negligence (negligence in the case of those Trustees or officers
who are directors, officers or employees of the Advisor
("Affiliated Indemnitees")), or (iv) reckless disregard of the
duties involved in the conduct of his position (the conduct
referred to in such clauses (i) through (iv) being sometimes
referred to herein as "disabling conduct"). Notwithstanding the
foregoing, with respect to any action, suit or other proceeding
voluntarily prosecuted by any indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of
such action, suit or other proceeding by such indemnitee was
authorized by a majority of the Trustees and a majority of the
Investor Trustees.
Further, pursuant to the Advisory Agreement, the Trust agrees to
indemnify the Advisor and each of the Advisor's directors,
officers, employees and controlling persons and the partners,
directors, officers and employees thereof (including any
individual who serves at the Advisor's request as a director,
officer, partner, trustee or the like of any of the Trust's
mortgage affiliates (each such person being an "indemnitee"))
against any liabilities and expenses, including amounts paid in
satisfaction of judgments, in compromise or as fines and
penalties, and reasonable counsel fees reasonably incurred by
such indemnitee in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or investigative body in which
he may be or may have been involved as a party or otherwise or
with which he may be or may have been threatened, while acting in
________________
* For purposes of Section 3 of the 1940 Act the
Registrant has 122 beneficial owners of its securities (other
than short-term paper).
any capacity set forth above in this Section with respect to the
services provided hereunder or thereafter by reason of his having
acted in any such capacity, except with respect to any matter as
to which he shall not have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust or,
in the case of any criminal proceeding, as to which he shall have
had reasonable cause to believe that the conduct was unlawful,
provided, however, that no indemnitee shall be indemnified
hereunder against any liability to any person or any expense of
such indemnitee arising by reason of (i) willful misfeasance,
(ii) bad faith, (iii) negligence or (iv) reckless disregard of
the duties involved in the conduct of his position (the conduct
referred to in such clauses (i) through (iv) being sometimes
referred to herein as "disabling conduct"). Notwithstanding the
foregoing, with respect to any action, suit or other proceeding
voluntarily prosecuted by any indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of
such action, suit or other proceeding by such indemnitee was
authorized by a majority of the Trustees and a majority of the
Investor Trustees.
Insofar as indemnification for liabilities under the 1933 Act may
be permitted to the Trustees, officers or employees, the Trust
has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in such Act
and is therefore unenforceable. If a claim for indemnification
against such liabilities under the 1933 Act (other than for
expenses incurred in a successful defense) is asserted against
the Trust by the directors or officers in connection with the
Shares, the Trust will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
such Act and will be governed by the final adjudication of such
issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
For information as to the business, profession, vocation or
employment of a substantial nature of each of the officers and
directors of the Advisor, reference is made to the Advisor's
current Form ADV filed under the Investment Advisors Act of 1940,
incorporated herein by reference.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Trust are maintained in part at
the office of the Advisor at 345 Park Avenue, New York, New York
10154, in part at the offices of the Custodian and Administrator,
State Street Bank & Trust Company, with offices at 1776 Heritage
Drive, North Quincy, MA 02171 and in part at the offices of
Boston Financial Data Services Inc., BFDS Building, 4th Floor, 2
Heritage Drive, Quincy, MA 02171.
ITEM 32. MANAGEMENT SERVICES
Except as described above in Item 9 - Management, the Trust is
not a party to any management service related contract.
ITEM 33. UNDERTAKINGS
Not Applicable.
SIGNATURES
Pursuant to the requirements of 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 the City of New York, State of New
York, on the 18th day of May, 1995.
BLACKROCK ASSET INVESTORS
(Registrant)
By Wesley R. Edens
_______________________
Wesley R. Edens
Chief Operating Officer
SCHEDULE OF EXHIBITS TO FORM N-2
Exhibit Page
Number Exhibit Number
Exhibit A Declaration of Trust . . . . . . . . . . .
Exhibit B By-Laws . . . . . . . . . . . . . . . . .
Exhibit C None . . . . . . . . . . . . . . . . . . .
Exhibit D Not Applicable . . . . . . . . . . . . . .
Exhibit E None . . . . . . . . . . . . . . . . . . .
Exhibit F None . . . . . . . . . . . . . . . . . . .
Exhibit G Form of Investment Advisory Agreement . .
Exhibit H Form of Placement Agent Agreement . . . .
Exhibit I None . . . . . . . . . . . . . . . . . . .
Exhibit J Form of Custodian Agreement . . . . . . .
Exhibit K (1) Form of Administration Agreement . .
(2) Form of Coinvestment Agreement
with BCF and Brazos GenPar, Inc. . .
(3) Form of Transfer Agent Agreement . .
Exhibit L Not Applicable . . . . . . . . . . . . . .
Exhibit M None . . . . . . . . . . . . . . . . . . .
Exhibit N Not Applicable . . . . . . . . . . . . . .
Exhibit O Not Applicable . . . . . . . . . . . . . .
Exhibit P Form of Subscription Agreement . . . . . .
Exhibit Q None . . . . . . . . . . . . . . . . . . .
Exhibit R None . . . . . . . . . . . . . . . . . . .
DECLARATION OF TRUST
OF
BLACKROCK ASSET INVESTORS
December 21, 1994
INDEX
DECLARATION OF TRUST
OF
BLACKROCK ASSET INVESTORS
ARTICLE I
NAME, INVESTMENT OBJECTIVE AND DEFINITIONS
Page
Section 1.1 Name, Principal Office and Registered Agent 1
Section 1.2 Investment Objective . . . . . . . . . . 2
Section 1.3 Definitions . . . . . . . . . . . . . . 2
ARTICLE II
TRUSTEES
Section 2.1 Number of Trustees . . . . . . . . . . . 6
Section 2.2 Election and Term of Office of Trustees 7
Section 2.3 Vacancies among Trustees . . . . . . . . 8
Section 2.4 Effect of Vacancies . . . . . . . . . . 8
Section 2.5 Committees . . . . . . . . . . . . . . . 9
Section 2.6 Delegation of Power . . . . . . . . . . 10
Section 2.7 Meetings . . . . . . . . . . . . . . . . 10
Section 2.8 Officers . . . . . . . . . . . . . . . . 11
ARTICLE III
POWERS OF TRUSTEES
Section 3.1 General . . . . . . . . . . . . . . . . 11
Section 3.2 Investments . . . . . . . . . . . . . . 12
Section 3.3 Investment Restrictions . . . . . . . . 17
Section 3.4 Legal Title . . . . . . . . . . . . . . 17
Section 3.5 Contracts with Service Providers . . . . 18
Section 3.6 Issuance and Purchase of Securities . . 19
Section 3.7 Collection and Payment . . . . . . . . . 19
Section 3.8 Expenses . . . . . . . . . . . . . . . . 19
Section 3.9 Manner of Acting; By-Laws . . . . . . . 20
Section 3.10 Miscellaneous Powers . . . . . . . . . . 20
Section 3.11 Interested Transactions . . . . . . . . . 21
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 4.1 No Personal Liability of
Shareholders, Trustees, etc. . . . . . 21
Section 4.2 Mandatory Indemnification . . . . . . . 22
Section 4.3 No Bond Required of Trustees . . . . . . 24
Section 4.4 No Duty of Investigation; Notice
in Trust Instruments, etc. . . . . . . 25
Section 4.5 Reliance on Experts, etc. . . . . . . . 25
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1 Beneficial Interest . . . . . . . . . . 26
Section 5.2 Rights of Shareholders . . . . . . . . . 26
Section 5.3 Trust Only . . . . . . . . . . . . . . . 26
Section 5.4 Issuance of Shares . . . . . . . . . . . 27
Section 5.5 Capital Calls . . . . . . . . . . . . . 27
Section 5.6 Register of Shares . . . . . . . . . . . 27
Section 5.7 Transfer of Shares . . . . . . . . . . . 28
Section 5.8 Notices . . . . . . . . . . . . . . . . 29
Section 5.9 Treasury Shares . . . . . . . . . . . . 29
Section 5.10 Distribution . . . . . . . . . . . . . 29
ARTICLE VI
DETERMINATION OF NET ASSET VALUE
Section 6.1 Net Asset Value . . . . . . . . . . . . 29
ARTICLE VII
LIMITED EXISTENCE; TERMINATION
OF TRUST; AMENDMENT; MERGERS, ETC.
Section 7.1 Limited Existence . . . . . . . . . . . 30
Section 7.2 Termination of Trust . . . . . . . . . . 32
Section 7.3 Amendment Procedure . . . . . . . . . . 32
Section 7.4 Merger, Consolidation and Sale of Assets 34
ARTICLE VIII
SHAREHOLDERS
Section 8.1 Meetings of Shareholders . . . . . . . . 34
Section 8.2 Voting . . . . . . . . . . . . . . . . . 34
Section 8.3 Notice of Meeting and Record Date . . . 35
Section 8.4 Quorum and Required Vote . . . . . . . . 35
Section 8.5 Proxies, etc. . . . . . . . . . . . . . 36
Section 8.6 Reports . . . . . . . . . . . . . . . . 36
Section 8.7 Shareholder Action by Written Consent . 37
ARTICLE IX
MISCELLANEOUS
Section 9.1 Filing . . . . . . . . . . . . . . . . . 37
Section 9.2 Governing Law . . . . . . . . . . . . . 37
Section 9.3 Counterparts . . . . . . . . . . . . . . 38
Section 9.4 Reliance by Third Parties . . . . . . . 38
Section 9.5 Provisions in Conflict with Law
or Regulations . . . . . . . . . . . . 38
Section 9.6 Use of the Name "BlackRock" . . . . . . 39
Section 9.7 Shareholder Coinvestment . . . . . . . . . 39
Appendix A . . . . . . . . . . . . . . . . . . . . . 40
DECLARATION OF TRUST
OF
BLACKROCK ASSET INVESTORS
December 21, 1994
DECLARATION OF TRUST made as of December 21,
1994, by the undersigned (together with all other persons
from time to time duly elected, qualified and serving as
Trustees in accordance with the provisions of Article II
hereof, the "Trustees"), and by the holders of shares of
beneficial interest to be issued hereunder as hereinafter
provided;
WHEREAS, the Trustees desire to establish a
business trust under the laws of the State of Delaware for
the investment and reinvestment of funds contributed
thereto; and
WHEREAS, the Trustees desire that the beneficial
interest in the trust assets be divided into transferable
shares of beneficial interest, as hereinafter provided;
NOW, THEREFORE, the Trustees hereby declare that
all money and property contributed to the trust
established hereunder shall be held and managed in trust
for the benefit of holders, from time to time, of the
shares of beneficial interest issued hereunder and subject
to the provisions hereof.
ARTICLE I
NAME, INVESTMENT OBJECTIVE AND DEFINITIONS
Section 1.1 Name, Principal Office and
Registered Agent. The name of the trust created hereby is
the "BlackRock Asset Investors" (the "Trust").
The post office address of the principal office
of the Trust is 345 Park Avenue, New York, New York 10154.
The name of the registered agent of the Trust in the State
of Delaware is The Corporation Trust Company, a Delaware
corporation, and the post office address of the registered
agent is 1209 Orange Street, Wilmington, Delaware 19801.
Section 1.2 Investment Objective. The Trust
will seek to achieve high total returns primarily from its
investments in subordinated commercial mortgage-backed
securities and other investment securities and from the
profits of its wholly-owned Affiliate, BlackRock Capital
Finance L.P., and other Mortgage Affiliates, which will
engage primarily in the businesses of acquiring, pooling
and repackaging performing commercial mortgage loans as
commercial mortgage-backed securities for distribution to
the Trust and its strategic coinvestors in such assets and
for sale in the capital markets and acquiring and working
out distressed commercial and residential mortgage loans.
Section 1.3 Definitions. Wherever they are
used herein, the following terms have the following
respective meanings:
(a) "Administrator" means State Street
Bank and Trust Company or any successor or assign thereto
furnishing administrative services to the Trust.
(b) "Affiliate" means any Affiliate as
defined in the Rules adopted pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended from time to
time.
(c) The terms "Affiliated Person,"
"Commission" and "Interested Person" have the meanings
given them in the 1940 Act.
(d) "BCF" means BlackRock Capital Finance
L.P., a Delaware Limited Partnership.
(e) "BlackRock" means BlackRock Financial
Management L.P., the Trust's Investment Advisor, and any
permitted successor or assign thereto.
(f) "Board" means the Board of Trustees of
the Trust.
(g) "Business Day" means any day other
than Saturdays, Sundays and holidays on which banks in the
City of New York or the New York Stock Exchange are not
open for business.
(h) "By-Laws" means the By-Laws referred
to in Section 3.9 hereof, as from time to time amended.
(i) "Capital Calls" means such calls for
payment of the unpaid amounts of a Shareholder's Capital
Commitment as the Trust may issue from time to time in
accordance with this Declaration.
(j) "Capital Commitments" means the
aggregate amount of funds committed to the Trust pursuant
to subscription agreements between the Trust and each
investor.
(k) "Commission" means the Securities and
Exchange Commission.
(l) "Commitment Period" means the period
during which funds may be drawn down for investments
subject to expiration pursuant to Section 5.5 herein.
(m) "Custodian" means any person other
than the Trust who has custody of any Trust Property as
required by Section 17(f) of the 1940 Act, but does not
include a system for the central handling of securities
described in said Section 17(f).
(n) "Declaration" means this Declaration
of Trust as amended from time to time. Reference in this
Declaration of Trust to "Declaration," "hereof," "herein"
and "hereunder" shall be deemed to refer to this
Declaration rather than the article or section in which
such words appear.
(o) "Delaware Act" means Chapter 38 of
Title 12 of the Delaware Code entitled "Treatment of
Delaware Business Trusts" as amended from time to time.
(p) "Fund" means BlackRock Fund Investors
I, II or III, each a Delaware business trust
(collectively, the "Funds").
(q) "Hedging" means the utilization of
Treasury, mortgage, Eurodollar and currency futures and
options (on cash and futures) and interest rate, currency
and mortgage swaps, caps and floors and other financial
instruments, provided that the Trust may utilize these
instruments solely for the purposes of hedging the
investment risks of individual securities (including
mortgage loans) and of the portfolio as a whole and not
for speculative purposes.
(r) "Initial Closing" means December 22,
1994 or such later date on which the Trust shall have
received at least $200 million of Capital Commitments.
(s) "Investment Advisor" means BlackRock
Financial Management L.P. and any permitted successor or
assign thereto furnishing investment advisory services to
the Trust.
(t) "Investor Trustee" means each Trustee
who is not a partner, director, officer, or employee of
the Investment Advisor, and who has been designated by a
shareholder of one of the Funds as specified in Section
2.1 hereof or any immediate or remote successor appointed
or elected pursuant to Sections 2.2 and/or 2.3 hereof.
(u) "Majority of the Investor Trustees"
means 51% of those Investor Trustees who have been
designated by a shareholder of one of the Funds whose
capital commitments to or total investment in such Fund
equals at least 8.33% of the Trust's aggregate Capital
Commitments and who are qualified to vote on the matter in
question.
(v) "Management Team" means Mr. Wesley R.
Edens and the four senior professionals of BlackRock who
report directly to Mr. Edens.
(w) "Mortgage Affiliate" means any
Affiliate described in Section 1.2, including but not
limited to BCF.
(x) "Person" means and includes
individuals, corporations, partnerships, trusts,
associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and
political subdivisions thereof, whether domestic or
foreign.
(y) "Quorum" means a majority of Trustees
including at least one (1) Investor Trustee.
(z) "Residual" means a "residual interest"
of a "real estate mortgage investment conduit" ("REMIC"),
as such terms are defined in Sections 860D and 860G of the
Internal Revenue Code of 1986, as amended (the "Code") and
the regulations issued pursuant thereto.
(aa) "Shareholder" means a record owner of
outstanding Shares.
(ab) "Shares" means the units of beneficial
interest in the Trust as described in Section 5.1 hereof
and includes fractions of Shares as well as whole Shares.
(bb) "Total Assets" means the value of the
Trust's total assets determined in accordance with the
Valuation Policies.
(cc) "Transfer Agent" means State Street
Bank and Trust Company, and its Affiliate, Boston
Financial Data Services, and any successor or assign
thereto furnishing transfer agency services to the Trust.
(dd) "Trust" means BlackRock Asset
Investors created hereby.
(ee) "Trust Property" means any and all
property, real or personal, tangible or intangible, which
is owned or held by or for the account of the Trust or the
Trustees.
(ff) "Trustee" or "Trustees" means the
person who has signed the Declaration as a trustee, so
long as he shall continue in office in accordance with the
terms hereof, and all other persons who may from time to
time be duly appointed or elected, qualified and serving
as Trustees in accordance with the provisions hereof, and
references herein to a Trustee or the Trustees shall refer
to such person or persons in their capacity as trustees
hereunder.
(gg) "Valuation Policies" mean the policies
and guidelines approved from time to time by a majority of
the Trustees and all of the Investor Trustees.
(hh) "1940 Act" means the Investment
Company Act of 1940, the Rules and Regulations thereunder
and any order applicable to the Trust granted thereunder,
in each case as amended from time to time.
ARTICLE II
TRUSTEES
Section 2.1 Number of Trustees. The number of
Trustees initially shall be ten (10), and thereafter the
number of Trustees shall be such number as shall be fixed
from time to time by a written instrument signed by a
majority of the Trustees; provided, however, that the
number of Trustees shall in no event be less than seven
(7). No amendment may be made to Section 2.1 which would
change any rights with respect to the number or existence
of Trustees, except with the unanimous vote or consent of
the Shareholders. If at any time a majority of Trustees
are Affiliated Persons of the Investment Advisor, the
Board shall in accordance with the other provisions hereof
promptly appoint such number of Trustees as shall result
in less than a majority of the Board being Affiliated
Persons of the Investment Advisor. No reduction in the
number of Trustees shall have the effect of removing any
Trustee from office prior to the expiration of his term
unless the Trustee is specifically removed pursuant to
Section 2.2 of this Article II at the time of the
decrease.
The initial Trustees shall be:
Laurence D. Fink(1),(2)
Ralph L. Schlosstein1,2
Wesley R. Edens1,2
John C. Deterding2,(3)
Philip Halpern2,3
Michael E. Klehm2,3
Donald G. Drapkin
Laurence E. Hirsch
Kendrick R. Wilson, III
James Grosfeld
Section 2.2 Election and Term of Office of
Trustees. Whenever the Trustees are to be elected by the
Shareholders, each Shareholder shall be entitled to cast a
number of votes for the election of Trustees equal to the
number of such Shareholder's Shares multiplied by the
number of Trustees to be elected, and a Shareholder may
cast all such votes for a single Trustee or may distribute
them among any two or more of them as the Shareholder may
see fit. Plurality voting shall govern the election of
Trustees. Each Trustee elected or appointed to office
shall hold office until his successor shall have been
elected or appointed and shall have qualified or until his
death; except that (a) any Trustee may resign his position
(without need for prior or subsequent accounting) by an
instrument in writing signed by him and delivered to the
other Trustees, which shall take effect upon such delivery
or upon such later date as is specified therein; (b) any
Trustee may be removed (provided that if the aggregate
number of Trustees after such removal shall be less than
the minimum number required by Section 2.1 hereof, his
successor shall be appointed or, if so required, elected,
as soon as possible) with cause, at any time by written
instrument, signed by at least two-thirds of the remaining
Trustees, specifying the date when such removal shall
become effective; (c) any Trustee who requests in writing
--------------------
1 Trustees who are partners, directors, officers or
employees of the Advisor.
2 Trustees who may be deemed to be "interested
persons" of the Trust.
3 Investor Trustee.
to be retired, who has become incapacitated by illness or
injury, or who has become mentally incompetent may be
retired by resolution by a majority of the other Trustees,
specifying the date of his retirement; and (d) any Trustee
may be removed with or without cause at any meeting of
Shareholders by a vote of 75% of the outstanding Shares.
Upon the resignation or removal of a Trustee, or his
otherwise ceasing to be a Trustee, he shall execute and
deliver such documents as the remaining Trustees shall
require for the purpose of conveying to the Trust or the
remaining Trustees any Trust Property held in the name of
the resigning or removed Trustee. Upon the incapacity or
death of any Trustee, his legal representative shall
execute and deliver on his behalf such documents as the
remaining Trustees shall require as provided in the
preceding sentence. As used in this Section 2.2, "cause"
means (x) a Trustee's willful failure or refusal to
perform reasonable duties specified by this Declaration
and such failure or refusal continues for or is not
otherwise cured within four weeks after written notice
thereof is sent to the Trustee by the remaining Trustees
of the Trust, provided, however, that if such failure is
incurable within such time it shall have been material;
(y) a Trustee's knowing violation of any applicable law or
any action other than voting that results in material
injury to the Trust; and (z) any breach (not covered by
clauses (x) or (y) above) of any of the provisions of this
Declaration if such breach is material and continues or is
otherwise not cured within four weeks after written notice
thereof is sent to the Trustee by the remaining Trustees
of the Trust.
Section 2.3 Vacancies among Trustees. If a
Trustee ceases to hold office for any reason, or if the
Trustees shall determine to increase the number of
Trustees as permitted under Section 2.1, a vacancy shall
occur. A resolution certifying the existence of such
vacancy by a majority of the Trustees shall be conclusive
evidence of the existence of such vacancy. Subject to the
following provisions of this Section 2.3, in the case of
an existing vacancy with respect to a Trustee who is not
an Investor Trustee, including a vacancy existing by
reason of an increase in the number of Trustees, the
remaining Trustees may fill such vacancy by nominating and
appointing such other person as they in their discretion
shall see fit. If the Board, as opposed to the
Shareholders, is (as it has the right to do) filling a
vacancy on the Board and the vacant seat had been occupied
by an Investor Trustee, then the vacancy will be filled by
the Board by a person satisfactory to the Fund shareholder
who had designated such Investor Trustee. If the vacancy
is to be filled by a Shareholder vote, a Shareholders'
meeting will be called at which the entire Board will be
elected and the Board's nominee for the vacancy that had
been occupied by an Investor Trustee will be a person
satisfactory to the Fund shareholder who had designated
such Investor Trustee. If at any time one or more
Trustees is to be elected by the Shareholders, the entire
Board will be elected by the Shareholders. Whenever an
Investor Trustee seat becomes vacant it must be filled as
promptly as practicable in accordance with the foregoing
provisions.
Section 2.4 Effect of Vacancies. The death,
resignation, retirement, removal, bankruptcy, incompetence
or incapacity to perform the duties of a Trustee, or any
one of them, shall not operate to annul the Trust or to
revoke any existing agency created pursuant to the terms
of this Declaration. Whenever a vacancy in the number of
Trustees shall occur, until such vacancy is filled as
provided in Section 2.3, the Trustees in office,
regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties
imposed upon the Trustees by the Declaration.
Section 2.5 Committees. The Trustees may by
resolution appoint committees consisting of less than the
whole number (but not less than three) of Trustees then in
office, provided that each Investor Trustee shall be
notified of the formation of such committee (if not
present at the meeting when such committee is formed) and
have the right, but not the obligation, to be a member of
any such committee, which committees may be empowered to
act for and bind the Trustees and the Trust, as if the
acts of such committee were the acts of all the Trustees
then in office, to such extent as the Trustees, including
all Investor Trustees, shall determine.
The committees of the Trustees shall include a
valuation committee, an audit committee and a compensation
committee. A quorum for all meetings of any such
committee shall be a majority of the members thereof.
Unless provided otherwise in this Declaration, any action
of any such committee may be taken at a meeting by vote of
a majority of the members present (whether in person or by
telephone) provided that a quorum is present or without a
meeting by written consent of all of the members. No
committee can take any action that would circumvent any
Board level voting requirements. Subject to the foregoing
restrictions, the Board shall have the power at any time
to change the membership of any committee, to fill all
vacancies, to designate alternate members to replace any
absent or disqualified member, or to dissolve any such
committee, other than the compensation committee. Nothing
herein shall be deemed to prevent the Board from
appointing committees consisting in whole or in part of
persons who are not trustees of the Trust; provided,
however, that no such committee shall have or may exercise
any authority or power of the Board in the management of
the business or affairs of the Trust.
Section 2.6 Delegation of Power. Any Trustee
may, by power of attorney consistent with applicable law,
delegate to any other natural person over the age of 21
his or her power for the purpose of executing any
registration statement or amendment thereto filed with the
Commission or making any other government filing.
The Trustees shall have power to delegate from
time to time to such of their number or to officers of the
Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names
of the Trustees or otherwise as the Trustees may deem
expedient, to the extent such delegation is not prohibited
by the 1940 Act.
Section 2.7 Meetings. Meetings of the Trustees
shall be held from time to time upon the call of the
Chairman, if any, the President, the Secretary or any
Trustee. Regular meetings of the Trustees may be held at
a time and place fixed by the By-Laws or by resolution of
the Trustees. Notice of any in-person meetings of the
Board of Trustees or any committee thereof shall be hand
delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less
than ten Business Days before such meeting. Notice of any
telephonic meetings of the Trustees or any committee
thereof shall be hand delivered or otherwise delivered in
writing (including by facsimile, with a hard copy by
overnight courier) not less than five Business Days before
a meeting. Notices shall contain a brief statement of the
time, place and anticipated purposes of the meeting. The
presence (whether in person or by telephone) of a Trustee
at a meeting shall constitute a waiver of notice of such
meeting except where a Trustee attends a meeting for the
express purpose of objecting to the transaction of any
business on the ground that the meeting has not been
lawfully called or convened. Unless provided otherwise in
this Declaration of Trust, any action of the Trustees may
be taken at a meeting by vote of a majority of the
Trustees present (whether in person or by telephone) and
eligible to vote with respect to such matter, provided
that a Quorum is present, or without a meeting by the
unanimous written consent of the Trustees.
Except as otherwise provided herein, for the
purpose of any provision requiring a vote of all Investor
Trustees, if an Investor Trustee is not present (in person
or by telephone) at a meeting duly called or abstains due
to a conflict, a vote of all Investor Trustees shall mean
all but the Investor Trustee who is not present or so
abstains. On each matter on which Trustees vote, each
Trustee may give or withhold his or her vote as he or she
deems appropriate in his or her sole discretion in
exercise of his or her business judgment and fiduciary
duties under the 1940 Act.
Section 2.8 Officers. The Trustees shall
annually elect a President, a Secretary and a Treasurer
and may elect a Chairman. The Trustees may elect or
appoint or may authorize the Chairman, if any, or
President to appoint such other officers with such powers
as the Trustees may deem to be advisable. A Chairman
shall, and the President, Secretary and Treasurer may, but
need not, be a Trustee.
ARTICLE III
POWERS OF TRUSTEES
Section 3.1 General. The Trustees shall have
exclusive and absolute control over the Trust Property and
over the business of the Trust to the same extent as if
the Trustees were the sole owners of the Trust Property in
their own right, but with such powers of delegation as may
be permitted by the Declaration. The Trustees shall have
power to conduct the activities of the Trust and maintain
offices both within and without the State of Delaware, in
any and all states of the United States of America, in the
District of Columbia, and in any and all commonwealths,
territories, dependencies, colonies, possessions, agencies
or instrumentalities of the United States of America and
of foreign governments and, subject to the other
provisions of this Declaration, to do all such other
things and execute all such instruments as the Trustees
deem necessary, proper or desirable in order to promote
the interests of the Trust although such things are not
herein specifically mentioned. Any determination as to
what is in the interests of the Trust made by the Trustees
in good faith shall be conclusive. In construing the
provisions of the Declaration, the presumption shall be in
favor of a grant of power to the Trustees.
The enumeration of any specific power herein
shall not be construed as limiting and/or restricting the
aforesaid general powers of the Trustees. Such powers of
the Trustees may be exercised without order of or resort
to any court.
Section 3.2 Investments. (a) Subject to the
other provisions of this Declaration, the Trustees shall
have the power:
(i) to operate as and carry on
the business of an investment company, and
exercise all of the powers necessary or
appropriate to the conduct of such operations;
(ii) to subscribe for, invest
in, hold for investment, trade or reinvest in:
(A) commercial and
residential mortgage-backed securities (in
whatever form issued), provided that such
securities are not Residuals;
(B) equity interests
in BCF and other Mortgage Affiliates,
provided that such interests are not
Residuals;
(C) Treasury,
mortgage, Eurodollar and currency futures
and options (on cash and futures) and
interest rate, currency and mortgage swaps,
caps and floors and other financial
instruments, provided that the Trust may
utilize these instruments solely for the
purposes of Hedging;
(D) financing
arrangements, including reverse repurchase
agreements and dollar rolls, subject to the
leverage limitations set forth below;
(E) U.S. Government
securities that have an effective duration
at the time of purchase no greater than the
effective duration of the two-year U.S.
Treasury note, including U.S. Treasury
securities and securities issued by
agencies or instrumentalities of the U.S.
Government;
(F) asset-backed
securities that have an effective duration
at the time of purchase no greater than the
effective duration of the two-year U.S.
Treasury note and that are rated in one of
the four highest rating categories by a
nationally recognized rating agency;
(G) corporate debt
securities that have an effective duration
at the time of purchase no greater than the
effective duration of the two-year U.S.
Treasury note and that are rated in one of
the four highest rating categories by a
nationally recognized rating agency;
(H) short-term
investments that have a remaining term to
maturity at the time of purchase of no
greater than one year, including commercial
paper rated not lower than A-1 P-1 and
other money market instruments of similar
credit standing, non-contingent interest
bearing deposits in banks chartered by or
within the United States with long-term
ratings at least A- and money market mutual
funds; and
(I) any other type of
asset investment in which is made in
furtherance of the Trust's investment
objective and after having received
approval by a majority of the Trustees and
all of the Investor Trustees.
(iii) to exercise all rights,
powers and privileges of ownership or interest
in all securities and repurchase agreements
included in the Trust Property, including the
right to vote thereon and otherwise act with
respect thereto and to do all acts for the
preservation, protection, improvement and
enhancement in value of all such securities and
repurchase agreements;
(iv) subject to Sections 4.1 and
4.4, and the leverage limitations of the 1940
Act, to borrow 33-1/3% of its Total Assets
(including the amount borrowed) and, on a short
term basis, to borrow up to an additional 5% of
its Total Assets for temporary purposes or
otherwise obtain credit and in this connection
issue notes or other evidence of indebtedness;
and to secure borrowings by mortgaging, pledging
or otherwise subjecting as security the Trust
Property; and to endorse, guarantee, or
undertake the performance of any obligation,
contract or engagement of any other Person
(other than any Mortgage Affiliate);
(v) subject to Sections 4.1 and
4.4, to aid by further investment any
corporation, company, trust, association or
firm, any obligation of or interest in which is
included in the Trust Property or in the affairs
of which the Trustees in their capacity as
Trustees hereunder have any direct or indirect
interest; to do all acts and things designed to
protect, preserve, improve or enhance the value
of such obligation or interest; to guarantee or
become surety on any or all other contracts,
stocks, bonds, notes, debentures and other
obligations of any such corporation, company,
trust, association or firm (other than any
Mortgage Affiliate); and
(vi) to carry on any other
business in connection with or incidental to any
of the foregoing powers, to do everything
necessary, suitable or proper for the
accomplishment of any purpose or the attainment
of any object or the furtherance of any power
hereinbefore set forth, and to do every other
act or thing incidental or appurtenant to or
connected with the aforesaid purposes, objects
or powers.
(b) The Trustees shall not be limited to
investing in obligations maturing before the termination
of the Trust, nor shall the Trustees be limited by any law
limiting the investments which may be made by fiduciaries.
(c) Notwithstanding anything to the contrary
herein, the Trustees shall not have the power to subscribe
for, invest in, hold for investment, or reinvest in,
Residuals.
(d) The Trust and the Investment Advisor will
use their respective best efforts to ensure that the Trust
qualifies each year and elects to be treated as a
regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended.
(e) The Trust and the Investment Advisor will
use their respective best efforts to ensure that the Trust
at all times is an investment company for purposes of the
1940 Act and is duly registered as such under the 1940
Act.
(f) Notwithstanding Section 3.2(a), except upon
approval by a majority of the Trustees and all of the
Investor Trustees, the Trustees shall not have the power
to invest, or direct the Trust's Mortgage Affiliates to
invest, in or acquire:
(i) a REMIC security unless it
has received an opinion from reputable tax
counsel stating that such security would not be
deemed to be a Residual, or
(ii) commercial mortgage-backed
securities in the primary market unless it has
the ability (but not the obligation) to name or
replace the master servicer and special servicer
with respect to the underlying mortgage loans or
pool of mortgage loans with its strategic
coinvestor in such investment, or an Affiliate
thereof.
(g) Notwithstanding Section 3.2(a), when
considering investments, the Trust will take into
consideration the general principles of diversification
and prudent risk management in assessing, among other
things, portfolio exposure to property types, borrowers
and geographic regions, and term structure and other
factors that may influence the liquidation value of the
Trust's investments. In addition, the Trust must comply
with the following additional investment limitations at
all times, provided that (i) prior to the earlier of two
years following the commencement of its operations or the
date on which at least 50% of the aggregate Capital
Commitments have been drawn down and are invested,
compliance will be measured on the basis of the greater of
aggregate Capital Commitments and Total Assets, and (ii)
after such date, compliance will be measured on the basis
of Total Assets; and, provided further, that for the
purpose of determining compliance with the foregoing
restrictions, to the extent that the Trust invests in
mortgage loans or direct participation interests therein
(other than those contemplated in Sections 3.2(a)(ii)(E)
through (H)) such investments will be aggregated with
those of BCF. These investment limitations are subject to
waiver or modification on a case by case basis upon
approval by a majority of the Trustees and all of the
Investor Trustees:
(i) Securities directly or
indirectly secured by or payable out of cash
flow from properties owned by a single person
and its Affiliates may not exceed 20% of
aggregate Capital Commitments or Total Assets,
as applicable;
(ii) Securities directly or
indirectly secured by or payable out of cash
flow from any particular property may not exceed
5% of aggregate Capital Commitments or Total
Assets, as applicable;
(iii) Securities directly or
indirectly secured by or payable out of cash
flow from properties located within a single
five-digit zip code area may not exceed 5% of
aggregate Capital Commitments or Total Assets,
as applicable;
(iv) Securities directly or
indirectly secured by or payable out of cash
flow from properties located outside the United
States may not exceed 10% of aggregate Capital
Commitments or Total Assets, as applicable; and
(v) Securities directly or
indirectly secured by or payable out of cash
flow from one- to four-family (residential)
properties may not exceed 25% of aggregate
Capital Commitments or Total Assets, as
applicable.
For purposes of the foregoing restrictions, a mortgage
loan secured by multiple properties will be considered to
be secured by a property only in the proportion that the
fair market value (less any senior liens) of the property
bears to the fair market value (less any senior liens) of
all properties by which such mortgage loan is secured and
a security other than a mortgage loan will be considered
to be secured by or payable out of the cash flow from a
property only in the proportion that the outstanding
principal amount of the mortgage loan relating to such
property and underlying such security bears to the sum of
the outstanding principal amount of all mortgage loans
underlying such security.
(h) The Trust will not be permitted to acquire
any commercial or residential mortgage asset (other than
those contemplated in Section 3.2(a)(ii) (E) through (H))
unless a strategic coinvestor in the relevant asset class
coinvests in such asset. Any strategic coinvestor must,
with respect to the relevant asset class, (i) possess the
requisite real estate and servicing capabilities, (ii)
commit professional resources to its efforts with the
Trust including loan underwriting, workout and servicing,
and (iii) agree to make coinvestments of at least 10% with
the Trust, pursuant to the terms of a coinvestment
agreement with such strategic coinvestor, and agree to
provide requested servicing functions with respect to the
relevant assets. In addition, all coinvestments will be
made concurrently with and on the same terms as the Trust
and BCF. In addition, the Trust and BCF will be required
to obtain the approval of a majority of the Trustees and
all of the Investor Trustees with respect to the identity
of and arrangements with each such strategic coinvestor.
Section 3.3 Investment Restrictions. Except
upon approval by a majority of the outstanding Shares, a
majority of Trustees and all of the Investor Trustees, the
Trust and BCF will not engage in any of the investment
practices set forth in Appendix A hereto, except to the
extent described in such Appendix A.
Section 3.4 Legal Title. Legal title to all
the Trust Property shall be vested in the Trustees as
joint tenants except that the Trustees shall have power to
cause legal title to any Trust Property to be held by or
in the name of one or more of the Trustees, or in the name
of the Trust, or in the name of any other Person as
nominee, on such terms as the Trustees may determine. The
right, title and interest of the Trustees in the Trust
Property shall vest automatically in each Person who may
hereafter become a Trustee. Upon the termination of the
term of office, resignation, removal or death of a Trustee
he shall automatically cease to have any right, title or
interest in any of the Trust Property, and the right,
title and interest of such Trustee in the Trust Property
shall vest automatically in the remaining Trustees. Such
vesting and cessation of title shall be effective whether
or not conveyancing documents have been executed and
delivered.
Section 3.5 Contracts with Service Providers.
(a)(i) The form and terms of any investment advisory
agreement and placement agent agreements, and any
amendments thereto, must be approved by a majority of the
Trustees who are not Interested Persons of the Trust and a
Majority of the Investor Trustees; (ii) the forms and
terms of any coinvestment agreements, and material
amendments thereto, with a strategic coinvestor must be
approved by a majority of the Trustees and all of the
Investor Trustees; and (iii) the form and basic terms of
contracts, and material amendments thereto, with any
Persons providing services of a material nature to the
Trust, any of its Mortgage Affiliates or any trustee of
any mortgage-backed securities issuance for which any of
the Trust's Mortgage Affiliates act as depositor or
issuer, including any mortgage servicing company that is
an Affiliate of the strategic coinvestor (other than those
contracts referred to in clauses (i) and (ii) above) are
subject to approval by a majority of the Trustees and a
Majority of the Investor Trustees. For purposes hereof,
the basic terms shall include any fees or fee formula.
Upon approval in the foregoing manner under clause (iii)
of the form and basic terms of any contracts covered by
such clause, approval of the complete terms of any such
contract by the Trustees shall not be necessary except as
required by the 1940 Act. No such agreement or contract
shall be subject to approval by the Shareholders except as
required by the 1940 Act.
(b) Any agreement of the character described in
Section 3.5(a) may be entered into with any Person,
although one or more of any Affiliated Person of the Trust
or of any Mortgage Affiliate or any Affiliated Person of
any such Affiliated Person may be an officer, partner,
director, trustee, shareholder or holder of any other
direct or indirect equity interest, or member of such
other party to the contract, and no such contract shall be
invalidated or rendered voidable by reason of the
existence of any such relationship; nor shall any Person
holding such relationship be disqualified from voting upon
or executing any such contract; nor shall any Person
holding such relationship be liable merely by reason of
such relationship for any loss or expense to the Trust
under or by reason of said contract or accountable for any
profit realized directly or indirectly therefrom.
Section 3.6 Issuance and Purchase of
Securities. Subject to Section 5.4 and the following
sentence, the Trustees shall have the power to issue,
sell, retire, cancel, hold, resell, reissue, dispose of,
transfer, and otherwise deal in Shares and subject to the
provisions set forth in Articles V, VI and VII hereof, to
apply to any such retirement or cancellation of Shares any
funds or property of the Trust whether capital or surplus
or otherwise, to the full extent now or hereafter
permitted by the laws of the State of Delaware governing
business corporations. The Trustees shall have the power
to purchase, redeem or acquire Shares only in the case of
a Shareholder who fails to pay a Capital Call in
accordance with the terms of the Shareholder's
subscription agreement, which power shall be enforced in a
consistent and nondiscriminatory manner by the Trustees.
Section 3.7 Collection and Payment. The
Trustees shall have power to collect all property due to
the Trust; to pay all claims, including taxes, against the
Trust Property; to prosecute, defend, compromise or
abandon any claims relating to the Trust Property; to
foreclose any security interest securing any obligations
by virtue of which any property is owed to the Trust; and
to enter into releases, agreements and other instruments.
Section 3.8 Expenses. The Trustees shall have
the power to incur and pay any expenses which in the
opinion of the Trustees are necessary or incidental to
carry out any of the purposes of the Declaration, and to
pay reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the
compensation of all officers and Trustees. No Trustee or
officer of the Trust who is a partner, director, officer
or employee of the Investment Advisor will receive
compensation from the Trust.
Section 3.9 Manner of Acting; By-Laws. Except
as otherwise provided herein or in the By-Laws, any action
to be taken by the Trustees may be taken by a majority of
the Trustees present (whether in person or by telephone)
at a meeting of Trustees, provided that a Quorum is
present, including any meeting held by means of a
conference telephone circuit or similar communications
equipment by means of which all persons participating in
the meeting can hear each other, or by written consents of
all the Trustees. Subject to the requirements of the 1940
Act, the Board, by affirmative vote of a majority thereof
and of all Investor Trustees, shall have the exclusive
right to amend, alter or repeal the By-Laws at any meeting
of the Board, except any particular By-Law which is
specified as not subject to alteration or repeal by the
Board.
Section 3.10 Miscellaneous Powers. Subject to
the other provisions of this Declaration, the Trustees
shall have the power to: (a) employ or contract with such
Persons as the Trustees may deem desirable for the
transaction of the business of the Trust; (b) enter into
joint ventures, partnerships and any other combinations or
associations in furtherance of the Trust's investment
objective; (c) remove Trustees and elect and remove such
officers as they consider appropriate, and appoint from
their own number, and terminate, any one or more
committees (other than the Compensation Committee) which
may exercise some or all of the power and authority of the
Trustees as the Trustees may determine; (d) purchase, and
pay for out of Trust Property its allocable share of
premiums therefor, insurance policies insuring the
Shareholders, Trustees, officers, investment advisors,
distributors, selected dealers or independent contractors
of the Trust against all claims arising by reason of
holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or
not constituting negligence, or whether or not the Trust
would have the power to indemnify such Person against such
liability; (e) to the extent permitted by Section 4.2,
indemnify any person with whom the Trust has dealings,
including the Investment Advisor, Transfer Agent,
Administrator, Custodian and selected dealers to such
extent as the Trustees shall determine; (f) determine and
change the fiscal year of the Trust and the method by
which its accounts shall be kept; and (g) adopt a seal for
the Trust but the absence of such seal shall not impair
the validity of any instrument executed on behalf of the
Trust.
Section 3.11 Interested Transactions. Without
in any way limiting or imposing further requirements with
respect to Sections 3.5(b) or 9.7, subject to compliance
with the 1940 Act, no agreement or transaction between the
Trust or any Mortgage Affiliate, on the one hand, and one
or more of the Trustees or officers of the Trust, or any
entity in or with respect to which any Trustee or officer
of the Trust has any official position or financial
interest shall be void or voidable solely for that reason
or solely because such Trustee or officer attends or
participates in the meeting of the Trustees or a committee
of Trustees that authorizes such agreement or transaction,
or solely because his attendance is counted toward a
quorum of a committee or Quorum of the Board of Trustees
or his vote is counted toward such authorization, if: (1)
the material facts as to his relationship or interest and
as to the agreement or transaction are disclosed to or
known by the remaining Trustees or such committee, and the
Trustees or such committee authorizes the agreement or
transaction by the requisite vote required pursuant to
this Declaration, excluding any Trustee subject to the
foregoing provisions whose vote is counted toward such
authorization even though the remaining Trustees are less
than the otherwise required number; (2) such material
facts are disclosed to or known by the Shareholders (or
the shareholders of the Funds) asked to vote on such
agreement or transaction, and such agreement or
transaction is specifically approved in good faith by the
Shareholders; or (3) such agreement or transaction is fair
to the Trust or such Mortgage Affiliate, as the case may
be, at the time it is approved or ratified by the
Trustees, or committee thereof or the Shareholders.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 4.1 No Personal Liability of
Shareholders, Trustees, etc. No Shareholder of the Trust
shall be subject in such capacity to any personal
liability whatsoever to any Person in connection with
Trust Property or the acts, obligations or affairs of the
Trust. Shareholders shall have the same limitation of
personal liability as is extended to stockholders of a
private corporation for profit incorporated under the
general corporation law of the State of Delaware. No
Trustee or officer of the Trust shall be subject in such
capacity to any personal liability whatsoever to any
Person, other than the Trust or its Shareholders, in
connection with Trust Property or the affairs of the
Trust, save only liability to the Trust or its
Shareholders arising from bad faith, willful misfeasance,
gross negligence (negligence in the case of those Trustees
or officers who are partners, directors, officers or
employees of the Investment Advisor ("Affiliated
Indemnitees")) or reckless disregard for his duty to such
Person; and, subject to the foregoing exception, all such
Persons shall look solely to the Trust Property for
satisfaction of claims of any nature arising in connection
with the affairs of the Trust. If any Shareholder,
Trustee or officer, as such, of the Trust, is made a party
to any suit or proceeding to enforce any such liability,
subject to the foregoing exception, he shall not, on
account thereof, be held to any personal liability. The
Trust shall indemnify and hold each Shareholder harmless
from and against all claims and liabilities to which such
Shareholder may become subject by reason of his being or
having been a Shareholder, and shall reimburse such
Shareholder for all legal and other expenses reasonably
incurred by him in connection with any such claim or
liability. The rights accruing to a Shareholder under
this Section 4.1 shall not exclude any other right to
which such Shareholder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust
to indemnify or reimburse a Shareholder in any appropriate
situation even though not specifically provided herein.
Every written obligation, contract, instrument,
certificate, share, or other security of BCF and/or any
other Mortgage Affiliate or understanding made or issued
by any partner, trustee, officer, employee or agent of BCF
or any Mortgage Affiliate shall recite that any action
that results in liability being incurred by BCF or other
Mortgage Affiliate (including borrowing money) will be
nonrecourse to the Trust and its Shareholders.
Section 4.2 Mandatory Indemnification. (a) The
Trust hereby agrees to indemnify the Trustees and officers
of the Trust (each such person being an "indemnitee")
against any liabilities and expenses, including amounts
paid in satisfaction of judgments, in compromise or as
fines and penalties, and reasonable counsel fees
reasonably incurred by such indemnitee in connection with
the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or investigative body in which he may be or
may have been involved as a party or otherwise or with
which he may be or may have been threatened, while acting
in any capacity set forth above in this Section 4.2 by
reason of his having acted in any such capacity, except
with respect to any matter as to which he shall not have
acted in good faith in the reasonable belief that his
action was in the best interest of the Trust or, in the
case of any criminal proceeding, as to which he shall have
had reasonable cause to believe that the conduct was
unlawful, provided, however, that no indemnitee shall be
indemnified hereunder against any liability to any person
or any expense of such indemnitee arising by reason of (i)
willful misfeasance, (ii) bad faith, (iii) gross
negligence (negligence in the case of Affiliated
Indemnitees), or (iv) reckless disregard of the duties
involved in the conduct of his position (the conduct
referred to in such clauses (i) through (iv) being
sometimes referred to herein as "disabling conduct").
Notwithstanding the foregoing, with respect to any action,
suit or other proceeding voluntarily prosecuted by any
indemnitee as plaintiff, indemnification shall be
mandatory only if the prosecution of such action, suit or
other proceeding by such indemnitee was authorized by a
majority of the Trustees and a Majority of the Investor
Trustees.
(b) Notwithstanding the foregoing, no
indemnification shall be made hereunder unless there has
been a determination (1) by a final decision on the merits
by a court or other body of competent jurisdiction before
whom the issue of entitlement to indemnification hereunder
was brought that such indemnitee is entitled to
indemnification hereunder or, (2) in the absence of such a
decision, by (i) a majority vote of a quorum of those
Trustees who are neither "interested persons" of the Trust
(as defined in Section 2(a)(19) of the 1940 Act) nor
parties to the proceeding ("Disinterested Non-Party
Trustees") and a Majority of the Investor Trustees, that
the indemnitee is entitled to indemnification hereunder,
or (ii) if such quorum is not obtainable or even if
obtainable, if such majorities so direct, independent
legal counsel in a written opinion conclude that the
indemnitee should be entitled to indemnification
hereunder. All determinations to make advance payments in
connection with the expense of defending any proceeding
shall be authorized and made in accordance with the
immediately succeeding paragraph (c) below.
(c) The Trust shall make advance payments
in connection with the expenses of defending any action
with respect to which indemnification might be sought
hereunder if the Trust receives a written affirmation by
the indemnitee of the indemnitee's good faith belief that
the standards of conduct necessary for indemnification
have been met and a written undertaking to reimburse the
Trust unless it is subsequently determined that he is
entitled to such indemnification and if a majority of the
Trustees and a Majority of the Investor Trustees determine
that the applicable standards of conduct necessary for
indemnification appear to have been met. In addition, at
least one of the following conditions must be met: (1)
the indemnitee shall provide adequate security for his
undertaking, (2) the Trust shall be insured against losses
arising by reason of any lawful advances, or (3) a
majority of a quorum of the Disinterested Non-Party
Trustees and a Majority of the Investor Trustees, or if a
majority vote of such quorum and a Majority of the
Investor Trustees so direct, independent legal counsel in
a written opinion, shall conclude, based on a review of
readily available facts (as opposed to a full trial-type
inquiry), that there is substantial reason to believe that
the indemnitee ultimately will be found entitled to
indemnification.
(d) The rights accruing to any indemnitee
under these provisions shall not exclude any other right
to which he may be lawfully entitled.
(e) Subject to any limitations provided by
the 1940 Act and this Declaration, the Trust shall have
the power and authority to indemnify other Persons
providing services to the Trust or any of its Mortgage
Affiliates to the full extent provided by law as if the
Trust were a corporation organized under the Delaware
General Corporation Law provided that such indemnification
has been approved by a majority of the Trustees and a
Majority of the Investor Trustees.
Section 4.3 No Bond Required of Trustees.
Subject to Section 4.2(d)(i), no Trustee shall be
obligated to give any bond or other security for the
performance of any of his duties hereunder.
Section 4.4 No Duty of Investigation; Notice in
Trust Instruments, etc. No purchaser, lender, transfer
agent or other Person dealing with the Trustees or any
officer of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to
be made by the Trustees or by said officer or be liable
for the application of money or property paid, loaned or
delivered to or on the order of the Trustees or of said
officer. Every obligation, contract, instrument,
certificate, Share, other security of the Trust or
undertaking, and every other act or thing whatsoever
executed in connection with the Trust shall be
conclusively presumed to have been executed or done by the
executors thereof only in their capacity as Trustees under
this Declaration or in their capacity as officers of the
Trust. Every written obligation, contract, instrument,
certificate, Share, other security of the Trust or
undertaking made or issued by the Trustees or by any
officer of the Trust shall recite that the same is
executed or made by them not individually, but as Trustees
under this Declaration or as an officer of the Trust, and
that the obligations of the Trust under any such
instrument are not binding upon any of the Trustees or
Shareholders, individually, but bind only the Trust
estate, and may contain any further recital which they or
he may deem appropriate, but the omission of such recital
shall not operate to bind the Trustees or Shareholders
individually.
Section 4.5 Reliance on Experts, etc. Each
Trustee or officer of the Trust shall, in the performance
of his duties, be fully and completely justified and
protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of
account or other records of the Trust, upon an opinion of
counsel, or upon reports made to the Trust by any of its
officers or agents selected with reasonable care by the
Trustees or officers of the Trust, regardless of whether
such officer or agent may also be a Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1 Beneficial Interest. The interest
of the beneficiaries hereunder shall be divided into
transferable Shares of beneficial interest with par value
of $.01 per Share. The number of Shares of beneficial
interest authorized hereunder is 200,000,000 Shares. All
Shares issued hereunder including, without limitation,
Shares issued in connection with a dividend in Shares or a
split of Shares, shall be fully paid and non-assessable
upon payment in full of such consideration not less than
the par value thereof as may be determined by the
Trustees.
The designations and powers, preferences and
rights, and the qualifications, limitations and
restrictions of the Shares are as set forth in this
Declaration.
Section 5.2 Rights of Shareholders. The
ownership of the Trust Property of every description and
the right to conduct any business hereinbefore described
are vested exclusively in the Trustees, and the
Shareholders shall have no right to call for any partition
or division of any property, profits, rights or interests
of the Trust nor can they be called upon to assume any
losses of the Trust or suffer any assessment of any kind
by virtue of their ownership of Shares if fully paid. The
Shares shall be personal property giving only the rights
in this Declaration specifically set forth herein, the
Delaware Act and any other applicable laws of the State of
Delaware. The Shares shall not entitle the holder to
preference, preemptive, appraisal, conversion or exchange
rights, except as the Trustees may determine with respect
to any class or series of Shares.
Section 5.3 Trust Only. It is the intention of
the Trustees to create only the relationship of Trustee
and beneficiary between the Trustees and each Shareholder
from time to time. It is not the intention of the
Trustees to create a general partnership, limited
partnership, joint stock association, corporation,
bailment or any form of legal relationship other than a
trust. Nothing in the Declaration shall be construed to
make the Shareholders, either by themselves or with the
Trustees, partners and members of a joint stock
association.
Section 5.4 Issuance of Shares. The Trustees
in their discretion may, from time to time without vote of
the Shareholders, issue Shares, in addition to the then
issued and outstanding Shares and Shares held in the
treasury, to Persons from whom the Trust has accepted, on
or prior to March 31, 1995, binding agreements to
subscribe for Shares. All issuances of Shares shall be in
accordance with the terms of the relevant forms of
subscription agreements, which forms shall have been
approved by the Trustees. The maximum dollar amount of
Shares for which subscription agreements may be accepted
is $600 million. In connection with any issuance of
Shares, the Trustees may issue fractional Shares and
Shares held in the treasury. Contributions to the Trust
may be accepted for whole Shares and/or 1/1,000ths of a
Share or integral multiples thereof.
Section 5.5 Capital Calls. The authority of
the Trust to require Shareholders to purchase Shares
pursuant to and in accordance with the terms and
provisions of their subscription agreements shall expire,
except with respect to Capital Calls made prior to that
date, on the later of (a) the third anniversary of the
Initial Closing, or (b) the fourth anniversary of the
Initial Closing if the Advisor, upon approval by holders
of a majority of the Shares, extends such period for such
additional year upon satisfaction of the following
conditions: (i) at least 50% of the Capital Commitments
have been drawn down and invested prior to the date
referred to in clause (a) above and (ii) the Advisor
determines, in its reasonable judgment, that sufficient
opportunities exist to deploy the unused Capital
Commitments during the extension period. Notwithstanding
the foregoing, such period may be shortened as set forth
in Section 7.1. All such purchases required of the
Shareholders will be made on a pro rata basis in
proportion to each respective Shareholder's undrawn
Capital Commitment to the Trust.
Section 5.6 Register of Shares. A register or
registers shall be kept at the principal office of the
Trust or at an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and
the number of Shares held by them respectively and a
record of all transfers thereof. Such register shall be
conclusive as to who are the holders of the Shares and who
shall be entitled to receive dividends or distributions or
otherwise to exercise or enjoy the rights of Shareholders.
No Shareholder shall be entitled to receive payment of any
dividend or distribution, nor to have notice given to him
as herein or in the By-Laws provided, until he has given
his address to the Transfer Agent or such other officer of
the Trustees as shall keep the said register for entry
thereon.
Section 5.7 Transfer of Shares. (a) The
Shares shall be transferable only with the prior written
consent of the Trust which will not be unreasonably
withheld. The Trust shall withhold consent to a transfer
of Shares if the Trust would be required to register such
transfer or any class of its securities under the
securities laws of any jurisdiction, if the transferee
would disqualify the Trust from being eligible to pay
performance fees under Rule 205-3 of the Investment
Advisers Act of 1940, as amended, or in the absence of a
written opinion of reputable counsel requested by the
Trust to the effect that the transfer of Shares
constitutes a private transaction exempt from registration
under U.S. securities laws. Any amendment to this Section
requires unanimous Trustee approval.
(b) The Shares shall be transferable on the
records of the Trust only by the record holder thereof or
by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Transfer Agent of a duly
executed instrument of transfer, together with any
certificate or certificates (if issued) for such Shares
and such evidence of the genuineness of each such
execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer
shall be recorded on the register of the Trust. Until
such record is made, the Shareholder of record shall be
deemed to be the holder of such Shares for all purposes
hereunder and neither the Trustees nor any Transfer Agent
or registrar nor any officer of the Trust shall be
affected by any notice of the proposed transfer.
(c) Any Person becoming entitled to any Shares
in consequence of the death, bankruptcy, or incompetence
of any Shareholder or otherwise by operation of law shall,
unless the transfer would be one to which the Trust would
be required to withhold consent under the second sentence
of Section 5.7(a), be recorded on the register of Shares
as the holder of such Shares upon production of the proper
evidence thereof to the Trustees or the Transfer Agent;
but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor any
Transfer Agent or registrar nor any officer of the Trust
shall be affected by any notice of such death, bankruptcy
or incompetence, or other operation of law.
Section 5.8 Notices. Unless otherwise provided
herein, any and all notices to which any Shareholder may
be entitled and any and all communications shall be deemed
duly served or given if mailed, postage prepaid, addressed
to any Shareholder of record at his last known address as
recorded on the register of the Trust. Such notice shall
be effective on the fifth Business Day after it is so
given or served.
Section 5.9 Treasury Shares. Shares held in
the treasury shall, until reissued pursuant to Section
5.4, not confer any voting rights on the Trustees, nor
shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
Section 5.10 Distribution. The Trust shall be
obligated to distribute, rather than reinvest, net
proceeds from the sale or refinancing of the Trust's
mortgage-backed securities and other investments realized
after the end of the Commitment Period.
ARTICLE VI
DETERMINATION OF NET ASSET VALUE
Section 6.1 Net Asset Value. The net asset
value (the "NAV") of the Trust will be calculated
quarterly as of each January 31, April 30, July 31 and
October 31, in connection with each issuance of shares by
the Trust and each of the Funds (after giving effect to
the Capital Call giving rise to such Share issuance), as
of each distribution declaration date (after giving effect
to the relevant declaration), as of the first anniversary
of the Trust's operations, as of the date on which the
Trust terminates, and more frequently as determined by the
Investment Advisor or a majority of the Trustees (each
such date hereinafter referred to as an "NAV Determination
Date"), in accordance with Valuation Policies and
guidelines approved from time to time by a majority of the
Trustees and all of the Investor Trustees.
ARTICLE VII
LIMITED EXISTENCE; TERMINATION
OF TRUST; AMENDMENT; MERGERS, ETC.
Section 7.1 Limited Existence. (a) Unless
terminated earlier, the Trust shall terminate on the
seventh anniversary of the Initial Closing, subject to no
more than two separate one-year extensions approved by
holders of a majority of the Trust's Shares. The Trust
and each of the Funds will also terminate and promptly
wind up their affairs upon a determination to do so by a
vote of the holders of 75% of the Shares of the Trust.
(b) The Investment Advisor shall promptly
notify each of the Trustees in writing if (i) either Mr.
Edens (or his successor) or a majority of the Management
Team ceases to devote substantially all of his or its time
to the affairs of the Trust and its downstream Affiliates
and the date as of which such services ceased or will
cease (the "BFM Trigger Date"); (ii) Mr. John Grayken
ceases to serve as Chairman of Brazos Advisors LLC, or
ceases to be primarily responsible for the day-to-day
operations of the counterparty to the coinvestment
agreement among the Trust, BCF and the strategic
coinvestor in commercial real estate debt ("Keystone")
(for so long as Keystone is the Trust's and BCF's
strategic coinvestor in commercial real estate debt
activities) and the date as of which such services ceased
or will cease (the "Keystone Trigger Date"); or (iii) the
Investment Advisor reasonably believes that there is a
substantial likelihood that the Trust or any of the Funds
has lost or will lose its tax status as a regulated
investment company ("RIC") (a "RIC Trigger") (each such
notification hereinafter referred to as a "Trigger
Notification").
As of the BFM Trigger Date, the Keystone Trigger
Date or the RIC Trigger, as the case may be, the Trust,
the Funds and BCF shall be prohibited from entering into
any new investment commitments and from making additional
drawdowns of capital other than to fund existing
investment commitments and liabilities of the Trust, the
Funds or BCF until such time as a majority of the Trustees
and all of the Investor Trustees consent to continue all
Capital Commitments and the operations of the Trust.
If such consent to continue all Capital
Commitments and the operations of the Trust is not given
within 60 days following the date of a Trigger
Notification, the Trustees shall promptly call a meeting
of the Trust's Shareholders to be held as soon as
practicable, provided that the date of such meeting shall
not be sooner than 45 days after the expiration of such 60
day period and, at such meeting, holders of a majority of
the Trust's Shares may require cancellation of all
unfunded Capital Commitments and, if they so elect,
immediate liquidation and winding up of the affairs of the
Trust and each of the Funds. In addition, unless all
unfunded Capital Commitments have been canceled pursuant
to the aforementioned vote of Shareholders, the Investment
Advisor shall cause the Trust to promptly notify each
shareholder of each of the Funds in writing that each
shareholder has the right, for five Business Days
following the date on which such notification is effective
(the "first option period"), to cancel its respective
unfunded Capital Commitment upon written notice to such
shareholder's Fund. Upon expiration of the first option
period, the Investment Advisor shall cause the Trust to
promptly notify each shareholder of each of the Funds that
has not canceled its unfunded Capital Commitment to such
shareholder's Fund of the aggregate amount of unfunded
Capital Commitments that were canceled during the first
option period, the identity of each Fund's shareholders
that effected such cancellations, the aggregate amount of
remaining unfunded capital commitments, and the identity
of each Fund's shareholders that have a remaining unfunded
capital commitment as of the end of the first option
period; and each such shareholder shall have the right,
for five Business Days following the date on which such
notification is effective, to cancel its respective
unfunded capital commitment by written notice to such
shareholder's Fund. Immediately upon receipt of written
notification from a shareholder of the cancellation of
such shareholder's unfunded capital commitment pursuant to
the provisions hereof, the Investment Advisor will cause
each Fund to exercise its right to cancel a corresponding
portion of such Fund's unfunded Capital Commitment to the
Trust by written notice to the Trust.
Section 7.2 Termination of Trust. Upon the
termination of the Trust:
(a) The Trust shall carry on no business
except for the purpose of winding up its affairs;
(b) The Trustees shall proceed to wind up
the affairs of the Trust and all of the powers of the
Trustees under this Declaration shall continue until the
affairs of the Trust shall have been wound up, including
the power to fulfill or discharge the contracts of the
Trust, collect its assets, sell, convey, assign, exchange,
transfer or otherwise dispose of all or any part of the
remaining Trust Property to one or more persons at public
or private sale for consideration which may consist in
whole or in part of cash, securities or other property of
any kind, discharge or pay its liabilities, and to do all
other acts appropriate to liquidate its business;
(c) After paying or adequately providing
for the payment of all liabilities, and upon receipt of
such releases, indemnities and refunding agreements as
they deem necessary for their protection, the Trustees
shall distribute the remaining Trust Property, in cash
only among the Shareholders according to their respective
rights; and
(d) After termination of the Trust and
distribution to the Shareholders as herein provided, a
majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting
forth the fact of such termination, and the Trustees shall
thereupon be discharged from all further liabilities and
duties hereunder, and the rights and interests of all
Shareholders shall thereupon cease.
Section 7.3 Amendment Procedure. (a) Except
as otherwise provided herein and except as otherwise
required by law, this Declaration may be amended upon such
terms and conditions authorized at any meeting of
Shareholders called for that purpose by the affirmative
vote of not less than two-thirds of the Shares outstanding
and entitled to vote, or by an instrument or instruments
in writing without a meeting executed by Shareholders with
respect to not less than two-thirds of such Shares. The
Trustees may also amend this Declaration without the vote
or consent of Shareholders to change the name of the
Trust, to cure or correct any inconsistent provision
hereof, or if they deem it necessary to conform this
Declaration to the requirements of applicable federal
securities laws or regulations or the requirements of the
regulated investment company provisions of the Code, but
the Trustees shall not be liable for failing so to do.
(b) No amendment may be made which would
change any rights with respect to any Shares by reducing
the amount payable thereon upon liquidation of the Trust
or by diminishing or eliminating any voting rights
pertaining thereto, except with the unanimous vote or
consent of the holders of the Shares so affected. No
amendment may be made to Section 9.6 of this Declaration
without the prior written consent of BlackRock.
(c) Nothing contained in this Declaration
shall permit the amendment of this Declaration to impair
the exemption from personal liability of the Shareholders,
Trustees or officers of the Trust or to permit assessment
upon Shareholders in excess of the amounts set forth in
their subscription agreements.
(d) No amendment may be made under this
Section 7.3 which shall amend, alter, change or repeal any
of the provisions of Sections 2.2(d), 3.3, 7.1, 7.2, 7.3,
7.4 or any other Shareholder voting requirements unless
the amendment, alteration, change or repeal shall receive
the affirmative vote or consent of not less than seventy-
five percent (75%) of the Shares. Such affirmative vote
or consent shall be in addition to the vote or consent of
the holders of Shares otherwise required by this
Declaration or by law, whether now or hereafter
authorized.
(e) No amendment may be made under this
Section 7.3 which shall amend, alter, change or repeal any
voting requirement applicable to Investor Trustees or
Trustees, unless the proposed amendment, alteration,
change or repeal shall receive the affirmative approval in
the form of a vote of all of the Investor Trustees
(whether or not present) or a majority of the Trustees, as
the case may be.
(f) The provisions relating directly or
indirectly to cumulative voting may not be amended without
the approval of each Shareholder which would be entitled
through cumulative voting to elect a Trustee if the entire
Board was then being elected.
Section 7.4 Merger, Consolidation and Sale of
Assets. The Trust may merge or consolidate with any other
corporation, association, trust, partnership or other
organization or may sell, lease or exchange all or
substantially all of the Trust Property, including its
good will, upon such terms and conditions and for such
consideration when and as authorized at any meeting of
Shareholders called for the purpose by the affirmative
vote of not less than two-thirds of the Shares entitled to
vote.
ARTICLE VIII
SHAREHOLDERS
Section 8.1 Meetings of Shareholders. Annual
meetings of the Shareholders shall not be required. A
meeting of Shareholders may be called at any time by a
majority of the Trustees and shall be called by any
Trustee for any proper purpose upon written request of
Shareholders of the Trust holding in the aggregate: with
respect to matters requiring voting by the Shareholders,
not less than 20% of the outstanding Shares, such request
specifying the purpose or purposes for which such meeting
is to be called; or, in the case of a meeting for the
purpose of voting on the question of removal of any
Trustee or Trustees, upon written request of the
Shareholders entitled to vote on the removal of such
Trustee or Trustees holding in the aggregate not less than
10% of the outstanding Shares; or, in the case of a
meeting for the purpose of voting on the question of
removal of the independent public accountants of the
Trust, upon written request of Shareholders, holding in
the aggregate not less than 10% of the outstanding Shares.
Any Meeting shall be held within or without the State of
Delaware on such day and at such time as the Trustees
shall designate and, in the case of any meeting called by
a Trustee as a result of a Shareholder's written request,
within sixty (60) days of such written request or such
longer period as is approved by the Trustee calling such
meeting.
Section 8.2 Voting. Shareholders shall have no
power to vote on any matter except matters on which a vote
of Shareholders is required by applicable law, this
Declaration, By-Laws or resolution of the Trustees.
Voting by the Trust's Shareholders shall be in accordance
with any provisions set forth in the Declarations of Trust
of such Shareholders.
Section 8.3 Notice of Meeting and Record Date.
Notice of all meetings of Shareholders, stating the time,
place and purposes of the meeting, shall be given by the
Trustees by mail to each Shareholder and to each
shareholder of record of each Fund entitled to vote
thereat at his registered address, mailed at least 10
Business Days and not more than 90 days before the
meeting. Only the business stated in the notice of the
meeting shall be considered at such meeting. Any
adjourned meeting may be held as adjourned without further
notice. For the purposes of determining the Shareholders
who are entitled to notice of and to vote at any meeting,
the Trustees may, without closing the transfer books, fix
a date not more than 90 days prior to the date of such
meeting of Shareholders as a record date for the
determination of the Persons to be treated as Shareholders
of record for such purposes.
Section 8.4 Quorum and Required Vote. The
holders of a majority of outstanding Shares entitled to
vote thereat of the Trust present in person or by proxy
shall constitute a quorum at any meeting of the
Shareholders for purposes of conducting business on which
a vote of Shareholders of the Trust is being taken.
Subject to any provision of the 1940 Act, this Declaration
or (to the extent authorized) a resolution of the Trustees
specifying a greater or lesser vote requirement for the
transaction of any item of business at any meeting of
Shareholders, the affirmative vote of a majority of the
Shares present in person or represented by proxy and
entitled to vote on the subject matter shall be the act of
the Shareholders with respect to such matter. Except as
otherwise provided in this Declaration, each whole Share
shall be entitled to one vote as to any matter on which it
is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote. Until Shares
are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, this
Declaration or the By-Laws to be taken by Shareholders.
The By-Laws may include further provisions, not
inconsistent with this Declaration, for Shareholder votes
and meetings and related matters. If at any meeting of
Shareholders, one or more of the Shareholders is not
present in person or by proxy and has not indicated in
writing that it chooses not to be present, the Trust shall
adjourn such meeting for a period of two Business Days for
the purpose of determining whether such Shareholder
desires to be present at such meeting and, if so, shall
adjourn such meeting for a further period of 10 Business
Days for the purpose of permitting such Shareholder to be
present at such meeting.
Section 8.5 Proxies, etc. At any meeting of
Shareholders, any holder of Shares entitled to vote
thereat may vote by properly executed proxy, provided that
no proxy shall be voted at any meeting unless it shall
have been placed on file with the Secretary, or with such
other officer of the Trust as the Secretary may direct,
for verification prior to or simultaneously with the time
at which such vote shall be taken. Pursuant to a
resolution of a majority of the Trustees, proxies may be
solicited in the name of one or more Trustees or one or
more of the officers of the Trust. Only Shareholders of
record shall be entitled to vote. When any Share is held
jointly by several persons, any one of them may vote at
any meeting in person or by proxy in respect of such
Share, but if more than one of them shall be present at
such meeting in person or by proxy, and such joint owners
or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such
Share. A proxy purporting to be executed by or on behalf
of a Shareholder shall be deemed valid unless challenged
at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of
any such Share is a minor or a person of unsound mind, and
subject to guardianship or to the legal control of any
other person as regards the charge or management of such
Share, he may vote by his guardian or such other person
appointed or having such control, and such vote may be
given in person or by proxy.
Section 8.6 Reports. The Trust will send to
each of its Shareholders with respect to the Trust and the
Trust's downstream Affiliates, including BCF: (i) annual
reports with audited annual financial statements, (ii)
semiannual reports with unaudited financial statements,
and (iii) copies of all tax filings made by the Trust and
the Trust's downstream Affiliates, including BCF.
Section 8.7 Shareholder Action by Written
Consent. Any action which may be taken by Shareholders by
vote may be taken without a meeting if the holders
entitled to vote thereon of the same proportion of Shares
required for approval of such action at a meeting of
Shareholders consent to the action in writing and the
written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated
for all purposes as a vote taken at a meeting of
Shareholders. The Trust shall promptly notify all
Shareholders, including non-consenting Shareholders, of
the results of any action so taken.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Filing. This Declaration and any
amendment hereto shall be filed and recorded in such
places as may be required under the laws of Delaware and
may also be filed or recorded in such other places as the
Trustees deem appropriate. A restated Declaration,
integrating into a single instrument all of the provisions
of the Declaration which are then in effect and operative,
may be executed from time to time by a majority of the
Trustees and shall upon filing with the Secretary of the
State of Delaware or lodging with the permanent records of
the Trust, be conclusive evidence of all amendments
contained therein and may thereafter be referred to in
lieu of the original Declaration and the various
amendments thereto.
Section 9.2 Governing Law. This Declaration of
Trust and the Trust created hereunder shall be governed by
and construed and administered according to the Delaware
Act and the other applicable laws of the State of
Delaware. The Trust shall be of the type commonly called
a Delaware business trust, and, subject to any limitations
expressed herein, the Trust may exercise all powers or
privileges which are ordinarily exercised by such a trust
under Delaware law and the absence of a specific reference
herein to any such power or privilege shall not imply that
the Trust may not exercise such power or privilege.
Section 9.3 Counterparts. This Declaration may
be simultaneously executed in several counterparts, each
of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any
such original counterpart.
Section 9.4 Reliance by Third Parties. Any
certificate executed by an individual who, according to
the records of the Trust appears to be a Trustee
hereunder, certifying: (a) the number or identity of
Trustees or Shareholders, (b) the due authorization of the
execution of any instrument or writing, (c) the form of
any vote passed at a meeting of Trustees or Shareholders,
(d) the fact that the number of Trustees or Shareholders
present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the
form of any By-Laws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of
any fact or facts which in any manner relate to the
affairs of the Trust, shall be conclusive evidence as to
the matters so certified in favor of any Person dealing
with the Trustees and their successors.
Section 9.5 Provisions in Conflict with Law or
Regulations. (a) The provisions of the Declaration are
severable, and if the Trustees shall determine, with the
advice of counsel, that any of such provisions are in
conflict with the 1940 Act, the regulated investment
company provisions of the Code, or any amendments or
successor statute thereto, or with other applicable laws
and regulations, the conflicting provision shall be deemed
not to constitute and never to have constituted a part of
the Declaration; provided, however, that such
determination shall not affect any of the remaining
provisions of the Declaration or render invalid or
improper any action taken or omitted prior to such
determination.
(b) If any provision of the Declaration
shall be held invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall
apply only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other
jurisdiction or any other provision of the Declaration in
any jurisdiction.
Section 9.6 Use of the Name "BlackRock".
BlackRock has consented to the use by the Trust of the
identifying word or name "BlackRock" in the name of the
Trust. Such consent is conditioned upon the employment of
BlackRock, its successors or any Affiliate thereof, as
Investment Advisor of the Trust. The name or identifying
word "BlackRock" may be used from time to time in other
connections and for other purposes by BlackRock or
Affiliated entities. BlackRock may require the Trust to
cease using "BlackRock" in the name of the Trust if the
Trust ceases to employ, for any reason, BlackRock, an
Affiliate, or any successor to BlackRock as Investment
Advisor of the Trust.
Section 9.7 Shareholder Coinvestment. (i)
Subject to the applicable coinvestment requirements
specified in Section 3.2(h) hereof, the Trust and its
strategic coinvestor in commercial mortgage assets will
have a prior right to acquire all or such portion, if any,
of the subordinated collateralized mortgage backed
securities ("CMBS") issued from time to time by the
Trust's Mortgage Affiliates (other than Residuals) as the
Trust and such strategic coinvestor respectively
determine, (ii) the portion of such subordinated CMBS, if
any, not acquired by the Trust and its strategic
coinvestor will be offered to each shareholder of a Fund
(or the investment entity specified by such shareholder)
that has designated an Investor Trustee, provided that
such shareholder (or such investment entity) has obtained
any necessary exemption from the SEC with respect to
relevant sections of the 1940 Act and (iii) each
subordinated CMBS acquired pursuant to clause (ii) will be
acquired concurrently with and on terms no more favorable
than those applicable to the Trust's acquisition of such
subordinated CMBS.
Appendix A
Fundamental Investment Restrictions
The Trust's investment objective and the following
investment restrictions are fundamental and cannot be
changed without approval of a majority of the Trustees and
all of the Investor Trustees and the approval of the
holders of a majority of the Trust's shares. If a
percentage restriction on investment or use of assets set
forth below is adhered to at the time a transaction is
effected, later changes in percentage resulting from
changing market values will not be considered a deviation
from policy. Subject to the foregoing, the Trust may not:
1. invest 25% or more of its Total Assets in any one
industry (mortgage loans, mortgage-backed securities
and other securities issued or guaranteed by the U.S.
government or any agency or instrumentality thereof
are not treated as industries), except for its
investments in BCF and other Mortgage Affiliates and
except to the extent its investments in mortgage-
backed securities may represent interests in mortgage
loans of borrowers engaged in particular industries;
2. issue preferred stock;
3. make loans of money or property to any person, except
through the purchase of fixed income securities
consistent with the Trust's investment objective and
policies or the acquisition of securities subject to
repurchase agreements;
4. underwrite the securities of other issuers, except to
the extent that in connection with the disposition of
portfolio securities or the sale of its own shares
the Trust may be deemed to be an underwriter;
5. invest for the purpose of exercising control over
management of any company other than BCF, other
Mortgage Affiliates and issuers of mortgage-backed
and other real estate related investments;
6. purchase real estate or interests therein other than
(i) real estate debt and interests therein, and (ii)
real estate acquired by foreclosure or deed-in-lieu
of foreclosure as part of a pool of real estate debt
or interests therein or acquired in connection with
the work-out of real estate debt owned by the Trust,
BCF or any of the other Mortgage Affiliates; or
7. purchase or sell commodities or commodity contracts
for any purpose except for Hedging purposes and
except as, and to the extent, permitted by applicable
law without the Trust becoming subject to
registration with the Commodity Futures Trading
Commission as a commodity pool.
IN WITNESS WHEREOF, the undersigned has caused
these presents to be executed as of the day and year first
above written.
__________________________ _________________________
John C. Deterding Laurence D. Fink
being a member of the being a member of the
Board of Trustees of the Board of Trustees of the
Trust Trust
__________________________ _________________________
Kendrick R. Wilson, III Ralph L. Schlosstein
being a member of the being a member of the
Board of Trustees of the Board of Trustees of the
Trust Trust
__________________________ _________________________
Laurence E. Hirsch Wesley R. Edens
being a member of the being a member of the
Board of Trustees of the Board of Trustees of the
Trust Trust
__________________________ _________________________
Donald G. Drapkin Michael E. Klehm
being a member of the being a member of the
Board of Trustees of the Board of Trustees of the
Trust Trust
__________________________ _________________________
Philip Halpern James Grosfeld
being a member of the being a member of the
Board of Trustees of the Board of Trustees of the
Trust Trust
State of )
) ss:
County of )
Then personally appeared before me Laurence D.
Fink, Ralph L. Schlosstein, Wesley R. Edens, Michael E.
Klehm, Kendrick R. Wilson, III, Laurence E. Hirsch, Donald G.
Drapkin, John C. Deterding, Philip Halpern and James Grosfeld
who acknowledged the foregoing instrument to be his free act
and deed and the free act and deed of the Trustee of
BlackRock Asset Investors.
Before me,
________________________
Notary Public
My Commission Expires: ___________________
BY-LAWS
OF
BLACKROCK ASSET INVESTORS
ARTICLE I
Offices
Section 1. Principal Office. The principal
office of BlackRock Asset Investors (the "Trust") shall
be in the City of Wilmington, State of Delaware.
Section 2. Principal Executive Office. The
principal executive offices of the Trust shall be at 345
Park Avenue, New York, New York 10154.
Section 3. Other Offices. The Trust may have
such other offices in such places as the Trustees may
from time to time determine.
ARTICLE II
Meetings of Shareholders
Section 1. No Annual Meeting. No annual
meeting of the shareholders of the Trust shall be
required to be held for any purpose.
Section 2. Meetings. Meetings of the
shareholders may be called for any purpose or purposes as
provided by the Declaration of Trust of the Trust.
Section 3. Place of Meeting. Meetings of the
shareholders shall be held at such place within the
United States as the Board of Trustees may from time to
time determine.
Section 4. Notice of Meetings; Waiver of
Notice. Notice of the place, date and time of the
holding of each meeting of the shareholders and the
purpose or purposes of each meeting shall be given in
accordance with the Declaration of Trust of the Trust.
Notice by mail shall be deemed to be duly given when
deposited in the United States mail addressed to the
shareholder at his address as it appears on the records
of the Trust, with postage thereon prepaid.
Notice of any meeting of shareholders shall be
deemed waived by any shareholder who shall attend such
meeting in person or by proxy, or who shall, either
before or after the meeting, submit a signed waiver of
notice which is filed with the records of the meeting.
When a meeting is adjourned to another time and place,
unless the Board of Trustees, after the adjournment,
shall fix a new record date for an adjourned meeting, or
the adjournment is for more than sixty days after the
original record date, notice of such adjourned meeting
need not be given if the time and place to which the
meeting shall be adjourned were announced at the meeting
at which the adjournment is taken.
Section 5. Quorum. At all meetings of the
shareholders, the holders of a majority of the shares of
beneficial interest of the Trust ("Shares") entitled to
vote at the meeting, present in person or by proxy, shall
constitute a quorum for the transaction of any business,
except as otherwise provided by statute or by the
Declaration of Trust. In the absence of a quorum no
business may be transacted, except that the holders of a
majority of the Shares present in person or by proxy and
entitled to vote may adjourn the meeting from time to
time, without notice other than announcement thereat
except as otherwise required by these By-Laws, until the
holders of the requisite amount of Shares shall be so
present. At any such adjournment meeting at which a
quorum may be present any business may be transacted
which might have been transacted at the meeting as
originally called. The absence from any meeting, in
person or by proxy, of holders of the number of Shares of
the Trust in excess of a majority thereof which may be
required by the laws of the State of Delaware, the
Investment Company Act of 1940, as amended, or other
applicable statute, the Declaration of Trust, or these
By-Laws, for action upon any given matter shall not
prevent action at such meeting upon any other matter or
matters which may properly come before the meeting, if
there shall be present thereat, in person or by proxy,
holders of the number of Shares of the Trust required for
action in respect of such other matter or matters.
Section 6. Organization. At each meeting of
the shareholders, the Chairman of the Board (if one has
been designated by the Board), or in the absence or
inability of the Chairman of the Board to act, the
President, or in the absence or inability of the Chairman
of the Board and the President, a Vice President, shall
act as chairman of the meeting. The Secretary, or in the
Secretary's absence or inability to act, any person
appointed by the chairman of the meeting, shall act as
secretary of the meeting and keep the minutes thereof.
Section 7. Order of Business. The order of
business at all meetings of the shareholders shall be as
determined by the chairman of the meeting.
Section 8. Voting. Except as otherwise
provided by statute or the Declaration of Trust, each
holder of record of Shares of the Trust having voting
power shall be entitled at each meeting of the
shareholders to one vote for every such share standing in
such shareholder's name on the record of shareholders of
the Trust as of the record date determined pursuant to
Section 9 of this Article or if such record date shall
not have been so fixed, then at the later of (i) the
close of business on the day on which notice of the
meeting is mailed or (ii) the thirtieth day before the
meeting.
Each shareholder entitled to vote at any
meeting of shareholders may authorize another person or
persons to act for him by a proxy signed by such
shareholder or his attorney-in-fact. No proxy shall be
valid after the expiration of eleven months from the date
thereof, unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the
shareholder executing it, except in those cases where
such proxy states that it is irrevocable and where an
irrevocable proxy is permitted by law. Except as
otherwise provided by statute, the Declaration of Trust
or these By-Laws, any corporate action to be taken by
vote of the shareholders shall be authorized by a
majority of the total votes cast at a meeting of
shareholders by the holders of Shares present in person
or represented by proxy and entitled to vote on such
action.
If a vote shall be taken on any question other
than the election of trustees, which shall be by written
ballot, then unless required by statute or these By-Laws,
or determined by the chairman of the meeting to be
advisable, any such vote need not be by ballot. On a
vote by ballot, each ballot shall be signed by the
shareholder voting, or by his proxy, if there be such
proxy, and shall state the number of Shares voted.
Section 9. Fixing of Record Date. The Board
of Trustees may set a record date for the purpose of
determining shareholders entitled to vote at any meeting
of the shareholders. The record date, which may not be
prior to the close of business on the day the record date
is fixed, shall be not more than ninety nor less than ten
days before the date of the meeting of the shareholders.
All persons who were holders of record of Shares at such
time, and not others, shall be entitled to vote at such
meeting and any adjournment thereof.
Section 10. Inspectors. The Board may, in
advance of any meeting of shareholders, appoint one or
more inspectors to act at such meeting or any adjournment
thereof. If the inspector shall not be so appointed or
if any of them shall fail to appear or act, the chairman
of the meeting may, and on the request of any shareholder
entitled to vote thereat shall, appoint inspectors. Each
inspector, before entering upon the discharge of his
duties, shall take and sign an oath to execute faithfully
the duties of inspector at such meeting with strict
impartiality and according to the best of his ability.
The inspectors shall determine the number of Shares
outstanding and the voting powers of each, the number of
Shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall
receive votes, ballots or consents, hear and determine
all challenges and questions arising in connection with
the right to vote, count and tabulate all votes, ballots
or consents, determine the result, and do such acts as
are proper to conduct the election or vote with fairness
to all shareholders. On request of the chairman of the
meeting or any shareholder entitled to vote thereat, the
inspectors shall make a report in writing of any
challenge, request or matter determined by them and shall
execute a certificate of any fact found by them. No
trustee or candidate for the office of trustee shall act
as inspector of an election of trustees. Inspectors need
not be shareholders.
ARTICLE III
Board of Trustees
Section 1. General Powers. Except as
otherwise provided in the Declaration of Trust, the
business and affairs of the Trust shall be managed under
the direction of the Board of Trustees. All powers of
the Trust may be exercised by or under authority of the
Board of Trustees except as conferred on or reserved to
the shareholders by law or by the Declaration of Trust or
these By-Laws.
Section 2. Election and Term of Trustees. The
Trustees as to which vacancies exist shall be elected by
written ballot at a meeting of shareholders held for that
purpose unless otherwise provided by statute or the
Declaration of Trust. The term of office of each trustee
shall be from the time of his election and qualification
until the expiration of his term as provided in the
Declaration of Trust.
Section 3. Place of Meetings. Meetings of the
Board may be held at such place as the Board may from
time to time determine or as shall be specified in the
notice of such meeting.
Section 4. Regular Meeting. Regular meetings
of the Board may be held without notice at such time and
place as may be determined by the Board of Trustees.
Section 5. Special Meetings. Special meetings
of the Board may be called by any Trustee of the Trust
or by the Chairman of the Board or the President or
Secretary.
Section 6. No Annual Meeting. No annual
meeting of the Board of Trustees shall be required to be
held.
Section 7. Waiver of Notice of Meetings.
Notice of any special meeting need not be given to any
trustee who shall, either before or after the meeting,
sign a written waiver of notice which is filed with the
records of the meeting or who shall attend such meeting
except where a Trustee attends a meeting for the express
purpose of objecting to the transaction of any business
on the ground that the meeting has not been lawfully
called or convened. Except as otherwise specifically
required by these By-Laws, a notice or waiver of notice
of any meeting need not state the purpose of such
meeting.
Section 8. Quorum. A quorum for all meetings
of the Trustees shall be as specified in the Declaration
of Trust. In the absence of a quorum at any meeting of
the Board, a majority of the members of the Board present
thereat may adjourn such meeting to another time and
place until a quorum shall be present thereat. Notice of
the time and place of any such adjourned meeting shall be
given to the trustees who were not present at the time of
the adjournment and, unless such time and place were
announced at the meeting at which the adjournment was
taken, to the other trustees. At any adjourned meeting at
which a quorum is present, any business may be transacted
which might have been transacted at the meeting as
originally called.
Section 9. Organization. The Board may, by
resolution adopted by a majority of the entire Board,
designate a Chairman of the Board, who shall preside at
each meeting of the Board. In the absence or inability
of the Chairman of the Board to preside at a meeting,
another Trustee selected by a majority of the trustees
present, shall act as chairman of the meeting and preside
thereat. The Secretary (or, in his absence or inability
to act, any person appointed by the Chairman) shall act
as secretary of the meeting and keep the minutes thereof.
Section 10. Compensation. Trustees may
receive compensation for services to the Trust in their
capacities as trustees or otherwise in such manner and in
such amounts as may be fixed from time to time by the
Board.
Section 11. Investment Advisor. The Board may
delegate the duty of management of the assets and the
administration of the Trust's operations to one or more
individuals or entities pursuant to a written contract or
contracts which have obtained the requisite approvals,
including the requisite approvals of renewals thereof, of
the Board of Trustees and/or the shareholders of the
Trust in accordance with the provisions of the Investment
Company Act of 1940, as amended, and the Declaration of
Trust.
ARTICLE IV
Officers, Agents and Employees
Section 1. Number of Qualifications. The
officers of the Trust shall be a President, a Secretary
and a Treasurer, each of whom shall be elected by the
Board of Trustees. The Board of Trustees may elect or
appoint one or more Vice Presidents and may also appoint
such other officers, agents and employees as it may deem
necessary or proper. Any two or more offices may be held
by the same person, except the offices of President and
Vice President, but no officer shall execute, acknowledge
or verify any instrument as an officer in more than one
capacity. Such officers shall be elected by the Board of
Trustees, each to hold office until his successor shall
have been duly elected and shall have qualified, or until
his death, or until he shall have resigned, or have been
removed, as hereinafter provided in these By-Laws. The
Board may from time to time elect, or delegate to the
President the power to appoint, such officers and such
agents, as may be necessary or desirable for the business
of the Trust. Such officers and agents shall have such
duties and shall hold their offices for such terms as may
be prescribed by the Board or by the appointing
authority.
Section 2. Resignations. Any officer of the
Trust may resign at any time by giving written notice of
resignation to the Board, the Chairman of the Board,
President or the Secretary. Any such resignation shall
take effect at the time specified therein or, if the time
when it shall become effective shall not be specified
therein, immediately upon its receipt; and, unless
otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 3. Removal of Officer, Agent or
Employee. Any officer, agent or employee of the Trust
may be removed by the Board of Trustees with or without
cause at any time, and the Board may delegate such power
of removal as to agents and employees not elected or
appointed by the Board of Trustees. Such removal shall
be without prejudice to such person's contract rights, if
any, but the appointment of any person as an officer,
agent or employee of the Trust shall not of itself create
contract rights.
Section 4. Vacancies. A vacancy in any
office, either arising from death, resignation, removal
or any other cause, may be filled for the unexpired
portion of the term of the office which shall be vacant,
in the manner prescribed in these By-Laws for the regular
election or appointment to such office.
Section 5. Compensation. The officers of the
Trust shall not be compensated by the Trust.
Section 6. Bonds or Other Security. If
required by the Board, any officer, agent or employee of
the Trust shall give a bond or other security for the
faithful performance of his duties, in such amount and
with such surety or sureties as the Board may require.
Section 7. President. The President shall be
the chief executive officer of the Trust. He shall have,
subject to the control of the Board of Trustees, general
charge of the business and affairs of the Trust. He may
employ and discharge employees and agents of the Trust,
except such as shall be appointed by the Board, and he
may delegate these powers.
Section 8. Vice President. Each Vice
President shall have such powers and perform such duties
as the Board of Trustees or the President may from time
to time prescribe.
Section 9. Treasurer. The Treasurer shall
(a) have charge and custody of, and be
responsible for, all the funds and securities of the
Trust, except those which the Trust has placed in the
custody of a bank or trust company or member of a
national securities exchange (as that term is defined in
the Securities Exchange Act of 1934, as amended) pursuant
to a written agreement designating such bank or trust
company or member of a national securities exchange as a
custodian or sub-custodian of the property of the Trust;
(b) keep full and accurate accounts of
receipts and disbursements in books belonging to the
Trust;
(c) cause all moneys and other valuables
to be deposited to the credit of the Trust;
(d) receive, and give receipts for,
moneys due and payable, to the Trust from any source
whatsoever;
(e) disburse the funds of the Trust and
supervise the investment of its funds as ordered or
authorized by the Board or any authorized agent of the
Trust, taking proper vouchers therefor; and
(f) in general, perform all the duties
incident to the office of Treasurer and such other duties
as from time to time may be assigned to him by the Board
or the President.
Section 10. Secretary. The Secretary shall
(a) keep or cause to be kept in one or
more books provided for the purpose, the minutes of all
meetings of the Board, the committees of the Board and
the Shareholders;
(b) see that all notices are duly given
in accordance with the provisions of these By-Laws and as
required by law;
(c) be custodian of the records and the
seal of the Trust and affix and attest the seal to all
documents to be executed on behalf of the Trust under its
seal;
(d) see that the books, reports,
statements, certificates and other documents and records
required by law to be kept and filed are properly kept
and filed; and
(e) in general, perform all the duties
incident to the office of Secretary and such other duties
as from time to time may be assigned to him by the Board
or the President.
Section 11. Delegation of Duties. In case of
the absence of any officer of the Trust, or for any other
reason that the Board may deem sufficient, the Board may
confer for the time being the powers or duties, or any of
them, of such officer upon any other officer or upon any
trustee.
ARTICLE V
Shares of Beneficial Interest
Section 1. Book-Entry. Shares of the Trust
will be issued in book entry form and holders of Shares
will not be entitled to share certificates unless the
Board approves the issuance of Share certificates.
Section 2. Books of Accounts and Record of
Shareholders. There shall be kept at the principal
executive offices of the Trust correct and complete books
and records of account of all the business and
transactions of the Trust.
Section 3. Transfers of Shares. Transfers of
Shares of the Trust shall be made on the share records of
the Trust only by the registered holder thereof, or by
his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary or with a
transfer agent or transfer clerk, and on surrender of the
certificate or certificates, if issued, for such Shares
properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon.
Except as otherwise provided by law, the Trust shall be
entitled to recognize the exclusive rights of a person in
whose name any Share or Shares stand on the record of
shareholders as the owner of such Share or Shares for all
purposes, including, without limitation, the rights to
receive dividends or other distributions, and to vote as
such owner, and the Trust shall not be bound to recognize
any equitable or legal claim to or interest in any such
Share or Shares on the part of any other person.
Section 4. Regulations. The Board may make
such additional rules and regulations, not inconsistent
with these By-Laws, as it may deem expedient concerning
the issue, transfer and registration of certificates for
Shares of the Trust. It may appoint, or authorize any
officer or officers to appoint, one or more transfer
agents or one or more transfer clerks and one or more
registrars.
Section 5. Fixing of a Record Date for
Dividends and Distributions. The Board may fix, in
advance, a date not more than ninety days preceding the
date fixed for the payment of any dividend or the making
of any distribution. Once the Board of Trustees fixes a
record date as the record date for the determination of
the shareholders entitled to receive any such dividend or
distribution, only the shareholders of record at the time
so fixed shall be entitled to receive such dividend or
distribution.
Section 6. Information to Shareholders and
Others. Any shareholder of the Trust or his agent may
inspect and copy during usual business hours the Trust's
By-Laws, minutes of the proceedings of its shareholders,
annual statements of its affairs, voting trust agreements
on file at its principal office and any of its other
books or records.
ARTICLE VI
Seal
The seal of the Trust shall be circular in form
and shall bear, in addition to any other emblem or device
approved by the Board of Trustees, the name of the Trust,
the year of its formation and words "Seal" and
"Delaware". Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any
other manner reproduced.
ARTICLE VII
Fiscal Year
Unless otherwise determined by the Board, the
fiscal year of the Trust shall end on the 31st day of
October.
ARTICLE VIII
Depositories and Custodians
Section 1. Depositories. The funds of the
Trust shall be deposited with such banks or other
depositories as the Board of Trustees of the Trust may
from time to time determine.
Section 2. Custodians. All securities and
other investments shall be deposited in the safe keeping
of such banks or other companies as the Board of Trustees
of the Trust may from time to time determine. Every
arrangement entered into with any bank or other company
for the safe keeping of the securities and investments of
the Trust shall contain provisions complying with the
Investment Company Act of 1940, as amended, and the
general rules and regulations thereunder.
ARTICLE IX
Execution of Instruments
Section 1. Checks, Notes, Drafts, etc.
Checks, notes, drafts, acceptances, bills of exchange and
other orders or obligations for the payment of money
shall be signed by such officer or officers or person or
persons as shall be designated from time to time by or
pursuant to the terms of any resolution adopted by the
Board of Trustees.
Section 2. Sale or Transfer of Securities.
Stock certificates, bonds or other securities at any time
owned by the Trust may be held on behalf of the Trust or
sold, transferred or otherwise disposed of subject to any
limits imposed by these By-Laws and pursuant to
authorization by the Board and, when so authorized to be
held on behalf of the Trust or sold, transferred or
otherwise disposed of, may be transferred from the name
of the Trust by the signature of the President or a Vice
President or the Treasurer or pursuant to any procedure
approved by the Board of Trustees, subject to applicable
law.
ARTICLE X
Independent Public Accountants
The firm of independent public accountants
which shall sign or certify the financial statements of
the Trust which are filed with the Securities and
Exchange Commission shall be selected annually by the
Board of Trustees and ratified by the shareholders in
accordance with the provisions of the Investment Company
Act of 1940, as amended.
ARTICLE XI
Annual Statement
The books of account of the Trust shall be
examined by an independent firm of public accountants at
the close of each annual period of the Trust and at such
other times as may be directed by the Board. A report to
the shareholders based upon each such examination shall
be mailed to each shareholder of the Trust of record, and
to each shareholder of record of each entity that is a
shareholder of record of the Trust, on such date with
respect to each report as may be determined by the Board,
at his address as the same appears on the books of the
Trust or such shareholder. Such annual statement shall
also be available at any meeting of shareholders held
during the twelve-month period after such statement is
first available and shall be placed on file at the
Trust's principal office in the State of Delaware. Each
such report shall show the assets and liabilities of the
Trust as of the close of the annual or other period
covered by the report and the securities in which the
funds of the Trust were then invested. Such report shall
also show the Trust's income and expenses for the period
from the end of the Trust's fiscal year to the close of
the annual or other period covered by the report and any
other information required by the 1940 Act, as amended,
and shall set forth such other matters as the Board or
such firm of independent public accountants shall
determine.
ARTICLE XII
Amendments
The Board of Trustees, by affirmative vote of a
majority thereof and all of the Investor Trustees, shall
have the exclusive right to amend, alter or repeal these
By-Laws at any meeting of the Board, except any
particular By-Law which is specified as not subject to
alteration or repeal by the Board of Trustees, subject to
the requirements of the Investment Company Act of 1940,
as amended.
ARTICLE XIII
Shareholder Liability
No Shareholder of the Trust shall be subject to
any personal liability whatsoever to any person in
connection with the Trust property or the acts,
obligations or affairs of the Trust. Shareholders shall
have the same limitation on personal liability that is
extended to stockholders of a private corporation for
profit incorporated under the general corporation law of
the State of Delaware.
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT (the
"Agreement"), dated December 21, 1994, between BlackRock
Asset Investors (the "Trust"), a Delaware business trust,
and BlackRock Financial Management L.P. (the "Advisor"),
a Delaware limited partnership. Except as otherwise
expressly provided herein or unless the context otherwise
requires, capitalized terms not otherwise defined herein
shall have the meanings specified in the Trust's
Declaration of Trust, dated December 21, 1994, as amended
(the "Declaration").
In consideration of the mutual promises and
agreements herein contained and other good and valuable
consideration, the receipt of which is hereby
acknowledged, it is agreed by and between the parties
hereto as follows:
1. In General
The Advisor agrees, all as more fully set forth
herein, to act as investment advisor to the Trust with
respect to the investment of the Trust's assets and to
supervise and arrange the purchase of securities for and
the sale of securities held in the investment portfolio
of the Trust.
2. Duties and Obligations of the Advisor
(a) Subject to the succeeding provisions
of this section and subject to the direction and control
of the Trustees, the Advisor shall (i) act as investment
advisor for and supervise and manage the investment and
reinvestment of the Trust's assets and in connection
therewith have complete discretion, subject to the
Trust's restrictions and limitations on investments as
set forth in the Declaration, in purchasing and selling
securities and other assets for the Trust and in voting,
exercising consents and exercising all other rights
appertaining to such securities and other assets on
behalf of the Trust; (ii) supervise continuously the
investment program of the Trust and the composition of
its investment portfolio; (iii) supervise the operations
and employees of the Trust's Mortgage Affiliates,
including BlackRock Capital Finance L.P. ("BCF"); (iv)
arrange, subject to the provisions of paragraph 3 hereof,
for the purchase and sale of securities and other assets
held in the investment portfolio of the Trust; (v)
arrange for the administration of all other affairs of
the Trust and its Mortgage Affiliates and, in this
regard, provide supervision of third parties engaged in
such administration; (vi) maintain all of the Trust's
books and records other than those maintained by a third
party administrator, transfer agent, custodian or
accountant; and (vii) provide the Trust with adequate
office space and all necessary office equipment and
services.
(b) The Advisor will use its best efforts
to (i) cause the Trust and each of BlackRock Fund
Investors I, BlackRock Fund Investors II and BlackRock
Fund Investors III (collectively, the "Funds") at all
times to be investment companies within the meaning of
the Investment Company Act of 1940, the Rules and
Regulations thereunder and any order applicable to the
Trust or the Funds granted thereunder, in each case as
amended from time to time (the "1940 Act"), to be duly
registered as such under the 1940 Act and to maintain
compliance with the 1940 Act, and (ii) cause the Trust
and each of the Funds at all times to qualify and remain
qualified for and to receive the special tax treatment
afforded a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). Without limiting the generality of
the foregoing, the Advisor will use its best efforts to
(i) cause the Trust's outstanding securities (other than
short-term paper) to be beneficially owned at all times
by more than 100 persons as determined in accordance with
the provisions of Section 3(c)(1) of the 1940 Act and
(ii) cause the Trust not to be a company described in
Sections 3(c)(5) and/or 3(c)(6) of the 1940 Act. The
Advisor will provide the Trustees a compliance report at
each quarterly meeting reviewing each factor related to
the Trust's RIC qualification.
(c) The Advisor will use its best efforts
to cause the Trust not to (i) invest in securities that
would be deemed to be residual interests of real estate
mortgage investment conduits, as such terms are defined
in Sections 860D and 860G of the Code, or (ii) otherwise
take or fail to take any action if such action or failure
would cause any Shareholder to incur "unrelated business
taxable income" as defined in Section 512 of the Code.
(d) The Advisor will use its best efforts
to cause the Trust's Mortgage Affiliates, including BCF,
to at all times not be investment companies within the
meaning of the 1940 Act.
(e) Subject to Section 2(k) hereof, in
the performance of its duties under this Agreement, the
Advisor shall at all times conform to, and act in
accordance with, any requirements imposed by (i) the
provisions of the 1940 Act and of the Investment Advisers
Act of 1940 (the "Advisers Act"), including any rules or
regulations in force thereunder; (ii) any other
applicable provision of law; (iii) the provisions of the
Declaration and By-Laws of the Trust, as such documents
are amended from time to time; (iv) the investment
objective, policies and restrictions of the Trust and BCF
as set forth in the Trust's registration statement on
Form N-2, as amended from time to time, the Confidential
Private Placement Memorandum, dated December 21, 1994,
and any supplements and amendments thereto (the
"Memorandum"), and any resolutions adopted by requisite
Trustee and/or shareholder approval; and (v) any other
policies and determinations of the Trustees of the Trust.
In addition, the Advisor shall use its best efforts to
cause the Trust and BCF and its other Mortgage Affiliates
not to engage in any transaction involving any person
known to the Advisor to be subject to Sections 17(a),
17(d) or 17(e) of the 1940 Act and the rules thereunder
with respect to the Trust or any of the Funds such that
any such person would violate any such provision of the
1940 Act or the rules thereunder.
(f) The Advisor will bear all costs and
expenses of its partners, directors, officers and
employees, any overhead incurred in connection with its
duties hereunder, the costs of any compensation of any
officers or Trustees of the Trust who are partners,
directors, officers or employees of the Advisor and all
other costs and expenses of the Trust and BCF and its
other Mortgage Affiliates not expressly stated in the
sections below to be borne by the Trust or BCF or its
Mortgage Affiliates.
(g) The Trust will bear the costs and
expenses of (i) the Management Fee (as defined in Section
4(a) hereof) and the Performance Fee (as defined in
Section 4(b) hereof); (ii) the fees and expenses of
custodians, pricing services, accounting systems,
accounting agents and auditors, external administrators
and transfer and dividend disbursement agents, counsel,
Trustees (but only the out-of-pocket expenses of the
Trustees who are partners, directors, officers or
employees of the Advisor), mortgage loan servicers and
mortgage pool trustees, insurance, taxes, any required
filings and registrations, proxy expenses, communications
to shareholders, Securities and Exchange Commission
("SEC") examinations, capital drawdowns, and registered
agents; (iii) portfolio transaction expenses, interest
and, to the extent borne by the Trust and not by BCF or
the other Mortgage Affiliates, reasonable costs
associated with the establishment of the other Mortgage
Affiliates, outside consultants engaged to assist in the
physical evaluation of mortgage loan documentation and of
the properties underlying such mortgage loans and in
processing data with respect to the foregoing, and work-
out of distressed portfolio investments; (iv) litigation
expenses (provided that in the case of litigation
expenses of indemnified parties, such expenses will be
borne by the Trust only to the extent provided for under
the terms of written indemnifications provided to such
parties by the Trust); and (v) such other expenses as are
approved from time to time by a majority of the Trustees
and a majority of the Investor Trustees.
Notwithstanding anything to the contrary, losses incurred
on the Trust's investments, whether classified as
expenses or otherwise, shall be borne by the Trust.
(h) In the case of BCF and each of the
other Mortgage Affiliates, these expenses consist of the
following, subject to and in accordance with the approved
budget in effect from time to time: personnel
compensation and benefits, the costs associated with
recruiting, training, travel and entertainment,
communications, publications, professional dues, research
and information services, software and analytical
systems, supplies, rent, furniture, computer equipment
and other fixed assets, the fees and expenses of
custodians, pricing services, accounting systems,
accounting agents and auditors, external administrators,
counsel, mortgage loan servicers and mortgage pool
trustees, insurance, taxes, any required filings and
registrations, outside consultants engaged to assist in
the physical evaluation of mortgage loan documentation
and of the properties underlying such mortgage loans and
in processing data with respect to the foregoing;
interest and other financing costs, portfolio transaction
expenses (including, without limitation, the costs of
acquiring and disposing of mortgage loans and other
assets and the costs of structuring, issuing and offering
commercial mortgage-backed securities ("CMBS")), the
costs of incomplete transactions, litigation expenses
(provided that in the case of litigation expenses of
indemnified parties, such expenses will be borne by BCF
and each of the other Mortgage Affiliates only to the
extent provided for under the terms of written
indemnifications provided to such parties by BCF or the
other Mortgage Affiliates, as the case may be), and such
other expenses as are contemplated in BCF's approved
budget. Notwithstanding anything to the contrary, losses
incurred on BCF's or the other Mortgage Affiliates'
investments, whether classified as expenses or otherwise,
shall be borne by BCF and the other Mortgage Affiliates,
as the case may be.
(i) At the beginning of each year, the
Advisor will submit a budget to the compensation
committee (the "Compensation Committee") of the Trust's
Board of Trustees, with respect to which each Investor
Trustee shall be offered membership. The budget will
consist of an annual estimate of the operating expenses
in the coming year as well as a salary and estimated
bonus for each employee of BCF. Employees of BCF will be
compensated in a manner and amount consistent with the
market for comparable professionals, including the
payment of a base salary and cash bonus. At year-end,
the Advisor will submit recommended bonuses for employees
to the Compensation Committee that reflect individual
employee performance, aggregate BCF performance as well
as prevailing market employment conditions. The budget
as well as the bonus pool must be approved by a majority
of the Compensation Committee. No partner, director,
officer or employee of the Advisor or the placement agent
will receive compensation from BCF.
(j) The Advisor will be responsible for
paying any organizational and offering expenses of the
Funds, the Trust and BCF in excess of an aggregate of
$750,000.
(k) The Advisor shall give the Trust the
benefit of its best judgment and effort in rendering
services hereunder, but the Advisor shall not be liable
for any act or omission or for any loss sustained by the
Trust in connection with the matters to which this
Agreement relates, except a loss resulting from willful
misfeasance, bad faith or negligence in the performance
of its duties, or by reason of its reckless disregard of
its obligations and duties under this Agreement.
(l) The Advisor shall promptly notify
each of the Trustees in writing if (i) either Mr. Wesley
Edens (or his successor) or a majority of the five person
management team (the "Management Team") consisting of Mr.
Edens and four senior professionals of the Advisor who
report directly to Mr. Edens cease to devote
substantially all of his or its time to the affairs of
the Trust and its downstream Affiliates and the date as
of which such services ceased or will cease (the "BFM
Trigger Date"); (ii) Mr. John Grayken ceases to serve as
Chairman of Brazos Advisors LLC, or ceases to be
primarily responsible for the day-to-day operations of
the counterparty to the coinvestment agreement among the
Trust, BCF and the strategic coinvestor in commercial
real estate debt ("Keystone") (for so long as Keystone is
the Trust's and BCF's strategic coinvestor in commercial
real estate debt activities) and the date as of which
such services ceased or will cease (the "Keystone Trigger
Date"); or (iii) the Advisor reasonably believes that
there is a substantial likelihood that the Trust or any
of the Funds has lost or will lose its tax status as a
RIC (a "RIC Trigger") (each such notification hereinafter
referred to as a "Trigger Notification").
As of the BFM Trigger Date, the Keystone
Trigger Date or the RIC Trigger, as the case may be, the
Trust, the Funds and BCF shall be prohibited from
entering into any new investment commitments and from
making additional drawdowns of capital other than to fund
existing investment commitments and liabilities of the
Trust, the Funds or BCF until such time as a majority of
the Trustees and all of the Investor Trustees consent to
continue all Capital Commitments and the operations of
the Trust.
If such consent to continue all Capital
Commitments and the operations of the Trust is not given
within 60 days following the date of a Trigger
Notification, the Trustees shall promptly call a meeting
of the Trust's Shareholders to be held as soon as
practicable, provided that the date of such meeting shall
not be sooner than 45 days after the expiration of such
60 day period and, at such meeting, holders of a majority
of the Trust's Shares may require cancellation of all
unfunded Capital Commitments and, if they so elect,
immediate liquidation and winding up of the affairs of
the Trust and each of the Funds. In addition, unless all
unfunded Capital Commitments have been canceled pursuant
to the aforementioned vote of shareholders, the Advisor
shall cause the Trust to promptly notify each shareholder
of each of the Funds in writing that each shareholder has
the right, for five Business Days following the date on
which such notification is effective (the "first option
period"), to cancel its respective unfunded Capital
Commitment to such shareholder's Fund upon written notice
to such shareholder's Fund. Upon expiration of the first
option period, the Advisor shall cause the Trust to
promptly notify each shareholder of each of the Funds
that has not canceled its unfunded Capital Commitment to
such shareholder's Fund of the aggregate amount of
unfunded Capital Commitments that were canceled during
the first option period, the identity of each Fund's
shareholders that effected such cancellations, the
aggregate amount of remaining unfunded Capital
Commitments, and the identity of each Fund's shareholders
that have a remaining unfunded capital commitment as of
the end of the first option period; and each such
shareholder shall have the right, for five Business Days
following the date on which such notification is
effective, to cancel its respective unfunded capital
commitment by written notice to such shareholder's Fund.
Immediately upon receipt of written notification from a
shareholder of the cancellation of such shareholder's
unfunded Capital Commitment pursuant to the provisions
hereof, the Advisor will cause each Fund to exercise its
right to cancel a corresponding portion of such Fund's
unfunded Capital Commitment to the Trust by written
notice to the Trust.
The Trust and each of the Funds will also
terminate and promptly wind up their affairs if it is so
determined by a vote of the holders of 75% of the shares
of the Trust.
(m) Nothing in this Agreement shall
prevent the Advisor or any partner, director, officer,
employee or other affiliate thereof from acting as
investment advisor for any other person, firm or
corporation, or from engaging in any other lawful
activity, and shall not in any way limit or restrict the
Advisor or any of its partners, directors, officers,
employees or agents from buying, selling or trading any
securities for its or their own accounts or for the
accounts of others for whom it or they may be acting,
provided, however that the Advisor will undertake no
activities which, in its judgment, will adversely affect
the performance of its obligations under this Agreement.
Notwithstanding the foregoing, neither the Advisor nor
any affiliate thereof will organize, market or manage
another investment vehicle with a substantially similar
investment program until at least 75% of the aggregate
unexpired Capital Commitments have been invested and only
on the condition that each of the shareholders of the
Funds have an opportunity either to terminate or transfer
to the new investment vehicle their remaining unfunded
Capital Commitments to such Funds.
(n) From time to time, one or more of the
investment companies or accounts which the Advisor
manages may own the same investments as the Trust.
Investment decisions for the Trust are made independently
from those of such other investment companies or
accounts; however, from time to time, the same investment
decision may be made for more than one company or
account; provided, however that (i)subject to the
coinvestment requirements applicable to the Trust's
strategic coinvestor in commercial real estate debt(as
described in the Declaration), the Trust and its
strategic coinvestor will have a prior right to acquire
all or such portion, if any, of the subordinated CMBS
(other than Residuals) issued from time to time by the
Trust's Mortgage Affiliates as the Trust and such
strategic coinvestor respectively determine, (ii) the
portion of such subordinated CMBS, if any, that the Trust
and its strategic coinvestor do not acquire will be
offered to each shareholder (or the investment entity
specified by such shareholder) that has designated an
Investor Trustee, provided that such shareholder (or such
investment entity) has obtained any necessary exemption
from the SEC with respect to relevant sections of the
1940 Act, (iii) each subordinated CMBS acquired by any
such shareholder in accordance with clause (ii) will be
acquired concurrently with and on terms no more favorable
than those applicable to the Trust's acquisition of such
subordinated CMBS, and (iv) neither the Trust nor its
Mortgage Affiliates will offer any of the subordinated
CMBS issued by the Trust's Mortgage Affiliates to any
investment entity or account managed by the Advisor other
than as described in clause (ii). Subject to the
foregoing, when two or more investment companies or
accounts managed by the Advisor seek to purchase or sell
the same securities, the securities actually purchased or
sold will be allocated among the companies and accounts
on a good faith equitable basis by the Advisor in its
discretion in accordance with the accounts' various
investment objectives. In some cases, this system may
adversely affect the price or size of the position
obtainable for the Trust. In other cases, however, the
ability of the Trust to participate in volume
transactions may produce better execution for the Trust.
(o) The Advisor will use its best efforts
to cause all debt incurred by BCF and any of the other
Mortgage Affiliates to be non-recourse to the Trust and
its shareholders.
(p) The Advisor will use its best efforts
to cause all representations, warranties and other
undertakings made by BCF and any of the other Mortgage
Affiliates regarding the validity and enforceability of
the mortgage loans constituting the pool backing each
issue of mortgage-backed securities, and the nature of
the collateral securing such mortgage loans, to be non-
recourse to the Trust and its shareholders.
3. Portfolio Transactions and Brokerage
The Advisor shall, for the purchase and sale of
the Trust's portfolio securities, employ such securities
dealers as will, in the reasonable judgment of the
Advisor, result in the Trust's obtaining the best net
results taking into account such factors as price,
including dealer spread, the size, type and difficulty of
the transaction involved, the firm's general execution
and operational facilities and the firm's risk in
positioning the securities involved. Consistent with
this requirement, the Advisor is authorized to direct the
execution of the Trust's portfolio transactions to
dealers and brokers furnishing statistical information or
research reasonably deemed by the Advisor to be useful or
valuable to the performance of its investment advisory
functions for the Trust.
4. Compensation of the Advisor
During the term hereof, the Trust agrees
to pay the Advisor and the Advisor agrees to accept as
full compensation for all services rendered hereunder a
Management Fee (as defined below) and a Performance Fee
(as defined below).
(a) During the period in which funds may
be drawn down for investments (the "Commitment Period"),
which is scheduled to expire on the third anniversary of
the Initial Closing, subject to a potential one year
extension and to a potential early termination as
described in the Declaration, the management fee (the
"Management Fee") will equal 0.75% per year of the
Trust's aggregate Capital Commitments, which are the
aggregate of all Capital Commitments under subscription
agreements accepted by the Trust, less, in the case of a
Capital Commitment that has been cancelled, that portion
of such Capital Commitment that has not been drawn down
and invested. Following the Commitment Period, the
Management Fee will equal 0.50% per year of the weighted
average capital (computed according to the principles for
determining Periodic Weighted Average Capital (as defined
below)), for the period commencing on the day immediately
succeeding the last day as of which the Management Fee
was paid and ending on the current Management Fee Payment
Date, invested in the Trust by its Shareholders. The
Management Fee shall be calculated and paid semiannually
in arrears, commencing on April 30, 1995, and shall be
prorated for any partial period.
(b) In addition to its Management Fee,
the Trust will pay to the Advisor as of the first
anniversary of the commencement of the Trust's
operations, as of each October 31 thereafter, and as of
the date on which the Trust terminates (the "Termination
Date") (each, a "Payment Date") a performance fee (the
"Performance Fee") calculated in the manner described
below.
On each Payment Date prior to the
Termination Date that is (i) prior to the final
expiration of the Commitment Period, or (ii) prior to the
time at which Aggregate Distributions (as defined below)
are equal to or greater than the sum of (A) the amount of
Capital Commitments drawn down by the Trust at the final
expiration of the Commitment Period, plus (B) the
Preferred Return (as defined below) as of the relevant
Payment Date, the Advisor will be entitled to receive a
Performance Fee from the Trust equal to (1) the lesser of
(x) 25% of the Base Performance Figure (as defined below)
as of the relevant Payment Date and (y) 50% of the
cumulative amount of the Management Fees paid or payable
by the Trust and management fees paid or payable by each
of the Funds pursuant to Section 4 of the Investment
Advisory Agreement applicable to such Fund ("Fund
Management Fees") from Inception (as defined below)
through the relevant Payment Date, minus (2) the
cumulative amount of Performance Fees paid with respect
to prior Payment Dates.
On each other Payment Date prior to the
Termination Date, the Advisor will be entitled to receive
a Performance Fee from the Trust equal to 50% of the Base
Performance Figure as of the relevant Payment Date, minus
the cumulative amount of Performance Fees paid with
respect to prior Payment Dates.
On the Payment Date that is as of the
Termination Date, the Advisor will be entitled to receive
a Performance Fee from the Trust equal to (i) the Base
Performance Figure as of the Termination Date minus the
cumulative amount of Performance Fees paid with respect
to prior Payment Dates, plus (ii) the True-Up (as defined
below); provided that nothing herein shall be deemed to
obligate the Advisor to make any payment to the Trust as
of the Termination Date in respect of the Performance Fee
other than as described under the True-Up below.
For purposes of calculating the
Performance Fee, the following terms shall have the
meanings set forth below:
The "Aggregate Distributions" as of each
Payment Date will be equal to (i) the cumulative amount
of the Trust's distributions (including Capital
Distributions (as defined below) to the extent not
redrawn) declared through the relevant Payment Date,
minus (ii) the cumulative amount of fees and expenses
(including Fund Management Fees) paid or payable by the
Funds through the relevant Payment Date.
The "Annualized Cumulative Return" as of each
NAV Determination Date will be equal to (i) one plus the
Cumulative Return (as defined below) as of the relevant
NAV Determination Date, compounded by (raised to the
power of) (A) 360, divided by (B) the number of days
(assuming 12 30-day months per year) from Inception to
the relevant NAV Determination Date, minus (ii) one.
The "Base Performance Figure" as of each
Payment Date will be equal to, if the Annualized
Cumulative Return as of the relevant Payment Date is (i)
less than or equal to 10%, $0; (ii) greater than 10% but
less than or equal to 20%, 40% of (A) the lesser of (1)
the product of two, and the Preferred Return as of the
relevant Payment Date and (2) the Cumulative Net
Distributions (as defined below) as of the relevant
Payment Date, minus (B) the Preferred Return as of the
relevant Payment Date; and (iii) greater than 20%, the
product of 20% and the Cumulative Net Distributions as of
the relevant Payment Date.
The "Capital Distributions" as of each Payment
Date will be equal to (i) the sum of common stock and
paid-in-capital as reported in the audited financial
statements for the period ended on the immediately
preceding Payment Date, plus (ii) the aggregate amount of
Capital Receipts (as defined below) during the period
commencing on the day after the immediately preceding
Payment Date and ending on the current Payment Date,
minus (iii) the sum of common stock and paid-in-capital
as reported in the audited financial statements for the
period ended on the current Payment Date; provided that
if such amount is negative, it shall be deemed to be
zero.
A "Capital Receipt" will be equal to, with
respect to a capital call, the amount of funds received
by the Trust in satisfaction of such capital call.
"Cumulative Net Distributions" as of each
Payment Date will be equal to (i) the cumulative amount
of distributions (other than Capital Distributions)
declared by the Trust through the relevant Payment Date,
minus (ii) the cumulative amount of fees and expenses
(including Fund Management Fees) paid or payable by the
Funds through the relevant Payment Date.
The "Cumulative Return" as of each NAV
Determination Date will be equal to (i) the sum of (A)
the product of (1) the Cumulative Return as of the
immediately preceding NAV Determination Date, (2)
Inception Weighted Average Capital (as defined below) as
of such immediately preceding NAV Determination Date, and
(3) the sum of one plus the Periodic Return (as defined
below) as of the current NAV Determination Date, plus (B)
the product of the Periodic Return as of the current NAV
Determination Date and the Periodic Weighted Average
Capital (as defined below) as of the current NAV
Determination Date, divided by (ii) Inception Weighted
Average Capital as of the current NAV Determination Date.
"Inception" will mean the date on which funds
are received by the Trust in satisfaction of the first
capital call.
The "Inception Weighted Average Capital" as of
each NAV Determination Date will be equal to (i) the sum
of, for the current and all preceding NAV Determination
Dates, the products of (A) the Periodic Weighted Average
Capital as of the relevant NAV Determination Date, and
(B) the number of days in the Return Period ending on the
relevant NAV Determination Date, divided by (ii) the
number of days from Inception to the current NAV
Determination Date (each assuming 12 30-day months per
year).
The "Performance NAV" will be equal to, at
Inception, the Trust's NAV at Inception and, as of each
NAV Determination Date, (i) the Trust's NAV as of the
relevant NAV Determination Date, minus (ii) the amount of
unrealized capital gains included in the Trust's NAV as
of the relevant NAV Determination Date, minus (iii) the
cumulative amount of fees and expenses (including Fund
Management Fees) paid or payable by the Funds through the
relevant NAV Determination Date, plus (iv) the
Performance Fee paid by the Trust as of the immediately
preceding NAV Determination Date. As of each NAV
Determination Date, Performance NAV per share shall be
equal to Performance NAV divided by the total number of
shares of the Trust outstanding as of such NAV
Determination Date.
The "Periodic Return" as of each NAV
Determination Date will be equal to (i) the Performance
NAV per share as of the current NAV Determination Date,
plus the amount of distributions per share declared by
the Trust during the Return Period (as defined below)
ending on the current NAV Determination Date, minus the
Performance NAV per share as of the immediately preceding
NAV Determination Date, divided by (ii) the Performance
NAV per share as of such immediately preceding NAV
Determination Date.
The "Periodic Weighted Average Capital" as of
each NAV Determination Date will be equal to (i) the
aggregate amount of Capital Receipts from Inception
through the immediately preceding NAV Determination Date,
minus (ii) the aggregate amount of Capital Distributions
from Inception through such immediately preceding NAV
Determination Date, plus (iii) the sum of, for each
Capital Receipt during the Return Period ending on the
current NAV Determination Date, the products of (A) the
amount of such Capital Receipt, and (B) the number of
days from the date of such Capital Receipt to the current
NAV Determination Date, divided by the total number of
days in the Return Period ending on the current NAV
Determination Date (each assuming 12 30-day months),
minus (iv) the product of the amount of Capital
Distributions, if any, during the Return Period ending on
the current NAV Determination Date, and the number of
days from the date of such Capital Distribution to the
current NAV Determination Date, divided by the total
number of days in the Return Period ending on the current
NAV Determination Date (each assuming 12 30-day months).
For purposes of calculating the Periodic Weighted Average
Capital as of each NAV Determination Date that is not a
Payment Date, the Advisor will estimate the Capital
Distributions as of such NAV Determination Date, provided
that on the next succeeding Payment Date, the Periodic
Weighted Average Capital as of each NAV Determination
Date during the period commencing on the day after the
immediately preceeding Payment Date and ending on the
current Payment Date (the "audit period") shall be
restated to reflect actual Capital Distributions during
the audit period.
The "Preferred Return" as of each Payment Date
will be equal to the product of (i) 10%, (ii) Inception
Weighted Average Capital as of the relevant Payment Date,
and (iii) the number of days from Inception to the
relevant Payment Date (assuming 12 30-day months per
year), divided by 360.
A "Return Period" will mean that period which
commences on the day after the immediately preceding NAV
Determination Date (Inception, in the case of the first
Return Period) and ends on the next succeeding NAV
Determination Date.
The "True-Up" will be equal to the sum of, for
all preceding Payment Dates, the product of (i) 3-month
LIBOR (as quoted on Reuters) as of the relevant Payment
Date, (ii) the Base Performance Figure as of the relevant
Payment Date, minus the cumulative amount of Performance
Fees paid as of that Payment Date, and (iii) the number
of days from the relevant Payment Date to the next
succeeding Payment Date (assuming 12 30-day months per
year), divided by 360; provided that, (A) if the
difference described in clause (ii) as of any Payment
Date is a negative number, the product of clauses (i),
(ii) and (iii) with respect to that Payment Date shall be
taken into account as a negative adjustment to the True-
Up, and (B) if the True-Up is a negative dollar amount,
the Advisor shall pay (either in cash or by waiving fees
and expenses then otherwise due to the Advisor) such
amount to the Trust, subject to a maximum payment by the
Advisor equal to the aggregate Management Fees paid or
payable to the Advisor by the Trust and the aggregate
Fund Management Fees paid or payable by the Funds with
respect to the immediately preceding 12 months.
5. Indemnity.
(a) The Trust hereby agrees to indemnify
the Advisor and each of the Advisor's partners,
directors, officers, employees and controlling persons
and the partners, directors, officers and employees
thereof (including any individual who serves at the
Advisor's request as a director, officer, partner,
trustee or the like of any of the Trust's Mortgage
Affiliates (each such person being an "indemnitee")
against any liabilities and expenses, including amounts
paid in satisfaction of judgments, in compromise or as
fines and penalties, and reasonable counsel fees
reasonably incurred by such indemnitee in connection with
the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court
or administrative or investigative body in which he may
be or may have been involved as a party or otherwise or
with which he may be or may have been threatened, while
acting in any capacity set forth above in this Section 5
with respect to the services provided hereunder or
thereafter by reason of his having acted in any such
capacity, except with respect to any matter as to which
he shall not have acted in good faith in the reasonable
belief that his action was in the best interest of the
Trust or, in the case of any criminal proceeding, as to
which he shall have had reasonable cause to believe that
the conduct was unlawful, provided, however, that no
indemnitee shall be indemnified hereunder against any
liability to any person or any expense of such indemnitee
arising by reason of (i) willful misfeasance, (ii) bad
faith, (iii) negligence or (iv) reckless disregard of the
duties involved in the conduct of his position (the
conduct referred to in such clauses (i) through (iv)
being sometimes referred to herein as "disabling
conduct"). Notwithstanding the foregoing, with respect
to any action, suit or other proceeding voluntarily
prosecuted by any indemnitee as plaintiff,
indemnification shall be mandatory only if the
prosecution of such action, suit or other proceeding by
such indemnitee was authorized by a majority of the
Trustees and a majority of the Investor Trustees.
(b) Notwithstanding the foregoing, no
indemnification shall be made hereunder unless there has
been a determination (1) by a final decision on the
merits by a court or other body of competent jurisdiction
before whom the issue of entitlement to indemnification
hereunder was brought that such indemnitee is entitled to
indemnification hereunder or, (2) in the absence of such
a decision, by (i) a majority vote of a quorum of those
Trustees who are neither "interested persons" of the
Trust (as defined in Section 2(a)(19) of the 1940 Act)
nor parties to the proceeding ("Disinterested Non-Party
Trustees") and a majority vote of the Investor Trustees
that the indemnitee is entitled to indemnification
hereunder, or (ii) if such quorum is not obtainable or
even if obtainable, if such majorities so direct,
independent legal counsel in a written opinion conclude
that the indemnitee should be entitled to indemnification
hereunder. All determinations that advance payments in
connection with the expense of defending any proceeding
shall be authorized and made in accordance with the
immediately succeeding paragraph (c) below.
(c) The Trust shall make advance payments
in connection with the expenses of defending any action
with respect to which indemnification might be sought
hereunder if the Trust receives a written affirmation by
the indemnitee of the indemnitee's good faith belief that
the standards of conduct necessary for indemnification
have been met and a written undertaking to reimburse the
Trust unless it is subsequently determined that he is
entitled to such indemnification and if a majority of the
Trustees and a Majority of the Investor Trustees
determine that the applicable standards of conduct
necessary for indemnification appear to have been met.
In addition, at least one of the following conditions
must be met: (1) the indemnitee shall provide adequate
security for his undertaking, (2) the Trust shall be
insured against losses arising by reason of any lawful
advances, or (3) a majority of a quorum of the
Disinterested Non-Party Trustees and a Majority of the
Investor Trustees, or if a majority vote of such quorum
and a Majority of the Investor Trustees so direct,
independent legal counsel in a written opinion, shall
conclude, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is
substantial reason to believe that the indemnitee
ultimately will be found entitled to indemnification.
(d) The rights accruing to any indemnitee
under these provisions shall not exclude any other right
to which he may be lawfully entitled.
(e) For purposes of this Agreement, a
"majority" of the Investor Trustees shall mean more than
50% of the total number of Investor Trustees who are
present and voting upon the matter in question, provided
the matter is considered at a meeting duly called and
required notice has been given.
6. Duration, Termination and Amendment
(a) This Agreement shall become effective
on the date it is approved by the shareholders of the
Trust and shall continue in effect for a period of two
years and thereafter from year to year, but only so long
as such continuation is specifically approved at least
annually at a meeting of the Trustees in accordance with
the requirements of the 1940 Act.
(b) This Agreement (i) may be terminated
by the Advisor at any time without penalty upon giving
the Trust ninety days prior written notice (which notice
may be waived by a majority of the Trustees including a
majority of the Investor Trustees) if the Trust is in
breach of this Agreement in any material respect and (ii)
may be terminated on behalf of the Trust at any time
without penalty upon giving the Advisor 60 days prior
written notice (which notice may be waived by the
Advisor) by the vote of a majority of the Trustees or by
the vote of the holders of a "majority" (as defined in
the 1940 Act) of the voting securities of the Trust at
the time outstanding and entitled to vote. This
Agreement shall terminate automatically in the event of
its assignment (as "assignment" is defined in the 1940
Act). Termination shall not affect any rights either
party may have against the other hereunder as of the date
of such termination.
(c) Any amendment to this Agreement
(including any increase in the compensation payable to
the Advisor hereunder) must be approved in accordance
with the requirements of the 1940 Act and by a majority
of the Investor Trustees.
(d) The Advisor is a partnership and will
notify the Trust promptly after any change in the
membership of such partnership.
7. Notices
Any notice under this Agreement shall be in
writing and shall be delivered to the other party by hand
or registered or certified mail, return receipt
requested, at such address as the other party may
designate from time to time for the receipt of such
notice and shall be deemed to be received on the earlier
of the date actually received or on the third day after
the postmark if such notice is mailed first class postage
prepaid.
8. Governing Law
This Agreement shall be construed in accordance
with the laws of the State of New York for contracts to
be performed entirely therein without reference to choice
of law principles thereof and in accordance with the
applicable provisions of the 1940 Act, the Advisers Act
and other applicable federal laws.
9. Shareholder Liability
No Shareholder of the Trust shall be subject in
such capacity to any personal liability whatsoever to any
Person in connection with Trust Property or the acts,
obligations or affairs of the Trust. No Trustee or
officer of the Trust shall be subject in such capacity to
any personal liability whatsoever to any Person, other
than the Trust or its Shareholders, in connection with
Trust Property or the affairs of the Trust, save only
liability to the Trust or its Shareholders arising from
bad faith, willful misfeasance, gross negligence
(negligence in the case of those Trustees and officers
who are partners, directors, officers or employees of the
Advisor) or reckless disregard for his duty to such
Person; and, subject to the foregoing exception, all such
Persons shall look solely to the Trust Property for
satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any
Shareholder, Trustee or officer, as such, of the Trust,
is made a party to any suit or proceeding to enforce any
such liability, subject to the foregoing exception, he
shall not, on account thereof, be held to any personal
liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and
liabilities to which such Shareholder may become subject
by reason of his being or having been a Shareholder, and
shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with
any such claim or liability.
IN WITNESS WHEREOF, the parties hereto have
caused the foregoing instrument to be executed by their
duly authorized officers as of the day and the year first
above written.
BLACKROCK ASSET INVESTORS
By:
Name: Wesley R. Edens
Title: Chief Operating Officer
BLACKROCK FINANCIAL MANAGEMENT L.P.
By:
Name: Ralph L. Schlosstein
Title: President
PLACEMENT AGENT AGREEMENT
PLACEMENT AGENT AGREEMENT dated as of December
21, 1994 among BlackRock Asset Investors, a Delaware
business trust (the "Trust"), BFM Advisory L.P., a
Delaware limited partnership (the "Placement Agent") and
BlackRock Financial Management L.P., a Delaware limited
partnership (the "Investment Advisor").
W I T N E S S E T H:
WHEREAS, the Trust has requested the Placement
Agent to act as the exclusive placement agent of the
Trust for the private placement to institutional
investors of up to 200,000,000 shares of beneficial
interest of the Trust (the "Shares").
WHEREAS, the Placement Agent has indicated its
willingness to act as the exclusive placement agent of
the Trust in the private placement of the Shares.
NOW, THEREFORE, in consideration of the
premises, the parties agree as follows:
1. Certain Definitions. 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 Trust's
Declaration of Trust, dated December 21, 1994, as amended
(the "Declaration"). All other capitalized terms used
herein shall have the meanings specified herein.
2. Appointment as the Placement Agent. (a) The
Trust appoints the Placement Agent its exclusive
placement agent for soliciting subscription agreements
(the "Subscription Agreements") for the purchases of the
Shares and acknowledges that the Placement Agent shall
have the exclusive right to assist the Trust in the
placement of the Shares during the term of this
Agreement.
(b) In soliciting Subscription Agreements for
purchases of the Shares in accordance with clause (a) of
this Section 2, the Placement Agent shall act as agent
for the Trust. The Placement Agent shall make reasonable
efforts to assist the Trust in obtaining performance by
each purchaser whose offer to purchase Shares has been
solicited by the Placement Agent. In the absence of
fraud, gross negligence or willful misconduct by the
Placement Agent, the Placement Agent shall have no
liability to the Trust in the event any such purchase is
not consummated for any reason. The Placement Agent
shall not have any obligation to purchase, as principal,
Shares under any circumstances. However, the Placement
Agent may purchase Shares as principal.
(c) Upon receipt of written or oral
instructions from the Trust, the Placement Agent will use
its best efforts to solicit purchases of the Shares as
the Trust and the Placement Agent shall agree upon from
time to time during the term of this Agreement. The
Placement Agent and the Trust shall have the right, in
their discretion reasonably exercised, to reject any
proposed purchase of Shares, in whole or in part.
(d) The Trust may instruct the Placement Agent
to suspend solicitation of purchases of Shares at any
time. Upon receipt of such instructions, the Placement
Agent will forthwith suspend solicitations until such
time as the Trust has advised it that solicitation of
purchases may be resumed.
(e) The Placement Agent shall be entitled to
no compensation from, or reimbursement of expenses by,
the Trust in connection with the performance by the
Placement Agent of its duties hereunder.
3. Offers and Sales of the Shares. The offer and
sale of the Shares are to be effected pursuant to the
exemption from the registration requirements of the
Securities Act of 1933, as amended (the "Act"), provided
by Section 4(2) thereof, which exempts transactions by an
issuer not involving any public offering. Offers and
sales of the Shares will be made in accordance with the
general provisions of Regulation D under the Act. The
Placement Agent, the Investment Advisor and the Trust
hereby establish the following procedures in connection
with the offer and sale or resale of the Shares:
(a) Offers and sales of the Shares will be
made only to purchasers which qualify as accredited
investors (as defined in Rule 501 of Regulation D under
the Act).
(b) The Shares will be offered only by
approaching prospective purchasers on an individual
basis. The Shares will not be offered or sold by any
means of general solicitation or general advertising.
(c) Each Share shall be subject to the
restrictions on transfer thereof described in the
Declaration and shall be subject to restrictive legends
as described therein. The purpose of this requirement is
to ensure that Shares are resold or otherwise transferred
only to qualified purchasers and not in a manner that
might call into question the non-public offering
character of the offer and sale of the Shares.
(d) The Trust's Private Placement Memorandum,
dated December 21, 1994, as amended or supplemented from
time to time (the "Memorandum") will be made available to
each purchaser or prospective purchaser of Shares from
the Trust, together with any supplements to such
Memorandum which may have been prepared which describes,
among other things the Trust and the Shares, material
agreements of the Trust and risks and special
considerations. The Memorandum will contain a statement
expressly offering an opportunity for each prospective
purchaser to ask questions of, and receive answers from,
the Trust concerning the offering of the Shares and to
obtain additional relevant information which the Trust
possesses or can acquire without unreasonable effort or
expense.
(e) The Trust and the Investment Advisor agree
to cooperate with the Placement Agent in the preparation
of the Memorandum and in amending it as from time to time
may be necessary in connection with the initial issuance
and sale of the Shares.
The Placement Agent shall not be liable or
responsible to the Trust for any losses, damages or
liabilities suffered or incurred by the Trust arising
from or relating to any resale or transfer of any Shares,
except to the extent the Placement Agent has acted as
agent or principal in connection therewith in violation
of the Trust's transfer restrictions.
4. Representations and Warranties. The Investment
Advisor represents and warrants to the Placement Agent
that:
(a) The Memorandum does not and will not
include any untrue statement of a material fact or omit
to state a material fact necessary in order to make the
statements made, in light of the circumstances under
which they are made, not misleading.
(b) The Trust (i) has been duly organized and
is validly existing as a business trust in good standing
under the laws of Delaware and (ii) has the requisite
corporate power and authority to sell, issue and deliver
the Shares and to execute and deliver the various
agreements referenced in the Memorandum and perform its
obligations under such agreements. When the Shares are
issued, delivered and paid for as described in the
Memorandum, the same will be duly authorized, validly
issued, fully paid and nonassessable shares of beneficial
interest.
(c) The Trust is not in violation of its
Declaration or by-laws or in default in the performance
or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage,
loan agreement or lease to which the Trust is a party or
by which it may be bound, and the execution and delivery
of this Agreement and those agreements specifically
referred to in the Memorandum and the consummation of the
transactions herein and therein contemplated will not
conflict with, or constitute a breach of or default
under, the Declaration or by-laws of the Trust or any
material contract, indenture, mortgage, loan agreement or
lease, to which the Trust is a party or by which it may
be bound, or any law, administrative regulation or court
decree.
(d) This Agreement has been duly authorized,
executed and delivered by the Trust and constitutes the
legal, valid and binding obligation of the Trust
enforceable in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy,
insolvency or other similar laws relating to or affecting
generally the enforcement of creditors' rights or by
general equitable principles.
(e) Assuming compliance with Section 5(b)
hereof, no consent, approval, authorization, order,
registration or qualification of or with any court or any
regulatory authority or other governmental agency or body
(including the SEC) is required for the issuance, offer
or sale of the Shares in accordance with the terms of
this Agreement or for the consummation of the transaction
contemplated by this Agreement.
(f) There are no legal or governmental
proceedings pending to which the Trust is a party or of
which any property of the Trust is the subject, other
than legal or governmental proceedings which in each case
will not have a material adverse effect on the business,
financial condition, shareholders' equity or results of
operations of the Trust; and to the best of its
knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by
others.
(g) The offer, issuance, sale and delivery of
the Shares in accordance with the terms of this Agreement
will constitute exempted transactions under the Act
pursuant to Section 4(2) thereof, and registration of the
Shares under the Act will not be required in connection
with any such offer, issuance, sale or delivery of the
Shares.
(h) The offer, issuance, sale and delivery of
the Shares in accordance with the terms of this Agreement
will be exempt from registration under the securities
laws of any state or jurisdiction of the United States on
the date such offer, issuance, sale or delivery shall
occur or will be so registered.
5. Covenants. (a) The Trust and the Investment
Advisor agree that no future offer and sale of Shares
will be made if, as a result of the doctrine of
"integration" referred to in Rule 502 of Regulation D
under the Act and various releases and "no action"
letters issued or made available by the SEC, such offer
and sale would call into question the entitlement of the
Shares to the exemption from the registration
requirements of the Act provided by Section 4(2) thereof.
(b) The Placement Agent will at all times
during the term of this Agreement maintain its
registration as a broker-dealer under the Securities
Exchange Act of 1934.
(c) The Placement Agent will endeavor, in
cooperation with the Trust, to qualify the Shares for
offer and sale under the applicable securities laws of
such states and other jurisdictions of the United States
and other countries as the Trust and the Placement Agent
shall determine, and will maintain such qualifications in
effect for as long as may be required for the
distribution of the Shares. The Trust and the Placement
Agent will file such statements and reports as may be
required by the laws of each jurisdiction in which the
Shares have been qualified as above provided.
(d) The Trust will register with the SEC
pursuant to Section 8(a) of the Investment Company Act of
1940 (the "1940 Act") as a closed-end, non-diversified
management investment company prior to or as promptly as
possible following advice from the Investment Advisor
that the Trust has more than 100 beneficial owners of its
securities (other than short-term paper) for purposes of
Section 3(c)(1) of the 1940 Act.
6. Notices. Unless otherwise indicated, all
notices required under the terms and provisions hereof
shall be in writing, either delivered by hand, by mail
(postage prepaid), or by telex, telecopier or telegram,
and any such notice shall be effective when received at
the address specified below.
If to the Trust:
BlackRock Asset Investors
345 Park Avenue
New York, New York 10154
Attention: Ralph L. Schlosstein, President
Telephone No.: (212) 754-5560
Facsimile No.: (212) 754-8760
If to the Placement Agent:
BFM Advisory L.P.
345 Park Avenue
New York, New York 10154
Attention: Ralph L. Schlosstein, President
Telephone No.: (212) 754-5560
Facsimile No.: (212) 754-8760
If to the Investment Advisor:
BlackRock Financial Management L.P.
345 Park Avenue
New York, New York 10154
Attention: Ralph L. Schlosstein, President
Telephone No.: (212) 754-5560
Facsimile No.: (212) 754-8760
or at such other address as such party may designate from
time to time by notice duly given in accordance with the
terms of this Section 8 to the other party hereto.
7. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO OTHERWISE
APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.
8. Amendment and Termination; Successors;
Counterparts. (a) This Agreement shall become effective
on the date first set forth above and shall remain in
effect until the expiration of the Commitment Period (as
defined in the Declaration).
(b) This Agreement may be terminated as to all
parties (a) by the Placement Agent at any time without
penalty by giving fifteen (15) days' written notice to
the Trust which notice may be waived by the Trust; or (b)
by the Trust at any time without penalty upon fifteen
(15) days' written notice to the Placement Agent (which
notice may be waived by the Placement Agent).
(c) This Agreement shall be binding upon and
inure exclusively to the benefit of the parties hereto
and their respective permitted successors and assigns and
the indemnified parties referred to in Section 6 hereof.
This Agreement may not be assigned by any party hereto
absent the prior written consent of the other party.
9. Captions. The captions in this Agreement are
for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
10. Severability of Provisions. Any provision of
this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining
provisions hereof or affecting the validity or
enforceability of such provision in any other
jurisdiction.
IN WITNESS WHEREOF, the parties have executed
this Agreement as of the date and year first above
written.
BLACKROCK ASSET INVESTORS
By:
Name: Wesley R. Edens
Title: Chief Operating Officer
BFM ADVISORY L.P.
By:
Name: Ralph L. Schlosstein
Title: President
BLACKROCK FINANCIAL MANAGEMENT L.P.
By:
Name: Ralph L. Schlosstein
Title: President
CUSTODIAN CONTRACT
Between
BLACKROCK ASSET INVESTORS
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be
Held By It.............................................1
1.1 Employment of Custodian and Property
to be held by it..................................1
1.2 Employment of Sub-Custodians......................1
1.3 Appointment of Agents.............................2
2. Duties of the Custodian with Respect to Property
of the Trust Held by the Custodian.....................2
2.1 Holding Securities................................2
2.2 Delivery of Securities............................2
2.3 Registration of Securities........................4
2.4 Bank Accounts.....................................5
2.5 Availability of Federal Funds.....................5
2.6 Collection of Income..............................5
2.7 Payment of Trust Monies...........................6
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased...................7
2.9 Deposit of Trust Assets in Securities System......7
2.9A Trust Assets Held in the Custodian's Direct
Paper System......................................9
2.10 Segregated Account...............................10
2.11 Ownership Certificates for Tax Purposes..........11
2.12 Proxies..........................................11
2.13 Communications Relating to Trust
Portfolio Securities.............................11
2.14 Proper Instructions..............................11
2.15 Actions Permitted Without Express Authority......12
2.16 Evidence of Authority............................12
3. Duties of Custodian With Respect to the Books
of Account and Calculation of Net Asset Value
and Net Income........................................12
4. Records...............................................13
5. Opinion of Trust's Independent Accountant.............13
6. Reports to Trust by Independent Public Accountants....13
7. Compensation of Custodian.............................13
8. Responsibility of Custodian...........................14
9. Effective Period, Termination and Amendment...........15
10. Successor Custodian...................................16
11. Interpretive and Additional Provisions................16
12. Massachusetts Law to Apply............................17
13. Prior Contracts.......................................17
14. Shareholder Communications............................17
15. Disclaimer of Liability...............................17
CUSTODIAN CONTRACT
This Contract between BlackRock Asset Investors, a business
trust organized and existing under the laws of Delaware, having
its principal place of business at 345 Park Avenue, New York, NY
10154 hereinafter called the "Trust", and State Street Bank and
Trust Company, a Massachusetts trust company, having its
principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH: That in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto agree as
follows:
1. Custodian, Sub-Custodians and Agents
1.1 Employment of Custodian and Property to be Held by It. The
Trust hereby employs the Custodian as the custodian of its
assets pursuant to the provisions of the Trust's Declaration
of Trust, dated December 21, 1994, as amended (the
"Declaration of Trust"). The Trust agrees to deliver to the
Custodian all securities and cash owned by it, and all
payments of income, payments of principal or capital
distributions received by it with respect to all securities
owned by the Trust from time to time, and the cash
consideration received by it for such new or treasury shares
of beneficial interest ("Shares") of the Trust as may be
issued or sold from time to time. The Custodian shall not
be responsible for any property of the Trust held or
received by the Trust and not delivered to the Custodian.
1.2 Employment of Sub-Custodian. Upon receipt of "Proper
Instructions" (within the meaning of Section 2.14), the
Custodian shall from time to time employ one or more sub-
custodians, and such employment, and the level of
responsibility or liability such sub-custodian has to the
Custodian, shall be approved by the Trustees and by a
majority of the Investors Trustees (as such term is defined
in the Declaration of Trust) of the Trust; provided that in
the absence of bad faith, negligence or willful misconduct
on the part of the Custodian, the Custodian shall have no
more or less responsibility or liability to the Trust on
account of any actions or omissions of any sub-custodian so
employed than any such sub-custodian has to the Custodian.
If the Custodian's actions or omissions relative to a sub-
custodian are in bad faith, with negligence or willful
misconduct, the employment of any sub-custodian shall not
relieve the Custodian of its responsibilities or liabilities
hereunder.
1.3 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time remove)
any other bank or trust company which is itself qualified
under the Investment Company Act of 1940, as amended, to act
as a custodian, as its agent to carry out such of the
provisions of Article 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any
agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2. Duties of the Custodian with Respect to Property of the
Trust Held By the Custodian
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of the Trust all non-cash
property, including all securities owned by the Trust, other
than (a) securities which are maintained pursuant to Section
2.9 in a clearing agency which acts as a securities
depository or in a book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" and
(b) commercial paper of an issuer for which State Street
Bank and Trust Company acts as issuing and paying agent
("Direct Paper") which is deposited and/or maintained in the
Direct Paper System of the Custodian pursuant to Section
2.9A.
2.2 Delivery of Securities. The Custodian shall release and
deliver securities owned by the Trust held by the Custodian
or in a Securities System account of the Custodian or in the
Custodian's Direct Paper book entry system account ("Direct
Paper System Account") only upon receipt of Proper
Instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following
cases:
1) Upon sale of such securities for the account of
the Trust and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Trust;
3) In the case of a sale effected through a
Securities System, in accordance with the
provisions of Section 2.9 hereof;
4) To the depository agent in connection with tender
or other similar offers for portfolio securities
of the Trust;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or
otherwise become payable; provided that, in any
such case, the cash or other consideration is to
be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Trust or into the name of any
nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed
pursuant to Section 1.3 or into the name or
nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other
evidence representing the same aggregate face
amount or number of units; provided that, in any
such case, the new securities are to be delivered
to the Custodian;
7) Upon the sale of such securities for the account
of the Trust, to the broker or its clearing agent,
against a receipt, for examination in accordance
with "street delivery" custom; provided that in
any such case, the Custodian shall have no
responsibility or liability for any loss arising
from the delivery of such securities prior to
receiving payment for such securities except as
may arise from the Custodian's own negligence,
willful misconduct, or lack of good faith;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities
of the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
provided that, in any such case, the new
securities and cash, if any, are to be delivered
to the Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise
of such warrants, rights or similar securities or
the surrender of interim receipts or temporary
securities for definitive securities; provided
that, in any such case, the new securities and
cash, if any, are to be delivered to the
Custodian;
10) For delivery in connection with any loans of
securities made by the Trust, but only against
receipt of adequate collateral as agreed upon from
time to time by the Custodian and the Trust, which
may be in the form of cash or obligations issued
by the United States government, its agencies or
instrumentalities, except that in connection with
any loans for which collateral is to be credited
to the Custodian's account in the book-entry
system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or
responsible for the delivery of securities owned
by the Trust prior to the receipt of such
collateral;
11) For delivery as security in connection with any
borrowings by the Trust requiring a pledge of
assets by the Trust, but only against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of
any agreement among the Trust, the Custodian and a
broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a
member of The National Association of Securities
Dealers, Inc. ("NASD"), relating to compliance
with the rules of The Options Clearing Corporation
and of any registered national securities
exchange, or of any similar organization or
organizations, regarding escrow or other
arrangements in connection with transactions by
the Trust;
13) For delivery in accordance with the provisions of
any agreement among the Trust, the Custodian, and
a Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any
similar organization or organizations, regarding
account deposits in connection with transactions
by the Trust; and
14) For any other proper corporate purpose, but only
upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of
the Board of Trustees or of the Executive
Committee signed by an officer of the Trust and
certified by the Secretary or an Assistant
Secretary, specifying the securities to be
delivered, setting forth the purpose for which
such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of
such securities shall be made.
2.3 Registration of Securities. Securities held by the
Custodian (other than bearer securities) shall be registered
in the name of the Trust or in the name of any nominee of
the Trust or of any nominee of the Custodian which nominee
shall be assigned exclusively to the Trust, unless the Trust
has authorized in writing the appointment of a nominee to be
used in common with other registered investment companies
having the same investment advisor as the Trust, or in the
name or nominee name of any agent appointed pursuant to
Section 1.3 or in the name or nominee name of any sub-
custodian appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the Trust under the
terms of this Contract shall be in "street name" or other
good delivery form. If, however, the Trust directs the
Custodian to maintain securities in "street name", the
Custodian shall utilize its best efforts only to timely
collect income due the Trust on such securities and to
notify the Trust on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the name of the Trust,
subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in
such account or accounts, subject to the provisions hereof,
all cash received by it from or for the account of the
Trust, other than cash maintained by the Trust in a bank
account established and used in accordance with Rule 17f-3
under the Investment Company Act of 1940. Funds held by the
Custodian for the Trust may be deposited by it to its credit
as Custodian in the Banking Department of the Custodian or
in such other banks or trust companies as it may in its
discretion deem necessary or desirable; provided, however,
that every such bank or trust company shall be qualified to
act as a custodian under the Investment Company Act of 1940
and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be
approved by vote of a majority of the Board of Trustees of
the Trust. Such funds shall be deposited by the Custodian
in its capacity as Custodian and shall be withdrawable by
the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement
between the Trust and the Custodian, the Custodian shall,
upon the receipt of Proper Instructions, make federal funds
available to the Trust as of specified times agreed upon
from time to time by the Trust and the Custodian in the
amount of checks received in payment for Shares of the Trust
which are deposited into the Trust's account.
2.6 Collection of Income. Subject to the provisions of Section
2.3, the Custodian shall collect on a timely basis all
income and other payments with respect to registered
securities held hereunder to which the Trust shall be
entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all
income and other payments with respect to bearer securities
if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent thereof and shall
credit such income, as collected, to the Trust's custodian
account. Without limiting the generality of the foregoing,
the Custodian shall detach and present for payment all
coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on
securities held hereunder. The Custodian shall utilize its
best efforts only to timely collect all income due the Trust
on securities loaned pursuant to the provisions of Section
2.2 (10).
2.7 Payment of Trust Monies. Upon receipt of Proper
Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay
out monies of the Trust in the following cases only:
1) Upon the purchase of securities, options, futures
contracts or options on futures contracts for the
account of the Trust but only (a) against the
delivery of such securities or evidence of title
to such options, futures contracts or options on
futures contracts to the Custodian (or any bank,
banking firm or trust company doing business in
the United States or abroad which is qualified
under the Investment Company Act of 1940, as
amended, to act as a custodian and has been
designated by the Custodian as its agent for this
purpose) registered in the name of the Trust or in
the name of a nominee of the Custodian referred to
in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected
through a Securities System, in accordance with
the conditions set forth in Section 2.9 hereof;
(c) in the case of a purchase involving the Direct
Paper System, in accordance with the conditions
set forth in Section 2.9A; (d) in the case of
repurchase agreements entered into between the
Trust and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i)
against delivery of the securities either in
certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank
with such securities or (ii) against delivery of
the receipt evidencing purchase by the Trust of
securities owned by the Custodian along with
written evidence of the agreement by the Custodian
to repurchase such securities from the Trust or
(e) for transfer to a time deposit account of the
Trust in any bank, whether domestic or foreign,
such transfer may be effected prior to receipt of
a confirmation from a broker and/or the applicable
bank pursuant to Proper Instructions from the
Trust as defined in Section 2.14;
2) Upon making of a capital contribution to any
partnership of which the Trust is a partner but
only against written evidence of a corresponding
increase in the capital account.
3) In connection with conversion, exchange or
surrender of securities owned by the Trust as set
forth in Section 2.2 hereof;
4) For the payment of any expense or liability
incurred by the Trust, including but not limited
to the following payments for the account of the
Trust: interest, taxes, administrative (except to
the extent required to be paid by the Trust's
investments advisors) management, accounting,
transfer agent and legal fees, and operating
expenses of the Trust whether or not such expenses
are to be in whole or part capitalized or treated
as deferred expenses;
5) For the payment of any dividends or other
distributions declared pursuant to the governing
documents of the Trust;
6) For payment of the amount of dividends received in
respect of securities sold short;
7) For any other proper purpose, but only upon
receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board of
Trustees or of the Executive Committee of the
Trust signed by an officer of the Trust and
certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment
is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons
to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities
Purchased. Except as specifically stated otherwise in this
Contract, in any and every case where payment for purchase
of securities for the account of the Trust is made by the
Custodian in advance of receipt of the securities purchased
in the absence of specific written instructions from the
Trust to so pay in advance, the Custodian shall be
absolutely liable to the Trust for such securities to the
same extent as if the securities had been received by the
Custodian.
2.9 Deposit of Trust Assets in Securities Systems. The
Custodian may deposit and/or maintain securities owned by
the Trust in a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal
agencies, collectively referred to herein as "Securities
System" in accordance with applicable Federal Reserve Board
and Securities and Exchange Commission rules and
regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Trust in
a Securities System provided that such securities
are represented in an account ("Account") of the
Custodian in the Securities System which shall not
include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise
for customers;
2) The records of the Custodian with respect to
securities of the Trust which are maintained in a
Securities System shall identify by book-entry
those securities belonging to the Trust;
3) The Custodian shall pay for securities purchased
for the account of the Trust upon (i) receipt of
advice from the Securities System that such
securities have been transferred to the Account,
and (ii) the making of an entry on the records of
the Custodian to reflect such payment and transfer
for the account of the Trust. The Custodian shall
transfer securities sold for the account of the
Trust upon (i) receipt of advice from the
Securities System that payment for such securities
has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian
to reflect such transfer and payment for the
account of the Trust. Copies of all advices from
the Securities System of transfers of securities
for the account of the Trust shall identify the
Trust, be maintained for the Trust by the
Custodian and be provided to the Trust at its
request. Upon request, the Custodian shall
furnish the Trust confirmation of each transfer to
or from the account of the Trust in the form of a
written advice or notice and shall furnish to the
Trust copies of daily transaction sheets
reflecting each day's transactions in the
Securities System for the account of the Trust;
4) The Custodian shall provide the Trust with any
report obtained by the Custodian on the Securities
System's accounting system, internal accounting
control and procedures for safeguarding securities
deposited in the Securities System;
5) The Custodian shall have received the initial or
annual certificate, as the case may be, required
by Article 9 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to
the Trust for any loss or damage to the Trust
resulting from use of the Securities System by
reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents
or of any of its or their employees or from
failure of the Custodian or any such agent to
enforce effectively such rights as it may have
against the Securities System; at the election of
the Trust, it shall be entitled to be subrogated
to the rights of the Custodian with respect to any
claim against the Securities System or any other
person which the Custodian may have as a
consequence of any such loss or damage if and to
the extent that the Trust has not been made whole
for any such loss or damage.
2.9A Trust Assets Held in the Custodian's Direct Paper System.
The Custodian may deposit and/or maintain securities owned
by the Trust in the Direct Paper System of the Custodian
subject to the following provisions:
1) No transaction relating to securities in the
Direct Paper System will be effected in the
absence of Proper Instructions;
2) The Custodian may keep securities of the Trust in
the Direct Paper System only if such securities
are represented in an account ("Account") of the
Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise
for customers;
3) The Custodian shall have received the initial or
annual certificate, as the case may be, required
by Article 9 hereof;
4) The records of the Custodian with respect to
securities of the Trust which are maintained
in the Direct Paper System shall identify by book-
entry those securities belonging to the Trust;
5) The Custodian shall pay for securities purchased
for the account of the Trust upon the making of an
entry on the records of the Custodian to reflect
such payment and transfer of securities to the
account of the Trust. The Custodian shall
transfer securities sold for the account of the
Trust upon the making of an entry on the records
of the Custodian to reflect such transfer and
receipt of payment for the account of the Trust;
6) The Custodian shall furnish the Trust confirmation
of each transfer to or from the account of the
Trust, in the form of a written advice or notice,
of Direct Paper on the next business day following
such transfer and shall furnish to the Trust
copies of daily transaction sheets reflecting each
day's transaction in the Securities System for the
account of the Trust;
7) The Custodian shall provide the Trust with any
report on its system of internal accounting
control as the Trust may reasonably request from
time to time.
2.10 Segregated Account. The Custodian shall upon receipt of
Proper Instructions establish and maintain a segregated
account or accounts for and on behalf of the Trust, into
which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by
the Custodian pursuant to Section 2.9 hereof, (i) in
accordance with the provisions of any agreement among the
Trust, the Custodian and a broker-dealer registered under
the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the
Trust, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or
written by the Trust or commodity futures contracts or
options thereon purchased or sold by the Trust, (iii) for
the purposes of compliance by the Trust with the procedures
required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and
(iv) for other proper corporate purposes, but only, in the
case of clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board
of Trustees or of the Executive Committee signed by an
officer of the Trust and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes
of such segregated account and declaring such purposes to be
proper corporate purposes.
2.11 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to securities of the Trust held by it and in
connection with transfers of securities.
2.12 Proxies. The Custodian shall, with respect to the
securities held hereunder, cause to be promptly executed by
the registered holder of such securities, if the securities
are registered otherwise than in the name of the Trust or a
nominee of the Trust, all proxies, without indication of the
manner in which such proxies are to be voted, and shall
promptly deliver to the Trust such proxies, all proxy
soliciting materials and all notices relating to such
securities.
2.13 Communications Relating to Trust Portfolio Securities.
Subject to the provisions of Section 2.3, the Custodian
shall transmit promptly to the Trust all written information
(including, without limitation, pendency of calls and
maturities of securities and expirations of rights in
connection therewith and notices of exercise of call and put
options written by the Trust and the maturity of futures
contracts purchased or sold by the Trust) received by the
Custodian from issuers of the securities being held for the
Trust. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Trust all written
information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the
party (or his agents) making the tender or exchange offer.
If the Trust desires to take action with respect to any
tender offer, exchange offer or any other similar
transaction, the Trust shall notify the Custodian at least
three business days (or such shorter period as the Custodian
may agree) prior to the date on which the Custodian is to
take such action.
2.14 Proper Instructions. Proper Instructions as used throughout
this Article 2 means a writing signed or initialed by one or
more person or persons as the Board of Trustees shall have
from time to time authorized. Each such writing shall set
forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for
which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably
believes them to have been given by a person authorized to
give such instructions with respect to the transaction
involved. The Trust shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the
Secretary or an Assistant Secretary as to the authorization
by the Board of Trustees of the Trust accompanied by a
detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications
effected directly between electro-mechanical or electronic
devices provided that the Board of Trustees and the
Custodian are satisfied that such procedures afford adequate
safeguards for the Trust's assets. For purposes of this
Section, Proper Instructions shall include instructions
received by the Custodian pursuant to any three-party
agreement which requires a segregated asset account in
accordance with Section 2.10.
2.15 Actions Permitted without Express Authority. The Custodian
may in its discretion, without express authority from the
Trust:
1) make payments to itself or others for minor out of
pocket expenses of handling securities or other
similar items relating to its duties under this
Contract, provided that all such payments shall be
accounted for to the Trust;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the Trust,
checks, drafts and other negotiable instruments;
and
4) in general, attend to all non-discretionary
details in connection with the sale, exchange,
substitution, purchase, transfer and other
dealings with the securities and property of the
Trust except as otherwise directed by the Board of
Trustees of the Trust.
2.16 Evidence of Authority. The Custodian shall be protected in
acting upon any instructions, notice, request, consent,
certificate or other instrument or paper reasonably believed
by it to be genuine and to have been properly executed by or
on behalf of the Trust. The Custodian may receive and
accept a certified copy of a vote of the Board of Trustees
of the Trust as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of any
determination or of any action by the Board of Trustees
pursuant to the Declaration of Trust as described in such
vote, and such vote may be considered as in full force and
effect until receipt by the Custodian of written notice to
the contrary.
3. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income
The Custodian shall keep the books of account of the Trust
and compute the net asset value per share of the outstanding
shares of the Trust.
4. Records
The Custodian shall create and maintain all records relating
to its activities and obligations under this Contract in such
manner as will meet the obligations of the Trust under the
Investment Company Act of 1940, with particular attention to
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All
such records shall be the property of the Trust and shall at all
times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents
of the Trust and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at the Trust's
request, supply the Trust with a tabulation of securities owned
by the Trust and held by the Custodian and shall, when requested
to do so by the Trust and for such compensation as shall be
agreed upon between the Trust and the Custodian, include
certificate numbers in such tabulations.
5. Opinion of Trust's Independent Accountant
The Custodian shall take all reasonable action, as the Trust
may from time to time request, to obtain from year to year
favorable opinions from the Trust's independent accountants with
respect to its activities hereunder in connection with the
preparation of the Trust's Form N-2, and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
6. Reports to Trust by Independent Public Accountants
The Custodian shall provide the Trust, at such times as the
Trust may reasonably require, with reports by independent public
accountants on the accounting system, internal accounting control
and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited
and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such
reports, shall be of sufficient scope and in sufficient detail,
as may reasonably be required by the Trust to provide reasonable
assurance that any material inadequacies would be disclosed by
such examination, and, if there are no such inadequacies, the
reports shall so state.
7. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation
for its services and expenses as Custodian, as agreed upon from
time to time between the Trust and the Custodian. The Custodian
shall provide monthly to the Trust a calculation of the fees
payable to the Custodian.
8. Responsibility of Custodian
So long as and to the extent that it is in the exercise of
good faith and reasonable care, the Custodian shall not be
responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered
by it pursuant to this Contract and shall be held harmless in
acting upon any notice, request, consent, certificate or other
instrument reasonably believed by it to be genuine and to be
signed by the proper party or parties, including any futures
commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the
exercise of good faith and non-negligence in carrying out the
provisions of this Contract.
The Custodian shall be entitled to receive, and act upon,
advice of counsel (which counsel shall be selected by the
Custodian with reasonable care based on such counsel's
professional competence and reputation or shall be counsel for
the Trust) and shall be without liability for any action
reasonable taken pursuant to such advice in good faith and
without negligence.
The Custodian shall be indemnified and held harmless by the
Trust for any action taken by it in carrying out terms and
provisions of this Contract if done in good faith and without
negligence or willful misconduct on the Custodian s part;
provided that: (i) the Custodian shall not be entitled to
indemnification in those situations where the Custodian is liable
to the Trust pursuant to Section 2.9(6) hereof, (ii) the
Custodian will use all reasonable care to identify and notify the
Trust promptly concerning any situation which presents, or
appears likely to present, the probability of such a claim for
indemnification against the Trust, and (iii) in any case in which
the Trust may be asked to so indemnify and hold harmless the
Custodian, the Trust shall have been fully and promptly advised
of all pertinent facts concerning the situation in question. The
Trust, using counsel of its choice, shall have the option to
defend the Custodian against any claim which may be a subject of
this indemnification and shall be given timely notice by the
Custodian to permit it to exercise that option as early as
possible with respect to such claim. In the event the Trust so
elects to defend the Custodian, the Trust will notify the
Custodian, and thereupon the Trust shall take over complete
defense of the claim, and after it does so, the Custodian shall
incur no further legal or other expenses for which it shall be
entitled to indemnification from the Trust. The Custodian shall
in no case confess any claim or make any compromise in any case
in which the Trust will be asked to indemnify the Custodian,
except with the Trust's prior written consent.
If the Trust requires the Custodian, its affiliates,
subsidiaries or agents, to advance cash or securities for any
purpose (including but not limited to securities settlements and
settlement of foreign exchange contracts) or in the event that
the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses or assessments in connection with the
performance of this Contract, except such as may arise from its
or its nominee's own negligent action, negligent failure to act,
willful misconduct or lack of good faith, any property at any
time held for the account of the Trust shall be security therefor
and should the Trust fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to
dispose of the Trust assets to the extent necessary to obtain
reimbursement.
9. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution,
shall continue in full force and effect until terminated as
hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either
party by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not
sooner than ninety (90) days after the date of such delivery or
mailing; provided, however that the Custodian shall not act under
Section 2.9 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the
Board of Trustees of the Trust has approved the initial use of a
particular Securities System and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the
Board of Trustees has reviewed the use by the Trust of such
Securities System, as required in each case by Rule 17f-4 under
the Investment Company Act of 1940, as amended and that the
Custodian shall not act under Section 2.9A hereof in the absence
of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has approved the
initial use of the Direct Paper System and the receipt of an
annual certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has reviewed the use by the Trust of
the Direct Paper System; provided further, however, that the
Trust shall not amend or terminate this Contract in contravention
of any applicable federal or state regulations, or any provision
of the Declaration of Trust, and further provided, that the Trust
may at any time by action of its Board of Trustees (i) substitute
another bank or trust company for the Custodian by giving notice
as described above to the Custodian, or (ii) immediately
terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian or upon the happening
of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Trust shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its
reasonable out of pocket, costs, expenses and disbursements.
10. Successor Custodian
If a successor custodian shall be appointed by the Board of
Trustees of the Trust, the Custodian shall, upon termination,
deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Trust's securities
held in a Securities System or Direct Paper System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy
of a vote of the Board of Trustees of the Trust, deliver at the
office of the Custodian and transfer such securities, funds and
other properties in accordance with such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of Trustees
shall have been delivered to the Custodian on or before the date
when such termination shall become effective, then the Custodian
shall have the right to deliver to a bank or trust company, which
is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts or New York, New York, of
its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not
less than $250,000,000, all securities, funds and other
properties held by the Custodian and all instruments held by the
Custodian relative thereto and all other property held by it
under this Contract and to transfer to an account of such
successor custodian all of the Trust's securities held in any
Securities System or Direct Paper System. Upon agreeing to be
bound by the terms of this contract such bank or trust company
shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Trust to procure the
certified copy of the vote referred to or of the Board of
Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period
as the Custodian retains possession of such securities, funds and
other properties and the provisions of this Contract relating to
the duties and obligations of the Custodian shall remain in full
force and effect.
11. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Trust may from time to time agree on such
provisions interpretive of or in addition to the provisions of
this Contract as may in their joint opinion be consistent with
the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Declaration of Trust of the Trust. No interpretive or additional
provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Contract.
12. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth
of Massachusetts.
13. Prior Contracts
This Contract supersedes and terminates, as of the date
hereof, all prior contracts between the Trust and the Custodian
relating to the custody of the Trust's assets.
14. Shareholder Communications
Securities and Exchange Commission Rule 14b-2 requires banks
which hold securities for the account of customers to respond to
requests by issuers of securities for the names, addresses and
holdings of beneficial owners of securities of that issuer held
by the bank unless the beneficial owner has expressly objected to
disclosure of this information. In order to comply with the
rule, we need you to indicate whether you authorize us to provide
your name, address, and share position to requesting companies
whose stock you own. If you tell us "no", we will not provide
this information to requesting companies. If you tell us "yes"
or do not check either "yes" or "no" below, we are required by
the rule to treat you as consenting to disclosure of this
information for all securities owned by you or any funds or
accounts established by you. For your protection, the Rule
prohibits the requesting company from using your name and address
for any purpose other than corporate communications. Please
indicate below whether you consent or object by checking one of
the alternatives below.
YES [ ] You are authorized to release our name, address,
and share positions.
NO [X] You are not authorized to release our name,
address, and share positions.
15. Disclaimer of Liability
Notwithstanding anything to the contrary contained in this
Agreement, the parties hereto acknowledge and agree that, as
provided in Section 4.4 of the Declaration of Trust, this
Agreement is executed by the Trustees and/or officers of the
Trust, not individually but as such Trustees and/or officers of
the Trust, and the obligations hereunder are not binding upon any
of the Trustees or Shareholders individually but bind only the
estate of the Trust.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the 21st day of December, 1994.
ATTEST BLACKROCK ASSET INVESTORS
By:
Name: Wesley R. Edens
Title: Chief Operating Officer
ATTEST STATE STREET BANK AND TRUST COMPANY
By:
Executive Vice President
EXHIBIT A
BLACKROCK ASSET INVESTORS
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT, made as of the 21st day of
December, 1994 between BlackRock Asset Investors, a Delaware
business trust (the "Trust"), and State Street Bank and Trust
Company, a Massachusetts trust company (the "Administrator").
W I T N E S E T H :
WHEREAS, the Trust is a non-diversified, closed-end
investment company that proposes to register under the Investment
Company Act of 1940, as amended (the "Investment Company Act");
and
WHEREAS, the Trust has retained BlackRock Financial
Management L.P. ("BlackRock") as investment advisor for the
purpose of investing its assets, arranging for the provision of
administrative services and supervising the provision of such
services and desires to retain the Administrator to provide
certain administrative services, and the Administrator is willing
to furnish such administrative services on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
1. The Trust hereby appoints the Administrator to provide the
services set forth below, subject to the overall supervision of
the Board of Trustees of the Trust and BlackRock, for the period
and on the terms set forth in this Agreement. The Administrator
hereby accepts such appointment and agrees during such period to
render the services herein described and to assume the
obligations herein set forth, for the compensation herein
provided.
2. Subject to the supervision of the Board of Trustees and
officers of the Trust and BlackRock, the Administrator shall
provide the following services with respect to the Trust:
(a) Oversee the determination and reporting of the Trust's
net asset value in accordance with the Trust's policy
as adopted from time to time by the Board of Trustees;
(b) Oversee the maintenance by State Street Bank and Trust
Company of those books and records of the Trust that
State Street Bank and Trust Company is required to
maintain;
(c) Prepare the Trust's federal, state and local income tax
returns for review by the Trust's independent
accountants and filing by the treasurer;
(d) Review with BlackRock the appropriateness of and
arrange for payment of the Trust's expenses;
(e) Prepare for review and approval by BlackRock financial
information for the Trust's semi-annual and annual
reports, proxy statements and other communications with
shareholders required or otherwise to be sent to Trust
shareholders, and arrange for the printing and
dissemination of such reports and communications to
shareholders and regulatory authorities;
(f) Prepare for review by BlackRock and counsel to the
Trust the Trust's periodic financial reports required
to be filed with the Securities and Exchange Commission
("SEC") on Form N-SAR and such other reports, forms or
filings, as may be mutually agreed upon;
(g) Prepare reports relating to the business and affairs of
the Trust as may be mutually agreed upon and not
otherwise appropriately prepared by BlackRock, the
Trust's custodian, counsel or auditors;
(h) Make such reports and recommendations to the Board
concerning the performance of the Trust's independent
accountants as the Board may reasonably request or
deems appropriate;
(i) Make such reports and recommendations to the Board
concerning the performance and fees of the Trust's
custodian and transfer and dividend disbursing agent as
the Board may reasonably request or deems appropriate;
(j) Calculate for review by BlackRock and authorization by
an officer of the Trust, the fees payable to the
Administrator, BlackRock, the custodian, and the
transfer agent;
(k) Consult with the Trust's officers, independent
accountants, legal counsel, custodian and transfer and
dividend disbursing agent in establishing the
accounting policies of the Trust;
(l) Assist BlackRock in drawing capital pursuant to the
Trust's subscription agreements and in making
distributions to the Trust's shareholders;
(m) Assist BlackRock in facilitating bank or other
borrowings by the Trust;
(n) Prepare such information and reports as may be required
by any bank from which the Trust borrows funds;
(o) Provide such assistance to BlackRock, the custodian,
the transfer agent and the Trust's counsel and
accountants as generally may be required to properly
carry on the business and operations of the Trust; and
(p) Respond to or refer to BlackRock or the Trust's
transfer agent, shareholder inquiries relating to the
Trust.
All services are to be furnished through the medium of any
officers or employees of the Administrator as the Administrator
deems appropriate in order to fulfill its obligations hereunder.
Certain details of the scope of the Administrator's services
hereunder shall be documented in the Compliance Manual and Fund
Profile, which outlines the administrative requirements of the
Trust as consistent with this Agreement and the Trust's
Declaration of Trust, as amended from time to time (the
"Declaration of Trust").
The Administrator will rely on the Partnership's outside
counsel and other servicers to determine that the loans purchased
by BlackRock Capital Finance and subsequent securitizations and
other securities held by BlackRock Capital Finance comply with
the requirements of the Trust. To the extent that the
Administrator does not receive information required to verify
compliance, the Administrator will assume that the instruments
held by BlackRock Capital Finance with respect to which such
information is unavailable are "In-Compliance" unless advised
otherwise.
3. The Trust will pay the Administrator a monthly fee as
described in the Administration Fee Schedule between the
Administrator and the Trust (See Schedule A). Except as provided
in such fee schedule, the Administrator and the Trust shall bear
all its own expenses incurred in connection with this Agreement.
4. (a) The Administrator shall be responsible for the
performance of only such duties as are set forth herein and in no
event shall be responsible for any investment advice to the
Trust. The Administrator shall have no liability for any loss or
damage resulting from the performance or nonperformance of its
duties hereunder unless directly caused by or resulting from the
willful misfeasance, bad faith or gross negligence of the
Administrator, its officers or employees or from reckless
disregard by any thereof of the Administrator's duties under this
Agreement.
(b) The Administrator will not be liable for any error of
judgement or mistake of law or for any loss suffered by the Trust
or its shareholders in connection with the performance of its
duties under this Agreement, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
duties under this Agreement.
(c) The Trust shall indemnify and hold the Administrator
harmless from all loss, cost, damage and expense, including
expenses for counsel, reasonably incurred by it resulting from
any claim, demand, action or suit in connection with its
acceptance of this Agreement, any action or omission by it in the
performance of its duties hereunder, or as a result of acting
upon any instructions reasonably believed by it to have been
executed by a duly authorized officer of BlackRock or of the
Trust, provided that this indemnification shall not apply to
actions or omissions of the Administrator, its officers,
employees or agents in cases of loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
duties under this Agreement.
(d) The Trust will be entitled to participate at its own
expense in the defense, or, if it so elects, to assume the
defense of any suit brought to enforce any liability subject to
the indemnification provided above, and, if the Trust elects to
assume the defense, such defense shall be conducted by counsel
chosen by it. In the event the Trust elects to assume the
defense of any such suit and retain such counsel, the
Administrator or any of its affiliated persons, named as
defendant or defendants in the suit, may retain additional
counsel but shall bear the fees and expenses of such counsel
unless the Trust shall have specifically authorized the retaining
of such counsel.
(e) The indemnification contained herein shall survive the
termination of this Agreement.
(f) Section 4 (c) shall not apply with respect to services
covered by the Trust's Custodian Contract, dated December 21,
1994 or the Trust's Registrar and Transfer Agency Agreement,
dated December 21, 1994, each as may be amended from time to
time.
5. This Agreement shall become effective as of the date on
which the Trust first draws down capital from those who executed
subscription agreements in favor of the Trust and shall
thereafter continue in effect unless terminated as herein
provided. This Agreement may be terminated by either party
hereto (without penalty) at any time upon not less than 90 days
prior written notice to the other party hereto.
6. The services of the Administrator to the Trust hereunder are
not exclusive and nothing in this Agreement shall limit or
restrict the right of the Administrator to engage in any other
business or to render services of any kind to any other
corporation, firm, individual or association. The Administrator
shall be deemed to be an independent contractor, unless otherwise
expressly provided or authorized by this Agreement.
7. During the term of this Agreement, the Trust agrees to
furnish the Administrator at the principal office of the
Administrator prior to use thereof all offering memoranda, proxy
statements, reports to shareholders, sales literature, or other
material prepared for distribution to shareholders (or
prospective shareholders) of the Trust that refer in any way to
the Administrator. If the Administrator reasonably objects in
writing to such references within five business days (or such
other time as may be mutually agreed) after receipt thereof, the
Trust will modify such references in a manner reasonably
satisfactory to the Administrator. In the event of termination
of this Agreement, the Trust will continue to furnish to the
Administrator copies of any of the above-mentioned materials that
refer in any way to the Administrator. The Trust shall furnish
or otherwise make available to the Administrator such other
information relating to the business affairs of the Trust as the
Administrator at any time, or from time to time, reasonably
requests in order to discharge its obligations hereunder.
8. This Agreement may be amended by mutual written consent.
9. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if
delivered or mailed by registered mail, postage prepaid, (1) to
the Administrator at State Street Bank and Trust Company, 1776
Heritage Drive, North Quincy, Massachusetts 02171, Attention:
BlackRock Asset Investors or (2) to the Trust at 345 Park Avenue,
New York, New York, 10154, Attention: President.
10. This Agreement (and the Compliance Manual and Fund Profile)
sets forth the entire agreement and understanding of the parties
hereto solely with respect to the matters covered hereby and the
relationship between the Trust and State Street Bank and Trust
Company as Administrator. Nothing in this Agreement shall
govern, restrict or limit in any respect any other business
dealings between the parties hereto unless otherwise expressly
provided herein.
11. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts
without reference to choice of law principles thereof and in
accordance with the Investment Company Act. In the case of any
conflict, the Investment Company Act shall control.
12. Notwithstanding anything to the contrary contained in this
Agreement, the parties hereto acknowledge and agree that, as
provided in Section 4.4 of the Declaration of Trust, this
Agreement is executed by the Trustees and/or officers of the
Trust, not individually but as such Trustees and/or officers of
the Trust, and the obligations hereunder are not binding upon any
of the Trustees or Shareholders individually but bind only the
estate of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as
of the day and year first above written.
BLACKROCK ASSET INVESTORS
By:________________________________
Name: Wesley R. Edens
Title: Chief Operating Officer
STATE STREET BANK AND TRUST COMPANY
By:________________________________
Name: Ronald E. Logue
Title: Executive Vice President
_____________________________________________________________________________
EXHIBIT B
BLACKROCK ASSET INVESTORS
BLACKROCK CAPITAL FINANCE L.P.
345 Park Avenue
New York, New York 10154
212/754-5534
January 23 , 1995
Brazos GenPar, Inc.
600 East Las Colinas Blvd.
Suite 400
Irving, Texas 75039
Attention: John P. Grayken,
President
Dear Mr. Grayken:
When countersigned and returned to the undersigned
by Brazos GenPar, Inc., a Delaware corporation (said
entity, or its permitted successor or assign, referred to
herein as "BGI"), this letter will constitute the
agreement among BGI, on the one hand, and BlackRock Asset
Investors ("BAI"), a Delaware business trust, and
BlackRock Capital Finance L.P. ("BCF"), a Delaware
limited partnership whose entire equity interests are
owned and controlled directly or indirectly by BAI (BAI
and BCF and their respective successors and assigns being
herein referred to collectively as "BlackRock"), on the
other hand, regarding the terms on which BGI and
BlackRock will coinvest in certain Covered Asset (as such
term is hereinafter defined) investment opportunities.
1. Certain Definitions. As used in this
Agreement, the following terms shall have the meanings
indicated below:
"CMBS" means commercial mortgage-backed securities
representing interests primarily in one or more CML,
together with interests in such commercial mortgage-
backed securities.
"CML" means loans secured primarily by lien
mortgages or deeds of trust covering real property other
than one to four family residential property.
"Coinvested Asset" means any Covered Asset in which
BlackRock and BGI have coinvested hereunder.
"Covered Asset" means (i) any performing, distressed
or non-performing CML; (ii) any Subordinated CMBS
acquired in the new issuance market, the secondary
market, or secured by CML in which the parties have
coinvested hereunder; or (iii) any assets (other than
interests in one to four family residential mortgage
loans) the acquisition of which is incidental to or
results from and is included in any transaction involving
any CML or any Subordinated CMBS in which the parties
have coinvested hereunder.
"Subordinated CMBS" means junior or subordinated,
non-investment grade CMBS, which shall in no event
include residual interests of real estate mortgage
conduits (REMICs).
2. New Business; Coinvestment Process.
2.1 Subject to the last sentence of this Section 2.1,
BlackRock shall not make any investment in any Covered Asset
for its own account, or for the accounts of programs
sponsored by BlackRock, without first having offered BGI the
opportunity to invest in such Covered Asset in accordance
with this Section 2. BlackRock shall be obligated to offer
to BGI the right to invest in each such Covered Asset in an
amount determined by BlackRock in its sole discretion;
provided, however, that the interest in such Covered Asset
so offered shall not be less than a 20% interest or greater
than a 50% interest in such Covered Asset; provided further,
however, that if BGI elects to exercise its right to
coinvest in such Covered Asset, BGI shall be required to
acquire not less than a 10% interest in such Covered Asset.
The actual percentage of the interest in such Covered Asset
that is actually acquired by BGI (which percentage shall be
equal to or in excess of 10% up to the percentage of the
interest in such Covered Asset so offered by BlackRock)
shall be determined by BGI in its sole discretion. BGI
understands that BlackRock has a limited term of existence
and a limited capital commitment period and that BlackRock
will cease to originate coinvestment opportunities as of the
earlier of the end of BlackRock's commitment period or the
date on which it ceases to have capital available for new
investments, which dates may be earlier than BlackRock's
termination date.
2.2 The coinvestment process between BlackRock and BGI
begins with a new business opportunity (a "New Business
Opportunity") to invest in one or more Covered Assets being
identified by BlackRock. The coinvestment process is
initiated when a new business letter (a "New Business
Letter"), a sample form of which is attached as Exhibit "A"
hereto, is delivered to BGI by BlackRock. The New Business
Letter details the dollar amount of the prospective
transaction, the expected timing of both the due diligence
and transaction date, the expected expense of the due
diligence, the proposed capital structure, and the expected
ownership percentage of each party. It is expected that the
expense and timing estimates will be made jointly by both
BGI and BlackRock. The actual due diligence expenses with
respect to a proposed transaction with respect to which a
New Business Offer was accepted, whether or not such
transaction is ever consummated, will be paid by each party
in proportion with the expected ownership percentages set
forth in the New Business Letter with respect to such
transaction.
A new business offer (a "New Business Offer") will be
deemed to have been made by BlackRock to BGI when a
substantially completed New Business Letter has been
delivered to BGI, signed by an officer of BlackRock . Each
New Business Offer made by BlackRock pursuant to the
provisions hereof shall be made in good faith only if
BlackRock has a good faith expectation that the New
Business Opportunity will yield at least a 30% internal rate
of return on equity capital invested. Once delivered, BGI
will have two business days to respond to the New Business
Offer. Acceptance of the New Business Offer requires a
countersignature of BGI in the space provided in the New
Business Letter by an authorized officer of BGI. Failure to
respond by BGI within two business days or specific
rejection by BGI will be deemed a rejection of the New
Business Offer, at which time BlackRock will be free to
pursue the acquisition of the Covered Assets which were the
subject of such New Business Opportunity with another party
and will be under no obligation to offer any subsequent
coinvestment right to BGI with respect to such Covered
Assets.
BGI will make every reasonable effort to commit the
time and resources necessary to evaluate the New Business
Opportunities identified, and the New Business Offers made,
by BlackRock hereunder, provided however that not
withstanding anything to the contrary contained herein,
termination of this Agreement by BlackRock pursuant to
Section 6(d) hereof by reason of BGI s failure in this
regard shall be BlackRock s sole and exclusive remedy for
such failure.
During the period of 365 days immediately after the
rejection or deemed rejection by BGI of any such New
Business Offer, BGI shall not, without BlackRock's prior
consent, acquire or seek to acquire all or any part of the
Covered Assets that were the subject of such rejected New
Business Offer; provided, however, that the foregoing
provisions of this paragraph, as applicable to BGI, shall
not apply with respect to any Covered Asset with respect to
which BGI has identified the coinvestment opportunity or any
Covered Asset with respect to which the parties have
identified the coinvestment opportunity jointly.
2.3 The due diligence process with respect to a New
Business Offer accepted by BGI hereunder will be conducted
as mutually agreed upon by the parties in a timeframe and
budget consistent with the New Business Letter with respect
to such New Business Offer. Modifications to either the
timeframe or budget will be made only with the mutual
consent of both BlackRock and BGI. Once the due diligence
is completed, the portfolio will be priced by both BlackRock
and BGI and a coinvestment letter substantially similar to
the letter attached as Exhibit "B" hereto (a "Coinvestment
Letter") will be completed by BCF and delivered to BGI, at
which time a coinvestment offer (a Coinvestment Offer )
will be deemed to have been made by BlackRock to BGI. At
such time, preliminary approval of the coinvestment is made,
and the Coinvestment Letter is signed by qualified officers
of both BlackRock and BGI prior to submission of the New
Business Opportunity to the investment committees of both
BGI and BlackRock. Notwithstanding such signing by such
officers, the Coinvestment Letter will become binding only
upon unqualified written approval by the investment
committees of both BlackRock and BGI and the signing of the
Coinvestment Letter by authorized representatives of each
such investment committee. BGI will have two business days
after delivery of the Coinvestment Letter to accept the
Coinvestment Offer by obtaining investment committee
approval, countersigning the letter and returning it to
BlackRock.
If within two business days after delivery of the
Coinvestment Letter, BGI has failed to respond, has not
obtained written investment committee approval or has
specifically rejected the Coinvestment Offer, the
Coinvestment Offer will be deemed rejected , at which time
BlackRock will be free to pursue the acquisition of the
Covered Assets which were the subject of such New Business
Opportunity with another party and will be under no
obligation to offer any subsequent coinvestment right to
BGI with respect to such Covered Assets. In any event, both
BlackRock and BGI will be obligated to pay the due diligence
expenses incurred in evaluating the transaction as detailed
in the New Business Letter with respect to such transaction
in relation to their expected ownership percentages.
During the period of 365 days immediately after the
rejection or deemed rejection by BGI of any such
Coinvestment Offer, BGI shall not, without BlackRock's prior
consent, acquire or seek to acquire all or any part of the
Covered Assets that were the subject of such rejected
Coinvestment Offer; provided, however, that the foregoing
provisions of this paragraph, as applicable to BGI, shall
not apply with respect to any Covered Asset with respect to
which BGI has identified the coinvestment opportunity or any
Covered Asset with respect to which the parties have
identified the coinvestment opportunity jointly.
BGI will make every reasonable effort to commit the
time and resources necessary to evaluate the Coinvestment
Offers made by BlackRock hereunder, provided however that
notwithstanding anything to the contrary contained herein,
termination of this Agreement by BlackRock pursuant to
Section 6(d) hereof by reason of BGI s failure in this
regard shall be BlackRock s sole and exclusive remedy for
such failure.
2.4 BGI shall not be obligated to accept any such New
Business Offer or Coinvestment Offer made by BlackRock
pursuant to the provisions hereof. BGI shall not have any
liability whatsoever to BlackRock hereunder or otherwise
arising out of their failure or refusal to accept any such
New Business Offer or Coinvestment Offer made by BlackRock
pursuant to the provisions hereof but shall remain liable to
the other party in respect of any due diligence expenses to
be paid by BGI pursuant to this Agreement on account of
having accepted a New Business Offer from BlackRock.
2.5 Each Coinvested Asset shall be acquired by the
parties concurrently and on the same terms, provided that,
pursuant to the provisions hereof, each party may own a 50%
interest in a Coinvested Asset (each, an "Equal Coinvestor")
or one party may own greater than a 50% interest (the
"Majority Coinvestor") and the other party may own less than
a 50% interest (the "Minority Coinvestor") in a Coinvested
Asset.
2.6 With respect to each Coinvestment Offer accepted
by BGI (and the investment committees of BGI and BlackRock)
in a timely manner hereunder, each party shall be
responsible for financing and funding its purchase of its
interest in such Covered Asset subject to such Coinvestment
Offer. Nothing in this Agreement will prevent joint
financing of acquisitions of Coinvested Assets, provided
that neither party's portion of such financing may be
recourse to the other party, such other party's interest in
the Covered Assets or such other party s equityholders. In
the event that a party defaults on its obligation to fund
its purchase of its interest in such Covered Asset, (i) such
defaulting party shall indemnify the other party from any
losses, damages, costs and expenses incurred by such other
party as a result of or arising out of the defaulting
party's failure to fund its purchase of its interest in such
Covered Asset; and (ii) the other party may, at its option,
acquire for its own account the interest the defaulting
party had committed to acquire, and the defaulting party
shall have no further rights with respect to such Covered
Asset, but shall remain liable to the other party under
clause (i) of this Section 2.6 and in respect of any due
diligence expenses to be paid by the defaulting party
pursuant to this Agreement.
2.7 The rights and obligations of the parties under
this Section 2 with respect to each New Business Offer and
each Coinvestment Offer made by BlackRock or BGI hereunder
prior to the effective date of any termination of this
Agreement, and any such New Business Offer or Coinvestment
Offer accepted by BGI or BlackRock hereunder (whether
accepted or formally approved before or after the effective
date of such termination), shall survive such termination.
2.8 BGI may, but shall not be obligated to, offer
BlackRock the right to acquire an interest in any Covered
Asset with respect to which BGI has identified the
coinvestment opportunity, provided that BlackRock shall not
be obligated to acquire any interest so offered. BlackRock
shall not have any liability whatsoever to BGI hereunder or
otherwise arising out of their failure or refusal to accept
any such New Business Offer or Coinvestment Offer made by
BGI pursuant to the provisions hereof but shall remain
liable to the other party in respect of any due diligence
expenses to be paid by BlackRock pursuant to this Agreement
on account of having accepted a New Business Offer from BGI.
The parties affirm that it is their intention to coinvest on
a 50/50 basis in each Covered Asset with respect to which
the parties have identified the coinvestment opportunity
jointly and that, in such case, each party will be required
to acquire at least a 10% interest in any such Covered
Asset. The provisions of this Agreement (assuming for this
purpose that BGI is the party making New Business Offers and
Coinvestment Offers and that BlackRock is the party
accepting or rejecting such offers) shall apply to any
coinvestment opportunity identified by BGI and presented to
BlackRock and to any Coinvested Asset resulting from any
such coinvestment opportunity identified by BGI and
accepted by BlackRock, or identified jointly by BGI and
BlackRock, as described above.
3. Holding Period Decisions.
3.1 Subject to the provisions of this Section 3, for
so long as both parties own an interest in a Coinvested
Asset, the parties will consult with each other regarding
each action or decision with respect to such Coinvested
Asset (each such action or decision, whether or not both
parties own an interest in such Coinvested Asset at the time
made or taken, referred to herein as a "Holding Period
Decision"), including without limitation (i) the exercise of
any and all rights and remedies of the mortgagee upon a
default in respect of any CML and (ii) the naming,
appointment, designation, termination or replacement of any
third party service provider (including the primary
servicer, the master servicer or the special servicer) with
respect to such Coinvested Asset.
With respect to any CML in which the parties have
coinvested hereunder, BlackRock shall, as between BlackRock
and BGI and for so long as BlackRock retains an ownership
interest therein, have the right, after consultation with
BGI, to direct the exercise of any and all rights and
remedies of the mortgagee upon default in respect of such
CML and BGI shall not have the right to impose any cost or
penalty on BlackRock as a consequence of any such action or
decision; provided however that with respect to any CML in
which the parties have coinvested arising from any such
coinvestment opportunity identified by BGI, BGI shall, as
between BGI and BlackRock and for so long as BGI retains any
ownership interest therein, have the right, after
consultation with BlackRock, to direct the exercise of any
and all rights and remedies granted by the terms of such CML
to the mortgagee upon default, and BlackRock shall not have
the right to impose any cost or penalty on BGI as a
consequence of any such action or decision taken or made in
good faith.
With respect to any Covered Asset (other than any and
all distressed or non-performing CML) in which the parties
have a coinvestment hereunder, as between BlackRock and BGI,
the naming, appointment, designation, termination or
replacement of the primary servicer, master servicer and/or
special servicer shall require the approval or consent of
both parties hereto which shall not be unreasonably withheld
or delayed
BlackRock and BGI agree that Brazos Advisors, L.L.C.,
a Texas limited liability company ("Brazos Advisors"), shall
be engaged as the special servicer with respect to any and
all distressed or non-performing CML in which the parties
have a coinvestment hereunder. In addition, BlackRock and
BGI agree that Brazos Advisors may be engaged as the primary
servicer, master servicer and/or special servicer with
respect to any other Covered Assets in which the parties
have a coinvestment hereunder. BGI understands that
BlackRock has the right to decide in its sole discretion,
and without any liability to BGI or Brazos with respect
thereto, whether or not to offer Brazos Advisors the option
to provide any servicing function, or to terminate or
replace Brazos Advisors as servicer, with respect to any
Covered Asset in which BGI has not coinvested or ceases to
own any interest by reason of a transfer or otherwise.
Any party may at any time request approval of any
Holding Period Decision with respect to a Coinvested Asset
by giving written notice to the other party of such proposed
Holding Period Decision. The other party shall indicate,
within five business days after receipt of such written
notice, by written notice to the proposing party, its
approval or disapproval of such proposed Holding Period
Decision. Failure of a party to so notify the proposing
party of its approval or disapproval of such proposed
Holding Period Decision within the time period specified
shall be deemed approval by such party of such proposed
Holding Period Decision.
In the event that the parties fail to agree with
respect to a Holding Period Decision with respect to a
Coinvested Asset (hereinafter referred to as a "Holding
Period Decision Dispute"), the party who disapproves of such
proposed Holding Period Decision may elect to proceed under
the buy-sell provisions set forth in Section 3.2 below with
respect to such Coinvested Asset.
In the event that there is no such election by the
disapproving party within a five-business-day period after
the occurrence of a Holding Period Decision Dispute to
proceed with a buy-sell, then the Majority Coinvestor may
decide the proposed Holding Period Decision giving rise to
the Holding Period Decision Dispute. The Minority
Coinvestor shall not have the right to impose any cost or
penalty on the Majority Coinvestor as a consequence of such
action or decision. The party who elects to proceed under
the buy-sell provisions set forth in Section 3.2 below with
respect to such Coinvested Asset is herein referred to as
the "Electing Party" and the other party is herein referred
to as the "Non-Electing Party".
3.2 In the event of a Holding Period Decision Dispute
with respect to a Coinvested Asset, the Electing Party may
elect to proceed under this Section 3.2 with respect to such
Coinvested Asset by giving written notice within five (5)
business days after the occurrence of such Holding Period
Decision Dispute to the Non-Electing Party of its decision
to so proceed (the "Buy/Sell Notice") and stating therein
the cash purchase price at which the Electing Party is
willing either to purchase the entire interest of the Non-
Electing Party in such Coinvested Asset or to sell the
entire interest of the Electing Party in such Coinvested
Asset to the Non-Electing Party. Such cash purchase price
shall be stated in terms of the cash price attributable to
100% of such Coinvested Asset on a nonfinanced basis.
Within five business days after the receipt by the Non-
Electing Party of the Buy/Sell Notice from the Electing
Party, the Non-Electing Party may elect in writing to
either:
(i) Purchase the entire interest of the
Electing Party in such Coinvested Asset for cash at a
price equal to a percentage of the cash purchase price
stated in the Buy/Sell Notice, which percentage shall
be equal to the ownership percentage of the Electing
Party in such Coinvested Asset; or
(ii) Sell the Electing Party the entire
interest of the Non-Electing Party in such Coinvested
Asset for cash at a price equal to a percentage of the
cash purchase price stated in the Buy/Sell Notice,
which percentage shall be equal to the ownership
percentage of the Non-Electing Party in such Coinvested
Asset.
During the period after the Non-Electing Party makes its
election pursuant to the preceding sentence and prior to
settlement of the purchase or sale resulting from such
election the acquiring party shall have the right to make
any and all Holding Period Decisions with respect to such
Coinvested Asset provided such decisions are made in good
faith and the other party shall not have the right to impose
any cost or penalty as a consequence of any such action or
decision.
The closing of such sale and purchase shall take place
at a time and place mutually agreed to by the parties within
60 days after the date the Non-Electing Party delivers
written notice to the Electing Party of its choice of (i) or
(ii) above. At such closing, the selling party shall assign
to the acquiring party (or, at the request of the acquiring
party, a designee of the acquiring party) the interest in
such Covered Asset to be sold, free and clear of all liens,
claims, and encumbrances, and shall execute all other
documents that may be necessary to effectuate said
transaction or the purposes of these provisions, and the
purchasing party shall pay the purchase price therefor in
cash or by a cashier's check or certified check from a bank
acceptable to the selling party or by federal wire transfer.
Subsequent to such closing, each party shall, at the request
of the other, execute and deliver such further documents and
instruments as the requesting party shall reasonably require
as necessary or desirable to more fully effectuate such
purposes.
If the Non-Electing Party fails to choose one of the
options given it under (i) or (ii) above within the time
period specified, the Electing Party, in its sole
discretion, shall be entitled as its sole and exclusive
remedy to decide the proposed Holding Period Decision giving
rise to the Holding Period Decision Dispute.
If the Non-Electing Party chooses either option set
forth in (i) or (ii) above, and a party fails to close as
provided herein, then the other party, in its sole
discretion, shall be entitled, to purchase the defaulting
party's interest in such Coinvested Asset for cash at a
price equal on a nonfinanced basis to the product of (i) 95%
of the cash purchase price stated in the Buy/Sell Notice
(net of any negative market interest rate changes occurring
during the period prior to the settlement date) and (ii) a
percentage, which percentage shall be equal to the ownership
percentage of the defaulting party in such Coinvested Asset.
In addition, the other party, in its sole discretion, shall
be entitled , to decide the proposed Holding Period Decision
giving rise to the Holding Period Decision Dispute.
3.3 The rights and obligations of the parties under
this Section 3 shall apply with respect to a particular
Coinvested Asset only for so long as both parties continue
to have an interest in such Coinvested Asset. The rights
and obligations of the parties under this Section 3 with
respect to Coinvested Assets acquired prior to the effective
date of any termination of this Agreement shall survive such
termination. The rights and obligations of the parties
under this Section 3 with respect to Coinvested Assets
acquired after the effective date of any termination of this
Agreement pursuant to a Coinvestment Offer made by BlackRock
or BGI hereunder prior to the effective date of such
termination and accepted by BGI or BlackRock hereunder
(whether accepted before or after the effective date of such
termination) shall survive such termination.
4. Dispositions.
4.1 For so long as both parties own an interest in a
Coinvested Asset, either party may propose to dispose of all
or a portion of such Coinvested Asset by notifying the other
party in writing of such proposal at least ten business days
prior to obtaining prices for its interest in such
Coinvested Asset. Such notification shall include a
preliminary, good faith and reasonably detailed description
of the proposed range of methods, timing, pricing and other
terms of disposition of such Coinvested Asset that the
proposing party desires to obtain (the "Preliminary Terms").
Not later than ten business days following receipt of such
notification, the other party shall notify the proposing
party, in writing, whether it agrees to pursue disposition
of such Coinvested Asset in accordance with the Preliminary
Terms. Failure of a party to so notify the proposing party
of its agreement to pursue disposition of such Coinvested
Asset in accordance with the Preliminary Terms within the
time period specified shall be deemed to constitute such
party's unwillingness to pursue disposition of such
Coinvested Asset in accordance with the Preliminary Terms.
4.2 If the other party agrees to pursue disposition of
such Coinvested Asset in accordance with the Preliminary
Terms, the parties will consult with each other as to the
actual method, timing, pricing and other terms of
disposition of such Coinvested Asset. If the actual method,
timing, pricing and other terms obtained from a third party
with respect to disposition of such Coinvested Asset are
within the range set forth in the Preliminary Terms, (i)
each party will be obligated to contribute its interest in
such Coinvested Asset toward such joint disposition unless
the parties otherwise mutually agree and (ii) the net
proceeds and Subordinated CMBS, if any, realized from such
joint disposition will be distributed to each party as soon
as practicable after receipt thereof in proportion to each
party's ownership interest therein. If the actual method,
timing, pricing and other terms obtained from all third
parties with respect to disposition of such Coinvested Asset
are not within the range set forth in the Preliminary Terms,
then neither party shall be obligated to contribute its
interest in such Coinvested Asset toward such joint
disposition unless the parties otherwise mutually agree.
4.3 If the Majority Coinvestor has proposed to dispose
of all or a portion of a Coinvested Asset in accordance with
the Preliminary Terms and the Minority Coinvestor does not
agree to pursue such disposition jointly in accordance with
the Preliminary Terms, then the Majority Coinvestor may
nonetheless dispose of all or a portion of its interest in
such Coinvested Asset in accordance with the Preliminary
Terms. If the Majority Coinvestor has proposed to dispose
of all or a portion of a Coinvested Asset in accordance with
(and within the range set forth in) the Preliminary Terms
and the Minority Investor agrees to pursue such disposition
jointly in accordance with the Preliminary Terms but the
actual method, timing, pricing and other terms obtained from
third parties with respect to joint disposition of such
Coinvested Asset are not within the range set forth in the
Preliminary Terms and, after the request of the Majority
Coinvestor, the Minority Coinvestor declines to contribute
its interest in such joint disposition, then the Majority
Coinvestor may nonetheless dispose of all or a portion of
its interest in such Coinvested Asset in accordance with the
pricing and other terms actually obtained from third
parties. Notwithstanding anything to the contrary contained
herein, (i) for so long as the Majority Coinvestor and the
Minority Coinvestor both continue to own an interest in such
Coinvested Asset, the Majority Coinvestor will continue to
be bound by the provisions of Sections 3 and 4 hereof with
respect to such Coinvested Asset; and (ii) for so long as
the Minority Coinvestor continues to own an interest in such
Coinvested Asset, any third party purchaser of the Majority
Coinvestor's interest in such Coinvested Asset shall be
subject to the provisions of Section 3 and 4 hereof as if
such purchaser were a party to this Agreement, shall make
any applicable investment representations and become subject
to any applicable legal restrictions on disposition, and
shall enter into a written agreement to be bound with
respect to the foregoing.
4.4 If an Equal Coinvestor has proposed to dispose of
all or a portion of a Coinvested Asset in accordance with
the Preliminary Terms and the other Equal Coinvestor does
not agree to pursue such disposition jointly in accordance
with the Preliminary Terms, or if the actual method, timing,
pricing and other terms obtained from third parties with
respect to joint disposition of such Coinvested Asset are
not within the range set forth in the Preliminary Terms and
the other Equal Coinvestor declines to contribute its
interest in such Coinvested Asset toward such joint
disposition, then the proposing party may elect to proceed
under the buy-sell provisions set forth below in this
Section 4.4 with respect to such Coinvested Asset by giving
written notice to the other party of its decision to so
proceed (the "Equal Coinvestor Buy/Sell Notice") and stating
therein the cash purchase price at which such electing party
is willing either to purchase the entire interest of the
other party in such Coinvested Asset or to sell the entire
interest of the electing party in such Coinvested Asset to
the other party. Such cash purchase price shall be stated
in terms of the cash price attributable to 100% of such
Coinvested Asset on a nonfinanced basis.
Within five business days after the receipt by the
other party of the Equal Coinvestor Buy/Sell Notice from the
electing party, the other party shall elect in writing to
either:
(i) Purchase the entire interest of the
electing party in such Coinvested Asset for cash at a
price equal to a percentage of the cash purchase price
stated in the Equal Coinvestor Buy/Sell Notice, which
percentage shall be equal to the ownership percentage
of the electing party in such Coinvested Asset; or
(ii) Sell the electing party the entire
interest of such other party in such Coinvested Asset
for cash at a price equal to a percentage of the cash
purchase price stated in the Equal Coinvestor Buy/Sell
Notice, which percentage shall be equal to the
ownership percentage of such other party in such
Coinvested Asset.
Failure to make an election within such five (5) business
days shall be deemed to be an election of the alternative in
(ii).
During the period after the other party makes or is
deemed to make its election pursuant to the two preceding
sentences and prior to the settlement of the purchase or
sale resulting from such election, the acquiring party shall
have the right to make any and all Holding Period Decisions
provided such decisions are made in good faith and the other
party shall not have the right to impose any cost or penalty
as a consequence of any such action or decision.
The closing of such sale and purchase shall take place
at a time and place mutually agreed to by the parties within
60 days after the date the other party delivers written
notice to the electing party of its choice of (i) or (ii)
above. At such closing, the selling party shall assign to
the purchasing party (or, at the request of the purchasing
party, a designee of the purchasing party) the interest in
such Coinvested Asset to be sold, free and clear of all
liens, claims, and encumbrances, and shall execute all other
documents that may be necessary to effectuate said
transaction or the purposes of these provisions, and the
purchasing party shall pay the purchase price therefor in
cash or by a cashier's check or certified check from a bank
acceptable to the selling party or by federal wire transfer.
Subsequent to such closing, each party shall, at the request
of the other, execute and deliver such further documents and
instruments as the requesting party shall reasonably require
as necessary or desirable to more fully effectuate such
purposes.
4.5 If the Minority Coinvestor has proposed to dispose
of all or a portion of a Coinvested Asset in accordance with
the Preliminary Terms and the Majority Coinvestor does not
agree to pursue such disposition jointly in accordance with
the Preliminary Terms, then the Minority Coinvestor may
nonetheless dispose of all (but not less than all) of its
interest in such Coinvested Asset in accordance with the
Preliminary Terms, subject to the Majority Coinvestor's
right of first refusal set forth below. If the Minority
Coinvestor has proposed to dispose of all or a portion of a
Coinvested Asset in accordance with the Preliminary Terms
and the Majority Investor agrees to pursue such disposition
jointly in accordance with the Preliminary Terms but the
actual method, timing, pricing and other terms obtained from
third parties with respect to joint disposition of such
Coinvested Asset are not within the range set forth in the
Preliminary Terms and, after the request of the Minority
Coinvestor, the Majority Coinvestor declines to contribute
its interest in such Coinvested Asset toward such joint
disposition, then the Minority Coinvestor may nonetheless
dispose of all (but not less than all) of its interest in
such Coinvested Asset in accordance with the pricing and
other terms actually obtained from third parties, subject to
the Majority Coinvestor's right of first refusal set forth
below. Notwithstanding the foregoing, prior to any such
sale by the Minority Coinvestor to any third party, the
Minority Coinvestor shall offer in writing to sell all (but
not less than all) its interest in such Coinvested Asset to
the Majority Coinvestor at a price equal to the highest
price obtained for such Coinvested Asset set forth in a bona
fide written offer from an unaffiliated third party (a copy
of which shall be delivered to the Majority Coinvestor with
the Minority Coinvestor's offer to sell its interest in such
Coinvested Asset), which offer shall remain open for one
business day after receipt of such offer. If such offer is
accepted, the closing of the purchase shall occur within 60
calendar days after such acceptance. During the period
after the Majority Coinvestor accepts such offer and prior
to settlement of the purchase resulting therefrom, the
Majority Coinvestor shall retain the right to make all
Holding Period Decisions with respect to such Coinvested
Asset provided such decisions are made in good faith and the
other party shall not have the right to impose any cost or
penalty as a consequence of any such action or decision.
Notwithstanding anything to the contrary contained herein,
if the Majority Coinvestor does not so purchase the Minority
Coinvestor's interest in such Coinvested Asset and the
Minority Coinvestor sells its interest in such Coinvested
Asset to a third party, then for so long as the Majority
Coinvestor continues to own an interest in such Coinvested
Asset, (i) any third party purchaser of the Minority
Coinvestor's interest in such Coinvested Asset shall be
subject to the provisions of this Agreement other than as
provided in clause (ii) below as if such purchaser were a
party to this Agreement, shall make any applicable
investment representations and become subject to any
applicable legal restrictions on disposition, and shall
enter into a written agreement to be bound with respect to
the foregoing; and (ii) the provisions of Section 3 hereof
shall not thereafter apply with respect to such Coinvested
Asset and the Majority Coinvestor shall thereafter have the
exclusive right to make all Holding Period Decisions with
respect to such Coinvested Asset (including, without
limitation, the naming, appointment, designation,
termination or replacement of the primary servicer, master
servicer and/or special servicer with respect to such
Coinvested Asset) and neither the third party purchaser nor
any affiliate thereof shall have the right to impose any
cost or penalty on the Majority Coinvestor as a consequence
of any such Holding Period Decision.
4.6 If Brazos Advisors is terminated or replaced as
the primary servicer, master servicer and/or special
servicer with respect to such Coinvested Asset as a
consequence of any Holding Period Decision, then Brazos
Advisors shall not have the right to impose any cost or
penalty as a consequence of such Holding Period Decision
including a claim regarding termination except as otherwise
provided in the agreement with Brazos Advisors covering such
servicing.
4.7 The rights and obligations of the parties under
this Section 4 shall apply with respect to a particular
Coinvested Asset only for so long as both parties continue
to have an interest in such Coinvested Asset. The rights
and obligations of the parties under this Section 4 with
respect to Coinvested Assets acquired prior to the effective
date of any termination of this Agreement shall survive such
termination. The rights and obligations of the parties
under this Section 4 with respect to Coinvested Assets
acquired after the effective date of any termination of this
Agreement pursuant to a Coinvestment Offer made by BlackRock
or BGI hereunder prior to the effective date of such
termination and accepted by BlackRock or BGI hereunder
(whether accepted before or after the effective date of such
termination) shall survive such termination.
5. Assignment. Except as otherwise specifically provided
herein, neither party hereto shall (by operation of law or
otherwise) assign, transfer, pledge, mortgage or otherwise
hypothecate (each a "Transfer") its interest in any Coinvested
Asset or this Agreement or any right or interest hereunder
without first obtaining the prior written consent of the other
party, which consent shall not be unreasonably delayed,
conditioned or withheld in case of a Transfer of a Coinvested
Asset and may be granted, conditioned or withheld in such party s
sole discretion in the case of a Transfer of this Agreement or
any right or interest hereunder (other than with respect to
particular Coinvested Assets). Except with respect to a Transfer
of a party s entire interest in a Coinvested Asset to a person
that is not an affiliate of such party, no Transfer permitted
hereunder shall operate as a release of the transferor s
obligations or liabilities hereunder, and the transferor shall
remain liable hereunder notwithstanding such Transfer, without
the prior written consent of the other party to such release
(which consent may be withheld in such other party s discretion).
In the event of any Transfer permitted hereunder, an instrument
of Transfer shall be executed by the transferee , which shall
expressly provide that the transferee assumes all of the
applicable obligations and liabilities of the transferor
contained herein. Except in the event of a Transfer of a party s
entire interest in this Agreement and the release of such party
from its obligations and liabilities hereunder, which shall
require the consent of the other party, the other party shall
continue to be entitled to look to such party for the exercise of
all rights, and the satisfaction of all obligations, of such
party and its affiliates hereunder. Insofar as Section 5 applies
to a particular Coinvested Asset, it shall apply only for so long
as both parties continue to have an interest in such Coinvested
Asset.
Notwithstanding anything to the contrary contained herein,
the following Transfers may be made (but without relieving the
Transferor of any liability except as specifically provided by
the preceding paragraph and subject to the assumption by the
Transferee of all applicable obligations hereunder) at any time
without the consent of any other party hereto (but upon written
notice thereto):
(a) Any Transfer by BGI of all of its interest in any
Coinvested Asset or the Covered Asset subject to a coinvestment
offer or, in the case of clause (i) below, this Agreement or any
right or interest hereunder to (i) Brazos Fund, L.P., a Delaware
limited partnership, of which BGI is a general partner; or (ii)
any other entity in which Robert M. Bass, J. T. Crandall and John
P. Grayken (collectively, the "BGI Principals") (either
individually or in combination with any other BGI Principal) owns
beneficially in the aggregate at least 51% of the voting control
of such entity and at least 10% of the participating equity in
such entity. It is anticipated that BGI will be the general
partner of a limited partnership that will be the general partner
of Brazos Fund, L.P. For purposes hereof, the BGI Principals will
be deemed to own beneficially 51% of the voting control of (i)
any entity in which one or more of the BGI Principals own and
control directly at least 51% of the voting control and (ii) any
entity or unbroken chain of entities with respect to each of
which an entity satisfying the requirements of clause (i) above
or this clause (ii) owns and controls directly at least 51% of
the voting control. For purposes hereof, a BGI Principal will be
deemed to own beneficially that percentage of the participating
equity interest in an entity that is owned by such BGI Principal
directly and that percentage of the participating equity interest
in such entity obtained by multiplying sequentially the
participating equity interest owned by each entity in a chain of
direct participating equity interests commencing with the entity
that owns directly a participating equity interest in such entity
and ending with any other entity in which such BGI Principal owns
directly a participating equity interest. As used herein, the
term "participating equity" or "participating equity interest"
means any equity or ownership interest in any corporation,
partnership, or other entity of a class which has an unlimited
right to participate in earnings (in excess of earnings allocable
to debt or preferential-return equity securities) or appreciation
in enterprise value (in excess of liquidating distributions
allocable to debt or equity securities providing for preferential
liquidating distributions), including without limitation common
stock or equivalent equity interest. As used herein, the term
"51% of the voting control" (i) of a corporation means the
ownership of shares entitling their holders to elect a majority
of the directors of such corporation; (ii) of a general
partnership means the ownership of general partnership interests
entitling their holders to direct and control the regular
business activities and investments of such general partnership;
(iii) of a limited partnership means the ownership of both a
majority of the general partner interests in such limited
partnership entitling their holders to direct and control the
regular business activities and investments of such limited
partnership and sufficient limited partnership interests to
remove and replace a majority of the managing general partners of
such limited partnership; and (iv) of a limited liability company
means the ownership of interests in such limited liability
company entitling their holders to direct and control the regular
business activities and investments of such limited liability
company and to elect a majority of the managers of such limited
liability company, if any. Notwithstanding anything to the
contrary herein, no Transfer shall be permitted to Brazos
Advisors or to any entity in which Brazos Advisors beneficially
owns 5% or more of the voting securities for purposes of the U.S.
Investment Company Act of 1940.
(b) Any Transfer of all or any portion of interests in
Coinvested Assets pursuant to Sections 3 and 4 hereof.
(c) Any Transfer by BCF of all or any portion of its
interest in any Coinvested Asset to BAI or any other downstream
affiliate of BAI.
(d) Any party or its successors or permitted assigns may
pledge, grant a security interest in, mortgage or otherwise
hypothecate all or any portion of its interest in any Coinvested
Asset to secure indebtedness of such assignor to any person or
entity incurred in connection with the acquisition or carrying of
such interest in such Coinvested Asset or any other Coinvested
Assets.
The Transfers referred to in clauses (a), (c) and (d) above shall
not be subject to the provisions set forth in Section 4 hereof.
6. Termination. The term of this Agreement shall remain
in effect until terminated pursuant to the termination provisions
set forth below. This Agreement may be terminated as follows:
(a) By mutual agreement of the parties; or
(b) By BlackRock during the first 120 days of the term of
this Agreement (provided, however, that such termination right
shall be deemed waived if not exercised in writing by BlackRock
on or prior to the end of such 120-day period); or
(c) By either party if the other party fails to fund its
purchase of its interest in any Covered Asset with respect to
which a Coinvestment Offer has been accepted by and has become
binding upon such other party hereunder (provided, however, that
such termination right with respect to such failure (but not with
respect to any subsequent failure) shall be deemed waived if not
exercised in writing by the nondefaulting party within 30 days
after such failure to fund); or
(d) By either party if there has been any failure by the
other party to perform in all material respects any obligation or
to comply in all material respects with any covenant or agreement
on its part to be performed or complied with hereunder (other
than such other party s obligations, covenants and agreements
set forth in Section 2.6 hereof) and such failure remains uncured
for a period of 30 days after written notice thereof, except with
respect to any such failure that is not reasonably susceptible of
cure within such 30-day period if the other party promptly
commences to cure such failure within such 30-day period and
diligently prosecutes such cure to completion as soon as is
reasonably practicable (but in no event later than 90 days after
written notice of such failure); or
(e) By BlackRock after the first six months of the term of
this Agreement if BGI and its successors and permitted assigns
collectively fail to accept three or more New Business Offers
made by BlackRock pursuant to the provisions hereof during any
consecutive six-month period if the minimum aggregate amount
that, if such rejected New Business Offers and the related
Coinvestment Offers had been accepted, would have been required
to be invested by BGI and its successors and permitted assigns in
such rejected New Business Offers (as set forth in Section 2.1
hereof and using the estimated and expected amounts and
percentages set forth in the New Business Letters with respect to
such rejected New Business Offers, as set forth in Section 2.2
hereof) is equal to or greater than an amount to 50% of the sum
of (i) the aggregate amounts actually invested by BGI and its
successors and permitted assigns during such six-month period in
all Coinvested Assets, (ii) the aggregate amounts required to be
invested by BGI and its successors and permitted assigns in all
unconsummated Coinvestment Offers accepted by BGI and its
successors and permitted assigns pursuant to the provisions
hereof during such six-month period, and (iii) the minimum
aggregate amounts that would be required to be invested by BGI
and its successors and permitted assigns in all unconsummated New
Business Offers accepted by BGI and its successors and permitted
assigns pursuant to the provisions hereof during such six-month
period (as set forth in Section 2.1 hereof and using the
estimated and expected amounts and percentages set forth in the
New Business Letters with respect to such accepted New Business
Offers, as set forth in Section 2.2 hereof); provided, however,
that any such termination right with respect to such failure (but
not with respect to any subsequent failure) shall be deemed
waived if not exercised in writing by BlackRock within 90 days
after the end of such sixth consecutive month; or
(f) By BlackRock after the first six months of the term of
this Agreement if BGI and its successors and permitted assigns
collectively fail to accept three or more Coinvestment Offers
made by BlackRock pursuant to the provisions hereof during any
consecutive six-month period if the minimum aggregate amount
that, if such rejected Coinvestment Offers had been accepted,
would have been required to be invested by BGI and its successors
and permitted assigns in such rejected Coinvestment Offers (as
set forth in Section 2.1 hereof and using the estimated and
expected amounts and percentages set forth in the Coinvestment
Letters with respect to such rejected Coinvestment Offers, as set
forth in Section 2.3 hereof) is equal to or greater than an
amount equal to 50% of the sum of (i) the aggregate amounts
actually invested by BGI and its successors and permitted assigns
during such six-month period in all Coinvested Assets, (ii) the
aggregate amounts required to be invested by BGI and its
successors and permitted assigns in all unconsummated
Coinvestment Offers accepted by BGI and its successors and
permitted assigns pursuant to the provisions hereof during such
six-month period and (iii) the minimum aggregate amounts that
would be required to be invested by BGI and its successors and
permitted assigns in all unconsummated New Business Offers
accepted by BGI and its successors and permitted assigns pursuant
to the provisions hereof during such six month period (as set
forth in Section 2.1 hereof and using the estimated and expected
amounts and percentages set forth in the New Business Letters
with respect to such accepted New Business Offers, as set forth
in Section 2.2 hereof) (provided, however, that any such
termination right with respect to such failure (but not with
respect to any subsequent failure) shall be deemed waived if not
exercised in writing by BlackRock within 90 days after the end of
such sixth consecutive month); or
(g) By BlackRock if Brazos Advisors is unable or unwilling
when requested in writing to provide primary servicing, master
servicing or special servicing with respect to any Coinvested
Assets on commercially reasonable terms (provided, however, that
any such termination right with respect to such inability or
unwillingness to provide such servicing (but not with respect to
any other inability or unwillingness to provide such servicing)
shall be deemed waived if not exercised in writing by BlackRock
within 90 days after the date such service is requested); or
(h) By BlackRock after the occurrence of any of the
following: (i) the death or permanent disability of John P.
Grayken; or (ii) the withdrawal, resignation, cessation or
removal of John P. Grayken as a manager of Brazos Advisors during
Brazos Advisors' term of existence; or (iii) if, during the
period that BGI, Brazos Fund, L.P. or any other entity, as the
case may be, holds any rights of BGI under Section 2 hereof to
accept or otherwise exercise coinvestment opportunities not yet
offered by BlackRock hereunder or had any such rights and
continues to hold any interest in any Coinvested Asset, John P.
Grayken either ceases to own, directly or indirectly, at least
10% of the aggregate participating equity interest in each such
entity of all the BGI Principals or ceases to be primarily
responsible for the overall day-to-day management of the regular
business activities and investments of each such entity
(provided, however, that all such termination rights shall be
deemed waived if the right to terminate is not exercised in
writing by BlackRock within 180 days after the date on which
BlackRock first had actual notice of the occurrence of any of the
foregoing (regardless of whether other such events occur after
the expiration of such 180-day period); or
(i) By BGI after the occurrence of any of the following:
(i) the death or permanent disability of Wesley R. Edens; or (ii)
the resignation of Wesley R. Edens as a Manager of Brazos
Advisors during Brazos Advisors term of existence; or (iii) if
Wesley R. Edens ceases to be an employee of BlackRock Financial
Management L.P. or its successor ("BFM") or any affiliate thereof
during their respective terms of existence; or (iv) if Wesley R.
Edens ceases to be primarily responsible for the overall day-to-
day management of the regular business activities and investments
of, BAI or BCF during their respective terms of existence
(provided, however, that all such termination rights shall be
deemed waived if the right to terminate is not exercised in
writing by BGI within 180 days after the date on which BGI first
had actual notice of the occurrence of any of the foregoing
(regardless of whether other such events occur after the
expiration of such 180-day period); or
(j) By BlackRock if BGI and its successors and permitted
assigns collectively have sold a majority of all its interests in
Coinvested Assets collectively to third parties while BlackRock
continues to own interests in each of the Coinvested Assets the
interests of which have been sold by BGI and its successors and
permitted assigns (provided, however, that such termination right
shall be deemed waived if not exercised in writing by BlackRock
within 90 days after the date on which BlackRock first had actual
notice of the occurrence of the foregoing).
(k) By vote of a majority of the trustees of BAI who are
not interested persons of BAI as defined under the Investment
Company Act of 1940 as amended and who have no financial interest
(other than through an indirect ownership interest in BAI) in
Brazos Advisors or any servicing contract entered into with
Brazos Advisors, if for any reason BFM (or an affiliate) ceases
to be a member of Brazos Advisors (provided, however that such
termination right shall be deemed waived if not exercised in
writing by BlackRock within 90 days after the date of which
BlackRock first had actual notice of the occurrence of the
foregoing).
(l) By BlackRock if Brazos Advisors has been terminated as
servicer for cause on more than one (1) servicing (special,
primary or master) contracts constituting in the aggregate a
minimum of 10% by dollar amount of assets serviced by Brazos
Advisors on BlackRock s behalf (provided, however that such
termination right shall be deemed waived with respect to a
particular termination of a servicing contract and not with
respect to any subsequent termination of a servicing contract if
not exercised in writing by BlackRock within 90 days after the
date on which BlackRock first had actual notice of such
termination of a servicing contract).
For purposes of Section 6(h) hereof, John P. Grayken will be
deemed to own beneficially that percentage of the participating
equity interest in BGI, Brazos Fund, L.P. or other referenced
entity, determined for him pursuant to the third sentence of
Section 5(a) hereof.
7. Effect of Termination. Upon any termination of this
Agreement, neither party shall have any further right, liability
or obligation hereunder after the effective date of such
termination except in respect to (i) any liability or obligation
arising hereunder, out of, or otherwise available at law or in
equity as a result of, such party's failure to perform any
obligation or to comply with any covenant or agreement on its
part to be performed or complied with hereunder; or (ii) any
liability or obligation hereunder which has accrued or been
incurred under the terms hereof prior to the effective date of
such termination but remains unsatisfied or undischarged on the
effective date of such termination; or (iii) any right, liability
or obligation arising under Section 3, 4, 5 or 6 hereof with
respect to any Coinvested Asset in which either party continues
to hold an investment or interest and any other provision hereof
to the extent necessary to implement such right, liability or
obligation; or (iv) any right, liability, obligation or provision
which survives any such termination as expressly provided herein.
8. Relationship. This Agreement does not create, and
shall not be construed to create, any joint venture or
partnership between the parties. No officer, employee, agent,
servant, or independent contractor of either party nor their
respective affiliates shall at any time be deemed to be an
employee, servant, agent, or contractor of the other party for
any purpose whatsoever solely as a result of this Agreement.
9. Waiver. Notwithstanding anything to the contrary
contained herein, the failure of either party to seek a redress
for violation, or to insist upon the strict performance, of any
covenant, agreement, provision, or condition hereof shall not
constitute the waiver of the terms of such covenant, agreement,
provision, or condition at subsequent times or of the terms of
any other covenant, agreement, provision or condition, and each
party shall have all remedies provided herein with respect to any
subsequent act which would have originally constituted the
violation hereunder.
10. Governing Law. This Agreement and all questions
relating to its validity, interpretation, performance, and
enforcement (including, without limitation, provisions concerning
limitations of action), shall be governed by and construed in
accordance with the internal laws of the State of New York,
notwithstanding any conflict-of-laws doctrines of such state or
other jurisdiction to the contrary.
11. Notices. All notices, requests, demands, New Business
Offers and Coinvestment Offers and other communications required
or permitted hereunder shall be in writing and shall be deemed to
have been duly given, made and received only when personally
delivered, or sent by facsimile transmission with transmission
confirmed and a copy sent by Federal Express on the same day, or
delivered by Federal Express or other nationally recognized
courier service, or two business days after having been deposited
in the United States mail, certified mail, postage prepaid,
return receipt requested, addressed as set forth below:
If to BGI: Brazos GenPar, Inc.
600 East Las Colinas Blvd.
Suite 400
Irving, Texas 75039
Attention: John P. Grayken,
President
Telephone: 214/831-2000
Telecopy: 214/831-2048
If to BlackRock: c/o BlackRock Capital Finance L.P.
345 Park Avenue
New York, New York 10154
Attention: Wesley R. Edens,
Chief Operating Officer
Telephone: 212/754-5346
Telecopy: 212/935-1370
Any party may change the address to which communications or
copies are to be sent by giving notice of such change of address
in conformity with the provisions of this Section 11 for the
giving of notice.
12. Severability. The provisions hereof are independent of
and separable from each other, and no provisions shall be
affected or rendered invalid or unenforceable by virtue of the
fact but for any reason any other or others of them may be
invalid or unenforceable in whole or in part.
13. Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the
subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, inducements, or
conditions, express or implied, oral, or written, except as
herein contained. The express terms hereof control and supersede
any course of performance or usage of the trade inconsistent with
any of the terms hereof. This Agreement may not be modified or
amended other than by an agreement in writing signed by an
authorized representative of each party hereto (as designated
from time to time by such party).
14. Headings. The headings herein are for convenience
only; they form no part of this Agreement and shall not be given
any substantive or interpretive effect whatsoever.
15. Multiple Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed an original, and
all such counterparts together shall constitute but one and the
same instrument; provided, however, that in making proof hereof,
it shall not be necessary to produce or account for more than one
such counterpart. It shall not be necessary that each party
hereto execute the same counterpart, so long as identical
counterparts are executed by each party.
16. No Other Rights in Third Parties. This Agreement shall
inure to the benefit of and bind the parties hereto and the
respective administrators, successors, and permitted assigns of
the parties hereto. Nothing expressed or referred to herein is
intended or shall be construed to give any person or entity other
than the parties hereto, or their respective successors or
permitted assigns, any legal or equitable right, remedy, or claim
under or in respect hereof or any provision contained herein, it
being the intention of the parties hereto that this Agreement
shall be for the sole and exclusive benefit of such parties, or
such successors and permitted assigns, and not for the benefit of
any other person or entity. References in this Section 16 to
"administrators, successors, and permitted assigns" shall not
relieve the parties from the provisions of Section 5 hereof.
17. Costs. Except as otherwise specifically provided
herein, each party shall be solely responsible for all of its
costs, salaries and other expenses incurred in connection with
the performance of its obligations hereunder, and the other party
hereto shall have no liability, obligation, or responsibility
therefor.
18. Attorneys' Fees. The prevailing party in any dispute
between the parties arising out of the interpretation,
application or enforcement of any provision hereof shall be
entitled to recover all of its reasonable attorneys' fees and
costs, including without limitation costs and attorneys' fees
related to or arising out of any arbitration proceeding or trial.
19. Drafting. The parties acknowledge and confirm that
each of their respective attorneys has participated jointly in
the review and revision hereof and that it has not been written
solely by counsel for one party. The parties hereto therefore
stipulate and agree that the rule of construction to the effect
that any ambiguities are to be or may be resolved against the
drafting party shall not be employed in the interpretation hereof
to favor any party against another.
20. References. The use of the words "hereof", "herein",
"hereunder", "herewith", and words of similar import shall refer
to this entire Agreement, and not to any particular article,
section, subsection, clause or paragraph hereof, unless the
context clearly indicates otherwise.
21. Calendar Days, Weeks and Months. Unless otherwise
specified herein, any reference to "day", "week" or "month"
herein shall mean a calendar day, week or month.
22. Gender. Where the context hereof so requires, the
masculine gender shall include the feminine or neuter, and the
singular shall include the plural and the plural the singular.
23. Cooperation. Each party shall cooperate fully with the
other party and shall execute such further instruments,
documents, and agreements and shall provide such further written
assurances, as reasonably may be requested by the other party, to
better evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and
purposes hereof.
24. Cumulative Rights. Except as otherwise expressly
limited or provided herein; all rights and remedies specified
herein are cumulative and are in addition to, and not in
limitation of, any rights or remedies the parties may have at law
or in equity, and all such rights and remedies may be exercised
singularly or concurrently.
25. Limitation of Liability of BlackRock. No shareholder,
Trustee, officer or employee of BAI shall be subject to personal
liability whatsoever in such capacity to any person in connection
with the property, act, obligations or affairs of BAI, except for
Trustee, officer or employee liability to BAI or its shareholders
arising from bad faith, willful misfeasance or gross negligence
(negligence in the case of those Trustees, officers or employees
who are partners, directors, officers or employees of BFM), or
reckless disregard for such person's duty to BAI or its
shareholders. BAI shall not have any liability for any act or
omission of BCF hereunder or for any liabilities of BCF with
respect to any CML in which the parties coinvest hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
If you are in agreement with the foregoing, please sign both
copies of this Agreement and return one to us.
Sincerely,
BlackRock Asset Investors
By:
Wesley R. Edens,
Chief Operating Officer
BlackRock Capital Finance L.P.
By: BlackRock Asset Investors,
general partner
By:
Wesley R. Edens,
Chief Operating Officer
Accepted and agreed to
this 23rd Day of January, 1995:
BRAZOS GENPAR, INC.
By: ______________________________
John P. Grayken, President
Brazos Advisors acknowledges that it is cognizant of and will be
bound by Section 4.6 of this Agreement.
By: ______________________________
John P. Grayken, Chairman
EXHIBIT A
FORM OF NEW BUSINESS LETTER
I. Transaction Overview/Asset Description
- Expected Transaction Date
- Asset Description
- Seller Description
II. Due Diligence
- Overview - Scope of Due Diligence
- Expected Timing and Cost
III. Capital Structure
- Anticipated Financing/Equity
- Expected Ownership Amount
Signatures:
BlackRock Capital Finance L.P., Wesley R. Edens, Chief
Operating Officer,
or any BCF officer
Brazos GenPar, Inc., John P. Grayken, President
EXHIBIT B
FORM OF COINVESTMENT LETTER
I. Transaction Summary
- Asset/Pool Description
- Bid Date/Transaction Date
II. Capital Structure
- Debt/Short-term Financing
- Equity
- Ownership Splits
Signatures:
BlackRock Capital Finance L.P., Wesley R. Edens, Chief
Operating Officer or any BCF officer
BlackRock Investment Committee
Brazos GenPar, Inc., John P. Grayken, President
Brazos Investment Committee, John P. Gray
____________________________________________________________________________
EXHIBIT C
REGISTRAR AND
TRANSFER AGENCY AGREEMENT
between
BLACKROCK ASSET INVESTORS
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
Article 1 Terms of Appointment; Duties of the Bank.............1
Article 2 Fees and Expenses....................................5
Article 3 Representations and Warranties of the Bank...........5
Article 4 Representations and Warranties of the Trust..........5
Article 5 Data Access and Proprietary Information..............6
Article 6 Indemnification......................................7
Article 7 Standard of Care.....................................9
Article 8 Covenants of the Trust and the Bank..................9
Article 9 Termination of Agreement............................10
Article 10 Assignment..........................................10
Article 11 Amendment...........................................11
Article 12 Massachusetts Law to Apply..........................11
Article 13 Force Majeure.......................................11
Article 14 Consequential Damages...............................11
Article 15 Merger of Agreement.................................11
Article 16 Disclaimer of Liability.............................11
REGISTRAR AND TRANSFER AGENCY AGREEMENT
AGREEMENT made as of the 21st day of December, 1994, by and
between BlackRock Asset Investors, a Delaware business trust
having its principal office and place of business at 345 Park
Avenue, New York, NY 10154 (the "Trust"), and STATE STREET BANK
AND TRUST COMPANY, a Massachusetts trust company having its
principal office and place of business at 225 Franklin Street,
Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Trust desires to appoint the Bank as its
registrar, transfer agent, and dividend disbursing agent and the
Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in
this Agreement, the Trust hereby appoints the Bank to act as, and
the Bank agrees to act as registrar, transfer agent and dividend
disbursing agent for the Trust s authorized and issued shares of
its beneficial interest ( Shares ).
1.02 The Bank agrees that it will perform the
following services:
(a) In accordance with procedures established from
time to time by agreement between the Trust and the Bank, the
Bank shall:
(i) Issue and record the appropriate number of Shares
as authorized and hold such Shares in the
appropriate Shareholder account;
(ii) Effect transfers of Shares by the registered
owners thereof upon receipt of appropriate
documentation including the written consent of the
Trust;
(iii) Prepare and transmit payments for dividends and
distributions declared by the Trust;
(iv) Mail to the purchaser confirmation of its purchase
and notice of the holding referred to in clause
(i);
(v) In connection with dividends and other
distributions, instruct the Custodian to wire or
otherwise electronically transfer net investment
income and capital gain dividends or distributions
to each Shareholder specifying the amount thereof
to be so transferred to such Shareholder;
(vi) Prepare and file with the Internal Revenue Service
and with the appropriate state agencies, and, if
required, mail to Shareholders such returns for
reporting any information as to the federal income
tax consequences of dividends and distributions
paid, credited or withheld as are required on the
part of the Trust to be so filed and mailed;
(vii) Prepare and mail an individual monthly statement
to each Shareholder showing all activity in such
Shareholder's account for the month. Upon request
from a Shareholder, the Bank shall prepare and
mail a year-to-date statement showing all activity
in such Shareholder's account on a year-to-date
basis;
(viii) Mail to Shareholders reports and proxy material,
proxy cards and other material supplied to it by
the Trust in connection with Shareholder meetings
of the Trust and receive, examine and tabulate
returned proxies and certify the vote to the
Trust, all as and to the extent requested by the
Trust;
(ix) Promptly answer all inquires by Shareholders
pertaining to their accounts maintained by the
Bank hereunder; and
(x) Cooperate with the Trust and the Trust's
independent public accountants in connection with
(a) the preparation of reports to Shareholders, to
the Securities and Exchange Commission (including
all required periodic and other reports), to state
securities commissioners, and to others, (b)
annual and other audits of the books and records
of the Trust, and (c) other matters of a like
nature.
1.03 Listed herein are additional services that more
fully define the services listed in Section 1.02. The Bank shall
perform the following services:
(a) Account Maintenance Services:
+ Establishing new accounts
+ Preparation and mailing of W-9 solicitation to new
accounts without T.I.N. s
+ Address changes
+ Processing T.I.N. changes
+ Processing routine and non-routine transfers of
ownership
+ Issuance of credit certificates
+ Posting debit and credit transactions
+ Providing a daily transfer journal of ownership
changes
+ Responding to written shareholder communications
+ Responding to shareholder telephone inquiries
+ Placing stop transfers
+ Releasing stop transfers
+ Replacing lost certificates
+ Registration of credit certificates
+ Effect transfers of shares by the registered
owners thereof upon receipt of appropriate
documentation including written consent of the
Trust.
(b) Dividend and Interest Disbursement Services:
+ Generate and mail dividend checks with one
enclosure
+ Generate and mail interest checks with one
enclosure
+ Electronic transfer of funds
+ Replace lost dividend and interest checks
+ Processing of backup withholding and remittance
+ Preparation and filing of Federal Tax Forms 1099
and 1042
+ Preparation and filing of State Tax information as
directed
+ Preparation of escheatment information (shares and
dividends)
(c) Dividend Reinvestment Services Provided:
+ Processing optional cash investments and
acknowledging same
+ The reinvestment of dividend proceeds for
participants
+ Participant withdrawal or sell requests
+ Preparation, mailing and filing of Federal Tax
Form 1099B for sales
(d) Annual Meeting Service:
+ Preparation for the mailing of proxies: proxy
statement, annual report and business reply
envelope
+ Providing one set of labels of banks, brokers and
nominees for broker search
+ Providing record date list
+ Tabulation of returned proxies
+ Daily reporting of tabulation results
+ Interface support during solicitation effort
+ Providing one inspector of election at annual
meeting
+ Providing an annual meeting voted list
(e) Addressing and Mailing Services:
+ Preparation for the addressing and mailing of
quarterly or semi-annual reports
(f) Informational Services Provided:
+ One (1) complete statistical report
- shareholders by state
- shareholders by classification code
- shareholders by share grouping
Article 2 Fees and Expenses
2.01 For the performance by the Bank pursuant to this
Agreement, the Trust agrees to pay the Bank an annual maintenance
fee as set out in the initial fee schedule attached hereto. Such
fees and out-of-pocket expenses and advances identified under
Section 2.02 below may be changed from time to time subject to
mutual written agreement between the Trust and the Bank.
2.02 In addition to the fee paid under Section 2.01
above, the Trust agrees to reimburse the Bank for reasonable out-
of-pocket expenses, including but not limited to confirmation
production, postage, forms, telephone, microfilm, microfiche,
tabulating proxies, records storage, or advances incurred by the
Bank for the items set out in the fee schedule attached hereto.
In addition, any other expenses incurred by the Bank at the
request or with the consent of the Trust, will be reimbursed by
the Trust.
2.03 The Trust agrees to pay all fees and reimbursable
expenses within five days following the receipt of the respective
billing notice. Postage and the cost of materials for mailing of
dividends, proxies, Trust reports and other mailings to all
Shareholder accounts shall upon the Bank s request, be advanced
to the Bank by the Trust at least seven (7) days prior to the
mailing date of such materials.
Article 3 Representations and Warranties of the Bank
The Bank represents and warrants to the Trust that:
3.01 It is a trust company duly organized and existing
and in good standing under the laws of the Commonwealth of
Massachusetts.
3.02 It is duly registered as a transfer agent with
the Securities Exchange Commission as a transfer agent pursuant
to Section 17A(c) of the Securities Exchange Act of 1934, as
amended.
3.03 It is duly qualified to carry on its business in
the Commonwealth of Massachusetts.
3.04 It is empowered under applicable laws and by its
Charter and By-Laws to enter into and perform this Agreement.
3.05 All requisite corporate proceedings have been
taken to authorize it to enter into and perform this Agreement.
3.06 It has and will continue to have access to the
necessary facilities, equipment and personnel to perform its
duties and obligations under this Agreement.
Article 4 Representations and Warranties of the Trust
The Trust represents and warrants to the Bank that:
4.01 It is a business trust duly organized and
existing and in good standing under the laws of the State of
Delaware.
4.02 It is empowered under applicable laws and by its
Declaration of Trust and By-Laws to enter into and perform this
Agreement.
4.03 All corporate proceedings required by said
Declaration of Trust and By-Laws have been taken to authorize it
to enter into and perform this Agreement.
4.04 It is a closed-end, non-diversified investment
company registered under the Investment Company Act of 1940, as
amended.
4.05 It shall make all required filings under federal
and state securities laws.
Article 5 Data Access and Proprietary Information
5.01 The Trust acknowledges that the data bases,
computer programs, screen formats, report formats, interactive
design techniques, and documentation manuals furnished to the
Trust by the Bank as part of the Trust's ability to access
certain Trust-related data ("Customer Data") maintained by the
Bank on data bases under the control and ownership of the Bank or
other third party ("Data Access Services") constitute
copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to
the Bank or other third party. In no event shall Proprietary
Information be deemed Customer Data. The Trust agrees to treat
all Proprietary Information as proprietary to the Bank and
further agrees that it shall not divulge any Proprietary
Information to any person or organization except as may be
provided hereunder. Without limiting the foregoing, the Trust
agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations
as may be designated in writing by the Bank
and solely in accordance with the Bank's
applicable user documentation;
(b) to refrain from copying or duplicating
in any way the Proprietary Information;
(c) to refrain from obtaining unauthorized access to
any portion of the Proprietary Information, and if
such access is inadvertently obtained, to inform
the Bank in a timely manner of such fact and
dispose of such information in accordance with the
Bank's instructions;
(d) to refrain from causing or allowing Proprietary
Information acquired hereunder from being
retransmitted to any other computer facility or
other location, except with the prior written
consent of the Bank;
(e) that the Trust shall have access only to those
authorized transactions agreed upon by the
parties;
(f) to honor all reasonable written requests made by
the Bank to protect at the Bank's expense the
rights of the Bank in Proprietary Information at
common law, under federal copyright law and under
other federal or state law.
Each party shall take reasonable efforts to advise its employees
of their obligations pursuant to this Article 5. The obligations
of this Article shall survive any earlier termination of this
Agreement.
5.02 If the Trust notifies the Bank that any of the
Data Access Services do not operate in material compliance with
the most recently issued user documentation for such services,
the Bank shall endeavor in a timely manner to correct such
failure. Organizations from which the Bank may obtain certain
data included in the Data Access Services are solely responsible
for the contents of such data and the Trust agrees to make no
claim against the Bank arising out of the contents of such third-
party data, including, but not limited to, the accuracy thereof.
DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE
SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS
IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL
WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT
NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
5.03 If the transactions available to the Trust
include the ability to originate electronic instructions to the
Bank in order to (i) effect the transfer or movement of cash or
Shares or (ii) transmit Shareholder information or other
information then in such event the Bank shall be entitled to rely
on the validity and authenticity of such instruction without
undertaking any further inquiry as long as such instruction is
undertaken in conformity with security procedures established by
the Bank from time to time.
Article 6 Indemnification
6.01 The Bank shall not be responsible for, and the
Trust shall indemnify and hold the Bank harmless from and
against, any and all losses, damages, costs, charges, reasonable
counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of the Bank or its agents or
subcontractors required to be taken pursuant to
this Agreement, provided that such actions are
taken in good faith and without negligence or
willful misconduct.
(b) The Trust's lack of good faith, negligence or
willful misconduct which arise out of the breach
of any representation or warranty of the Trust
hereunder.
(c) The reliance on or use by the Bank or its agents
or subcontractors of information, records,
documents or services which (i) are received by
the Bank or its agents or subcontractors, and (ii)
have been prepared, maintained or performed by the
Trust or any other person or firm on behalf of the
Trust including but not limited to any previous
transfer agent or registrar.
(d) The reliance on, or the carrying out by the Bank
or its agents or subcontractors of any
instructions or requests of the Trust.
(e) The offer or sale of Shares in violation of any
requirement under the federal securities laws or
regulations or the securities laws or regulations
of any state that such Shares be registered in
such state or in violation of any stop order or
other determination or ruling by any federal
agency or any state with respect to the offer or
sale of such Shares in such state.
6.02 The Bank shall be responsible for any and all
losses, damages, costs,. charges, reasonable counsel fees,
payments, expenses and liability arising out of acts attributed
to the bad faith, negligence or willful misconduct of the Bank
and its agents or subcontractors.
6.03 At any time the Bank may apply to any officer of
the Trust for instructions, with respect to any matter arising in
connection with the services to be performed by the Bank under
this Agreement, and the Bank and its agents or subcontractors
shall not be liable and shall be indemnified by the Trust for any
action taken or omitted by it in reasonable reliance upon such
instructions provided that such action is taken in good faith and
without negligence. The Bank shall be entitled to receive, and
act upon, advice of counsel (which counsel shall be selected by
the Bank with reasonable care based on such counsel's
professional competence and reputation or shall be counsel for
the Trust) and shall be without liability for any action
reasonably taken pursuant to such advice in good faith and
without negligence. The Bank, its agents and subcontractors
shall be protected and indemnified in acting upon any paper or
document furnished by or on behalf of the Trust, reasonably
believed to be genuine and to have been signed by the proper
person or persons, or upon any instruction, information, data,
records or documents provided the Bank or its agents or
subcontractors by telephone, in person, machine readable input,
telex, CRT data entry or other similar means authorized by the
Trust and reasonably believed to be genuine, and shall not be
held to have notice of any change of authority of any person,
until receipt of written notice thereof from the Trust.
6.04 In order that the indemnification provisions
contained in this Article 6 shall apply, upon the assertion of a
claim for which the Trust may be required to indemnify the Bank,
its agents or subcontractors (the Covered Persons ), the Covered
Persons shall promptly notify the Trust of such assertion, and
shall keep the Trust advised with respect to all developments
concerning such claim. The Trust shall have the option, at its
election, to participate with the Covered Persons in the defense
of such claim or to defend against said claim in its own name or
in the name of the Covered Persons and, in the event that the
Trust elects to defend against said claim in its own name or in
the name of the Covered Persons, the Covered Persons shall incur
no further legal or other expenses for which they shall be
entitled to indemnification from the Trust. No Covered Person
shall in any case confess any claim or make any compromise in any
case in which the Trust may be required to indemnify the Covered
Persons except with the Trust's prior written consent.
Article 7 Standard of Care
7.01 The Bank shall at all times act in good faith and
without negligence or willful misconduct and agrees to use its
best efforts within reasonable limits to insure the accuracy of
all services performed under this Agreement, but assumes no
responsibility and shall not be liable for loss or damage due to
errors unless said errors are caused by its negligence, bad
faith, or willful misconduct or that of its employees.
Article 8 Covenants of the Trust and the Bank
8.01 The Trust shall promptly furnish to the Bank the
following:
(a) A certified copy of the resolution of the Board of
Trustees of the Trust authorizing the appointment
of the Bank and the execution and delivery of this
Agreement.
(b) A copy of the Declaration of Trust and By-Laws of
the Trust and all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Trust for
safekeeping of stock certificates, check forms and facsimile
signature imprinting devices, if any; and for the preparation or
use, and for keeping account of, such certificates, forms and
devices.
8.03 The Bank shall keep records relating to the
services to be performed hereunder, in the form and manner
required by applicable law and otherwise as it may deem
advisable. The Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed
by the Bank hereunder are the property of the Trust and will be
preserved, maintained and made available in accordance with
Section 31 of the Investment Company Act of 1940, as amended, and
the Rules thereunder, and will be surrendered promptly to the
Trust on and in accordance with its request.
8.04 The Bank and the Trust agree that all books,
records, information and data pertaining to the business of the
other party which are exchanged or received pursuant to the
negotiation or the carrying out of this Agreement shall remain
confidential, and shall not be voluntarily disclosed to any other
person, except as may be required by law.
8.05 In cases of any requests or demands for the
inspection of the Shareholder records of the Trust, the Bank will
endeavor to notify the Trust and to secure instructions from an
authorized officer of the Trust as to such inspection. The Bank
reserves the right, however, to exhibit the Shareholder records
to any person whenever it is advised by its counsel that it may
be held liable for the failure to exhibit the Shareholder records
to such person.
Article 9 Termination of Agreement
9.01 This Agreement may be terminated by either party
upon sixty (60) days written notice to the other.
9.02 Should the Trust exercise its right to terminate,
all reasonable out-of-pocket expenses of the Bank associated with
the movement of records and material will be borne by the Trust.
Article 10 Assignment
10.01 Except as provided in Section 10.03 below,
neither this Agreement nor any rights or obligations hereunder
may be assigned by either party without the written consent of
the other party.
10.02 This Agreement shall inure to the benefit of and
be binding upon the parties and their respective permitted
successors and assigns.
10.03 The Bank may, without further consent on the
part of the Trust, subcontract for the performance hereof with
(i) Boston Financial Data Services, Inc., a Massachusetts
corporation ("BFDS") which is duly registered as a transfer agent
pursuant to Section 17A(c) of the Securities Exchange Act of
1934, as amended ("Section 17A(c)"), (ii) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c) or
(iii) a BFDS affiliate duly registered as a transfer agent
pursuant to Section 17A(c); provided, however, that the Bank
shall be as fully responsible to the Trust for the acts and
omissions of any subcontractor as it is for its own acts and
omissions.
Article 11 Amendment
11.01 This Agreement may be amended or modified by a
written agreement executed by both parties and authorized or
approved by a resolution of the Board of Trustees of the Trust.
Article 12 Massachusetts Law to Apply
12.01 This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with the
laws of the Commonwealth of Massachusetts.
Article 13 Force Majeure
13.01 In the event either party is unable to perform
its obligations under the terms of this Agreement because of acts
of God, strikes, equipment or transmission failure or damage
reasonably beyond its control, or other causes reasonably beyond
its control, such party shall not be liable for damages to the
other resulting from such failure to perform or otherwise from
such causes.
Article 14 Consequential Damages
14.01 Neither party to this Agreement shall be liable
to the other party for consequential damages under any provision
of this Agreement or for any consequential damages arising out of
any act or failure to act hereunder.
Article 15 Merger of Agreement
15.01 This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement
with respect to the subject hereof whether oral or written.
Article 16 Disclaimer of Liability
16.01 Notwithstanding anything to the contrary
contained in this Agreement, the parties hereto acknowledge and
agree that, as provided in Section 4.4 of the Declaration of
Trust, this Agreement is executed by the Trustees and/or officers
of the Trust by them not individually but as such Trustees and/or
officers of the Trust, and the obligations hereunder are not
binding upon any of the Trustees or Shareholders individually but
bind only the estate of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf by
and through their duly authorized officers, as of the day and
year first above written.
BLACKROCK ASSET INVESTORS
By:
Wesley R. Edens
Chief Operating Officer
ATTEST:
STATE STREET BANK AND TRUST
COMPANY
By:
ATTEST:
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement") made as of this ________ day
of ________, 1995 among BlackRock Asset Investors, a Delaware business
trust, with its principal offices at 345 Park Avenue, New York, New
York 10154 (the "Trust"), BlackRock Financial Management L.P., a
Delaware limited partnership with its principal offices at 345 Park
Avenue, New York, New York 10154 (the "Advisor") and the undersigned,
BlackRock Fund Investors III, a Delaware business trust (the
"Subscriber").
W I T N E S S E T H:
WHEREAS, the Trust is authorized to issue an aggregate of up
to 200,000,000 shares of beneficial interest, par value $.01 per
share, of the Trust (the "Shares"), upon the terms and subject to the
conditions hereinafter set forth, and the Subscriber desires to
irrevocably commit, upon the terms and subject to the conditions
hereinafter set forth, to purchase up to a specified aggregate dollar
amount of Shares ("Capital Commitment") as set forth on the signature
page hereof;
NOW, THEREFORE, for and in consideration of the premises and
the mutual representations and covenants hereinafter set forth, the
parties hereto do hereby agree as follows:
1. Subscription for shares and Representations and Agreements of
Subscriber
1.1 The Subscriber hereby acknowledges that (a) it was
organized solely for the purpose of investing in the Trust; and (b) by
executing this Agreement, the Subscriber irrevocably commits, upon the
terms and subject to the conditions hereinafter set forth, to purchase
up to the aggregate amount (net of cash distributions of capital from
the Trust to the Subscriber) of Shares of the Trust as set forth upon
the signature page hereof.
1.2 The initial closing is expected to occur on or about
January 6, 1995 (the "Initial Closing"), although the Initial Closing
may occur on any date, prior to March 31, 1995, after which at least
$200 million of total capital commitments ("Total Trust Commitments")
have been secured from all investors in the Trust. Subsequent
closings may be held on or before March 31, 1995.
1.3 As summarized in the Confidential Private Placement
Memorandum dated December 21, 1994 (the "Memorandum"), pursuant to and
subject to all of the terms of the Trust's Declaration of Trust, as
amended from time to time (the "Declaration"), and the Subscriber's
Declaration of Trust, as amended from time to time (the "Subscriber's
Declaration"), under certain circumstances following a Trigger
Notification Date (as defined in the Declaration), each shareholder of
the Subscriber will be given the right to cancel its unfunded Capital
Commitment (as defined in the Subscriber's Declaration) and, if so
approved by holders of a majority of the Trust's shares, all unfunded
Capital Commitments will be cancelled and, if so approved, the Trust
and each investment company investing in the Trust (each a "Fund" and
collectively, the "Funds") will terminate and promptly wind up their
affairs. In addition, pursuant to and subject to all of the terms of
the Declaration, all unfunded Capital Commitments will be cancelled
and the Trust and each Fund will terminate and promptly wind up their
affairs at any time if so approved by holders of 75% of the Trust's
shares. Subject to the foregoing, the period during which the Capital
Commitment may be drawn down by the Trust (the "Commitment Period")
will expire on the third anniversary of the Initial Closing; provided,
however, that the Advisor, upon approval by holders of a majority of
the outstanding shares of beneficial interest of the Trust, may extend
the Commitment Period for up to one additional year if (i) at least
50% of the Total Trust Commitments have been drawn down and invested
prior to such expiration date and (ii) the Advisor determines, in its
reasonable judgment, that sufficient opportunities exist to deploy the
unused Total Trust Commitments during the extension period.
1.4 Undrawn Capital Commitments by the Subscriber and each
other Fund may be called by the Trust during the Commitment Period in
any amount not less than $10 million in the aggregate; provided that
each such capital call to the Subscriber and the Funds shall be
expressed as a pro rata percentage of the Subscriber's and each Fund's
undrawn Capital Commitment to the Trust.
1.5 In order to make a capital call on the Subscriber, the
Trust must provide at least 14 days prior written notice of the amount
of the call (both as a percentage of the unpaid portion of the
Subscriber's Capital Commitment and as a dollar amount) and the date
(no sooner than 14 days following the capital call) on which
immediately available funds must be received by the Trust. Upon
receipt of funds pursuant to a call, the Trust will issue in the name
of and for the account of the Subscriber that number of full and
fractional Shares having an aggregate net asset value equal to the
amount of the capital call from the Subscriber as determined by the
Trust at any time within 48 hours, excluding Saturdays, Sundays and
holidays on which banks in the City of New York or the New York Stock
Exchange are not open for business, prior to the date of such
issuance. Upon the Subscriber's payment to the Trust pursuant to a
capital call, the Subscriber's undrawn Capital Commitment shall be
reduced by the amount of such payment; provided, however, that the
Subscriber's undrawn Capital Commitment shall be increased (but not in
excess of the original amount) by any cash distributions of capital
from the Trust to the Subscriber during the Commitment Period. At or
prior to the date of each capital call, the Trust will advise the
Subscriber of the total amount of such Subscriber's undrawn Capital
Commitment, together with details of any return of capital subsequent
to the previous capital call. If the Subscriber does not receive from
one or more of its subscribers the entire amount of the capital call
made by the Subscriber in order to satisfy the Trust's capital call,
the Subscriber will reduce its payment to the Trust accordingly and
will not borrow funds or use funds on hand to satisfy the missing
portion of the Trust's capital call.
1.6 If the Subscriber fails to pay the full amount of a
capital call by the date specified in the notice, the Trust will send
a second notice of such call. If the Subscriber fails to pay the full
amount of such capital call in immediately available funds on or prior
to 5:30 p.m. on the 14th day (the "Default Date") after the date of
such second notice, the Trust shall be entitled at any time prior to
the 120th day after the Default Date to repurchase, retire and cancel
the same number of its Shares from the Subscriber as the number of
shares of the Subscriber previously repurchased by the Subscriber
pursuant to a parallel repurchase right, at a price per Share equal to
the price per share of the Subscriber paid by the Subscriber. Other
than as set forth in this Section 1.6, the Trust shall not purchase,
redeem or otherwise acquire its Shares.
1.7 If this Agreement is accepted by the Trust after the
date on which the Trust receives funds in satisfaction of its first
capital call (the "Initial Funding Date"), the Trust will specify in
such acceptance, and the Trust will specify in a written notice to
each other subscriber that has a Capital Commitment expressed as a
percentage of the Total Trust Commitments, the amount that the new
Subscriber and each such percentage subscriber, respectively, shall
pay in immediately available funds within 14 days after such
acceptance or notice, which amount shall be sufficient to permit all
future capital calls to be made on a pro rata basis; provided that the
Trust will accept new or additional subscriptions no more frequently
than biweekly after the Initial Funding Date. Payments due will not
be treated as capital calls subject to the minimum as set forth in
Section 1.4.
1.8 The Subscriber understands and acknowledges (i) that
the Subscriber must bear the economic risk of his investment in the
Shares; (ii) that the Shares have not been registered under the
Securities Act of 1933 (the "1933 Act") or any state or foreign
securities laws, that the Trust has no intention of doing so and that
the Subscriber has no right to require it to do so and that therefore
such Shares cannot be resold or transferred unless they are
subsequently registered under the 1933 Act and applicable state laws
or unless an exemption from such registration is available; (iii) that
the Subscriber is purchasing the Shares for investment purposes only
for the account of the Subscriber and not with any view toward a
distribution thereof; (iv) that the Subscriber has no contract,
undertaking, agreement or arrangement with any person to sell,
transfer or pledge to such person or anyone else any of the Shares
which the Subscriber hereby subscribes to purchase or any part thereof
or interest therein, and the Subscriber has no present plans to enter
into any such contract, undertaking, agreement or arrangement; (v)
that the Subscriber understands that, except as otherwise provided in
the Declaration, the Shares cannot be transferred without the prior
written consent of the Trust; (vi) that there will be no public market
for the Shares; (vii) that any disposition of the Shares or any
interest therein may result in unfavorable tax consequences to the
Subscriber; and (viii) that this Agreement represents an interest in
Shares and is subject to the foregoing to the same extent as the
Shares.
1.9 The Subscriber recognizes that the purchase of Shares
involves a high degree of risk in that (i) the Trust has no operating
history; (ii) an investment in the Trust is highly speculative, and
only investors who can afford the loss of their entire investment
should consider investing in the Trust and the Shares; (iii) the
Subscriber may not be able to dispose of his investment; (iv)
transferability of the Shares is extremely limited and (v) in the
event of a disposition, the Subscriber could sustain the loss of his
entire investment.
1.10 The Subscriber represents that it is an "accredited
investor" as such term is defined in Rule 501 of Regulation D
promulgated under the 1933 Act, as indicated by the responses to the
questions contained in Section 6 hereof.
1.11 The Subscriber hereby represents that he has been
afforded the opportunity to ask questions of and obtain additional
information concerning the terms and conditions of the offering of the
Shares or to verify the information contained in the Confidential
Private Placement Memorandum dated December 21, 1994, as supplemented
from time to time, and the appendices thereto (collectively, the
"Offering Documents") or otherwise relative to the Trust, to the
extent that the officers and representatives of the Trust possess such
information or can acquire it without unreasonable effort or expense.
All such questions if asked have been answered satisfactorily and all
such information provided has been found to be fully satisfactory.
1.12 The Subscriber hereby represents that the Subscriber
has received, reviewed carefully and understands fully the Offering
Documents. The Subscriber has evaluated the risks of investing in the
Shares, and has determined that the Shares are a suitable investment
for the Subscriber. The Subscriber can bear the economic risk of this
investment and can afford a complete loss of his investment. In
evaluating the suitability of an investment in the Shares, the
Subscriber has not relied upon any representations or other
information (whether oral or written) other than as set forth in the
Offering Documents, and independent investigations made by the
Subscriber or representative(s) of the Subscriber or the investors in
the Subscriber.
1.13 The Subscriber hereby acknowledges that the offering of
the Shares has not been reviewed, endorsed or recommended by the
United States Securities and Exchange Commission (the "Commission") or
any state or foreign regulatory authority and that no federal, state
or foreign authority has made any finding or determination as to the
fairness of the offering of the Shares.
1.14 The Subscriber understands that there is no market for
the Shares and that no market is expected to develop for the Shares.
The Subscriber hereby agrees that it will not dispose of an interest
in this Agreement or any of the Shares purchased pursuant hereto
(including by way of sale, transfer, assignment, pledge, hypothecation
or any other means) other than in accordance with the provisions set
forth in the Declaration (which provisions are summarized in the
Memorandum).
1.15 Any information which the Subscriber has furnished to
the Trust in Section 6 or on the signature page hereof, is correct and
complete as of the date of this Agreement and if there should be any
material change prior to the Initial Closing in such information or in
any representation or warranty made by the Subscriber herein, the
Subscriber will immediately furnish such revised or corrected
information to the Trust.
1.16 The Subscriber hereby represents that the address or
the addresses of the Subscriber furnished by him on the signature page
hereof is the undersigned's principal residence if he is a natural
person or its principal business address or addresses if it is a
corporation or other entity.
1.17 The representations, warranties, agreements,
undertakings and acknowledgements made by the Subscriber in this
Agreement (the "Covered Items") are made with the intent that they be
relied upon by the Trust in determining the Subscriber's suitability
as a purchaser of the Shares, and shall survive any such purchase.
The Subscriber recognizes that the offer of the Shares to him was made
in reliance upon his representations and warranties and the
acknowledgments and agreements set forth herein, and hereby agrees to
indemnify, to the extent of the Subscriber's undrawn Capital
Commitment and the Subscriber's interest in the Trust (which shall be
the maximum indemnification liability of the Subscriber for all
purposes hereof), the Trust, the Advisor and each of their respective
Affiliates (as defined in the Declaration), and to hold each of them
harmless against, all liabilities, costs or expenses (including
reasonable attorneys' fees) arising as a result of the sale or
distribution of the Shares by the Subscriber in violation of the
registration requirements of the 1933 Act (or other applicable law) or
any material misrepresentation or material breach by the Subscriber of
the Covered Items.
2. Representations by, and Covenants of, the Advisor and the Trust
2.1 As of the Initial Closing, the Advisor, and as of each
subsequent closing date, the date of notice of each call and the date
of each sale of Shares by the Trust (each, a "Subsequent Date"), the
Advisor (but only to the best of its knowledge insofar as the Trust is
concerned) and the Trust (but solely as to the Trust and the Funds
other than the Subscriber and not as to the Advisor) represent,
warrant and, where applicable, covenant that (A) the Trust has been
duly organized, and is subsisting and in good standing, as a business
trust under the laws of the State of Delaware and has the requisite
power and authority to conduct its business as described in the
Offering Documents and the Declaration and (B) each of the
Declaration, the Declaration of Trust of each of the Funds, the
Investment Advisory Agreement (the "Advisory Agreement") in effect
between the Trust and the Advisor, this Agreement, the other
subscription agreements with respect to the Trust and each Fund and
any other documents executed and delivered by the Trust, the Funds,
their respective Trustees or the Advisor in connection therewith or
herewith have been duly authorized, executed and delivered by such
persons, and are the legal, valid and binding obligations of such
persons enforceable in accordance with their respective terms, except
(i) that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights and (ii) that the remedy of
specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
2.2 As of the Initial Closing and as of each Subsequent
Date, the Advisor represents, warrants and, where applicable,
covenants that it has been duly organized, and is subsisting and in
good standing, under the laws of the state of its organization and has
the requisite power and authority to enter into and perform its
obligations under the Advisory Agreement.
2.3 As of the Initial Closing, the Advisor, and as of each
Subsequent Date, the Advisor and the Trust represent, warrant and,
where applicable, covenant that the Shares have been duly and validly
authorized and, when delivered and paid for in accordance with this
Agreement, will be duly and validly issued units of beneficial
interest in the Trust and that the Subscriber shall be entitled to all
the benefits of a beneficial owner of the Trust under the Declaration
and the Delaware Act (as defined in the Declaration).
2.4 As of the Initial Closing, the Advisor represents and
warrants that the Trust is duly qualified to do business and is in
good standing in the State of New York and is not required by virtue
of the conduct of its business to be qualified as a foreign
corporation in any other jurisdiction.
2.5 As of the Initial Closing, the Advisor, and as of each
Subsequent Date, the Advisor, to the extent within its control, and
the Trust represent, warrant and, where applicable, covenant that the
Trust will use the proceeds from the sale of the Shares solely to
invest in a manner consistent with the Offering Documents and to pay
the Trust's expenses.
2.6 As of the Initial Closing, the Advisor, and as of each
Subsequent Date, the Advisor, to the extent within its control, and
the Trust represent, warrant and, where applicable, covenant that
commencing on the Initial Funding Date, the Trust will (i) be an
investment company within the meaning of the Investment Company Act of
1940 (the "1940 Act") and be registered as such under the 1940 Act and
(ii) qualify for and be entitled to receive the special tax treatment
afforded a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended. Without limiting the
generality of the foregoing, to the extent within the control of the
Advisor, commencing on the Initial Funding Date, the Trust will have
outstanding securities (other than short-term paper) beneficially
owned by more than 100 persons as determined in accordance with
provisions of Section 3(c)(1) of the 1940 Act and the Trust will not
be a company described in Sections 3(c)(5) and/or 3(c)(6) of the 1940
Act.
2.7 As of the Initial Closing, the Advisor, and as of each
Subsequent Date, the Advisor (to the best of its knowledge insofar as
the Trust and any Fund is concerned) and the Trust (but solely as to
the Trust and the Funds other than the Subscriber and not as to the
Advisor), to the best of its knowledge, represent, warrant and, where
applicable, covenant that neither the Trust, any Fund, nor the Advisor
is in default (nor has any event occurred which with notice, lapse of
time, or both, would constitute a default) in the performance of any
obligation, agreement or condition contained in the Declaration or the
Declaration of Trust of each respective Fund, or in any indenture,
mortgage, deed of trust, credit agreement, note or other evidence of
indebtedness or any lease or other agreement or understanding, or any
license, permit, franchise or certificate, to which any such person is
a party or by which any thereof is bound or to which the properties of
any thereof are subject, nor is any such person in violation of any
statute, regulation, law, order, writ, injunction, judgment or decree
to which it is subject, which default or violation would materially
adversely affect the business or financial condition of such person or
impair such person's ability to carry out its obligations under this
Agreement, any subscription agreement with respect to any Fund, the
Declaration or the Declaration of Trust of each respective Fund, as
the case may be, or impair the Advisor's ability to carry out its
obligations under the Advisory Agreement.
2.8 As of the Initial Closing, the Advisor, and as of each
Subsequent Date, the Advisor, and the Trust (but solely as to the
Trust and the Funds other than the Subscriber and not as to the
Advisor), represent, warrant and, where applicable, covenant that
there is no litigation, investigation, or other proceeding pending or,
to the best of its or their knowledge, threatened against the Trust,
each Fund, the Advisor or any of their respective Affiliates
(excluding from such term solely for this purpose any investor in the
Trust or in any Fund other than the Advisor or its Affiliates) which,
if adversely determined, would materially adversely affect the
business or financial condition of the Trust, each Fund or the Advisor
or the ability of such person to carry out its obligations under this
Agreement, any subscription agreement with respect to each Fund, the
Declaration or the Declaration of Trust of each Fund, as the case may
be, or impair the Advisor's ability to carry out its obligations under
the Advisory Agreement.
2.9 As of the Initial Closing, the Advisor, and as of each
Subsequent Date, the Advisor, to the best its knowledge, and the
Trust, to the best of its knowledge, represent, warrant and, where
applicable, covenant that neither the Trust nor any person acting on
its behalf has taken any actions that would subject the issuance and
sale of the Shares to the registration and prospectus delivery
provisions of the 1933 Act.
2.10 As of the Initial Closing, the Advisor, and as of each
Subsequent Date occuring on or prior to March 31, 1995, the Advisor,
and the Trust represent, warrant and, where applicable, covenant that
the Offering Documents do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements contained therein not misleading in light of the
circumstances under which they are or were made.
2.11 As of the Initial Closing, the Advisor, and as of each
Subsequent Date, the Advisor and the Trust represent, warrant and,
where applicable, covenant that if, in connection with the sale of
shares in the Trust, the Trust or the Advisor or an Affiliate of
either offers any rights or benefits to or for the benefit of the
purchaser of such shares, rights or benefits no less favorable than
those offered to or for the benefit of such purchaser shall be offered
to the Subscriber.
2.12 As of the Initial Closing and as of each Subsequent
Date, the Advisor represents, warrants and, where applicable,
covenants that the Subscriber has been provided true, complete and
correct copies or forms of all letters, agreements, undertakings and
other documents by and among the Trust or the Advisor or an Affiliate
thereof relative to any such person's purchase of shares of the Trust
or any terms, conditions, operations, obligations or other
understandings affecting such Trust.
2.13 As of the Initial Closing and as of each Subsequent
Date, the Advisor represents, warrants and, where applicable,
covenants that the Advisor will reimburse the Trust, BlackRock Capital
Finance, and the Funds for, or cause to be paid on behalf of the
Trust, BlackRock Capital Finance and the Funds, each such entity's
allocable share of the aggregate offering and organizational expenses
of the Trust, BlackRock Capital Finance and the Funds in excess of
$750,000.
2.14 The Advisor and/or the Trust, as the case may be,
acknowledges that the representations, warranties and covenants made
by the Advisor and/or the Trust, as the case may be, are made with the
intent that they be relied upon by the Subscriber in committing to
purchase and in purchasing Shares and shall survive any such purchase
and that the commitment to purchase, and each purchase of, Shares by
the Subscriber was and will be made in reliance upon the
representations, warranties and covenants set forth herein. To the
extent such representations, warranties and covenants are made by the
Advisor and the Trust, they are made jointly and severally: provided,
however, that if the Subscriber brings action against only the Trust
or only the Advisor, the defending party may implead or seek
contribution from the other and the other will, in addition to any
liability or contribution imposed, be liable to the defending party
for the incremental costs incurred by the defending party in
connection with such impleader or contribution proceeding if (a) the
other is found to be responsible for 25% or more of the aggregate
recovery, (b) the other is found to be responsible for $1,250,000 or
more or (c) the defending party is found to be not responsible for any
amount and the other is found to be responsible for some amount. The
Advisor hereby agrees to indemnify, to the extent of the dollar amount
of the Subscriber's Capital Commitment (which shall be the maximum
indemnification liability of the Advisor for all purposes hereof), the
Subscriber and any Affiliates, and to hold each of them harmless
against liabilities, costs or expenses (including reasonable
attorneys' fees) arising as a result of the sale or distribution of
the Shares by the Trust or the Advisor (or any Affiliate of the
Advisor) in violation of the registration requirements of the 1933 Act
(or other applicable law) or any material misrepresentation or
material breach by the Advisor of its representations, warranties and
covenants made herein.
3. Closing Conditions
3.1 The Subscriber's obligations hereunder are subject to
the fulfillment (or waiver by the Subscriber), prior to or at the time
of the Initial Closing, of the following conditions:
(a) The representations and warranties set forth
herein on the part of the Advisor shall be true and correct as if made
on and as of the time of the Initial Closing.
(b) The Initial Closing shall have occurred not later
than March 31, 1995; the Total Trust Commitments at the time of the
Initial Closing shall be at least $200 million and the Total Trust
Commitments shall include a capital commitment on the part of the
Advisor (either directly or through one or more affiliates) to one or
more of the Subscriber and the Funds in an aggregate amount equal to
the lesser of 5% of the Total Trust Commitments and $27 million.
(c) The certificate of trust with respect to the Trust
shall have been duly filed in the Office of the Secretary of State of
the State of Delaware.
(d) The Advisor shall have executed and delivered to
the Subscriber a certificate satisfactory in form and substance to the
Subscriber certifying the fulfillment of the conditions specified in
clauses (a) through (c) above.
(e) The Subscriber shall have received opinions dated
the date of the Initial Closing from Skadden, Arps, Slate, Meagher &
Flom in substantially the form attached hereto as Schedule 1.
3.2 If at the Initial Closing the Advisor fails to tender
to the Subscriber the documents specified herein which are required to
be delivered to the Subscriber at the Initial Closing or if any of the
conditions specified in Section 3.1 above shall not have been
fulfilled, the Subscriber shall, at its election, be relieved of all
further obligations under this Agreement.
4. Miscellaneous
4.1 Any notice or other communication given hereunder shall
be deemed sufficient if in writing and sent by facsimile with written
confirmation of receipt and a copy of the notice sent by overnight
courier or if delivered by hand against written receipt therefor,
addressed to BlackRock Asset Investors, c/o BFM Advisory L.P., 345
Park Avenue, New York, New York 10154, Attention: Ralph L.
Schlosstein, President (Fax: 212-754-8760), BlackRock Financial
Management L.P., 345 Park Avenue, New York, New York 10154, Attention:
Ralph L. Schlosstein, President, (Fax: 212-754-8760) or to the
Subscriber at his address or facsimile number indicated on the
signature page of this Agreement, or in either case such other person
or address as shall have been given by notice to the other party.
Notices shall be deemed to have been given on the date sent or
delivered by hand in accordance with the provisions set forth in this
Section 4.1.
4.2 This Agreement shall not be changed, modified or
amended except by a writing signed by the parties hereto and approved
by those persons owning or committed to purchase shares issued or to
be issued by the Subscribers, and this Agreement may not be discharged
except by performance in accordance with its terms or by a writing
signed by such parties and approved by such persons.
4.3 This Agreement shall be binding upon and inure to the
benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Agreement and any other
agreements referred to herein sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and
merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them with respect to such
subject matter. This Agreement may not be assigned without the prior
written consent of each party hereto or the successor to substantially
all of the business of any such person.
4.4 Upon the execution and delivery of this Agreement by
the Subscriber, this Agreement shall become a binding obligation of
the Subscriber with respect to the purchase of Shares as herein
provided and shall survive the insolvency, merger, consolidation,
share exchange, sale of assets and the death or disability of the
Subscriber; provided, however, if within 14 days of the Trust's
acknowledged receipt of the Subscription Agreement, the Subscription
Agreement is not accepted by the Trust and the Advisor and an accepted
copy is not delivered to the Subscriber, the Subscription Agreement
shall be of no further force and effect unless the Subscriber agrees
in writing to an extension of such 14 day period.
4.5 Notwithstanding the place where this Agreement may be
executed by any of the parties hereto, the parties expressly agree
that all the terms and provisions hereof shall be construed in
accordance with and governed by the laws of the State of New York,
without regard to principles of conflicts of law.
4.6 The holding of any provision of this Agreement to be
invalid or unenforceable by a court of competent jurisdiction shall
not affect any other provision of this Agreement, which shall remain
in full force and effect.
4.7 It is agreed that a waiver by either party of a breach
of any provision of this Agreement shall not operate, or be construed,
as a waiver of any subsequent breach by that same party.
4.7 This Agreement may be executed in one or more
counterparts each of which shall be deemed an original, but all of
which shall together constitute one and the same instrument.
5. Notice to Certain State Residents
5.1 In making an investment decision investors must rely on
their own examination of the issuer and the terms of the offering,
including the merits and risks involved. These securities have not
been recommended by any federal or state securities commission or
regulatory authority in any jurisdiction. Furthermore the foregoing
authorities have not confirmed the accuracy or determined the adequacy
of this document. Any representation to the contrary is a criminal
offense.
5.2 These securities are subject to restrictions on
transferability and resale and may not be transferred or resold except
as permitted under the 1933 Act, as amended, and the applicable state
securities laws, pursuant to registration or exemption therefrom.
Investors should be aware that they will be required to bear the
financial risks of this investment.
5.3 The Attorney General of the State of New York has not
passed on or endorsed the merits of this offering. Any representation
to the contrary is unlawful.
5.4 Florida Residents: Where sales are made to five or
more persons in Florida (excluding certain institutional purchasers
described in section 517.061(7) of the Florida Securities and Investor
Protection Act) (the "Act"), any such sale made pursuant to section
517.061(11) of the Act shall be voidable by the purchaser either
within three days after the first tender of consideration is made by
such purchaser to the issuer, or an agent of the issuer, or an escrow
agent or within three days after the availability of that privilege is
communicated to such purchaser, whichever occurs later.
5.5 New Hampshire Residents: Neither the fact that a
registration statement or an application for license has been filed
under Chapter 421-B with the State of New Hampshire nor the fact that
a security is effectively registered or a person is licensed in the
State of New Hampshire constitutes a finding by the Secretary of State
that any document filed under RSA 421-B is true, complete and not
misleading. Neither any such fact nor the fact that an exemption or
exception is available for a security or a transaction means that the
Secretary of State has passed in any way upon the merits or
qualification of, or recommended or given approval to, any person,
security or transaction. It is unlawful to make, or cause to be made,
to any prospective purchaser, customer or client any representation
inconsistent with the provisions of this paragraph.
5.6 Pennsylvania Residents: If a purchaser is a resident
of the Commonwealth of Pennsylvania, he acknowledges and agrees that
(a) the securities purchased by such purchaser cannot be sold for a
period of twelve (12) months from the date of purchase, except as
permitted under section 204.011 of the Pennsylvania Securities
Regulations, and (b) pursuant to section 207(M) of the Pennsylvania
Securities Act, each Pennsylvania resident who accepts an offer to
purchase securities exempted from registration under section 203(D) of
the Pennsylvania Securities Act directly from an issuer or an
affiliate of an issuer has the right to withdraw his acceptance
without incurring any liability to the seller, underwriter, if any, or
any other person within two (2) business days from the date of receipt
by the issuer of his written binding contract of purchase or, in the
case of a transaction in which there is no written binding contract of
purchase, within two (2) business days after he makes the initial
payment for the securities being offered.
6. CONFIDENTIAL INVESTOR QUESTIONNAIRE
The Subscriber represents and warrants that the purchaser of
the Shares comes within each category marked below, and that for any
category marked, he or she has truthfully set forth the factual basis
or reason the Subscriber comes within that category. ALL INFORMATION
IN RESPONSE TO THIS PARAGRAPH WILL BE KEPT STRICTLY CONFIDENTIAL. The
undersigned agrees to furnish such additional information as is
reasonably necessary in order for the Trust or the Advisor to verify
the answers set forth below.
Please mark each applicable box
( ) a. The undersigned is an individual (not a
partnership, corporation, etc.) whose individual
net worth, or joint net worth with his or her
spouse, presently exceeds $ 1,000,000.
Explanation. In calculating net worth you may
include equity in personal property and real
estate, including your principal residence, cash,
short-term investments, stock and securities.
Equity in personal property and real estate should
be based on the appraised fair market value of such
property less debt secured by such property.
( ) b. The undersigned is an individual (not a partnership,
corporation, etc.) who had an income in excess of
$200,000 in each of the two most recent years, or joint
income with their spouse in excess of $300,000 in each of
those years (in each case including foreign income, tax
exempt income and full amount of capital gains and losses
but excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable
expectation of reaching the same income level in the
current year.
( ) c. The undersigned is a director or executive officer of the
Trust which is issuing and selling the Shares.
( ) d. The undersigned is a bank; a savings and loan
association, insurance company, registered investment
company; registered business development company;
licensed small business investment company ("SBIC"); a
plan established and maintained by a state, its political
subdivisions, on any agency on instrumentality of a state
or its political subdivisions, for the benefit of its
employees, if such plan has total assets in excess of
$5,000,000; or an employee benefit plan within the
meaning of Title 1 of ERISA and (a) the investment
decision is made by a plan fiduciary which is either a
bank, savings and loan association, insurance company or
registered investment advisor, or (b) the plan has total
assets in excess of $5,000,000 or is a self directed plan
with investment decisions made solely by persons that are
accredited investors.
(describe entity)
( ) e. The undersigned is a private business development company
as defined in section 202(a)(22) of the Investment
Advisors Act of 1940;
(describe entity)
( ) f. The undersigned is a corporation, partnership,
Massachusetts or other business trust, or a non-profit
organization within the meaning of Section 501 (c)(3) of
the Internal Revenue Code, in each case not formed for
the specific purpose of acquiring the Shares and with
total assets in excess of $5,000,000;
(describe entity)
( ) g. The undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of
acquiring the Shares, where the purchase is directed by a
"sophisticated person" as defined in Regulation
506(b)(2)(ii). Such "sophisticated person" has the
knowledge and experience in financial and business
matters to capably evaluate the merits and risks of the
prospective investment.
( ) h. The undersigned is an entity all the equity owners of
which are "accredited investors" within one or more of
the above categories.
(describe entity)
( ) i. The undersigned is not within any of the categories above
and is therefore a nonaccredited investor.
( ) j. The undersigned is (i) an individual or company whose
subscription is for at least $500,000 or (ii) an
individual or company whose net worth at the time of
entering into such person's or company's subscription
agreement is at least $1,000,000. For this purpose, the
term "company" generally means a corporation,
partnership, association, joint-stock company, trust, or
any organized group of persons (which may include a
contractual arrangement), whether incorporated or not, or
any receiver, trustee in bankruptcy or liquidating agent
for any of the foregoing. However, the term "company"
does not include a registered investment company, a
business development company as defined in Section
202(a)(22) of the Investment Advisors Act of 1940 (which
would include a registered business development company)
or any "company" which would be required to register as
an investment company except by virtue of the operation
of Section 3(c)(1) of the Investment Company Act of 1940
unless each of such company's equity holders satisfies
the requirements of clause (i) or (ii) above (taking into
account the definition of company used in such clauses).
THE UNDERSIGNED IS INFORMED OF THE SIGNIFICANCE OF THE FOREGOING
REPRESENTATIONS, AND THEY ARE MADE WITH THE INTENTION THAT THE TRUST
WILL RELY ON THEM.
7. Manner in Which Title to be Held (check one)
a. ( ) Individual Ownership
b. ( ) Community Property
c. ( ) Joint Tenant with Right of Survivorship (both parties must sign)
d. ( ) Partnership*
e. ( ) Tenants in Common
f. ( ) Corporation*
g. ( ) Trust*
h. ( ) Other
* If Shares are being subscribed for by an entity other than an
individual, please complete Exhibit A, B or C, as applicable, which
are attached.
Capital Commitment (please fill in (a) and (b) below): The minimum
Capital Commitment is the lesser of (x) $100 million or (y) 16.67% of
the Trust's maximum amount of Capital Commitments ($600 million).
(a) $ million
(b) % of the aggregate Capital
Commitments of the Trust, subject to a
maximum of $ million
BlackRock Fund Investors III
Name(s) Exactly as to Appear on Stock
Register
By:
Name: Wesley R. Edens
Title: Chief Operating Officer
BlackRock Fund Investors III
Name Typed or Printed
345 Park Avenue
Business Address
New York, New York
10154
City. State and Zip Code
(212) 754-5560
Telephone
(212) 935-1370
Facsimile Number
applied for
Tax Identification Number
Dated: , 199
This Subscription Agreement is agreed to and
accepted as of ________ __, 1995
BlackRock Asset Investors
By:
Name: Wesley R. Edens
Title: Chief Operating Officer
BlackRock Financial Management L.P.
By:
Name: Ralph L. Schlosstein
Title: President
EXHIBIT A
CERTIFICATE OF TRUST INVESTOR
CERTIFICATE OF BlackRock Fund Investors III (the "Fund")
(Name of Trust or Custodial Relationship)
The undersigned, an officer of the Fund, hereby certifies as
follows:
1. That the Fund was established pursuant to a Declaration of
Trust dated ________ __, 1995 (the "Agreement").
2. That as of the date hereof, the Agreement has not been
revoked and is still in full force and effect.
3. That Laurence D. Fink, Ralph L. Schlosstein, Wesley R.
Edens, Henry Gabbay and Susan L. Wagner is each authorized to execute,
on behalf of the Fund, any and all documents in connection with the
Fund's investment in the Trust.
IN WITNESS WHEREOF, I have executed this certificate as an
officer of the Fund authorized to execute this certificate this __ day
of , 199 , and declared that it is truthful and
correct.
BlackRock Fund
Investors III
(Name of Trust or
Custodial Relationship)
By:
Name: Wesley R. Edens
Title: Chief Operating
Officer
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SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement") made as of this ________ day
of ________, 1995 among BlackRock Asset Investors, a Delaware business
trust, with its principal offices at 345 Park Avenue, New York, New
York 10154 (the "Trust"), BlackRock Financial Management L.P., a
Delaware limited partnership with its principal offices at 345 Park
Avenue, New York, New York 10154 (the "Advisor") and the undersigned,
BlackRock Fund Investors , a Delaware business trust (the
"Subscriber").
W I T N E S S E T H:
WHEREAS, the Trust is authorized to issue an aggregate of up
to 200,000,000 shares of beneficial interest, par value $.01 per
share, of the Trust (the "Shares"), upon the terms and subject to the
conditions hereinafter set forth, and the Subscriber desires to
irrevocably commit, upon the terms and subject to the conditions
hereinafter set forth, to purchase up to a specified aggregate dollar
amount of Shares ("Capital Commitment") as set forth on the signature
page hereof;
NOW, THEREFORE, for and in consideration of the premises and
the mutual representations and covenants hereinafter set forth, the
parties hereto do hereby agree as follows:
1. Subscription for shares and Representations and Agreements of
Subscriber
1.1 The Subscriber hereby acknowledges that (a) it was
organized solely for the purpose of investing in the Trust; and (b) by
executing this Agreement, the Subscriber irrevocably commits, upon the
terms and subject to the conditions hereinafter set forth, to purchase
up to the aggregate amount (net of cash distributions of capital from
the Trust to the Subscriber) of Shares of the Trust as set forth upon
the signature page hereof.
1.2 The initial closing is expected to occur on or about
Janaury 6, 1995 (the "Initial Closing"), although the Initial Closing
may occur on any date, prior to March 31, 1995, after which at least
$200 million of total capital commitments ("Total Trust Commitments")
have been secured from all investors in the Trust. Subsequent
closings may be held on or before March 31, 1995.
1.3 As summarized in the Confidential Private Placement
Memorandum dated December 21, 1994 (the "Memorandum"), pursuant to and
subject to all of the terms of the Trust's Declaration of Trust, as
amended from time to time (the "Declaration"), and the Subscriber's
Declaration of Trust, as amended from time to time (the "Subscriber's
Declaration"), under certain circumstances following a Trigger
Notification Date (as defined in the Declaration), each shareholder of
the Subscriber will be given the right to cancel its unfunded Capital
Commitment (as defined in the Subscriber's Declaration) and, if so
approved by holders of a majority of the Trust's shares, all unfunded
Capital Commitments will be cancelled and, if so approved, the Trust
and each investment company investing in the Trust (each a "Fund" and
collectively, the "Funds") will terminate and promptly wind up their
affairs. In addition, pursuant to and subject to all of the terms of
the Declaration, all unfunded Capital Commitments will be cancelled
and the Trust and each Fund will terminate and promptly wind up their
affairs at any time if so approved by holders of 75% of the Trust's
shares. Subject to the foregoing, the period during which the Capital
Commitment may be drawn down by the Trust (the "Commitment Period")
will expire on the third anniversary of the Initial Closing; provided,
however, that the Advisor, upon approval by holders of a majority of
the outstanding shares of beneficial interest of the Trust, may extend
the Commitment Period for up to one additional year if (i) at least
50% of the Total Trust Commitments have been drawn down and invested
prior to such expiration date and (ii) the Advisor determines, in its
reasonable judgment, that sufficient opportunities exist to deploy the
unused Total Trust Commitments during the extension period.
1.4 Undrawn Capital Commitments by the Subscriber and each
other Fund may be called by the Trust during the Commitment Period in
any amount not less than $10 million in the aggregate; provided that
each such capital call to the Subscriber and the Funds shall be
expressed as a pro rata percentage of the Subscriber's and each Fund's
undrawn Capital Commitment to the Trust.
1.5 In order to make a capital call on the Subscriber, the
Trust must provide at least 14 days prior written notice of the amount
of the call (both as a percentage of the unpaid portion of the
Subscriber's Capital Commitment and as a dollar amount) and the date
(no sooner than 14 days following the capital call) on which
immediately available funds must be received by the Trust. Upon
receipt of funds pursuant to a call, the Trust will issue in the name
of and for the account of the Subscriber that number of full and
fractional Shares having an aggregate net asset value equal to the
amount of the capital call from the Subscriber as determined by the
Trust at any time within 48 hours, excluding Saturdays, Sundays and
holidays on which banks in the City of New York or the New York Stock
Exchange are not open for business, prior to the date of such
issuance. Upon the Subscriber's payment to the Trust pursuant to a
capital call, the Subscriber's undrawn Capital Commitment shall be
reduced by the amount of such payment; provided, however, that the
Subscriber's undrawn Capital Commitment shall be increased (but not in
excess of the original amount) by any cash distributions of capital
from the Trust to the Subscriber during the Commitment Period. At or
prior to the date of each capital call, the Trust will advise the
Subscriber of the total amount of such Subscriber's undrawn Capital
Commitment, together with details of any return of capital subsequent
to the previous capital call. If the Subscriber does not receive from
one or more of its subscribers the entire amount of the capital call
made by the Subscriber in order to satisfy the Trust's capital call,
the Subscriber will reduce its payment to the Trust accordingly and
will not borrow funds or use funds on hand to satisfy the missing
portion of the Trust's capital call.
1.6 If the Subscriber fails to pay the full amount of a
capital call by the date specified in the notice, the Trust will send
a second notice of such call. If the Subscriber fails to pay the full
amount of such capital call in immediately available funds on or prior
to 5:30 p.m. on the 14th day (the "Default Date") after the date of
such second notice, the Trust shall be entitled at any time prior to
the 120th day after the Default Date to repurchase, retire and cancel
the same number of its Shares from the Subscriber as the number of
shares of the Subscriber previously repurchased by the Subscriber
pursuant to a parallel repurchase right, at a price per Share equal to
the price per share of the Subscriber paid by the Subscriber. Other
than as set forth in this Section 1.6, the Trust shall not purchase,
redeem or otherwise acquire its Shares.
1.7 If this Agreement is accepted by the Trust after the
date on which the Trust receives funds in satisfaction of its first
capital call (the "Initial Funding Date"), the Trust will specify in
such acceptance, and the Trust will specify in a written notice to
each other subscriber that has a Capital Commitment expressed as a
percentage of the Total Trust Commitments, the amount that the new
Subscriber and each such percentage subscriber, respectively, shall
pay in immediately available funds within 14 days after such
acceptance or notice, which amount shall be sufficient to permit all
future capital calls to be made on a pro rata basis; provided that the
Trust will accept new or additional subscriptions no more frequently
than biweekly after the Initial Funding Date. Payments due will not
be treated as capital calls subject to the minimum as set forth in
Section 1.4.
1.8 The Subscriber understands and acknowledges (i) that
the Subscriber must bear the economic risk of his investment in the
Shares; (ii) that the Shares have not been registered under the
Securities Act of 1933 (the "1933 Act") or any state or foreign
securities laws, that the Trust has no intention of doing so and that
the Subscriber has no right to require it to do so and that therefore
such Shares cannot be resold or transferred unless they are
subsequently registered under the 1933 Act and applicable state laws
or unless an exemption from such registration is available; (iii) that
the Subscriber is purchasing the Shares for investment purposes only
for the account of the Subscriber and not with any view toward a
distribution thereof; (iv) that the Subscriber has no contract,
undertaking, agreement or arrangement with any person to sell,
transfer or pledge to such person or anyone else any of the Shares
which the Subscriber hereby subscribes to purchase or any part thereof
or interest therein, and the Subscriber has no present plans to enter
into any such contract, undertaking, agreement or arrangement; (v)
that the Subscriber understands that, except as otherwise provided in
the Declaration, the Shares cannot be transferred without the prior
written consent of the Trust; (vi) that there will be no public market
for the Shares; (vii) that any disposition of the Shares or any
interest therein may result in unfavorable tax consequences to the
Subscriber; and (viii) that this Agreement represents an interest in
Shares and is subject to the foregoing to the same extent as the
Shares.
1.9 The Subscriber recognizes that the purchase of Shares
involves a high degree of risk in that (i) the Trust has no operating
history; (ii) an investment in the Trust is highly speculative, and
only investors who can afford the loss of their entire investment
should consider investing in the Trust and the Shares; (iii) the
Subscriber may not be able to dispose of his investment; (iv)
transferability of the Shares is extremely limited and (v) in the
event of a disposition, the Subscriber could sustain the loss of his
entire investment.
1.10 The Subscriber represents that it is an "accredited
investor" as such term is defined in Rule 501 of Regulation D
promulgated under the 1933 Act, as indicated by the responses to the
questions contained in Section 6 hereof.
1.11 The Subscriber hereby represents that he has been
afforded the opportunity to ask questions of and obtain additional
information concerning the terms and conditions of the offering of the
Shares or to verify the information contained in the Confidential
Private Placement Memorandum dated December 21, 1994, as supplemented
from time to time, and the appendices thereto (collectively, the
"Offering Documents") or otherwise relative to the Trust, to the
extent that the officers and representatives of the Trust possess such
information or can acquire it without unreasonable effort or expense.
All such questions if asked have been answered satisfactorily and all
such information provided has been found to be fully satisfactory.
1.12 The Subscriber hereby represents that the Subscriber
has received, reviewed carefully and understands fully the Offering
Documents. The Subscriber has evaluated the risks of investing in the
Shares, and has determined that the Shares are a suitable investment
for the Subscriber. The Subscriber can bear the economic risk of this
investment and can afford a complete loss of his investment. In
evaluating the suitability of an investment in the Shares, the
Subscriber has not relied upon any representations or other
information (whether oral or written) other than as set forth in the
Offering Documents, and independent investigations made by the
Subscriber or representative(s) of the Subscriber or the investors in
the Subscriber.
1.13 The Subscriber hereby acknowledges that the offering of
the Shares has not been reviewed, endorsed or recommended by the
United States Securities and Exchange Commission (the "Commission") or
any state or foreign regulatory authority and that no federal, state
or foreign authority has made any finding or determination as to the
fairness of the offering of the Shares.
1.14 The Subscriber understands that there is no market for
the Shares and that no market is expected to develop for the Shares.
The Subscriber hereby agrees that it will not dispose of an interest
in this Agreement or any of the Shares purchased pursuant hereto
(including by way of sale, transfer, assignment, pledge, hypothecation
or any other means) other than in accordance with the provisions set
forth in the Declaration (which provisions are summarized in the
Memorandum).
1.15 Any information which the Subscriber has furnished to
the Trust in Section 6 or on the signature page hereof, is correct and
complete as of the date of this Agreement and if there should be any
material change prior to the Initial Closing in such information or in
any representation or warranty made by the Subscriber herein, the
Subscriber will immediately furnish such revised or corrected
information to the Trust.
1.16 The Subscriber hereby represents that the address or
the addresses of the Subscriber furnished by him on the signature page
hereof is the undersigned's principal residence if he is a natural
person or its principal business address or addresses if it is a
corporation or other entity.
1.17 The representations, warranties, agreements,
undertakings and acknowledgements made by the Subscriber in this
Agreement (the "Covered Items") are made with the intent that they be
relied upon by the Trust in determining the Subscriber's suitability
as a purchaser of the Shares, and shall survive any such purchase.
The Subscriber recognizes that the offer of the Shares to him was made
in reliance upon his representations and warranties and the
acknowledgments and agreements set forth herein, and hereby agrees to
indemnify, to the extent of the Subscriber's undrawn Capital
Commitment and the Subscriber's interest in the Trust (which shall be
the maximum indemnification liability of the Subscriber for all
purposes hereof), the Trust, the Advisor and each of their respective
Affiliates (as defined in the Declaration), and to hold each of them
harmless against, all liabilities, costs or expenses (including
reasonable attorneys' fees) arising as a result of the sale or
distribution of the Shares by the Subscriber in violation of the
registration requirements of the 1933 Act (or other applicable law) or
any material misrepresentation or material breach by the Subscriber of
the Covered Items.
2. Representations by, and Covenants of, the Advisor and the Trust
2.1 As of the Initial Closing, the Advisor, and as of each
subsequent closing date, the date of notice of each call and the date
of each sale of Shares by the Trust (each, a "Subsequent Date"), the
Advisor (but only to the best of its knowledge insofar as the Trust is
concerned) and the Trust (but solely as to the Trust and the Funds
other than the Subscriber and not as to the Advisor) represent,
warrant and, where applicable, covenant that (A) the Trust has been
duly organized, and is subsisting and in good standing, as a business
trust under the laws of the State of Delaware and has the requisite
power and authority to conduct its business as described in the
Offering Documents and the Declaration and (B) each of the
Declaration, the Declaration of Trust of each of the Funds, the
Investment Advisory Agreement (the "Advisory Agreement") in effect
between the Trust and the Advisor, this Agreement, the other
subscription agreements with respect to the Trust and each Fund and
any other documents executed and delivered by the Trust, the Funds,
their respective Trustees or the Advisor in connection therewith or
herewith have been duly authorized, executed and delivered by such
persons, and are the legal, valid and binding obligations of such
persons enforceable in accordance with their respective terms, except
(i) that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights and (ii) that the remedy of
specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
2.2 As of the Initial Closing and as of each Subsequent
Date, the Advisor represents, warrants and, where applicable,
covenants that it has been duly organized, and is subsisting and in
good standing, under the laws of the state of its organization and has
the requisite power and authority to enter into and perform its
obligations under the Advisory Agreement.
2.3 As of the Initial Closing, the Advisor, and as of each
Subsequent Date, the Advisor and the Trust represent, warrant and,
where applicable, covenant that the Shares have been duly and validly
authorized and, when delivered and paid for in accordance with this
Agreement, will be duly and validly issued units of beneficial
interest in the Trust and that the Subscriber shall be entitled to all
the benefits of a beneficial owner of the Trust under the Declaration
and the Delaware Act (as defined in the Declaration).
2.4 As of the Initial Closing, the Advisor represents and
warrants that the Trust is duly qualified to do business and is in
good standing in the State of New York and is not required by virtue
of the conduct of its business to be qualified as a foreign
corporation in any other jurisdiction.
2.5 As of the Initial Closing, the Advisor, and as of each
Subsequent Date, the Advisor, to the extent within its control, and
the Trust represent, warrant and, where applicable, covenant that the
Trust will use the proceeds from the sale of the Shares solely to
invest in a manner consistent with the Offering Documents and to pay
the Trust's expenses.
2.6 As of the Initial Closing, the Advisor, and as of each
Subsequent Date, the Advisor, to the extent within its control, and
the Trust represent, warrant and, where applicable, covenant that
commencing on the Initial Funding Date, the Trust will (i) be an
investment company within the meaning of the Investment Company Act of
1940 (the "1940 Act") and be registered as such under the 1940 Act and
(ii) qualify for and be entitled to receive the special tax treatment
afforded a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended. Without limiting the
generality of the foregoing, to the extent within the control of the
Advisor, commencing on the Initial Funding Date, the Trust will have
outstanding securities (other than short-term paper) beneficially
owned by more than 100 persons as determined in accordance with
provisions of Section 3(c)(1) of the 1940 Act and the Trust will not
be a company described in Sections 3(c)(5) and/or 3(c)(6) of the 1940
Act.
2.7 As of the Initial Closing, the Advisor, and as of each
Subsequent Date, the Advisor (to the best of its knowledge insofar as
the Trust and any Fund is concerned) and the Trust (but solely as to
the Trust and the Funds other than the Subscriber and not as to the
Advisor), to the best of its knowledge, represent, warrant and, where
applicable, covenant that neither the Trust, any Fund, nor the Advisor
is in default (nor has any event occurred which with notice, lapse of
time, or both, would constitute a default) in the performance of any
obligation, agreement or condition contained in the Declaration or the
Declaration of Trust of each respective Fund, or in any indenture,
mortgage, deed of trust, credit agreement, note or other evidence of
indebtedness or any lease or other agreement or understanding, or any
license, permit, franchise or certificate, to which any such person is
a party or by which any thereof is bound or to which the properties of
any thereof are subject, nor is any such person in violation of any
statute, regulation, law, order, writ, injunction, judgment or decree
to which it is subject, which default or violation would materially
adversely affect the business or financial condition of such person or
impair such person's ability to carry out its obligations under this
Agreement, any subscription agreement with respect to any Fund, the
Declaration or the Declaration of Trust of each respective Fund, as
the case may be, or impair the Advisor's ability to carry out its
obligations under the Advisory Agreement.
2.8 As of the Initial Closing, the Advisor, and as of each
Subsequent Date, the Advisor, and the Trust (but solely as to the
Trust and the Funds other than the Subscriber and not as to the
Advisor), represent, warrant and, where applicable, covenant that
there is no litigation, investigation, or other proceeding pending or,
to the best of its or their knowledge, threatened against the Trust,
each Fund, the Advisor or any of their respective Affiliates
(excluding from such term solely for this purpose any investor in the
Trust or in any Fund other than the Advisor or its Affiliates) which,
if adversely determined, would materially adversely affect the
business or financial condition of the Trust, each Fund or the Advisor
or the ability of such person to carry out its obligations under this
Agreement, any subscription agreement with respect to each Fund, the
Declaration or the Declaration of Trust of each Fund, as the case may
be, or impair the Advisor's ability to carry out its obligations under
the Advisory Agreement.
2.9 As of the Initial Closing, the Advisor, and as of each
Subsequent Date, the Advisor, to the best its knowledge, and the
Trust, to the best of its knowledge, represent, warrant and, where
applicable, covenant that neither the Trust nor any person acting on
its behalf has taken any actions that would subject the issuance and
sale of the Shares to the registration and prospectus delivery
provisions of the 1933 Act.
2.10 As of the Initial Closing, the Advisor, and as of each
Subsequent Date occuring on or prior to March 31, 1995, the Advisor,
and the Trust represent, warrant and, where applicable, covenant that
the Offering Documents do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements contained therein not misleading in light of the
circumstances under which they are or were made.
2.11 As of the Initial Closing and as of each Subsequent
Date, the Advisor represents, warrants and, where applicable,
covenants that the Subscriber has been provided true, complete and
correct copies or forms of all letters, agreements, undertakings and
other documents by and among the Trust or the Advisor or an Affiliate
thereof relative to any such person's purchase of shares of the Trust
or any terms, conditions, operations, obligations or other
understandings affecting such Trust.
2.12 As of the Initial Closing and as of each Subsequent
Date, the Advisor represents, warrants and, where applicable,
covenants that the Advisor will reimburse the Trust, BlackRock Capital
Finance, and the Funds for, or cause to be paid on behalf of the
Trust, BlackRock Capital Finance and the Funds, each such entity's
allocable share of the aggregate offering and organizational expenses
of the Trust, BlackRock Capital Finance and the Funds in excess of
$750,000.
2.13 The Advisor and/or the Trust, as the case may be,
acknowledges that the representations, warranties and covenants made
by the Advisor and/or the Trust, as the case may be, are made with the
intent that they be relied upon by the Subscriber in committing to
purchase and in purchasing Shares and shall survive any such purchase
and that the commitment to purchase, and each purchase of, Shares by
the Subscriber was and will be made in reliance upon the
representations, warranties and covenants set forth herein. To the
extent such representations, warranties and covenants are made by the
Advisor and the Trust, they are made jointly and severally: provided,
however, that if the Subscriber brings action against only the Trust
or only the Advisor, the defending party may implead or seek
contribution from the other and the other will, in addition to any
liability or contribution imposed, be liable to the defending party
for the incremental costs incurred by the defending party in
connection with such impleader or contribution proceeding if (a) the
other is found to be responsible for 25% or more of the aggregate
recovery, (b) the other is found to be responsible for $1,250,000 or
more or (c) the defending party is found to be not responsible for any
amount and the other is found to be responsible for some amount. The
Advisor hereby agrees to indemnify, to the extent of the dollar amount
of the Subscriber's Capital Commitment (which shall be the maximum
indemnification liability of the Advisor for all purposes hereof), the
Subscriber and any Affiliates, and to hold each of them harmless
against liabilities, costs or expenses (including reasonable
attorneys' fees) arising as a result of the sale or distribution of
the Shares by the Trust or the Advisor (or any Affiliate of the
Advisor) in violation of the registration requirements of the 1933 Act
(or other applicable law) or any material misrepresentation or
material breach by the Advisor of its representations, warranties and
covenants made herein.
3. Closing Conditions
3.1 The Subscriber's obligations hereunder are subject to
the fulfillment (or waiver by the Subscriber), prior to or at the time
of the Initial Closing, of the following conditions:
(a) The representations and warranties set forth
herein on the part of the Advisor shall be true and correct as if made
on and as of the time of the Initial Closing.
(b) The Initial Closing shall have occurred not later
than March 31, 1995; the Total Trust Commitments at the time of the
Initial Closing shall be at least $200 million and the Total Trust
Commitments shall include a capital commitment on the part of the
Advisor (either directly or through one or more affiliates) to one or
more of the Subscriber and the Funds in an aggregate amount equal to
the lesser of 5% of the Total Trust Commitments and $27 million.
(c) The certificate of trust with respect to the Trust
shall have been duly filed in the Office of the Secretary of State of
the State of Delaware.
(d) The Advisor shall have executed and delivered to
the Subscriber a certificate satisfactory in form and substance to the
Subscriber certifying the fulfillment of the conditions specified in
clauses (a) through (c) above.
(e) The Subscriber shall have received opinions dated
the date of the Initial Closing from Skadden, Arps, Slate, Meagher &
Flom in substantially the form attached hereto as Schedule 1.
3.2 If at the Initial Closing the Advisor fails to tender
to the Subscriber the documents specified herein which are required to
be delivered to the Subscriber at the Initial Closing or if any of the
conditions specified in Section 3.1 above shall not have been
fulfilled, the Subscriber shall, at its election, be relieved of all
further obligations under this Agreement.
4. Miscellaneous
4.1 Any notice or other communication given hereunder shall
be deemed sufficient if in writing and sent by facsimile with written
confirmation of receipt and a copy of the notice sent by overnight
courier or if delivered by hand against written receipt therefor,
addressed to BlackRock Asset Investors, c/o BFM Advisory L.P., 345
Park Avenue, New York, New York 10154, Attention: Ralph L.
Schlosstein, President (Fax: 212-754-8760), BlackRock Financial
Management L.P., 345 Park Avenue, New York, New York 10154, Attention:
Ralph L. Schlosstein, President, (Fax: 212-754-8760) or to the
Subscriber at his address or facsimile number indicated on the
signature page of this Agreement, or in either case such other person
or address as shall have been given by notice to the other party.
Notices shall be deemed to have been given on the date sent or
delivered by hand in accordance with the provisions set forth in this
Section 4.1.
4.2 This Agreement shall not be changed, modified or
amended except by a writing signed by the parties hereto and approved
by those persons owning or committed to purchase shares issued or to
be issued by the Subscribers, and this Agreement may not be discharged
except by performance in accordance with its terms or by a writing
signed by such parties and approved by such persons.
4.3 This Agreement shall be binding upon and inure to the
benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Agreement and any other
agreements referred to herein sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and
merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them with respect to such
subject matter. This Agreement may not be assigned without the prior
written consent of each party hereto or the successor to substantially
all of the business of any such person.
4.4 Upon the execution and delivery of this Agreement by
the Subscriber, this Agreement shall become a binding obligation of
the Subscriber with respect to the purchase of Shares as herein
provided and shall survive the insolvency, merger, consolidation,
share exchange, sale of assets and the death or disability of the
Subscriber; provided, however, if within 14 days of the Trust's
acknowledged receipt of the Subscription Agreement, the Subscription
Agreement is not accepted by the Trust and the Advisor and an accepted
copy is not delivered to the Subscriber, the Subscription Agreement
shall be of no further force and effect unless the Subscriber agrees
in writing to an extension of such 14 day period.
4.5 Notwithstanding the place where this Agreement may be
executed by any of the parties hereto, the parties expressly agree
that all the terms and provisions hereof shall be construed in
accordance with and governed by the laws of the State of New York,
without regard to principles of conflicts of law.
4.6 The holding of any provision of this Agreement to be
invalid or unenforceable by a court of competent jurisdiction shall
not affect any other provision of this Agreement, which shall remain
in full force and effect.
4.7 It is agreed that a waiver by either party of a breach
of any provision of this Agreement shall not operate, or be construed,
as a waiver of any subsequent breach by that same party.
4.7 This Agreement may be executed in one or more
counterparts each of which shall be deemed an original, but all of
which shall together constitute one and the same instrument.
5. Notice to Certain State Residents
5.1 In making an investment decision investors must rely on
their own examination of the issuer and the terms of the offering,
including the merits and risks involved. These securities have not
been recommended by any federal or state securities commission or
regulatory authority in any jurisdiction. Furthermore the foregoing
authorities have not confirmed the accuracy or determined the adequacy
of this document. Any representation to the contrary is a criminal
offense.
5.2 These securities are subject to restrictions on
transferability and resale and may not be transferred or resold except
as permitted under the 1933 Act, as amended, and the applicable state
securities laws, pursuant to registration or exemption therefrom.
Investors should be aware that they will be required to bear the
financial risks of this investment.
5.3 The Attorney General of the State of New York has not
passed on or endorsed the merits of this offering. Any representation
to the contrary is unlawful.
5.4 Florida Residents: Where sales are made to five or
more persons in Florida (excluding certain institutional purchasers
described in section 517.061(7) of the Florida Securities and Investor
Protection Act) (the "Act"), any such sale made pursuant to section
517.061(11) of the Act shall be voidable by the purchaser either
within three days after the first tender of consideration is made by
such purchaser to the issuer, or an agent of the issuer, or an escrow
agent or within three days after the availability of that privilege is
communicated to such purchaser, whichever occurs later.
5.5 New Hampshire Residents: Neither the fact that a
registration statement or an application for license has been filed
under Chapter 421-B with the State of New Hampshire nor the fact that
a security is effectively registered or a person is licensed in the
State of New Hampshire constitutes a finding by the Secretary of State
that any document filed under RSA 421-B is true, complete and not
misleading. Neither any such fact nor the fact that an exemption or
exception is available for a security or a transaction means that the
Secretary of State has passed in any way upon the merits or
qualification of, or recommended or given approval to, any person,
security or transaction. It is unlawful to make, or cause to be made,
to any prospective purchaser, customer or client any representation
inconsistent with the provisions of this paragraph.
5.6 Pennsylvania Residents: If a purchaser is a resident
of the Commonwealth of Pennsylvania, he acknowledges and agrees that
(a) the securities purchased by such purchaser cannot be sold for a
period of twelve (12) months from the date of purchase, except as
permitted under section 204.011 of the Pennsylvania Securities
Regulations, and (b) pursuant to section 207(M) of the Pennsylvania
Securities Act, each Pennsylvania resident who accepts an offer to
purchase securities exempted from registration under section 203(D) of
the Pennsylvania Securities Act directly from an issuer or an
affiliate of an issuer has the right to withdraw his acceptance
without incurring any liability to the seller, underwriter, if any, or
any other person within two (2) business days from the date of receipt
by the issuer of his written binding contract of purchase or, in the
case of a transaction in which there is no written binding contract of
purchase, within two (2) business days after he makes the initial
payment for the securities being offered.
6. CONFIDENTIAL INVESTOR QUESTIONNAIRE
The Subscriber represents and warrants that the purchaser of
the Shares comes within each category marked below, and that for any
category marked, he or she has truthfully set forth the factual basis
or reason the Subscriber comes within that category. ALL INFORMATION
IN RESPONSE TO THIS PARAGRAPH WILL BE KEPT STRICTLY CONFIDENTIAL. The
undersigned agrees to furnish such additional information as is
reasonably necessary in order for the Trust or the Advisor to verify
the answers set forth below.
Please mark each applicable box
( ) a. The undersigned is an individual (not a
partnership, corporation, etc.) whose individual
net worth, or joint net worth with his or her
spouse, presently exceeds $ 1,000,000.
Explanation. In calculating net worth you may
include equity in personal property and real
estate, including your principal residence, cash,
short-term investments, stock and securities.
Equity in personal property and real estate should
be based on the appraised fair market value of such
property less debt secured by such property.
( ) b. The undersigned is an individual (not a partnership,
corporation, etc.) who had an income in excess of
$200,000 in each of the two most recent years, or joint
income with their spouse in excess of $300,000 in each of
those years (in each case including foreign income, tax
exempt income and full amount of capital gains and losses
but excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable
expectation of reaching the same income level in the
current year.
( ) c. The undersigned is a director or executive officer of the
Trust which is issuing and selling the Shares.
( ) d. The undersigned is a bank; a savings and loan
association, insurance company, registered investment
company; registered business development company;
licensed small business investment company ("SBIC"); a
plan established and maintained by a state, its political
subdivisions, on any agency on instrumentality of a state
or its political subdivisions, for the benefit of its
employees, if such plan has total assets in excess of
$5,000,000; or an employee benefit plan within the
meaning of Title 1 of ERISA and (a) the investment
decision is made by a plan fiduciary which is either a
bank, savings and loan association, insurance company or
registered investment advisor, or (b) the plan has total
assets in excess of $5,000,000 or is a self directed plan
with investment decisions made solely by persons that are
accredited investors.
(describe entity)
( ) e. The undersigned is a private business development company
as defined in section 202(a)(22) of the Investment
Advisors Act of 1940;
(describe entity)
( ) f. The undersigned is a corporation, partnership,
Massachusetts or other business trust, or a non-profit
organization within the meaning of Section 501 (c)(3) of
the Internal Revenue Code, in each case not formed for
the specific purpose of acquiring the Shares and with
total assets in excess of $5,000,000;
(describe entity)
( ) g. The undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of
acquiring the Shares, where the purchase is directed by a
"sophisticated person" as defined in Regulation
506(b)(2)(ii). Such "sophisticated person" has the
knowledge and experience in financial and business
matters to capably evaluate the merits and risks of the
prospective investment.
( ) h. The undersigned is an entity all the equity owners of
which are "accredited investors" within one or more of
the above categories.
(describe entity)
( ) i. The undersigned is not within any of the categories above
and is therefore a nonaccredited investor.
( ) j. The undersigned is (i) an individual or company whose
subscription is for at least $500,000 or (ii) an
individual or company whose net worth at the time of
entering into such person's or company's subscription
agreement is at least $1,000,000. For this purpose, the
term "company" generally means a corporation,
partnership, association, joint-stock company, trust, or
any organized group of persons (which may include a
contractual arrangement), whether incorporated or not, or
any receiver, trustee in bankruptcy or liquidating agent
for any of the foregoing. However, the term "company"
does not include a registered investment company, a
business development company as defined in Section
202(a)(22) of the Investment Advisors Act of 1940 (which
would include a registered business development company)
or any "company" which would be required to register as
an investment company except by virtue of the operation
of Section 3(c)(1) of the Investment Company Act of 1940
unless each of such company's equity holders satisfies
the requirements of clause (i) or (ii) above (taking into
account the definition of company used in such clauses).
THE UNDERSIGNED IS INFORMED OF THE SIGNIFICANCE OF THE FOREGOING
REPRESENTATIONS, AND THEY ARE MADE WITH THE INTENTION THAT THE TRUST
WILL RELY ON THEM.
7. Manner in Which Title to be Held (check one)
a. ( ) Individual Ownership
b. ( ) Community Property
c. ( ) Joint Tenant with Right of Survivorship (both parties must sign)
d. ( ) Partnership*
e. ( ) Tenants in Common
f. ( ) Corporation*
g. ( ) Trust*
h. ( ) Other
* If Shares are being subscribed for by an entity other than an
individual, please complete Exhibit A, B or C, as applicable, which
are attached.
Capital Commitment (please fill in (a) and (b) below): The
minimum Capital Commitment is the lesser of (x) $5 million
or (y) 0.83% of the Trust's maximum amount of Capital
Commitments ($600 million).
(a) $ million
(b) % of the aggregate
Capital Commitments of the Trust, subject
to a maximum of $ million
BlackRock Fund Investors I
Name(s) Exactly as to Appear on
Stock Register
By:
Name: Wesley R. Edens
Title: Chief Operating Officer
BlackRock Fund Investors I
Name Typed or Printed
345 Park Avenue
Business Address
New York, New York
10154
City, State and Zip Code
(212) 754-5560
Telephone
(212) 935-1370
Facsimile Number
applied for
Tax Identification Number
Dated: , 199
This Subscription Agreement is agreed to and
accepted as of _______ __, 1995
BlackRock Asset Investors I
By:
Name: Wesley R. Edens
Title: Chief Operating Officer
BlackRock Financial Management L.P.
By:
Name: Ralph L. Schlosstein
Title: President
Capital Commitment (please fill in (a) and (b) below): The
minimum Capital Commitment is the lesser of (x) $50 million
or (y) 8.33% of the Trust's maximum amount of Capital
Commitments ($600 million).
(a) $ million
(b) % of the aggregate
Capital Commitments of the Trust, subject
to a maximum of $ million
BlackRock Fund Investors II
Name(s) Exactly as to Appear on
Stock Register
By:
Name: Wesley R. Edens
Title: Chief Operating Officer
BlackRock Fund Investors II
Name Typed or Printed
345 Park Avenue
Business Address
New York, New York
10154
City, State and Zip Code
(212) 754-5560
Telephone
(212) 935-1370
Facsimile Number
applied for
Tax Identification Number
Dated: , 199
This Subscription Agreement is agreed to and
accepted as of _______ __, 1995
BlackRock Asset Investors II
By:
Name: Wesley R. Edens
Title: Chief Operating Officer
BlackRock Financial Management L.P.
By:
Name: Ralph L. Schlosstein
Title: President
EXHIBIT A
CERTIFICATE OF TRUST INVESTOR
CERTIFICATE OF BlackRock Fund Investors (the "Fund")
(Name of Trust or Custodial Relationship)
The undersigned, an officer of the Fund, hereby certifies as
follows:
1. That the Fund was established pursuant to a Declaration of
Trust dated ________ __, 1995 (the "Agreement").
2. That as of the date hereof, the Agreement has not been
revoked and is still in full force and effect.
3. That Laurence D. Fink, Ralph L. Schlosstein, Wesley R.
Edens, Henry Gabbay and Susan L. Wagner is each authorized to execute,
on behalf of the Fund, any and all documents in connection with the
Fund's investment in the Trust.
IN WITNESS WHEREOF, I have executed this certificate as an
officer of the Fund authorized to execute this certificate this __ day
of , 199 , and declared that it is truthful and correct.
BlackRock Fund
Investors
(Name of Trust or
Custodial Relationship)
By:
Name: Wesley R. Edens
Title: Chief Operating
Officer
