rank equally with any other series of preferred stock that we may issue in the future as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of our affairs. Preferred shares have preference over the common stock with respect to the payment of dividends and as to the distribution of assets upon dissolution, liquidation or winding up of our affairs. Preferred shares will be subordinated in right of payment to any of our existing and future indebtedness, as to the distribution of assets upon dissolution, liquidation or winding up of our affairs. The terms applicable to preferred stock, except as may be modified by any Appendix to the Articles of Incorporation with respect to a particular series of preferred stock, are set forth below.
Dividends and Dividend Periods
. The following is a general description of dividends and dividend periods for our preferred stock. The holders of preferred stock of any series will be entitled to receive, when, as and if declared by, or under authority granted by, the Board, out of funds legally available for the payment thereof and in preference to dividends and other distributions on common stock, cumulative cash dividends and other distributions on each share at the applicable Dividend Rate applicable to such series of preferred stock in effect during each applicable Dividend Period (as defined below) applicable to such series applied to the liquidation preference applicable to such series. Dividends and other distributions on preferred stock of any series will accumulate from the date of original issue.
Dividend Rate, Payment of Dividends and Dividend Periods.
With respect to preferred stock of any series, the “Dividend Rate,” “Dividend Period” and “Dividend Payment Date” for such series shall be as set forth in the applicable Appendix to the Articles of Incorporation. The Dividend Rate for the preferred stock of such series may also be adjusted periodically upon the occurrence of certain events resulting in a “Default.” See “—Default Rate.”
. With respect to each series to preferred stock, except as modified in the applicable Appendix to the Articles of Incorporation in respect of such series of preferred stock, the “Default Rate” for any calendar day on which a Default (as defined below) with respect to the sum of such series is in effect will be equal to the Dividend Rate applicable to preferred stock of such series in effect on such day plus five percent (5%) per annum. The applicable Dividend Rate for preferred stock of such series will be adjusted to the Default Rate for any date on which (and for any succeeding period during which) we fail to deposit with the applicable redemption and paying agent by 12:00 noon, New York City time, on the (i) Dividend Payment Date applicable to preferred stock of such series, Deposit Securities (as defined below) that will provide funds available to the applicable redemption and paying agent on such Dividend Payment Date sufficient to pay the full amount of any dividend on such series, payable on such Dividend Payment Date (a “Dividend Default”) or (ii) the Redemption Date applicable to such series, Deposit Securities that will provide funds available to the applicable redemption and paying agent on such Redemption Date sufficient to pay the full amount of the redemption price applicable to such series payable on such Redemption Date (a “Redemption Default” and, together with a Dividend Default, referred to as a “Default”). A Dividend Default or a Redemption Default will end on the business day on which, by 12:00 noon, New York City time, an amount equal to all unpaid dividends and any unpaid redemption price, as applicable, has been deposited irrevocably in trust in
same-day
funds with the applicable redemption and paying agent.
Reporting of Default Rate.
With respect to each series of preferred stock, except as modified in the applicable Appendix to the Articles of Incorporation in the event that a Default Rate is in effect for such series, we will, or will request the applicable redemption and paying agent, on our behalf, as soon as practicable (but in no event later than five (5) business days following the first day that such applicable Default Rate is in effect), notify the holders of record of preferred stock of such series on the first day that such Default Rate was in effect by overnight delivery, by first class mail, postage prepaid or by electronic means, in each case reasonably designed to reach all holders of record of the effectiveness of the applicable Default Rate and the date(s) on which such Default Rate was effective. In addition, following the end of a Default triggering such Default Rate, we will, or will request the applicable redemption and paying Agent, on our behalf, as soon as practicable (but in no event
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later than five business days following the last day that such Default Rate is in effect), notify the holders of record of the preferred stock of such series, on the first day that such Default Rate ceased to be in effect by overnight delivery, by first class mail, postage prepaid, or by electronic means reasonably designed to reach all holders of record of the date on which such Default Rate ceased to be effective.
Mechanics of Payment of Dividends
. With respect to each series of preferred stock, except as set forth in the applicable Appendix to the Articles of Incorporation, not later than 12:00 noon, New York City time, on any Dividend Payment Date applicable to preferred stock of such series, we will deposit with the applicable redemption and paying agent sufficient funds for the payment of dividends applicable to such series in the form of Deposit Securities. “Deposit Securities” will generally consist of (i) cash or cash equivalents; (ii) direct obligations of the United States or its agencies or instrumentalities that are entitled to the full faith and credit of the United States (“U.S. Government Obligations”); (iii) investments in money market funds registered under the 1940 Act that qualify under Rule
2a-7
under the 1940 Act and certain similar investment vehicles that invest principally in U.S. Government Obligations; or (iv) any letter of credit from a bank or other financial institution that has a credit rating from at least one NRSRO that is the highest applicable rating generally ascribed by such NRSRO to bank deposits or short-term debt of banks or such other financial institutions as of the date of the Supplement in each case either that is a demand obligation payable to the holder on any business day or that has a maturity date, mandatory redemption date or mandatory payment date preceding the relevant Redemption Date, Dividend Payment Date or other payment date applicable to preferred stock of such series.
With respect to each series of preferred stock, all Deposit Securities deposited with the applicable redemption and paying agent for the payment of dividends will be held in trust for the payment of such dividends to the holders of preferred stock of such series. With respect to each series of preferred stock, dividends will be paid by the applicable redemption and paying agent to the holders of preferred stock of such series as their names appear on our registration books on the record date for any applicable Dividend Period. Dividends that are in arrears for any past Dividend Period may be declared and paid at any time, without reference to any applicable regular Dividend Payment Date. Such payments will be made to holders of preferred stock of such Series as their names appear on our registration books on such date, not exceeding 15 calendar days preceding the payment date thereof, as may be fixed by the Board. Any payment of dividends in arrears will first be credited against the earliest accumulated but unpaid dividends. No interest or sum of money in lieu of interest will be payable in respect of any dividend payment or payments on preferred stock which may be in arrears. See “—Restrictions on Dividend, Redemption and Other Payments.”
Upon failure to pay dividends on preferred stock of any series for at least two years, the holders of preferred stock of any series and all other preferred stock we may issue in the future will acquire certain additional voting rights. See “—Voting Rights” below. Unless otherwise provided in the Articles of Incorporation, including the Supplement and any Appendix to the Articles of Incorporation, such rights will be the exclusive remedy of the holders of preferred stock upon any failure to pay dividends on any series of preferred stock.
Restrictions on Dividend, Redemption and Other Payments
No full dividends and other distributions will be declared or paid on preferred stock of any series for any applicable Dividend Period, or a part thereof, unless the full cumulative dividends and other distributions due through the most recent dividend payment dates for all our outstanding preferred stock have been, or contemporaneously are, declared and paid through the most recent dividend payment dates for each outstanding series of preferred stock. If full cumulative dividends and other distributions due have not been paid on all outstanding preferred stock of any series, any dividends and other distributions being declared and paid on preferred stock of any series will be declared and paid as nearly pro rata as possible in proportion to the respective amounts of dividends and other distributions accumulated but unpaid on the shares of each such series of preferred stock. No holders of preferred stock will be entitled to any dividends and other distributions in excess of full cumulative dividends and other distributions as provided in the Articles of Incorporation, including the Supplement or any Appendix to the Articles of Incorporation.
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For so long as any preferred stock are outstanding, we will not: (x) declare or pay any dividend or other distribution (other than a dividend or distribution paid in common stock) in respect of the common stock, (y) call for redemption, redeem, purchase or otherwise acquire for consideration any common stock, or (z) pay any proceeds of our liquidation in respect of the common stock, unless, in each case, (A) immediately thereafter, we will be in compliance with the 200% asset coverage limitations set forth under the 1940 Act after deducting the amount of such dividend or other distribution or redemption or purchase price or liquidation proceeds (as such asset coverage requirement may be modified in the Supplement or any Appendix to the Articles of Incorporation in respect of a particular series of preferred stock), (B) all cumulative dividends and other distributions of shares of all series of our preferred stock ranking on a parity with preferred stock due on or prior to the date of the applicable dividend, distribution, redemption, purchase or acquisition have been declared and paid (or have been declared and sufficient funds or Deposit Securities as permitted by the terms of preferred stock of any series for the payment thereof have been deposited irrevocably with the applicable paying agent), and (C) we have deposited Deposit Securities with the applicable redemption and paying agent in accordance with the requirements described in the Articles of Incorporation, including the Supplement or any Appendix to the Articles of Incorporation, with respect to outstanding preferred stock of any series to be redeemed pursuant to a redemption or Corrective Action resulting from the failure to comply with the Asset Coverage requirements described below for which a Notice of Redemption has been given or has been required to be given in accordance with the terms described in the Articles of Incorporation, including the Supplement or any Appendix to the Articles of Incorporation, on or prior to the date of the applicable dividend, distribution, redemption, purchase or acquisition.
Except as required by law, we will not redeem preferred stock of any series unless all accumulated and unpaid dividends and other distributions on all outstanding preferred stock of any series ranking on a parity with such preferred stock with respect to dividends and other distributions for all applicable past dividend periods (whether or not earned or declared by us) (x) have been or are contemporaneously paid or (y) have been or are contemporaneously declared and Deposit Securities or sufficient funds (in accordance with the terms of such series of preferred stock) for the payment of such dividends and other distributions have been or are contemporaneously deposited with the applicable redemption and paying agent or other paying agent. However, this limitation will not prevent the purchase or acquisition of outstanding preferred stock pursuant to an otherwise lawful purchase or exchange offer made on the same terms to holders of all outstanding preferred stock and any other series of preferred stock for which all accumulated and unpaid dividends and other distributions have not been paid.
Notwithstanding the 1940 Act’s requirements, as described below, each series of preferred stock must maintain an Asset Coverage (as defined for purposes of each series of preferred stock) of at least 225% instead of 200% (except as may be modified by any Appendix to the Articles of Incorporation). Under the 1940 Act, we may not (1) declare any dividend with respect to any preferred stock (except a dividend payable in our stock) if, at the time of such declaration (and after giving effect thereto), our asset coverage with respect to any of our borrowings that are senior securities representing indebtedness (as determined in accordance with Section 18(h) under the 1940 Act), would be less than 200% or (2) declare any other distribution on the preferred stock or purchase or redeem preferred stock if at the time of the declaration or redemption (and after giving effect thereto), asset coverage with respect to such borrowings that are senior securities representing indebtedness would be less than 300%. “Senior securities representing indebtedness” generally means any bond, debenture, note or similar obligation or instrument constituting a security (other than shares of capital stock) and evidencing indebtedness and could include our obligations under any borrowings. For purposes of determining our asset coverage for senior securities representing indebtedness in connection with the payment of dividends or other distributions on or purchases or redemptions of stock, the term senior security does not include any promissory note or other evidence of indebtedness issued in consideration of any loan, extension or renewal thereof, made by a bank or other person and privately arranged, and not intended to be publicly distributed. The term senior security also does not include any such promissory note or other evidence of indebtedness in any case where such a loan is for temporary purposes only and in an amount not exceeding 5% of the value of our total assets at the time when the loan is made; a loan is presumed under the 1940 Act to be for temporary purposes if it is repaid within 60 calendar days and is not extended or renewed; otherwise such loan is presumed not to be for temporary purposes.
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If we fail to maintain Asset Coverage (as defined below) of at least 225% (except as may be modified by any Appendix to the Articles of Incorporation) as of the close of business on any business day, and such failure is not cured as of the close of business on the Asset Coverage Cure Date, we will, to the extent permitted by the 1940 Act and Delaware law, and pursuant to the terms and conditions of any financing arrangement in effect at such time, be required to take Corrective Action as provided below. “Asset Coverage” means asset coverage in respect of the issuance of a class of senior security which is a stock, as defined for purposes of Section 18(h) of the 1940 Act, determined on the basis of values calculated as of a time within 48 hours (only including business days) next preceding the time of such determination. For purposes of this determination, no preferred stock of any series will be deemed to be outstanding for purposes of the computation of Asset Coverage if, prior to or concurrently with such determination, sufficient Deposit Securities or other sufficient funds (in accordance with the terms of such preferred stock) to pay the full redemption price for such preferred stock (or the portion thereof to be redeemed) have been irrevocably deposited in trust with the paying agent for such preferred stock and the requisite notice of redemption for such preferred stock (or the portion thereof to be redeemed) has been given. In such event, the Deposit Securities or other sufficient funds so deposited will not be included as our assets for purposes of the computation of Asset Coverage. In addition, the calculation of Asset Coverage for purposes of determining compliance with the 225% requirement (except as may be modified by any Appendix to the Articles of Incorporation), as applicable, of each series of preferred stock excludes (a) the portion of the aggregate value of our investment in all issuers in a consolidated group of corporations or other entities exceeding the Concentration Limit at the time of purchase of any such investment and (b) the portion of the aggregate value of our investment in Equity Securities exceeding the Equity Restriction at the time of purchase of any Equity Securities.
We monitor our Asset Coverage daily. If at any time when preferred stock of any series are outstanding we fail to comply with the Asset Coverage requirements under the 1940 Act, we will seek to regain compliance as soon as possible, subject to a determination by the Board.
. With respect to each series of preferred stock, we are required to redeem all applicable preferred stock in accordance with the terms and procedures set forth in the Articles of Incorporation, including the Supplement or any Appendix to the Articles of Incorporation, on the “Term Redemption Date” applicable to such series at the applicable “Term Redemption Price” (in each case, as defined in the Articles of Incorporation) for such series out of funds legally available for such payment and to the extent permitted by any financing arrangement in effect on such date.
With respect to preferred stock of any series, we may redeem out of funds legally available therefor and to the extent permitted by an financing arrangement in effect on such date, in whole or, from time to time, in part, outstanding preferred stock of such series at a redemption price, including certain premiums, if applicable, on the other terms and conditions set forth in the Supplement or any Appendix to the Articles of Incorporation in respect of a particular class of preferred stock.
In the event of any liquidation, dissolution or winding up of our affairs, whether voluntary or involuntary, the holders of preferred stock of any series will be entitled to receive out of our assets available for distribution to stockholders, after satisfying claims of creditors but before any distribution or payment will be made in respect of the common stock, a liquidation distribution per share equal to the liquidation preference for such preferred share plus an amount equal to all unpaid dividends and other distributions accumulated on such preferred share to (but excluding) the date fixed for such distribution or payment (whether or not earned or declared by us, but without interest thereon), and such holders will be entitled to no further participation in any distribution or payment in connection with any such liquidation, dissolution or winding up.
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If, upon any liquidation, dissolution or winding up of our affairs, whether voluntary or involuntary, our assets available for distribution among the holders of all outstanding preferred stock will be insufficient to permit the payment in full to such holders of any series of preferred stock of the liquidation preference applicable to such series plus accumulated and unpaid dividends and other distributions and the amounts due upon liquidation, dissolution or winding up of our affairs with respect to any other outstanding preferred stock, then the available assets will be distributed among the holders of such preferred stock and such other series of our preferred stock ratably in proportion to the respective preferential liquidation amounts to which they are entitled. In connection with any liquidation, dissolution or winding up of our affairs, whether voluntary or involuntary, unless and until the liquidation preference on each outstanding preferred share plus accumulated and unpaid dividends and other distributions has been paid in full to the holders of such preferred stock, no dividends, distributions or other payments will be made by us on, and no redemption, purchase or other acquisition will be made by us in respect of, the common stock.
Neither the sale of all or substantially all of our property or business, nor our merger, consolidation or reorganization into or with any other business or statutory trust, corporation or other entity, nor the merger, consolidation or reorganization of any other business or statutory trust, corporation or other entity into or with us will be a dissolution, liquidation or winding up, whether voluntary or involuntary, for purposes of the provisions relating to dissolution, liquidation or winding up set forth in the Articles of Incorporation, including the Supplement or any Appendix to the Articles of Incorporation.
Except as otherwise provided in our Articles of Incorporation, including the Supplement and or any Appendix to the Articles of Incorporation, or as otherwise required by applicable law, each holder of preferred stock of any series will be entitled to one vote for each such share held by such holder on each matter submitted to a vote of our stockholders. The holders of our outstanding preferred stock will vote together with holders of common stock as a single class. In addition, the holders of our outstanding preferred stock will be entitled, as a class, to the exclusion of the holders of all other securities and classes of common stock, to elect two Directors at all times. The holders of outstanding common stock and preferred stock voting together as a single class, will elect the balance of the Directors.
Notwithstanding the foregoing, if (i) at the close of business on any dividend payment date for dividends on any outstanding preferred stock accumulated dividends (whether or not earned or declared) on our preferred stock equal to at least two full year’s dividends are due and unpaid and sufficient cash or specified securities have not been deposited with the applicable redemption and paying agent or other paying agent for the payment of such accumulated dividends; or (ii) at any time holders of our preferred stock are otherwise entitled under the 1940 Act to elect a majority of the Directors (a period when either of the foregoing conditions exists, a “Voting Period”), then the number of members constituting the Board will automatically be increased by the smallest number that, when added to the two Directors elected exclusively by the holders of our preferred stock as described above, would constitute a majority of the Board as so increased by such smallest number, and the holders of our preferred stock will be entitled as a class, on a
basis, to elect such additional Directors. The terms of office of the persons who are Directors at the time of that election will not be affected by the election of the additional Directors. If we thereafter pay, or declare and set apart for payment, in full all dividends payable on all outstanding shares of our preferred stock for all past dividend periods, or the Voting Period is otherwise terminated, (i) the voting rights stated above will cease, subject always, however, to the revesting of such voting rights in the holders of our preferred stock upon the further occurrence of any of the events described herein, and (ii) the terms of office of all of the additional Directors so elected will terminate automatically. Any of our outstanding preferred stock and any preferred stock issued after the date hereof will vote together as a single class on the matters described above, and the issuance of any other preferred stock may reduce the voting power of the holders of preferred stock. A Voting Period will terminate when all of the conditions described above cease to exist.
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As soon as practicable after the accrual of any right of the holders of our preferred stock to elect additional Directors as described above, we will call a special meeting of such holders and notify the applicable redemption and paying agent and/or such other person as is specified in the terms of such preferred stock to receive notice, (i) by mailing or delivery by electronic means or (ii) in such other manner and by such other means as are specified in the terms of such preferred stock, a notice of such special meeting to such holders, such meeting to be held not less than 10 nor more than 30 calendar days after the date of the delivery by electronic means or mailing of such notice. If we fail to call such a special meeting, it may be called at our expense by any such holder on like notice. The record date for determining the holders of our preferred stock entitled to notice of and to vote at such special meeting will be the close of business on the fifth business day preceding the calendar day on which such notice is mailed or otherwise delivered. At any such special meeting and at each meeting of holders of our preferred stock held during a Voting Period at which Directors are to be elected, such holders, voting together as a class (to the exclusion of the holders of all other securities and classes of our capital stock), will be entitled to elect the number of additional Directors prescribed above on a
basis.
Except as otherwise permitted by the terms of the Articles of Incorporation, including the Supplement or any Appendix to the Articles of Incorporation, so long as any preferred stock are outstanding, we will not, without the affirmative vote of the holders of at least a majority of preferred stock of all series outstanding at the time, voting together as a separate class, amend, alter or repeal the provisions of the Articles of Incorporation, including the Supplement or any Appendix to the Articles of Incorporation, whether by merger, consolidation or otherwise, so as to (i) alter or abolish any preferential right of such preferred share, or (ii) create, alter or abolish any right in respect of redemption of such preferred share. However, a division, stock split or reverse stock split of a preferred share will not, by itself, be deemed to have any of the effects set forth in clause (i) or (ii) above. No vote of the holders of common stock will be required to amend, alter or repeal the provisions of the Supplement, including any Appendix to the Articles of Incorporation.
Except as otherwise permitted by the terms of the Supplement, and subject to the paragraph below, so long as any preferred stock of any series are outstanding, with respect to any series, we will not, without the affirmative vote or consent of the holders of at least a majority of the preferred stock of such series outstanding at the time, voting as a separate class, amend, alter or repeal the provisions of the Supplement relating to the preferred stock of such series, whether by merger, consolidation or otherwise, so as to materially and adversely affect any preference, right or power set forth of the preferred stock of such series, or the holders thereof provided that a division, stock split or reverse stock split of a preferred share will not, by itself, be deemed to violate this provision. For purposes of this provision, no matter will be deemed to materially and adversely affect any preference, right or power of a preferred share of a series or the holder thereof unless such matter (i) alters or abolishes any preferential right of such series, or (ii) creates, alters or abolishes any right in respect of redemption of such series. For the avoidance of doubt, no vote of the holders of common stock will be required to amend, alter or repeal the provisions of the Supplement, including any Appendix to the Articles of Incorporation.
So long as any preferred stock of any series are outstanding, with respect to any series, we will not, without the unanimous vote or consent of the holders of the preferred stock of such series, outstanding at the time, voting as a separate class, amend, alter or repeal the provisions of the Supplement relating to the preferred stock of such series, which provisions (i) obligate us to pay the Term Redemption Price on the Term Redemption Date for the preferred stock of such series, (ii) obligate us to accumulate dividends at the applicable Dividend Rate (as set forth in the Supplement) for the preferred stock of such series, or (iii) set forth the liquidation preference for the preferred stock of such series; provided that a division, stock split or reverse stock split of a preferred share will not, by itself, be deemed to violate clause (i), (ii) or (iii) above. For the avoidance of doubt, no vote of the holders of common stock will be required to amend, alter or repeal the provisions of the Supplement, including any Appendix to the Articles of Incorporation.
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Unless a higher percentage is provided for in our Articles of Incorporation, including the Supplement and any Appendix to the Articles of Incorporation, (i) the affirmative vote of the holders of at least a “majority of the outstanding preferred stock,” including preferred stock outstanding at the time, voting together as a separate class, will be required (i) to approve our conversion from a
closed-end
to an
open-end
investment company, (ii) to approve any plan of “reorganization” (as such term is defined in Section 2(a)(33) of the 1940 Act) adversely affecting such preferred stock or (iii) to approve any other action requiring a vote of our security holders under Section 13(a) of the 1940 Act. For purposes of the foregoing, the vote of a “majority of the outstanding preferred stock” means the vote at an annual or special meeting duly called of (i) 67% or more of preferred stock present at a meeting, if the holders of more than 50% of our preferred stock are present or represented by proxy at such meeting, or (ii) more than 50% of our preferred stock, whichever is less.
For purposes of determining any rights of the holders of preferred stock of any series to vote on any matter, whether such right is created by provisions of the Articles of Incorporation (including the Supplement or any Appendix to the Articles of Incorporation in respect of a particular series of preferred stock), by statute or otherwise, no holder of preferred stock will be entitled to vote any preferred stock and no preferred stock will be deemed to be “outstanding” for the purpose of voting or determining the number of shares required to constitute a quorum if, prior to or concurrently with the time of determination of shares entitled to vote or the time of the actual vote on the matter, as the case may be, the requisite Notice of Redemption with respect to such preferred stock will have been given in accordance with the Supplement and Deposit Securities for the payment of the redemption price of such preferred stock will have been deposited in trust with the applicable redemption and paying agent for that purpose. No preferred stock held (legally or beneficially) by us will have any voting rights or be deemed to be outstanding for voting or for calculating the voting percentage required on any other matter or other purposes.
Notwithstanding anything herein to the contrary, the rating agency guidelines discussed below, as they may be amended from time to time by the respective rating agency, may be amended by the respective rating agency without the vote, consent or approval of us, the Board and any holder of our preferred stock or any of our other stockholders.
Unless otherwise required by law or the Articles of Incorporation (including the Supplement and any Appendix to the Articles of Incorporation) holders of preferred stock of any series will not have any relative rights or preferences or other special rights with respect to voting other than those specifically set forth in the “Voting Rights” section of the Supplement. The holders of preferred stock of any series will have no rights to cumulative voting. If we fail to declare or pay any dividends on preferred stock, the exclusive remedy of the holders will be the right to vote for additional Directors as discussed above; provided that the foregoing does not affect our obligation to accumulate and, if permitted by applicable law, the Articles of Incorporation (including the Supplement and any Appendix to the Articles of Incorporation), pay dividends at the Default Rate as discussed above.
We will use commercially reasonable efforts to cause at least one rating agency to issue a long-term credit rating with respect to preferred stock of each series for so long as any preferred stock of such series are outstanding. We will use commercially reasonable efforts to comply with any applicable rating agency guidelines. Rating agency guidelines are guidelines of any rating agency, as they may be amended or modified from time to time, compliance with which is required to cause such rating agency to continue to issue a rating with respect to preferred stock of each series for so long as preferred stock of such series are outstanding. If a rating agency ceases to rate securities of
closed-end
management investment companies generally, we will terminate the designation of such rating agency as a rating agency. We may elect to terminate the designation of any rating agency previously designated to act as a rating agency so long as either (i) immediately following such termination, there would be at least one rating agency with respect to the preferred stock of such series or (ii) it replaces the terminated rating agency with another NRSRO and provides notice thereof to the holders of
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preferred stock of such series; provided that such replacement will not occur unless such replacement rating agency will have at the time of such replacement (i) published a rating for the preferred stock of such series and (ii) entered into an agreement with us to continue to publish such rating subject to the rating agency’s customary conditions.
We may also elect to designate one or more other NRSROs as rating agencies with respect to preferred stock of any series by notice to the holders of preferred stock of such series. The rating agency guidelines of any rating agency may be amended by such rating agency without the vote, consent or approval of us, the Board or any of our stockholders.
Issuance of Additional Preferred Shares
So long as preferred stock of any series are outstanding, we may, without the vote or consent of the holders thereof, authorize, establish and create and issue and sell shares of one or more series of preferred stock ranking on a parity with such preferred stock as to payment of dividends and the distribution of assets upon dissolution, liquidation or the winding up of our affairs, in addition to then outstanding preferred stock and authorize, issue and sell additional shares of preferred stock of any series, in each case in accordance with applicable law, provided that we will, immediately after giving effect to the issuance of such additional preferred stock and to our receipt and application of the proceeds thereof, including to an irrevocable deposit in respect of the redemption of preferred stock or the repayment of indebtedness with such proceeds, have Asset Coverage of at least 225%.
Actions on Other than business days
Unless otherwise provided herein or in the Articles of Incorporation (including the Supplement and any Appendix to the Articles of Incorporation), if the date for making any payment, performing any act or exercising any right is not a business day, such payment will be made, act performed or right exercised on the next succeeding business day, with the same force and effect as if made or done on the nominal date provided therefor, and, with respect to any payment so made, no dividends, interest or other amount will accrue for the period between such nominal date and the date of payment
To the extent permitted by applicable law and the Supplement, the Board, without the vote of the holders of preferred stock of any series, may interpret, supplement or amend the provisions of the Supplement or any Appendix to the Articles of Incorporation to supply any omission, resolve any inconsistency or ambiguity or cure, correct or supplement any defective or inconsistent provision, including any provision that becomes defective after the date of this Prospectus because of impossibility of performance or any provision that is inconsistent with any provision of any other outstanding series of our preferred stock.
All shares of preferred stock that we may issue will be identical and of equal rank except as to the particular terms thereof that may be fixed by the Board, and all shares of each series of preferred stock will be identical and of equal rank except as to the dates from which dividends or other distributions, if any, thereon will be cumulative. To the extent we issue preferred stock, the payment of distributions to holders of our preferred stock will take priority over payment of distributions to our common stockholders. We urge you to read the applicable prospectus supplement and any free writing prospectus that we may authorize to be provided to you related to any preferred stock being offered, as well as the complete articles supplementary that contain the terms of the applicable series of preferred stock.
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DESCRIPTION OF OUR SUBSCRIPTION RIGHTS
The following is a general description of the terms of the subscription rights we may issue from time to time. Particular terms of any subscription rights we offer will be described in the prospectus supplement relating to such subscription rights. We will not offer transferable subscription rights to our stockholders at a price equivalent to less than the then-current net asset value per share of common stock, taking into account underwriting commissions and discounts, unless we first file a post-effective amendment that is declared effective by the SEC with respect to such issuance. The 1940 Act also generally provides that the amount of voting securities that would result from the exercise of subscription rights, as well as warrants, options and any other rights, at the time of issuance may not exceed 25% of our outstanding voting securities.
We may issue subscription rights to our stockholders to purchase common stock. Subscription rights may be issued independently or together with any other offered security and may or may not be transferable by the person purchasing or receiving the subscription rights. In connection with any subscription rights offering to our stockholders, we may enter into a standby underwriting, backstop or other arrangement with one or more persons pursuant to which such persons would purchase any offered securities remaining unsubscribed for after such subscription rights offering. In connection with a subscription rights offering to our stockholders, we would distribute certificates evidencing the subscription rights and a prospectus supplement to our stockholders on the record date that we set for receiving subscription rights in such subscription rights offering. Our common stockholders will indirectly bear all of the expenses incurred by us in connection with any subscription rights offerings, regardless of whether any common stockholder exercises any subscription rights.
A prospectus supplement will describe the particular terms of any subscription rights we may issue, including the following:
the period of time the offering would remain open (which shall be open a minimum number of days such that all record holders would be eligible to participate in the offering and shall not be open longer than 120 days);
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the title and aggregate number of such subscription rights; |
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the exercise price for such subscription rights (or method of calculation thereof); |
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the currency or currencies, including composite currencies, in which the price of such subscription rights may be payable; |
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if applicable, the designation and terms of the securities with which the subscription rights are issued and the number of subscription rights issued with each such security or each principal amount of such security; |
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the ratio of the offering (which, in the case of transferable rights, will require a minimum of three shares to be held of record before a person is entitled to purchase an additional share); |
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the number of such subscription rights issued to each stockholder; |
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the extent to which such subscription rights are transferable and the market on which they may be traded if they are transferable; |
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the date on which the right to exercise such subscription rights shall commence, and the date on which such right shall expire (subject to any extension); |
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if applicable, the minimum or maximum number of subscription rights that may be exercised at one time; |
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the extent to which such subscription rights include an over-subscription privilege with respect to unsubscribed securities and the terms of such over-subscription privilege; |
any termination right we may have in connection with such subscription rights offering;
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the terms of any rights to redeem, or call such subscription rights; |
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information with respect to book-entry procedures, if any; |
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the terms of the securities issuable upon exercise of the subscription rights; |
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the material terms of any standby underwriting, backstop or other purchase arrangement that we may enter into in connection with the subscription rights offering; |
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if applicable, a discussion of certain U.S. federal income tax considerations applicable to the issuance or exercise of such subscription rights; and |
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any other terms of such subscription rights, including exercise, settlement and other procedures and limitations relating to the transfer and exercise of such subscription rights. |
Each subscription right will entitle the holder of the subscription right to purchase for cash or other consideration such amount of shares of common stock at such subscription price as shall in each case be set forth in, or be determinable as set forth in, the prospectus supplement relating to the subscription rights offered thereby. Subscription rights may be exercised as set forth in the prospectus supplement beginning on the date specified therein and continuing until the close of business on the expiration date for such subscription rights set forth in the prospectus supplement. After the close of business on the expiration date, all unexercised subscription rights will become void.
Upon receipt of payment and the subscription rights certificate properly completed and duly executed at the corporate trust office of the subscription rights agent or any other office indicated in the prospectus supplement we will forward, as soon as practicable, the shares of common stock purchasable upon such exercise. If less than all of the rights represented by such subscription rights certificate are exercised, a new subscription certificate will be issued for the remaining rights. Prior to exercising their subscription rights, holders of subscription rights will not have any of the rights of holders of the securities purchasable upon such exercise. To the extent permissible under applicable law, we may determine to offer any unsubscribed offered securities directly to persons other than stockholders, to or through agents, underwriters or dealers or through a combination of such methods, as set forth in the applicable prospectus supplement.
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DESCRIPTION OF OUR WARRANTS
The following is a general description of the terms of the warrants we may issue from time to time. Particular terms of any warrants we offer will be described in the prospectus supplement relating to such warrants.
We may issue warrants to purchase shares of our common stock, preferred stock or debt securities. Such warrants may be issued independently or together with shares of common stock, preferred stock or debt securities and may be attached or separate from such securities. We will issue each series of warrants under a separate warrant agreement to be entered into between us and a warrant agent. The warrant agent will act solely as our agent and will not assume any obligation or relationship of agency for or with holders or beneficial owners of warrants.
A prospectus supplement will describe the particular terms of any series of warrants we may issue, including the following:
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the title and aggregate number of such warrants; |
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the price or prices at which such warrants will be issued; |
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the currency or currencies, including composite currencies, in which the price of such warrants may be payable; |
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if applicable, the designation and terms of the securities with which the warrants are issued and the number of warrants issued with each such security or each principal amount of such security; |
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in the case of warrants to purchase debt securities, the principal amount of debt securities purchasable upon exercise of one warrant and the price at which and the currency or currencies, including composite currencies, in which this principal amount of debt securities may be purchased upon such exercise; |
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in the case of warrants to purchase common stock or preferred stock, the number of shares of common stock or preferred stock, as the case may be, purchasable upon exercise of one warrant and the price at which and the currency or currencies, including composite currencies, in which these shares may be purchased upon such exercise; |
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the date on which the right to exercise such warrants shall commence and the date on which such right will expire (subject to any extension); |
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whether such warrants will be issued in registered form or bearer form; |
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if applicable, the minimum or maximum amount of such warrants that may be exercised at any one time; |
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if applicable, the date on and after which such warrants and the related securities will be separately transferable; |
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the terms of any rights to redeem, or call such warrants; |
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information with respect to book-entry procedures, if any; |
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the terms of the securities issuable upon exercise of the warrants; |
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if applicable, a discussion of certain U.S. federal income tax considerations; and |
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any other terms of such warrants, including terms, procedures and limitations relating to the exchange and exercise of such warrants. |
We and the warrant agent may amend or supplement the warrant agreement for a series of warrants without the consent of the holders of the warrants issued thereunder to effect changes that are not inconsistent with the provisions of the warrants and that do not materially and adversely affect the interests of the holders of the warrants.
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Each warrant will entitle the holder to purchase for cash such common stock or preferred stock at the exercise price or such principal amount of debt securities as shall in each case be set forth in, or be determinable as set forth in, the prospectus supplement relating to the warrants offered thereby. Warrants may be exercised as set forth in the prospectus supplement beginning on the date specified therein and continuing until the close of business on the expiration date set forth in the prospectus supplement. After the close of business on the expiration date, unexercised warrants will become void.
Upon receipt of payment and a warrant certificate properly completed and duly executed at the corporate trust office of the warrant agent or any other office indicated in the prospectus supplement, we will, as soon as practicable, forward the securities purchasable upon such exercise. If less than all of the warrants represented by such warrant certificate are exercised, a new warrant certificate will be issued for the remaining warrants. If we so indicate in the applicable prospectus supplement, holders of the warrants may surrender securities as all or part of the exercise price for warrants.
Prior to exercising their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise, including, in the case of warrants to purchase debt securities, the right to receive principal, premium, if any, or interest payments, on the debt securities purchasable upon exercise or to enforce covenants in the applicable indenture or, in the case of warrants to purchase common stock or preferred stock, the right to receive dividends or other distributions, if any, or payments upon our liquidation, dissolution or winding up or to exercise any voting rights.
Under the 1940 Act, we may generally only offer warrants provided that (a) the warrants expire by their terms within ten years, (b) the exercise or conversion price is not less than the current market value at the date of issuance, (c) our stockholders authorize the proposal to issue such warrants, and a majority of our directors who have no financial interest in the issuance and a majority of our independent directors approves such issuance on the basis that the issuance is in the best interests of us and our stockholders and (d) if the warrants are accompanied by other securities, the warrants are not separately transferable unless no class of such warrants and the securities accompanying them has been publicly distributed. The 1940 Act also provides that the amount of our voting securities that would result from the exercise of all outstanding warrants, as well as options and rights, at the time of issuance may not exceed 25% of our outstanding voting securities.
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DESCRIPTION OF OUR DEBT SECURITIES
The Fund does not currently have any debt securities outstanding.
Our charter authorizes the issuance of debt securities or notes, with rights as determined by the Board, by action of the Board without the approval of our stockholders. To the extent the Board authorizes the issuance of any debt securities, the directors are also permitted to amend or supplement the Articles of Incorporation, as they deem appropriate. Any such amendment or supplement may set forth the rights, preferences, powers and privileges of such debt securities.
Under the 1940 Act, the Fund may only issue one class of senior securities representing indebtedness, which in the aggregate must have asset coverage immediately after the time of issuance of at least 300%. So long as debt securities are outstanding, additional debt securities must rank on a parity with debt securities with respect to the payment of interest and upon the distribution of the Fund’s assets.
A prospectus supplement relating to any debt securities will include specific terms relating to the offering. The terms to be stated in a prospectus supplement will include the following:
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the form and title of the security; |
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the aggregate principal amount of the securities; |
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the interest rate of the securities; |
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whether the interest rate for the securities will be determined by auction or remarketing; |
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the maturity dates on which the principal of the securities will be payable; |
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the frequency with which auctions or remarketings, if any, will be held; |
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any changes to or additional events of default or covenants; |
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any minimum period prior to which the securities may not be called; |
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any optional or mandatory call or redemption provisions; |
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the credit rating of the debt securities; |
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if applicable, a discussion of the material U.S. federal income tax considerations applicable to the issuance of the debt securities; and |
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any other terms of the securities |
The applicable prospectus supplement will describe the interest payment provisions relating to debt securities. Interest on debt securities will be payable when due as described in the related prospectus supplement. If the Fund does not pay interest when due, it will trigger an event of default and the Fund will be restricted from declaring dividends and making other distributions with respect to its common stock and preferred stock.
Under the requirements of the 1940 Act, immediately after issuing any debt securities, the value of the Fund’s total assets, less certain ordinary course liabilities, must equal or exceed 300% of the amount of the debt securities outstanding. Other types of borrowings also may result in the Fund being subject to similar covenants in credit agreements.
Additionally, the 1940 Act requires that the Fund prohibit the declaration of any dividend or distribution (other than a dividend or distribution paid in the Fund’s common or preferred stock or in options, warrants or rights to subscribe for or purchase the Fund’s common or preferred stock) in respect of the Fund’s common or preferred stock, or call for redemption, redeem, purchase or otherwise acquire for consideration any such fund common or preferred stock, unless the Fund’s debt securities have asset coverage of at least 300% (200% in the case of a dividend or distribution on preferred stock) after deducting the amount of such dividend, distribution, or
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acquisition price, as the case may be. These 1940 Act requirements do not apply to any promissory note or other evidence of indebtedness issued in consideration of any loan, extension, or renewal thereof, made by a bank or other person and privately arranged, and not intended to be publicly distributed; however, any such borrowings may result in the Fund being subject to similar covenants in credit agreements. Moreover, the Indenture related to the debt securities could contain provisions more restrictive than those required by the 1940 Act, and any such provisions would be described in the related prospectus supplement.
Upon the occurrence and continuance of an event of default, the holders of a majority in principal amount of a series of outstanding debt securities or the Board will be able to declare the principal amount of that series of debt securities immediately due and payable upon written notice to the Fund. A default that relates only to one series of debt securities does not affect any other series and the holders of such other series of debt securities will not be entitled to receive notice of such a default under the Indenture. Upon an event of default relating to bankruptcy, insolvency or other similar laws, acceleration of maturity will occur automatically with respect to all series. At any time after a declaration of acceleration with respect to a series of debt securities has been made, and before a judgment or decree for payment of the money due has been obtained, the holders of a majority in principal amount of the outstanding debt securities of that series, by written notice to the Fund and the trustee, may rescind and annul the declaration of acceleration and its consequences if all events of default with respect to that series of debt securities, other than the
non-payment
of the principal of that series of debt securities which has become due solely by such declaration of acceleration, have been cured or waived and other conditions have been met.
In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Fund or to the Fund’s creditors, as such, or to the Fund’s assets, or (b) any liquidation, dissolution or other winding up of the Fund, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Fund, then (after any payments with respect to any secured creditor of the Fund outstanding at such time) and in any such event the holders of debt securities shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all debt securities (including any interest accruing thereon after the commencement of any such case or proceeding), or provision shall be made for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of the debt securities, before the holders of any of the Fund’s common or preferred stock are entitled to receive any payment on account of any redemption proceeds, liquidation preference or dividends from such shares. The holders of debt securities shall be entitled to receive, for application to the payment thereof, any payment or distribution of any kind or character, whether in cash, property or securities, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Fund being subordinated to the payment of the debt securities, which may be payable or deliverable in respect of the debt securities in any such case, proceeding, dissolution, liquidation or other winding up event.
Unsecured creditors may include, without limitation, service providers including FS Global Advisor, auction agents, broker-dealers and the trustee, pursuant to the terms of various contracts with the Fund. Secured creditors may include, without limitation, parties entering into any interest rate swap, floor or cap transactions, or other similar transactions with the Fund that create liens, pledges, charges, security interests, security agreements or other encumbrances on the Fund’s assets.
A consolidation, reorganization or merger of the Fund with or into any other company, or a sale, lease or exchange of all or substantially all of the Fund’s assets in consideration for the issuance of equity securities of another company shall not be deemed to be a liquidation, dissolution or winding up of the Fund.
The debt securities will have no voting rights, except as mentioned below and to the extent required by law or as otherwise provided in the Indenture relating to the acceleration of maturity upon the occurrence and continuance of an event of default. In connection with the debt securities or certain other borrowings (if any), the 1940 Act
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does in certain circumstances grant to the note holders or lenders certain voting rights. The 1940 Act requires that provision is made either (i) that, if on the last business day of each of twelve consecutive calendar months such debt securities shall have an asset coverage of less than 100%, the holders of such debt securities voting as a class shall be entitled to elect at least a majority of the members of the Fund’s Directors, such voting right to continue until such debt securities shall have an asset coverage of 110% or more on the last business day of each of three consecutive calendar months, or (ii) that, if on the last business day of each of twenty-four consecutive calendar months such debt securities shall have an asset coverage of less than 100%, an event of default shall be deemed to have occurred. It is expected that, unless otherwise stated in the related prospectus supplement, provision will be made that, if on the last business day of each of twenty-four consecutive calendar months such debt securities shall have an asset coverage of less than 100%, an event of default shall be deemed to have occurred. These 1940 Act requirements do not apply to any promissory note or other evidence of indebtedness issued in consideration of any loan, extension, or renewal thereof, made by a bank or other person and privately arranged, and not intended to be publicly distributed; however, any such borrowings may result in the Fund being subject to similar covenants in credit agreements. As reflected above, the Indenture relating to the debt securities may also grant to the note holders voting rights relating to the acceleration of maturity upon the occurrence and continuance of an event of default, and any such rights would be described in the related prospectus supplement.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a general summary of the material U.S. federal income tax considerations applicable to us and to an investment in our shares of common stock. This summary does not purport to be a complete description of the income tax considerations applicable to an investment in any of our securities. For example, we have not described tax consequences that may be relevant to certain types of holders subject to special treatment under U.S. federal income tax laws, including stockholders subject to the alternative minimum tax,
tax-exempt
organizations, insurance companies, dealers in securities, traders in securities that elect to
their securities holdings for tax purposes, pension plans and trusts, partnerships (including entities treated as partnerships for U.S. federal income tax purposes), and their partners, members and owners, persons whose functional currency (as defined in Section 985 of the Code) is not the U.S. dollar, and financial institutions. This summary assumes that investors hold our common stock as capital assets (within the meaning of the Code). The discussion is based upon the Code, U.S. Treasury Regulations and administrative and judicial interpretations, each as of the date of this Prospectus and all of which are subject to change, possibly retroactively, which could affect the continuing validity of this discussion. We have not sought and will not seek any ruling from the Internal Revenue Service (the “IRS”), regarding an offering. This summary does not discuss any aspects of U.S. estate or gift tax or foreign, state or local tax. It does not discuss the special treatment under U.S. federal income tax laws that could result if we invested in
tax-exempt
securities or certain other investment assets.
A “U.S. stockholder” generally is a beneficial owner of shares of our common stock who is for U.S. federal income tax purposes:
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a citizen or individual resident of the United States; |
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a corporation or other entity treated as a corporation, for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any political subdivision thereof; |
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a trust, if a court in the United States has primary supervision over its administration and one or more United States persons (as defined under the Code) have the authority to control all substantial decisions of the trust, or the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person; or |
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an estate, the income of which is subject to U.S. federal income taxation regardless of its source. |
