Exhibit 10.2

 

EXECUTION VERSION

 

COLLATERAL MANAGEMENT AGREEMENT

 

dated as of November 16, 2018

 

by and between

 

GOLUB CAPITAL BDC CLO III LLC,

as Issuer

 

and

 

GC ADVISORS LLC,

as Collateral Manager

 

   

 

 

Table of Contents

 

    Page       Section 1. Definitions 1 Section 2. General Duties and Authority
of the Collateral Manager 4 Section 3. Purchase and Sale Transactions; Brokerage
9 Section 4. Additional Activities of the Collateral Manager 11 Section 5.
Conflicts of Interest 14 Section 6. Records; Confidentiality 15 Section 7.
Obligations of Collateral Manager 16 Section 8. Compensation 17 Section 9.
Benefit of the Agreement 19 Section 10. Limits of Collateral Manager
Responsibility 19 Section 11. No Joint Venture 21 Section 12. Term; Termination
21 Section 13. Assignments 23 Section 14. Removal for Cause 24 Section 15.
Obligations of Resigning or Removed Collateral Manager 27 Section 16.
Representations and Warranties 27 Section 17. Limited Recourse; No Petition 30
Section 18. Notices 31 Section 19. Binding Nature of Agreement; Successors and
Assigns 32 Section 20. Entire Agreement; Amendment 32 Section 21. Governing Law
33 Section 22. Submission to Jurisdiction 33 Section 23. Waiver of Jury Trial 34
Section 24. Conflict with the Indenture 34 Section 25. Subordination; Assignment
of Agreement 34 Section 26. Indulgences Not Waivers 34 Section 27. Costs and
Expenses 35 Section 28. Third Party Beneficiary 35 Section 29. Titles Not to
Affect Interpretation 36 Section 30. Execution in Counterparts 36

 

 i 

 

 

Table of Contents

(continued)

 

    Page       Section 31. Provisions Separable 36 Section 32. Gender 36 Section
33. Communications with Rating Agencies 36

 

 ii 

 

 

COLLATERAL MANAGEMENT AGREEMENT

 

This Collateral Management Agreement (as amended, supplemented or otherwise
modified from time to time, this “Agreement”), dated as of November 16, 2018 is
entered into by and between GOLUB CAPITAL BDC CLO iii llc, a limited liability
company organized under the laws of the State of Delaware (the “Issuer”), and GC
ADVISORS LLC, a limited liability company organized under the laws of the State
of Delaware, as collateral manager (together with its successors and permitted
assigns, “GC Advisors” and the “Collateral Manager”).

 

WITNESSETH:

 

WHEREAS, the Notes (as defined in the Indenture) will be issued pursuant to an
indenture dated as of the date hereof (the “Indenture”), among the Issuer and
U.S. Bank National Association, as trustee (the “Trustee”);

 

WHEREAS, the Issuer intends to pledge all Collateral Obligations and the other
Assets, all as set forth in the Indenture, to the Trustee as security for the
Issuer’s obligations under the Indenture;

 

WHEREAS, the Issuer desires to appoint GC Advisors as the Collateral Manager to
provide the services described herein and GC Advisors desires to accept such
appointment;

 

WHEREAS, the Indenture authorizes the Issuer to enter into this Agreement,
pursuant to which the Collateral Manager agrees to perform, on behalf of the
Issuer, certain investment management duties with respect to the acquisition,
administration and disposition of Assets in the manner and on the terms set
forth herein and to perform such additional duties as are consistent with the
terms of this Agreement and the Indenture as the Issuer may from time to time
reasonably request; and

 

WHEREAS, the Collateral Manager has the capacity to provide the services
required hereby and is prepared to perform such services upon the terms and
subject to the conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual agreements herein set forth and
of other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

 

Section 1.           Definitions.

 

(a)As used in this Agreement:

 

“Advisers Act” shall mean the U.S. Investment Advisers Act of 1940, as amended.

 

“Affiliate Transaction” shall have the meaning set forth in Section 5.

 

“Aggregate Collateral Management Fee” shall have the meaning set forth in
Section 8(a).

 

  

 

 

“Agreement” shall have the meaning set forth in the preamble.

 

“Cause” shall have the meaning set forth in Section 14(a).

 

“Client” shall mean, with respect to any specified Person, any Person or account
for which the specified Person provides investment management services or
investment advice.

 

“CM Information” shall mean the CM Offering Circular Information and any
amendment or supplement approved by the Collateral Manager to the Final Offering
Circular that supplements or amends any of the CM Offering Circular Information
(including any offering circular approved in writing by the Collateral Manager
for additional Notes issued pursuant to Section 2.13 of the Indenture, or for
replacement securities issued in connection with a Refinancing in part by Class
of one or more Classes of Secured Notes, or any offering circular in connection
with a Re-Pricing).

 

“CM Offering Circular Information” shall mean the information in the Final
Offering Circular set forth under the headings “Risk Factors—Relating to Certain
Conflicts of Interest—Certain Conflicts of Interest Relating to the Collateral
Manager and its Affiliates,” “Risk Factors—Risks Relating to the Collateral
Manager—The Collateral Manager relies on affiliates for certain services,” “Risk
Factors—Relating to Certain Conflicts of Interest—Conflicts related to
obligations of the Collateral Manager’s investment committee, the Collateral
Manager, or its affiliates to other clients,” “Risk Factors—Relating to Certain
Conflicts of Interest—No Ethical Screens or Information Barriers” and “The
Collateral Manager and the Retention Provider”.

 

“Collateral Management Fee” shall have the meaning set forth in Section 8(a).

 

“Collateral Management Fee Shortfall Amount” shall have the meaning set forth in
Section 8(a).

 

“Collateral Manager” shall have the meaning set forth in the preamble.

 

“Collateral Manager Breaches” shall have the meaning set forth in Section 10(a).

 

“Collateral Manager Notes” shall mean any Notes owned by the Collateral Manager,
an Affiliate thereof, or any account, fund, client or portfolio established and
controlled by the Collateral Manager or an Affiliate thereof or for which the
Collateral Manager or an Affiliate thereof acts as the investment adviser or
with respect to which the Collateral Manager or an Affiliate thereof exercises
discretionary control thereover.

 

“Cumulative Deferred Management Fee” shall have the meaning set forth in Section
8(a).

 

“Current Deferred Management Fee” shall have the meaning set forth in Section
8(a).

 

“Expenses” shall have the meaning set forth in Section 10(b).

 

 2 

 

 

“Fee Basis Amount” shall mean, as of any date of determination, the sum of (a)
the Collateral Principal Amount, (b) the aggregate outstanding principal balance
of all Defaulted Obligations and (c) the aggregate amount of all Principal
Financed Accrued Interest.

 

“Final Offering Circular” shall mean the final offering circular, dated as of
November 12, 2018, with respect to the Notes.

 

“Indemnified Party” shall have the meaning set forth in Section 10(b).

 

“Indenture” shall have the meaning set forth in the recitals hereto.

 

“Independent Review Party” shall have the meaning set forth in Section 5.

 

“Instrument of Acceptance” shall have the meaning set forth in Section 12(c).

 

“Internal Policies” shall have the meaning set forth in Section 3(b).

 

“Issuer” shall have the meaning set forth in the preamble.

 

“Losses” shall have the meaning set forth in Section 10(b).

 

“Material Adverse Effect” shall mean, with respect to any event or circumstance,
a material adverse effect on (a) the business, financial condition (other than
the performance of the Assets) or operations of the Issuer, taken as a whole,
(b) the validity or enforceability of the Indenture, this Agreement or the
Issuer’s Organizational Instruments or (c) the existence, perfection, priority
or enforceability of the Trustee’s lien on the Assets.

 

“Offering Circulars” shall mean, collectively, the Final Offering Circular, the
Second Preliminary Offering Circular and the Preliminary Offering Circular.

 

“Organizational Instruments” shall mean the memorandum and articles of
association or certificate of incorporation and bylaws (or the comparable
documents for the applicable jurisdiction), in the case of a corporation, or the
partnership agreement, in the case of a partnership, or the certificate of
formation and limited liability company agreement (or the comparable documents
for the applicable jurisdiction), in the case of a limited liability company.

 

“Owner” shall mean, with respect to any Person, any direct or indirect
shareholder, member, partner or other equity or beneficial owner thereof.

 

“Preliminary Offering Circular” shall mean the preliminary offering circular,
dated October 15, 2018, with respect to the Notes.

 

“Prime Rate” shall mean, as of any date of determination, that certain rate
quoted in the Wall Street Journal as the U.S. “prime rate” on such date (or, if
not quoted on such date, on the preceding date on which it is so quoted).

 

“Proceedings” shall have the meaning set forth in Section 22.

 

 3 

 

 

“Related Person” shall mean, with respect to any Person, the owners of the
equity interests therein, directors, officers, employees, managers, agents and
professional advisors thereof.

 

“Responsible Officer” shall mean, with respect to any Person, any duly
authorized director, officer or manager of such Person with direct
responsibility for the administration of the applicable agreement and also, with
respect to a particular matter, any other duly authorized director, officer or
manager of such Person to whom such matter is referred because of such
director’s, officer’s or manager’s knowledge of and familiarity with the
particular subject. Each party may receive and accept a certification of the
authority of any other party (which may contain contact information including an
email address) as conclusive evidence of the authority of any Person to act, and
such certification may be considered as in full force and effect until receipt
by such other party of written notice to the contrary.

 

“Second Preliminary Offering Circular” shall mean the Second Preliminary
Offering Circular, dated October 30, 2018, with respect to the Notes.

 

“Section 28(e)” shall have the meaning set forth in Section 3(b).

 

“Statement of Cause” shall have the meaning set forth in Section 14(a).

 

“Termination Notice” shall have the meaning set forth in Section 14(a).

 

“Transaction” shall mean any action taken by the Collateral Manager on behalf of
the Issuer with respect to the Assets, including, without limitation, (i)
selecting the Collateral Obligations and Eligible Investments to be acquired by
the Issuer, (ii) investing and reinvesting the Assets, (iii) amending, waiving
and/or taking any other action commensurate with managing the Assets and (iv)
instructing the Trustee with respect to any acquisition, disposition or tender
of a Collateral Obligation, Equity Security, Eligible Investment or other assets
received in respect thereof in the open market or otherwise by the Issuer.

 

“Trustee” shall have the meaning set forth in the recitals hereto.

 

(b)          Capitalized terms used but not otherwise defined herein shall have
the respective meanings assigned thereto in the Indenture. Unless the context
requires otherwise, references to “Section” mean a section of this Agreement.

 

Section 2.           General Duties and Authority of the Collateral Manager.

 

(a)          GC Advisors is hereby appointed as Collateral Manager of the Issuer
for the purpose of performing certain investment management functions including,
without limitation, supervising and directing the investment and reinvestment of
the Collateral Obligations and Eligible Investments and performing certain
administrative and advisory functions on behalf of the Issuer in accordance with
the applicable provisions of this Agreement, the Collateral Administration
Agreement and the Indenture, and GC Advisors hereby accepts such appointment.
Except as may otherwise be expressly provided in this Agreement or the
Indenture, the Collateral Manager will perform its obligations hereunder and
under the Indenture with reasonable care and in good faith, (i) using a degree
of skill and attention no less than that which the Collateral Manager exercises
with respect to comparable assets that it may manage for itself and its other
clients and (ii) in accordance with the Collateral Manager’s existing practices
and procedures with respect to investing in assets of the nature and character
of the Assets. To the extent not inconsistent with the foregoing, the Collateral
Manager will follow its customary standards, policies and procedures in
performing its duties under this Agreement and the Indenture; provided that the
Collateral Manager shall not be liable for any loss or damages resulting from
any failure to satisfy the standard of care set forth in this Section 2(a)
except to the extent such failure would result in liability pursuant to Section
10(a).

 

 4 

 

 

(b)          Subject to Section 2(a), Section 2(c)(i), Section 2(e), Section 5,
Section 7 and Section 10 and to the applicable provisions of the Indenture and
of this Agreement, the Collateral Manager shall, and is hereby authorized to:

 

(i)           select the Collateral Obligations and Eligible Investments to be
acquired, sold, terminated or otherwise disposed of by the Issuer;

 

(ii)          invest and reinvest the Assets (provided that investments and
reinvestments in Collateral Obligations are subject to certain conditions);

 

(iii)         instruct the Trustee with respect to any acquisition, disposition
or tender of, or Offer with respect to, a Collateral Obligation, Equity
Security, Eligible Investment or other assets received in respect thereof in the
open market or otherwise by the Issuer; and

 

(iv)         perform all other tasks and may, in the Collateral Manager’s
discretion, take all other actions that are specified, or not inconsistent with,
the duties of the Collateral Manager set forth in the Indenture, the Collateral
Administration Agreement or this Agreement.

 

The Collateral Manager shall, and is hereby authorized to, perform its
obligations hereunder and under the Indenture and the Collateral Administration
Agreement in a manner which is consistent with the terms hereof and of the
Indenture and the Collateral Administration Agreement. The Collateral Manager
will not be bound to comply with any supplement to the Indenture, however, until
it has received a copy of any such supplement from the Issuer or the Trustee and
unless the Collateral Manager has consented thereto, as provided in the
Indenture.

 

Notwithstanding anything to the contrary in this Section 2(b), none of the
services performed by the Collateral Manager shall result in or be construed as
resulting in an obligation to perform any of the following: (i) the Collateral
Manager acting repeatedly or continuously as an intermediary in securities or
loans for the Issuer; (ii) the Collateral Manager providing investment banking
services to the Issuer; or (iii) the Collateral Manager having direct contact
with, or actively soliciting or finding, outside investors to invest in the
Issuer.

 

 5 

 

 

(c)          Subject to the provisions concerning its general duties and
obligations as set forth in paragraphs (a) and (b) above and the terms of the
Indenture, the Collateral Manager shall provide, and is hereby authorized to
provide, the following services to the Issuer:

 

(i)           The Collateral Manager shall perform the investment-related duties
and functions (including, without limitation, the furnishing of Issuer Orders
and Responsible Officer’s certificates) as are expressly required hereunder and
under the Indenture with regard to acquisitions, sales or other dispositions of
Collateral Obligations, Equity Securities, Eligible Investments and other assets
permitted to be acquired or sold under, and subject to, the Indenture (including
any proceeds received by way of Offers, workouts and restructurings on assets
owned by the Issuer) and shall comply with the Investment Criteria and the other
requirements in the Indenture. The Collateral Manager shall have no obligation
to perform any other duties other than as expressly specified herein or in the
Indenture and the Collateral Manager shall be subject to no implicit obligations
of any kind. The Issuer hereby irrevocably (except as provided below) appoints
the Collateral Manager as its true and lawful agent and attorney-in-fact (with
full power of substitution) in its name, place and stead and at its expense, in
connection with the performance of its duties provided for in this Agreement or
in the Indenture, including, without limitation, the following powers: (A) to
give or cause to be given any necessary receipts or acquittance for amounts
collected or received hereunder, (B) to make or cause to be made all necessary
transfers of the Collateral Obligations, Equity Securities and Eligible
Investments in connection with any acquisition, sale or other disposition made
pursuant hereto and the Indenture, (C) to execute (under hand, under seal or as
a deed) and deliver or cause to be executed and delivered on behalf of the
Issuer all necessary or appropriate bills of sale, assignments, agreements and
other instruments in connection with any such acquisition, sale or other
disposition and (D) to execute (under hand, under seal or as a deed) and deliver
or cause to be executed and delivered on behalf of the Issuer any consents,
votes, proxies, waivers, notices, amendments, modifications, agreements,
instruments, orders or other documents in connection with or pursuant to this
Agreement or the Indenture and relating to any Collateral Obligation, Equity
Security or Eligible Investment. The Issuer hereby ratifies and confirms all
that such attorney-in-fact (or any substitute) shall lawfully do hereunder and
pursuant hereto and authorizes such attorney-in-fact to exercise full discretion
and act for the Issuer in the same manner and with the same force and effect as
the managers or officers of the Issuer might or could do in respect of the
performance of such services, as well as in respect of all other things the
Collateral Manager deems necessary or incidental to the furtherance or conduct
of such services, subject in each case to the other terms of this Agreement. The
Issuer hereby authorizes such attorney-in-fact, in its sole discretion (but
subject to applicable law and the provisions of this Agreement and the
Indenture), to take all actions that it considers reasonably necessary and
appropriate in respect of the Assets, this Agreement, the Indenture and the
other Transaction Documents. Nevertheless, if so requested by the Collateral
Manager or by a purchaser of any Collateral Obligation, Equity Security or
Eligible Investment, the Issuer shall ratify and confirm any such sale or other
disposition by executing and delivering to the Collateral Manager or such
purchaser all proper bills of sale, assignments, releases, powers of attorney,
proxies, dividends, other orders and other instruments as may reasonably be
designated in any such request. Except as otherwise set forth and provided for
herein, this grant of power of attorney is coupled with an interest, and it
shall survive and not be affected by the subsequent dissolution or bankruptcy of
the Issuer. Notwithstanding anything herein to the contrary, the appointment
herein of the Collateral Manager as the Issuer’s agent and attorney-in-fact
shall automatically cease and terminate upon the effective date of any
termination of this Agreement, the resignation of the Collateral Manager
pursuant to Section 12 or any removal of the Collateral Manager pursuant to
Section 14. Each of the Collateral Manager and the Issuer shall take such other
actions, and furnish such certificates, opinions and other documents, as may be
reasonably requested by the other party hereto in order to effectuate the
purposes of this Agreement and to facilitate compliance with applicable laws and
regulations and the terms of this Agreement and the Indenture.

 

 6 

 

 

(ii)          The Collateral Manager shall instruct the Issuer with respect to
the acquisition of Collateral Obligations by the Issuer in accordance with the
Indenture.

 

(iii)         The Collateral Manager shall monitor the Assets on behalf of the
Issuer on an ongoing basis and shall provide or cause to be provided to the
Issuer all reports, schedules and other data reasonably available to the
Collateral Manager that the Issuer is required to prepare and deliver or cause
to be prepared and delivered under the Indenture, in such forms and containing
such information required thereby, in reasonably sufficient time for such
required reports, schedules and data to be reviewed and delivered by or on
behalf of the Issuer to the parties entitled thereto under the Indenture.
Pursuant to the terms of the Collateral Administration Agreement, the Collateral
Administrator shall provide certain reports, schedules and calculations to the
Collateral Manager regarding the Collateral Obligations. The obligation of the
Collateral Manager to furnish such information is subject to the Collateral
Manager’s timely receipt of necessary reports and the appropriate information
from the Person responsible for the delivery of or preparation of such reports
and such information (including without limitation, Obligors of the Collateral
Obligations, the Rating Agencies, the Trustee and the Collateral Administrator)
and to any confidentiality restrictions with respect thereto. The Collateral
Manager shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument,
document or other writing reasonably believed by it to be genuine and to have
been signed or sent by a Person that the Collateral Manager has no reason to
believe is not duly authorized. The Collateral Manager also may rely upon any
statement made to it orally or by telephone and made by a Person the Collateral
Manager has no reason to believe is not duly authorized, and shall not incur any
liability for relying thereon. The Collateral Manager is entitled to rely on any
other information furnished to it by third parties that it reasonably believes
in good faith to be genuine.

 

(iv)         The Collateral Manager, on behalf of the Issuer, shall be
responsible for obtaining, to the extent reasonably practicable and to the
extent such information is readily available to it, any information concerning
whether a Collateral Obligation is a Discount Obligation or has become a
Defaulted Obligation, a Credit Risk Obligation, a Deferring Obligation, a
Current Pay Obligation or a Credit Improved Obligation.

 

 7 

 

 

(v)          The Collateral Manager may, subject to and in accordance with the
Indenture, as agent of the Issuer and on behalf of the Issuer, take or, if
applicable, direct the Trustee to take any of the following actions with respect
to a Collateral Obligation, Equity Security or Eligible Investment, as
applicable:

 

(A)           purchase or otherwise acquire such Collateral Obligation or
Eligible Investment;

 

(B)            retain such Collateral Obligation, Equity Security or Eligible
Investment;

 

(C)           sell or otherwise dispose of such Collateral Obligation, Equity
Security or Eligible Investment (including any assets received by way of Offers,
workouts and restructurings on assets owned by the Issuer) in the open market or
otherwise;

 

(D)           if applicable, tender such Collateral Obligation, Equity Security
or Eligible Investment;

 

(E)           if applicable, consent to or refuse to consent to any proposed
amendment, modification, restructuring, exchange, waiver or Offer;

 

(F)           retain or dispose of any securities or other property (if other
than cash) received by the Issuer;

 

(G)           waive any default with respect to any Defaulted Obligation;

 

(H)           vote to accelerate the maturity of any Defaulted Obligation;

 

(I)             participate in a committee or group formed by creditors of an
issuer or a borrower under a Collateral Obligation, Eligible Investment or
Equity Security;

 

(J)             after or in connection with the payment in full of all amounts
owed under the Secured Notes and the termination without replacement of the
Indenture or in connection with any redemption of the Notes (other than a
Refinancing), advise the Issuer as to when, in the view of the Collateral
Manager, it would be in the best interest of the Issuer to liquidate all or a
portion of the Issuer’s investment portfolio (and, if applicable, after
discharge of the Indenture) and render such assistance as may be necessary or
required by the Issuer in connection with such liquidation or any actions
necessary to effectuate a redemption of the Notes (other than a Refinancing);

 

(K)           advise and assist the Issuer with respect to the valuation of the
Assets, to the extent required or permitted by the Indenture;

 

(L)            provide strategic and financial planning (including advice on
utilization of assets), financial statements and other similar reports;

 

 8 

 

 

(M)           negotiate, modify or amend any loan for the Issuer as authorized
by the Indenture in accordance with a Refinancing; and

 

(N)            exercise any other rights or remedies with respect to such
Collateral Obligation, Equity Security or Eligible Investment as provided in the
Underlying Instruments of the obligor under such Assets or the other documents
governing the terms of such Assets or take any other action consistent with the
terms of this Agreement or the Indenture which the Collateral Manager reasonably
determines to be in the best interests of the Holders.

 

(vi)         The Collateral Manager may, upon request of the Issuer, retain
accounting, tax, counsel and other professional services on behalf of the
Issuer.

 

(vii)        In connection with the acquisition of any loan or Participation
Interest by the Issuer, the Collateral Manager shall prepare, on behalf of the
Issuer, the information required to be delivered to the Trustee pursuant to the
Indenture.

 

(viii)       Where the Collateral Manager executes on behalf of the Issuer an
agreement or instrument pursuant to which any security interest over any assets
of the Issuer is created or released, the Collateral Manager shall promptly give
written notice thereof to the Issuer and shall provide the Issuer with such
information and/or copy documentation in respect thereof as the Issuer may
reasonably require.

 

(d)          In performing its duties hereunder and when exercising its
discretion and judgment in connection with any transactions involving the
Assets, the Collateral Manager shall carry out any reasonable written directions
of the Issuer for the purpose of the Issuer’s compliance with its Organizational
Instruments and the Indenture; provided that such directions are not
inconsistent with any provision of this Agreement or the Indenture by which the
Collateral Manager is bound or prohibited by applicable law.

 

(e)          In providing services hereunder, the Collateral Manager may,
without the consent of any party, delegate to third parties (including without
limitation its Affiliates) the duties assigned to the Collateral Manager under
this Agreement, and employ third parties (including without limitation its
Affiliates) to render advice (including investment advice), to provide services
to arrange for trade execution and otherwise provide assistance to the Issuer,
and to perform any of the Collateral Manager’s duties under this Agreement;
provided that the Collateral Manager shall not (i) delegate investment
decision-making responsibilities to non-Affiliates or (ii) be relieved of any of
its duties hereunder regardless of the performance of any services by third
parties, including Affiliates.

 

Section 3.           Purchase and Sale Transactions; Brokerage.

 

(a)          The Collateral Manager, subject to and in accordance with the
Indenture, hereby agrees that it shall cause any Transaction to be conducted on
terms and conditions negotiated on an arm’s-length basis and in accordance with
applicable law. Except as expressly permitted under the Indenture, no Assets
(other than any Delayed Drawdown Collateral Obligations or Revolving Collateral
Obligations) shall be purchased if such Assets may give rise to any obligation
or liability on the Issuer’s part to take any action or make any payment other
than at the Issuer’s option. Further, the Collateral Manager will not cause or
allow the Issuer to acquire any obligation of a Portfolio Company.

 

 9 

 

 

(b)          The Collateral Manager will seek to obtain the best execution (but
shall have no obligation to obtain the lowest price available) for all orders
placed with respect to any Transaction, in a manner permitted by law and in a
manner it believes to be in the best interests of the Issuer. Subject to the
preceding sentence, the Collateral Manager may, in the allocation of business,
select brokers and/or dealers with whom to effect trades on behalf of the Issuer
and may open cash trading accounts with such brokers and dealers; provided that
none of the Assets may be credited to, held in or subject to the lien of the
broker or dealer with respect to any such account. In addition, subject to the
first sentence of this paragraph, the Collateral Manager may, in the allocation
of business, take into consideration research and other brokerage services
furnished to the Collateral Manager or its Affiliates by brokers and dealers
which are not Affiliates of the Collateral Manager; provided that the Collateral
Manager in good faith believes that the compensation for such services rendered
by such brokers and dealers complies with the requirements of Section 28(e) of
the Securities Exchange Act of 1934, as amended (“Section 28(e)”), or in the
case of principal or fixed income transactions for which the “safe harbor” of
Section 28(e) is not available, the amount of the spread charged is reasonable
in relation to the value of the research and other brokerage services provided.
Such services may be used by the Collateral Manager in connection with its other
advisory activities or investment operations. The Collateral Manager may
aggregate sales and purchase orders placed with respect to the Assets with
similar orders being made simultaneously for other accounts managed by the
Collateral Manager or with accounts of the Affiliates of the Collateral Manager,
if in the Collateral Manager’s reasonable judgment such aggregation can be
expected to result in an overall economic benefit to the Issuer, taking into
consideration the advantageous selling or purchase price, brokerage commission
or other expenses, as well as the availability of such Assets on any other
basis. In accounting for such aggregated order price, commissions and other
expenses may be apportioned on a weighted average basis. When a Transaction
occurs as part of any aggregate sales or purchase orders, the objective of the
Collateral Manager will be to use commercially reasonable efforts to allocate
the executions among the accounts in a manner that is fair and equitable and
over time the Collateral Manager believes, in its reasonable business judgment,
to be appropriate and in accordance with its internal policies and procedures
(as such may be amended from time to time, the “Internal Policies”) and
applicable law.

 

(c)          The Issuer acknowledges and agrees that (i) the determination by
the Collateral Manager of any benefit to the Issuer will be subjective and will
represent the Collateral Manager’s evaluation at the time that the Issuer can be
expected to be benefited by relatively better purchase or sales prices, lower
brokerage commissions, lower transaction costs and expenses and beneficial
timing of transactions or any combination of any of these and/or other factors
and (ii) the Collateral Manager shall be fully protected with respect to any
such determination to the extent the Collateral Manager acts in accordance with
Section 2(a). The Issuer acknowledges and agrees that one or more Affiliates of
the Collateral Manager will hold or beneficially own all of the Outstanding
Subordinated Notes on and potentially after the Closing Date and that accounts
advised or sub-advised by the Collateral Manager or its Affiliates may acquire
other Notes and that such investments may give rise to conflicts of interest
between the Collateral Manager’s duties to the Issuer under this Agreement and
the interests of the Collateral Manager, its Affiliates or its Related Persons.
The Issuer hereby acknowledges that various potential and actual conflicts of
interest do or may exist with respect to the Collateral Manager, including in
its capacity as investment adviser for both the Issuer and the BDC, as described
in this Agreement and in the Final Offering Circular.

 

 10 

 

 

(d)          Subject to compliance with applicable laws and regulations and
subject to the Indenture and the Collateral Manager’s execution obligations
described in Sections 3(a), 3(b) and 3(e) and the covenants set forth in Section
5, the Collateral Manager is hereby authorized to effect client
cross-transactions where the Collateral Manager causes a Transaction to be
effected between the Issuer and another account advised by it or any of its
Affiliates; provided that, if and to the extent required by the Advisers Act,
such authorization is terminable prior to the initiation of such
cross-transaction at the Issuer’s option without penalty. Such termination shall
be effective upon receipt by the Collateral Manager of written notice from the
Issuer. Subject to the Collateral Manager’s execution obligations described in
Sections 3(a), 3(b) and 3(e) and the covenants set forth in Section 5, the
Collateral Manager is hereby authorized to effect principal transactions and
transactions where the Issuer may invest in securities of issuers in which the
Collateral Manager and/or its Affiliates have a debt, equity or participation
interest, in each case in accordance with applicable law.

 

(e)          The Issuer acknowledges and agrees that the Collateral Manager or
any of its Affiliates may acquire or sell obligations or securities, for its own
account or for the accounts of its customers, without either requiring or
precluding the acquisition or sale of such obligations or securities for the
account of the Issuer. Such investments may be the same or different from those
made on behalf of the Issuer as to direction, amount, timing or other terms. The
Issuer acknowledges that the Collateral Manager and its Affiliates may enter
into, for their own accounts or for the accounts of others, credit default swaps
relating to obligors with respect to the Collateral Obligations included in the
Assets.

 

Section 4.           Additional Activities of the Collateral Manager.

 

Nothing herein shall prevent the Collateral Manager or any of its Affiliates
from engaging in other businesses, or from rendering services of any kind to the
Issuer, the Trustee, the Initial Purchaser, any holder or beneficial owner of a
Note or their respective Affiliates or any other Person or entity regardless of
whether such business is in competition with the Issuer or otherwise. Without
prejudice to the generality of the foregoing, partners, members, shareholders,
directors, managers, officers, employees and agents of the Collateral Manager,
Affiliates of the Collateral Manager, and the Collateral Manager may:

 

(a)           serve as managers or directors (whether supervisory or managing),
officers, employees, partners, agents, nominees or signatories for the Issuer or
any Affiliate thereof, or for any obligor in respect of any of the Collateral
Obligations, Equity Securities or Eligible Investments or any Affiliate thereof,
to the extent permitted by their respective Organizational Instruments and
Underlying Instruments, as from time to time amended, or by any resolutions duly
adopted by the Issuer, its Affiliates or any obligor in respect of any of the
Collateral Obligations, Eligible Investments or Equity Securities (or any
Affiliate thereof) pursuant to their respective Organizational Instruments;

 

 11 

 

 

(b)          receive fees for services of whatever nature rendered to the
obligor in respect of any of the Collateral Obligations, Eligible Investments or
Equity Securities or any Affiliate thereof;

 

(c)          be retained to provide services unrelated to this Agreement to the
Issuer or its Affiliates, and be paid therefor, on an arm’s-length basis;

 

(d)          be a secured or unsecured creditor of, or hold a debt obligation of
or equity interest in, the Issuer or any Affiliate thereof or any obligor of any
Collateral Obligation, Eligible Investment or Equity Security or any Affiliate
thereof;

 

(e)          subject to Section 3(b), Section 5 and applicable law sell any
Collateral Obligation or Eligible Investment to, or purchase or acquire any
Collateral Obligation, Equity Security or Eligible Investment from the Issuer
while acting in the capacity of principal or agent;

 

(f)           underwrite, arrange, structure, originate, syndicate, act as a
distributor of or make a market in any Collateral Obligation, Equity Security or
Eligible Investment;

 

(g)          serve as a member of any “creditors’ board”, “creditors’ committee”
or similar creditor group with respect to any Collateral Obligation, Defaulted
Obligation, Eligible Investment or Equity Security; or

 

(h)          act as collateral manager, portfolio manager, investment manager
and/or investment adviser or sub-adviser in collateralized bond obligation
vehicles, collateralized loan obligation vehicles and other similar warehousing
or financing vehicles or other investment vehicles.

 

As a result, such individuals may possess information relating to obligors of
Collateral Obligations that is (a) not known to or (b) known but restricted as
to its use by the individuals at the Collateral Manager responsible for
monitoring the Collateral Obligations and performing the other obligations of
the Collateral Manager under this Agreement. Each of such ownership and other
relationships may result in securities laws restrictions on transactions in such
securities by the Issuer and otherwise create conflicts of interest for the
Issuer. The Issuer acknowledges and agrees that, in all such instances, the
Collateral Manager and its Affiliates may in their discretion make investment
recommendations and decisions that may be the same as or different from those
made with respect to the Issuer’s investments and they have no duty, in making
or managing such other investments, to act in a way that is favorable to the
Issuer.

 

The Issuer acknowledges that there are generally no ethical screens or
information barriers among the Collateral Manager and certain of its Affiliates
of the type that many firms implement to separate Persons who make investment
decisions from others who might possess material, non-public information that
could influence such decisions. The officers or Affiliates of the Collateral
Manager may possess information relating to obligors of Collateral Obligations
that is not known to the individuals at the Collateral Manager responsible for
monitoring the Collateral Obligations and performing the other obligations under
this Agreement. The Collateral Manager may from time to time come into
possession of material nonpublic information that limits the ability of the
Collateral Manager to effect a transaction for the Issuer, and the Issuer’s
investments may be constrained as a consequence of the Collateral Manager’s
inability to use such information for advisory purposes or otherwise to effect
transactions that otherwise may have been initiated on behalf of its clients,
including the Issuer.

 

 12 

 

 

Unless the Collateral Manager determines in its sole discretion that a
Transaction complies with the provisions of Section 5, the Collateral Manager
will not direct the Trustee to acquire or sell securities issued by (i) Persons
of which the Collateral Manager, any of its Affiliates or any of its officers,
directors or employees are directors or officers, (ii) Persons of which the
Collateral Manager, or any of its respective Affiliates act as principal or
(iii) Persons about which the Collateral Manager or any of its Affiliates have
material non-public information which the Collateral Manager deems would
prohibit it from advising as to the trading of such securities in accordance
with applicable law.

 

It is understood that the Collateral Manager and any of its Affiliates may
engage in any other business and furnish investment management and advisory
services to others, including Persons which may have investment policies similar
to or different from those followed by the Collateral Manager with respect to
the Assets and which may own securities or debt obligations of the same class,
or which are of the same type, as the Collateral Obligations or the Eligible
Investments or other securities or debt obligations of the obligors of the
Collateral Obligations or the Eligible Investments as well as other assets that
are the same or similar to other assets owned by the Issuer. The Collateral
Manager will be free, in its sole discretion, to make recommendations to others,
or effect transactions on behalf of itself or for others, which may be the same
as or different from those effected with respect to the Assets. Nothing in the
Indenture and this Agreement shall prevent the Collateral Manager or any of its
Affiliates, acting either as principal or agent on behalf of others, from buying
or selling, or from recommending to or directing any other account to buy or
sell, at any time, securities or obligations of the same kind or class, or
securities or obligations of a different kind or class of the same obligor, as
those directed by the Collateral Manager to be purchased or sold on behalf of
the Issuer. It is understood that, to the extent permitted by applicable law,
the Collateral Manager, its Owners, their Affiliates or their respective Related
Persons or any member of their families or a Person or entity advised by the
Collateral Manager may have an interest in a particular transaction or in
securities or obligations of the same kind or class, or securities or
obligations of a different kind or class of the same obligor, as those whose
acquisition or sale the Collateral Manager may direct hereunder. If, in light of
market conditions and investment objectives, the Collateral Manager determines
that it would be advisable to purchase the same item of Collateral Obligation
both for the Issuer, and either the proprietary account of the Collateral
Manager or any Affiliate of the Collateral Manager or another client of the
Collateral Manager, the Collateral Manager will allocate such investment
opportunities across such entities for which such opportunities are appropriate
consistent with (i) its Internal Policies, as the same may be amended from time
to time, (ii) any applicable requirements of the Advisers Act and (iii) any
allocation and/or co-investment policy or agreement entered into with any such
entity. The Collateral Manager shall use commercially reasonable efforts to
allocate such investment opportunities in a manner that will be fair and
equitable over time. The Issuer agrees that, in the course of managing the
Collateral Obligations held by the Issuer, the Collateral Manager may consider
its relationships with other Clients (including obligors and issuers) and its
Affiliates. The Collateral Manager may decline to make a particular investment
for the Issuer in view of such relationships.

 

 13 

 

 

The Issuer acknowledges that the Collateral Manager and its Affiliates or their
other clients may make and/or hold investments in an obligor’s obligations or
securities that may be pari passu, senior or junior in ranking to an investment
in such obligor’s obligations or securities made and/or held by the Issuer, or
otherwise have interests different from or adverse to those of the Issuer.

 

Section 5.           Conflicts of Interest.

 

Subject to compliance with applicable laws and regulations and subject to this
Agreement and the Indenture, the Collateral Manager is hereby authorized to
effect client cross-transactions where the Collateral Manager may cause the
Issuer and direct the Trustee to acquire a Collateral Obligation or Eligible
Investment from, or sell a Collateral Obligation, Equity Security or Eligible
Investment to, any client advised by the Collateral Manager or any of its
Affiliates for market value (or, in the case of a sale to any such client or its
Affiliate, for at least market value) or, in the absence of a readily
ascertainable market value, at an amount that is equal to “fair value” (or, in
the case of a sale to any such client or its Affiliate, for an amount that is at
least equal to “fair value”) as reasonably determined by the Collateral Manager
in accordance with its relevant policies and procedures. Subject to compliance
with applicable laws and regulations and subject to this Agreement and the
Indenture, the Collateral Manager may effect principal transactions where the
Collateral Manager may cause the Issuer and direct the Trustee to acquire a
Collateral Obligation or Eligible Investment from, or sell a Collateral
Obligation, Equity Security or Eligible Investment to, the Collateral Manager or
any of its Affiliates for market value (or, in the case of a sale to the
Collateral Manager or its Affiliates, for at least market value) or, in the
absence of a readily ascertainable market value, at an amount that is equal to
“fair value” (or, in the case of a sale to the Collateral Manager or its
Affiliates, for an amount that is at least equal to “fair value”) as reasonably
determined by the Collateral Manager in accordance with its relevant policies
and procedures; provided that the Collateral Manager shall obtain consent to
such transaction from the Independent Review Party following written disclosure
thereto prior to settlement of such transaction which shall constitute the
consent of the Issuer required under Section 206(3) of the Advisers Act (an
“Affiliate Transaction”). The Issuer understands and acknowledges that, solely
for the purposes of compliance with the U.S. Risk Retention Rules, the
Collateral Manager shall, with the consent of a majority of the directors of the
BDC who are not “interested persons” (as defined in Section 2(a)(19) of the 1940
Act) of the BDC, enter into the Closing Date Master Loan Sale Agreement with the
BDC and the Issuer pursuant to which the Issuer shall acquire Collateral
Obligations from the BDC, as seller, through the Collateral Manager, as closing
date seller, on the Closing Date in a series of transactions occurring
immediately following one another.  The Issuer further understands and
acknowledges that the Collateral Manager will not receive any compensation for
effectuating, or achieve any profits or losses as a result of its entry into the
Closing Date Master Loan Sale Agreement and that, at the time of the
transactions referenced in the Closing Date Master Loan Sale Agreement, the
Collateral Manager will not be insolvent, and the Collateral Obligations
transferred through the Collateral Manager in such transactions would not be
encumbered by any lien solely by virtue of such transactions. Subject to
compliance with applicable laws and regulations and subject to this Agreement
and the Indenture, the Collateral Manager is hereby authorized to effect agency
cross-transactions where the Collateral Manager or any of its Affiliates may act
as broker for the Issuer or for the other party in connection with the
acquisition of a Collateral Obligation or Eligible Investment or disposition or
exchange of a Collateral Obligation, Equity Security or Eligible Investment and
receive compensation therefor; provided that, if and to the extent required by
the Advisers Act, such authorization is terminable prior to the completion of
such agency cross-transaction at the Issuer’s option without penalty, such
termination to be effective upon receipt by the Collateral Manager of written
notice from the board of directors of the BDC, as designated manager of the
Issuer. The Collateral Manager and its Affiliates so acting have a potentially
conflicting division of loyalties and responsibilities to both parties to such
transactions. The Issuer understands and expects that the Collateral Manager
will engage in a significant amount of client cross-transactions. The Issuer
understands that Collateral Obligations or Equity Securities that are fair
valued in accordance with the Collateral Manager’s valuation policies generally
will not have readily ascertainable market values and that the fair value
assigned to such Collateral Obligations or Equity Securities, as determined in
good faith by the Collateral Manager in accordance with its policies and
procedures, may not match the next available and reliable market price or, in
retrospect, have been the price at which the Collateral Obligation or Equity
Security could have been purchased or sold. The Issuer acknowledges that the
Collateral Manager or an Affiliate thereof may hold or beneficially own a
portion of the outstanding Notes. In certain circumstances, the interests of the
Issuer and/or the holders with respect to matters as to which the Collateral
Manager is advising the Issuer may conflict with the interests of the Collateral
Manager and its Affiliates. The Issuer hereby acknowledges that various
potential and actual conflicts of interest may exist with respect to the
Collateral Manager as described in this Agreement, the Indenture, the Offering
Circulars provided by the Issuer for the Notes or the Form ADV of the Collateral
Manager; provided that nothing in this Section 5 shall be construed as altering
the duties of the Collateral Manager as set forth herein, in the Indenture or
under applicable law. With respect to the approval of Affiliate Transactions,
the Issuer hereby appoints the independent directors of the BDC, the Issuer’s
designated manager, to act on the Issuer’s behalf by majority vote (a majority
of such directors, the “Independent Review Party”).

 

 14 

 

 

Section 6.           Records; Confidentiality.

 

The Collateral Manager shall maintain or cause to be maintained appropriate
books of account and records relating to its services performed hereunder, and
such books of account and records shall be accessible for inspection by
representatives of the Issuer, the Trustee, the Holders, and the Independent
accountants appointed by the Collateral Manager on behalf of the Issuer pursuant
to Article X of the Indenture at any time during normal business hours and upon
not less than three Business Days’ prior notice. The Collateral Manager shall
keep confidential any and all information obtained in connection with the
services rendered hereunder and shall not disclose any such information to
non-affiliated third parties (excluding any Holders and beneficial owners of
Notes) except (a) with the prior written consent of the Issuer, (b) such
information as a Rating Agency shall reasonably request in connection with its
rating of the Secured Notes or supplying credit estimates on any obligation
included in the Assets, (c) in connection with establishing trading or
investment accounts or otherwise in connection with effecting Transactions on
behalf of the Issuer, (d) as required by (i) applicable law, regulation, court
order, or a request by a governmental regulatory agency with jurisdiction over
the Collateral Manager or any of its Affiliates, (ii) the rules or regulations
of any self-regulating organization, body or official having jurisdiction over
the Collateral Manager or any of its Affiliates or (iii) the rules and
regulations of any stock exchange on which the Notes may be listed, (e) to its
professional advisors (including, without limitation, legal, tax and accounting
advisors), (f) such information as shall have been publicly disclosed other than
in known violation of this Agreement or the provisions of the Indenture or shall
have been obtained by the Collateral Manager on a non-confidential basis, (g)
such information as is necessary or appropriate to disclose so that the
Collateral Manager may perform its duties hereunder, under the Indenture or any
other Transaction Document or (h) general performance information which may be
used by the Collateral Manager, its Affiliates or Owners in connection with
their marketing activities. Notwithstanding the foregoing, it is agreed that the
Collateral Manager may disclose (a) that it is serving as collateral manager of
the Issuer, (b) the nature, aggregate principal amount and overall performance
of the Issuer’s assets, (c) the amount of earnings on the Assets, (d) such other
information about the Issuer, the Assets and the Notes as is customarily
disclosed by managers of collateralized loan obligations and (e) each of its
respective employees, representatives or other agents may disclose to any and
all Persons, without limitation of any kind, the U.S. federal income tax
treatment and U.S. federal income tax structure of the transactions contemplated
by the Indenture, this Agreement and the related documents and all materials of
any kind (including opinions and other tax analyses) that are provided to them
relating to such U.S. federal income tax treatment and U.S. income tax
structure. For purposes of this Section 6, the Holders shall not be considered
“non-affiliated third parties.”

 

 15 

 

 

Nothing in this Section 6 prohibits any Person from reporting possible
violations of federal law or regulation to any governmental agency or entity,
including but not limited to the Department of Justice, the Securities and
Exchange Commission, the United States Congress, and any agency inspector
general, or making other disclosures that are protected under the whistleblower
provisions of federal law or regulation. There is no prior authorization
necessary hereunder to make any such reports or disclosures and there is no
requirement hereunder to notify the Collateral Manager that any such reports or
disclosures have been made.

 

Section 7.           Obligations of Collateral Manager.

 

In accordance with the performance standard set forth in Section 2(a), the
Collateral Manager shall take care to avoid taking any action that would (a)
materially adversely affect the status of the Issuer for purposes of United
States federal or state law, or other law applicable to the Issuer, (b) not be
permitted by the Issuer’s Organizational Instruments, copies of which the
Collateral Manager acknowledges the Issuer has provided to the Collateral
Manager, (c) violate any law, rule or regulation of any governmental body or
agency having jurisdiction over the Issuer, including, without limitation,
actions which would violate any United States federal, state or other applicable
securities law that is known by the Collateral Manager to be applicable to it
and, in each case, the violation of which would have a Material Adverse Effect
on the Issuer or have a material adverse effect on the ability of the Collateral
Manager to perform its obligations hereunder, (d) require registration of the
Issuer or the pool of Assets as an “investment company” under Section 8 of the
1940 Act or (e) knowingly and willfully adversely affect the interests of the
Holders in the Assets in any material respect (other than (i) as expressly
permitted hereunder or under the Indenture or (ii) in connection with any action
taken in the ordinary course of business of the Collateral Manager in accordance
with its fiduciary duties to its clients). If the Collateral Manager is ordered
by the designated manager of the Issuer or the requisite Holders or beneficial
owners of Notes to take any action which would, or could reasonably be expected
to, in each case in its reasonable business judgment, have any such
consequences, the Collateral Manager shall promptly notify the Issuer that such
action would, or could reasonably be expected to, in each case in its reasonable
business judgment, have one or more of the consequences set forth above and
shall not take such action unless the designated manager of the Issuer then
request the Collateral Manager to do so and both a Majority of the Controlling
Class and a Majority of the Subordinated Notes have consented thereto in
writing. Notwithstanding any such request, the Collateral Manager shall not take
such action unless (1) arrangements satisfactory to it are made to insure or
indemnify the Collateral Manager, Affiliates of the Collateral Manager and
shareholders, partners, directors, members, managers, officers or employees of
the Collateral Manager or such Affiliates from any liability and expense it may
incur as a result of such action and (2) if the Collateral Manager so requests
in respect of a question of law, the Issuer delivers to the Collateral Manager
an Opinion of Counsel (from outside counsel satisfactory to the Collateral
Manager) that the action so requested does not violate any law, rule or
regulation of any governmental body or agency having jurisdiction over the
Issuer or over the Collateral Manager. Neither the Collateral Manager nor its
Affiliates, shareholders, partners, directors, members, managers, officers or
employees shall be liable to the Issuer or any other Person, except as provided
in Section 10. Notwithstanding anything contained in this Agreement to the
contrary, any indemnification or insurance by the Issuer provided for in this
Section 7 or Section 10 shall be payable out of the Assets in accordance with
the Priority of Payments, and the Collateral Manager may take into account such
Priority of Payments in determining whether any proposed indemnity arrangements
contemplated by this Section 7 are satisfactory.

 

 16 

 

 

Section 8.           Compensation.

 

(a)          As compensation for its performance of its obligations as
Collateral Manager under this Agreement, the Collateral Manager will be entitled
to receive on each Payment Date (in accordance with the Priority of Payments) a
fee (the “Collateral Management Fee”). The Collateral Management Fee shall be
payable on each Payment Date to the extent of the funds available for such
purpose in accordance with the Priority of Payments.

 

The Collateral Management Fee is payable to the Collateral Manager in arrears,
on each Payment Date (prorated for the related Interest Accrual Period) in an
amount equal to 0.35%, per annum (calculated on the basis of the actual number
of days in the applicable Collection Period divided by 360) of the Fee Basis
Amount at the beginning of the Collection Period relating to such Payment Date;
provided that the Collateral Management Fee payable on any Payment Date shall
not include any such fee (or any portion thereof) that has been waived or
deferred by the Collateral Manager pursuant to this Section 8 no later than the
Determination Date immediately prior to such Payment Date.

 

 17 

 

 

The Collateral Management Fee is payable on each Payment Date only to the extent
that sufficient Interest Proceeds or Principal Proceeds are available. To the
extent the Collateral Management Fee is not paid on a Payment Date due to
insufficient Interest Proceeds or Principal Proceeds (and such fee was not
voluntarily deferred or waived by the Collateral Manager), the unpaid portion of
the Collateral Management Fee due on such Payment Date (the “Collateral
Management Fee Shortfall Amount”) will be automatically deferred for payment on
the succeeding Payment Date, with interest, in accordance with the Priority of
Payments. Interest on Collateral Management Fee Shortfall Amounts shall accrue
at the Prime Rate for the period beginning on the first Payment Date on which
the related Collateral Management Fee was due (and not paid) through the Payment
Date on which such Collateral Management Fee Shortfall Amount (including accrued
interest) is paid.

 

At the option of the Collateral Manager, by written notice to the Trustee and
the Collateral Administrator, no later than the Determination Date immediately
prior to such Payment Date, on each Payment Date, (i) all or a portion of the
Collateral Management Fees or the Collateral Management Fee Shortfall Amount
(including accrued interest) due and owing on such Payment Date may be deferred
for payment on a subsequent Payment Date, without interest (the “Current
Deferred Management Fee”) and (ii) all or a portion of the previously deferred
Collateral Management Fees or Collateral Management Fee Shortfall Amounts
(collectively, the “Cumulative Deferred Management Fee”) may be declared due and
payable (to the extent there are sufficient Interest Proceeds and Principal
Proceeds therefor).

 

At such time as the Secured Notes are redeemed in connection with an Optional
Redemption, a Tax Redemption or Clean-Up Call Redemption without duplication,
all accrued and unpaid Collateral Management Fees, Current Deferred Management
Fees, Collateral Management Fee Shortfall Amounts (including accrued interest)
and Cumulative Deferred Management Fees (the “Aggregate Collateral Management
Fee”) shall be due and payable to the Collateral Manager.

 

(b)          The Collateral Manager may, in its sole discretion (but shall not
be obligated to), elect to waive all or any portion of the Collateral Management
Fee payable to the Collateral Manager on any Payment Date, notwithstanding that
the Collateral Manager may be entitled to such Collateral Management Fee. Any
such election shall be made by the Collateral Manager delivering written notice
thereof to the Trustee and the Collateral Administrator no later than the
Determination Date immediately prior to such Payment Date. Any election to waive
the Collateral Management Fee may also be made by written standing instructions
to the Trustee and the Collateral Administrator; provided that such standing
instructions may be rescinded by the Collateral Manager at any time.

 

(c)          Except as otherwise set forth herein and in the Indenture, the
Collateral Manager will continue to serve as collateral manager under this
Agreement notwithstanding that the Collateral Manager will not have received
amounts due to it under this Agreement because sufficient funds were not then
available hereunder to pay such amounts in accordance with the Priority of
Payments.

 

 18 

 

 

(d)          If this Agreement is terminated for any reason, or the Collateral
Manager resigns or is removed, (i) any Collateral Management Fees calculated as
provided in Section 8(a) shall be prorated for any partial period elapsing from
the last Payment Date on which such Collateral Manager received the Collateral
Management Fee to the effective date of such termination, resignation or removal
and (ii) any unpaid Cumulative Deferred Management Fees and Collateral
Management Fee Shortfall Amounts (including related interest) shall be
determined as of the effective date of such termination, resignation or removal
and, in each case, shall be due and payable on each Payment Date following the
effective date of such termination, resignation or removal in accordance with
the Priority of Payments until paid in full; provided, however, that,
notwithstanding the foregoing or any other provision contained herein, in the
event the Collateral Manager’s services terminate other than by reason of an
involuntary termination not for cause, then the terminating Collateral Manager
shall not be entitled to any deferred Collateral Management Fee on any Payment
Date following the date of such termination. Otherwise, such Collateral Manager
shall not be entitled to any further compensation hereunder for further services
but shall be entitled to receive any expense reimbursement accrued to the
effective date of termination, resignation or removal and any indemnity amounts
owing (or that may become owing) under Section 10. Any Aggregate Collateral
Management Fee expense reimbursement and indemnities owed to such Collateral
Manager or owed to any successor Collateral Manager on any Payment Date shall be
paid pro rata based on the amount thereof then owing to each such Person,
subject to the Priority of Payments.

 

Section 9.           Benefit of the Agreement.

 

The Collateral Manager shall perform its obligations hereunder and under the
Indenture in accordance with the terms of this Agreement and the terms of the
Indenture applicable to it. The Collateral Manager agrees and consents to the
provisions contained in Section 15.1(f) of the Indenture. In addition, the
Collateral Manager acknowledges the pledge under the granting clause of the
Indenture.

 

Section 10.         Limits of Collateral Manager Responsibility.

 

(a)          None of the Collateral Manager, its Affiliates, its Owners or their
respective Related Persons assumes any responsibility under this Agreement
except that the Collateral Manager agrees to render the services required to be
performed by it hereunder and under the terms of the Indenture applicable to it.
The Collateral Manager shall not be responsible for any action or inaction of
the Issuer or the Trustee in following or declining to follow any advice,
recommendation or direction of the Collateral Manager including as set forth in
Section 7. The Indemnified Parties shall not be liable to the Issuer, the
Trustee, any Holder, any beneficial owner of Notes, the Initial Purchaser, any
of their respective Affiliates, Owners or Related Persons or any other Persons
for any act, omission, error of judgment, mistake of law, or for any claim,
loss, liability, damage, judgment, assessment, settlement, cost, or other
expense (including attorneys’ fees and expenses and court costs) arising out of
any investment, or for any other act or omission in the performance of the
Collateral Manager’s obligations under or in connection with this Agreement or
the terms of any other Transaction Document applicable to the Collateral
Manager, incurred as a result of actions taken or recommended or for any
omissions of the Collateral Manager, or for any decrease in the value of the
Assets, except for liability to which the Collateral Manager would be subject
(i) by reason of acts or omissions constituting bad faith, willful misconduct or
gross negligence in the performance of its duties hereunder and under the terms
of the Indenture or (ii) with respect to the CM Information in each Offering
Circular, as of the date made, containing any untrue statement of a material
fact or omitting to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (the preceding clauses (i) and (ii) collectively referred to for
purposes of this Section 10 as “Collateral Manager Breaches”). The Collateral
Manager shall not be liable for any consequential, indirect, special, punitive,
exemplary or treble damages or lost profits hereunder or under the Indenture.
The Collateral Manager and any of its Affiliates may consult with counsel,
independent accountants or any other experts selected by them and shall not be
liable for any action taken or omitted to be taken by them in accordance with
their advice. Nothing contained herein shall be deemed to waive any liability
which cannot be waived under applicable state or federal law or any rules or
regulations adopted thereunder.

 

 19 

 

 

(b)          The Issuer shall indemnify and hold harmless the Collateral
Manager, its Affiliates and Owners and their respective Related Persons (each,
an “Indemnified Party”) from and against any and all losses, claims, damages,
judgments, assessments, costs or other liabilities (collectively, “Losses”) and
will promptly reimburse each such Indemnified Party for all reasonable fees and
expenses incurred by an Indemnified Party with respect thereto (including
reasonable fees and expenses of counsel) (collectively, “Expenses”) arising out
of or in connection with the issuance of the Notes (including, without
limitation, any untrue statement of material fact contained in each Offering
Circular, or omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, other than CM
Information), the transactions contemplated by the applicable Offering Circular,
the Indenture, this Agreement, the other Transaction Documents, any Underlying
Instruments and the performance of the Assets and any acts or omissions of any
such Indemnified Party; provided that such Indemnified Party shall not be
indemnified for any Losses or Expenses incurred as a result of any Collateral
Manager Breach. Notwithstanding anything contained herein to the contrary, the
obligations of the Issuer under Section 10 to indemnify any Indemnified Party
for any Losses or Expenses are non-recourse obligations of the Issuer payable
solely out of the Assets in accordance with the Priority of Payments set forth
in the Indenture.

 

(c)          It is understood that certain provisions of this Agreement may
serve to limit the potential liability of the Collateral Manager. The Issuer has
had the opportunity to consult with the Collateral Manager as well as, if
desired, its professional advisors and legal counsel as to the effect of these
provisions. It is further understood that certain applicable laws, including
applicable federal or state securities laws, may impose liability or allow for
legal remedies even where the Collateral Manager has acted in good faith and
that the rights under those laws may be non-waivable. Nothing in this Agreement
shall, in any way, constitute a waiver or limitation of any rights which may not
be so limited or waived in accordance with applicable law, including with
respect to the breach of any fiduciary duty owed under Section 206 of the
Advisers Act.

 

 20 

 

 

Section 11.         No Joint Venture.

 

The Issuer and the Collateral Manager are not partners or joint venturers with
each other and nothing herein shall be construed to make them such partners or
joint venturers or impose any liability as such on either of them. The
Collateral Manager shall be deemed, for all purposes herein, an independent
contractor and shall, except as otherwise expressly provided herein or in the
Indenture or authorized by the Issuer from time to time, have no authority to
act for or represent the Issuer in any way or otherwise be deemed an agent of
the Issuer. It is acknowledged that neither the Collateral Manager nor any of
its Affiliates has provided or shall provide any tax, accounting or legal advice
or assistance to the Issuer or any other Person in connection with the
transactions contemplated hereby.

 

Section 12.         Term; Termination.

 

(a)          This Agreement shall commence as of the date first set forth above
and shall continue in force until the first of the following occurs: (i) the
final liquidation of the Assets and the final distribution of the proceeds of
such liquidation to the Holders, (ii) the payment in full of the Notes, and the
satisfaction and discharge of the Indenture in accordance with its terms or
(iii) the early termination of this Agreement in accordance with Section 12(b)
or (e) or Section 14.

 

(b)          Subject only to clause (c) below, the Collateral Manager may
resign, upon 90 days’ prior written notice to the Issuer (or such shorter notice
as is acceptable to the Issuer), the Holders and the Trustee; provided that the
Collateral Manager shall have the right to resign immediately upon the
effectiveness of any material change in applicable law or regulations which
renders the performance by the Collateral Manager of its duties hereunder or
under the Indenture to be a violation of such law or regulation.

 

(c)          Notwithstanding the provisions of clause (b) above, no resignation
or removal of the Collateral Manager or termination of this Agreement pursuant
to such clause shall be effective until the date as of which a successor
Collateral Manager shall have been appointed and approved in accordance with
Section 12(d) and has accepted all of the Collateral Manager’s duties and
obligations pursuant to this Agreement in writing (an “Instrument of
Acceptance”) and has assumed such duties and obligations.

 

(d)          Promptly after notice of any removal under Section 14 or any
resignation of the Collateral Manager that is to take place while any of the
Notes are Outstanding, the Issuer shall transmit copies of such notice to the
Trustee (which shall forward a copy of such notice to the Holders) and each
Rating Agency (provided that, in the case of Fitch, only for so long as any
Class A Notes remain Outstanding) and shall appoint an institution as Collateral
Manager, at the direction of a Majority of the Subordinated Notes, which
institution (i) has demonstrated an ability, whether as an entity or by its
principals or employees, to professionally and competently perform duties
similar to those imposed upon the Collateral Manager hereunder, (ii) is legally
qualified and has the capacity to assume all of the responsibilities, duties and
obligations of the Collateral Manager hereunder and under the applicable terms
of the Indenture, (iii) does not cause or result in the Issuer becoming, or
require the pool of Assets to be registered as, an investment company under the
1940 Act, (iv) with respect to which the Global Rating Agency Condition has been
satisfied and (v) has been approved by a Majority of the Controlling Class.

 

 21 

 

 

(e)          If (i) a Majority of the Subordinated Notes fails to nominate a
successor within 30 days of initial notice of the resignation or removal of the
Collateral Manager or (ii) a Majority of the Controlling Class does not approve
the proposed successor nominated by the Holders of the Subordinated Notes within
ten days of the date of the notice of such nomination, then a Majority of the
Controlling Class shall, within 60 days of the failure described in clauses (i)
or (ii) of this sentence, as the case may be, nominate a successor Collateral
Manager that meets the criteria set forth in Section 12(d). If a Majority of the
Subordinated Notes approves such Controlling Class nominee, such nominee shall
become the Collateral Manager. If no successor Collateral Manager is appointed
within 90 days (or, in the event of a change in applicable law or regulation
which renders the performance by the Collateral Manager of its duties under this
Agreement or the Indenture to be a violation of such law or regulation, within
30 days) following the termination or resignation of the Collateral Manager, any
of the Collateral Manager, a Majority of the Subordinated Notes and a Majority
of the Controlling Class shall have the right to petition a court of competent
jurisdiction to appoint a successor Collateral Manager, in either such case
whose appointment shall become effective after such successor has accepted its
appointment and without the consent of any holder or beneficial owner of any
Note.

 

(f)          The successor Collateral Manager shall be entitled to the
Collateral Management Fee set forth in Section 8(a) and no compensation payable
to such successor Collateral Manager shall be greater than as set forth in
Section 8(a) without the prior written consent of 100% of the Holders of each
Class of Notes voting separately by Class, including Collateral Manager Notes.
Upon the later of the expiration of the applicable notice periods with respect
to termination specified in this Section 12 or in Section 14 and the acceptance
of its appointment hereunder by the successor Collateral Manager, all authority
and power of the Collateral Manager hereunder, whether with respect to the
Assets or otherwise, shall automatically and without action by any person or
entity pass to and be vested in the successor Collateral Manager. The Issuer,
the Trustee and the successor Collateral Manager shall take such action (or the
Issuer shall cause the outgoing Collateral Manager to take such action)
consistent with this Agreement and as shall be necessary to effect any such
succession.

 

(g)          If this Agreement is terminated pursuant to this Section 12, such
termination shall be without any further liability or obligation of either party
to the other, except as provided in clause (h) below.

 

(h)          Sections 6, 7 (with respect to any indemnity or insurance provided
thereunder), 10, 12(h), 15, 17, 21, 22, 23 and 25 shall survive any termination
of this Agreement pursuant to this Section 12 or Section 14.

 

 22 

 

 

Section 13.         Assignments.

 

(a)          Except as otherwise provided in this Section 13, the Collateral
Manager may not assign or delegate (except as provided in Section 2(e)) its
rights or responsibilities under this Agreement unless (i) the Global Rating
Agency Condition has been satisfied with respect thereto, (ii) the consent of
the Issuer has been obtained with respect thereto and (iii) such assignment or
delegation has not been disapproved in writing by (A) a Majority of the
Subordinated Notes and (B) for an assignment to any person who is not an
Affiliate of the Collateral Manager that is a Registered Investment Adviser, a
Majority of the Controlling Class within 30 days’ notice of such assignment. The
Collateral Manager shall not be required to obtain such consents or satisfy such
condition with respect to a change of control transaction that is deemed to be
an assignment within the meaning of Section 202(a)(1) of the Advisers Act at the
time of any such transaction; provided that, if the Collateral Manager is a
Registered Investment Adviser, the Collateral Manager shall obtain the consent
of the Issuer to such assignment, in a manner consistent with SEC Staff
interpretations of Section 205(a)(2) of the Advisers Act.

 

(b)          The Collateral Manager may without satisfaction of the Global
Rating Agency Condition, without obtaining the consent of any holder or
beneficial owner of any Note and, so long as such assignment or delegation does
not constitute an “assignment” for purposes of Section 205(a)(2) of the Advisers
Act during such time as the Collateral Manager is a Registered Investment
Adviser, without obtaining the prior consent of the Issuer, (1) assign any of
its rights or obligations under this Agreement to an Affiliate; provided that
such Affiliate (i) has demonstrated an ability to professionally and competently
perform duties similar to those imposed upon the Collateral Manager pursuant to
this Agreement, (ii) has the legal right and capacity to act as Collateral
Manager under this Agreement and (iii) shall not cause the Issuer or the pool of
Assets to become required to register under the provisions of the 1940 Act or
(2) enter into (or have its parent enter into) any consolidation or amalgamation
with, or merger with or into, or transfer of all or substantially all of its
assets to, another entity; provided further that, at the time of such
consolidation, merger, amalgamation or transfer the resulting, surviving or
transferee entity assumes all the obligations of the Collateral Manager under
this Agreement generally and the other entity is solely a continuation of the
Collateral Manager in another corporate or similar form and has substantially
the same staff; provided further that such action does not cause the Issuer to
be subject to tax in any jurisdiction outside of its jurisdiction of
organization; provided further that the Collateral Manager shall deliver prior
notice to the Rating Agencies (provided that, in the case of Fitch, only for so
long as any Class A Notes remain Outstanding) of any assignment, delegation or
combination thereof made pursuant to this sentence. Upon the execution and
delivery of any such assignment by the assignee, the Collateral Manager will be
released from further obligations pursuant to this Agreement except with respect
to its obligations and agreements arising under Sections 10, 12(g), 17, 21
through 24, and 26 in respect of acts or omissions occurring prior to such
assignment and except with respect to its obligations under Section 15 after
such assignment.

 

(c)          This Agreement shall not be assigned by the Issuer without (i) the
prior written consent of (A) the Collateral Manager, (B) a Majority of the
Subordinated Notes and (C) a Majority of each Class of Secured Notes (voting
separately) and (ii) satisfaction of the Global Rating Agency Condition, except
in the case of assignment by the Issuer (1) to an entity which is a successor to
the Issuer permitted under the Indenture, in which case such successor
organization shall be bound hereunder and by the terms of said assignment in the
same manner as the Issuer is bound thereunder or (2) to the Trustee as
contemplated by the granting clause of the Indenture. The Issuer has assigned
its rights, title and interest in (but not its obligations under) this Agreement
to the Trustee pursuant to the Indenture; and the Collateral Manager by its
signature below agrees to, and acknowledges, such assignment. Upon assignment by
the Issuer, the Issuer shall use reasonable efforts to cause such assignee to
execute and deliver to the Collateral Manager such documents as the Collateral
Manager shall consider reasonably necessary to effect fully such assignment.

 

 23 

 

 

(d)          The Issuer shall provide the Rating Agencies (provided that, in the
case of Fitch, only for so long as any Class A Notes remain Outstanding) and the
Trustee (who shall provide a copy of such notice to the Controlling Class) with
notice of any assignment pursuant to this Section 13.

 

Section 14.         Removal for Cause.

 

(a)          The Collateral Manager may be removed for Cause upon 30 Business
Days’ prior written notice by the Issuer (“Termination Notice”) at the direction
of a Supermajority of the Controlling Class or a Majority of the Subordinated
Notes. Simultaneous with its direction to the Issuer to remove the Collateral
Manager for Cause, a Majority of the Subordinated Notes or a Supermajority of
the Controlling Class, as applicable, shall give to the Issuer a written
statement setting forth the reason for such removal (“Statement of Cause”). The
Issuer shall deliver to the Trustee (who shall deliver a copy of such notice to
the Holders) a copy of the Termination Notice and the Statement of Cause within
five Business Days of receipt. No such removal shall be effective (A) until the
date as of which a successor Collateral Manager shall have been appointed in
accordance with Sections 12(d) and (e) and delivered an Instrument of Acceptance
to the Issuer and the removed Collateral Manager and the successor Collateral
Manager has effectively assumed all of the Collateral Manager’s duties and
obligations and (B) unless the Statement of Cause has been delivered to the
Issuer as set forth in this Section 14(a). “Cause” means any of the following:

 

(i)           the Collateral Manager shall willfully and intentionally violate,
or takes any action that it actually knows breaches, any material provision of
this Agreement or the Indenture applicable to it (not including a willful and
intentional breach that results from a good faith dispute regarding reasonable
alternative courses of action or interpretation of instructions);

 

(ii)          the Collateral Manager shall breach any material provision of this
Agreement or any terms of the Indenture applicable to it (other than as covered
by clause (i) and it being understood that failure to meet any Concentration
Limitation, Collateral Quality Test or Coverage Test is not a breach for
purposes of this clause (ii)), which breach would reasonably be expected to have
a Material Adverse Effect on any Class of Noteholders and shall not cure such
breach (if capable of being cured) within 30 days after the earlier to occur of
a Responsible Officer of the Collateral Manager receiving notice or having
actual knowledge of such breach, unless, if such breach is remediable, the
Collateral Manager has taken action commencing the cure thereof within such 30
day period that the Collateral Manager believes in good faith will remedy such
breach within 60 days after the earlier to occur of a Responsible Officer
receiving notice or having actual knowledge thereof;

 

 24 

 

 

(iii)         the failure of any representation, warranty, certification or
statement made or delivered by the Collateral Manager in or pursuant to this
Agreement or the Indenture to be correct in any material respect when made which
failure (A) would reasonably be expected to have a Material Adverse Effect on
any Class of Noteholders and (B) is not corrected by the Collateral Manager
within 45 days of a Responsible Officer of the Collateral Manager receiving
notice of such failure, unless, if such failure is remediable, the Collateral
Manager has taken action commencing the cure thereof within such 45 day period
that the Collateral Manager believes in good faith will remedy such failure
within 75 days after the earlier to occur of a Responsible Officer receiving
notice thereof or having actual knowledge thereof; provided that the delivery of
a certificate or other report which corrects any inaccuracy contained in a
previous report or certification shall be deemed to cure such inaccuracy as of
the date of delivery of such updated report or certificate and any and all
inaccuracies arising from continuation of such initial inaccurate report or
certificate and the sale or other disposition of any asset that did not satisfy
clause (a) of the Investment Criteria shall cure any breach or failure arising
therefrom as of the date of such failure;

 

(iv)         the Collateral Manager is wound up or dissolved or there is
appointed over it or a substantial part of its assets a receiver, administrator,
administrative receiver, trustee or similar officer; or the Collateral Manager
(A) ceases to be able to, or admits in writing its inability to, pay its debts
as they become due and payable, or makes a general assignment for the benefit
of, or enters into any composition or arrangement with, its creditors generally;
(B) applies for or consents (by admission of material allegations of a petition
or otherwise) to the appointment of a receiver, trustee, assignee, custodian,
liquidator or sequestrator (or other similar official) of the Collateral Manager
or of any substantial part of its properties or assets in connection with any
winding up, liquidation, reorganization or other relief under any bankruptcy,
insolvency, receivership or similar law, or authorizes such an application or
consent, or proceedings seeking such appointment are commenced without such
authorization, consent or application against the Collateral Manager and
continue undismissed for 60 days; (C) authorizes or files a voluntary petition
in bankruptcy, or applies for or consents (by admission of material allegations
of a petition or otherwise) to the application of any bankruptcy,
reorganization, arrangement, readjustment of debt, insolvency, dissolution, or
similar law, or authorizes such application or consent, or proceedings to such
end are instituted against the Collateral Manager without such authorization,
application or consent and are approved as properly instituted and remain
undismissed for 60 days or result in adjudication of bankruptcy or insolvency or
the issuance of an order for relief; or (D) permits or suffers all or any
substantial part of its properties or assets to be sequestered or attached by
court order and the order (if contested in good faith) remains undismissed for
60 days;

 

(v)          the occurrence and continuation of an Event of Default pursuant to
Section 5.1(a), (b) or (c) under the Indenture that results primarily from any
material breach by the Collateral Manager of its duties under this Agreement or
under the Indenture which breach or default is not cured within any applicable
cure period; or

 

 25 

 

 

(vi)         (A) the occurrence of an act by the Collateral Manager that
constitutes fraud or criminal activity in the performance of its obligations
under this Agreement (as determined pursuant to a final adjudication by a court
of competent jurisdiction) or the Collateral Manager being indicted for a
criminal offense materially related to its business of providing asset
management services, or (B) any Responsible Officer of the Collateral Manager
primarily responsible for the performance by the Collateral Manager of its
obligations under this Agreement (in the performance of his or her investment
management duties) is indicted for a criminal offense materially related to the
business of the Collateral Manager providing asset management services and
continues to have responsibility for the performance by the Collateral Manager
under this Agreement for a period of 30 days after such indictment; provided
that any indictment arising from practices that have become the subject of
contemporaneous actions against multiple investment advisers shall not
constitute “Cause” for purposes of this clause (vi) if the Collateral Manager
enters into an agreement or settlement with any authority that has commenced an
indictment, which agreement is entered into without prejudice within 90 days
following such indictment.

 

(b)          If any of the events specified in clauses (a)(i) through (vi) of
this Section 14 shall occur, the Collateral Manager shall give prompt written
notice thereof to the Issuer, the Holders, the Trustee, and the Rating Agencies
(provided that, in the case of Fitch, only for so long as any Class A Notes
remain Outstanding); provided that if any of the events specified in Section
14(a)(iv) shall occur, the Collateral Manager shall give written notice thereof
to the Issuer, the Trustee, and the Rating Agencies (provided that, in the case
of Fitch, only for so long as any Class A Notes remain Outstanding) immediately
upon the Collateral Manager’s becoming aware of the occurrence of such event. A
Majority of each Class of Notes, voting separately by Class, may waive any event
described in Section 14(a)(i), (ii), (iii), (v) or (vi) as a basis for
termination of this Agreement and removal of the Collateral Manager under this
Section 14. In no event will the Trustee be required to determine whether or not
Cause exists for the removal of the Collateral Manager.

 

(c)          Unless all Notes of the applicable Class are Collateral Manager
Notes, Collateral Manager Notes will be disregarded and have no voting rights
with respect to any vote in respect of (i) the removal of the Collateral Manager
for “cause” under this Section 14 and (ii) the waiver of any event constituting
“cause” as a basis for termination of this Agreement and removal of the
Collateral Manager, and such Notes will be deemed not to be Outstanding in
connection with any such vote, except that only Notes that a trust officer of
the Trustee actually knows to be Collateral Manager Notes shall be so
disregarded. Collateral Manager Notes will have voting rights with respect to
all other matters as to which the holders of the Notes of the applicable Classes
are entitled to vote.

 

(d)          If the Collateral Manager is removed pursuant to this Section 14,
the Issuer shall have, in addition to the rights and remedies set forth in this
Agreement, all of the rights and remedies available with respect thereto at law
or equity.

 

 26 

 

 

Section 15.         Obligations of Resigning or Removed Collateral Manager.

 

(a)          On, or as soon as practicable after, the date any resignation or
removal is effective, the Collateral Manager shall (at the Issuer’s expense):

 

(i)           deliver to the Issuer or to such other Person as the Issuer shall
instruct all property and documents of the Issuer or otherwise relating to the
Assets then in the custody of the Collateral Manager;

 

(ii)          deliver to the Trustee an accounting with respect to the books and
records delivered to the Trustee or the successor Collateral Manager appointed
pursuant to Section 12; and

 

(iii)         agree to cooperate with all reasonable requests related to any
proceedings, even after its resignation or removal, which arise in connection
with this Agreement or the Indenture, assuming the Collateral Manager has
received an indemnity in form reasonably satisfactory to the Collateral Manager
from an entity reasonably satisfactory to the Collateral Manager, and expense
reimbursement reasonably satisfactory to the Collateral Manager.

 

(b)          Notwithstanding such resignation or removal, the Collateral Manager
shall remain liable for its obligations under Section 10 and its acts or
omissions giving rise thereto and for any expenses, losses, damages,
liabilities, demands, charges and claims of any nature whatsoever (including
reasonable attorneys’ fees) in respect of or arising out of a Collateral Manager
Breach, subject to the limitations of liability set forth in Section 10.

 

Section 16.         Representations and Warranties.

 

(a)          The Issuer hereby represents and warrants to the Collateral Manager
as follows:

 

(i)           The Issuer is a limited liability company duly organized and
validly existing and in good standing under the laws of the State of Delaware,
has the full power and authority to own its assets and the securities proposed
to be owned by it and included in the Assets and to transact the business in
which it is presently engaged and is duly qualified under the laws of each
jurisdiction where its ownership or lease of property, the conduct of its
business or the performance of this Agreement, the Indenture and the Notes
require such qualification, except for those jurisdictions in which the failure
to be so qualified, authorized or licensed would not have a Material Adverse
Effect on the Issuer.

 

 27 

 

 

(ii)          The Issuer has full power and authority to execute, deliver and
perform all of its obligations under this Agreement, the Indenture and the Notes
and has taken all necessary action to authorize this Agreement and the execution
and delivery of this Agreement and the performance of all obligations imposed
upon it hereunder, and, as of the Closing Date, will have taken all necessary
action to authorize the Indenture and the Notes and the execution, delivery and
performance of this Agreement, the Indenture and the Notes and the performance
of all obligations imposed upon it hereunder or thereunder. No consent of any
other Person including, without limitation, members and creditors of the Issuer,
and no license, permit, approval or authorization of, exemption by, notice or
report to, or registration, filing (other than any filings pursuant to the UCC
required under the Indenture and necessary to perfect any security interest
granted thereunder) or declaration with, any governmental authority is required
by the Issuer in connection with the execution, delivery, performance, validity
or enforceability of this Agreement, the Indenture or the Notes or the
obligations imposed upon the Issuer hereunder and thereunder. This Agreement has
been, and each instrument and document to which the Issuer is a party required
hereunder or under the Indenture or the Notes will be, executed and delivered by
a Responsible Officer of the Issuer, and this Agreement constitutes, and each
instrument or document required hereunder to which the Issuer is a party, when
executed and delivered hereunder, will constitute, the legally valid and binding
obligation of the Issuer enforceable against the Issuer in accordance with its
terms, subject, as to enforcement, (A) to the effect of bankruptcy,
receivership, insolvency, winding-up or similar laws affecting generally the
enforcement of creditors’ rights as such laws would apply in the event of any
bankruptcy, receivership, insolvency, winding-up or similar event applicable to
the Issuer and (B) to general equitable principles (whether enforceability of
such principles is considered in a proceeding at law or in equity).

 

(iii)         The execution, delivery and performance of this Agreement and the
documents and instruments required hereunder and under the Indenture will not
violate any provision of any existing law or regulation binding on the Issuer,
or any order, judgment, award or decree of any court, arbitrator or governmental
authority binding on the Issuer, or the Organizational Instruments of, or any
securities issued by, the Issuer or of any mortgage, indenture, lease, contract
or other agreement, instrument or undertaking to which the Issuer is a party or
by which the Issuer or any of its assets may be bound, the violation of which
would have a Material Adverse Effect on the Issuer, and will not result in or
require the creation or imposition of any lien on any of its property, assets or
revenues pursuant to the provisions of any such mortgage, indenture, lease,
contract or other agreement, instrument or undertaking (other than the lien of
the Indenture).

 

(iv)         The Issuer is not in violation of its Organizational Instruments or
in breach or violation of or in default under any contract or agreement to which
it is a party or by which it or any of its property may be bound, or any
applicable statute or any rule, regulation or order of any court, government
agency or body having jurisdiction over the Issuer or its properties, the breach
or violation of which or default under which would have a material adverse
effect on the validity or enforceability of this Agreement or the provisions of
the Indenture applicable to the Issuer, or the performance by the Issuer of its
duties hereunder or thereunder.

 

(v)          The Issuer acknowledges that it has received Part 2A, and relevant
Part 2B, of the Collateral Manager’s Form ADV filed with the Securities and
Exchange Commission, as required by Rule 204-3 under the Advisers Act, prior to
execution of this Agreement.

 

 28 

 

 

(b)          The Collateral Manager hereby represents and warrants to the
Issuer, as of the date hereof, as follows:

 

(i)           The Collateral Manager is a limited liability company duly
organized and validly existing and in good standing under the laws of the State
of Delaware and has full power and authority to own its assets and to transact
the business in which it is currently engaged, and is duly qualified to do
business and is in good standing under the laws of each jurisdiction where the
performance of this Agreement would require such qualification, except for those
jurisdictions in which the failure to be so qualified, authorized or licensed
would not have a material adverse effect on the ability of the Collateral
Manager to perform its obligations under this Agreement and the provisions of
the Indenture applicable to the Collateral Manager, or on the validity or
enforceability of this Agreement and the provisions of the Indenture applicable
to the Collateral Manager.

 

(ii)          The Collateral Manager has full power and authority to execute and
deliver this Agreement and to perform all of its obligations required hereunder
and under the provisions of the Indenture applicable to the Collateral Manager,
and has taken all necessary action to authorize this Agreement on the terms and
conditions hereof and the execution and delivery of this Agreement and the
performance of all obligations required hereunder and under the terms of the
Indenture applicable to the Collateral Manager. No consent of any other Person,
including, without limitation, members and creditors of the Collateral Manager,
and no license, permit, approval or authorization of, exemption by, notice or
report to, or registration, filing or declaration with, any governmental
authority is required by the Collateral Manager or any Affiliate thereof in
connection with this Agreement or the execution, delivery, performance, validity
or enforceability of this Agreement or the obligations imposed on the Collateral
Manager hereunder or under the terms of the Indenture applicable to the
Collateral Manager other than those which have been obtained or made. No
representation is made herein with respect to the requirements of state
securities laws or regulations. This Agreement has been executed and delivered
by a Responsible Officer of the Collateral Manager, and this Agreement
constitutes the valid and legally binding obligations of the Collateral Manager
enforceable against the Collateral Manager in accordance with its terms,
subject, as to enforcement, (A) to the effect of bankruptcy, insolvency,
winding-up or similar laws affecting generally the enforcement of creditors’
rights as such laws would apply in the event of any bankruptcy, receivership,
insolvency, winding-up or similar event applicable to the Collateral Manager and
(B) to general equitable principles (whether enforceability of such principles
is considered in a proceeding at law or in equity).

 

(iii)         The execution, delivery and performance of this Agreement and the
terms of the Indenture applicable to the Collateral Manager will not violate any
provision of any existing law or regulation binding on the Collateral Manager
(except that no representation is made herein with respect to the requirements
of state securities laws or regulations), or any order, judgment, award or
decree of any court, arbitrator or governmental authority binding on the
Collateral Manager, or the Organizational Instruments of, or any securities
issued by, the Collateral Manager or of any mortgage, indenture, lease, contract
or other agreement, instrument or undertaking to which the Collateral Manager is
a party or by which the Collateral Manager or any of its assets may be bound,
the violation of which would have a material adverse effect on the business,
operations, assets or financial condition of the Collateral Manager or which
would reasonably be expected to adversely affect in a material manner its
ability to perform its obligations hereunder or under the Indenture.

 

 29 

 

 

(iv)         There is no charge, investigation, action, suit or proceeding
before or by any court pending or, to the actual knowledge of the Collateral
Manager, threatened, that, if determined adversely to the Collateral Manager,
would have a material adverse effect upon the performance by the Collateral
Manager of its duties under this Agreement or the provisions of the Indenture
applicable to the Collateral Manager.

 

(c)          The Collateral Manager makes no representation, express or implied,
with respect to the Issuer or the disclosure with respect to the Issuer.

 

(d)          The Collateral Manager is a “registered investment adviser” for
purposes of the Advisers Act.

 

Section 17.         Limited Recourse; No Petition.

 

The Collateral Manager hereby agrees that it shall not institute against, or
join any other Person in instituting against the Issuer any bankruptcy,
reorganization, arrangement, insolvency, moratorium or liquidation proceedings
or other proceedings under United States federal or state or other bankruptcy or
similar laws until at least one year (or, if longer, the applicable preference
period then in effect) plus one day after payment in full of all Notes issued
under the Indenture (and any other debt obligations of the Issuer that have been
rated upon issuance by any Rating Agency at the request of the Issuer); provided
that nothing in this Section 17 shall preclude the Collateral Manager from (A)
taking any action prior to the expiration of such applicable preference period
in (x) any case or proceeding voluntarily filed or commenced by the Issuer or
(y) any insolvency proceeding filed or commenced against the Issuer by any
Person other than the Collateral Manager or (B) commencing against the Issuer or
any of its properties any legal action that is not a bankruptcy, reorganization,
arrangement, insolvency, moratorium or liquidation proceeding. The Collateral
Manager hereby acknowledges and agrees that the Issuer’s obligations hereunder
will be solely the limited liability company obligations of the Issuer, and that
the Collateral Manager will not have any recourse to any of the authorized
persons, managers, officers, employees, members or Affiliates of the Issuer with
respect to any claims, losses, damages, liabilities, indemnities or other
obligations in connection with any Transactions contemplated hereby.
Notwithstanding any other provisions hereof or of any other transaction
document, recourse in respect of any obligations of the Issuer to the Collateral
Manager hereunder or thereunder will be limited to the Assets as applied in
accordance with the Priority of Payments pursuant to the Indenture and, on the
exhaustion of the Assets, all claims against the Issuer arising from this
Agreement or any Transaction Document or any Transactions contemplated hereby or
thereby shall be extinguished and shall not revive. This Section 17 shall
survive the termination of this Agreement for any reason whatsoever.

 

 30 

 

 

Section 18.         Notices.

 

Unless expressly provided otherwise herein, all notices, requests, demands and
other communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given, made and received when
delivered against receipt or upon actual receipt of registered or certified
mail, postage prepaid, return receipt requested, or, in the case of telecopier
notice, when received in legible form, addressed as set forth below:

 

(a)          If to the Issuer:

 

Golub Capital BDC CLO III LLC,

c/o Puglisi & Associates

850 Library Avenue, Suite 204

Newark, Delaware 19711

Telecopier No.: (302) 738-7210

Attention: Donald Puglisi

 

with a copy to:

 

GC Advisors LLC

150 South Wacker Drive, Suite 800

Chicago, Illinois 60606

Telecopier No.: (312) 201-9167

Attention: David Golub

 

 31 

 

 

(b)          If to the Collateral Manager:

 

GC Advisors LLC

150 South Wacker Drive

Suite 800

Chicago, Illinois 60606

Telecopier No.: (312) 201-9167

Attention: David Golub

 

with a copy to:

 

Dechert LLP

100 N. Tryon Street

Suite 4000

Charlotte, NC 28202

Telephone No.: (704) 339-3100

Telecopier No.: (704) 339-3101

Attention: John Timperio

 

(c)          If to the Trustee:

 

U.S. Bank National Association

8 Greenway Plaza

Suite 1100

Houston, Texas 77046

Attention: Corporate Trust Services—Golub Capital BDC CLO III LLC

 

(d)          If to the Holders:

 

At their respective addresses set forth in the Register, as applicable.

 

Any party may change the address or telecopy number to which communications or
copies directed to such party are to be sent by giving notice to the other
parties of such change of address or telecopy number in conformity with the
provisions of this Section 18 for the giving of notice.

 

Section 19.         Binding Nature of Agreement; Successors and Assigns.

 

This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns as provided herein.

 

Section 20.         Entire Agreement; Amendment.

 

(a)          This Agreement and the Indenture contain the entire agreement and
understanding among the parties hereto with respect to the subject matter
hereof, and supersede all prior and contemporaneous agreements, understandings,
inducements and conditions, express or implied, oral or written, of any nature
whatsoever with respect to the subject matter hereof. The express terms hereof
and thereof control and supersede any course of performance and/or usage of the
trade inconsistent with any of the terms hereof.

 

 32 

 

 

(b)          This Agreement may not be modified or amended other than by an
agreement in writing executed by each of the parties hereto. No amendment to
this Agreement may, without notice to the Rating Agencies and the prior written
consent of (1) in the case of clauses (a), (b) and (c) below, a Majority of the
Controlling Class, (2) in the case of clauses (a) and (b) below, the Holders of
the Subordinated Notes and (3) in the case of clause (b)(II) below, a Majority
of each other Class of Secured Notes, (a) modify the definition of the term
“Cause,” (b) modify the Collateral Management Fee, including the method for
calculation of any component of the Collateral Management Fee or any definition
in the Collateral Management Agreement directly related to the Collateral
Management Fee (I) in connection with the appointment of a successor Collateral
Manager or (II) in any other circumstance or (c) modify the Class or Classes or
the percentage of the Aggregate Outstanding Amount of any Class that has the
right to remove the Collateral Manager, consent to any assignment of this
Agreement or nominate or approve any successor collateral manager. This
Agreement may be amended for any other purpose upon notice to the Rating
Agencies and 10 (ten) days’ prior written notice to the Controlling Class and
the Subordinated Notes without the consent of the Holders of any Notes; provided
that, (i) the prior written consent of a Majority of the Subordinated Notes
shall be required if any such amendment would have a material adverse effect on
the Subordinated Notes and (ii) the prior written consent of a Majority of the
Controlling Class shall be required if any such amendment would have a material
adverse effect on the Controlling Class. The Issuer shall provide the Holders
with notice of any amendment to this Agreement.

 

Section 21.         Governing Law.

 

THIS AGREEMENT AND ANY DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT
(WHETHER IN CONTRACT, TORT OR OTHERWISE) SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARDS TO CONFLICT OF
LAWS PRINCIPLES THEREOF (OTHER THAN AS SET FORTH IN SECTIONS 5-1401 AND 5-1402
OF THE NEW YORK GENERAL OBLIGATIONS LAW).

 

Section 22.         Submission to Jurisdiction.

 

With respect to any suit, action or proceedings relating to this Agreement or
any matter between the parties arising under or in connection with this
Agreement (“Proceedings”), each party irrevocably: (i) submits to the
non-exclusive jurisdiction of the Supreme Court of the State of New York sitting
in the Borough of Manhattan and the United States District Court for the
Southern District of New York, and any appellate court from any thereof; and
(ii) waives any objection which it may have at any time to the laying of venue
of any Proceedings brought in any such court, waives any claim that such
Proceedings have been brought in an inconvenient forum and further waives the
right to object, with respect to such Proceedings, that such court does not have
any jurisdiction over such party. Nothing in this Agreement precludes any of the
parties from bringing Proceedings in any other jurisdiction, nor will the
bringing of Proceedings in any one or more jurisdictions preclude the bringing
of Proceedings in any other jurisdiction.

 

 33 

 

 

The Collateral Manager irrevocably consents to the service of any and all
process in any action or proceeding by the mailing or delivery of copies of such
process to it at the office to which notices are sent to it. The Issuer hereby
irrevocably designates and appoints CT Corporation System as the agent of the
Issuer to receive on its behalf service of all process brought against it with
respect to any such action or proceeding in any such court in the State of New
York, such service being hereby acknowledged by the Issuer to be effective and
binding on it in every respect. If for any reason such agent shall cease to be
available to act as such, then the Issuer shall promptly designate a new agent
in the City of New York.

 

Section 23.         Waiver of Jury Trial.

 

EACH PARTY TO THIS AGREEMENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
PROCEEDING.

 

Section 24.         Conflict with the Indenture.

 

In respect of any conflict between the terms of this Agreement and the Indenture
or actions required under the terms of the Indenture and the terms of this
Agreement, the terms of the Indenture shall control.

 

Section 25.         Subordination; Assignment of Agreement.

 

The Collateral Manager agrees that the payment of all amounts to which it is
entitled pursuant to this Agreement shall be subordinated to the extent set
forth in, and the Collateral Manager agrees to be bound by the provisions of,
Article XI of the Indenture as if the Collateral Manager were a party to the
Indenture and hereby consents to the assignment of this Agreement as provided in
Section 15.1 of the Indenture.

 

Section 26.         Indulgences Not Waivers.

 

Neither the failure nor any delay on the part of any party hereto to exercise
any right, remedy, power or privilege under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, remedy,
power or privilege preclude any other or further exercise of the same or of any
other right, remedy, power or privilege, nor shall any waiver of any right,
remedy, power or privilege with respect to any occurrence be construed as a
waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed
by the party asserted to have granted such waiver.

 

 34 

 

 

Section 27.         Costs and Expenses.

 

Except as otherwise agreed to by the parties hereto, the costs and expenses
(including the fees and disbursements of counsel and accountants but excluding
all overhead costs and employees’ salaries) of the Collateral Manager and of the
Issuer incurred in connection with the negotiation and preparation of and the
execution of this Agreement and any amendment hereto, and all matters incidental
thereto, shall be borne by the Issuer. The Issuer will reimburse the Collateral
Manager for expenses including fees and out-of-pocket expenses reasonably
incurred by the Collateral Manager in connection with the services provided
under this Agreement including, without limitation, (a) legal advisers,
consultants, rating agencies, accountants, brokers and other professionals
retained by the Issuer or the Collateral Manager (on behalf of the Issuer), (b)
asset pricing and asset rating services, compliance services and software, and
accounting, programming and data entry services directly related to the
management of the Assets, (c) all taxes, regulatory and governmental charges
(not based on the income of the Collateral Manager), insurance premiums or
expenses, (d) any and all costs and expenses incurred in connection with the
acquisition, disposition of investments on behalf of the Issuer (whether or not
actually consummated) and management thereof, including attorneys’ fees and
disbursements, (e) any fees, expenses or other amounts payable to any Rating
Agency, (f) preparing reports to holders of the Secured Notes, (g) reasonable
travel expenses (including without limitation airfare, meals, lodging and other
transportation) undertaken in connection with the performance by the Collateral
Manager of its obligations under duties pursuant this Agreement and the
Indenture, (h) expenses and costs in connection with any investor conferences,
(i) any broker or brokers in consideration of brokerage services provided to the
Collateral Manager in connection with the sale or purchase of any Collateral
Obligation, Equity Security, Eligible Investment or other assets received in
respect thereof, (j) bookkeeping, accounting or recordkeeping services obtained
or maintained with respect to the Issuer (including those services rendered at
the behest of the Collateral Manager), (k) software programs licensed from a
third party and used by the Collateral Manager in connection with servicing the
Assets, (l) fees and expenses incurred in obtaining the Market Value of
Collateral Obligations (including without limitation fees payable to any
nationally recognized pricing service), (m) audits incurred in connection with
any consolidation review, (n) any extraordinary costs and expenses incurred by
the Collateral Manager in the performance of its obligations under this
Agreement and the Indenture, (o) any out-of-pocket expenses incurred by the
Collateral Manager or the Retention Provider in connection with complying with
the U.S. Risk Retention Rules and/or the E.U. Retention Requirement Laws
(excluding the purchase price of any Notes acquired by it to comply with the
U.S. Risk Retention Rules and/or the E.U. Retention Requirement Laws) and (p) as
otherwise agreed upon by the Issuer and the Collateral Manager. In addition, the
Issuer will pay or reimburse the costs and expenses (including fees and
disbursements of counsel and accountants) of the Collateral Manager and the
Issuer incurred in connection with or incidental to the entering into of this
Agreement or any amendment thereof. The fees and expenses payable to the
Collateral Manager on any Payment Date are payable only as described under the
Priority of Payments.

 

Section 28.         Third Party Beneficiary.

 

The parties hereto agree that the Trustee on behalf of the Secured Parties shall
be a third party beneficiary of this Agreement, and shall be entitled to rely
upon and enforce such provisions of this Agreement to the same extent as if it
were a party hereto. For the avoidance of doubt, the Noteholders will not be
third party beneficiaries of this Agreement.

 

 35 

 

 

Section 29.         Titles Not to Affect Interpretation.

 

The titles of paragraphs and subparagraphs contained in this Agreement are for
convenience only, and they neither form a part of this Agreement nor are they to
be used in the construction or interpretation hereof.

 

Section 30.         Execution in Counterparts.

 

This Agreement may be executed in any number of counterparts by telegraphic or
other written form of communication, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories.

 

Section 31.         Provisions Separable.

 

The provisions of this Agreement are independent of and separable from each
other, and no provision shall be affected or rendered invalid or unenforceable
by virtue of the fact that for any reason any other or others of them may be
invalid or unenforceable in whole or in part.

 

Section 32.         Gender.

 

Words used herein, regardless of the number and gender specifically used, shall
be deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context requires.

 

Section 33.         Communications with Rating Agencies.

 

The Collateral Manager shall, on behalf of the Issuer, take all steps required
for the Issuer to comply with its obligations under the Indenture and under the
rating application letters and any related side letters, in each case in respect
of Rule 17g-5 under the Exchange Act.

 

 36 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Collateral Management
Agreement as of the date first written above.

 

  GOLUB CAPITAL BDC CLO III LLC,   as Issuer         By: Golub Capital BDC,
Inc., its designated manager         By: /s/ Ross A. Teune     Name: Ross A.
Teune     Title: Chief Financial Officer

 

   

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Collateral Management
Agreement as of the date first written above.

 

  GC ADVISORS LLC,   as Collateral Manager         By: /s/ Joshua M. Levinson  
  Name: Joshua M. Levinson     Title: Co-General Counsel & Chief Compliance
Officer