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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
June 14, 2024 (June 10, 2024)
XAI
Octagon Floating Rate & Alternative Income Trust
(Exact name of registrant as specified in its
charter)
Delaware |
|
811-23247 |
|
82-235867 |
(State or other jurisdiction
of incorporation) |
|
(Commission File Number) |
|
(IRS Employer
Identification No.) |
321 North Clark Street, Suite 2430, Chicago, Illinois |
|
60654 |
(Address of principal executive offices) |
|
(Zip Code) |
Registrants telephone number, including area
code (312) 374-6930
(Former name or former address, if changed since
last report.)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
Common Shares of Beneficial Interest |
|
XFLT |
|
New York Stock Exchange |
6.50% Series 2026
Term Preferred Shares
(Liquidation Preference $25.00) |
|
XFLTPRA |
|
New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange
Act of 1934 (§240.12b-2 of this chapter).
☐ Emerging
growth company
If an emerging
growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01. Entry
into a Material Definitive Agreement.
Convertible Preferred Shares
On June 10, 2024, XAI Octagon Floating Rate
& Alternative Income Trust (NYSE: XFLT) (the “Trust”) entered into a purchase agreement (the “Purchase
Agreement”) between the Trust, Eagle Point Credit Management LLC and the purchasers named therein (the
“Purchasers”), in connection with the issuance and sale of 400,000 shares of the Trust’s 6.95% Series II 2029
Convertible Preferred Shares, liquidation preference of $25.00 (the “Series II 2029 Convertible Preferred Shares”), on
June 13, 2024, at a price equal to $23.25 per Series II 2029 Convertible Preferred Share, in a transaction exempt from registration
pursuant to Section 4(a)(2) of the Securities Act of 1933. The Trust expects to receive net proceeds (before expenses) from the sale
of the Series II 2029 Convertible Preferred Shares of approximately $9.3 million.
In addition, pursuant to the Purchase Agreement,
the Purchasers have agreed to purchase up to 1,400,000 additional Series II 2029 Convertible Preferred Shares at one or more subsequent
closings, as determined by the Trust in its discretion, on or before December 10, 2025. In the event the Trust does not elect to sell
to the Purchasers all of the Series II 2029 Convertible Preferred Shares which the Purchasers have agreed to purchase by December 10,
2025, the Trust will pay to the Purchasers an amount equal to $0.75 per unissued Series II 2029 Convertible Preferred Share.
The Series II 2029 Convertible Preferred Shares
have a liquidation preference of $25.00 per share. In the event of any liquidation, dissolution or winding up of the Trust’s affairs,
holders of Series II 2029 Convertible Preferred Shares will be entitled to receive a liquidating distribution per share equal to the liquidation
preference, plus an amount equal to all unpaid dividends and distributions on such share accumulated to (but excluding) the date
fixed for distribution or payment, whether or not earned or declared by the Trust, but excluding interest on any such distribution or
payment.
The Series II 2029 Convertible Preferred Shares
pay a quarterly dividend at a fixed annual rate of 6.95% of the liquidation preference, or $1.7375 per share, per year. The dividend rate
is subject to adjustment under certain circumstances.
Cumulative cash dividends or distributions on each
Series II 2029 Convertible Preferred Share are payable quarterly, when, as and if declared, or under authority granted, by the Board of
Trustees of the Trust out of funds legally available for such payment. The Trust will pay dividends on the Series II 2029 Convertible
Preferred Shares every January 31, April 30, July 31 and October 31, commencing on the first such date to occur following the initial
issuance of the Series II 2029 Convertible Preferred Shares.
The Series II 2029 Convertible Preferred
Shares are senior securities that constitute shares of beneficial interest of the Trust. The Series II 2029 Convertible Preferred
Shares rank senior to the Trust’s common shares of beneficial interest, par value $0.01 per share (the “Common
Shares”), in priority of payment of dividends and as to the distribution of assets upon dissolution, liquidation or winding up
of the Trust’s affairs; equal in priority with the Trust’s 6.50% Series 2026 Term Preferred Shares, liquidation
preference $25.00 (the “2026 Preferred Shares”) and the Trust’s 6.95% Series 2029 Convertible Preferred Shares,
liquidation preference $25.00 (the “Existing Convertible Preferred Shares” and together with the Series II 2029
Convertible Preferred Shares and the 2026 Preferred Shares, the “Preferred Shares”) and all other future series of
preferred shares the Trust may issue as to priority of payment of dividends and as to distributions of assets upon dissolution,
liquidation or the winding-up of the Trust’s affairs; and subordinate in right of payment to amounts owed under the credit
agreement, dated October 6, 2017, as amended from time to time, between the Trust and Société Générale, and to
the holder of any future senior indebtedness.
The Trust is required to redeem, out of funds legally
available therefor, all outstanding Series II 2029 Convertible Preferred Shares on December 31, 2029, or the “Term Redemption Date,”
at a price equal to the liquidation preference plus an amount equal to accumulated but unpaid dividends and distributions, if any,
on such shares (whether or not earned or declared, but excluding interest on such dividends) to, but excluding, the Term Redemption Date.
If the Trust fails to maintain asset coverage of
at least 200% as of the close of business on the last Business Day of a calendar quarter, and such failure is not cured by the close of
business on the date that is thirty (30) calendar days following the date of filing of the Trust’s Annual Report or Semi-Annual
Report on Form N-CSR with respect to the Trust’s fourth and second fiscal quarters, respectively, and the applicable monthly report
on Form N-PORT filed by the Trust with the Securities and Exchange Commission (the “SEC”) with respect to the fiscal period
ending as of the last day of such calendar quarter with respect to the Trust’s first and third fiscal quarters (such date the “Asset
Coverage Cure Date”), then the Trust is required to redeem, within ninety (90) calendar days of the Asset Coverage Cure Date, such
number of Preferred Shares equal to the lesser of (1) the minimum number of Preferred Shares the redemption of which, if deemed to have
occurred immediately prior to the opening of business on the Asset Coverage Cure Date that will result in the Trust having an asset coverage
ratio of at least 200% and (2) the maximum number of Preferred Shares that can be redeemed out of funds legally available for such redemption.
In addition to Preferred Shares required to be redeemed, at the Trust’s sole discretion, the Trust may redeem such number of Preferred
Shares (including Preferred Shares required to be redeemed) that will result in the Trust having an asset coverage ratio of up to and
including 285%. The Preferred Shares to be redeemed may include, at the Trust’s sole option, any number or proportion of the Series
II 2029 Convertible Preferred Shares and other series of Preferred Shares. If the Series II 2029 Convertible Preferred Shares are to be
redeemed in such an event, they will be redeemed at a redemption price equal to the liquidation preference per share plus accumulated
but unpaid dividends, if any, on such liquidation preference (whether or not declared, but excluding interest on accrued but unpaid dividends,
if any) to, but excluding, the date fixed for such redemption.
At any time on or after December 13, 2025, at the
Trust’s sole option, the Trust may redeem, from time to time, the Series II 2029 Convertible Preferred Shares in whole or in part,
out of funds legally available for such redemption, at a price per share equal to the sum of the liquidation preference plus an
amount equal to accumulated but unpaid dividends, if any, on such shares (whether or not earned or declared, but excluding interest on
such dividends) to, but excluding, the date fixed for such redemption.
Each holder of a Series II 2029 Convertible Preferred
Share shall have the right, at such holder’s option, to convert any such Series II 2029 Convertible Preferred Share, at any time
on or after the date six months after the issuance date of the Series II 2029 Convertible Preferred Share (the “Conversion Date”)
and prior to the close of business on the business day immediately preceding the Term Redemption Date, into such number of Common Shares
equal to the liquidation preference of the Series II 2029 Convertible Preferred Share plus an amount equal to all unpaid dividends
and distributions on such Share accumulated to (but excluding) the date of exercise, divided by the Conversion Price. The “Conversion
Price” is the greater of (i) the market price per Common Share, represented by the arithmetic average of the volume-weighted average
price (“VWAP”) per Common Share for each of the five consecutive trading days immediately preceding the date of exercise,
or (ii) the Trust’s most recently reported net asset value per Common Share immediately prior to the date of exercise. If the Trust
fails to fulfill its obligations to deliver Common Shares upon conversion of any Series II 2029 Convertible Preferred Shares, the quarterly
dividend rate payable on the Series II 2029 Convertible Preferred Shares of any sub-series of which one or more shares was surrendered
for conversion on such exercise date will increase to a fixed annual rate of 8.95% of the liquidation preference until the date on which
the Trust fulfills its delivery obligations.
No holder of Series II 2029 Convertible Preferred
Shares may exercise its conversion right if upon conversion the holder would receive Common Shares that would cause funds and accounts
(collectively, the “EP Accounts”) managed by Eagle Point Credit Management LLC (“Eagle Point”) and any person
controlled by its direct parent company ( “Eagle Point Parent”) to beneficially own in the aggregate more than 4.9% of the
Common Shares.
The Trust is required to redeem the Series II 2029
Convertible Preferred Shares at the liquidation preference, plus any accumulated and unpaid dividends thereon (whether or not authorized
or declared) to, but excluding, the redemption date, if the Common Shares are no longer publicly traded on the NYSE, the Nasdaq Capital
Market, the Nasdaq Global Select Market or the Nasdaq Global Market for a period of twenty (20) consecutive trading days.
In the case of a consolidation, merger or sale
of all or substantially all of the Trust’s assets to another closed-end fund or business development company, the Trust must redeem
the Series II 2029 Convertible Preferred Shares at $25.00, plus any accumulated and unpaid dividends thereon (whether or not authorized
or declared) to, but excluding, the redemption date unless (i) the successor entity’s common shares are publicly traded on the NYSE,
the Nasdaq Capital Market, the Nasdaq Global Select Market or the Nasdaq Global Market and have average daily trading volume over the
90 days immediately preceding approval of the transaction by the Board of Trustees of the Trust that is equal to or greater than the average
daily trading volume of the Common Shares over such period; and (ii) if the Trust is not the successor entity, the successor entity issues
to the holders of Series II 2029 Convertible Preferred Shares preferred shares with terms that are substantially identical to the terms
of the Series II 2029 Convertible Preferred Shares.
For so long as the Series II 2029 Convertible Preferred
Shares are outstanding, the Purchasers have agreed not to sell in any day, in the aggregate, an amount of Common Shares exceeding the
greater of (i) 20% of the previous 20 trading days’ average trading volume and (ii) 20% of the current trading day’s trading
volume.
Eagle Point and the Purchasers have granted to
the Trust an irrevocable proxy to vote all Preferred Shares (including 2026 Preferred Shares, Existing Convertible Preferred Shares and
Series II 2029 Convertible Preferred Shares) held by the EP Accounts in proportion to the vote of all other preferred shareholders.
The Series II 2029 Convertible Preferred Shares
will not be listed on any exchange and may not be transferred without the consent of the Trust.
The foregoing description of the Series II 2029
Convertible Preferred Shares does not purport to be complete and is qualified in its entirety by reference to the full text of the Statement
of Preferences of Term Preferred Shares, filed herewith as Exhibit 3.1 and incorporated by reference herein, and the Purchase Agreement,
filed herewith as Exhibit 10.1 and incorporated by reference herein.
Preferred Share Voting Arrangements
Pursuant to the Purchase Agreement and the Existing
Convertible Preferred Shares Purchase Agreement, the Purchasers and Eagle Point have granted the Trust an irrevocable proxy to vote at
any annual meeting or special meeting of shareholders of the Trust all Preferred Shares of the Trust, including Series II 2029 Convertible
Preferred Shares, Existing Convertible Preferred Shares and 2026 Preferred Shares held by the Purchasers, Eagle Point, any other person
controlled by Eagle Point Parent, or any other investment vehicles or accounts sponsored or managed by Eagle Point or any person controlled
by Eagle Point Parent, or which Eagle Point or any person controlled by Eagle Point Parent otherwise has or shares the power to vote,
or to direct the voting of, as of the record date for the applicable annual or special meeting of shareholders of the Trust in the same
proportion as the vote of all other holders. The foregoing is qualified in its entirety by reference to the full text of the Purchase
Agreement filed herewith as Exhibit 10.1 and incorporated herein by reference.
Item 3.02. Unregistered Sale of Equity Securities
The disclosure required by this Item and included
in Item 1.01 of this Current Report is incorporate herein by reference.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On June 10, 2024, the Trust adopted Appendix D
to the Statement of Preferences of Term Preferred Shares (the “Statement of Preferences”) establishing and fixing the rights
and preferences of the Series II 2029 Convertible Preferred Shares. The Statement of Preferences, as amended, authorizes 1,800,000 Series
II 2029 Convertible Preferred Shares, liquidation preference $25.00 per share. A copy of the Statement of Preferences is filed herewith
as Exhibit 3.1 and incorporated herein by reference.
Item 7.01. Regulation FD Disclosure
On June 10, 2024, the Trust issued a press release,
furnished as Exhibit 99.1 to this Current Report and is incorporated herein by reference.
The information disclosed under this Item 7.01,
including Exhibit 99.1 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934 and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, except as
expressly set forth by specific refence in such filing.
Item 9.01 Financial Statements and Exhibits.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
XAI OCTAGON FLOATING RATE & ALTERNATIVE INCOME TRUST |
|
|
|
Date: June 14, 2024 |
By: |
/s/ Benjamin D. McCulloch |
|
Name: |
Benjamin D. McCulloch |
|
Title: |
Secretary and Chief Legal Officer |
Exhibit 3.1
APPENDIX D
XAI OCTAGON FLOATING RATE & ALTERNATIVE
INCOME TRUST
TERM PREFERRED SHARES
6.95% SERIES II 2029 CONVERTIBLE PREFERRED SHARES
This Appendix establishes a
Series of Term Preferred Shares of XAI Octagon Floating Rate & Alternative Income Trust (the “Trust”). Except as
set forth below, this Appendix incorporates by reference the terms set forth with respect to all Series of such Term Preferred Shares
in those “Statement of Preferences” dated March 23, 2021 (the “Statement of Preferences”). This Appendix
has been adopted by resolution of the Board of Trustees or a duly authorized committee thereof on June 10, 2024. Capitalized terms used
herein but not defined herein have the respective meanings set forth in the Statement of Preferences.
DESIGNATION
Term Preferred Shares, 6.95%
Series II 2029 Convertible Preferred Shares: A series of 1,800,000 Preferred Shares classified as Term Preferred Shares is hereby designated
as the “6.95% Series II 2029 Convertible Preferred Shares.” Each share of such Series shall have such preferences, voting
powers, restrictions, limitations as to dividends and distributions, conversion privilege, qualifications and terms and conditions of
redemption, in addition to those required by applicable law and those that are expressly set forth in the Trust’s Declaration of
Trust and the Statement of Preferences (except as the Statement of Preferences may be expressly modified by this Appendix), as are set
forth in this Appendix D. The 6.95% Series II 2029 Convertible Preferred Shares shall constitute a separate series of Preferred Shares
and of the Term Preferred Shares.
The following terms and conditions
shall apply solely to the 6.95% Series II 2029 Convertible Preferred Shares:
Section 1. Number of Authorized Shares of Series;
Designation of Sub-Series.
The number of authorized shares
of 6.95% Series II 2029 Convertible Preferred Shares is 1,800,000.
The 6.95% Series II 2029 Convertible
Preferred Shares shall be divided into a number of sub-series (each a “Sub-Series”) as determined by the Board of Trustees
of the Trust or pursuant to their delegated authority.
Upon each subsequent issuance
date of Shares of 6.95% Series II 2029 Convertible Preferred Shares, as determined by the Board of Trustees of the Trust or pursuant to
their delegated authority, the shares issued on such date shall be designated as a separate Sub-Series. Each share of each Sub-Series
shall be identical.
Each Sub-Series shall be listed
on Annex I to this Appendix D, which shall be amended or supplemented in connection with each designation of a Sub-Series.
The shares of each Sub-Series
shall rank on parity with shares of each other Sub-Series and with shares of any other series of Term Preferred Shares and any other series
of Preferred Shares as to the payment of dividends and distribution of assets upon dissolution, liquidation or winding up of the affairs
of the Trust.
Section 2. Date of Original
Issue with respect to each Sub-Series.
The Date of Original Issue with
respect to each Sub-Series shall be set forth on Annex I to this Appendix D.
Section 3. Fixed Dividend Rate Applicable to
Series.
The Fixed Dividend Rate is 6.95%.
Section 4. Liquidation Preference Applicable
to Series.
The Liquidation Preference is
$25.00 per share.
Section 5. Term Redemption Date Applicable
to Series.
The Term Redemption Date is
December 31, 2029.
Section 6. Optional Redemption Premium Applicable
to Series.
There is no optional redemption premium applicable
to the Series.
Section 7. Dividend Payment Dates Applicable
to Series.
The Dividend Payment Dates are
January 31, April 30, July 31, and October 31 (or, if any such day is not a Business Day, then on the next succeeding Business Day).
Section 8. Non-Call Period Applicable to Series.
The Non-Call Period is the period
beginning on the Date of Original Issue with respect to Sub-Series A as set forth on Annex I to this Appendix D and ending at the close
of business on the date that is 18 months after the Date of Original Issue of such Sub-Series.
Section 9. Exceptions to Certain Definitions
Applicable to the Series.
The following definitions contained
under the heading “Definitions” in the Statement of Preferences are, as such terms are used this Appendix D, hereby amended
as follows:
Not applicable.
Section 10. Additional Definitions Applicable
to the Series.
The following terms shall have
the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless
the context otherwise requires:
“Closing Sale Price”
of the Common Shares on any date means the closing sale price per share (or if no closing sale price is reported, the average of the bid
and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) at 4:00 p.m. (New York
City time) on that date as reported in composite transactions for the principal U.S. national securities exchange on which the Common
Shares are traded.
“Convertibility Date”
means, with respect to each Sub-Series, the Convertibility Date for such Sub-Series as set forth on Annex I of this Appendix D, which
shall be the date six-months after the Date of Original Issue with respect to such Sub-Series.
“Conversion Price”
means the greater of (i) the Market Price or (ii) the Trust’s most recently reported net asset
value per Common Share immediately prior to the relevant Exercise Date; provided, that the Trust shall use commercially reasonable efforts
to publicly report a net asset value each Business Day; and provided, however, if as of any Exercise Date, the Common Shares are not listed
or quoted on a United States securities exchange or automated quotation system, the Conversion Price shall be the Trust’s most recently
reported net asset value per Common Share immediately prior to the relevant Exercise Date.
“Dividend Period”
means, with respect to each Sub-Series of 6.95% Series II 2029 Convertible Preferred Shares, in the case of the first Dividend Period,
the period beginning on the Date of Original Issue for such Sub-Series and ending on, but excluding, the next Dividend Payment Date, and
for each subsequent Dividend Period, the period beginning on and including the Dividend Payment Date for the previous Dividend Period
and ending on, but excluding, the next Dividend Payment Date.
“Eagle
Point” means Eagle Point Credit Management LLC or any Person controlled by Eagle Point Holdings LP, Eagle Point’s ultimate
parent company.
“EP
Accounts” means any funds and accounts managed by Eagle Point.
“Market
Disruption Event” means any suspension of, or limitation imposed on, trading of the Common Shares by any exchange or quotation
system on which the VWAP is determined pursuant to the definition of the term “VWAP” (the “Relevant Exchange”)
during any period or periods aggregating one half-hour or longer during the regular trading session on the relevant day and whether by
reason of movements in price exceeding limits permitted by the Relevant Exchange as to securities generally, or otherwise relating to
the Common Shares on the Relevant Exchange.
“Market
Price” means per Common Share, as of any Exercise Date, the arithmetic average of the VWAP per Common Share for each of the
five (5) consecutive full Trading Days ending on the Trading Day immediately preceding such Exercise Date.
“Minimum Conversion
Shares” means, as of any Exercise Date, the lesser of (i) 10,000 6.95% Series II 2029 Convertible Preferred Shares or (ii) the
total number of 6.95% Series II 2029 Convertible Preferred Shares held by all holders exercising their option to convert on such Exercise
Date and eligible for conversion on such Exercise Date.
“Non-Listing Event”
means that the Trust’s Common Shares shall have failed to be publicly-traded on the New York Stock Exchange, the Nasdaq Capital
Market, the Nasdaq Global Select Market or the Nasdaq Global Market for a period of twenty (20) consecutive Trading Days.
“Qualifying Transaction”
means the merger or consolidation of the Trust with a closed-end investment company or business development company or the sale or transfer
of all or substantially all of the Trust’s assets to a closed-end investment company or business development company, in which (a)
the Trust is the successor entity or the successor entity’s common shares are publicly traded on the New York Stock Exchange, the
Nasdaq Capital Market, the Nasdaq Global Select Market or the Nasdaq Global Market and have an average daily trading volume that is equal
to or greater than the average daily trading volume of the Common Shares over the ninety (90) Trading Days immediately preceding the approval
of the transaction by the Board of Trustees of the Trust, and (b) if the Trust is not the successor entity, the successor entity issues
to the holders of 6.95% Series II 2029 Convertible Preferred Shares preferred shares with terms that are substantially identical to the
terms of the 6.95% Series II 2029 Convertible Preferred Shares.
“Record Date”
means, with respect to each 6.95% Series II 2029 Convertible Preferred Share, the close of business on the January 15, April 15, July
15 or October 15, immediately preceding the applicable Dividend Payment Date (or, if any such day is not a Business Day, then on the next
succeeding Business Day).
“Relevant
Exchange” has the meaning set forth in the definition of the term “Market Disruption Event.”
“Reorganization
Transaction” means a merger or consolidation of the Trust with any other closed-end investment company or business development
company or the sale or transfer of all or substantially all of the Trust’s assets to any other closed-end investment company or
business development company; provided that a Qualifying Transaction shall not be a Reorganization Transaction.
“Trading
Day” means a Business Day on which the Relevant Exchange is scheduled to be open for business and, other than with respect to
determination of a Delisting Event, on which there has not occurred a Market Disruption Event.
“Voting
Security” has the meaning set forth in Section 2(a)(42) of the 1940 Act.
“VWAP”
per Common Share on any Trading Day means the per share volume-weighted
average price as displayed under the heading Bloomberg VWAP on Bloomberg (or, if Bloomberg ceases to publish such price, any successor
service reasonably agreed by the Trust and Eagle Point; provided that reporting prepared for the Trust by the
then-current Designated Market Maker for the Common Shares shall be considered reasonably agreed
by both the Trust and Eagle Point) page “XFLT US<Equity>VAP” (or its equivalent successor if such page is not available)
in respect of the period from the open of trading on the relevant Trading Day until the close of trading on such Trading Day (or if such
volume-weighted average price is unavailable, the average Closing Sale Price for the five Trading Days immediately prior to giving notice
of conversion).
Section 11. Amendments to Terms of Term Preferred
Shares Applicable to the Series.
The provisions contained in
Section 2.9 under the heading “Terms Applicable to all Series of Term Preferred Shares” in the Statement of Preferences are
hereby amended and restated with respect to the 6.95% Series II 2029 Convertible Preferred Shares as follows:
(a) Share
Certificates. A register shall be kept at the offices of the Trust or any transfer agent duly appointed by the Trustees under the
direction of the Trustees which shall contain the names and addresses of the Holders of the 6.95% Series II 2029 Convertible Preferred
Shares and the number of shares of each Sub-Series of 6.95% Series II 2029 Convertible Preferred 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 of each Sub-Series of 6.95%
Series II 2029 Convertible Preferred Share and who shall be entitled to receive dividends or distributions or otherwise to exercise or
enjoy the rights of a Holder of the 6.95% Series II 2029 Convertible Preferred Shares. No Holder of the 6.95% Series II 2029 Convertible
Preferred Shares shall be entitled to receive payment of any dividend or distribution, nor to have notice given to him as herein provided,
until he, she or it has given his, her or its address to a transfer agent or such other officer or agent of the Trustees as shall keep
the register for entry thereon.
Section 12. Additional Terms and Provisions
Applicable to the Series.
The following provisions shall
be incorporated into and be deemed part of the Statement of Preferences:
(a) Conversion
of Shares.
(i) Conversion
Privilege. Subject to and upon compliance with the provisions of this Section 12(a) each holder of a share of a Sub-Series of 6.95%
Series II 2029 Convertible Preferred Shares shall have the right, at such holder’s option, to convert any such share, at any time
on or after the Convertibility Date applicable to such Sub-Series and prior to the close of business on the Business Day immediately preceding
the Term Redemption Date, into such number of Common Shares equal to the Liquidation Preference of the 6.95% Series II 2029 Convertible
Preferred Share plus an amount equal to all unpaid dividends and distributions on such Share accumulated to (but excluding) the Exercise
Date, divided by the Conversion Price (subject to, and in accordance with, the settlement provision of Section 12(a)(ii), the “Conversion
Obligation”).
(ii) Conversion
Procedures; Settlement Upon Conversion.
(A) In
connection with the conversion of any 6.95% Series II 2029 Convertible Preferred Shares, such holder shall complete, sign and deliver
(including via facsimile, .pdf attachment or other electronically transmitted signature thereof (including DocuSign or Adobe Sign)) an
irrevocable notice to the Trust as set forth in Annex II to this Appendix D) (a “Notice of Conversion”) and state in
writing therein the number of Shares of each Sub-Series of 6.95% Series II 2029 Convertible Preferred Shares to be converted.
On any single Exercise
Date, converting holders must surrender for conversion an aggregate number of 6.95% Series II 2029 Convertible Preferred Shares equal
to or greater than the Minimum Conversion Shares. If more than one 6.95% Series II 2029 Convertible Preferred Share shall be surrendered
for conversion at one time by the same holder on a single Exercise Date, the Conversion Obligation with respect to such shares shall be
computed on the basis of the aggregate Liquidation Preference plus an amount equal to all unpaid dividends and distributions on such shares
accumulated to (but excluding) the Exercise Date, so surrendered on such Exercise Date by such holder.
(B) A
share shall be deemed to have been converted immediately prior to the close of business on the Business Day (the “Exercise Date”)
that the holder has complied with the requirements set forth in subsection (A) above. By the close of business on the second Business
Day immediately following the Exercise Date, the Trust shall (1) update the register maintained by the Trust pursuant to Section 11(a)
to reflect the change in the number of shares of each applicable Sub-Series outstanding and held by such holder as a result of the conversion
and (2) issue or cause to be issued, and deliver to such holder of converted 6.95% Series II 2029 Convertible Preferred Shares a book-entry
transfer through the Depository Trust Company for the full number of Common Shares to which such holder shall be entitled in satisfaction
of the Conversion Obligation; provided that if the Trust shall fail to fulfill the obligations in clauses (1) and (2) above by the close
of business on the second Business Day immediately following the Exercise Date, the dividends payable on the Convertible Preferred Shares
of any Sub-Series of which one or more Shares was surrendered for conversion on such Exercise Date shall increase to a rate per annum
that is 2.00% above the Fixed Dividend Rate stated in Section 3 until the date on which the obligations set forth in clauses (1) and (2)
above have been satisfied. All Common Shares to be issued upon conversion of 6.95% Series II 2029 Convertible Preferred Shares shall be
fully paid and nonassessable by the Trust and free from all taxes, liens and charges with respect to the issue thereof.
(C) No
fractional Common Shares or scrip representing fractional Common Shares shall be issued upon conversion of any 6.95% Series II 2029 Convertible
Preferred Shares into Common Shares. In lieu of fractional shares otherwise issuable, the converting holder will be entitled to receive
an amount in cash equal to the fraction of Common Share multiplied by the applicable Conversion Price. In order to determine whether the
number of Common Shares to be delivered to a holder upon the conversion of such holder’s 6.95% Series II 2029 Convertible Preferred
Shares will include a fractional share, such determination shall be based on the aggregate number of 6.95% Series II 2029 Convertible
Preferred Shares of such holder that are being converted on any single Exercise Date.
(D)
If a holder submits a 6.95% Series II 2029 Convertible
Preferred Share for conversion, the Trust shall pay any documentary, stamp or similar issue or transfer tax due on the issue of the Common
Shares upon conversion.
(E) The
Person in whose name the certificate for any Common Shares delivered upon conversion is registered shall be treated as a shareholder of
record as of the close of business on the relevant Exercise Date. Upon a conversion of 6.95% Series
II 2029 Convertible Preferred Shares, the rights of the converting holder with respect to the 6.95% Series
II 2029 Convertible Preferred Shares being converted shall cease, except that the holder thereof shall thereafter have and retain
(i) the right to receive Common Shares in respect of the converted 6.95% Series II 2029 Convertible
Preferred Shares and cash in lieu of fractional shares, and (ii) the right to vote such 6.95% Series
II 2029 Convertible Preferred Shares in connection with any matters submitted to a vote of Shareholders or to receive distributions with
respect to such 6.95% Series II 2029 Convertible Preferred Share, in each case as to which
the applicable record date established by the Board of Trustees for determining Shareholders entitled to vote on such matter or entitled
to receive distributions, as the case may be, shall occur prior to the Exercise Date.
(F) Notwithstanding
anything to the contrary herein, no holder shall exercise its conversion privilege or be entitled to receive Common Shares upon the exercise
of its conversion privilege to the extent (but only to the extent) that the receipt of such Common Shares would cause EP Accounts, in
the aggregate, to become, directly or indirectly, “beneficial owners” (within the meaning of Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder) of more than 4.9% of the Common Shares outstanding at such time (the “EP
Account Ownership Limitation”). In addition, notwithstanding anything to the contrary herein, no holder that is an investment
company (as defined in the 1940 Act) or would be an investment company but for Section 3(c)(1) or 3(c)(7) of the 1940 Act shall exercise
its conversion privilege or be entitled to receive Common Shares upon the exercise of its conversion privilege, to the extent (but only
to the extent) that the receipt of such Common Shares would cause such holder to become, directly or indirectly, a beneficial owner of
more than 3% of the Voting Securities of the Trust (together with the EP Account Ownership Limitation, the “Ownership Limitations”).
Any purported conversion of 6.95% Series II 2029 Convertible Preferred Shares shall be void and have no effect to the extent (but only
to the extent) that delivery of Common Shares upon such conversion would result in the converting holder or the EP Accounts becoming the
beneficial owner of Common Shares in excess of an Ownership Limitation.
(b) Mandatory
Redemption.
(i) Non-Listing
Event Mandatory Redemption. Upon the occurrence of a Non-Listing Event, the Trust shall, to the extent permitted by the 1940 Act and
Delaware law, by the close of business on the next Business Day immediately following the occurrence of a Non-Listing Date, fix a redemption
date (which date shall be no later than 30 days after the occurrence of the Non-Listing Event) and proceed to redeem all of the outstanding
6.95% Series II 2029 Convertible Preferred Shares in accordance with the procedures for redemption
set forth in Sections 2.5(d) – (f) of the Statement of Preferences and at a price per share equal to the Liquidation Preference
per share plus an amount equal to all unpaid dividends and distributions on such share accumulated to (but excluding) the date fixed for
such redemption by the Board of Trustees (whether or not earned or declared by the Trust, but excluding interest thereon).
(ii) Reorganization
Transaction Mandatory Redemption. In the case of a Reorganization Transaction, the Trust shall, prior to the closing of the Reorganization
Transaction, fix a redemption date and proceed to redeem all of the outstanding 6.95% Series II
2029 Convertible Preferred Shares in accordance with the procedures for redemption set forth in Sections 2.5(d) – (f) of
the Statement of Preferences prior to such closing and at a price per share equal to the Liquidation Preference per share plus an amount
equal to all unpaid dividends and distributions on such share accumulated to (but excluding) the date fixed for such redemption by the
Board of Trustees (whether or not earned or declared by the Trust, but excluding interest thereon).
(c) Irrevocable
Proxy. To the fullest extent permitted by applicable law, each holder may in its discretion grant an irrevocable proxy.
(d) Transfer.
Unless approved in writing by the Trust, a holder may not sell, transfer, convey, assign or otherwise dispose of 6.95% Series
II 2029 Convertible Preferred Shares. Any transfer in violation of the foregoing restrictions shall be void ab initio and any transferee
of 6.95% Series II 2029 Convertible Preferred Shares transferred in violation of the foregoing
restrictions shall be deemed to agree to hold all payments it received on any such improperly transferred 6.95% Series
II 2029 Convertible Preferred Shares in trust for the benefit of the transferor of such 6.95% Series
II 2029 Convertible Preferred Shares.
(e) Status
of Redeemed, Converted or Repurchased Shares. 6.95% Series II 2029 Convertible Preferred Shares
that at any time have been converted into Common Shares as provided herein or redeemed or repurchased by the Trust shall, after such conversion,
redemption or purchase, have the status of authorized but unissued shares of beneficial interest of the Trust.
(f) Withholding.
If any amount of withholding tax is payable with respect to any distribution or other amount paid or deemed paid with respect to the 6.95%
Series II 2029 Convertible Preferred Shares (including constructive distributions), the Trust may withhold such amount from any cash,
property or Common Shares otherwise deliverable (whether presently or in the future) to the holder upon a distribution, redemption, conversion,
or otherwise.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, XAI Octagon
Floating Rate & Alternative Income Trust has caused these presents to be signed as of the date first written above in its name and
on its behalf by its Chief Legal Officer and Secretary and attested by its Vice President. Said officers of the Trust have executed this
Appendix as officers and not individually, and the obligations and rights set forth in this Appendix are not binding upon any such officers,
or the Trustees or shareholders of the Trust, individually, but are binding only upon the assets and property of the Trust.
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XAI OCTAGON FLOATING RATE & |
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ALTERNATIVE INCOME TRUST |
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By: |
/s/ Benjamin D. McCulloch |
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Name: |
Benjamin D. McCulloch |
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Title: |
Chief Legal Officer and Secretary |
ATTEST: |
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/s/ Kimberly A. Flynn |
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Name: |
Kimberly A. Flynn |
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Title: |
Vice President |
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[Appendix D to Statement of Preferences | Signature
Page]
Annex I
6.95% Series II 2029 Convertible Preferred Shares
(Effective as of June 13, 2024)
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Date of Original Issue |
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Convertibility Date |
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Sub-Series A |
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June 13, 2024 |
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December 13, 2024 |
[Annex I to Appendix D to Statement of Preferences]
FORM OF NOTICE OF CONVERSION
XAI Octagon Floating Rate & Alternative Income Trust
321 North Clark Street, Suite 2430
Chicago, IL 60654
Attention: [ ]
The undersigned registered owner of 6.95% Series II 2029 Convertible
Preferred Shares issued by XAI Octagon Floating Rate & Alternative Income Trust (the “Trust”) hereby exercises the option
to convert the number of shares of each such Sub-Series below designated into Common Shares (and cash in lieu of fractional Common Shares,
if applicable), in accordance with the terms of the Trust’s Statement of Preferences.
The undersigned represents that the Common Shares are being acquired
for the holder’s own account and not as a nominee for any other party. The undersigned represents and warrants that all offers and
sales by the undersigned of the Common Shares shall be made pursuant to either an effective registration statement or an exemption from
registration under the Securities Act of 1933, as amended.
If the aggregate number of 6.95% Series II 2029 Convertible Preferred
Shares being converted by all holders thereof on the date hereof is less than 10,000 shares, the undersigned represents that the 6.95%
Series II 2029 Convertible Preferred Shares set forth below represents all 6.95% Series II 2029 Convertible Preferred Shares held by the
holder as of the date hereof that are eligible for conversion.
Capitalized terms used herein but not defined shall have the meanings
ascribed to such terms in the Trust’s Statement of Preferences.
Sub-Series |
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Number of Shares |
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Holder:
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(Print Legal Name of Holder) |
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(Signature of Duly Authorized Representative of Holder) |
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[Annex II to Appendix D to Statement of Preferences]
Exhibit 10.1
Execution Version
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this
“Agreement”) is entered into as of June 10, 2024, by and among XAI Octagon Floating Rate & Alternative Income Trust,
a Delaware statutory trust (the “Trust”), Eagle Point Credit Management
LLC (“Eagle Point”) and each purchaser identified on Appendix A hereto (each, a “Purchaser”
and collectively the “Purchasers”).
WHEREAS, subject to the terms
and conditions set forth in this Agreement, the Trust desires to issue, and each Purchaser, severally and not jointly, desires to purchase
shares of the Trust’s 6.95% Series II 2029 Convertible Preferred Shares, liquidation preference $25.00 per share (the “Series
II 2029 Convertible Preferred Shares”), a series of the Trust’s preferred shares of beneficial interest (the “Preferred
Shares”), upon the terms and conditions as more particularly provided herein; and
NOW, THEREFORE, in consideration
of the foregoing and of the mutual agreements hereinafter contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound, the Trust and each Purchaser hereby agree as follows:
ARTICLE I
PURCHASE AND SALE; CLOSINGS
1.1 Purchase
and Sale of the Shares. At the Initial Closing (as defined in Section 1.2) and any Subsequent Closings (as defined in Section 1.4),
the Trust shall sell to each Purchaser, and each Purchaser, severally and not jointly, shall buy from the Trust, upon the terms and conditions
hereinafter set forth, all or a portion of the number of Series II 2029 Convertible Preferred Shares as specified on Appendix A
to this Agreement as determined by the Trust, in its discretion (such Series II 2029 Convertible Preferred Shares purchased in the Initial
Closing, the “Initial Shares”), and at the purchase price of $23.25 per share. The total purchase commitment of the
Purchasers, severally and not jointly, whether purchased in the Initial Closing or Subsequent Closings, shall be 1,800,000 Series II
2029 Convertible Preferred Shares.
1.2
The Initial Closing. Upon the purchase and sale of the Initial Shares (the “Initial
Closing”), (a) the purchase price for the Initial Shares being purchased by each Purchaser (the “Purchase
Price”) shall be delivered by or on behalf of such Purchaser to the Trust as more particularly provided in Section 1.5 and
(b) the Trust shall cause Equiniti Trust Company, LLC, the Trust’s transfer agent (the “Transfer Agent”),
to deliver to each Purchaser the number of Initial Shares as more particularly provided in Section 1.6.
1.3 Purchases
and Sales of Additional Shares. (a) Each Purchaser, severally and not jointly, hereby agrees to purchase an additional number of
Series II 2029 Convertible Preferred Shares as determined by the Trust, in its discretion, up to the number of Series II 2029 Convertible
Preferred Shares specified on Appendix A to this Agreement less the number of Initial Shares purchased by such Purchaser (such
additional Series II 2029 Convertible Preferred Shares, the “Additional Shares” and, together with the Initial Shares,
the “Shares”) at the purchase price of $23.25 per Additional Share. Each Purchaser, severally and not jointly, shall
purchase Additional Shares in the same proportion as the number of Shares purchased by each Purchaser at the Initial Closing at such
times, dates and locations as determined by the Trust in its discretion on or before December 10, 2025 (each such purchase of Additional
Shares, a “Subsequent Closing” and, together with the Initial Closing, each a “Closing”).
(b) At each Subsequent Closing,
(a) the purchase price for the Additional Shares being purchased by each Purchaser (the “Additional Shares Purchase Price”)
shall be delivered by or on behalf of such Purchaser to the Trust as more particularly provided in Section 1.5 and (b) the Trust shall
cause the Transfer Agent to deliver to each Purchaser the number of Additional Shares to be purchased by each Purchaser, as more particularly
provided in Section 1.6. The Additional Shares sold by the Trust to the Purchasers at each Subsequent Closing will be designated as a
separate sub-series of the Preferred Shares.
1.4 Notice
of Closings. The Trust shall provide notice of each Closing to each Purchaser no fewer than six (6) business days prior to such Closing
which shall specify the time, date and location of such Closing and the number of Initial Shares or Additional Shares, as applicable,
to be purchased by such Purchaser, and the corresponding Purchase Price or Additional Shares Purchase Price, as applicable.
1.5 Delivery
of the Purchase Price. At each Closing, each Purchaser shall remit by wire transfer the amount of funds equal to the Purchase Price
or Additional Share Purchase Price, as applicable, with respect to the Shares being purchased by it to the account designated by the
Trust.
1.6 Delivery
of the Shares. On the date of the Initial Closing and the date of each Subsequent Closing (each, a “Closing Date”),
the Transfer Agent shall update the share register for the Series II 2029 Convertible Preferred Shares to reflect the names and addresses
of each Purchaser and the number of shares of each sub-series of Series II 2029 Convertible Preferred Shares held by each Purchaser.
1.7 Conditions
to the Trust’s Obligations. The Trust’s obligation to sell and issue the Shares to each Purchaser will be subject to the
receipt by the Trust of the respective Purchase Price or Additional Share Purchase Price, as applicable, from such Purchaser as set forth
in Section 1.5 and the accuracy of the representations and warranties made by such Purchaser and the fulfillment of those undertakings
of such Purchaser to be fulfilled prior to the applicable Closing Date.
1.8 Conditions
to Purchaser’s Obligations. Each Purchaser’s obligation to purchase the respective Shares to be purchased by it hereunder
is subject to the fulfillment to each such Purchaser’s reasonable satisfaction, prior to or at such Closing, of the following conditions:
(a) The
representations and warranties of the Trust in this Agreement shall be correct when made and at such Closing.
(b) The
Trust shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied
with by it prior to or at such Closing.
(c) The
Trust shall have delivered to each such Purchaser an officer’s certificate from the Trust’s President, Vice President or other
senior officer, dated the date of such Closing, certifying that the conditions specified in Sections 1.8(a) and 1.8(b) have been fulfilled.
(d) The
Trust shall have delivered to each such Purchaser a certificate of its Secretary, dated the date of such Closing, certifying as to (i)
the resolutions attached thereto and other trust proceedings relating to the authorization, issuance and sale of the Shares and the authorization,
execution and delivery of this Agreement and (ii) the Trust’s organizational documents as then in effect.
(e) At
least three Business Days prior to the date of the applicable Closing, each Purchaser shall have received written instructions signed
by an officer of the Trust on letterhead of the Trust specifying (i) the name and address of the transferee bank, (ii) such transferee
bank’s ABA number and (iii) the account name and number into which the Purchase Price or Additional Share Purchase Price, as applicable,
for the Shares is to be deposited.
(f) Such
Purchaser shall have received an opinion, dated as of the date of the Initial Closing, from Skadden, Arps, Slate, Meagher & Flom LLP,
special counsel for the Trust, as to the validity of the Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Purchaser
Representations and Warranties. In connection with the purchase and sale of the Shares, each Purchaser represents and warrants,
severally and not jointly, to the Trust that:
(a) Such
Purchaser understands that the Shares are “restricted securities” and have not been registered under the Securities Act of
1933, as amended (the “Securities Act”), or any applicable state securities laws and such Purchaser is acquiring the
Shares as principal for its own account and not with a view to or for the purpose of distributing or reselling such securities or any
part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of
such Shares in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings
with any other persons to distribute or regarding the distribution of such Shares in violation of the Securities Act or any applicable
state securities law.
(b) Each
Purchaser severally represents that it (a) is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act, (b) either alone or together with its representatives has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of this investment and make an informed decision to so invest, and has so
evaluated the risks and merits of such investment and made such informed decision to so invest, (c) has the ability to bear the economic
risks of this investment and can afford a complete loss of such investment, (d) understands the terms of and risks associated with the
purchase of the Shares, including a lack of liquidity, pricing availability and risks associated with the industry in which the Trust
operates, (e) has had the opportunity to review the Disclosure Documents (as defined below) and such other disclosure regarding the Trust,
its business and its financial condition as such Purchaser has determined to be necessary or relevant in connection with the purchase
of the Shares, and has carefully reviewed such disclosure and (f) has had a full opportunity to ask such questions and make such inquiries
concerning the Trust, its business and its financial condition as such Purchaser has deemed appropriate in connection with such purchase
and to receive satisfactory answers to such questions and inquiries.
(c) Such
Purchaser has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby
and has taken all necessary action to authorize the execution, delivery and performance of this Agreement. Eagle Point, in its capacity
as agent and/or investment manager of each Purchaser, is duly authorized and empowered to execute this Agreement on behalf of each Purchaser.
This Agreement has been duly and validly authorized, executed and delivered by or on behalf of each Purchaser and this Agreement constitutes
a valid and binding obligation of such Purchaser enforceable against such Purchaser in accordance with its terms.
(d) Such
Purchaser understands that nothing in this Agreement or any other materials presented to Purchaser in connection with the purchase and
sale of the Shares constitutes legal, tax or investment advice. Such Purchaser has consulted such legal, tax and investment advisors as
it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of Shares.
(e) Such
Purchaser is not (i) currently subject to any sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department
(“OFAC”), the European Union, the United Kingdom, or the United Nations or any other relevant sanctions authority or
(ii) located, organized or resident in a country or territory that is subject to sanctions by OFAC or any other relevant sanctions authority;
and such Purchaser will knowingly use funds from any payment made pursuant to the terms of the Shares, or lend, contribute or otherwise
make available such funds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities
of any person currently subject to any U.S. sanctions administered by OFAC or any other relevant sanctions authority.
2.2 Trust
Representations and Warranties. In connection with the purchase and sale of the Shares, the Trust represents and warrants to each
Purchaser that:
(a) The
Trust (i) has been duly formed and has legal existence as a statutory trust and is in good standing under the laws of the State of Delaware;
(ii) has full power and authority to own, lease and operate its properties and assets, and conduct its business as currently conducted;
(iii) is duly licensed and qualified to transact business and is in good standing in each jurisdiction where it owns or leases property
or in which the conduct of its business or other activity requires such qualification, except where the failure to so qualify or to be
in good standing would not have a material adverse effect on the Trust.
(b) The
Trust has full power and authority to enter into this Agreement and to perform all of the terms and provisions hereof to be carried out
by it. This Agreement has been duly and validly authorized, executed and delivered by or on behalf of the Trust. Assuming due authorization,
execution and delivery by the other parties thereto, this Agreement constitutes a legal, valid and binding obligation of the Trust enforceable
in accordance with its terms, subject to the qualification that the enforceability of the Trust’s obligations thereunder may be
limited by U.S. bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and similar laws affecting creditors’
rights generally, whether statutory or decisional, and to general equitable principles (regardless of whether enforcement is sought in
a proceeding in equity or at law), and except as enforcement of rights to indemnity or contribution thereunder may be limited by federal
or state securities laws.
(c) The
Shares to be issued and delivered to and paid for by the Purchasers in accordance with this Agreement have been duly authorized and when
issued and delivered to the Purchasers against payment therefor as provided by this Agreement will have been validly issued and will be
fully paid and nonassessable.
(d) The
Trust’s Annual Report on Form N-CSR for the fiscal year ended September 30, 2023, as filed with the SEC on November 29, 2023, and
the Trust’s Semi-Annual Report on Form N-CSRS for the period ended March 31, 2024, as filed with the SEC on May 29, 2024 (collectively,
the “Disclosure Documents”), do not contain any untrue statement of a material fact, except to the extent updated or
corrected in a subsequent filing by the Trust with the SEC. The Disclosure Documents and all other applicable reports filed by the Trust
with the SEC fairly describe, in all material respects, the general nature of the business and principal properties of the Company and
its Subsidiaries. Except as disclosed in the Disclosure Documents, since March 31, 2024, there has been no material adverse change in
the condition (financial or otherwise), business prospects, management, net assets or results of operations of the Trust, whether or not
arising in the ordinary course of business (other than changes resulting from changes in securities markets generally).
(e) The
financial statements, including the statement of assets and liabilities, together with any related notes or schedules thereto, included
in the Disclosure Documents present fairly the financial position of the Trust as of the dates and for the periods indicated and such
statements were prepared in accordance with generally accepted accounting principles in the United States applied on a consistent basis.
(e) None
of (i) the execution and delivery by the Trust of this Agreement, (ii) the issuance and sale by the Trust of the Shares as contemplated
by this Agreement and (iii) the performance by the Trust of its obligations under this Agreement (A) conflicts with or will conflict with,
or results in or will result in a breach or violation of the declaration of trust (as amended and restated from time to time), Statement
of Preferences of Term Preferred Shares, as amended through the date hereof (“Statement of Preferences”), bylaws or
similar organizational documents of the Trust, (B) conflicts with or will conflict with, results in or will result in a breach or violation
of, or constitutes or will constitute a default or an event of default under, or results in or will result in the creation or imposition
of any lien, charge or encumbrance upon any properties or assets of the Trust under the terms and provisions of any agreement, indenture,
mortgage, loan agreement, note, insurance or surety agreement, lease or other instrument to which the Trust is a party or by which it
may be bound or to which any of the property or assets of the Trust is subject, except which breach, violation, default, lien, charge
or encumbrance would not have a material adverse effect on the Trust, or (C) results in or will result in any violation of any order,
law, rule or regulation of any court, governmental instrumentality, securities exchange or association or arbitrator, whether foreign
or domestic, applicable to the Trust or having jurisdiction over the Trust’s properties, except which violation would not have a
material adverse effect on the Trust.
(f) No
consent, approval, authorization, notification or order of, or filing with, or the issuance of any license or permit by, any federal,
state, local or foreign court or governmental or regulatory agency, commission, board, authority or body or with any self-regulatory organization,
other non-governmental regulatory authority, securities exchange or association, whether foreign or domestic, is required by the Trust
for the consummation by the Trust of the transactions to be performed by the Trust or the performance by the Trust of all the terms and
provisions to be performed by or on behalf of it in each case as contemplated in this Agreement, except such as (i) may be required and
have been obtained under the Securities Act; the Securities Exchange Act of 1934, as amended; the Investment Company Act of 1940, as amended
(the “Investment Company Act”); or the Investment Advisors Act of 1940, as amended or (ii) which failure to obtain
would not have a material adverse effect on the Trust.
(g) Except as otherwise
disclosed by the Trust to the Purchasers, there is no action, suit, claim, inquiry, investigation or proceeding affecting the Trust or
to which the Trust is a party before or by any court, commission, regulatory body, administrative agency or other governmental agency
or body, whether foreign or domestic, now pending or, to the knowledge of the Trust, threatened against the Trust, except which would
not have a material adverse effect on the Trust.
(h) The
operations of the Trust are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the Money Laundering Control Act of 1986, as amended, the
Bank Secrecy Act, as amended, the United and Strengthening of America by Providing Appropriate tools Required to Intercept and Obstruct
Terrorism Act (USA PATRIOT Act) of 2011, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder
and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively,
the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority
or body or any arbitrator involving the Trust with respect to the Money Laundering Laws is pending or, to the knowledge of the Trust after
reasonable inquiry, threatened.
(i) The Trust intends to
direct the investment of the proceeds of the offering of the Shares in such a manner as to comply with the requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and has qualified and intends to
continue to operate in compliance with the requirements to maintain its qualification as a regulated investment company under
Subchapter M of the Code.
(j) Neither
the Trust, nor to the knowledge of the Trust, after reasonable inquiry, any trustee, officer, agent, employee or affiliate of the Trust
is (i) currently subject to any sanctions administered by OFAC, the European Union, the United Kingdom, or the United Nations or any other
relevant sanctions authority or (ii) located, organized or resident in a country or territory that is subject to sanctions by OFAC or
any other relevant sanctions authority; and the Trust will not directly or indirectly use the proceeds of the offering, or lend, contribute
or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing
the activities of any person currently subject to any U.S. sanctions administered by OFAC or any other relevant sanctions authority.
(k) The
Trust is duly registered with the Commission under the Investment Company Act as a diversified, closed-end management investment company;
the provisions of the Trust’s declaration of trust (as amended and restated from time to time), Statement of Preferences and bylaws
comply in all material respects with the requirements of the Investment Company Act.
(l) Private
Placement of Shares.
(i) Neither
the Trust nor any of its affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act (“Regulation D”))
has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security
(as defined in the Securities Act) that is or will be integrated with the sale of the Shares in a manner that would require registration
of the Shares under the Securities Act.
(ii) None
of the Trust or any of its affiliates (as defined in Rule 501(b) of Regulation D) or any other person acting on its or their behalf has
solicited offers for, or offered or sold, the Shares by means of any form of general solicitation or general advertising within the meaning
of Rule 502(c) of Regulation D or in any manner involving a public offering within the meaning of Section 4(a)(2) of the Securities Act.
(iii) Neither
the Trust nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Shares to
the registration requirements of section 5 of the Securities Act or to the registration requirements of any securities or blue sky laws
of any applicable jurisdiction. Assuming the accuracy of the representations and warranties of the Purchasers contained herein, it is
not necessary, in connection with the issuance and sale of the Shares to the Purchasers to register the Shares under the Securities Act.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Unissued
Shares Payment. In the event the Trust does not sell to each Purchaser all Series II 2029 Convertible Preferred Shares which such
Purchaser has agreed to purchase by December 10, 2025 the Trust will pay to each Purchaser an amount equal to $0.75 per unissued Share.
3.2 Restrictions
on Transfer. For so long as the Series II 2029 Convertible Preferred Shares are outstanding, Eagle Point and any successor investment
adviser responsible for managing an investment in the Shares, shall not and shall not cause any EP Account to, or in the event that no
investment adviser is responsible for managing the Shares, each Purchaser shall not, sell, offer, pledge, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, otherwise transfer or dispose
of or enter into any swap or other agreement, arrangement, hedge or transaction that transfers into another, in whole or in part, directly
or indirectly, and of the economic consequences of ownership of any Series II 2029 Convertible Preferred Shares or shares of any other
series of Preferred Shares that the EP Accounts or Purchasers, as applicable, hold; provided, that the foregoing shall in no way restrict
(i) the redemption of Preferred Shares by the Trust pursuant to the Statement of Preferences or (ii) the exercise of the Purchasers’
option to convert the Shares into common shares of beneficial interest of the Trust (“Common Shares”) pursuant to the
terms of the Statement of Preferences.
3.4 Voting.
Each Purchaser hereby grants to the Trust an irrevocable proxy to vote at any annual or special meeting of shareholders of the Trust all
of the Series II 2029 Convertible Preferred Shares that such Purchaser holds in the same proportion as the vote of all other holders of
Preferred Shares of the Trust.
3.5 Beneficial
Ownership of Common Shares Information. For so long as the Series II 2029 Convertible Preferred Shares are outstanding, in connection
with the limitation on beneficial ownership provided in Section 12(a)(ii)(F) of Appendix D to the Statement of Preferences and upon written
request of the Trust, Eagle Point will provide the Trust, within five (5) business days of such request, a report regarding the aggregate
Common Share ownership of any funds or accounts managed by Eagle Point (the “EP Accounts”) as of the most recent quarter
end.
3.6 Limitation
on Sale of Common Shares. For so long as the Series II 2029 Convertible Preferred Shares are outstanding, Eagle Point and any successor
investment adviser responsible for managing an investment in the Shares, shall not and shall not cause any Purchaser to, or in the event
that no investment adviser is responsible for managing the Shares, each Purchaser shall not, sell, offer, pledge, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, otherwise transfer or dispose
of or enter into any swap or other agreement, arrangement, hedge or transaction that transfers into another, in whole or in part, directly
or indirectly, and of the economic consequences of ownership of any Common Shares of the Trust that they hold, whether now owned or hereafter
acquired (including pursuant to the conversion of the Series II 2029 Convertible Preferred Shares), to the extent (but only to the extent)
that the aggregate number of Common Shares so sold, transferred or otherwise disposed of by the holders of Series II 2029 Convertible
Preferred shares, in the aggregate, on any one day would exceed the greater of (i) 20% of the average daily trading volume of the Common
Shares over the twenty (20) Trading Days immediate preceding such day and (ii) 20% of the current Trading Day’s trading volume of
the Common Shares.
3.7 Tax
Information. On the date of the Initial Closing, each Purchaser shall deliver to the Trust a properly completed and executed IRS Form
W-9, dated as of the date of the Initial Closing, and shall update or replace such form from time to time upon any subsequent obsolescence,
inaccuracy, or other invalidity thereof.
3.8 Listing
of Common Stock. The Trust covenants and agrees that the Trust shall list and keep listed, so long as the Common Shares shall be so
listed on such exchange or automated quotation system, any Common Shares issuable upon conversion of the Shares.
ARTICLE IV
GENERAL PROVISIONS
4.1 Survival of
Representations, Warranties and Agreements. Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Trust and each Purchaser hereby will survive the execution of this
Agreement, the delivery to such Purchaser of the Shares and the payment by such Purchaser of the Purchase Price or Additional Shares
Purchase Price, as applicable, therefor for a period of one year.
4.2 Entire
Agreement. This Agreement represents the entire agreement among the parties with respect to the transactions contemplated herein and
supersedes all prior agreements, written or oral, with respect thereto.
4.3 Amendment
and Waiver. The provisions of this Agreement may be amended only with the prior written consent of the Trust and each Purchaser. The
failure of any party to insist upon strict adherence to any one or more of the covenants and restrictions in this Agreement, on one or
more occasion, shall not be construed as a waiver, nor deprive such party of the right to require strict compliance thereafter with the
same. All waivers must be in writing and signed by the waiving party.
4.4 Expenses.
The Trust will pay all expenses, including attorneys’ fees, in connection with the negotiation of this Agreement, the performance
of its obligations hereunder, and the consummation of the transactions contemplated by this Agreement; provided that the maximum amount
of fees, costs and expenses incurred by the Purchasers that the Trust shall be required to pay shall be $50,000.
4.5 Successors
and Assigns. This Agreement and all of the provisions hereof will be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns; provided, however, that neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by any party without the prior written consent of each other party, except that the Shares may be
transferred by each Purchaser without the consent of the Trust.
4.6 Governing
Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect
to the choice of law principles thereof.
4.7 Counterparts.
This Agreement may be executed in counterparts, each of which shall be an original and all of which shall constitute a single
agreement. Delivery of an executed signature page of this Agreement by facsimile or other electronic transmission shall be effective
as delivery of a manually executed counterpart hereof.
4.8 Severability.
The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect
the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any
person or entity or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such provision to other persons, entities or circumstances
shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or
enforceability of such provision, or the application thereof, in any other jurisdiction.
4.9 Construction.
Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other
covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed
to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any person, or which such
person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such
person, whether or not expressly specified in such provision. The construction of this Agreement shall not be affected by which
party drafted this Agreement.
4.10 Headings.
The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction
of any provision of this Agreement.
4.11 Further
Assurances. In connection with this Agreement and the transactions contemplated herein, the parties to this Agreement shall execute
and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate
and perform the provisions of this Agreement and such transactions.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have executed
this Purchase Agreement on the date first written above.
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XAI OCTAGON FLOATING RATE & ALTERNATIVE INCOME TRUST |
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/s/ Benjamin D. McCulloch |
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Name: |
Benjamin D. McCulloch |
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Title: |
Chief Legal Officer & Secretary |
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EAGLE POINT CREDIT MANAGEMENT LLC |
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(solely with respect to Sections 3.2, 3.5 and 3.6) |
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/s/ Taylor Pine |
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Name: |
Taylor Pine |
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Title: |
Director |
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PURCHASERS: |
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By: |
EAGLE POINT CREDIT MANAGEMENT LLC |
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On behalf of each Purchaser listed on Appendix A hereto |
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/s/ Taylor Pine |
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Name: |
Taylor Pine |
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Title: |
Director |
10
Exhibit 99.1
XAI Octagon Floating Rate & Alternative
Income Trust Announces Agreement for Private Placement of Convertible Preferred Shares
CHICAGO, Illinois – June 10, 2024
– XAI Octagon Floating Rate & Alternative Income Trust (the “Trust”) (NYSE: XFLT), a diversified, closed-end management
investment company with an investment objective to seek attractive total return with an emphasis on income generation across multiple
stages of the credit cycle, has entered into a Purchase Agreement with certain institutional investors for the purchase and sale of 1,800,000
shares of the Trust’s 6.95% Series II 2029 Convertible Preferred Shares due December 2029 (the “Convertible Preferred Shares”),
liquidation preference $25.00 per share. Assuming the issuance and sale of all of the Convertible Preferred Shares, the Trust expects
to receive net proceeds (before expenses) from the sale of the Convertible Preferred Shares of approximately $41.85 million. No Convertible
Preferred Shares are being issued at this time. Pursuant to the Purchase Agreement, the investors have agreed to purchase the Convertible
Preferred Shares, at one or more closings on or before December 10, 2025, as determined by the Trust in its discretion.
The Convertible Preferred Shares, when issued,
will pay a quarterly dividend at a fixed annual rate of 6.95% of the liquidation preference, or $1.7375 per share, per year.
The Trust will be required to redeem, out of funds
legally available therefor, all outstanding Convertible Preferred Shares on December 31, 2029, or the “Term Redemption Date,”
at a price equal to the liquidation preference plus an amount equal to accumulated but unpaid dividends and distributions, if any, on
such shares (whether or not earned or declared, but excluding interest on such dividends) to, but excluding, the Term Redemption Date.
At any time on or after the date eighteen months
after the first issuance of Convertible Preferred Shares, at the Trust’s sole option, the Trust may redeem, from time to time, the
Convertible Preferred Shares in whole or in part, out of funds legally available for such redemption, at a price per share equal to the
sum of the liquidation preference plus an amount equal to accumulated but unpaid dividends, if any, on such shares (whether or not earned
or declared, but excluding interest on such dividends) to, but excluding, the date fixed for such redemption.
Each holder of a Convertible Preferred Share shall
have the right, at such holder’s option, to convert any such Convertible Preferred Share, at any time on or after the date six months
after the issuance date of the Convertible Preferred Share (the “Convertibility Date”) and prior to the close of business
on the business day immediately preceding the Term Redemption Date, into such number of common shares of beneficial interest (“Common
Shares”) equal to the liquidation preference of the Convertible Preferred Share plus an amount equal to all unpaid dividends and
distributions on such Share accumulated to (but excluding) the date of exercise, divided by the Conversion Price. The “Conversion
Price” is the greater of (i) the market price per Common Share, represented by the five-day volume-weighted average price (“VWAP”)
per Common Share ending on the trading day immediately preceding the date of exercise, or (ii) the Trust’s most recently reported
net asset value per Common Share immediately prior to the date of exercise.
The Convertible Preferred Shares will not be listed
on any exchange and may not be transferred without the consent of the Trust.
Additional information regarding the Convertible
Preferred Shares are included in a Current Report on Form 8-K to be filed with the U.S. Securities and Exchange Commission (“SEC”).
The Convertible Preferred Shares were offered
directly to the purchasers without a placement agent, underwriter, broker or dealer.
The Convertible Preferred Shares and the Common
Shares into which the Convertible Preferred Shares are convertible are being issued in reliance upon an exemption from registration under
the Securities Act of 1933 (the “Securities Act”) and have not been registered under the Securities Act or any state securities
laws and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from such registration
requirements.
This press release shall not constitute an offer
to sell or a solicitation of an offer to buy the Convertible Preferred Shares, nor shall there be any sale of Convertible Preferred Shares
in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification
under the securities laws of such jurisdiction.
About XA Investments
XA Investments LLC (“XAI”) serves
as the Trust’s investment adviser. XAI is a Chicago-based firm founded by XMS Capital Partners in April, 2016. In addition to investment
advisory services, the firm also provides investment fund structuring and consulting services focused on registered closed-end funds to
meet institutional client needs. XAI offers custom product build and consulting services, including development and market research, sales,
marketing, fund management and administration. XAI believes that the investing public can benefit from new vehicles to access a broad
range of alternative investment strategies and managers. XAI provides individual investors with access to institutional-caliber alternative
managers. For more information, please visit www.xainvestments.com.
About XMS Capital Partners
XMS Capital Partners, LLC, established in 2006,
is a global, independent financial services firm providing M&A, corporate advisory and asset management services to clients. It has
offices in Chicago, Boston and London. For more information, please visit www.xmscapital.com.
About Octagon Credit Investors
Octagon
Credit Investors, LLC (“Octagon”) serves as the Trust’s investment sub-adviser. Octagon is a 25+ year old, $34.4B below-investment
grade corporate credit investment adviser focused on leveraged loan, high yield bond and structured credit (CLO debt and equity) investments.
Through fundamental credit analysis and active portfolio management, Octagon’s investment team identifies attractive relative value
opportunities across below-investment grade asset classes, sectors and issuers. Octagon’s investment philosophy and methodology
encourage and rely upon dynamic internal communication to manage portfolio risk. Over its history, the firm has applied a disciplined,
repeatable and scalable approach in its effort to generate attractive risk-adjusted returns for its investors. For more information, please
visit www.octagoncredit.com.
* * *
The Trust, XAI and Octagon
do not provide tax advice; consult a professional tax advisor regarding your specific tax situation. Income may be subject to state and
local taxes, as well as the federal alternative minimum tax.
This press release contains
certain statements that may include “forward-looking statements.” Forward-looking statements can be identified by the words
“may,” “will,” “intend,” “expect,” “estimate,” “continue,” “plan,”
“anticipate,” and similar terms and the negatives of such terms. By their nature, all forward-looking statements involve risks
and uncertainties, and actual results could differ materially from those contemplated by the forward-looking statements. Many factors
that could materially affect the Trust’s actual results are the performance of the portfolio of securities held by the Trust, the
conditions in the U.S. and international financial and other markets, the price at which Preferred Shares trade in the public markets
and other factors discussed in the Trust’s prospectus supplement and accompanying base prospectus and to be discussed in the Trust’s
periodic filings with the SEC.
Although
the Trust believes that the expectations expressed in such forward-looking statements are reasonable, actual results could differ materially
from those expressed or implied in such forward-looking statements. The Trust’s future financial condition and results of operations,
as well as any forward-looking statements, are subject to change and are subject to inherent risks and uncertainties. You are cautioned
not to place undue reliance on these forward-looking statements, which are made as of the date of this press release. Except for the Trust’s
ongoing obligations under the federal securities laws, the Trust does not intend, and the Trust undertakes no obligation, to update any
forward-looking statement.
NOT
FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
Company Contact:
Kimberly Flynn, Managing Director
XA Investments LLC
Phone: 1-888-903-3358
Email: info@xainvestments.com
www.xainvestments.com
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