FS Investment Corporation III 8-K [fsiciii-8k_120214.htm]

 

Exhibit 10.1

EXECUTION VERSION

 

 

LOAN FINANCING AND SERVICING AGREEMENT

 

 

dated as of December 2, 2014

 

 

DUNLAP FUNDING LLC
as Borrower

 

 

THE LENDERS FROM TIME TO TIME PARTIES HERETO,

 

 

DEUTSCHE BANK AG, NEW YORK BRANCH,
as Administrative Agent

 

 

THE OTHER AGENTS PARTIES HERETO,

 

 

and

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Collateral Agent and as Collateral Custodian

 

 

 

 

TABLE OF CONTENTS

 

      Page         Article I          DEFINITIONS   1         Section 1.1
Defined Terms   1         Section 1.2 Other Definitional Provisions   39        
Article II         THE FACILITY, ADVANCE PROCEDURES AND NOTES   41        
Section 2.1 Advances   41         Section 2.2 Funding of Advances   41        
Section 2.3 Notes   42         Section 2.4 Repayment and Prepayments   43      
  Section 2.5 Permanent Reduction of Facility Amount   43         Section 2.6
Extension of Revolving Period   43         Section 2.7 Calculation of Discount
Factor   44         Article III        YIELD, UNDRAWN FEE, ETC   44        
Section 3.1 Yield and Undrawn Fee   44         Section 3.2 Yield Distribution
Dates   44         Section 3.3 Yield Calculation   45         Section 3.4
Computation of Yield, Fees, Etc.   45         Article IV        PAYMENTS; TAXES
  45         Section 4.1 Making of Payments   45         Section 4.2 Due Date
Extension   45         Section 4.3 Taxes   46

 

-i-

 

 

Article V          INCREASED COSTS, ETC   50         Section 5.1 Increased
Costs, Capital Adequacy   50         Article VI         EFFECTIVENESS;
CONDITIONS TO ADVANCES   51         Section 6.1 Effectiveness   51        
Section 6.2 Advances and Reinvestments   53         Section 6.3 Transfer of
Collateral Obligations and Permitted Investments   55         Article
VII        ADMINISTRATION AND Management OF COLLATERAL OBLIGATIONS   56        
Section 7.1 Investment Manager   56         Section 7.2 Investment Manager
Events of Default   56         Section 7.3 Duties of the Investment Manager   57
        Section 7.4 Reserved   58         Section 7.5 Covenants Relating to the
Investment Manager   58         Section 7.6 Reserved   61         Section 7.7
Collateral Reporting   61         Section 7.8 Reserved   61         Section 7.9
Procedural Review of Collateral Obligations; Access to Investment Manager and
Investment Manager’s Records   61         Section 7.10 Optional Sales   62      
  Section 7.11 Repurchase or Substitution of Warranty Collateral Obligations  
64         Section 7.12 Required Sale Date   64         Article
VIII       ACCOUNTS; PAYMENTS   64         Section 8.1 Accounts   64        
Section 8.2 Excluded Amounts   66         Section 8.3 Distributions,
Reinvestment and Dividends   67

 

-ii-

 

 

Section 8.4 Fees   69         Section 8.5 Monthly Report   69         Article
IX         REPRESENTATIONS AND WARRANTIES OF THE BORROWER   70         Section
9.1 Organization and Good Standing   70         Section 9.2 Due Qualification  
70         Section 9.3 Power and Authority   70         Section 9.4 Binding
Obligations   71         Section 9.5 Security Interest   71         Section 9.6
No Violation   72         Section 9.7 No Proceedings   72         Section 9.8 No
Consents   72         Section 9.9 Solvency   72         Section 9.10 Compliance
with Laws   73         Section 9.11 Taxes   73         Section 9.12 Monthly
Report   73         Section 9.13 No Liens, Etc.   73         Section 9.14
Information True and Correct   74         Section 9.15 Bulk Sales   74        
Section 9.16 Collateral   74         Section 9.17 Selection Procedures   74    
    Section 9.18 Indebtedness   74         Section 9.19 No Injunctions   74    
    Section 9.20 No Subsidiaries   74         Section 9.21 ERISA Compliance   74
        Section 9.22 Investment Company Status   74

 

-iii-

 

 

Section 9.23 Set-Off, Etc.   74         Section 9.24 Collections   75        
Section 9.25 Value Given   75         Section 9.26 Regulatory Compliance   75  
      Section 9.27 Separate Existence   75         Section 9.28 Transaction
Documents   75         Section 9.29 Anti-Terrorism, Anti-Money Laundering   76  
      Article X          COVENANTS   76         Section 10.1 Protection of
Security Interest of the Secured Parties   76         Section 10.2 Other Liens
or Interests   77         Section 10.3 Costs and Expenses   77         Section
10.4 Reporting Requirements   77         Section 10.5 Separate Existence   78  
      Section 10.6 Hedging Agreements   79         Section 10.7 Tangible Net
Worth   81         Section 10.8 Taxes   81         Section 10.9 Merger,
Consolidation, Etc.   81         Section 10.10 Deposit of Collections   81      
  Section 10.11 Indebtedness; Guarantees   82         Section 10.12 Limitation
on Purchases from Affiliates   82         Section 10.13 Documents   82        
Section 10.14 Preservation of Existence   82         Section 10.15 Limitation on
Investments   82         Section 10.16 Distributions   83         Section 10.17
Performance of Borrower Assigned Agreements   83

 

-iv-

 

 

Section 10.18 Material Modifications   83         Section 10.19 Further
Assurances; Financing Statements   83         Section 10.20 Obligor Payment
Instructions   84         Section 10.21 Delivery of Collateral Obligation Files
  84         Section 10.22 Collateral Obligation Schedule   84         Article
XI         THE COLLATERAL AGENT   85         Section 11.1 Appointment of
Collateral Agent   85         Section 11.2 Monthly Reports   85         Section
11.3 Collateral Administration   85         Section 11.4 Removal or Resignation
of Collateral Agent   88         Section 11.5 Representations and Warranties  
89         Section 11.6 No Adverse Interest of Collateral Agent   89        
Section 11.7 Reliance of Collateral Agent   89         Section 11.8 Limitation
of Liability and Collateral Agent Rights   90         Section 11.9 Tax Reports  
92         Section 11.10 Merger or Consolidation   92         Section 11.11
Collateral Agent Compensation   93         Section 11.12 Anti-Terrorism Laws  
93         Article XII        GRANT OF SECURITY INTEREST   93         Section
12.1 Borrower’s Grant of Security Interest   93         Section 12.2 Borrower
Remains Liable   95         Section 12.3 Release of Collateral   95        
Article XIII        FACILITY TERMINATION EVENTS   95         Section 13.1
Facility Termination Events   95

 

-v-

 

 

Section 13.2 Effect of Facility Termination Event   98         Section 13.3
Rights upon Facility Termination Event   99         Section 13.4 Collateral
Agent May Enforce Claims Without Possession of Notes   99         Section 13.5
Collective Proceedings   99         Section 13.6 Insolvency Proceedings   100  
      Section 13.7 Delay or Omission Not Waiver   101         Section 13.8
Waiver of Stay or Extension Laws   101         Section 13.9 Limitation on Duty
of Collateral Agent in Respect of Collateral   101         Section 13.10 Power
of Attorney   102         Article XIV        THE ADMINISTRATIVE AGENT   103    
    Section 14.1 Appointment   103         Section 14.2 Delegation of Duties  
103         Section 14.3 Exculpatory Provisions   103         Section 14.4
Reliance by Note Agents   104         Section 14.5 Notices   104         Section
14.6 Non-Reliance on Note Agents   104         Section 14.7 Indemnification  
105         Section 14.8 Successor Note Agent   105         Section 14.9 Note
Agents in their Individual Capacity   106         Section 14.10 Borrower
Procedural Review   106         Article XV        ASSIGNMENTS   106        
Section 15.1 Restrictions on Assignments   106         Section 15.2
Documentation   106         Section 15.3 Rights of Assignee   106

 

-vi-

 

 

Section 15.4 Assignment by Lenders   107         Section 15.5 Registration;
Registration of Transfer and Exchange   107         Section 15.6 Mutilated,
Destroyed, Lost and Stolen Notes   108         Section 15.7 Persons Deemed
Owners   109         Section 15.8 Cancellation   109         Section 15.9
Participations; Pledge   109         Article XVI       INDEMNIFICATION   110    
    Section 16.1 Borrower Indemnity   110         Section 16.2 Reserved   110  
      Section 16.3 Contribution   111         Section 16.4 Net After-Tax Basis  
111         Article XVII      MISCELLANEOUS   111         Section 17.1 No
Waiver; Remedies   111         Section 17.2 Amendments, Waivers   111        
Section 17.3 Notices, Etc.   112         Section 17.4 Costs and Expenses   112  
      Section 17.5 Binding Effect; Survival   113         Section 17.6 Captions
and Cross References   113         Section 17.7 Severability   113        
Section 17.8 GOVERNING LAW   113         Section 17.9 Counterparts   113        
Section 17.10 WAIVER OF JURY TRIAL   113         Section 17.11 No Proceedings  
114         Section 17.12 Limited Recourse   114         Section 17.13 ENTIRE
AGREEMENT   115

 

-vii-

 

 

Section 17.14 Confidentiality   115         Section 17.15 Non-Confidentiality of
Tax Treatment   116         Section 17.16 Replacement of Lenders   116        
Section 17.17 Consent to Jurisdiction   117         Section 17.18 Option to
Acquire Rating   118         Article XVIII     COLLATERAL CUSTODIAN   118      
  Section 18.1 Designation of Collateral Custodian   118         Section 18.2
Duties of the Collateral Custodian   118         Section 18.3 Delivery of
Collateral Obligation Files   120         Section 18.4 Collateral Obligation
File Certification   120         Section 18.5 Release of Collateral Obligation
Files   121         Section 18.6 Examination of Collateral Obligation Files  
123         Section 18.7 Lost Note Affidavit   123         Section 18.8
Transmission of Collateral Obligation Files   123         Section 18.9 Merger or
Consolidation   124         Section 18.10 Collateral Custodian Compensation  
124         Section 18.11 Removal or Resignation of Collateral Custodian   124  
      Section 18.12 Limitations on Liability   125         Section 18.13
Collateral Custodian as Agent of Collateral Agent   126

 

-viii-

 

 

EXHIBIT A Form of Note EXHIBIT B Audit Standards EXHIBIT C-1 Form of Advance
Request EXHIBIT C-2 Form of Reinvestment Request EXHIBIT C-3 Form of Asset
Approval Request EXHIBIT D Form of Monthly Report EXHIBIT E Form of Approval
Notice EXHIBIT F-1 Authorized Representatives of Investment Manager EXHIBIT F-2
Request for Release and Receipt EXHIBIT F-3 Request for Release of Request for
Release and Receipt EXHIBIT G-1 U.S. Tax Compliance Certificate (Foreign Lender
- non-Partnerships) EXHIBIT G-2 U.S. Tax Compliance Certificate (Foreign
Participant - non-Partnerships) EXHIBIT G-3 U.S. Tax Compliance Certificate
(Foreign Participants - Partnerships) EXHIBIT G-4 U.S. Tax Compliance
Certificate (Foreign Lenders - Partnerships) EXHIBIT H Schedule of Collateral
Obligations Certification     SCHEDULE 1 Diversity Score Calculation SCHEDULE 2
Moody’s Industry Classification Group List SCHEDULE 3 Collateral Obligations

 

-ix-

 

 

LOAN FINANCING AND SERVICING AGREEMENT

 

THIS LOAN FINANCING AND SERVICING AGREEMENT is made and entered into as of
December 2, 2014, among DUNLAP FUNDING LLC, a Delaware limited liability company
(the “Borrower”), each LENDER (as hereinafter defined) FROM TIME TO TIME PARTY
HERETO, the AGENTS for the Lender Groups (as hereinafter defined) from time to
time parties hereto (each such party, in such capacity, together with their
respective successors and permitted assigns in such capacity, an “Agent”), WELLS
FARGO BANK, NATIONAL ASSOCIATION, as Collateral Agent and Collateral Custodian
(each as hereinafter defined), and DEUTSCHE BANK AG, NEW YORK BRANCH, as
Administrative Agent (in such capacity, together with its successors and
permitted assigns in such capacity, the “Administrative Agent”).

 

RECITALS

 

WHEREAS, the Borrower desires that each Lender extend financing on the terms and
conditions set forth herein; and

 

WHEREAS, each Lender desires to extend financing on the terms and conditions set
forth herein.

 

NOW, THEREFORE, based upon the foregoing Recitals, the premises and the mutual
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:

 

Article I

DEFINITIONS

 

Section 1.1        Defined Terms. As used in this Agreement, the following terms
have the following meanings:

 

“1940 Act” means the Investment Company Act of 1940, as amended.

 

“Account” means the Unfunded Exposure Account, the Principal Collection Account
and the Interest Collection Account, together with any sub-accounts deemed
appropriate or necessary by the Securities Intermediary, for convenience in
administering such accounts.

 

“Account Collateral” has the meaning set forth in Section 12.1(d).

 

“Account Control Agreement” means the Securities Account Control Agreement,
dated as of the Effective Date, by and between the Borrower, as pledgor, the
Collateral Agent on behalf of the Secured Parties, as secured party, and the
Collateral Custodian, as Securities Intermediary.

 

 

 

 

“Accrual Period” means, with respect to any Distribution Date, the period from
and including the previous Distribution Date (or, in the case of the first
Distribution Date, from and including the Effective Date) through and including
the day preceding such Distribution Date.

 

“Adjusted Aggregate Eligible Collateral Obligation Balance” means, as of any
date, the Aggregate Eligible Collateral Obligation Amount minus the Excess
Concentration Amount on such date.

 

“Administrative Agent” has the meaning set forth in the Preamble.

 

“Advance” has the meaning set forth in Section 2.1(a).

 

“Advance Date” has the meaning set forth in Section 2.1(a).

 

“Advance Rate” has the meaning set forth in the Fee Letters.

 

“Advance Request” has the meaning set forth in Section 2.2(a).

 

“Adverse Claim” means any claim of ownership or any Lien, title retention, trust
or other charge or encumbrance, or other type of preferential arrangement having
the effect or purpose of creating a Lien, other than Permitted Liens.

 

“Affected Person” has the meaning set forth in Section 5.1.

 

“Affiliate” of any Person means any other Person that directly or indirectly
Controls, is Controlled by or is under common Control with such Person
(excluding any trustee under, or any committee with responsibility for
administering, any employee benefit plan). For the purposes of this definition,
“Control” shall mean the possession, directly or indirectly (including through
affiliated entities), of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise, and the terms “Controlling” and
“Controlled” shall have meanings correlative thereto.

 

“Agent” has the meaning set forth in the Preamble.

 

“Aggregate Eligible Collateral Obligation Amount” means, as of any date, the sum
of the Collateral Obligation Amounts for all Eligible Collateral Obligations.

 

“Aggregate Funded Spread” means, as of any day, the sum of: (a) in the case of
each Eligible Collateral Obligation (including, for any Deferrable Collateral
Obligation, only the required current cash pay interest thereon) that bears
interest at a spread over a London interbank offered rate based index, (i) the
sum of (I) the stated interest rate spread on each such Collateral Obligation
above such index plus (II) for each such Collateral Obligation that provides for
a minimum index amount, the excess, if any, of such minimum index amount over
such index multiplied by (ii) the Collateral Obligation Amount of each such
Collateral Obligation plus (b) in the case of each Eligible Collateral
Obligation (including, for any Deferrable Collateral Obligation, only the
required current cash pay interest thereon) that bears interest at a spread over
an index other than a London interbank offered rate based index, (A) the excess
for each such Collateral Obligation of the sum of such spread for each such
Collateral Obligation and such index for each such Collateral Obligation over
the LIBOR Rate for such applicable period of time (which spread or excess may be
expressed as a negative percentage) multiplied by (B) the Collateral Obligation
Amount of each such Collateral Obligation plus (c) in the case of each Eligible
Collateral Obligation (including, for any Deferrable Collateral Obligation, only
the required current cash pay interest thereon) that is a Fixed Rate Collateral
Obligation, (x) the interest rate for such Collateral Obligation minus the LIBOR
Rate multiplied by (y) the Collateral Obligation Amount of each such Collateral
Obligation.

 

-2-

 

 

“Aggregate Notional Amount” shall mean, with respect to any date of
determination, an amount equal to the sum of the notional amounts or equivalent
amounts of all outstanding Hedging Agreements, Replacement Hedging Agreements
and Qualified Substitute Arrangements, each as of such date of determination.

 

“Aggregate Unfunded Amount” shall mean, as of any date of determination, the sum
of the unfunded commitments and all other standby or contingent commitments
associated with each Variable Funding Asset included in the Collateral as of
such date.

 

“Agreement” means this Loan Financing and Servicing Agreement, as it may be
amended, restated, supplemented or otherwise modified from time to time.

 

“Alternate Base Rate” means a fluctuating rate per annum as shall be in effect
from time to time, which rate shall be at all times equal to the higher of:

 

(a)        the rate of interest announced publicly by DBNY in New York, New
York, from time to time as DBNY’s base commercial lending rate; and

 

(b)        ½ of one percent above the Federal Funds Rate.

 

“Amount Available” means, with respect to any Distribution Date, the sum of
(a) the amount of Collections with respect to the related Collection Period and
any amounts paid into the Collection Account under any Hedging Agreement with
respect to the Accrual Period ending on the day preceding such Distribution
Date, plus (b) any investment income earned on amounts on deposit in the
Collection Account since the immediately prior Distribution Date (or since the
Effective Date in the case of the first Distribution Date), plus (c) any
Repurchase Amounts deposited in the Collection Account with respect to the
related Collection Period.

 

“Applicable Law” means for any Person all existing and future laws, rules,
regulations (including temporary and final income tax regulations), statutes,
treaties, codes, ordinances, permits, certificates, orders, licenses of and
interpretations by any Official Body applicable to such Person (including,
without limitation, predatory and abusive lending laws, usury laws, the Federal
Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing
Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Magnuson Moss Warranty Act, the Federal
Reserve Board’s Regulations “B” and “Z,” the Servicemembers Civil Relief Act of
2003 and state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code and all other consumer credit laws and equal credit
opportunity and disclosure laws) and applicable judgments, decrees, injunctions,
writs, awards or orders of any court, arbitrator or other administrative,
judicial, or quasi-judicial tribunal or agency of competent jurisdiction.

 

-3-

 

 

“Applicable Margin” has the meaning set forth in the Fee Letters.

 

“Appraised Value” means, with respect to any Asset Based Loan, the appraised
value of the pro rata portion of the underlying collateral securing such
Collateral Obligation as determined by an Approved Valuation Firm.

 

“Approval Notice” means, with respect to any Collateral Obligation, a copy of a
notice executed by the Administrative Agent in the form of Exhibit E,
evidencing, among other things, the approval of the Administrative Agent, in its
sole discretion, of such Collateral Obligation and the applicable Discount
Factor, the jurisdiction (if other than the United States or any State thereof)
of the applicable Obligor, the loan type and lien priority, the Effective LTV,
the Original Effective LTV and the Attaching Original Effective LTV (if such
Collateral Obligation is an Asset Based Loan), the Original Leverage Multiple
and the Attaching Leverage Multiple, other non-cash charges included in EBITDA
and each other item listed in Section 6.2(h).

 

“Approved Valuation Firm” means, with respect to any Collateral Obligation, any
valuation firm either (a) specified on the related Asset Approval Request and
approved on the related Approval Notice or (b) otherwise approved in writing by
the Administrative Agent in its reasonable discretion.

 

“Asset Approval Request” means a notice in the form of Exhibit C-3 which
requests an Approval Notice with respect to one or more Collateral Obligations
and shall include (among other things):

 

        (a)        the proposed date of each related acquisition;

 

        (b)        the Investment Manager’s internal risk rating (including all
other output and related calculations) for each such Collateral Obligation;

 

        (c)        the Original Leverage Multiple and Original Effective LTV (if
such Collateral Obligation is an Asset Based Loan) for each such Collateral
Obligation, measured as of the date of such notice;

 

        (d)        each requested other non-cash charge to be included in EBITDA
(if any);

 

        (e)        a list, for each such Second Lien Loan, of any Liens
permitted under the applicable Underlying Instruments that are permitted to (i)
secure borrowed money in excess of $500,000, whether individually or in the
aggregate and (ii) rank in priority senior to or pari passu with such Second
Lien Loan;

 

        (f)        all Obligor Information, including notice of any unavailable
items of Obligor Information; and

 

        (f)        a related Schedule of Collateral Obligations.

 

“Asset Based Loan” means any Loan which the Investment Manager identifies on the
related Asset Approval Request that (i) was underwritten primarily on the
appraised value of the assets securing such Loan and (ii) is governed by a
borrowing base.

 

-4-

 

 

“Attaching Leverage Multiple” means, with respect to any Collateral Obligation
that is an Enterprise Value Loan, the Leverage Multiple of any Loan of the
applicable Obligor that is immediately senior in right of payment to such
Collateral Obligation.

 

“Attaching Original Effective LTV” means, with respect to any Collateral
Obligation that is an Asset Based Loan, the Original Effective LTV of any Loan
of the applicable Obligor that is immediately senior in right of payment to such
Collateral Obligation.

 

“Available Funds” has the meaning set forth in Section 17.12.

 

“Average Life” means, as of any day and with respect to any Collateral
Obligation, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years (rounded up to the nearest one hundredth thereof) from
such day to the respective dates of each successive Scheduled Collateral
Obligation Payment of principal on such Collateral Obligation multiplied by
(b) the respective amounts of principal of such Scheduled Collateral Obligation
Payments by (ii) the sum of all successive Scheduled Collateral Obligation
Payments of principal on such Collateral Obligation.

 

“Bankruptcy Code” means the United States Bankruptcy Code, 11 U.S.C. § 101, et
seq., as amended.

 

“Base Rate” for any Advance means a rate per annum equal to the LIBOR Rate for
such Advance or portion thereof; provided, that in the case of

 

        (a)        any day on or after the first day on which a Committed Lender
shall have notified the Administrative Agent that the introduction of or any
change in or in the interpretation of any law or regulation makes it unlawful,
or any central bank or other Official Body asserts that it is unlawful, for such
Committed Lender to fund such Advance at the Base Rate set forth above (and such
Committed Lender shall not have subsequently notified the Administrative Agent
that such circumstances no longer exist), or

 

        (b)        any period in the event the LIBOR Rate is not reasonably
available to any Lender for such period,

 

the “Base Rate” shall be a floating rate per annum equal to the Alternate Base
Rate in effect on each day of such period.

 

“Basel III Regulation” shall mean, with respect to any Affected Person, any
rule, regulation or guideline applicable to such Affected Person and arising
directly or indirectly from (a) any of the following documents prepared by the
Basel Committee on Banking Supervision of the Bank of International Settlements:
(i) Basel III: International Framework for Liquidity Risk Measurement, Standards
and Monitoring (December 2010), (ii) Basel III: A Global Regulatory Framework
for More Resilient Banks and Banking Systems (June 2011), (iii) Basel III: The
Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools (January 2013), or
(iv) any document supplementing, clarifying or otherwise relating to any of the
foregoing, or (b) any accord, treaty, statute, law, rule, regulation, guideline
or pronouncement (whether or not having the force of law) of any governmental
authority implementing, furthering or complementing any of the principles set
forth in the foregoing documents of strengthening capital and liquidity, in each
case as from time to time amended, restated, supplemented or otherwise modified.
Without limiting the generality of the foregoing, “Basel III Regulation” shall
include Part 6 of the European Union regulation on prudential requirements for
credit institutions and investment firms (the “CRR”) and any law, regulation,
standard, guideline, directive or other publication supplementing or otherwise
modifying the CRR.

 

-5-

 

 

“Borrower” has the meaning set forth in the Preamble.

 

“Borrower Assigned Agreements” has the meaning set forth in Section 12.1(c).

 

“Borrowing Base” means, on any day of determination, (i) the product of the
lower of (a) the Weighted Average Advance Rate and (b) the Maximum Portfolio
Advance Rate multiplied by the Adjusted Aggregate Eligible Collateral Obligation
Balance plus (ii) the amount on deposit in the Principal Collection Account
minus (iii) the Aggregate Unfunded Amount plus (iv) the amount on deposit in the
Unfunded Exposure Account.

 

“Borrowing Base Condition” means, both before and after giving pro forma effect
to any such distribution, (i) with respect to any distribution permitted under
Sections 10.16(a)(A)(1) and 10.16(a)(A)(2), the Borrowing Base is greater than
or equal to the Advances outstanding, and (ii) with respect to any distribution
permitted under Sections 10.16(a)(A)(3) and 10.16(a)(A)(4), the Borrowing Base
is greater than or equal to 110% of the Advances outstanding.

 

“Business Day” means any day that is not a Saturday, Sunday or other day on
which banking institutions in New York, New York or the city in which the
offices of the Collateral Agent or Collateral Custodian are located are
authorized or obligated by law, executive order or government decree to remain
closed. All references to any “day” or any particular day of any “calendar
month” shall mean calendar day unless otherwise specified.

 

“Capped Fees/Expenses” means, at any time, the Collateral Agent Fees and
Expenses and Collateral Custodian Fees and Expenses such that the aggregate
amount of such Collateral Agent Fees and Expenses and Collateral Custodian Fees
and Expenses paid to the Collateral Agent or the Collateral Custodian under the
Transaction Documents in any calendar year do not exceed the sum of (i) 0.03%
per annum of the Aggregate Eligible Collateral Obligation Amount plus (ii)
$200,000.

 

“Change of Control” means the Equityholder shall no longer be the sole
equityholder of the Borrower.

 

“Charges” means (i) all federal, state, county, city, municipal, local, foreign
or other governmental taxes (including taxes owed to the PBGC at the time due
and payable); (ii) all levies, assessments, charges, or claims of any
governmental entity or any claims of statutory lienholders, the nonpayment of
which could give rise by operation of law to a Lien on the Collateral
Obligations or any other property of the Borrower and (iii) any such taxes,
levies, assessment, charges or claims which constitute a lien or encumbrance on
any property of the Borrower.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

-6-

 

 

“Collateral” has the meaning set forth in Section 12.1.

 

“Collateral Agent” means Wells Fargo Bank, National Association, solely in its
capacity as Collateral Agent, together with its successors and permitted assigns
in such capacity.

 

“Collateral Agent and Collateral Custodian Fee Letter” means that certain letter
agreement between the Collateral Agent and Collateral Custodian and the
Borrower, as the same may be amended, supplemented or otherwise modified by the
parties thereto with the consent of the Administrative Agent.

 

“Collateral Agent Fees and Expenses” has the meaning set forth in Section 11.11.

 

“Collateral Custodian” means Wells Fargo Bank, National Association, solely in
its capacity as collateral custodian, together with its successors and permitted
assigns in such capacity.

 

“Collateral Custodian Fees and Expenses” has the meaning set forth in Section
18.10.

 

“Collateral Database” has the meaning set forth in Section 11.3(a)(i).

 

“Collateral Obligation” means a Loan or participation interest therein owned by
the Borrower, excluding the Retained Interest thereon.

 

“Collateral Obligation Amount” means for any Collateral Obligation, as of any
date of determination, an amount equal to the product of (i) the Discount Factor
of such Collateral Obligation at such time multiplied by (ii) the Principal
Balance of such Collateral Obligation at such time.

 

The Collateral Obligation Amount of any Collateral Obligation that ceases to be
(or otherwise is not) an Eligible Collateral Obligation shall be zero.

 

“Collateral Obligation File” means, with respect to each Collateral Obligation
as identified on the related Document Checklist, (i) if the Collateral
Obligation includes a promissory note, (x) an original, executed copy of such
promissory note, or (y) in the case of a lost promissory note, a copy of such
executed promissory note accompanied by an original executed affidavit and
indemnity endorsed by the Borrower in blank, in each case with respect to clause
(x) or clause (y) with an unbroken chain of endorsements from each prior holder
of such promissory note to the Borrower or in blank (unless such note is in
bearer form, in which case delivery alone shall suffice), or (z) in the case of
a noteless Collateral Obligation, a copy of each executed document or instrument
evidencing the assignment of such Collateral Obligation to the Borrower, (ii)
copies (as indicated on the Schedule of Collateral Obligations and the related
Document Checklist) of any related loan agreement, security agreement, mortgage,
moveable or immoveable hypothec, deed of hypothec, guarantees, note purchase
agreement, intercreditor and/or subordination agreement, each to the extent in
the possession of the Borrower, (iii) copies of the file-stamped (or the
electronic equivalent of) UCC financing statements and continuation statements
(including amendments or modifications thereof) authorized by the Obligor
thereof or by another Person on the Obligor’s behalf in respect of such
Collateral Obligation, and (iv) any other document included by the Investment
Manager on the related Document Checklist.

 

-7-

 

 

“Collateral Obligation Schedule” means the list of Collateral Obligations set
forth on Schedule 3, as the same may be updated by the Borrower (or the
Investment Manager on behalf of the Borrower) from time to time.

 

“Collateral Quality Tests” means, collectively or individually as the case may
be, the Minimum Diversity Test, the Minimum Weighted Average Spread Test and the
Maximum Weighted Average Life Test.

 

“Collection Account” means, collectively, the Principal Collection Account and
the Interest Collection Account.

 

“Collection Period” means, with respect to the first Distribution Date, the
period from and including the Effective Date to and including the Determination
Date preceding the first Distribution Date; and thereafter, the period from but
excluding the Determination Date preceding the previous Distribution Date to and
including the Determination Date preceding the current Distribution Date.

 

“Collections” means the sum of all Interest Collections and all Principal
Collections received with respect to the Collateral.

 

“Commercial Paper Rate” for Advances means, to the extent a Conduit Lender funds
such Advances by issuing commercial paper, the sum of (i) the weighted average
of the rates at which commercial paper notes of such Conduit Lender issued to
fund such Advances (which shall include commissions of placement agents and
dealers, incremental carrying costs incurred with respect to its commercial
paper maturing on dates other than those on which corresponding funds are
received by the Conduit Lender and costs or other borrowings by the Conduit
Lender (other than under any related support facility) may be sold by any
placement agent or commercial paper dealer selected by such Conduit Lender, as
agreed in good faith between each such agent or dealer and such Conduit Lender;
provided, that if the rate (or rates) as agreed between any such agent or dealer
and such Conduit Lender for any Advance is a discount rate (or rates), then such
rate shall be the rate (or if more than one rate, the weighted average of the
rates) resulting from converting such discount rate (or rates) to an
interest-bearing equivalent rate per annum plus, without duplication (ii) any
and all reasonable costs and expenses of any issuing and paying agent or other
Person responsible for the administration of such Conduit Lender’s commercial
paper program in connection with the preparation, completion, issuance, delivery
or payment of commercial paper issued to fund the making or maintenance of any
Advance. Each Conduit Lender shall notify the Administrative Agent of its
Commercial Paper Rate applicable to any Advance promptly after the determination
thereof.

 

“Commitment” means, for each Committed Lender, (a) prior to the Facility
Termination Date, the commitment of such Committed Lender to make Advances to
the Borrower in an amount not to exceed, in the aggregate, the amount set forth
opposite such Committed Lender’s name on Annex B or pursuant to the assignment
executed by such Committed Lender and its assignee(s) and delivered pursuant to
Article XV (as such Commitment may be reduced as set forth in Section 2.5), and
(b) on and after the earlier to occur of (i) Facility Termination Date and
(ii) the end of the Revolving Period, such Committed Lender’s pro rata share of
all Advances outstanding.

 

-8-

 

 

“Committed Lenders” means, for any Lender Group, the Persons executing this
Agreement in the capacity of a “Committed Lender” for such Lender Group (or an
assignment hereof) in accordance with the terms of this Agreement.

 

“Competitor” means (a) any Person primarily engaged in the business of private
investment management as a business development company, mezzanine fund, private
debt fund, hedge fund or private equity fund, which is in direct or indirect
competition with the Borrower, the Investment Manager, the sub-advisor of the
Investment Manager, or any Affiliate thereof that is an investment advisor, (b)
any Person controlled by, or controlling, or under common control with, a Person
referred to in clause (a) above, or (c) any Person for which a Person referred
to in clause (a) above serves as an investment advisor with discretionary
investment authority.

 

“Conduit Advance Termination Date” means, with respect to a Conduit Lender, the
date of the delivery by such Conduit Lender to the Borrower of written notice
that such Conduit Lender elects, in its sole discretion, to permanently cease
funding Advances hereunder.

 

“Conduit Lender” means any Person that shall become a party to this Agreement in
the capacity as a “Conduit Lender” and any assignee of any of the foregoing.

 

“Corporate Trust Office” means the applicable designated corporate trust office
of the Collateral Agent or the Collateral Custodian, as applicable, specified on
Annex A, or such other address within the United States as it may designate from
time to time by notice to the Administrative Agent.

 

“Cost of Funds Rate” means, for any Accrual Period and any Lender, the rate
determined as set forth below:

 

        (a)        With respect to each Conduit Lender and each day of such
Accrual Period, such Conduit Lender’s Commercial Paper Rate for such day;
provided, that if and to the extent that, and only for so long as, a Conduit
Lender at any time determines in good faith that it is unable to raise or is
precluded or prohibited from raising, or that it is not advisable to raise,
funds through the issuance of commercial paper notes in the commercial paper
market of the United States to finance its making or maintenance of its portion
of any Advance or any portion thereof (which determination may be based on any
allocation method employed in good faith by such Conduit Lender), upon notice
from such Conduit Lender to the Agent for its Lender Group and the
Administrative Agent, such Conduit Lender’s portion of such Advance shall bear
interest at a rate per annum equal to the Base Rate; and

 

        (b)        With respect to each Committed Lender, the Base Rate.

 

“Cut-Off Date” means, with respect to each Collateral Obligation, the date such
Collateral Obligation becomes a part of the Collateral.

 

“DBNY” means Deutsche Bank AG, New York Branch, and its successors.

 

-9-

 

 

“Defaulted Collateral Obligation” means any Collateral Obligation as to which
any one of the following events has occurred:

 

        (a)        any Scheduled Collateral Obligation Payment or part thereof
is unpaid more than 2 Business Days beyond the grace period (if any) permitted
by the related Underlying Instrument;

 

        (b)        an Insolvency Event occurs with respect to the Obligor
thereof;

 

        (c)        the Investment Manager or the Borrower has actual knowledge
of a default as to the payment of principal and/or interest that has occurred
and continues for more than two Business Days on another loan or other debt
obligation of the same Obligor that is (a) senior or pari passu in right of
payment to such Collateral Obligation, (b) either a full recourse obligation of
the Obligor or secured by the same collateral securing such Collateral
Obligation and (c) in an amount (whether separately or in the aggregate) in
excess of $250,000;

 

        (d)        such Collateral Obligation has (x) a public rating by
Standard & Poor’s of “CC” or below, or “SD” or (y) a Moody’s probability of
default rating (as published by Moody’s) of “D” or “LD” or, in each case, had
such ratings before they were withdrawn by Standard & Poor’s or Moody’s, as
applicable;

 

        (e)        the Investment Manager or the Borrower has actual knowledge
that such Collateral Obligation is pari passu or junior in right of payment as
to the payment of principal and/or interest to another debt obligation of the
same issuer which has (i) a public rating by Standard & Poor’s of “CC” or below,
or “SD” or (ii) a Moody’s probability of default rating (as published by
Moody’s) of “D” or “LD,” and in each case such other debt obligation remains
outstanding (provided that both the Collateral Obligation and such other debt
obligation are full recourse obligations of the applicable Obligor);

 

        (f)        a Responsible Officer of the Investment Manager or the
Borrower has received written notice or has actual knowledge that a default has
occurred under the Underlying Instruments, any applicable grace period has
expired and the holders of such Collateral Obligation have accelerated the
repayment of such Collateral Obligation (but only until such default is cured or
waived) in the manner provided in the Underlying Instruments;

 

        (g)         with respect to any Related Collateral Obligation, (i) the
Equityholder or any of its subsidiaries fails to comply with any funding
obligation under such Variable Funding Asset, and (ii) the Equityholder fails to
notify the Administrative Agent prior to such failure to fund and in reasonable
detail that, to the knowledge of the Equityholder, such failure to comply was
not solely as a result of the Equityholder’s or such subsidiary’s inability to
fund such obligation; or

 

        (h)        the Investment Manager determines, in its sole discretion, in
accordance with the Investment Management Standard, that all or a material
portion of such Collateral Obligation is not collectible or otherwise places
such Collateral Obligation on non-accrual status.

 

“Deferrable Collateral Obligation” means a Collateral Obligation that by its
terms permits the deferral or capitalization of payment of accrued and unpaid
interest.

 

“Determination Date” means the last day of each calendar month.

 

-10-

 

 

“DIP Loan” means any Loan made to a debtor-in-possession pursuant to Section 364
of the Bankruptcy Code having the priority allowed by either Section 364(c) or
364(d) of the Bankruptcy Code and fully secured by senior Liens.

 

“Discount Factor” means, with respect to each Collateral Obligation and as of
any date of determination pursuant to Section 2.7, the value (expressed as a
percentage of par) of such Collateral Obligation as determined by the
Administrative Agent in its sole discretion in accordance with Section 2.7.

 

“Distribution Date” means the 15th day of each January, April, July and October,
or if such date is not a Business Day, the next succeeding Business Day,
commencing in April 2015.

 

“Diversity Score” means, as of any day, a single number that indicates
collateral concentration in terms of both issuer and industry concentration,
calculated as set forth in Schedule 1 hereto, as such diversity scores shall be
updated at the option of the Administrative Agent in its sole discretion if
Moody’s publishes revised criteria and the application of such revised criteria
to this facility is necessary to avoid an increased regulatory capital charge
for the Administrative Agent or its Affiliates that are Lenders hereunder.

 

“Document Checklist” means an electronic or hard copy list delivered by the
Borrower (or by the Investment Manager on behalf of the Borrower) to the
Collateral Custodian that identifies each of the documents contained in each
Collateral Obligation File and whether such document is an original or a copy
and whether a hard copy or electronic copy will be delivered to the Collateral
Custodian related to a Collateral Obligation and includes the name of the
Obligor with respect to such Collateral Obligation, in each case as of the
related Funding Date.

 

“Dollar(s)” and the sign “$” mean lawful money of the United States of America.

 

“EBITDA” means, with respect to any period and any Collateral Obligation, the
meaning of “EBITDA,” “Adjusted EBITDA” or any comparable definition in the
Underlying Instruments for each such Collateral Obligation. In any case that
“EBITDA,” “Adjusted EBITDA” or such comparable definition is not defined in such
Underlying Instruments, an amount, for the related Obligor and any of its
parents or Subsidiaries that are obligated with respect to such Collateral
Obligation pursuant to its Underlying Instruments (determined on a consolidated
basis without duplication in accordance with GAAP) equal to earnings from
continuing operations for such period plus interest expense, income taxes,
depreciation, amortization and, to the extent reported pursuant to the related
Underlying Instruments and set forth on the related Approval Notice or otherwise
approved by the Administrative Agent in its sole discretion, other non-cash
charges that were deducted in determining earnings from continuing operations
for such period and, to the extent approved by the Administrative Agent on a
Collateral Obligation by Collateral Obligation basis, any other costs and
expenses reducing earnings and other extraordinary non-recurring costs and
expenses for such period (to the extent deducted in determining earnings from
continuing operations for such period).

 

“Effective Advance Rate” means, on any date of determination, (a) the Advances
outstanding on such date divided by (b) the sum of (i) the Adjusted Aggregate
Eligible Collateral Obligation Balance on such date plus (ii) the amount of
Principal Collections on deposit in the Principal Collection Account on such
date minus (iii) the Aggregate Unfunded Amount on such date plus (iv) the amount
on deposit in the Unfunded Exposure Account on such date.

 

-11-

 

 

“Effective Date” has the meaning set forth in Section 6.1.

 

“Effective Equity” means, as of any day, the greater of (x) the sum of the
Principal Balances of all Eligible Collateral Obligations minus (ii) the
outstanding principal amount of all Advances and (y) $0.

 

“Effective LTV” means, with respect to any Asset Based Loan as of any date of
determination, the product of (i) the Principal Balance of such Collateral
Obligation divided by (ii) the Appraised Value of such Collateral Obligation as
of such date of determination.

 

“Eligible Account” means (i) a segregated trust account or (ii) a segregated
direct deposit account, in each case, maintained with a securities intermediary
or trust company organized under the laws of the United States of America, or
any of the States thereof, or the District of Columbia, having a certificate of
deposit, short term deposit or commercial paper rating of at least A-1 by
Standard & Poor’s and P-1 by Moody’s. In either case, such depository
institution or trust company shall have been approved by the Administrative
Agent, acting in its reasonable discretion, by written notice to the Borrower.
DBNY and Wells Fargo Bank, National Association are deemed to be acceptable
securities intermediaries to the Administrative Agent.

 

“Eligible Collateral Obligation” means, on any Measurement Date, each Collateral
Obligation that satisfies the following conditions (unless otherwise waived by
the Administrative Agent in its sole discretion on the applicable Approval
Notice):

 

        (a)        the Administrative Agent in its sole discretion has delivered
an Approval Notice with respect to such Collateral Obligation;

 

        (b)        such Collateral Obligation is (i) a First Lien Loan, a Second
Lien Loan, an Unsecured Loan or (ii) prior to the Required Sale Date, a Senior
Secured Bond or an Unsecured Bond;

 

        (c)        such Collateral Obligation is not a Defaulted Collateral
Obligation;

 

        (d)        such Collateral Obligation is not an Equity Security and is
not convertible into an Equity Security at the option of the applicable Obligor
or any other Person other than the Borrower;

 

        (e)        such Collateral Obligation is not a Structured Finance
Obligation;

 

        (f)        such Collateral Obligation is denominated in Dollars and is
not convertible by the Obligor thereof into any currency other than Dollars;

 

        (g)        such Collateral Obligation is not a single-purpose real
estate based loan (unless the related real estate is a hotel, casino or other
operating company), a construction loan or a project finance loan;

 

-12-

 

 

        (h)       such Collateral Obligation is not a lease (including a
financing lease);

 

        (i)         if such Collateral Obligation is a Deferrable Collateral
Obligation, it provides for periodic payments of interest thereon in cash no
less frequently than semi-annually and the portion of interest required to be
paid in cash under the terms of the related Underlying Instruments results in
the outstanding principal amount of such Collateral Obligation having an
effective rate of current interest paid in cash on such day of not less than (i)
if such Deferrable Collateral Obligation is a Fixed Rate Collateral Obligation,
3.00% per annum over the LIBOR Rate or (ii) otherwise, 3.00% per annum over the
applicable index rate;

 

        (j)         reserved;

 

        (k)        such Collateral Obligation is not incurred or issued in
connection with a merger, acquisition, consolidation, sale of all or
substantially all of the assets of a Person, restructuring or similar
transaction, which obligation or security by its terms is required to be repaid
within one year of the incurrence thereof with proceeds from additional
borrowings or other refinancings (other than any additional borrowing or
refinancing if one or more financial institutions has provided the issuer of
such obligation or security with a binding written commitment to provide the
same, so long as (i) such commitment is equal to the outstanding principal
amount of such Collateral Obligation and (ii) such committed replacement
facility has a maturity of at least one year and cannot be extended beyond such
one year maturity pursuant to the terms thereof);

 

        (l)         such Collateral Obligation is not a trade claim;

 

        (m)       such Collateral Obligation does not have either (x) a public
rating by Standard & Poor’s of “CCC-” or below or (y) a Moody’s probability of
default rating (as published by Moody’s) of “Caa3” or below;

 

        (n)        the Obligor with respect to such Collateral Obligation is an
Eligible Obligor;

 

        (o)        such Collateral Obligation is not Margin Stock;

 

        (p)        such Collateral Obligation is not a security or swap
transaction that has payments associated with either payments of interest on
and/or principal of a reference obligation or the credit performance of a
reference obligation;

 

        (q)        such Collateral Obligation provides for the periodic payment
of cash interest;

 

        (r)         such Collateral Obligation is not subject to substantial
non-credit related risk, as determined by the Investment Manager in accordance
with the Investment Management Standard, other than non-credit related risks
that have previously been disclosed to the Administrative Agent during the
process of obtaining an Approval Notice with respect to such Collateral
Obligation;

 

-13-

 

 

        (s)        the acquisition of which will not cause the Borrower to be
deemed to own 5.0% or more of any class of voting securities of any Obligor or
25.0% or more of the total equity of any Obligor or any securities that are
immediately convertible into or immediately exercisable or exchangeable for 5.0%
or more of any class of voting securities of any Obligor or 25.0% or more of the
total equity of any Obligor, in each case as determined by the Investment
Manager;

 

        (t)        the Underlying Instrument for which does not contain
confidentiality provisions that restrict the ability of the Administrative Agent
to exercise its rights under the Transaction Documents, including, without
limitation, its rights to review such debt obligation or participation, the
Underlying Instrument and related documents and credit approval file;

 

        (u)        the acquisition of which is not in violation of Regulations
T, U or X of the FRS Board;

 

        (v)        such Collateral Obligation is capable of being transferred to
and owned by the Borrower (whether directly or by means of a security
entitlement) and of being pledged, assigned or novated by the owner thereof or
of an interest therein (a) subject to customary qualifications for instruments
similar to such Collateral Obligation, to the Administrative Agent, (b) subject
to customary qualifications for instruments similar to such Collateral
Obligation, to any assignee of the Administrative Agent permitted or
contemplated under this Agreement, (c) subject to customary qualifications for
instruments similar to such Collateral Obligation, to any Person at any
foreclosure or strict sale or other disposition initiated by a secured creditor
in furtherance of its security interest, and (d) subject to customary
qualifications for instruments similar to such Collateral Obligation, to
commercial banks, financial institutions, offshore and other funds (in each
case, including transfer permitted by operation of the Uniform Commercial Code);

 

        (w)        the proceeds of such Loan will not be used to finance
activities of the type engaged in by businesses classified under NAICS Codes
2361 (Residential Building Construction), 2362 (Nonresidential Building
Construction), 2371 (Utility System Construction), or 2372 (Land Subdivision);
and

 

        (x)        the Related Security for such Collateral Obligation is
primarily located in the United States or an Eligible Jurisdiction.

 

“Eligible Jurisdiction” means Australia, Canada, Cayman Islands, Germany,
Ireland, Luxembourg, New Zealand, Sweden, Switzerland, The Netherlands, the
United Kingdom and the United States.

 

“Eligible Obligor” means, on any day, any Obligor that (i) is a business
organization (and not a natural person) that is duly organized and validly
existing under the laws of, the United States or any State thereof (or any other
Eligible Jurisdiction), (ii) is a legal operating entity or holding company,
(iii) is not an Official Body and (iv) is not an Affiliate of, or controlled by,
the Borrower, the Investment Manager or the Equityholder.

 

“Enterprise Value Loan” means any Loan that is not an Asset Based Loan.

 

-14-

 

 

“Environmental Laws” means any and all foreign, federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or any other Official Body, relating to the
protection of human health or the environment, including requirements pertaining
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation, handling, reporting, licensing, permitting, investigation or
remediation of Hazardous Materials. Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601 et
seq.), the Hazardous Material Transportation Act (49 U.S.C. § 331 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42
U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et
seq.), the Safe Drinking Water Act (42 U.S.C. § 300, et seq.), the Environmental
Protection Agency’s regulations relating to underground storage tanks (40 C.F.R.
Parts 280 and 281), and the Occupational Safety and Health Act (29 U.S.C. § 651
et seq.), and the rules and regulations thereunder, each as amended or
supplemented from time to time.

 

“Equityholder” means FS Investment Corporation III, a Maryland corporation,
together with its permitted successors and assigns.

 

“Equity Security” means any asset that is not (i) a First Lien Loan, a Second
Lien Loan, an Unsecured Loan or a Permitted Investment or (ii) prior to the
Required Sale Date, a Senior Secured Bond or an Unsecured Bond.

 

“ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as
amended from time to time.

 

“Exceptions” has the meaning set forth in Section 18.4(b).

 

“Excess Concentration Amount” means, as of the most recent Measurement Date (and
after giving effect to all Collateral Obligations to be purchased or sold by the
Borrower on such date), the sum, without duplication, of the following amounts,
in each case multiplied by the Discount Factor applicable to each such
individual Collateral Obligation:

 

        (a)        the excess, if any, of the sum of the Principal Balances of
all Collateral Obligations that are Second Lien Loans or Unsecured Bonds over
30% of the Excess Concentration Measure;

 

        (b)        the excess, if any, of the sum of the Principal Balances of
all Collateral Obligations that are obligations of any single Obligor (other
than an Obligor described in the following proviso) over 5% of the Excess
Concentration Measure; provided, that (x) the sum of the Principal Balances of
all Collateral Obligations that are obligations of any Obligor that represents
Principal Balances in excess of all other single Obligors may be up to 10% of
the Excess Concentration Measure and (y) the sums of the Principal Balances of
all Collateral Obligations that are obligations of any two Obligors (other than
the Obligor specified in clause (x)) that represent Principal Balances in excess
of all other single Obligors (other than the Obligor specified in clause (x))
may be up to 7.5% of the Excess Concentration Measure;

 

-15-

 

 

        (c)        the excess, if any, of the sum of the Principal Balances of
all Collateral Obligations in any single Moody’s Industry Classification (other
than a Moody’s Industry Classification described in the following proviso) over
10% of the Excess Concentration Measure; provided, that (x) the sum of the
Principal Balances of all Collateral Obligations that are obligations of
Obligors in any one Moody’s Industry Classification may be up to 15% of the
Excess Concentration Measure and (y) the sum of the Principal Balances of all
Collateral Obligations that are obligations of Obligors in any one Moody’s
Industry Classification other than the Moody’s Industry Classification specified
in clause (x) may be up to 12.5% of the Excess Concentration Measure;

 

        (d)        the excess, if any, of the sum of the Principal Balances of
all Loans that are Fixed Rate Collateral Obligations that are not subject to a
qualifying Hedging Agreement pursuant to Section 10.6 over 10% of the Excess
Concentration Measure;

 

        (f)        the excess, if any, of the sum of the Principal Balances of
all Collateral Obligations which have an Obligor organized in country other than
the United States over 10% of the Excess Concentration Measure;

 

        (g)        the excess, if any, of the sum of the Principal Balances of
all Collateral Obligations which have an Obligor with either or both of (x) a
public rating by Standard & Poor’s of “CCC” or (y) a Moody’s probability of
default rating (as published by Moody’s) of “Caa2” over 10% of the Excess
Concentration Measure;

 

        (h)        the excess, if any, of the sum of the Principal Balances of
all Collateral Obligations that are DIP Loans over 5% of the Excess
Concentration Measure;

 

        (i)        the excess, if any, of the sum of the Principal Balances of
all Collateral Obligations that are participation interests over 10% of the
Excess Concentration Measure; and

 

        (j)        the excess, if any, of the sum of the Principal Balances of
all Collateral Obligations that are Senior Secured Bonds over 15% of the Excess
Concentration Measure.

 

“Excess Concentration Measure” means (a) during the Ramp-up Period, the Target
Portfolio Amount, and (b) after the Ramp-up Period, the sum of (x) the Aggregate
Eligible Collateral Obligation Amount, (y) all Principal Collections on deposit
in the Principal Collection Account and (z) all amounts on deposit in the
Unfunded Exposure Account.

 

“Excess Funds” means, as of any date of determination and with respect to any
Conduit Lender, funds of such Conduit Lender not required, after giving effect
to all amounts on deposit in its commercial paper account, to pay or provide for
the payment of (i) all of its matured and maturing commercial paper notes on
such date of such determination and (ii) the principal of and interest on all of
its loans outstanding on such date of such determination.

 

“Excluded Amounts” means (i) any amount received in the Collection Account with
respect to any Collateral Obligation, which amount is attributable to the
reimbursement of payment by the Borrower of any Tax, fee or other charge imposed
by any Official Body on such Collateral Obligation or on any Related Security,
(ii) any interest or fees (including origination, agency, structuring,
management or other up-front fees) that are for the account of the applicable
Person from whom the Borrower purchased such Collateral Obligation, (iii) any
reimbursement of insurance premiums, (iv) any escrows relating to Taxes,
insurance and other amounts in connection with Collateral Obligations which are
held in an escrow account for the benefit of the Obligor and the secured party
pursuant to escrow arrangements under Underlying Instruments, (v) any amount
deposited into the Collection Account in error or (vi) payments by the Obligors
of indemnification obligations and reimbursements for actually incurred
out-of-pocket expenses, in each case that are not received in lieu of principal,
interest or fees owed under the related Underlying Instruments.

 

-16-

 

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
a Recipient or required to be withheld or deducted from a payment to a
Recipient, (a) Taxes imposed on or measured by net income (however denominated),
franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result
of such Recipient being organized under the laws of, or having its principal
office or, in the case of any Lender, its applicable lending office located in,
the jurisdiction imposing such Tax (or any political subdivision thereof) or
(ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal
withholding Taxes imposed on amounts payable to or for the account of such
Lender with respect to an applicable interest in the Obligations pursuant to a
law in effect on the date on which (i) such Lender acquires such interest in the
Obligations (other than pursuant to Section 17.16) or (ii) such Lender changes
its lending office, except in each case to the extent that, pursuant to Section
4.3, amounts with respect to such Taxes were payable either to such Lender’s
assignor immediately before such Lender became a party hereto or to such Lender
immediately before it changed its lending office, (c) Taxes attributable to such
Recipient’s failure to comply with Section 4.3(f) and (d) any U.S. federal
withholding Taxes imposed under FATCA.

 

“Executive Officer” means, with respect to the Borrower, the Investment Manager
or the Equityholder, the Chief Executive Officer, the Chief Operating Officer,
the Executive Vice President of such Person or any other Person included on the
incumbency of the Borrower, Investment Manager or Equityholder, as applicable,
delivered pursuant to Section 6.1(g) and, with respect to any other Person, the
President, Chief Financial Officer, Executive Vice President or any Vice
President.

 

“Extension Request” has the meaning set forth in Section 2.6.

 

“Facility” means the loan facility to be provided to the Borrower pursuant to,
and in accordance with, this Agreement.

 

“Facility Amount” means (a) prior to the end of the Revolving Period,
$100,000,000, unless this amount is permanently reduced pursuant to Section 2.5,
in which event it means such lower amount and (b) after the end of the Revolving
Period, the Advances outstanding.

 

“Facility Termination Date” means the earlier of (i) the date that is eighteen
months after the last day of the Revolving Period and (ii) the effective date on
which the facility hereunder is terminated pursuant to Section 13.2.

 

“Facility Termination Event” means any of the events described in Section 13.1.

 

-17-

 

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), and any current or future
regulations or official interpretations thereof, any agreements entered into
pursuant to Section 1471(b)(1) of the Code, any intergovernmental agreement
entered into in connection with such sections of the Code and any legislation,
law, regulation or practice enacted or promulgated pursuant to such
intergovernmental agreement.

 

“Federal Funds Rate” means, for any period, a fluctuating rate per annum equal
for each day during such period to the weighted average of the rates on
overnight federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Administrative Agent from three federal funds brokers of
recognized standing selected by it.

 

“Fee Letter” has the meaning set forth in Section 8.4.

 

“Fees” has the meaning set forth in Section 8.4.

 

“First Lien Loan” means any Loan that (i) is not (and is not expressly permitted
by its terms to become) subordinate in right of payment to any obligation of the
Obligor in any bankruptcy, reorganization, arrangement, insolvency, moratorium
or liquidation proceedings, (ii) is secured by a pledge of collateral, which
security interest is validly perfected and first priority under Applicable Law
(subject to liens permitted under the applicable credit agreement that are
reasonable for similar loans, and liens accorded priority by law in favor of any
Official Body), and (iii) the Investment Manager determines in good faith that
the value of the collateral for such loan or the enterprise value securing the
loan on or about the time of acquisition equals or exceeds the outstanding
principal balance of the loan plus the aggregate outstanding balances of all
other loans of equal or higher seniority secured by a first priority Lien over
the same collateral. For the avoidance of doubt, DIP Loans shall constitute
First Lien Loans.

 

“Fitch” means Fitch Ratings, Inc., Fitch Ratings Ltd. and their subsidiaries,
including Derivative Fitch Inc. and Derivative Fitch Ltd. and any successor
thereto.

 

“Fixed Rate Collateral Obligation” means any Collateral Obligation that bears a
fixed rate of interest.

 

“Foreign Lender” means a Lender that is not a “United States person” as defined
in Section 7701(a)(30) of the Code.

 

“FRS Board” means the Board of Governors of the Federal Reserve System and, as
applicable, the staff thereof.

 

“Funding Date” means any Advance Date or any Reinvestment Date, as applicable.

 

“GAAP” means generally accepted accounting principles in the United States,
which are applicable to the circumstances as of any day.

 

-18-

 

 

“Hazardous Materials” means all materials subject to any Environmental Law,
including materials listed in 49 C.F.R. § 172.101, materials defined as
hazardous pursuant to § 101(14) of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, flammable, explosive or
radioactive materials, hazardous or toxic wastes or substances, lead-based
materials, petroleum or petroleum distillates or asbestos or material containing
asbestos, polychlorinated biphenyls, radon gas, urea formaldehyde and any
substances classified as being “in inventory,” “usable work in process” or
similar classification that would, if classified as unusable, be included in the
foregoing definition.

 

“Hedge Breakage Costs” means, with respect to each Hedge Counterparty upon the
early termination of any Hedge Transaction with such Hedge Counterparty, the net
amount, if any, payable by the Borrower to such Hedge Counterparty for the early
termination of that Hedge Transaction or any portion thereof.

 

“Hedge Counterparty” means (a) DBNY and its Affiliates and (b) any other entity
that (i) on the date of entering into any Hedge Transaction (x) is an interest
rate swap dealer that has been approved in writing by the Administrative Agent,
and (y) has a long-term unsecured debt rating of not less than “A” by S&P, not
less than “A2” by Moody’s and not less than “A” by Fitch (if such entity is
rated by Fitch) (the “Long-term Rating Requirement”) and a short-term unsecured
debt rating of not less than “A-1” by S&P, not less than “P-1” by Moody’s and
not less than “Fl” by Fitch (if such entity is rated by Fitch) (the “Short-term
Rating Requirement”), and (ii) in a Hedging Agreement (x) consents to the
assignment hereunder of the Borrower’s rights under the Hedging Agreement to the
Administrative Agent on behalf of the Secured Parties and (y) agrees that in the
event that Moody’s, S&P or Fitch reduces its long-term unsecured debt rating
below the Long-term Rating Requirement or reduces it short-term debt rating
below the Short-term Rating Requirement, it shall either collateralize its
obligations in a manner reasonably satisfactory to the Administrative Agent, or
transfer its rights and obligations under each Hedging Agreement (excluding,
however, any right to net payments or Hedge Breakage Costs under any Hedge
Transaction, to the extent accrued to such date or to accrue thereafter and
owing to the transferring Hedge Counterparty as of the date of such transfer) to
another entity that meets the requirements of clauses (b)(i) and (b)(ii) hereof
and has entered into a Hedging Agreement with the Borrower on or prior to the
date of such transfer.

 

“Hedge Transaction” means each interest rate swap, index rate swap or interest
rate cap transaction or comparable derivative arrangement between the Borrower
and a Hedge Counterparty that is entered into pursuant to Section 10.6 and is
governed by a Hedging Agreement.

 

“Hedging Agreement” means the agreement between the Borrower and a Hedge
Counterparty that governs one or more Hedge Transactions entered into by the
Borrower and such Hedge Counterparty pursuant to Section 10.6, which agreement
shall consist of a “Master Agreement” in a form published by the International
Swaps and Derivatives Association, Inc., together with a “Schedule” thereto, and
each “Confirmation” thereunder confirming the specific terms of each such Hedge
Transaction or a “Confirmation” that incorporates the terms of such a “Master
Agreement” and “Schedule.”

 

-19-

 

 

“Increased Costs” means collectively, any increased cost, loss or liability
owing to the Administrative Agent and/or any other Affected Person under
Article V of this Agreement.

 

“Indebtedness” means, with respect to any Person, at any day, without
duplication: (i) all obligations of such Person for borrowed money; (ii) all
obligations of such Person evidenced by bonds, debentures, notes, deferrable
securities or other similar instruments; (iii) all obligations of such Person to
pay the deferred purchase price of property or services, except trade accounts
payable arising in the ordinary course of business; (iv) all obligations of such
Person as lessee under capital leases; (v) all non-contingent obligations of
such Person to reimburse or prepay any bank or other Person in respect of
amounts paid under a letter of credit, banker’s acceptance or similar
instrument; (vi) all debt of others secured by a Lien on any asset of such
Person, whether or not such debt is assumed by such Person; and (vii) all debt
of others guaranteed by such Person and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss other than any unfunded
commitments of the Borrower with respect to Variable Funding Assets.

 

“Indemnified Amounts” has the meaning set forth in Section 16.1.

 

“Indemnified Party” has the meaning set forth in Section 16.1.

 

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or
with respect to any payment made by or on account of any obligation of the
Borrower under any Transaction Document and (b) to the extent not otherwise
described in clause (a), Other Taxes.

 

“Independent Accountants” means a firm of nationally recognized independent
certified public accountants.

 

“Independent Manager” means an individual who has prior experience as an
independent director, independent manager or independent member with at least
three years of employment experience and who is provided by CT Corporation,
Corporation Service Company, Puglisi & Associates, National Registered Agents,
Inc., Wilmington Trust Company, Stewart Management Company, Lord Securities
Corporation or, if none of those companies is then providing professional
Independent Managers, another nationally-recognized company reasonably approved
by Lender, in each case that is not an Affiliate of the Borrower and that
provides professional Independent Managers and other corporate services in the
ordinary course of its business, and which individual is duly appointed as an
Independent Manager and is not, and has never been, and will not while serving
as Independent Manager be, any of the following:

 

        (a)        a member, partner, equityholder, manager, director, officer
or employee of the Borrower, the Equityholder, or any of their respective
equityholders or Affiliates (other than as an Independent Manager of the
Borrower or an Affiliate of the Borrower that is not in the direct chain of
ownership of the Borrower and that is required by a creditor to be a single
purpose bankruptcy remote entity; provided that such Independent Manager is
employed by a company that routinely provides professional Independent Managers
or managers in the ordinary course of its business);

 

-20-

 

 

        (b)        a creditor, supplier or service provider (including provider
of professional services) to the Borrower, the Equityholder, or any of their
respective equityholders or Affiliates (other than a nationally-recognized
company that routinely provides professional Independent Managers and other
corporate services to the Borrower, the Equityholder or any of their respective
Affiliates in the ordinary course of its business);

 

        (c)        a family member of any such member, partner, equityholder,
manager, director, officer, employee, creditor, supplier or service provider; or

 

        (d)        a Person that controls (whether directly, indirectly or
otherwise) any of (a), (b) or (c) above.

 

“Insolvency Event” means, with respect to any Person, (a) the entry of a decree
or order for relief by a court having jurisdiction in the premises in respect of
such Person or any substantial part of its property in an involuntary case under
any applicable federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
such Person’s affairs, or the commencement of an involuntary case under the
federal bankruptcy laws, as now or hereinafter in effect, or another present or
future federal or state bankruptcy, insolvency or similar law and such case is
not dismissed within 60 days; or (b) the commencement by such Person of a
voluntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or the consent by such Person to
the entry of an order for relief in an involuntary case under any such law, or
the consent by such Person to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors, or
such Person shall admit in writing its inability to pay its debts as such debts
become due, or the taking of action by such Person in furtherance of any of the
foregoing.

 

“Instrument” has the meaning given such term in the UCC.

 

“Interest Collections” means, with respect to the Collateral following the
applicable Cut-Off Date, (i) all payments and collections owing to the Borrower
in its capacity as lender and attributable to interest on any Collateral
Obligation or other Collateral, including scheduled payments of interest and
payments of interest relating to principal prepayments, all guaranty payments
attributable to interest and proceeds of any liquidations, sales, dispositions
or securitizations attributable to interest on such Collateral Obligation or
other Collateral, (ii) any commitment, ticking, upfront, underwriting,
origination or amendment fees received in respect of any Collateral Obligation
(including any proceeds received by the Borrower as a result of exercising any
Warrant Asset at any time), (iii) all payments received by the Borrower pursuant
to any Hedging Agreement that is an interest rate cap transaction and (iv) the
earnings on Interest Collections in the Collection Account that are invested in
Permitted Investments, in each case other than Retained Interests.

 

“Interest Collection Account” means a segregated, non-interest bearing
securities account (within the meaning of Section 8-501 of the UCC) number
83447401, which is created and maintained on the books and records of the
Securities Intermediary entitled “Interest Collection Account” in the name of
the Borrower and subject to the prior Lien of the Collateral Agent for the
benefit of the Secured Parties, which is established and maintained pursuant to
Section 8.1(a).

 

-21-

 

 

“Interest Rate” means, for any Accrual Period and any Lender, a rate per annum
equal to the sum of (a) the Applicable Margin and (b) the Cost of Funds Rate for
such Accrual Period and such Lender.

 

“Investment Management Agreement” means the Investment Management Agreement,
dated as of the date hereof, by and between the Investment Manager and the
Borrower.

 

“Investment Management Standard” means, with respect to any Collateral
Obligations, to service and administer such Collateral Obligations on behalf of
the Secured Parties in accordance with Applicable Law, the terms of the
Transaction Documents, all customary and usual servicing practices for loans
like the Collateral Obligations and, to the extent consistent with the
foregoing, (i) with reasonable care, using a degree of skill and diligence not
less than that with which the Borrower or Investment Manager, as applicable,
services and administers loans for its own account or for the account of its
Affiliates having similar lending objectives and restrictions, and (ii) to the
extent not inconsistent with clause (i), in a manner consistent with the
customary standards, policies and procedures followed by institutional managers
of national standing relating to assets of the nature and character of the
Collateral Obligations and without regard to any relationship that the
Investment Manager or any Affiliate thereof may have with any Obligor or any
Affiliate of any Obligor.

 

“Investment Manager” means initially FS Investment Corporation III, a Maryland
corporation or any successor investment manager appointed pursuant to this
Agreement.

 

“Investment Manager Event of Default” means the occurrence of one of the
following events:

 

        (a)        any failure by the Investment Manager to deposit or credit,
or to deliver for deposit, in the Collection Account any amount required
hereunder to be so deposited, credited or delivered or to make any required
distributions therefrom;

 

        (b)        failure on the part of the Investment Manager duly to observe
or to perform in any respect any other covenant or agreement of the Investment
Manager set forth in the Investment Management Agreement which failure continues
unremedied for a period of 30 days (if such failure can be remedied) after the
date on which written notice of such failure shall have been given to the
Investment Manager by the Borrower, the Collateral Agent or the Administrative
Agent;

 

        (c)        the occurrence of an Insolvency Event with respect to the
Investment Manager;

 

        (d)        any representation, warranty or statement of the Investment
Manager made in the Investment Management Agreement or any certificate, report
or other writing delivered pursuant hereto shall prove to be incorrect as of the
time when the same shall have been made (i) which incorrect representation,
warranty or statement has a material and adverse effect on (1) the validity,
enforceability or collectability of the Investment Management Agreement or any
other Transaction Document or (2) the rights and remedies of any Secured Party
with respect to matters arising under this Agreement or any other Transaction
Document, and (ii) within 30 days after written notice thereof shall have been
given to the Investment Manager by the Borrower, the Collateral Agent or the
Administrative Agent, the circumstance or condition in respect of which such
representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured;

 

-22-

 

 

        (e)        a Facility Termination Event occurs;

 

        (f)        the failure of the Investment Manager to make any payment
when due (after giving effect to any related grace period) under one or more
agreements for borrowed money to which it is a party in an aggregate amount in
excess of $2,500,000, individually or in the aggregate; or (ii) the occurrence
of any event or condition that has resulted in or permits the acceleration of
such recourse debt, whether or not waived;

 

        (g)        the rendering against the Investment Manager of one or more
final, non-appealable judgments, decrees or orders for the payment of money in
excess of $2,500,000, individually or in the aggregate, and the continuance of
such judgment, decree or order unsatisfied and in effect for any period of more
than sixty (60) consecutive days without a stay of execution;

 

        (h)        a Change of Control occurs;

 

        (i)        the Equityholder ceases to be a “business development
company” within the meaning of the 1940 Act;

 

        (j)        a “cause event” (as defined in Section 11(a) of the
Investment Management Agreement) occurs; or

 

        (k)        either (x) FS Investment Corporation III is terminated as,
removed from being, or otherwise ceases to be the Investment Manager (including
by reason of any failure to renew the term of the Investment Management
Agreement) or (y) GSO/Blackstone Debt Funds Management, LLC ceases to be a
sub-advisor of the Investment Manager, in each case without the prior written
consent of the Administrative Agent (such consent not to be unreasonably
conditioned, withheld or delayed).

 

“IRS” means the United States Internal Revenue Service.

 

“Lender” means each Conduit Lender, each Committed Lender and each Uncommitted
Lender, as the context may require.

 

“Lender Allocation Percentage” means (i) if the Effective Advance Rate is equal
to or greater than 50%, 70% (ii) if the Effective Advance Rate is equal to or
greater than 40% but less than 50%, 50% (iii) if the Effective Advance Rate is
equal to or greater than 35% but less than 40%, 30% and (iv) if the Effective
Advance Rate is less than 35%, 10%.

 

“Lender Group” means each Lender and related Agent from time to time party
hereto.

 

-23-

 

 

“Leverage Multiple” means, with respect to any Collateral Obligation for the
most recent relevant period of time for which the Borrower has received the
financial statements of the relevant Obligor, the ratio of (i) Indebtedness of
the relevant Obligor (other than Indebtedness of such Obligor that is junior in
terms of payment or lien subordination (including unsecured Indebtedness) to
Indebtedness of such Obligor held by the Borrower) less unrestricted cash of the
relevant Obligor to (ii) EBITDA of such Obligor (as such calculation may be
updated in connection with a modification of such Collateral Obligation
described in clause (j) of the definition of “Material Modification”).

 

“LIBOR Rate” shall mean, with respect to any Accrual Period, the rate per annum
shown by the Bloomberg Professional Service as the London interbank offered rate
for deposits in U.S. dollars for a period equal to such Accrual Period as of
11:00 a.m., London time, two Business Days prior to the first day of such
Accrual Period; provided, that in the event no such rate is shown, the LIBOR
Rate shall be the rate per annum based on the rates at which Dollar deposits for
a period equal to such Accrual Period are displayed on page “LIBOR” of the
Reuters Monitor Money Rates Service or such other page as may replace the LIBOR
page on that service for the purpose of displaying London interbank offered
rates of major banks as of 11:00 a.m., London time, two Business Days prior to
the first day of such Accrual Period (it being understood that if at least two
such rates appear on such page, the rate will be the arithmetic mean of such
displayed rates); provided, further, that in the event fewer than two such rates
are displayed, or if no such rate is relevant, the LIBOR Rate shall be a rate
per annum at which deposits in Dollars are offered by the principal office of
the Administrative Agent in London, England to prime banks in the London
interbank market at 11:00 A.M. (London time) two Business Days before the first
day of such Accrual Period for delivery on such first day and for a period equal
to such Accrual Period.

 

“Lien” means any security interest, lien, charge, pledge, preference, equity or
encumbrance of any kind, including tax liens, mechanics’ liens and any liens
that attach by operation of law.

 

“Loan” means any commercial loan, bond or note.

 

“Make-Whole Fees” has the meaning set forth in the Fee Letters.

 

“Margin Stock” means “Margin Stock” as defined under Regulation U issued by the
FRS Board.

 

“Material Adverse Effect” means a material adverse effect on: (a) the assets,
operations, properties, financial condition, or business of the Borrower or the
Investment Manager; (b) the ability of the Borrower or the Investment Manager to
perform its obligations under this Agreement or any of the other Transaction
Documents; (c) the validity or enforceability of this Agreement, any of the
other Transaction Documents, or the rights and remedies of the Secured Parties
hereunder or thereunder taken as a whole; or (d) the aggregate value of the
Collateral or on the collateral assignments and Liens granted by the Borrower in
this Agreement.

 

-24-

 

 

“Material Modification” means any amendment or waiver of, or modification or
supplement to, any Underlying Instrument governing a Collateral Obligation
which:

 

(a)        reduces or forgives any or all of the principal amount due under such
Collateral Obligation;

 

(b)        (i) waives one or more interest payments (other than any incremental
interest accrued due to a default or event of default with respect to such
Collateral Obligation), (ii) permits any interest due in cash to be deferred or
capitalized and added to the principal amount of such Collateral Obligation
(other than any deferral or capitalization already allowed by the terms of any
Deferrable Collateral Obligation as of the related Cut-Off Date) or (iii)
reduces the spread or coupon payable on such Collateral Obligation unless (x)
the Investment Manager certifies that such reduction results from an increase in
the credit quality of the related Obligor and (y) such reduction (when taken
together with all other reductions with respect to such Collateral Obligation)
is by less than 10% of the spread or coupon payable as of the related Cut-Off
Date;

 

(c)        contractually or structurally subordinates such Collateral Obligation
by operation of (i) any priority of payment provisions, (ii) turnover
provisions, (iii) the transfer of assets in order to limit recourse to the
related Obligor or (iv) the granting of Liens on any of the collateral securing
such Collateral Obligation, each that requires the consent of the Borrower or
any lenders thereunder;

 

(d)        either (i) extends the maturity date of such Collateral Obligation by
more than 120 days past the maturity date as of the related Cut-Off Date or (ii)
extends the amortization schedule with respect thereto;

 

(e)        substitutes, alters or releases the Related Security securing such
Collateral Obligation and such substitution, alteration or release, individually
or in the aggregate and as determined in the Administrative Agent’s reasonable
discretion, materially and adversely affects the value of such Collateral
Obligation;

 

(f)        results in any less financial information in respect of reporting
frequency, scope or otherwise being provided with respect to the related Obligor
or reduces the frequency or total number of any appraisals required thereunder
that, in each case, has a material adverse effect on the ability of Investment
Manager or the Administrative Agent (as determined by the Administrative Agent
in its reasonable discretion) to make any determinations or calculations
required or permitted hereunder; provided, however, that it shall not be a
Material Modification if any such amendment, waiver, modification or supplement
grants an extension (or extensions) of not more than 30 days of the time for
delivery of quarterly or annual financial statements or grants an extension (or
extensions) of the time for delivery of, or waives delivery of, financial
statements other than quarterly and annual financial statements;

 

(g)        results in any change in the currency or composition of any payment
of interest or principal to any currency other than that in which such
Collateral Obligation was originally denominated unless the related currency
risk is mitigated by a Hedging Agreement acceptable to the Administrative Agent
in its reasonable discretion;

 

-25-

 

 

(h)        with respect to an Asset Based Loan, results in a material (as
determined by the Administrative Agent in its reasonable discretion) change to
or grants material (as determined by the Administrative Agent in its reasonable
discretion) relief from the borrowing base or any related definition;

 

(i)        with respect to an Asset Based Loan, any of (i) if the Borrower has
the authority to change the appraiser with respect to such Asset Based Loan as
set forth on the related Asset Approval Request, the appraiser is changed to a
Person other than an Approved Valuation Firm without the prior written consent
of the Administrative Agent, (ii) the frequency of the appraisals is reduced
from the frequency set forth on the related Asset Approval Request or (iii) the
related appraiser changes the metric for valuing the collateral of such Loan
other than in accordance with its ordinary practices, and such change results in
an increase in the value of the collateral for such Asset Based Loan; or

 

(j)        results in a modification of the calculation of EBITDA for any
Obligor during any period hereunder, by including any other non-cash charges
that were deducted in determining earnings of such Obligor from continuing
operations for such period, unless (w) such modification or non-cash charges
were set forth on the related Approval Notice, (x) such modification or non-cash
charges were otherwise approved by the Administrative Agent in its sole
discretion, (y) the Investment Manager continues to calculate the EBITDA of such
Obligor without giving effect to such modification for all purposes under this
Agreement, or if the Investment Manager elects to calculate the EBITDA of such
Obligor after giving effect to such modification, the Investment Manager shall
recalculate the Original Leverage Multiple for such Collateral Obligation by
giving pro forma effect to such modification of the calculation of EBITDA or (z)
both (1) at the time of such modification, the Equityholder and its Subsidiaries
did not collectively possess an ability to prevent the effectiveness of such
modification and (2) no Revaluation Event described in clause (g) of the
definition thereof occurs with respect to such Collateral Obligation as a result
of such modification.

 

“Maximum Portfolio Advance Rate” means (a) if the Diversity Score is greater
than 20, 64%, (b) if the Diversity Score is less than or equal to 20 and greater
than 15, 62.5% and (c) if the Diversity Score is equal to or less than 15, 60%.

 

“Maximum Weighted Average Life Test” means a test that will be satisfied on any
day if the Weighted Average Life of all Eligible Collateral Obligations included
in the Collateral is less than or equal to 6.0 years.

 

“Measurement Date” means each of the following, as applicable: (i) the Effective
Date; (ii) each Determination Date, (iii) each Funding Date; (iv) the date of
any repayment or prepayment pursuant to Section 2.4; (v) the date that the
Investment Manager has actual knowledge of the occurrence of any Revaluation
Event with respect to any Collateral Obligation; (vi) the date of any optional
repurchase or substitution pursuant to Section 7.11; and (vii) the date of any
Optional Sale.

 

“Minimum Diversity Test” means a test that will be satisfied on any date of
determination if the Diversity Score of all Eligible Collateral Obligations
included in the Collateral is equal to or greater than 10.

 

-26-

 

 

“Minimum Equity Condition” means a test that will be satisfied on any date of
determination if the Effective Equity is greater than the greater of (a) the sum
of the Collateral Obligation Amounts of the five Obligors with Collateral
Obligations constituting the highest aggregate Collateral Obligation Amounts and
(b) an amount equal to $30,000,000; provided that, for purposes of calculating
clause (a) above, the Collateral Obligation Amount with respect to any Obligor
shall be the sum of all Collateral Obligation Amounts with respect to which such
Person is an Obligor.

 

“Minimum Weighted Average Spread Test” means a test that will be satisfied on
any day if the Weighted Average Spread of all Eligible Collateral Obligations
included in the Collateral on such day is equal to or greater than 5.5%

 

“Monthly Report” means a report prepared by the Collateral Agent, on behalf of
the Borrower, substantially in the form of Exhibit D.

 

“Moody’s” means Moody’s Investors Service, Inc., or any successor thereto.

 

“Moody’s Industry Classification” means the industry classifications set forth
in Schedule 2 hereto, as such industry classifications shall be updated at the
option of the Administrative Agent in its sole discretion if Moody’s publishes
revised industry classifications and the application of such revised industry
classifications to this facility is necessary to avoid an increased regulatory
capital charge for the Administrative Agent or its Affiliates that are Lenders
hereunder.

 

“Net Purchased Loan Balance” means, as of any date of determination, an amount
equal to (a) the aggregate Principal Balance of all Collateral Obligations
acquired by the Borrower prior to such date minus (b) the aggregate Principal
Balance of all Collateral Obligations (other than Warranty Collateral
Obligations or assets sold to the Equityholder as a result of the Required Sale
Date) repurchased by the Equityholder or an Affiliate thereof or released to the
Equityholder pursuant to a dividend, in each case prior to such date.

 

“Note” means a promissory grid note, in the form of Exhibit A, made payable to
the order of an Agent, on behalf of the related Lenders.

 

“Note Agent” has the meaning set forth in Section 14.1.

 

“Note Register” has the meaning set forth in Section 15.5(a).

 

“Note Registrar” has the meaning set forth in Section 15.5(a).

 

“Obligations” means all obligations (monetary or otherwise) of the Borrower to
the Lenders, the Agents, the Collateral Agent, the Collateral Custodian, the
Administrative Agent or any other Affected Person or Indemnified Party arising
under or in connection with this Agreement, the Notes and each other Transaction
Document.

 

“Obligor” means any Person that owes payments under any Loan and, solely for
purposes of calculating the Excess Concentration Amount pursuant to clause (b)
or (c) of the definition thereof, any Obligor that is an Affiliate of another
Obligor shall be treated as the same Obligor.

 

-27-

 

 

“Obligor Information” means, with respect to any Obligor, (i) the legal name of
such Obligor, (ii) the jurisdiction in which such Obligor is domiciled, (iii)
the audited financial statements for the two prior fiscal years of such Obligor
(or such shorter period of time that the Obligor has been in existence), (iv)
the Investment Manager’s internal credit memo with respect to the Obligor and
the related Collateral Obligation, (v) the annual report for the most recent
fiscal year of such Obligor, (vi) a company forecast of such Obligor including
plans related to capital expenditures, (vii) the business model, company
strategy and names of known peers of such Obligor, (viii) the shareholding
pattern and details of the management team of such Obligor and (ix) details of
any banking facilities and the debt maturity schedule of such Obligor but
excluding, in each case, any item of Obligor Information that is unavailable if
Borrower has provided prior notice that such item is unavailable.

 

“Officer’s Certificate” means a certificate signed by an Executive Officer.

 

“Official Body” means any government or political subdivision or any agency,
authority, regulatory body, bureau, central bank, commission, department or
instrumentality of any such government or political subdivision, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.

 

“Opinion of Counsel” means a written opinion of independent counsel reasonably
acceptable in form and substance and from counsel acceptable to the
Administrative Agent.

 

“Optional Sale” has the meaning set forth in Section 7.10.

 

“Original Effective LTV” means, with respect to any Collateral Obligation, the
Effective LTV of such Collateral Obligation as calculated by the Administrative
Agent in accordance with the definitions of Effective LTV and the definitions
used therein and set forth in the related Approval Notice.

 

“Original Leverage Multiple” means, with respect to any Collateral Obligation,
the Leverage Multiple applicable to such Collateral Obligation as calculated by
the Investment Manager and approved by the Administrative Agent in accordance
with the definition of Leverage Multiple and the definitions used therein and
set forth in the related Approval Notice (as such calculation may be updated in
connection with a modification of such Collateral Obligation described in clause
(j) of the definition of “Material Modification”).

 

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as
a result of a present or former connection between such Recipient and the
jurisdiction imposing such Tax (other than connections arising from such
Recipient having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to or enforced any
Transaction Document, or sold or assigned an interest in the Obligations or any
Transaction Document).

 

“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or registration
of, from the receipt or perfection of a security interest under, or otherwise
with respect to, any Transaction Document, except any such Taxes that are Other
Connection Taxes imposed with respect to an assignment (other than an assignment
made pursuant to Section 17.16).

 

-28-

 

 

“Participant” has the meaning set forth in Section 15.9(a).

 

“Participant Register” has the meaning set forth in Section 15.9(c).

 

“PBGC” means the Pension Benefit Guaranty Corporation and its successors and
assigns.

 

“Permitted Investment” means, at any time:

 

        (a)        direct interest-bearing obligations of, and interest-bearing
obligations guaranteed as to timely payment of principal and interest by, the
United States or any agency or instrumentality of the United States, the
obligations of which are backed by the full faith and credit of the United
States;

 

        (b)        demand or time deposits in, certificates of deposit of,
demand notes of, or bankers’ acceptances issued by any depository institution or
trust company organized under the laws of the United States or any State thereof
(including any federal or state branch or agency of a non-U.S. depository
institution or trust company) and subject to supervision and examination by
federal and/or state banking authorities (including, if applicable, the
Collateral Agent, the Collateral Custodian or Administrative Agent or any agent
thereof acting in its commercial capacity); provided, that the short-term
unsecured debt obligations of such depository institution or trust company at
the time of such investment, or contractual commitment providing for such
investment, are rated at least “A-1” by Standard & Poor’s and “P-1” by Moody’s;

 

        (c)        repurchase obligations pursuant to a written agreement
(i) with respect to any obligation described in clause (a) above, where the
Collateral Custodian has taken actual or constructive delivery of such
obligation in accordance with Article VIII of this Agreement, and (ii) entered
into with (x) the Collateral Custodian or (y) the corporate trust department of
a depository institution or trust company organized under the laws of the United
States or any State thereof, the deposits of which are insured by the Federal
Deposit Insurance Corporation and the short-term unsecured debt obligations of
which are rated at least “A-1” by Standard & Poor’s and “P-1” by Moody’s
(including, if applicable, the Administrative Agent, Collateral Agent or any
agent thereof acting in its commercial capacity);

 

        (d)        securities bearing interest or sold at a discount issued by
any corporation incorporated under the laws of the United States or any State
whose long-term unsecured debt obligations are assigned one of the two highest
long-term ratings by each Rating Agency at the time of such investment or
contractual commitment providing for such investment; provided, that securities
issued by any particular corporation will not be Permitted Investments to the
extent that an investment therein will cause the then outstanding principal
amount of securities issued by such corporation and held in the Accounts
collectively to exceed 10% of the value of Permitted Investments held in such
account (with Permitted Investments held in such accounts valued at par);

 

        (e)        commercial paper that (i) is payable in United States dollars
and (ii) is rated at least “A-1” by Standard & Poor’s and “P-1” by Moody’s;

 

-29-

 

 

        (f)        units of money market funds rated in the highest credit
rating category by each Rating Agency;

 

        (g)       U.S. Dollars; or

 

        (h)       any other demand or time deposit, obligation, security or
investment (including a hedging arrangement) as may be acceptable to the
Administrative Agent, as evidenced by a writing to that effect.

 

Permitted Investments may be purchased by or through the Collateral Custodian or
any of its Affiliates. All Permitted Investments shall be held in the name of
the Collateral Custodian. No Permitted Investment shall have an “f,” “r,” “p,”
“pi,” “q,” “sf” or “t” subscript affixed to its Standard & Poor’s rating. Any
such investment may be made or acquired from or through the Collateral Agent or
the Administrative Agent or any of their respective affiliates, or any entity
for whom the Collateral Agent or the Administrative Agent or any of their
respective affiliates provides services and receives compensation (so long as
such investment otherwise meets the applicable requirements of the foregoing
definition of Permitted Investment at the time of acquisition); provided, that
notwithstanding the foregoing clauses (a) through (h), after the Required Sale
Date, Permitted Investments may only include obligations or securities that
constitute cash equivalents for purposes of the rights and assets in paragraph
(c)(8)(i)(B) of the exclusions from the definition of “covered fund” for
purposes of the Volcker Rule.

 

“Permitted Lien” means (i) the Lien in favor of the Collateral Agent for the
benefit of the Secured Parties, (ii) Liens for Taxes and mechanics’ or
suppliers’ liens for services or materials supplied, in either case, not yet due
and payable and for which adequate reserves have been established in accordance
with GAAP, (iii) as to Related Security (1) the Lien in favor of the Borrower
herein and (2) any Liens on the Related Security permitted pursuant to the
applicable Underlying Instruments and (iv) as to agented Loans, Liens in favor
of the agent on behalf of all the lenders of the related Obligor.

 

“Person” means an individual, partnership, corporation (including a business
trust), joint stock company, limited liability company, trust, unincorporated
association, joint venture, government or any agency or political subdivision
thereof or any other entity.

 

“Prepayment Fee” has the meaning set forth in the Fee Letters.

 

“Primary IM Fee” means with respect to any Distribution Date, the fee payable to
the Investment Manager or successor investment manager (as applicable) for
services rendered during the related Collection Period, which shall be equal to
one-fourth of the product of (i) the Primary IM Fee Percentage multiplied by
(ii) the average of the values of the aggregate Collateral Obligation Amount of
the Eligible Collateral Obligations on the first day and the last day of the
related Collection Period. For the avoidance of doubt, the Investment Manager
may waive or defer the payment of any Primary IM Fee in its sole discretion.

 

“Primary IM Fee Percentage” means 0.45%.

 

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“Principal Balance” means with respect to any Collateral Obligation and as of
any date, the lower of (x) the Purchase Price paid by the Borrower for such
Collateral Obligation and (y) the outstanding principal balance of such
Collateral Obligation, exclusive of (x) any deferred or capitalized interest on
any Deferrable Collateral Obligation that is deferred or capitalized after the
Cut-Off Date applicable to such Deferrable Collateral Obligation and (y) any
unfunded amounts with respect to any Variable Funding Asset; provided, that for
purposes of calculating the “Principal Balance” of any Deferrable Collateral
Obligation, principal payments received on such Collateral Obligation shall
first be applied to reducing or eliminating any outstanding deferred or
capitalized interest; provided, further, that the “Principal Balance” of any
revolving loan as of any date shall be equal to the outstanding principal
balance thereof plus amounts on deposit in respect thereof in the Unfunded
Exposure Account. The “Principal Balance” of any Equity Security shall be zero.

 

“Principal Collections” means any and all amounts of collections received with
respect to the Collateral other than Interest Collections and Excluded Amounts,
including (but not limited to) (i) all collections attributable to principal on
such Collateral, (ii) the earnings on Principal Collections in the Collection
Account that are invested in Permitted Investments, (iii) all payments received
by the Borrower pursuant to any Hedging Agreement that is an interest rate swap
or index rate swap transaction and (iv) all Repurchase Amounts, in each case
other than Retained Interests.

 

“Principal Collection Account” means a segregated, non-interest bearing
securities account (within the meaning of Section 8-501 of the UCC) number
83447402, which is created and maintained on the books and records of the
Securities Intermediary entitled “Principal Collection Account” in the name of
the Borrower and subject to the prior Lien of the Collateral Agent for the
benefit of the Secured Parties, which is established and maintained pursuant to
Section 8.1(a).

 

“Purchase Price” means, with respect to any Collateral Obligation, the actual
price paid by the Borrower for such Collateral Obligation minus all Principal
Collections described in clause (i) of the definition thereof in respect of such
Collateral Obligation.

 

“Qualified Substitute Arrangement” has the meaning set forth in Section 10.6(c).

 

“Ramp-up Period” means the period from and including the Effective Date to the
earlier of (i) the first date on which the sum of the Principal Balances of all
Eligible Collateral Obligations equals or is greater than the Target Portfolio
Amount and (ii) the six-month anniversary of the Effective Date.

 

“Rating Agencies” means Standard & Poor’s and Moody’s.

 

“Recipient” means (a) the Administrative Agent, (b) any Lender and (c) any other
recipient of a payment hereunder.

 

“Records” means the Collateral Obligation File for any Collateral Obligation and
all other documents, books, records and other information prepared and
maintained by or on behalf of the Borrower with respect to any Collateral
Obligation and the Obligors thereunder, including all documents, books, records
and other information prepared and maintained by the Borrower or the Investment
Manager with respect to such Collateral Obligation or Obligors.

 

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“Reinvestment” has the meaning given in Section 8.3(b).

 

“Reinvestment Date” has the meaning given in Section 8.3(b).

 

“Reinvestment Request” has the meaning given in Section 8.3(b).

 

“Related Collateral Obligation” means any Collateral Obligation where the
Equityholder or any Subsidiary of the Equityholder owns a Variable Funding Asset
pursuant to the same Underlying Instruments; provided that any such asset will
cease to be a Related Collateral Obligation once all commitments by the
Equityholder or any such Subsidiary to make advances or fund such Variable
Funding Asset to the related Obligor expire or are irrevocably terminated or
reduced to zero.

 

“Related Committed Lender” means, with respect to any Uncommitted Lender, each
Committed Lender in its Lender Group.

 

“Related Property” means, with respect to a Collateral Obligation, any property
or other assets designated and pledged or mortgaged as collateral to secure
repayment of such Collateral Obligation, including, without limitation, any
pledge of the stock, membership or other ownership interests in the related
Obligor or its subsidiaries, all Warrant Assets with respect to such Collateral
Obligation and all proceeds from any sale or other disposition of such property
or other assets.

 

“Related Security” means, with respect to each Collateral Obligation:

 

        (a)        any Related Property securing a Collateral Obligation, all
payments paid in respect thereof and all monies due, to become due and paid in
respect thereof accruing after the applicable Advance Date and all liquidation
proceeds thereof;

 

        (b)        all guaranties, indemnities and warranties, insurance
policies, financing statements and other agreements or arrangements of whatever
character from time to time supporting or securing payment of any such
indebtedness;

 

        (c)        all Collections with respect to such Collateral Obligation
and any of the foregoing;

 

        (d)        any guarantees or similar credit enhancement for an Obligor’s
obligations under any Collateral Obligation, all UCC financing statements or
other filings relating thereto, including all rights and remedies, if any,
against any Related Security, including all amounts due and to become due to the
Borrower thereunder and all rights, remedies, powers, privileges and claims of
the Borrower thereunder (whether arising pursuant to the terms of such agreement
or otherwise available to the Borrower at law or in equity);

 

        (e)        all Records with respect to such Collateral Obligation and
any of the foregoing; and

 

        (f)        all recoveries and proceeds of the foregoing.

 

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“REO Asset Owner” has the meaning specified in the Investment Management
Agreement.

 

“Replacement Hedging Agreement” means one or more Hedging Agreements, which in
combination with all other Hedging Agreements then in effect, after giving
effect to any planned cancellations of any presently outstanding Hedging
Agreements satisfy the Borrower’s covenant contained in Section 10.6, of this
Agreement to maintain Hedging Agreements.

 

“Reporting Date” means the 7th Business Day of each calendar month.

 

“Repurchase Amount” means, for any Warranty Collateral Obligation for which a
payment or substitution is being made pursuant to Section 7.11 as of any time of
determination, the sum of (i) the greater of (a) an amount equal to the purchase
price paid by the Borrower for such Collateral Obligation (excluding purchased
accrued interest and original issue discount) less all payments of principal
received in connection with such Collateral Obligation since the date it was
added to the Collateral and (b) the Collateral Obligation Amount of such
Collateral Obligation, (ii) any accrued and unpaid interest thereon since the
last Distribution Date and (iii) all Hedge Breakage Costs owed to any relevant
Hedge Counterparty for any termination of one or more Hedge Transactions, in
whole or in part, as required by the terms of any Hedging Agreement, incurred in
connection with such payment or repurchase and the termination of any Hedge
Transactions in whole or in part in connection therewith.

 

“Repurchase Event” has the meaning set forth in the Sale Agreement.

 

“Repurchased Collateral Obligation” means, with respect to any Collection
Period, any Collateral Obligation as to which the Repurchase Amount has been
deposited in the Collection Account by or on behalf of the Borrower or the
Investment Manager, as applicable, on or before the immediately prior Reporting
Date and any Collateral Obligation purchased by the Equityholder pursuant to the
Sale Agreement as to which the Repurchase Amount has been deposited in the
Collection Account by or on behalf of the Equityholder.

 

“Request for Release and Receipt” means a form substantially in the form of
Exhibit F-2 completed and signed by the Investment Manager.

 

“Required Lenders” means, at any time, Lenders holding Advances aggregating
greater than 50% of all Advances outstanding or if there are no Advances
outstanding, Lenders holding Commitments aggregating greater than 50% of all
Commitments.

 

“Required Sale Assets” means all Permitted Investments that would disqualify the
Borrower from using the “loan securitization exemption” under the Volcker Rule
(as determined by the Administrative Agent in its reasonable discretion), all
Unsecured Bonds and all Senior Secured Bonds.

 

-33-

 

 

“Required Sale Date” means the date immediately prior to July 21, 2015 (or the
date immediately prior to such later date as shall be determined by written
order of the Board of Governors of the Federal Reserve System with respect to
the required conformance with the Volcker Rule by banking entities generally);
provided that, if the Administrative Agent receives an opinion of nationally
recognized counsel satisfactory to it in its sole discretion that (A) the
ownership of the Required Sale Assets will not cause the Borrower to be a
“covered fund” under the Volcker Rule, (B) the Advances are not considered to
constitute “ownership interests” under the Volcker Rule or (C) ownership of the
Advances will be otherwise exempt from the Volcker Rule, then the Required Sale
Date shall not occur; provided, further, that upon receipt of further official
guidance from or on behalf of the Board of Governors of the Federal Reserve
System with respect to compliance with the Volcker Rule, the Administrative
Agent, the Lenders and the Borrower shall negotiate in good faith in respect of
amendments or modifications to the Transaction Documents appropriate to assure
compliance with or exemption from the Volcker Rule.

 

“Responsible Officer” means, with respect to (a) the Investment Manager or the
Borrower, its Chief Executive Officer, Chief Operating Officer, Executive Vice
President or any other officer or employee of the Investment Manager or the
Borrower directly responsible for the administration or collection of the
Collateral Obligations, (b) the Collateral Agent or Collateral Custodian, any
officer within the Corporate Trust Office, including any director, vice
president, assistant vice president or associate having direct responsibility
for the administration of this Agreement, who at the time shall be such
officers, respectively, or to whom any matter is referred because of his or her
knowledge of and familiarity with the particular subject, or (c) any other
Person, the President, any Vice-President or Assistant Vice-President, Corporate
Trust Officer or the Controller of such Person, or any other officer or employee
having similar functions.

 

“Retained Interest” means, with respect to any Collateral Obligation included in
the Collateral, (a) such obligations to provide additional funding with respect
to such Collateral Obligation that have been retained by the other lender(s) of
such Collateral Obligation, (b) all of the rights and obligations, if any, of
the agent(s) under the Underlying Instruments, (c) any unused commitment fees
associated with the additional funding obligations that are being retained in
accordance with clause (a) above, and (d) any agency or similar fees associated
with the rights and obligations of the agent(s) that are being retained in
accordance with clause (b) above.

 

“Revaluation Event” means each occurrence of any of the following with respect
to any Collateral Obligation during the time such Collateral Obligation is
Collateral:

 

(a)        the occurrence of a default as to the payment of principal and/or
interest has occurred and is continuing with respect to such Collateral
Obligation (after giving effect to the shorter of any grace period applicable
thereto and five (5) Business Days from the due date);

 

(b)        the Borrower, the Administrative Agent or the Investment Manager
obtains actual knowledge that a default as to the payment of principal and/or
interest has occurred and is continuing (after giving effect to any grace period
applicable thereto) with respect to another debt obligation of the same Obligor
that is (i) secured by the same collateral, (ii) senior to or pari passu with in
right of payment to such Collateral Obligation and (iii) in an amount in excess
of $250,000;

 

(c)        the occurrence of an Insolvency Event with respect to any related
Obligor;

 

-34-

 

 

(d)        the Investment Manager determines, in its sole discretion, in
accordance with the Investment Management Standard, that all or a portion of
such Collateral Obligation is not collectible or otherwise places such
Collateral Obligation on non-accrual status;

 

(e)        the occurrence (without the prior approval of the Administrative
Agent) of a Material Modification with respect to such Collateral Obligation;

 

(f)        the Obligor thereunder fails to deliver to the Borrower or the
Investment Manager any financial reporting information as required by the
Underlying Instruments of such Collateral Obligation (including any grace
periods thereunder) but in no event less frequently than quarterly, that in each
case has an adverse effect on the ability of the Investment Manager or the
Administrative Agent (as determined by the Administrative Agent in its
reasonable discretion) to make any determinations or calculations required
hereunder; provided, however, that the Borrower (or the Investment Manager on
its behalf) may, on a single occasion (or any other additional occasions
approved by the Administrative Agent in its sole discretion) with respect to any
Obligor, grant an extension of up to 30 days for the delivery of such financial
statements by such Obligor; or

 

(g)       with respect to any Enterprise Value Loan, the Leverage Multiple with
respect to such Collateral Obligation increases by 1x or more over the Original
Leverage Multiple with respect to such Collateral Obligation; provided that each
subsequent increase of an additional 1x over the applicable Original Leverage
Multiple shall be an additional Revaluation Event;

 

(h)        with respect to any Asset Based Loan, (A) the Borrower fails (or
fails to cause the Obligor to) retain an Approved Valuation Firm to re-calculate
the Appraised Value of (x) with respect to any such Asset Based Loan that has
intellectual property, equipment or real property, as the case may be, in its
borrowing base, the collateral securing such Asset Based Loan that at least once
every twelve (12) months that such Loan is included in the Collateral (subject
to a 30 day grace period with respect to any such review) and (y) with respect
to all other Asset Based Loans included in the Collateral, the collateral
securing such Loan at least once every six (6) months that such Loan is included
in the Collateral (subject to a 30 day grace period with respect to any such
review) or (B) the Borrower (or the related Obligor, as applicable) changes the
Approved Valuation Firm with respect to any Asset Based Loan that or the related
Approved Valuation Firm changes the metric for valuing the collateral of such
Loan, each without the written approval of the Administrative Agent; or

 

(j)        with respect to any Asset Based Loan, the Effective LTV of such
Collateral Obligation increases by more than an amount equal to 15% of the
Original Effective LTV of such Collateral Obligation; provided that each
subsequent increase of an additional 15% over the applicable Original Effective
LTV shall be an additional Revaluation Event.

 

“Revolving Loan” means a Collateral Obligation that specifies a maximum
aggregate amount that can be borrowed by the related Obligor and permits such
Obligor to re-borrow any amount previously borrowed and subsequently repaid
during the term of such Collateral Obligation.

 

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“Revolving Period” means the period of time starting on the Effective Date and
ending on the earliest to occur of (i) the date that is thirty months after the
Effective Date or, if such date is extended pursuant to Section 2.6, the date
mutually agreed upon by the Borrower and the Administrative Agent, (ii) the date
on which the Facility Amount is terminated in full pursuant to Section 2.5 or
(iii) the occurrence of a Facility Termination Event.

 

“Sale Agreement” means the Sale and Contribution Agreement, dated as of the date
hereof, by and between the Equityholder, as seller, and the Borrower, as
purchaser.

 

“Schedule of Collateral Obligations” means the list or lists of Collateral
Obligations attached to each Asset Approval Request. Each such schedule shall
identify the assets that will become Collateral Obligations, shall set forth
such information with respect to each such Collateral Obligation as the Borrower
or the Administrative Agent may reasonably require and shall supplement any such
schedules attached to previously-delivered Asset Approval Requests.

 

“Scheduled Collateral Obligation Payment” means each periodic installment
payable by an Obligor under a Collateral Obligation for principal and/or
interest in accordance with the terms of the related Underlying Instrument.

 

“Second Lien Loan” means any Loan that (i) is not (and that by its terms is not
permitted to become) subordinate in right of payment to any other obligation of
the related Obligor other than a First Lien Loan with respect to the liquidation
of such Obligor or the collateral for such Loan and (ii) is secured by a valid
second priority perfected Lien to or on specified collateral securing the
related Obligor’s obligations under the Loan, which Lien is not subordinate to
the Lien securing any other debt for borrowed money other than a First Lien Loan
on such specified collateral (subject to Liens permitted under the applicable
Underlying Instrument that are reasonable for similar loans and, if permitted to
secure borrowed money in excess of $500,000 and rank in priority senior to or
pari passu with such Second Lien Loan, whether individually or in the aggregate,
are set forth on the related Asset Approval Request).

 

“Secondary IM Fee” means with respect to any Distribution Date, the fee payable
to the Investment Manager or successor investment manager (as applicable) for
services rendered during the related Collection Period, which shall be equal to
one-fourth of the product of (i) the Secondary IM Fee Percentage multiplied by
(ii) the average of the values of the aggregate Collateral Obligation Amount of
the Eligible Collateral Obligations on the first day and the last day of the
related Collection Period. For the avoidance of doubt, the Investment Manager
may waive or defer the payment of any Secondary IM Fee in its sole discretion.

 

“Secondary IM Fee Percentage” means 0.30%.

 

“Secured Parties” means, collectively, the Collateral Agent, the Collateral
Custodian, each Lender, the Administrative Agent, each Agent, each other
Affected Person, Indemnified Party and Hedge Counterparty and their respective
permitted successors and assigns.

 

“Securities Intermediary” means the Collateral Custodian, or any subsequent
institution acceptable to the Administrative Agent at which the Accounts are
kept.

 

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“Senior Secured Bond” means a debt security (that is not a loan) that is (a)
issued by a corporation, limited liability company, partnership or trust and (b)
secured by a valid first priority perfected security interest on specified
collateral.

 

“Standard & Poor’s” means Standard & Poor’s Ratings Services, a Standard &
Poor’s Financial Services LLC business, and any successor or successors thereto.

 

“Structured Finance Obligation” means any obligation owing or issued by a
special purpose vehicle and secured directly by, referenced to, or representing
ownership of, a pool of receivables or other financial assets of any Obligor,
including collateralized debt obligations and mortgage-backed securities,
including (but not limited to) collateral debt obligations, collateral loan
obligations, asset backed securities and commercial mortgage backed securities
or any resecuritization thereof.

 

“Subsidiary” means, with respect to any Person, a corporation, partnership or
other entity of which such Person and/or its other Subsidiaries own, directly or
indirectly, such number of outstanding shares as have more than 50% of the
ordinary voting power for the election of directors.

 

“Substituted Collateral Obligation” means, with respect to any Collection
Period, any Warranty Collateral Obligation with respect to which the
Equityholder has substituted in a replacement Eligible Collateral Obligation
pursuant to Section 7.11 and the Sale Agreement.

 

“Tangible Net Worth” means, with respect to any Person, the consolidated net
worth of such Person and its consolidated Subsidiaries calculated in accordance
with GAAP after subtracting therefrom the aggregate amount of the intangible
assets of such Person and its consolidated Subsidiaries, including, without
limitation, goodwill, franchises, licenses, patents, trademarks, tradenames,
copyrights and service marks.

 

“Target Portfolio Amount” means, (i) during the Ramp-up Period, $360,000,000 and
(ii) thereafter, the sum of (x) the Aggregate Eligible Collateral Obligation
Amount, (y) all Principal Collections on deposit in the Principal Collection
Account and (z) all amounts on deposit in the Unfunded Exposure Account.

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Official Body, including any interest, additions to tax or
penalties applicable thereto.

 

“Transaction Documents” means this Agreement, the Notes, the Sale Agreement, the
Investment Management Agreement, the Collateral Agent and Collateral Custodian
Fee Letter, each Fee Letter, the Account Control Agreement, and the other
documents to be executed and delivered in connection with this Agreement,
specifically excluding from the foregoing, however, Underlying Instruments
delivered by the Borrower or the Investment Manager in connection with this
Agreement.

 

“UCC” means the Uniform Commercial Code as from time to time in effect in the
applicable jurisdiction or jurisdictions.

 

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“Uncommitted Lender” means any Conduit Lender designated as an “Uncommitted
Lender” for any Lender Group and any of its assignees.

 

“Underlying Instrument” means the loan agreement, credit agreement or other
customary agreement pursuant to which a Collateral Obligation has been created
or issued and each other agreement that governs the terms of or secures the
obligations represented by such Collateral Obligation or of which the holders of
such Collateral Obligation are the beneficiaries.

 

“Undrawn Fee” a fee payable pursuant to Section 3.2 for each day of the related
Collection Period during the Revolving Period equal to the product of (x) the
difference between the aggregate Commitments on such day minus the aggregate
principal amount of outstanding Advances on such day, times (y) the Undrawn Fee
Rate times (z) 1/360.

 

“Undrawn Fee Rate” has the meaning set forth in the Fee Letters.

 

“Unfunded Exposure Account” means the account designated as the Unfunded
Exposure Account in, and which is established and maintained pursuant to,
Section 8.1(a).

 

“Unfunded Exposure Shortfall” has the meaning set forth in Section 8.1(a).

 

“Unmatured Facility Termination Event” means any event that, if it continues
uncured, will, with lapse of time or notice or lapse of time and notice,
constitute a Facility Termination Event.

 

“Unmatured Investment Manager Event of Default” means any event that, if it
continues uncured, will, with lapse of time or notice or lapse of time and
notice, constitute an Investment Manager Event of Default.

 

“Unsecured Bond” means any bond that is (a) not secured by a pledge of
collateral and (b) senior or pari passu in right of payment to any other
unsecured indebtedness of the related Obligor.

 

“Unsecured Loan” means any loan that is (a) not secured by a pledge of
collateral and (b) senior or pari passu in right of payment to any other
unsecured indebtedness of the related Obligor.

 

“USA Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
Public Law 107 56.

 

“U.S. Borrower” means a Borrower that is a “United States person” as defined in
Section 7701(a)(30) of the Code.

 

“U.S. Tax Compliance Certificate” has the meaning assigned to such term in
Section 4.3(f).

 

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“Variable Funding Asset” means any Revolving Loan or other asset that by its
terms may require one or more future advances to be made to the related Obligor
by any lender thereon or owner thereof.

 

“Volcker Rule” means Section 13 of the U.S. Bank Holding Company Act of 1956, as
amended, and the applicable rules and regulations thereunder.

 

“Warrant Asset” means any equity purchase warrants or similar rights convertible
into or exchangeable or exercisable for any equity interests received by the
Borrower as an “equity kicker” from the Obligor in connection with a Collateral
Obligation.

 

“Warranty Collateral Obligation” has the meaning set forth in Section 7.11.

 

“Weighted Average Advance Rate” means, as of any date of determination with
respect to all Eligible Collateral Obligations included in the Adjusted
Aggregate Eligible Collateral Obligation Balance, the number obtained by (i)
summing the products obtained by multiplying (a) the Advance Rate of each such
Eligible Collateral Obligation by (b) such Eligible Collateral Obligation’s
contribution to the Adjusted Aggregate Eligible Collateral Obligation Balance
and (ii) dividing such sum by the Adjusted Aggregate Eligible Collateral
Obligation Balance.

 

“Weighted Average Life” means, as of any day with respect to all Eligible
Collateral Obligations included in the Collateral, the number of years following
such date obtained by (i) summing the products obtained by multiplying (a) the
Average Life at such time of each such Eligible Collateral Obligation by (b) the
Collateral Obligation Amount of such Collateral Obligation and (ii) dividing
such sum by the aggregate Collateral Obligation Amounts of all Eligible
Collateral Obligations included in the Collateral.

 

“Weighted Average Spread” means, as of any day, the number expressed as a
percentage equal to (i) the Aggregate Funded Spread divided by (ii) the
Aggregate Eligible Collateral Obligation Amount (excluding any interest that has
been deferred and capitalized on any Deferrable Collateral Obligation).

 

“Withholding Agent” means the Borrower, the Administrative Agent, and the
Investment Manager.

 

“written” or “in writing” (and other variations thereof) means any form of
written communication or a communication by means of telex, telecopier device,
telegraph or cable.

 

“Yield” means, with respect to any period, the daily interest accrued on
Advances during such period as provided for in Article III.

 

Section 1.2        Other Definitional Provisions. (a)        Unless otherwise
specified therein, all terms defined in this Agreement have the meanings as so
defined herein when used in the Notes or any other Transaction Document,
certificate, report or other document made or delivered pursuant hereto or
thereto.

 

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(b)        Each term defined in the singular form in Section 1.1 or elsewhere in
this Agreement shall mean the plural thereof when the plural form of such term
is used in this Agreement, the Notes or any other Transaction Document,
certificate, report or other document made or delivered pursuant hereto or
thereto, and each term defined in the plural form in Section 1.1 shall mean the
singular thereof when the singular form of such term is used herein or therein.

 

(c)        The words “hereof,” “herein,” “hereunder” and similar terms when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, the term “including” means “including
without limitation,” and article, section, subsection, schedule and exhibit
references herein are references to articles, sections, subsections, schedules
and exhibits to this Agreement unless otherwise specified.

 

(d)        The following terms which are defined in the Uniform Commercial Code
in effect in the State of New York on the date hereof are used herein as so
defined: Accounts, Certificated Securities, Chattel Paper, Control, Documents,
Equipment, Financial Assets, Funds-Transfer system, General Intangibles, Indorse
and Indorsed, Instruments, Inventory, Investment Property, Proceeds, Securities
Accounts, Securities Intermediary, Security Certificates, Security Entitlements,
Security Interest and Uncertificated Securities.

 

(e)        For the avoidance of doubt, on each Measurement Date, the Borrower
shall cause the Investment Manager to re-determine the status of each Eligible
Collateral Obligation as of such calculation date and to provide notice of any
change in the status of any Eligible Collateral Obligation to the Collateral
Agent and, as a consequence thereof, (A) Collateral Obligations that were
previously Eligible Collateral Obligations on a prior Measurement Date may be
excluded from the Aggregate Eligible Collateral Obligation Amount on such
Measurement Date and (B) Collateral Obligations that were previously excluded
from the Aggregate Eligible Collateral Obligation Amount on a prior Measurement
Date may, upon receipt of a related Approval Notice, be included in the
Aggregate Eligible Collateral Obligation Amount on such Measurement Date.

 

(f)        Unless otherwise specified, each reference in this Agreement or in
any other Transaction Document to a Transaction Document shall mean such
Transaction Document as the same may from time to time be amended, restated,
supplemented or otherwise modified in accordance with the terms of the
Transaction Documents.

 

(g)       All calculations required to be made hereunder with respect to the
Collateral Obligations and the Borrowing Base (including, without limitation, to
determine whether a Facility Termination Event or an Unmatured Facility
Termination Event shall have occurred) shall be made on a trade date basis and
after giving effect to (x) all purchases or sales to be entered into on such
trade date and (y) all Advances requested to be made on such trade date plus the
balance of all unfunded Advances to be made in connection with the Borrower’s
purchase of previously requested (and approved) Collateral Obligations.

 

(h)        For all purposes under this Agreement, “knowledge” shall mean actual
knowledge after reasonable inquiry.

 

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Article II

THE FACILITY, ADVANCE PROCEDURES AND NOTES

 

Section 2.1        Advances. (a)        On the terms and subject to the
conditions set forth in this Agreement, each Lender Group hereby agrees to make
advances to or on behalf of the Borrower (individually, an “Advance” and
collectively the “Advances”) from time to time on any date (each such date on
which an Advance is made, an “Advance Date”) during the period from the
Effective Date to the end of the Revolving Period; provided that there shall be
no more than two (2) Advance Dates during any calendar week.

 

(b)        Under no circumstances shall any Lender make an Advance if, after
giving effect to such Advance and any purchase of Eligible Collateral
Obligations in connection therewith, the aggregate outstanding principal amount
of all Advances would exceed the lower of (i) the Facility Amount and (ii) the
Borrowing Base on such day. Subject to the terms of this Agreement, during the
Revolving Period, the Borrower may borrow, reborrow, repay and prepay (subject
to the provisions of Section 2.4) one or more Advances.

 

Section 2.2        Funding of Advances. (a)        Subject to the satisfaction
of the conditions precedent set forth in Section 6.2, the Borrower may request
Advances hereunder by giving notice to the Administrative Agent, each Agent and
the Collateral Agent of the proposed Advance at or prior to 10:00 a.m., New York
City time, at least (x) in the case of Advances of more than 20% of the
then-current Facility Amount, thirty-one (31) days or (y) in the case of
Advances of up to 20% of the then-current Facility Amount, one (1) Business Day
prior to the proposed Advance Date. Such notice (herein called the “Advance
Request”) shall be in the form of Exhibit C-1 and shall include (among other
things) the proposed Advance Date and amount of such proposed Advance, and
shall, if applicable, be accompanied by an Asset Approval Request setting forth
the information required therein with respect to the Collateral Obligations to
be acquired by the Borrower on the Advance Date (if applicable). The amount of
any Advance shall at least be equal to the least of (i) $1,000,000, (ii) the (1)
Borrowing Base on such day minus (2) the Advances outstanding on such day and
(iii) the (1) Facility Amount on such day minus (2) the Advances outstanding on
such day before giving effect to the requested Advance as of such date. Any
Advance Request given by the Borrower pursuant to this Section 2.2, shall be
irrevocable and binding on the Borrower. The Administrative Agent shall have no
obligation to lend funds hereunder in its capacity as Administrative Agent.
Subject to receipt by the Collateral Agent of an Officer’s Certificate of the
Borrower confirming the satisfaction of the conditions precedent set forth in
Section 6.2, and the Collateral Agent’s receipt of such funds from the Lenders,
the Collateral Agent shall make the proceeds of such requested Advances
available to the Borrower by deposit to such account as may be designated by the
Borrower (in a written notice received by the Administrative Agent and the
Collateral Agent at least one (1) Business Day prior to such Advance Date) in
same day funds no later than 2:00 p.m., New York City time, on such Advance
Date. Lender shall notify Borrower within two (2) Business Days of any Advance
Request made pursuant to Section 2.2(a)(x) if it will elect to fund the related
Advance on any day prior to the end of the applicable thirty-one (31) day notice
period. The Borrower expressly acknowledges and agrees that any election by any
Lender on one or more occasions to fund any Advance on any day prior to the full
passage of the applicable thirty-one (31) day notice period set forth in Section
2.2(a)(x) shall not constitute or be deemed to be an amendment, waiver or other
modification of the requirement for thirty-one (31) days’ notice prior to any
Lender funding any Advance made in respect of an Advance Request made pursuant
to Section 2.2(a)(x).

 

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(b)        Committed Lender’s Commitment. At no time will any Uncommitted Lender
have any obligation to fund an Advance. At all times on and after the Conduit
Advance Termination Date, all Advances shall be made by the Agent on behalf of
the applicable Committed Lenders. The Administrative Agent shall use
commercially reasonable efforts to ensure that Advances are funded in the first
instance by the Uncommitted Lenders. At any time when any Uncommitted Lender has
failed to or has rejected a request to fund an Advance, its Agent shall so
notify the Related Committed Lender and such Related Committed Lender shall fund
such Advance. Notwithstanding anything contained in this Section 2.2(b) or
elsewhere in this Agreement to the contrary, no Committed Lender shall be
obligated to provide its Agent or the Borrower with funds in connection with an
Advance in an amount that would result in the portion of the Advances then
funded by it exceeding its Commitment then in effect. The obligation of the
Committed Lender in each Lender Group to remit any Advance shall be several from
that of the other Lenders, and the failure of any Committed Lender to so make
such amount available to its Agent shall not relieve any other Committed Lender
of its obligation hereunder.

 

(c)        Unfunded Commitment Provisions. Notwithstanding anything to the
contrary herein, upon the occurrence of the earlier of (i) any acceleration of
the maturity of Advances pursuant to Section 13.2 or (ii) the end of the
Revolving Period, the Borrower shall request an Advance in the amount of the
Aggregate Unfunded Amount minus the amount then on deposit in the Unfunded
Exposure Account. Following receipt of such Advance Request, the Lenders shall
fund such requested amount by depositing such amount directly to the Collateral
Custodian to be deposited into the Unfunded Exposure Account, notwithstanding
anything to the contrary herein (including, without limitation, the Borrower’s
failure to satisfy any of the conditions precedent set forth in Section 6.2).

 

Section 2.3        Notes. The Borrower shall, upon request of any Lender Group,
on or after such Lender Group becomes a party hereto (whether on the Effective
Date or by assignment or otherwise), execute and deliver a Note evidencing the
Advances of such Lender Group. Each such Note shall be payable to the order of
the Agent for such Lender Group in a face amount equal to the applicable Lender
Group’s Commitment as of the Effective Date or the effective date on which such
Lender Group becomes a party hereto, as applicable. The Borrower hereby
irrevocably authorizes each Agent to make (or cause to be made) appropriate
notations on the grid attached to the Notes (or on any continuation of such
grid, or at the option of such Agent, in its records), which notations, if made,
shall evidence, inter alia, the date of the outstanding principal of the
Advances evidenced thereby and each payment of principal thereon. Such notations
shall be rebuttably presumptive evidence of the subject matter thereof absent
manifest error; provided, that the failure to make any such notations shall not
limit or otherwise affect any of the Obligations or any payment thereon.

 

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Section 2.4        Repayment and Prepayments. (a)        The Borrower shall
repay the Advances outstanding (i) on each Distribution Date to the extent
required to be repaid hereunder and funds are available therefor pursuant to
Section 8.3 and (ii) in full on the Facility Termination Date.

 

(b)        Prior to the Facility Termination Date, the Borrower may, from time
to time, make a voluntary prepayment, in whole or in part, of the outstanding
principal amount of any Advance using Principal Collections on deposit in the
Principal Collection Account or other funds available to the Borrower on such
date; provided, that

 

(i)        all such voluntary prepayments shall require prior written notice to
the Administrative Agent by 11:00 a.m. two (2) Business Days prior to such
voluntary prepayment;

 

(ii)       all such voluntary partial prepayments shall be in a minimum amount
of $1,000,000; and

 

(iii)       each prepayment shall be applied on the Business Day received by the
Administrative Agent if received by 3:00 p.m., New York City time, on such day
by the Administrative Agent as Amount Available constituting Principal
Collections pursuant to Section 8.3(a) as if (x) the date of such prepayment
were a Distribution Date and (y) such prepayment occurred during the Collection
Period to which such Distribution Date relates.

 

Each such prepayment shall be subject to the payment of any amounts required by
Section 2.5(b) (if any) resulting from a prepayment or payment.

 

Section 2.5        Permanent Reduction of Facility Amount. (a)        The
Borrower may at any time (x) during the Revolving Period if an Extension Request
has been rejected by the Administrative Agent or (y) after the end of the
Revolving Period, in each case upon five Business Days’ prior written notice to
the Administrative Agent, permanently reduce the Facility Amount (i) in whole
upon payment in full (in accordance with Section 2.4) of the aggregate
outstanding principal amount of all Advances) or (ii) in part by any pro rata
amount that the Facility Amount exceeds the aggregate outstanding principal
amount of all Advances (after giving effect to any concurrent prepayment
thereof). In connection with any permanent reduction of the Facility Amount
under this Section 2.5(a), the Commitment of each Committed Lender shall
automatically, and without any further action by any party, be reduced pro rata
with all other Committed Lenders such that the sum of all Commitments will equal
the newly reduced Facility Amount.

 

(b)        Notwithstanding anything to the contrary herein, the Borrower may
permanently reduce the Facility Amount at any time, provided that if such
reduction occurs at any time other than those specified in Section 2.5(a), it
shall pay the applicable Prepayment Fee to the Administrative Agent, for the
respective accounts of the Lenders.

 

Section 2.6        Extension of Revolving Period. The Borrower may, at any time
after the first anniversary of the Effective Date and prior to the date that is
ten Business Days prior to the last date of the Revolving Period, deliver a
written notice to the Administrative Agent requesting an extension of the
Revolving Period for an additional twelve months (each qualifying request, an
“Extension Request”). The Administrative Agent may approve or decline an
Extension Request in its sole discretion; provided, that the Administrative
Agent shall respond to an Extension Request in writing not later than 30 days
following receipt of such Extension Request, and if the Administrative Agent
does not respond in writing by the end of such 30-day period it shall be deemed
to have denied such Extension Request. No request by the Borrower to extend the
Revolving Period shall be considered an “Extension Request” if such request is
conditioned on an amendment to any other provision of the Transaction Documents.

 

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Section 2.7        Calculation of Discount Factor.

 

(a)        In connection with the purchase of each Collateral Obligation and
prior to such Collateral Obligation being purchased by the Borrower and included
in the Collateral, the Administrative Agent will assign (in its sole discretion)
a Discount Factor for such Collateral Obligation.

 

(b)        If, but only if, a Revaluation Event occurs with respect to any
Collateral Obligation, the Discount Factor of such Collateral Obligation may be
amended by the Administrative Agent, in its sole discretion. The Administrative
Agent will provide written notice of the revised Discount Factor to the Borrower
and the Investment Manager. To the extent the Investment Manager has actual
knowledge or, pursuant to the terms of the applicable Underlying Instruments,
has received notice of any Revaluation Event with respect to any Collateral
Obligation, the Investment Manager shall give prompt notice thereof to the
Administrative Agent (but, in any event, not longer than two Business Days after
it receives notice or gains actual knowledge thereof).

 

(c)        The Administrative Agent will provide written notice of each revised
Discount Factor to the Borrower, the Investment Manager and the Collateral
Agent.

 

Article III

YIELD, UNDRAWN FEE, ETC.

 

Section 3.1        Yield and Undrawn Fee. (a)        The Borrower hereby
promises to pay, on the dates specified in Section 3.2, Yield on the unpaid
principal amount of each Advance (or each portion thereof) for the period
commencing on the applicable Advance Date until such Advance is paid in full. No
provision of this Agreement or the Notes shall require the payment or permit the
collection of Yield in excess of the maximum permitted by Applicable Law.

 

(b)        The Borrower shall pay the Undrawn Fee on the dates specified in
Section 3.2.

 

Section 3.2        Yield Distribution Dates. Yield accrued on each Advance
(including any previously accrued and unpaid Yield) and Undrawn Fee (as
applicable) shall be payable, without duplication:

 

(a)        on the Facility Termination Date;

 

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(b)        on the date of any payment or prepayment, in whole or in part, of
principal outstanding on such Advance; and

 

(c)        on each Distribution Date.

 

Section 3.3        Yield Calculation. Each Note shall bear interest on each day
during each Accrual Period at a rate per annum equal to the product of (a) the
Interest Rate for such Accrual Period multiplied by (b) the outstanding Advances
attributable to such Note on such day. All Yield shall be computed on the basis
of the actual number of days (including the first day but excluding the last
day) occurring during the period for which such Yield is payable over a year
comprised of 360 days (other than Yield accruing by the reference rate set forth
in clause (a) of the definition of Alternate Base Rate, which shall be computed
over a year comprised of 365/366 days).

 

Section 3.4        Computation of Yield, Fees, Etc. Each Agent (on behalf of its
respective Lender Group) and the Administrative Agent shall determine the
applicable Yield and all Fees to be paid by the Borrower on each Distribution
Date for the related Accrual Period and shall advise the Collateral Agent
thereof in writing no later than the Determination Date immediately prior to
such Distribution Date. Such reporting may also include an accounting of any
amounts due and payable pursuant to Sections 4.3 and 5.1.

 

Article IV

PAYMENTS; TAXES

 

Section 4.1        Making of Payments. Subject to, and in accordance with, the
provisions hereof, all payments of principal of or Yield on the Advances and
other amounts due to the Lenders shall be made pursuant to Section 8.3(a) by no
later than 3:00 p.m., New York City time, on the day when due in lawful money of
the United States of America in immediately available funds. Payments received
by any Lender or Agent after 3:00 p.m., New York City time, on any day will be
deemed to have been received by such Lender or Agent on its next following
Business Day. Each Agent shall allocate to the Lenders in its Lender Group each
payment in respect of the Advances received by such Agent as provided by Section
8.3 or Section 2.4. Payments in reduction of the principal amount of the
Advances shall be allocated and applied to Lenders pro rata based on their
respective portions of such Advances, or in any such case in such other
proportions as each affected Lender may agree upon in writing from time to time
with such Agent and the Borrower. Payments of Yield and Undrawn Fee shall be
allocated and applied to Lenders pro rata based upon the respective amounts of
interest and fees due and payable to them.

 

Section 4.2        Due Date Extension. If any payment of principal or Yield with
respect to any Advance falls due on a day which is not a Business Day, then such
due date shall be extended to the next following Business Day, and additional
Yield shall accrue and be payable for the period of such extension at the rate
applicable to such Advance.

 

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Section 4.3        Taxes. (a)        Payments Free of Taxes. Any and all
payments by or on account of any obligation of the Borrower under any
Transaction Document shall be made without deduction or withholding for any
Taxes, except as required by applicable law. If any applicable law (as
determined in the good faith discretion of an applicable Withholding Agent)
requires the deduction or withholding of any Tax from any such payment by a
Withholding Agent, then the applicable Withholding Agent shall be entitled to
make such deduction or withholding and shall timely pay the full amount deducted
or withheld to the relevant Official Body in accordance with applicable law and,
if such Tax is an Indemnified Tax, then the sum payable by the Borrower shall be
increased as necessary so that after such deduction or withholding has been made
(including such deductions and withholdings applicable to additional sums
payable under this Section 4.3) the applicable Recipient receives an amount
equal to the sum it would have received had no such deduction or withholding
been made.

 

(b)        Payment of Other Taxes by the Borrower. The Borrower shall timely pay
to the relevant Official Body in accordance with applicable law, or at the
option of the Administrative Agent timely reimburse it for the payment of, any
Other Taxes.

 

(c)        Indemnification by the Borrower. The Borrower shall indemnify each
Recipient, and its direct and indirect beneficial owners, within 10 days after
demand therefor, for the full amount of any Indemnified Taxes (including
Indemnified Taxes imposed or asserted on or attributable to amounts payable
under this Section 4.3) payable or paid by such Recipient or such beneficial
owners or required to be withheld or deducted from a payment to such Recipient
or such beneficial owners and any reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes were correctly or legally
imposed or asserted by the relevant Official Body. A certificate as to the
amount of such payment or liability delivered to the Borrower by a Lender (with
a copy to the Administrative Agent), or by the Administrative Agent on its own
behalf or on behalf of another Recipient, shall be conclusive absent manifest
error.

 

(d)        Indemnification by the Lenders. Each Lender shall severally indemnify
the Administrative Agent, within 10 days after demand therefor, for (i) any
Indemnified Taxes attributable to such Lender (but only to the extent that the
Borrower has not already indemnified the Administrative Agent for such
Indemnified Taxes and without limiting the obligation of the Borrower to do so),
(ii) any Taxes attributable to such Lender’s failure to comply with the
provisions of Section 15.9 relating to the maintenance of a Participant Register
and (iii) any Excluded Taxes attributable to such Lender, in each case, that are
payable or paid by the Administrative Agent in connection with any Transaction
Document, and any reasonable expenses arising therefrom or with respect thereto,
whether or not such Taxes were correctly or legally imposed or asserted by the
relevant Official Body. A certificate as to the amount of such payment or
liability delivered to any Lender by the Administrative Agent shall be
conclusive absent manifest error. Each Lender hereby authorizes the
Administrative Agent to set off and apply any and all amounts at any time owing
to such Lender under any Transaction Document or otherwise payable by the
Administrative Agent to the Lender from any other source against any amount due
to the Administrative Agent under this Section 4.3(d).

 

(e)        Evidence of Payments. As soon as practicable after any payment of
Taxes by the Borrower to an Official Body pursuant to this Section 4.3, the
Borrower shall deliver to the Administrative Agent the original or a certified
copy of a receipt issued by such Official Body evidencing such payment, a copy
of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.

 

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(f)        Status of Lenders.

 

(i)        Any Lender that is entitled to an exemption from or reduction of
withholding Tax with respect to payments made under any Transaction Document
shall deliver to the Borrower and the Administrative Agent, at the time or times
reasonably requested by the Borrower or the Administrative Agent, such properly
completed and executed documentation reasonably requested by the Borrower or the
Administrative Agent as will permit such payments to be made without withholding
or at a reduced rate of withholding. In addition, any Lender, if reasonably
requested by the Borrower or the Administrative Agent, shall deliver such other
documentation prescribed by applicable law or reasonably requested by the
Borrower or the Administrative Agent as will enable the Borrower or the
Administrative Agent to determine whether or not such Lender is subject to
backup withholding or information reporting requirements. Notwithstanding
anything to the contrary in the preceding two sentences, the completion,
execution and submission of such documentation (other than such documentation
set forth in Section 4.3(f)(ii)(A), Section 4.3(f)(ii)(B) and Section
4.3(f)(ii)(D) below) shall not be required if in the Lender’s reasonable
judgment such completion, execution or submission would subject such Lender to
any material unreimbursed cost or expense or would materially prejudice the
legal or commercial position of such Lender.

 

(ii)        Without limiting the generality of the foregoing, if the Borrower is
a U.S. Borrower:

 

(A)        any Lender that is a “United States person” as defined in Section
7701(a)(30) of the Code shall deliver to the Borrower and the Administrative
Agent on or prior to the date on which such Lender becomes a Lender under this
Agreement (and from time to time thereafter upon the reasonable request of the
Borrower or the Administrative Agent) executed originals of IRS Form W-9
certifying that such Lender is exempt from U.S. federal backup withholding tax;

 

(B)        any Foreign Lender shall, to the extent it is legally entitled to do
so, deliver to the Borrower and the Administrative Agent (in such number of
copies as shall be requested by the recipient) on or prior to the date on which
such Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of the Borrower or the Administrative
Agent) whichever of the following is applicable:

 

(I)        in the case of a Foreign Lender claiming the benefits of an income
tax treaty to which the United States is a party (x) with respect to payments of
interest under any Transaction Document, executed originals of IRS Form W-8BEN
or IRS Form W-8BEN-E, as applicable, establishing an exemption from, or
reduction of, U.S. federal withholding Tax pursuant to the “interest” article of
such tax treaty and (y) with respect to any other applicable payments under any
Transaction Document, IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable,
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the “business profits” or “other income” article of such tax treaty;

 

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(II)      executed originals of IRS Form W-8ECI;

 

(III)     in the case of a Foreign Lender claiming the benefits of the exemption
for portfolio interest under Section 881(c) of the Code, (x) a certificate
substantially in the form of Exhibit G-1 to the effect that such Foreign Lender
is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10
percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B)
of the Code, or a “controlled foreign corporation” described in Section
881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed
originals of IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable; or

 

(IV)      to the extent a Foreign Lender is not the beneficial owner, executed
originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN,
IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate substantially in the form
of Exhibit G-2 or Exhibit G-3, IRS Form W-9, and/or other certification
documents from each beneficial owner, as applicable; provided that if the
Foreign Lender is a partnership and one or more direct or indirect partners of
such Foreign Lender are claiming the portfolio interest exemption, such Foreign
Lender may provide a U.S. Tax Compliance Certificate substantially in the form
of Exhibit G-4 on behalf of each such direct and indirect partner;

 

(C)           any Foreign Lender shall, to the extent it is legally entitled to
do so, deliver to the Borrower and the Administrative Agent (in such number of
copies as shall be requested by the recipient) on or prior to the date on which
such Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of the Borrower or the Administrative
Agent) executed originals of any other form prescribed by applicable law as a
basis for claiming exemption from or a reduction in U.S. federal withholding
Tax, duly completed, together with such supplementary documentation as may be
prescribed by applicable law to permit the Borrower or the Administrative Agent
to determine the withholding or deduction required to be made; and

 

(D)           if a payment made to a Lender under any Transaction Document would
be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were
to fail to comply with the applicable reporting requirements of FATCA (including
those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such
Lender shall deliver to the Borrower and the Administrative Agent at the time or
times prescribed by law and at such time or times reasonably requested by the
Borrower or the Administrative Agent such documentation prescribed by applicable
law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such
additional documentation reasonably requested by the Borrower or the
Administrative Agent as may be necessary for the Borrower and the Administrative
Agent to (x) comply with their obligations under FATCA and to determine that
such Lender has complied with such Lender’s obligations under FATCA or (y)
determine the amount to deduct and withhold from such payment. Solely for
purposes of this Section 4.3(f)(ii)(D), “FATCA” shall include any amendments
made to FATCA after the date of this Agreement.

 

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Each Lender agrees that if any form or certification it previously delivered
expires or becomes obsolete or inaccurate in any respect, it shall update such
form or certification or promptly notify the Borrower and the Administrative
Agent in writing of its legal inability to do so.

 

(g)        Treatment of Certain Refunds. If any party determines, in its sole
discretion exercised in good faith, that it has received a refund of any Taxes
as to which it has been indemnified pursuant to this Section 4.3 (including by
the payment of additional amounts pursuant to this Section 4.3), it shall pay to
the indemnifying party an amount equal to such refund (but only to the extent of
indemnity payments made under this Section 4.3 with respect to the Taxes giving
rise to such refund), net of all out-of-pocket expenses (including Taxes) of
such indemnified party and without interest (other than any interest paid by the
relevant Official Body with respect to such refund). Such indemnifying party,
upon the request of such indemnified party, shall repay to such indemnified
party the amount paid over pursuant to this Section 4.3(g) (plus any penalties,
interest or other charges imposed by the relevant Official Body) in the event
that such indemnified party is required to repay such refund to such Official
Body. Notwithstanding anything to the contrary in this Section 4.3(g), in no
event will the indemnified party be required to pay any amount to an
indemnifying party pursuant to this Section 4.3(g) the payment of which would
place the indemnified party in a less favorable net after-Tax position than the
indemnified party would have been in if the indemnification payments or
additional amounts giving rise to such refund had never been paid. This Section
4.3(g) shall not be construed to require any indemnified party to make available
its Tax returns (or any other information relating to its Taxes that it deems
confidential) to the indemnifying party or any other Person.

 

(h)        Survival. Each party’s obligations under this Section 4.3 shall
survive the resignation or replacement of the Administrative Agent or any
assignment of rights by, or the replacement of, a Lender and the repayment,
satisfaction or discharge of all obligations under any Transaction Document.

 

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Article V

INCREASED COSTS, ETC.

 

Section 5.1        Increased Costs, Capital Adequacy. (a)        If, due to
either (i) the introduction of or any change following the date hereof
(including, without limitation, any change by way of imposition or increase of
reserve requirements) in or in the interpretation, administration or application
arising following the date hereof of any Applicable Law, in each case whether
foreign or domestic or (ii) the compliance with any guideline or request
following the date hereof from any central bank or other Official Body (whether
or not having the force of law), (A) there shall be any increase in the cost to
the Administrative Agent, any Agent, any Lender, successor or assign thereof
(each of which shall be an “Affected Person”) of agreeing to make or making,
funding or maintaining any Advance (or any reduction of the amount of any
payment (whether of principal, interest, fee, compensation or otherwise) to any
Affected Person hereunder), as the case may be, (B) there shall be any reduction
in the amount of any sum received or receivable by an Affected Person under this
Agreement or under any other Transaction Document, or (C) any Recipient is
subject to any Taxes (other than (1) Indemnified Taxes and (2) Excluded Taxes)
on its loans, loan principal, letters of credit, commitments, or other
obligations, or its deposits, reserves, other liabilities or capital
attributable thereto, then, in each case, the Borrower shall, from time to time,
after written demand by the Administrative Agent (which demand shall be
accompanied by a statement setting forth in reasonable detail the basis for such
demand), on behalf of such Affected Person, pay to the Administrative Agent, on
behalf of such Affected Person, additional amounts sufficient to compensate such
Affected Person for such increased costs or reduced payments within thirty (30)
days after such demand; provided, that the amounts payable under this
Section 5.1 shall be without duplication of amounts payable under Section 4.3.

 

(b)        If either (i) the introduction of or any change following the date
hereof in or in the interpretation, administration or application arising
following the date hereof of any law, guideline, rule or regulation, directive
or request or (ii) the compliance by any Affected Person with any law,
guideline, rule, regulation, directive or request following the date hereof,
from any central bank, any Official Body or agency, including, without
limitation, compliance by an Affected Person with any request or directive
regarding capital adequacy, has or would have the effect of reducing the rate of
return on the capital of any Affected Person, as a consequence of its
obligations hereunder or any related document or arising in connection herewith
or therewith to a level below that which any such Affected Person could have
achieved but for such introduction, change or compliance (taking into
consideration the policies of such Affected Person with respect to capital
adequacy), by an amount deemed by such Affected Person to be material, then,
from time to time, after demand by such Affected Person (which demand shall be
accompanied by a statement setting forth in reasonable detail the basis for such
demand), the Borrower shall pay the Administrative Agent on behalf of such
Affected Person such additional amounts as will compensate such Affected Person
for such reduction.

 

(c)        If an Affected Person shall at any time (without regard to whether
any Basel III Regulations are then in effect) suffer or incur (i) any explicit
or implicit charge, assessment, cost or expense by reason of the amount or type
of assets, capital or supply of funding such Affected Person or any of its
Affiliates is required or expected to maintain in connection with the
transactions contemplated herein, without regard to (A) whether such charge,
assessment, cost or expense is imposed or recognized internally, externally or
inter-company or (B) whether it is determined in reference to a reduction in the
rate of return on such Affected Person’s or Affiliate’s assets or capital, an
inherent cost of the establishment or maintenance of a reserve of stable
funding, a reduction in the amount of any sum received or receivable by such
Affected Person or its Affiliates or otherwise, or (ii) any other imputed cost
or expense arising by reason of the actual or anticipated compliance by such
Affected Person or any of its Affiliates with the Basel III Regulations, then,
upon demand by or on behalf of such Affected Person through the Administrative
Agent, the Borrower shall pay to the Administrative Agent, for the benefit of
such Affected Person, such amount as will, in the determination of such Affected
Person, compensate such Affected Person therefor. A certificate of the
applicable Affected Person setting forth the amount or amounts necessary to
compensate the Affected Person under this Section 5.1(c) shall be delivered to
the Borrower and shall be conclusive absent manifest error.

 

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(d)        In determining any amount provided for in this Section 5.1, the
Affected Person may use any reasonable averaging and attribution methods. The
Administrative Agent, on behalf of any Affected Person making a claim under this
Section 5.1, shall submit to the Borrower a certificate setting forth in
reasonable detail the basis for and the computations of such additional or
increased costs, which certificate shall be conclusive absent manifest error.

 

Article VI

EFFECTIVENESS; CONDITIONS TO ADVANCES

 

Section 6.1        Effectiveness. This Agreement shall become effective on the
first day (the “Effective Date”) on which the Administrative Agent, on behalf of
the Lenders, shall have received the following, each in form and substance
reasonably satisfactory to the Administrative Agent:

 

(a)        Transaction Documents. This Agreement and each other Transaction
Document, in each case duly executed by each party thereto;

 

(b)        Notes. For each Lender Group that has requested the same, a Note duly
completed and executed by the Borrower and payable to the Agent for such Lender
Group;

 

(c)        Establishment of Account. Evidence that each Account has been
established;

 

(d)        Resolutions. Certified copies of the resolutions of the board of
managers (or similar items) of the Borrower and the Investment Manager approving
the Transaction Documents to be delivered by it hereunder and the transactions
contemplated hereby, certified by its secretary or assistant secretary;

 

(e)        Organization Documents. The certificate of formation (or similar
organization document) of each of the Borrower and the Investment Manager
certified by the Secretary of State of its jurisdiction of organization; and a
certified, executed copy of the Borrower’s and the Investment Manager’s
organizational documents;

 

(f)        Good Standing Certificates. Good standing certificates for each of
the Borrower and the Investment Manager issued by the applicable Official Body
of its jurisdiction of organization;

 

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(g)        Incumbency. A certificate of the secretary or assistant secretary of
each of the Borrower and the Investment Manager certifying the names and true
signatures of the officers authorized on its behalf to sign this Agreement and
the other Transaction Documents to be delivered by it;

 

(h)        Filings. Copies of proper financing statements, as may be necessary
or, in the opinion of the Administrative Agent, desirable under the UCC of all
appropriate jurisdictions or any comparable law to perfect the security interest
of the Collateral Agent on behalf of the Secured Parties in all Collateral in
which an interest may be pledged hereunder;

 

(i)        Opinions. Legal opinions of Dechert LLP counsel for the Borrower and
the Investment Manager, and Locke Lorde LLP and in-house counsel for the
Collateral Agent, each in form and substance reasonably satisfactory to the
Administrative Agent covering such matters as the Administrative Agent may
reasonably request;

 

(j)        No Facility Termination Event, etc. Each of the Transaction Documents
is in full force and effect and no Facility Termination Event or Unmatured
Facility Termination Event has occurred and is continuing or will result from
the issuance of the Notes and the borrowing hereunder;

 

(k)        Liens. The Administrative Agent shall have received (i) the results
of a recent search by a Person satisfactory to the Administrative Agent, of the
UCC, judgment, security interest and tax lien filings which may have been filed
with respect to personal property of the Borrower, and bankruptcy and pending
lawsuits with respect to the Borrower and the results of such search shall be
satisfactory to the Administrative Agent and (ii) filed UCC termination
statements, if any, necessary to release all security interests and other rights
of any Person in any Collateral previously granted by the Borrower and any
executed pay-off letters reasonably requested by the Administrative Agent;

 

(l)        Payment of Fees. The Administrative Agent shall have received
evidence, to its sole satisfaction, that all Fees due to the Lenders on the
Effective Date have been paid in full;

 

(m)       No Material Adverse Effect. No Material Adverse Effect shall have
occurred since September 30, 2014 and no litigation shall have commenced which,
if successful, could have a Material Adverse Effect;

 

(n)        Financial Statements. The Administrative Agent has received the most
recently available copies of the financial statements and reports described in
Section 7.5(k) certified by a Responsible Officer of the Investment Manager to
be true and correct; such financial statements fairly present in all material
respects the financial condition of such Person as of the applicable date of
issuance; and

 

(o)        Other. Such other approvals, documents, opinions, certificates and
reports as the Administrative Agent may reasonably request.

 

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Section 6.2        Advances and Reinvestments. The making of any Advance
(including the initial Advance hereunder) and any Reinvestment are all subject
to the condition that the Effective Date shall have occurred and to the
following further conditions precedent that:

 

(a)        No Facility Termination Event, Etc. Each of the Transaction Documents
shall be in full force and effect (unless terminated in accordance with their
terms) and (i) no Facility Termination Event or Unmatured Facility Termination
Event shall have occurred and be continuing or will result from the making of
such Advance or Reinvestment, (ii) no Investment Manager Event of Default or
Unmatured Investment Manager Event of Default shall have occurred and be
continuing or will result from the making of such Advance or Reinvestment, (iii)
the representations and warranties of the Borrower contained herein, of the
Investment Manager contained in the Investment Management Agreement and of the
Borrower and the Investment Manager in the other Transaction Documents shall be
true and correct in all material respects as of the related Funding Date (or if
such representations and warranties specifically refer to an earlier date, such
earlier date), with the same effect as though made on the date of (and after
giving effect to) such Advance or Reinvestment, and (iv) after giving effect to
such Advance or Reinvestment (and any purchase of Eligible Collateral
Obligations in connection therewith), the aggregate outstanding principal
balance of the Advances will not exceed the Borrowing Base;

 

(b)        Requests. (i) In connection with the funding of any Advance pursuant
to Section 2.2(a), the Collateral Agent, each Agent and the Administrative Agent
shall have received the Advance Request for such Advance in accordance with
Section 2.2(a), together with all items required to be delivered in connection
therewith and (ii) in connection with any Reinvestment, the Collateral Agent,
each Agent and the Administrative Agent shall have received the Reinvestment
Request for such reinvestment in accordance with Section 8.3(b), together with
all items required to be delivered in connection therewith;

 

(c)        Revolving Period. The Revolving Period shall not have ended;

 

(d)        Document Checklist. The Administrative Agent and the Collateral
Custodian shall have received a Document Checklist for each Eligible Collateral
Obligation to be added to the Collateral on the related Funding Date;

 

(e)        Borrowing Base Confirmation. The Collateral Agent and the
Administrative Agent shall have received an Officer’s Certificate of the
Borrower or the Investment Manager (which may be included as part of the Advance
Request or Reinvestment Request) computed as of the date of such request and
after giving effect thereto and to the purchase by the Borrower of the
Collateral Obligations to be purchased by it on such date (if any),
demonstrating that the aggregate principal amount of all outstanding Advances
shall not exceed the Borrowing Base, calculated as of the Funding Date as if the
Collateral Obligations purchased by the Borrower on such Funding Date were owned
by the Borrower;

 

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(f)        Collateral Quality Tests, Minimum Equity Condition. The Collateral
Agent and the Administrative Agent shall have received an Officer’s Certificate
of the Investment Manager (which may be included as part of the Advance Request
or Reinvestment Request) computed as of the date of such requested Advance or
Reinvestment, and after giving effect thereto and to the purchase by the
Borrower of the Collateral Obligations to be purchased by it on such Funding
Date, demonstrating that (i) with respect to each Advance, all of the Collateral
Quality Tests and the Minimum Equity Condition are satisfied, or (ii) with
respect to each Reinvestment, (A) the Diversity Score is at least 8 and (B) each
other Collateral Quality Test is satisfied or, if not satisfied, maintained or
improved, and the Minimum Equity Condition is satisfied;

 

(g)        Hedging Agreements. The Administrative Agent shall have received
evidence, in form and substance satisfactory to the Required Lenders, that the
Borrower has entered into Hedging Agreements to the extent required by, and
satisfying the requirements of, Section 10.6;

 

(h)        Administrative Agent Approval. In connection with the acquisition of
any Collateral Obligation by the Borrower, the Borrower shall have received a
copy of an Approval Notice with respect to such Collateral Obligation;

 

(i)        Permitted Use. The proceeds of any Advance will be used solely by the
Borrower for general corporate purposes consistent with terms hereof, which, for
the avoidance of doubt, include dividends and distributions to the Equityholder
permitted pursuant to Section 10.16, or to acquire Collateral Obligations as
identified on the applicable Asset Approval Request; and

 

(j)        Appraised Value. In connection with the acquisition of each Asset
Based Loan and within the time periods set forth below, the Borrower or the
Investment Manager (on behalf of the Borrower) shall have retained or shall have
caused the Obligor to retain an Approved Valuation Firm to calculate the
Appraised Value of (A) with respect to any such Collateral Obligation that has
intellectual property, equipment or real property, as the case may be, in its
borrowing base, the collateral securing such Collateral Obligation within twelve
(12) months prior to the acquisition of such Collateral Obligation and inclusion
into the Collateral and (B) with respect to all other Asset Based Loans, the
collateral securing such Collateral Obligation within six (6) months prior to
the acquisition of such Collateral Obligation and inclusion into the Collateral.
The Borrower shall cause the Investment Manager to report the Approved Valuation
Firm, appraisal metric and Appraised Value for such Collateral Obligation to the
Administrative Agent in the Advance Request related to such Collateral
Obligation.

 

(k)        Borrower’s Certification. The Borrower shall have delivered to the
Collateral Agent and the Administrative Agent an Officer’s Certificate (which
may be included as part of the Advance Request or Reinvestment Request) dated
the date of such requested Advance or Reinvestment certifying that the
conditions described in Sections 6.2(a) through (j) have been satisfied;

 

(l)        Rating Letters. Solely with respect to the initial advance to be made
by each Conduit Lender, the Administrative Agent shall have received a letter
from each applicable Rating Agency confirming its rating of such Conduit Lender;
and

 

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(m)        Other. With respect to any Advance, the Administrative Agent shall
have received such other approvals, documents, opinions, certificates and
reports as they may request, which request is reasonable as to content and
timing.

 

Section 6.3        Transfer of Collateral Obligations and Permitted Investments.
(a)        The Collateral Custodian shall hold all Certificated Securities
(whether Collateral Obligations or Permitted Investments) and Instruments in
physical form at the Corporate Trust Office.

 

(b)        On the Effective Date (with respect to each Collateral Obligation and
Permitted Investment owned by the Borrower on such date) and each time that the
Borrower shall (or shall cause the Investment Manager to) direct or cause the
acquisition of any Collateral Obligation or Permitted Investment, the Borrower
shall (or shall cause the Investment Manager to), if such Permitted Investment
or, in the case of a Collateral Obligation, the related promissory note or
assignment documentation has not already been delivered to the Collateral
Custodian in accordance with the requirements set forth in the definition of
“Collateral Obligation File,” cause the delivery of such Permitted Investment
or, in the case of a Collateral Obligation, the related promissory note or
assignment documentation in accordance with the requirements set forth in the
definition of “Collateral Obligation File” to the Collateral Custodian to be
credited by the Collateral Custodian to the Principal Collection Account in
accordance with the terms of this Agreement.

 

(c)        The Borrower shall (or shall cause the Investment Manager to) cause
all Collateral Obligations or Permitted Investments acquired by the Borrower to
be transferred to the Collateral Custodian for credit by it to the Principal
Collection Account, and shall cause all Collateral Obligations and Permitted
Investments acquired by the Borrower to be delivered to the Collateral Custodian
by one of the following means (and shall take any and all other actions
necessary to create and perfect in favor of the Collateral Agent a valid
security interest in each Collateral Obligation and Permitted Investment, which
security interest shall be senior (subject to Permitted Liens) to that of any
other creditor of the Borrower (whether now existing or hereafter acquired):

 

(i)        in the case of an Instrument or a Certificated Security in registered
form by having it Indorsed to the Collateral Custodian or in blank by an
effective Indorsement or registered in the name of the Collateral Custodian and
by (A) delivering such Instrument or Security Certificate to the Collateral
Custodian at the Corporate Trust Office and (B) causing the Collateral Custodian
to maintain (on behalf of the Collateral Agent for the benefit of the Secured
Parties) continuous possession of such Instrument or Certificated Security at
the Corporate Trust Office;

 

(ii)       in the case of an Uncertificated Security, by (A) causing the
Collateral Custodian to become the registered owner of such Uncertificated
Security and (B) causing such registration to remain effective;

 

(iii)      in the case of any Security Entitlement, by causing each such
Security Entitlement to be credited to the Account in the name of the Borrower;
and

 

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(iv)      in the case of General Intangibles (including any Collateral
Obligation or Permitted Investment not evidenced by an Instrument) by filing,
maintaining and continuing the effectiveness of, a financing statement naming
the Borrower as debtor and the Collateral Agent as secured party and describing
the Collateral Obligation or Permitted Investment (or a description of “all
assets” of the Borrower) as the collateral at the filing office of the Secretary
of State of Delaware.

 

Article VII

ADMINISTRATION AND Management OF COLLATERAL OBLIGATIONS

 

Section 7.1        Investment Manager. The management, administration and
collection of the Collateral Obligations shall be conducted by the Person
designated as Investment Manager from time to time in accordance with the
Investment Management Agreement.

 

Section 7.2        Investment Manager Events of Default. (a)        If an
Investment Manager Event of Default shall occur and be continuing, at the
election of the Administrative Agent by written notice to the Borrower, the
Borrower shall (i) not permit the Investment Manager to (w) consent to
modifications to Collateral Obligations or Hedging Agreements, (x) cause the
Borrower to enter into any Hedging Agreement, (y) consent to any acquisition or
disposition of Collateral Obligations under the Investment Management Agreement
or (z) take any other action with respect to the Borrower, the Collateral or the
Transaction Documents specified by the Administrative Agent (or its
representative) to the Investment Manager in its sole discretion from time to
time (each, a “Specified Transaction”), (ii) cause the Investment Manager to
have the prior written consent of the Administrative Agent in its sole
discretion prior to directing the Borrower to enter into any Specified
Transaction and (iii) seek to sell, or cause the Investment Manager to seek to
sell, in each case at the direction of the Administrative Agent, the Collateral
Obligations for fair value on commercially reasonable terms and conditions. The
Borrower shall pay the reasonable and documented costs and expenses of any
agents and advisers retained by the Administrative Agent in connection with the
exercise of the foregoing rights; provided, however, that the Borrower’s
obligations to reimburse any such costs and expenses in respect of any period
during which an Investment Manager Event shall have occurred and be continuing
shall not exceed an amount equal to 2.00% per annum of the average daily value
of the aggregate Collateral Obligation Amount of the Eligible Collateral
Obligations during such period. The Investment Manager hereby agrees to work in
good faith with any such agents and advisors. The Investment Management
Agreement shall provide that the Investment Manager may not resign until a
successor has been chosen in accordance with the foregoing provisions and has
commenced services.

 

In addition, upon the occurrence of an Investment Manager Event of Default, the
Borrower shall cause the Investment Manager to, if so requested by the
Administrative Agent acting at the direction of the Required Lenders, deliver as
directed by the Administrative Agent copies of its Records within five Business
Days after demand therefor and an electronic transmission (the form of such
transmission shall be reasonably acceptable to such successor investment
manager) containing as of the close of business on the date of demand all of the
data maintained by the Investment Manager in computer format in connection with
managing the Collateral Obligations.

 

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(b)        The Borrower shall not permit the Investment Manager to resign from
the obligations and duties imposed on it under the Transaction Documents other
than in accordance with Section 11 of the Investment Management Agreement.

 

(c)        At any time, any of the Administrative Agent or any Lender may
irrevocably waive any rights granted to such party under Section 7.2(a). Any
such waiver shall be in writing and executed by such party that is waiving its
rights hereunder. A copy of such waiver shall be promptly delivered by the
waiving party to the Collateral Manager and the Administrative Agent.

 

Section 7.3        Duties of the Investment Manager. In addition to the duties
and obligations set forth in the Investment Management Agreement, the Borrower
shall cause the Investment Manager to manage, service, administer and make
collections on the Collateral Obligations and perform the other actions required
by the Investment Manager in accordance with the terms and provisions of the
Transaction Documents and the Investment Management Standard.

 

(a)        The Borrower shall cause the Investment Manager to take or cause to
be taken all such actions, as may be reasonably necessary or advisable to
attempt to recover Collections from time to time, all in accordance with
(i) Applicable Law, (ii) the applicable Collateral Obligation and its Underlying
Instruments and (iii) the Investment Management Standard.

 

(b)        The Borrower shall cause the Investment Manager to administer the
Collections in respect of the Loan payments in accordance with the procedures
described herein. The Borrower shall cause the Investment Manager to (i)
instruct all Obligors (and related agents) to deposit Collections directly into
the Collection Account and (ii) deposit all Collections received directly by it
into the Collection Account within one (1) Business Day of receipt thereof. The
Borrower shall cause the Investment Manager to identify all Collections as
either Principal Collections or Interest Collections, as applicable. The
Borrower shall cause the Investment Manager to make such deposits or payments by
electronic funds transfer through the Automated Clearing House system, or by
wire transfer.

 

(c)        The Borrower shall cause the Investment Manager to maintain for the
Borrower and the Secured Parties in accordance with their respective interests
all Records that evidence or relate to the Collections not previously delivered
to the Collateral Agent and shall, as soon as reasonably practicable upon demand
of the Administrative Agent, make available, or, upon the occurrence and during
the continuation of an Investment Manager Event of Default, deliver to the
Administrative Agent copies of all material Records in its possession which
evidence or relate to the Collections.

 

(d)        The Borrower shall cause the Investment Manager to, as soon as
practicable following receipt thereof, turn over to the applicable Person any
cash collections or other cash proceeds received with respect to each Collateral
Obligation that does not constitute a Collateral Obligation or was paid in
connection with a Retained Interest.

 

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Section 7.4        Reserved.

 

Section 7.5        Covenants Relating to the Investment Manager. Until the date
on or after the Facility Termination Date on which the Advances shall have been
repaid in full, all Yield shall have been paid, and no other amount shall be
owing to the Secured Parties under this Agreement:

 

(a)        Compliance with Agreements and Applicable Laws. The Borrower shall
cause the Investment Manager to perform each of its obligations under this
Agreement and the other Transaction Documents and comply with all Applicable
Laws, including those applicable to the Collateral Obligations and all
Collections thereof, except to the extent that the failure to so comply would
not reasonably be expected to have a Material Adverse Effect.

 

(b)        Maintenance of Existence and Conduct of Business. The Borrower shall
cause the Investment Manager to: (i) do or cause to be done all things necessary
to (A) preserve and keep in full force and effect its existence as a corporation
and its rights and franchises in the jurisdiction of its formation and
(B) qualify and remain qualified as a foreign corporation in good standing and
preserve its rights and franchises in each jurisdiction in which the failure to
so qualify and remain qualified and preserve its rights and franchises would
reasonably be expected to have a Material Adverse Effect; (ii) continue to
conduct its business substantially as now conducted or as otherwise permitted
hereunder or under its organizational documents; and (iii) at all times
maintain, preserve and protect all of its licenses, permits, charters and
registrations except where the failure to maintain, preserve and protect such
licenses, permits, charters and registrations would not reasonably be expected
to have a Material Adverse Effect.

 

(c)        Books and Records. The Borrower shall cause the Investment Manager to
keep proper books of record and account in which full and correct entries shall
be made of all financial transactions and the assets and business of the
Investment Manager in accordance with GAAP, maintain and implement
administrative and operating procedures, and keep and maintain all documents,
books, records and other information necessary or reasonably advisable for the
collection of all Collateral Obligations.

 

(d)        Reserved.

 

(e)        ERISA. The Borrower shall cause the Investment Manager to give the
Administrative Agent and each Lender prompt written notice of any event that
could result in the imposition of a Lien on the Collateral under Section 430 of
the Code or Section 303(k) or 4068 of ERISA. The Borrower shall not permit the
Investment Manager or any Affiliates of the Investment Manager to, cause or
permit to occur an event that could result in the imposition of a Lien on the
Collateral under Section 430 of the Code or Section 303(k) or 4068 of ERISA.

 

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(f)        Compliance with Collateral Obligations and Investment Management
Standard. The Borrower shall cause the Investment Manager to, at its expense,
timely and fully perform and comply with all material provisions, covenants and
other promises required to be observed by the Investment Manager under any
Collateral Obligations (except, in the case of a successor Investment Manager,
such material provisions, covenants and other provisions shall only include
those provisions relating to the collection and managing the Collateral
Obligations to the extent such obligations are set forth in a document included
in the related Collateral Obligation File) and shall comply with the Investment
Management Standard in all material respects with respect to all Collateral
Obligations.

 

(g)        Maintain Records of Collateral Obligations. The Borrower shall cause
the Investment Manager to, at its own cost and expense, maintain reasonably
satisfactory and complete records of the Collateral, including a record of all
payments received and all credits granted with respect to the Collateral and all
other dealings with the Collateral. The Borrower shall cause the Investment
Manager to maintain its computer systems so that, from and after the time of
sale of any Collateral Obligation to the Borrower, the Investment Manager’s
master computer records (including any back-up archives) that refer to such
Collateral Obligation shall indicate the interest of the Borrower and the
Administrative Agent in such Collateral Obligation and that such Collateral
Obligation is owned by the Borrower and has been pledged to the Administrative
Agent for the benefit of the Secured Parties pursuant to this Agreement.

 

(h)        Liens. The Borrower shall not permit the Investment Manager to
create, incur, assume or permit to exist any Lien on or with respect to any of
its rights under any of the Transaction Documents, whether with respect to the
Collateral Obligations or any other Collateral other than Permitted Liens.

 

(i)        Mergers. The Borrower shall not permit the Investment Manager to
directly or indirectly, by operation of law or otherwise, merge with,
consolidate with, acquire all or substantially all of the assets or capital
stock of, or otherwise combine with or acquire, any Person, except that the
Investment Manager shall be permitted to merge with any entity so long as the
Investment Manager remains the surviving corporation of such merger and such
merger does not result in a Change of Control. The Borrower shall cause the
Investment Manager to give prior written notice of any merger to the
Administrative Agent.

 

(j)        Investment Management Obligations. The Borrower shall not permit the
Investment Manager to (i) agree to any amendment, waiver or other modification
of any Transaction Document to which it is a party and to which the
Administrative Agent is not a party without the prior written consent of the
Administrative Agent, (ii) agree or permit the Borrower to agree to a Material
Modification with respect to any Collateral Obligation without the prior written
consent of the Administrative Agent, (iii) interpose any claims, offsets or
defenses it may have as against the Borrower as a defense to its performance of
its obligations in favor of any Affected Person hereunder or under any other
Transaction Documents or (iv) change its fiscal year so that the reports
described in Section 7.5(k) would be delivered to the Administrative Agent less
frequently than every 12 months.

 

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(k)        Financial Reports. The Borrower shall cause the Investment Manager to
furnish, or cause to be furnished, to the Administrative Agent:

 

(i)        as soon as available, but in any event within 120 days after the end
of each fiscal year of the Equityholder, a copy of the consolidated and
consolidating balance sheet of the Equityholder and its consolidated
Subsidiaries as at the end of such year, the related consolidated and
consolidating statements of income for such year, and the related consolidated
statements of changes in net assets and of cash flows for such year, setting
forth in each case in comparative form the figures for the previous year;
provided, that the financial statements required to be delivered pursuant to
this clause (i) which are made available via EDGAR, or any successor system of
the Securities and Exchange Commission, in the Equityholder’s annual report on
Form 10-K, shall be deemed delivered to the Administrative Agent on the date
such documents are made so available; and

 

(ii)        as soon as available and in any event within 45 days after the end
of each fiscal quarter of each fiscal year (other than the last fiscal quarter
of each fiscal year), an unaudited consolidated and consolidating balance sheet
of the Equityholder and its consolidated Subsidiaries as of the end of such
fiscal quarter and including the prior comparable period (if any), and the
unaudited consolidated and consolidating statements of income of the
Equityholder and its consolidated Subsidiaries for such fiscal quarter and for
the period commencing at the end of the previous fiscal year and ending with the
end of such fiscal quarter, and the unaudited consolidated statements of cash
flows of the Equityholder and its consolidated Subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the end of
such fiscal quarter; provided, that the financial statements required to be
delivered pursuant to this clause (ii) which are made available via EDGAR, or
any successor system of the Securities and Exchange Commission, in the
Equityholder’s quarterly report on Form 10-Q, shall be deemed delivered to the
Administrative Agent on the sate such documents are made so available.

 

(l)         Obligor Reports. The Borrower shall cause the Investment Manager to
furnish to the Administrative Agent, with respect to each Obligor

 

(i)        within 15 Business Days of the completion of the Investment Manager’s
portfolio review of such Obligor (which, for any individual Obligor, shall occur
no less frequently than quarterly), without duplication of any other reporting
requirements set forth in this Agreement or any other Transaction Document, any
financial reporting packages with respect to such Obligor and with respect to
each Collateral Obligation for such Obligor (including any attached or included
information, statements and calculations) received by the Borrower and/or the
Investment Manager as of the date of the completion of such review. In no case,
however, shall the Investment Manager be obligated hereunder to deliver such
Obligor reports to the Administrative Agent more than once per calendar month.
Upon demand by the Administrative Agent, the Borrower shall cause the Investment
Manager to provide such other information as the Administrative Agent may
reasonably request with respect to any Collateral Obligation or Obligor (to the
extent reasonably available to the Investment Manager); and

 

(ii)        not later than the date on which financial statements are due in
respect of any fiscal quarter, any updated Obligor Information for such Obligor
received during such fiscal quarter, including notice of any unavailable items
of Obligor Information.

 

(m)        Commingling. The Borrower shall not permit the Investment Manager to,
and shall not permit any Affiliate of the Investment Manager to, deposit or
permit the deposit of any funds that do not constitute Collections or other
proceeds of any Collateral Obligations into the Collection Account.

 

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Section 7.6        Reserved. 

 

Section 7.7        Collateral Reporting. The Borrower shall cause the Investment
Manager to cooperate with the Collateral Agent in the performance of the
Collateral Agent’s duties under Section 11.3. Without limiting the generality of
the foregoing, the Borrower shall cause the Investment Manager to supply in a
timely fashion any information maintained by it that the Collateral Agent may
from time to time request with respect to the Collateral Obligations and
reasonably necessary to complete the reports and certificates required to be
prepared by the Collateral Agent hereunder or required to permit the Collateral
Agent to perform its obligations hereunder.

 

Section 7.8        Reserved.

 

Section 7.9        Procedural Review of Collateral Obligations; Access to
Investment Manager and Investment Manager’s Records. (a)        The Borrower
shall, and shall cause the Investment Manager to, at the Borrower’s expense,
permit representatives of the Administrative Agent at any time and from time to
time as the Administrative Agent shall reasonably request (A) to inspect and
make copies of and abstracts from its records relating to the Collateral
Obligations, and (B) to visit its properties in connection with the collection,
processing or managing of the Collateral Obligations for the purpose of
examining such records, and to discuss matters relating to the Collateral
Obligations or such Person’s performance under this Agreement and the other
Transaction Documents with any officer or employee or auditor (if any) of such
Person having knowledge of such matters. The Borrower agrees, and will cause the
Investment Manager, to render to the Administrative Agent such clerical and
other assistance as may be reasonably requested with regard to the foregoing;
provided, that such assistance shall not interfere in any material respect with
the Investment Manager’s business and operations. So long as no Unmatured
Facility Termination Event, Facility Termination Event, Unmatured Investment
Manager Event of Default or Investment Manager Event of Default has occurred and
is continuing, such visits and inspections shall occur only (i) upon five
Business Days’ prior written notice, (ii) during normal business hours and (iii)
no more than twice in any calendar year. During the existence of an Unmatured
Facility Termination Event, a Facility Termination Event, an Unmatured
Investment Manager Event of Default or an Investment Manager Event of Default,
there shall be no limit on the timing or number of such inspections and no prior
notice will be required before any inspection.

 

(b)        The Borrower shall, and shall cause the Investment Manager to, at the
Borrower’s expense and as applicable, provide to the Administrative Agent access
to the documentation evidencing the Collateral Obligations and all other
documents regarding the Collateral Obligations included as part of the
Collateral and the Related Security in each case, in its possession, in such
cases where the Administrative Agent is required in connection with the
enforcement of the rights or interests of the Lenders, or by applicable statutes
or regulations, to review such documentation, such access being afforded without
charge but only (i) upon two Business Days’ prior written notice (so long as no
Unmatured Facility Termination Event, Facility Termination Event or Investment
Manager Event of Default has occurred and is continuing), (ii) during normal
business hours and (iii) up to twice per calendar year (so long as no Unmatured
Facility Termination Event, Facility Termination Event or Investment Manager
Event of Default has occurred and is continuing). From and after the Effective
Date and periodically thereafter at the reasonable discretion of the
Administrative Agent, the Administrative Agent may review the Borrower’s and the
Investment Manager’s collection and administration of the Collateral Obligations
in order to assess compliance by the Investment Manager with the Investment
Manager’s written policies and procedures, as well as this Agreement and may, no
more than twice in any calendar year, conduct an audit of the Collateral
Obligations and Records in conjunction with such review.

 

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(c)        Nothing in this Section 7.9 shall derogate from the obligation of the
Borrower and the Investment Manager to observe any Applicable Law prohibiting
disclosure of information regarding the Obligors, and the failure of the
Investment Manager to provide access as a result of such obligation shall not
constitute a breach of this Section 7.9.

 

Section 7.10        Optional Sales. (a)        The Borrower shall have the right
to sell all or a portion of the Collateral Obligations (each, an “Optional
Sale”), subject to the following terms and conditions:

 

(i)        immediately after giving effect to such Optional Sale:

 

(A)        each Collateral Quality Test is satisfied (or, if any Collateral
Quality Test is not satisfied, it is improved);

 

(B)        the Minimum Equity Condition is satisfied;

 

(C)        the Borrowing Base is greater than or equal to the Advances
outstanding; and

 

(D)        no Facility Termination Event, Unmatured Facility Termination Event,
Unmatured Investment Manager Event of Default or Investment Manager Event of
Default shall have occurred and be continuing; provided that, once in any
twelve-month period, if an Unmatured Facility Termination Event or Unmatured
Investment Manager Event of Default is continuing, the Borrower may make an
Optional Sale if, after giving effect to such Optional Sale, such event is cured
(although, for the avoidance of doubt, such event shall be continuing for all
purposes hereunder until the settlement date of such Optional Sale);

 

provided, notwithstanding the above, that the Borrower may make (i) any Optional
Sale of any Collateral Obligation that, in the Collateral Manager’s reasonable
judgment, has a significant risk of declining in credit quality and, with the
lapse of time, becoming a Defaulted Collateral Obligation, if after giving
effect to such Optional Sale, (a) no Facility Termination Event is continuing
and (b) the aggregate Principal Balance of all such Collateral Obligations sold
pursuant to this proviso in any twelve-month period does not exceed 15% of the
Aggregate Eligible Collateral Obligation Amount in effect on the date of such
sale, (ii) any Optional Sale of any Collateral Obligation if (x) the sale price
is equal to or greater than the Principal Balance of such Collateral Obligation
and (y) the proceeds from such Optional Sale are applied to reduce the Advances
or (iii) any Optional Sale required as a result of the Required Sale Date.

 

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(ii)        at least one (1) Business Day prior to the date of any Optional
Sale, the Borrower shall cause the Investment Manager to give the Administrative
Agent, the Collateral Custodian and the Collateral Agent written notice of such
Optional Sale, which notice shall identify the related Collateral subject to
such optional sale and the expected proceeds from such Optional Sale and include
(x) an Officer’s Certificate computed as of the date of such request and after
giving effect to such Optional Sale, demonstrating compliance with clauses (A),
(B) and (C) above and all other conditions set forth herein are satisfied and
(y) a certificate of the Investment Manager substantially in the form of Exhibit
F-3 requesting the release of the related Collateral Obligation File in
connection with such Optional Sale;

 

(iii)        such Optional Sale shall be made by the Investment Manager, on
behalf of the Borrower (A) in accordance with the Investment Management
Standard, (B) reflecting arm’s length market terms and (C) in a transaction in
which the Borrower makes no representations, warranties or covenants and
provides no indemnification for the benefit of any other party (other than those
which are customarily made or provided in connection with the sale of assets of
such type);

 

(iv)        if such Optional Sale is to an Affiliate of the Borrower or the
Investment Manager, the Administrative Agent has given its prior written consent
(which shall not be unreasonably withheld, conditioned or delayed); and

 

(v)        on the date of such Optional Sale, all proceeds from such Optional
Sale will be sent directly into the Collection Account.

 

(b)        In connection with any Optional Sale, following deposit of all
proceeds from such Optional Sale into the Collection Account, the Collateral
Agent shall be deemed to release and transfer to the Borrower (or the purchaser
thereof from the Borrower) without recourse, representation or warranty all of
the right, title and interest of the Collateral Agent for the benefit of the
Secured Parties in, to and under such Collateral Obligation(s) and related
Collateral subject to such Optional Sale and such portion of the Collateral so
transferred shall be released from the Lien of this Agreement.

 

(c)        The Borrower hereby agrees to pay the reasonable and documented
outside counsel legal fees and out-of-pocket expenses of the Administrative
Agent, the Collateral Agent, the Collateral Custodian, each Agent and each
Lender in connection with any Optional Sale (including, but not limited to,
expenses incurred in connection with the release of the Lien of the Collateral
Agent, on behalf of the Secured Parties, in the Collateral in connection with
such Optional Sale).

 

(d)        In connection with any Optional Sale, the Collateral Agent shall, at
the sole expense of the Borrower, execute such instruments of release with
respect to the portion of the Collateral subject to such Optional Sale to the
Borrower, in recordable form if necessary, as the Borrower, or the Investment
Manager on its behalf, may reasonably request.

 

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(e)        Notwithstanding the foregoing, the Principal Balance of all
Collateral Obligations (other than Warranty Collateral Obligations released to
the Equityholder pursuant to a dividend by the Borrower or Collateral
Obligations sold to the Equityholder as a result of the Required Sale Date) sold
pursuant to Section 7.10(a) to the Equityholder or an Affiliate thereof or
released to the Equityholder pursuant to a dividend by the Borrower shall not
during the term of this Agreement exceed 20% of the Net Purchased Loan Balance
measured as of the date of such sale or dividend; provided, that the Principal
Balance of all Defaulted Collateral Obligations (other than Warranty Collateral
Obligations released to the Equityholder pursuant to a dividend by the Borrower
or Collateral Obligations sold to the Equityholder as a result of the Required
Sale Date) sold pursuant to Section 7.10(a) to the Equityholder or an Affiliate
thereof or released to the Equityholder pursuant to a dividend by the Borrower
shall not during the term of this Agreement exceed 10% of the Net Purchased Loan
Balance measured as of the date of such sale or dividend.

 

Section 7.11        Repurchase or Substitution of Warranty Collateral
Obligations. In the event of (x) a Repurchase Event or (y) a breach of Section
9.5, Section 9.13 or Section 9.26 or of a material breach of any other
representation, warranty, undertaking or covenant set forth in Article IX,
Article X, Section 18.3 or Section 18.5(b) with respect to a Collateral
Obligation (or the Related Security and other related collateral constituting
part of the Collateral related to such Collateral Obligation) (each such
Collateral Obligation, a “Warranty Collateral Obligation”), no later than
30 days after the earlier of (x) knowledge of such breach on the part of the
Equityholder or the Investment Manager and (y) receipt by the Equityholder or
the Investment Manager of written notice thereof given by the Administrative
Agent, the Borrower shall either (a) repay Advances outstanding in an amount
equal to the aggregate Repurchase Amount of such Warranty Collateral
Obligation(s) to which such breach relates on the terms and conditions set forth
below or (b) substitute for such Warranty Collateral Obligation one or more
Eligible Collateral Obligations with an aggregate Collateral Obligation Amount
at least equal to the Repurchase Amount of the Warranty Collateral Obligation(s)
being replaced; provided, that no such repayment or substitution shall be
required to be made with respect to any Warranty Collateral Obligation (and such
Collateral Obligation shall cease to be a Warranty Collateral Obligation) if, on
or before the expiration of such 30-day period either (x) such Repurchase Event
shall no longer be continuing or (y) the representations and warranties in
Article IX with respect to such Warranty Collateral Obligation shall be made
true and correct in all material respects with respect to such Warranty
Collateral Obligation as if such Warranty Collateral Obligation had become part
of the Collateral on such day, as applicable or if the Advances outstanding do
not exceed the Borrowing Base, as applicable.

 

Section 7.12        Required Sale Date. Notwithstanding anything else in this
Agreement to the contrary, the Borrower shall divest itself of all Required Sale
Assets on or prior to the Required Sale Date.

 

Article VIII

ACCOUNTS; PAYMENTS

 

Section 8.1        Accounts. (a)        On or prior to the Effective Date, the
Borrower shall establish each Account in the name of the Borrower and each
Account shall be a segregated, non-interest bearing trust account established
with the Securities Intermediary, who shall forward funds from the Collection
Account to the Collateral Agent for application by the Collateral Agent pursuant
to Section 8.3 and the applicable Monthly Report. If at any time a Responsible
Officer of the Collateral Agent obtains actual knowledge that any Account ceases
to be an Eligible Account (with notice to the Investment Manager and the
Administrative Agent), then the Borrower shall cause the Investment Manager to
transfer such account to another institution such that such account shall meet
the requirements of an Eligible Account.

 

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Except as set forth below, amounts on deposit in the Unfunded Exposure Account
may be withdrawn by the Borrower or at the direction of the Investment Manager
(i) to fund any draw requests of the relevant Obligors under any Variable
Funding Asset, or (ii) to make a deposit into the Collections Account as
Principal Collections if, after giving effect to such withdrawal, the aggregate
amount on deposit in the Unfunded Exposure Account is equal to or greater than
the Aggregate Unfunded Amount.

 

Following the Facility Termination Date, the Borrower shall cause the Investment
Manager to forward any draw request made by an Obligor under a Variable Funding
Asset, along with wiring instructions for the applicable Obligor, to the
Collateral Custodian (with a copy to the Administrative Agent) along with an
instruction to the Collateral Custodian to withdraw the applicable amount from
the Unfunded Exposure Account and a certification that the conditions to fund
such draw are satisfied, and the Collateral Custodian shall fund such draw
request in accordance with such instructions from the Investment Manager.

 

Following the end of the Revolving Period, if the Borrower shall receive any
Principal Collections from an Obligor with respect to a Variable Funding Asset
and, as of the date of such receipt (and after taking into account such
repayment), the aggregate amount on deposit in the Unfunded Exposure Account is
less than the Aggregate Unfunded Amount (the amount of such shortfall, in each
case, the “Unfunded Exposure Shortfall”), the Borrower shall cause the
Investment Manager to direct the Collateral Custodian to and the Collateral
Custodian shall deposit into the Unfunded Exposure Account an amount of such
Principal Collections equal to the lesser of (a) the aggregate amount of such
Principal Collections and (b) the Unfunded Exposure Shortfall.

 

(b)        All amounts held in any Account shall, to the extent permitted by
Applicable Laws, be invested by the Collateral Custodian, as directed by the
Investment Manager in writing (or, if the Investment Manager fails to provide
such direction, such amounts shall remain uninvested), in Permitted Investments
that mature (i) with respect to the Collection Account, not later than one
Business Day prior to the Distribution Date for the Collection Period to which
such amounts relate and (ii) with respect to the Unfunded Exposure Account, on
the immediately following Business Day. Any such written direction shall certify
that any such investment is authorized by this Section 8.1. Investments in
Permitted Investments shall be made in the name of the Collateral Custodian,
and, except as specifically required below, such investments shall not be sold
or disposed of prior to their maturity. If any amounts are needed for
disbursement from the Collection Account and sufficient uninvested funds are not
available therein to make such disbursement, the Collateral Custodian shall
cause to be sold or otherwise converted to cash a sufficient amount of the
investments in such account to make such disbursement in accordance with and
upon the written direction of the Investment Manager or, if the Investment
Manager shall fail to give such direction, the Administrative Agent. The
Collateral Custodian shall, upon written request, provide the Administrative
Agent with all information in its possession regarding transfer into and out of
the Collection Account (including, but not limited to, the identity of the
counterparty making or receiving such transfer). In no event shall the
Collateral Agent or the Collateral Custodian be liable for the selection of any
investments or any losses in connection therewith, or for any failure of the
Investment Manager or the Administrative Agent, as applicable, to timely provide
investment instruction to the Collateral Custodian. The Collateral Agent or the
Collateral Custodian and their respective Affiliates shall be permitted to
receive additional compensation that could be deemed to be in the Collateral
Agent’s or the Collateral Custodian’s economic self-interest for (i) serving as
investment adviser, administrator, shareholder, servicing agent, custodian or
sub-custodian with respect to certain of the Permitted Investments, (ii) using
affiliates to effect transactions in certain Permitted Investments, and (iii)
effecting transactions in certain investments. Such compensation shall not be
considered an amount that is reimbursable or payable pursuant to this Agreement.

 

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(c)        Neither the Borrower nor the Investment Manager shall have any rights
of direction or withdrawal, with respect to amounts held in the Collection
Account, except to the extent explicitly set forth in Section 8.1(a), Section
8.1(b), Section 8.2, or Section 8.3(b).

 

Subject to the other provisions hereof, the Collateral Agent shall have sole
Control (within the meaning of the UCC) over each Account and each such
investment and the income thereon, and any certificate or other instrument
evidencing any such investment, if any, shall be delivered to the Collateral
Agent or its agent, together with each document of transfer, if any, necessary
to transfer title to such investment to the Collateral Agent in a manner that
complies with this Section 8.1. All interest, dividends, gains upon sale and
other income from, or earnings on, investments of funds in the Accounts shall be
deposited or transferred to the Collection Account and distributed pursuant to
Section 8.3(a).

 

(d)        The Equityholder may, from time to time in its sole discretion (x)
deposit amounts into the Principal Collection Account and/or (y) transfer
Eligible Collateral Obligations as equity contributions to the Borrower. All
such amounts will be included in each applicable compliance calculation under
this Agreement, including, without limitation, calculation of the Borrowing Base
and the Minimum Equity Condition.

 

Section 8.2        Excluded Amounts. The Borrower may cause the Investment
Manager to direct the Collateral Agent and the Securities Intermediary to
withdraw from the applicable Account and pay to the Person entitled thereto any
amounts credited thereto constituting Excluded Amounts if the Investment Manager
has, prior to such withdrawal and consent, delivered to the Administrative Agent
and the Collateral Agent a report setting forth the calculation of such Excluded
Amounts in form and substance reasonably satisfactory to the Administrative
Agent, which report shall include a brief description of the facts and
circumstances supporting such request and designate a date for the payment of
such reimbursement, which date shall not be earlier than two (2) Business Days
following delivery of such notice.

 

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Section 8.3        Distributions, Reinvestment and Dividends. (a)        On each
Distribution Date, the Collateral Agent shall distribute from the Collection
Account, in accordance with the applicable Monthly Report prepared by the
Collateral Agent and approved by the Administrative Agent pursuant to Section
8.5, the Amount Available for such Distribution Date in the following order of
priority:

 

(A)        FIRST, to the payment of taxes and governmental fees owing by the
Borrower, if any, which expenses shall not exceed $100,000 on any Distribution
Date;

 

(B)        SECOND, to the Collateral Agent and the Collateral Custodian, any
accrued and unpaid Collateral Agent Fees and Expenses and Collateral Custodian
Fees and Expenses for the related Collection Period pursuant to the Collateral
Agent and Collateral Custodian Fee Letter, which expenses shall not exceed the
amount of the Capped Fees/Expenses;

 

(C)        THIRD, to the Investment Manager (unless waived or deferred in whole
or in part by the Investment Manager), any fees of the Investment Manager in an
aggregate amount not to exceed the amount of any accrued and unpaid Primary IM
Fee for the related Collection Period;

 

(D)        FOURTH, pro rata, based on the amounts owed to such Persons under
this Section 8.3(a)(D), (A) to the Lenders, an amount equal to the Yield on the
Advances accrued during the Accrual Period with respect to such Distribution
Date (and any Yield with respect to any prior Accrual Period to the extent not
paid on a prior Distribution Date), (B) to the Administrative Agent and the
Agents on behalf of their respective Lenders, all accrued and unpaid Fees due to
the Lenders, the Agents and the Administrative Agent and (C) to the Hedge
Counterparties, any amounts owed for the current and prior Distribution Dates to
the Hedge Counterparties under Hedging Agreements (other than Hedge Breakage
Costs), together with interest accrued thereon;

 

(E)        FIFTH, during the Revolving Period, to the Agents on behalf of their
respective Lenders pro rata in accordance with the outstanding Advances, (1) in
the amount necessary to reduce the Advances outstanding to an amount not to
exceed any Borrowing Base and (2) if the Diversity Score is lower than 8, in the
amount necessary to reduce the Advances outstanding to zero;

 

(F)        SIXTH, after the end of the Revolving Period, to the Agents on behalf
of their respective Lenders pro rata to repay the Advances outstanding, an
amount equal to the sum of (i) all remaining Amount Available constituting
Principal Collections plus (ii) the product of (a) all remaining Amount
Available constituting Interest Collections multiplied by (b) the applicable
Lender Allocation Percentage;

 

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(G)        SEVENTH, to the Investment Manager (unless waived or deferred in
whole or in part by the Investment Manager), any fees of the Investment Manager
in an aggregate amount not to exceed the amount of any accrued and unpaid
Secondary IM Fee for the related Collection Period, as well as any expenses of
the Investment Manager or other amounts owing to the Investment Manager, in each
case reimbursable or owing under the terms of the Investment Management
Agreement;

 

(H)        EIGHTH, pro rata based on amounts owed to such Persons under this
Section 8.3(a)(H), to the Hedge Counterparties, any unpaid Hedge Breakage Costs,
together with interest accrued thereon;

 

(I)         NINTH, to any Affected Persons, any Increased Costs then due and
owing;

 

(J)         TENTH, to the extent not previously paid pursuant to Section
8.3(a)(A) above, to the payment of taxes and governmental fees owing by the
Borrower, if any;

 

(K)        ELEVENTH, to the extent not previously paid by or on behalf of the
Borrower, to each Indemnified Party, any Indemnified Amounts then due and owing
to each such Indemnified Party;

 

(L)        TWELFTH, at the election of the Investment Manager to pay to the
Investment Manager any deferred and unpaid Primary IM Fee or deferred and unpaid
Secondary IM Fee;

 

(M)       THIRTEENTH, to the extent not previously paid pursuant to
Section 8.3(a)(B) above, to the Collateral Agent and the Collateral Custodian,
any Collateral Agent Fees and Expenses and Collateral Custodian Fees and
Expenses due to the Collateral Agent and the Collateral Custodian under the
Transaction Documents;

 

(N)        FOURTEENTH, to pay any other amounts due under this Agreement and the
other Transaction Documents and not previously paid pursuant to this Section
8.3(a); and

 

(O)         FIFTEENTH, (A) all remaining Amount Available constituting Interest
Collections to the Borrower or, during the Revolving Period at the discretion of
the Investment Manager, to remain in the Collection Account and (B) all
remaining Amount Available constituting Principal Collections, (x) during the
Revolving Period, to remain in the Collection Account as Principal Collections
and (y) after the end of the Revolving Period, to the Borrower.

 

(b)        During the Revolving Period, the Borrower may make distributions
pursuant to Section 10.16. The Borrower may also withdraw from the Collection
Account (x) any Principal Collections, or (y) if after giving effect to such
withdrawal, the Borrower is able to make all required payments pursuant to
Section 8.3 on the next Distribution Date on a pro forma basis, Interest
Collections, and apply such Collections to (A) prepay the Advances outstanding
in accordance with Section 2.4 or (B) acquire additional Collateral Obligations
(each such reinvestment of Collections, a “Reinvestment”), subject to the
following conditions:

 

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(i)        the Borrower shall have given written notice to the Collateral Agent
and the Administrative Agent of the proposed Reinvestment at or prior to 3:00
p.m., New York City time, two Business Days prior to the proposed date of such
Reinvestment (the “Reinvestment Date”). Such notice (the “Reinvestment Request”)
shall be in the form of Exhibit C-2 and shall include (among other things) the
proposed Reinvestment Date, the amount of such proposed Reinvestment and a
Schedule of Collateral Obligations setting forth the information required
therein with respect to the Collateral Obligations to be acquired by the
Borrower on the Reinvestment Date (if applicable);

 

(ii)       each condition precedent set forth in Section 6.2, other than those
set forth in clauses (i) and (m) thereof, shall be satisfied;

 

(iii)      upon the written request of the Borrower (or the Investment Manager
on the Borrower’s behalf) delivered to the Collateral Agent no later than 11:00
a.m. New York City time on the Reinvestment Date, the Collateral Agent shall
have provided to the Administrative Agent by facsimile or e-mail (to be received
no later than 1:30 p.m. New York City time on that same day) a statement
reflecting the total amount on deposit on such day in the Collection Account;
and

 

(iv)      any Reinvestment Request given by the Borrower pursuant to this
Section 8.3(b), shall be irrevocable and binding on the Borrower.

 

Subject to the Collateral Agent’s receipt of an Officer’s Certificate of the
Investment Manager as to the satisfaction of the conditions precedent set forth
in Section 6.2 and this Section 8.3, the Collateral Agent will release funds
from the Collection Account to the Borrower in an amount not to exceed the
lesser of (A) the amount requested by the Borrower and (B) the amount of
Collections on deposit in the Collection Account.

 

Section 8.4        Fees. The Borrower shall pay, pursuant hereto, the Undrawn
Fee, the Make-Whole Fee, the Prepayment Fee and any other fees (collectively,
“Fees”) in the amounts and on the dates set forth herein or in one or more fee
letter agreements, dated the date hereof (or dated the date any Lender and its
related Lender Group becomes a party hereto pursuant to an assignment or
otherwise), signed by the Borrower, the applicable Agent and the Administrative
Agent (as any such fee letter agreement may be amended, restated, supplemented
or otherwise modified from time to time, a “Fee Letter”).

 

Section 8.5        Monthly Report. The Collateral Agent shall prepare (based on
information provided to it by the Investment Manager, the Administrative Agent
and the Lenders as set forth herein) a Monthly Report in the form of Exhibit D
determined as of the close of business on each Determination Date and make
available such Monthly Report to the Administrative Agent, the Borrower and the
Investment Manager on each Reporting Date starting with the Reporting Date in
January 2015. If any party receiving any Monthly Report disagrees with any items
of such report, it shall contact the Collateral Agent and notify it of such
disputed item and provide reasonably sufficient information to correct such
item, with (if other than the Administrative Agent) a copy of such notice and
information to the Administrative Agent and the Investment Manager. Unless the
Collateral Agent is otherwise timely directed by the Administrative Agent, the
Collateral Agent shall distribute a revised Monthly Report on the Business Day
after it receives such information. If the Collateral Agent is directed by the
Administrative Agent that the Collateral Agent should not make such correction,
the Collateral Agent shall take such action as instructed by the Administrative
Agent. The Administrative Agent’s reasonable determination with regard to any
disputed item in the Monthly Report shall be final.

 

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Without limiting the generality of the foregoing, in connection with the
preparation of a Monthly Report, the Administrative Agent and the Lenders shall
be responsible for providing to the Collateral Agent the information required by
Section 3.4 for part (d) of Exhibit D for such Monthly Report on which the
Collateral Agent may conclusively rely. The Administrative Agent shall review
and verify the contents of the aforesaid reports (including the Monthly Report),
instructions, statements and certificates. Upon receipt of approval from the
Administrative Agent, such reports, instructions, statements and certificates
shall be executed by the Borrower and the Investment Manager and, in the case of
the Monthly Report, the Collateral Agent shall make the distributions required
by Section 8.3 pursuant to such Monthly Report.

 

Article IX

REPRESENTATIONS AND WARRANTIES OF THE BORROWER

 

In order to induce the other parties hereto to enter into this Agreement and, in
the case of the Lenders, to make Advances hereunder, the Borrower hereby
represents and warrants to the Administrative Agent, the Agents and the Lenders
as to itself, as of the Effective Date and each Funding Date, as follows:

 

Section 9.1        Organization and Good Standing. It has been duly organized
and is validly existing under the laws of the jurisdiction of its organization,
with power and authority to own its properties and to conduct its business as
such properties are currently owned and such business is currently conducted. It
had at all relevant times and now has, power, authority and legal right (x) to
acquire and own the Collateral Obligations and its interest in the Related
Security, and to grant to the Collateral Agent a security interest in the
Collateral Obligations and the Related Security and the other Collateral and
(y) to enter into and perform its obligations under this Agreement and the other
Transaction Documents to which it is a party.

 

Section 9.2        Due Qualification. It is duly qualified to do business and
has obtained all necessary licenses and approvals and made all necessary filings
and registrations in all jurisdictions, except where the failure to do so would
not reasonably be expected to have a Material Adverse Effect.

 

Section 9.3        Power and Authority. It has the power, authority and legal
right to execute and deliver this Agreement and the other Transaction Documents
to which it is a party and to perform its obligations hereunder and thereunder;
has full power, authority and legal right to grant to the Collateral Agent, for
the benefit of the Secured Parties, a valid and enforceable security interest in
the Collateral Obligations and the other Collateral and has duly authorized such
grant by all necessary action.

 

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Section 9.4        Binding Obligations. This Agreement and the Transaction
Documents to which it is a party have been duly executed and delivered by the
Borrower and are enforceable against the Borrower in accordance with their
respective terms, except as such enforceability may be limited by
(A) bankruptcy, insolvency, reorganization, or other similar laws affecting the
enforcement of creditors’ rights generally, (B) equitable limitations on the
availability of specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law and (C) implied covenants of good
faith and fair dealing.

 

Section 9.5        Security Interest. This Agreement creates a valid and
continuing Lien on the Collateral in favor of the Collateral Agent, on behalf of
the Secured Parties, which security interest is validly perfected under Article
9 of the UCC (to the extent such security interest may be perfected under such
article), and is enforceable as such against creditors of and purchasers from
the Borrower; the Collateral is comprised of Instruments, Security Entitlements,
General Intangibles, Certificated Securities, Uncertificated Securities,
Securities Accounts, Investment Property and Proceeds and such other categories
of collateral under the applicable UCC as to which the Borrower has complied
with its obligations as set forth herein; with respect to Collateral that
constitute Security Entitlements (a) all of such Security Entitlements have been
credited to the Accounts and the Securities Intermediary has agreed to treat all
assets credited to the Accounts as Financial Assets, (b) the Borrower has taken
all steps necessary to enable the Collateral Agent to obtain Control with
respect to the Collection Account and (c) the Accounts are not in the name of
any Person other than the Borrower, subject to the Lien of the Collateral Agent
for the benefit of the Secured Parties; the Borrower has not instructed the
Securities Intermediary to comply with the entitlement order of any Person other
than the Collateral Agent; provided that, until the Collateral Agent delivers a
Notice of Exclusive Control (as defined in the Account Control Agreement), the
Borrower may, or may cause the Investment Manager to, cause cash in the Accounts
to be invested or distributed in accordance with this Agreement; all Accounts
constitute Securities Accounts; the Borrower owns and has good and marketable
title to the Collateral free and clear of any Lien (other than Permitted Liens);
the Borrower has received all consents and approvals required by the terms of
any Collateral Obligation to the transfer and granting of a security interest in
the Collateral Obligations hereunder to the Collateral Agent, on behalf of the
Secured Parties; the Borrower has taken all necessary steps to file or authorize
the filing of all appropriate financing statements in the proper filing office
in the appropriate jurisdictions under Applicable Law in order to perfect the
security interest in that portion of the Collateral in which a security interest
may be perfected by filing pursuant to Article 9 of the UCC as in effect in
Delaware; all original executed copies of each underlying promissory note
constituting or evidencing any Collateral Obligation have been or, subject to
the delivery requirements contained herein and/or Section 18.7, will be
delivered to the Collateral Custodian; the Borrower has received, or subject to
the delivery requirements contained herein will receive, a written
acknowledgment from the Collateral Custodian that the Collateral Custodian or
its bailee is holding each underlying promissory note evidencing a Collateral
Obligation solely on behalf of the Collateral Agent for the benefit of the
Secured Parties; none of the underlying promissory notes that constitute or
evidence the Collateral Obligations has any marks or notations indicating that
they have been pledged, assigned or otherwise conveyed to any Person other than
the Collateral Agent on behalf of the Secured Parties; with respect to
Collateral that constitutes a Certificated Security, such certificated security
has been delivered to the Collateral Custodian and, if in registered form, has
been specially Indorsed (within the meaning of the UCC) to the Collateral
Custodian or in blank by an effective Indorsement or has been registered in the
name of the Collateral Custodian upon original issue or registration of transfer
by the Borrower of such Certificated Security, in each case to be held by the
Collateral Custodian on behalf of the Collateral Agent for the benefit of the
Secured Parties; and in the case of an Uncertificated Security, by (A) causing
the Collateral Custodian to become the registered owner of such uncertificated
security and (B) causing such registration to remain effective.

 

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Section 9.6        No Violation. The consummation of the transactions
contemplated by this Agreement and the other Transaction Documents to which it
is a party, and the fulfillment of the terms of this Agreement and the other
Transaction Documents to which it is a party, shall not conflict with, result in
any breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time) a default under, its organizational documents, or any
indenture, agreement, mortgage, deed of trust or other instrument to which the
Borrower is a party or by which it is bound or any of its properties are
subject, or result in the creation or imposition of any Lien (other than
Permitted Liens) upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, or violate in
any material respect any law, or any order, rule or regulation applicable to the
Borrower of any Official Body having jurisdiction over the Borrower or any of
its properties, or in any way materially adversely affect the Borrower’s ability
to perform its obligations under this Agreement or the other Transaction
Documents to which it is a party.

 

Section 9.7        No Proceedings. There are no proceedings or investigations
pending or, to its knowledge, threatened against the Borrower, before any court
or Official Body having jurisdiction over it or its properties (A) asserting the
invalidity of this Agreement or any of the other Transaction Documents,
(B) seeking to prevent the consummation of any of the transactions contemplated
by this Agreement or any of the other Transaction Documents, (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Borrower of its obligations under, or the validity or
enforceability of, this Agreement or any of the other Transaction Documents or
(D) seeking any determination or ruling that would reasonably be expected to
have a material adverse effect on any of the Collateral.

 

Section 9.8        No Consents. It is not required to obtain the material
consent of any other Person or any material approval, authorization, consent,
license, approval or authorization, or registration or declaration with, any
Official Body having jurisdiction over it or its properties in connection with
the execution, delivery, performance, validity or enforceability of this
Agreement or the other Transaction Documents to which it is a party, in each
case other than consents, licenses, approvals, authorizations, orders,
registrations, declarations or filings which have been obtained or made and
continuation statements and renewals in respect thereof.

 

Section 9.9        Solvency. It is solvent and will not become insolvent after
giving effect to the transactions contemplated by this Agreement and the
Transaction Documents. After giving effect to the transactions contemplated by
this Agreement and the other Transaction Documents, it will have an adequate
amount of capital to conduct its business in the foreseeable future.

 

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Section 9.10        Compliance with Laws. It has complied and will comply in all
material respects with all Applicable Laws, judgments, agreements with
governmental authorities, decrees and orders with respect to its business and
properties and all Collateral.

 

Section 9.11        Taxes. For U.S. federal income tax purpose, it is, and
always has been, an entity disregarded as separate from the Equityholder and the
Equityholder or its parent is treated as a United States person for U.S. federal
income tax purposes. It has filed on a timely basis all federal and other
material Tax returns (including foreign, state, local and otherwise) required to
be filed, if any, and has paid all federal and other material Taxes due and
payable by it and any assessments made against it or any of its property and all
other Taxes, fees or other charges imposed on it or any of its property by any
Official Body (other than any amount the validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of the
Borrower). Other than Permitted Liens, no lien or similar Adverse Claim has been
filed, and no claim is being asserted, with respect to any Tax, assessment or
other governmental charge. Any Taxes, fees and other governmental charges
payable by the Borrower in connection with the execution and delivery of this
Agreement and the other Transaction Documents and the transactions contemplated
hereby or thereby including the transfer of each Collateral Obligation and the
Related Security to the Borrower have been paid or shall have been paid if and
when due.

 

Section 9.12        Monthly Report. Each Monthly Report is accurate in all
material respects as of the date thereof, subject, in the case of information
contained therein (which shall include any statements and calculations to the
extent such statements or calculations are inaccurate solely as a result of such
information) received from any un-Affiliated third party, to the standard set
forth in Section 9.14 with respect to information received from an un-Affiliated
third party.

 

Section 9.13        No Liens, Etc. The Collateral and each part thereof is owned
by the Borrower free and clear of any Adverse Claim (other than Permitted Liens)
or restrictions on transferability and the Borrower has the full right, power
and lawful authority to assign, transfer and pledge the same and interests
therein, and upon the making of each Advance, the Collateral Agent, for the
benefit of the Secured Parties, will have acquired a perfected, first priority
and valid security interest (except, as to priority, for any Permitted Liens) in
such Collateral, free and clear of any Adverse Claim (other than Permitted
Liens) or restrictions on transferability, to the extent (as to perfection and
priority) that a security interest in said Collateral may be perfected under the
applicable UCC. The Borrower has not pledged, assigned, sold, granted a security
interest in or otherwise conveyed any of the Collateral and no effective
financing statement (other than with respect to Permitted Liens) or other
instrument similar in effect naming or purportedly naming the Borrower or any of
its Affiliates as debtor and covering all or any part of the Collateral is on
file in any recording office, except such as may have been filed in favor of the
Collateral Agent as “Secured Party” pursuant hereto or as necessary or advisable
in connection with the Sale Agreement. There are no judgments or Liens for Taxes
with respect to the Borrower and no claim is being asserted with respect to the
Taxes of the Borrower (other than with respect to Permitted Liens).

 

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Section 9.14        Information True and Correct. All information (other than
any information provided to the Borrower by an un-Affiliated third party)
heretofore or hereafter furnished by or on behalf of the Borrower in writing to
any Lender, the Collateral Agent or the Administrative Agent in connection with
this Agreement or any transaction contemplated hereby is and will be (when taken
as a whole) true and correct in all material respects and does not omit to state
any material fact necessary to make the statements contained therein not
misleading. With respect to any information received from any un-Affiliated
third party, the Borrower (i) will not furnish (and has not furnished) any such
information to any Lender, the Collateral Agent or the Administrative Agent in
connection with this Agreement or any transaction contemplated hereby that it
knows (or knew) to be incorrect at the time such information is (or was)
furnished in any material respect and (ii) has informed (or will inform) the
applicable Lender, the Collateral Agent or the Administrative Agent, as
applicable, of any such information which it found to be incorrect in any
material respect after such information was furnished.

 

Section 9.15        Bulk Sales. The grant of the security interest in the
Collateral by the Borrower to the Collateral Agent, for the benefit of the
Secured Parties, pursuant to this Agreement, is in the ordinary course of
business for the Borrower and is not subject to the bulk transfer or any similar
statutory provisions in effect in any applicable jurisdiction.

 

Section 9.16        Collateral. Except as otherwise expressly permitted or
required by the terms of this Agreement, no item of Collateral has been sold,
transferred, assigned or pledged by the Borrower to any Person.

 

Section 9.17        Selection Procedures. In selecting the Collateral
Obligations hereunder and for Affiliates of the Borrower, no selection
procedures were employed which are intended to be adverse to the interests of
any Agent or Lender.

 

Section 9.18        Indebtedness. The Borrower has no Indebtedness or other
indebtedness, secured or unsecured, direct or contingent (including guaranteeing
any obligation), other than (i) Indebtedness incurred under the terms of the
Transaction Documents and (ii) Indebtedness incurred pursuant to certain
ordinary business expenses arising pursuant to the transactions contemplated by
this Agreement and the other Transaction Documents.

 

Section 9.19        No Injunctions. No injunction, writ, restraining order or
other order of any nature adversely affects the Borrower’s performance of its
obligations under this Agreement or any Transaction Document to which the
Borrower is a party.

 

Section 9.20        No Subsidiaries. The Borrower has no Subsidiaries other than
REO Asset Owners.

 

Section 9.21        ERISA Compliance. It has no benefit plans subject to ERISA.

 

Section 9.22        Investment Company Status. It is not an “investment company”
as such term is defined in the 1940 Act.

 

Section 9.23        Set-Off, Etc. No Collateral Obligation has been compromised,
adjusted, extended, satisfied, subordinated, rescinded, set-off or modified by
the Borrower or the Obligor thereof, and no Collateral is subject to compromise,
adjustment, extension, satisfaction, subordination, rescission, set-off,
counterclaim, defense, abatement, suspension, deferment, deduction, reduction,
termination or modification, whether arising out of transactions concerning the
Collateral or otherwise, by the Borrower or the Obligor with respect thereto,
except, in each case, pursuant to the Transaction Documents and for amendments,
extensions and modifications, if any, to such Collateral otherwise permitted
hereby and in accordance with the Investment Management Standard.

 

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Section 9.24        Collections. The Borrower acknowledges that (i) all Obligors
(and related agents) have been directed to make all payments directly to the
Collection Account and (ii) all Collections received by it or its Affiliates
with respect to the Collateral pledged hereunder are held and shall be held in
trust for the benefit of the Collateral Agent, on behalf of the Secured Parties
until deposited into the Collection Account in accordance with Section 10.10.

 

Section 9.25        Value Given. The Borrower has given fair consideration and
reasonably equivalent value to the Equityholder (including, for this purpose,
equity of the Borrower) or the applicable third party seller in exchange for the
purchase of the Collateral Obligations (or any number of them). No such transfer
has been made for or on account of an antecedent debt and no such transfer is or
may be voidable or subject to avoidance under any section of the Bankruptcy
Code.

 

Section 9.26        Regulatory Compliance. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (as defined in Regulation U (12 C.F.R. Part 221) of the FRS Board) and
none of the proceeds of the Advances will be used, directly or indirectly, for a
purpose that violates Regulation T, Regulation U, Regulation X or any other
regulation promulgated by the FRS Board from time to time.

 

Section 9.27        Separate Existence. The Borrower is operated as an entity
with assets and liabilities distinct from those of any of its Affiliates or any
Affiliates of the Investment Manager, and the Borrower hereby acknowledges that
the Administrative Agent, each of the Agents and each of the Lenders are
entering into the transactions contemplated by this Agreement in reliance upon
the Borrower’s identity as a separate legal entity. Since its formation, the
Borrower has been (and will be) operated in such a manner as to comply with the
covenants set forth in Section 10.5.

 

There is not now, nor will there be at any time in the future, any agreement or
understanding between the Borrower and the Investment Manager (other than as
expressly set forth herein and the other Transaction Documents) providing for
the allocation or sharing of obligations to make payments or otherwise in
respect of any Taxes, fees, assessments or other governmental charges.

 

Section 9.28        Transaction Documents. The Transaction Documents delivered
to the Administrative Agent represent all material agreements between the
Equityholder, on the one hand, and the Borrower, on the other. Upon the purchase
and/or contribution of each Collateral Obligation (or an interest in a
Collateral Obligation) pursuant to this Agreement or the Sale Agreement, the
Borrower shall be the lawful owner of, and have good title to, such Collateral
Obligation and all assets relating thereto, free and clear of any Adverse Claim.
All such assets are transferred to the Borrower without recourse to the
Equityholder except as described in the Sale Agreement. The purchases of such
assets by the Borrower constitute valid and true sales for consideration (and
not merely a pledge of such assets for security purposes) and the contributions
of such assets received by the Borrower constitute valid and true transfers for
consideration, each enforceable against creditors of the Equityholder, and no
such assets shall constitute property of the Equityholder.

 

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Section 9.29        Anti-Terrorism, Anti-Money Laundering. Neither the Borrower
nor any Affiliate of the Borrower is (i) a country, territory, organization,
person or entity named on an Office of Foreign Asset Control (OFAC) list; (ii) a
Person that resides or has a place of business in a country or territory named
on such lists or which is designated as a “Non-Cooperative Jurisdiction” by the
Financial Action Task Force on Money Laundering, or whose subscription funds are
transferred from or through such a jurisdiction; (iii) a “Foreign Shell Bank”
within the meaning of the USA Patriot Act, i.e., a foreign bank that does not
have a physical presence in any country and that is not affiliated with a bank
that has a physical presence and an acceptable level of regulation and
supervision; or (iv) a person or entity that resides in or is organized under
the laws of a jurisdiction designated by the United States Secretary of the
Treasury under Sections 311 or 312 of the USA Patriot Act as warranting special
measures due to money laundering concerns. The Borrower is in compliance with
all applicable OFAC rules and regulations and also in compliance with all
applicable provisions of the USA Patriot Act.

 

Article X

COVENANTS

 

From the date hereof until the first day following the Facility Termination Date
on which all Obligations shall have been finally and fully paid and performed
(other than as expressly survive the termination of this Agreement), the
Borrower hereby covenants and agrees with the Lenders, the Agents and the
Administrative Agent that:

 

Section 10.1        Protection of Security Interest of the Secured Parties.
(a)        At or prior to the Effective Date, the Borrower shall have filed or
caused to be filed a UCC-1 financing statement, naming the Borrower as debtor,
naming the Collateral Agent (for the benefit of the Secured Parties) as secured
party and describing the Collateral, with the office of the Secretary of State
of the State of Delaware. From time to time thereafter, the Borrower shall file
(and the Borrower hereby authorizes the Collateral Agent to so file) such
financing statements and cause to be filed such continuation statements, all in
such manner and in such places as may be required by law fully to preserve,
maintain and protect the interest of the Collateral Agent in favor of the
Secured Parties under this Agreement in the Collateral and in the proceeds
thereof. The Borrower shall deliver (or cause to be delivered) to the Collateral
Agent file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing. In the event that
the Borrower fails to perform its obligations under this subsection, the
Collateral Agent or the Administrative Agent may (but shall have no obligation
to) do so, in each case at the expense of the Borrower, however neither the
Collateral Agent nor the Administrative Agent shall have any liability in
connection therewith.

 

(b)        The Borrower shall not change its name, identity or corporate
structure in any manner that would make any financing statement or continuation
statement filed by the Borrower (or by the Collateral Agent on behalf of the
Borrower) in accordance with subsection (a) above seriously misleading or change
its jurisdiction of organization, unless the Borrower shall have given the
Administrative Agent and the Collateral Agent at least 30 days prior written
notice thereof, and shall promptly file appropriate amendments to all previously
filed financing statements and continuation statements (and shall provide a copy
of such amendments to the Collateral Agent and Administrative Agent together
with an Officer’s Certificate to the effect that all appropriate amendments or
other documents in respect of previously filed statements have been filed).

 

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(c)        The Borrower shall maintain its computer systems, if any, so that,
from and after the time of the first Advance under this Agreement, the
Borrower’s master computer records (including archives) that shall refer to the
Collateral indicate clearly that such Collateral is subject to the first
priority security interest in favor of the Collateral Agent, for the benefit of
the Secured Parties. Indication of the Collateral Agent’s (for the benefit of
the Secured Parties) security interest shall be deleted from or modified on the
Borrower’s computer systems when, and only when, the Collateral in question
shall have been paid in full, the security interest under this Agreement has
been released in accordance with its terms, upon such Collateral Obligation
becoming a Repurchased Collateral Obligation, Substituted Collateral Obligation
or otherwise as expressly permitted by this Agreement.

 

(d)        Without limiting any of the other provisions hereof, if at any time
the Borrower shall propose to sell, grant a security interest in, or otherwise
transfer any interest in loan receivables to any prospective lender or other
transferee, the Borrower shall give to such prospective lender or other
transferee computer tapes, records, or print-outs (including any restored from
archives) that, if they shall refer in any manner whatsoever to any Collateral
shall indicate clearly that such Collateral is subject to a first priority
security interest in favor of the Collateral Agent, for the benefit of the
Secured Parties.

 

Section 10.2        Other Liens or Interests. Except for the security interest
granted hereunder and as otherwise permitted pursuant to Sections 7.10, 7.11 and
10.16, the Borrower will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien on the
Collateral or any interest therein (other than Permitted Liens), and the
Borrower shall defend the right, title, and interest of the Collateral Agent
(for the benefit of the Secured Parties) and the Lenders in and to the
Collateral against all claims of third parties claiming through or under the
Borrower (other than Permitted Liens).

 

Section 10.3        Costs and Expenses. The Borrower shall pay (or cause to be
paid) all of its reasonable costs, charges and disbursements in connection with
the performance of its obligations hereunder and under the Transaction
Documents.

 

Section 10.4        Reporting Requirements. The Borrower shall furnish, or cause
to be furnished, to the Administrative Agent, the Collateral Agent and each
Lender:

 

(a)        as soon as possible and in any event within three Business Days after
a Responsible Officer of the Borrower shall have knowledge of the occurrence of
a Facility Termination Event, Unmatured Facility Termination Event, Investment
Manager Event of Default or Unmatured Investment Manager Event of Default, the
statement of an Executive Officer of the Borrower setting forth complete details
of such event and the action which the Borrower has taken, is taking and
proposes to take with respect thereto;

 

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(b)        promptly, from time to time, such other information, documents,
records or reports respecting the Collateral Obligations or the Related
Security, the other Collateral or the condition or operations, financial or
otherwise, of the Borrower as such Person may, from time to time, reasonably
request; and

 

(c)        promptly, in reasonable detail, (i) of any Adverse Claim known to it
that is made or asserted against any of the Collateral and (ii) any Material
Modification.

 

Section 10.5        Separate Existence. (a)        The Borrower shall at all
times: (i) maintain at least one Independent Manager; (ii) maintain its own
separate books and records and bank accounts; (iii) hold itself out to the
public and all other Persons as a legal entity separate from any other Person;
(iv) have a board of managers separate from that of any other Person; (v) file
its own Tax returns, except to the extent that the Borrower is treated as a
“disregarded entity” for Tax purposes and is not required to file Taxes under
Applicable Law, and pay any Taxes so required to be paid under Applicable Law,
except for those Taxes being contested in good faith by appropriate proceedings
and in respect of which the Borrower has established proper reserves on its
books in accordance with GAAP; (vi) not commingle its assets with assets of any
other Person; (vii) conduct its business in its own name and strictly comply
with all organizational formalities to maintain its separate existence; (viii)
maintain separate financial statements; provided, however, that the Borrower’s
assets may be included in a consolidated financial statement of its Affiliate if
(A) appropriate notation shall be made on such consolidated financial statements
to indicate the separateness of the Borrower from such Affiliate and to indicate
that the Borrower’s assets and credit are not available to satisfy the debts and
other obligations of such Affiliate or any other Person and (B) such assets
shall also be listed on the Borrower’s own separate balance sheet (if the
Borrower prepares its own separate balance sheet); (ix) pay its own liabilities
only out of its own funds; (x) maintain an arm’s length relationship with the
Equityholder and each of its other Affiliates; (xi) not hold out its credit or
assets as being available to satisfy the obligations of others; (xii) allocate
fairly and reasonably any overhead expenses that are shared with an Affiliate,
including for shared office space; (xiii) use separate stationery, invoices and
checks; (xiv) except as expressly permitted by this Agreement, not pledge its
assets as security for the obligations of any other Person; (xv) correct any
known misunderstanding regarding its separate identity; (xvi) maintain adequate
capital in light of its contemplated business purpose, transactions and
liabilities and pay its operating expenses and liabilities from its own assets;
(xvii) cause its board of managers to meet at least annually or act pursuant to
written consent and keep minutes of such meetings and actions and observe in all
respects all other Delaware limited liability company formalities; (xviii) not
acquire the obligations or any securities of its Affiliates; (xix) cause the
managers, officers, agents and other representatives of the Borrower to act at
all times with respect to the Borrower consistently and in furtherance of the
foregoing and in the best interests of the Borrower; and (xx) maintain at least
one special member, who, upon the dissolution of the sole member or the
withdrawal or the disassociation of the sole member from the Borrower, shall
immediately become the member of the Borrower in accordance with its
organizational documents.

 

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(b)        The Borrower shall not (i) engage, directly or indirectly, in any
business, other than the actions required or permitted to be performed under the
preceding clause (a); (ii) fail to be solvent; (iii) release, sell, transfer,
convey or assign any Collateral Obligation unless in accordance with the
Transaction Documents; (iv) except for capital contributions or capital
distributions permitted under the terms and conditions of this Agreement and
properly reflected on the books and records of the Borrower, enter into any
transaction with an Affiliate of the Borrower except on commercially reasonable
terms similar to those available to unaffiliated parties in an arm’s-length
transaction; (v) identify itself as a department or division of any other
Person; or (vi) own any asset or property other than the Collateral, any REO
Asset Owner and the related assets and incidental personal property necessary
for the ownership or operation of these assets.

 

(c)        The Borrower shall not (and shall not permit the Equityholder to)
take any action contrary to the “Assumptions and Facts” section in the opinion
of Dechert LLP, dated the date hereof, relating to certain nonconsolidation
matters.

 

Section 10.6        Hedging Agreements. (a)        With respect to any Fixed
Rate Collateral Obligation (other than Fixed Rate Collateral Obligations not
counted as “excess” pursuant to clause (d) of the definition of “Excess
Concentration Amount”), the Borrower hereby covenants and agrees that, upon the
direction of the Administrative Agent in its sole discretion as notified to the
Borrower and the Investment Manager on or prior to the related Funding Date for
such Collateral Obligation, the Borrower shall obtain and deliver to the
Collateral Agent (with a copy to the Administrative Agent) one or more Hedging
Agreements from qualified Hedge Counterparties having, singly or in the
aggregate, an Aggregate Notional Amount not less than the amount determined by
the Administrative Agent in its reasonable discretion, which (1) each shall have
a notional principal amount equal to or greater than $1,000,000, (2) may provide
for reductions of the Aggregate Notional Amount on each Distribution Date on an
amortization schedule for such Aggregate Notional Amount assuming a 0.0 ABS
prepayment speed (or such other ABS prepayment speed as may be approved in
writing by the Administrative Agent) and zero losses, and (3) shall have other
terms and conditions and be represented by Hedging Agreements otherwise
acceptable to the Administrative Agent in its sole discretion.

 

(b)        In the event that any Hedge Counterparty defaults in its obligation
to make a payment to the Borrower under one or more Hedging Agreements on any
date on which payments are due pursuant to a Hedging Agreement, the Borrower
shall make a demand on such Hedge Counterparty, or any guarantor, if applicable,
demanding payment by 12:30 p.m., New York City time, on such date. The Borrower
shall give notice to the Lenders upon the continuing failure by any Hedge
Counterparty to perform its obligations during the two Business Days following a
demand made by the Borrower on such Hedge Counterparty, and shall take such
action with respect to such continuing failure as may be directed by the
Administrative Agent.

 

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(c)        In the event that any Hedge Counterparty no longer maintains the
ratings specified in the definition of “Hedge Counterparty,” then within 30 days
after receiving notice of such decline in the creditworthiness of such Hedge
Counterparty as determined by any Rating Agency, either (x) such Hedge
Counterparty, upon the receipt of the consent of the Administrative Agent, will
enter into an arrangement the purpose of which shall be to assure performance by
the Hedge Counterparty of its obligations under the applicable Hedging
Agreement; or (y) the Borrower shall, at its option and with the written consent
(in its sole discretion) of the Administrative Agent, either (i) cause such
Hedge Counterparty to pledge securities in the manner provided by applicable law
which shall be held by the Collateral Agent, for the benefit of the Secured
Parties, free and clear of the Lien of any third party, in a manner conferring
on the Collateral Agent a perfected first Lien in such securities securing such
Hedge Counterparty’s performance of its obligations under the applicable Hedging
Agreement, (ii) provided that a Replacement Hedging Agreement or Qualified
Substitute Arrangement meeting the requirements of Section 10.6(d) has been
obtained, (A) provide written notice to such Hedge Counterparty (with a copy to
the Collateral Agent and the Administrative Agent) of its intention to terminate
the applicable Hedging Agreement within such 30-day period and (B) terminate the
applicable Hedging Agreement within such 30-day period, request the payment to
it of all amounts due to the Borrower under the applicable Hedging Agreement
through the termination date and deposit any such amounts so received, on the
day of receipt, to the Collection Account, or (iii) establish any other
arrangement (including an arrangement or arrangements in addition to or in
substitution for any prior arrangement made in accordance with the provisions of
this Section 10.6(c)) with the written consent (in its sole discretion) of the
Administrative Agent (a “Qualified Substitute Arrangement”); provided, that in
the event at any time any alternative arrangement established pursuant to the
above shall cease to be satisfactory to the Administrative Agent, then the
provisions of this Section 10.6(c), shall again be applied and in connection
therewith the 30-day period referred to above shall commence on the date the
Borrower receives notice of such cessation or termination, as the case may be.

 

(d)        Unless an alternative arrangement pursuant to clause (x) or (y)(i)
or (y)(iii) of Section 10.6(c) is being established, the Borrower shall use its
best efforts to obtain a Replacement Hedging Agreement or Qualified Substitute
Arrangement meeting the requirements of this Section 10.6 during the 30-day
period referred to in Section 10.6(c). The Borrower shall not terminate the
Hedging Agreement unless, prior to the expiration of the 30-day period referred
to in said Section 10.6(c), the Borrower delivers to the Collateral Agent (with
a copy to the Administrative Agent) (i) a Replacement Hedging Agreement or
Qualified Substitute Arrangement, (ii) to the extent applicable, an Opinion of
Counsel reasonably satisfactory to the Administrative Agent as to the due
authorization, execution and delivery and validity and enforceability of such
Replacement Hedging Agreement or Qualified Substitute Arrangement, as the case
may be, and (iii) evidence that the Administrative Agent has consented in
writing to the termination of the applicable Hedging Agreement and its
replacement with such Replacement Hedging Agreement or Qualified Substitute
Arrangement.

 

(e)        The Borrower shall notify the Administrative Agent and the Collateral
Agent within five Business Days after a Responsible Officer of such Person shall
obtain knowledge that the senior unsecured debt rating of a Hedge Counterparty
has been withdrawn or reduced by any Rating Agency.

 

(f)        The Borrower may at any time obtain a Replacement Hedging Agreement
with the consent (in its sole discretion) of the Administrative Agent.

 

(g)        The Borrower shall not agree to any amendment to any Hedging
Agreement without the consent (in its sole discretion) of the Administrative
Agent.

 

(h)        The Borrower shall notify the Administrative Agent and the Collateral
Agent after a Responsible Officer of the Borrower shall obtain actual knowledge
of the transfer by the related Hedge Counterparty of any Hedging Agreement, or
any interest or obligation thereunder.

 

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(i)        The Borrower, with the consent of the Administrative Agent in its
sole discretion, may sell all or a portion of the Hedging Agreements; provided,
that no consent of the Administrative Agent shall be required for the sale of
all or a portion of any Hedging Agreement relating to Fixed Rate Collateral
Obligations not counted as “excess” pursuant to clause (d) of the definition of
“Excess Concentration Amount.” The Borrower shall have the duty of obtaining a
fair market value price for the sale of any Hedging Agreement, notifying the
Administrative Agent and the Collateral Agent of prospective purchasers and
bids, and selecting the purchaser of such Hedging Agreement. The Borrower and,
at the Borrower’s request, the Collateral Agent, upon receipt of the purchase
price in the Collection Account shall, with the prior written consent of the
Administrative Agent, execute all documentation necessary to release the Lien of
the Collateral Agent on such Hedging Agreement and proceeds thereof.

 

Notwithstanding the foregoing, with respect to any Collateral Obligation, the
Borrower may include in an Asset Approval Request provisions of Hedging
Agreements applicable to such Collateral Obligation, and, if nothing to the
contrary is included in the related Approval Notice delivered to the Borrower by
the Administrative Agent, the provisions relating to Hedging Agreements in the
Asset Approval Request shall control to the extent such provisions conflict with
this Section 10.6. Notwithstanding anything to the contrary in this
Section 10.6, the parties hereto agree that should the Borrower fail to observe
or perform any of its obligations under this Section 10.6 with respect to any
Hedging Agreement, the sole result will be that the Collateral Obligation or
Collateral Obligations that are the subject of such Hedging Agreement shall
immediately cease to be Eligible Collateral Obligations for all purposes under
this Agreement.

 

Section 10.7        Tangible Net Worth. The Borrower shall maintain at all times
a positive Tangible Net Worth.

 

Section 10.8        Taxes. For U.S. federal income tax purpose, the Borrower
will be an entity disregarded as separate from the Equityholder and the
Equityholder or its parent will be treated as a United States person for U.S.
federal income tax purposes. The Borrower will file on a timely basis all
federal and other material Tax returns required to be filed, if any, and will
pay all federal and other material Taxes due and payable by it and any
assessments made against it or any of its property (other than any amount the
validity of which is contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP are provided on the books of
the Borrower).

 

Section 10.9        Merger, Consolidation, Etc. The Borrower shall not merge or
consolidate with any other Person or permit any other Person to become the
successor to all or substantially all of its business or assets without the
prior written consent of the Administrative Agent in its sole discretion.

 

Section 10.10      Deposit of Collections. The Borrower shall transfer, or cause
to be transferred, all Collections to the Collection Account by the close of
business on the Business Day following the date such Collections are received by
the Borrower, the Equityholder, the Investment Manager, any sub-advisor of the
Investment Manager or any of their respective Affiliates.

 

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Section 10.11        Indebtedness; Guarantees. The Borrower shall not create,
incur, assume or suffer to exist any Indebtedness other than Indebtedness
permitted under the Transaction Documents. The Borrower shall incur no
Indebtedness secured by the Collateral other than the Obligations. The Borrower
shall not assume, guarantee, endorse or otherwise be or become directly or
contingently liable for the obligations of any Person by, among other things,
agreeing to purchase any obligation of another Person, agreeing to advance funds
to such Person or causing or assisting such Person to maintain any amount of
capital, other than as expressly permitted under the Transaction Documents.

 

Section 10.12        Limitation on Purchases from Affiliates. Other than
pursuant to the Sale Agreement, the Borrower shall not purchase any asset from
the Equityholder or the Investment Manager or any Affiliate of the Borrower, the
Equityholder or the Investment Manager.

 

Section 10.13        Documents. Except as otherwise expressly permitted herein,
it shall not cancel or terminate any of the Transaction Documents to which it is
party (in any capacity), or consent to or accept any cancellation or termination
of any of such agreements, or amend or otherwise modify any term or condition of
any of the Transaction Documents to which it is party (in any capacity) or give
any consent, waiver or approval under any such agreement, or waive any default
under or breach of any of the Transaction Documents to which it is party (in any
capacity) or take any other action under any such agreement not required by the
terms thereof, unless (in each case) the Administrative Agent shall have
consented thereto in its sole discretion.

 

Section 10.14        Preservation of Existence. It shall do or cause to be done
all things necessary to (i) preserve and keep in full force and effect its
existence as a limited liability company and take all reasonable action to
maintain its rights and franchises in the jurisdiction of its formation and
(ii) qualify and remain qualified as a limited liability company in good
standing in each jurisdiction where the failure to qualify and remain qualified
would reasonably be expected to have a Material Adverse Effect.

 

Section 10.15        Limitation on Investments. The Borrower shall not form, or
cause to be formed, any Subsidiaries other than REO Asset Owners; or make or
suffer to exist any loans or advances to, or extend any credit to, or make any
investments (by way of transfer of property, contributions to capital, purchase
of stock or securities or evidences of indebtedness, acquisition of the business
or assets, or otherwise) in, any Affiliate or any other Person except
investments as otherwise permitted herein and pursuant to the other Transaction
Documents.

 

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Section 10.16        Distributions. (a)        The Borrower shall not declare or
make (i) payment of any distribution on or in respect of any equity interests,
or (ii) any payment on account of the purchase, redemption, retirement or
acquisition of any option, warrant or other right to acquire such equity
interests; provided that the Borrower may make a distribution of (A) (1)
Interest Collections, (2) during any 12-month period, an aggregate amount of
Principal Collections or proceeds of any Advance equal to 10% of the Aggregate
Eligible Collateral Obligation Amount as of the first day of such 12-month
period during the Revolving Period, (3) any Principal Collections or proceeds of
any Advance in excess of the amount permitted under the foregoing clause (2),
and (4) with the prior written consent of the Administrative Agent (which
consent shall not be unreasonably withheld, conditioned or delayed), any
Collateral Obligations or other assets of the Borrower, in each case, if after
giving effect to such distribution, (v) as certified in writing by the Borrower
and Investment Manager to the Administrative Agent, sufficient proceeds remain
for all payments to be made pursuant to Section 8.3(a) (other than clause (N)
thereof) on the next Distribution Date, (w) no Unmatured Facility Termination
Event, Facility Termination Event, Unmatured Investment Manager Event of Default
or Investment Manager Event of Default shall have occurred and be continuing,
(x) each Collateral Quality Test is satisfied, (y) the Minimum Equity Condition
is satisfied and (z) the Borrowing Base Condition is satisfied, (B) amounts paid
to it pursuant to Section 8.3(a) on the applicable Distribution Date and (C) the
proceeds of any Advance on the applicable Advance Date, but only if such Advance
is made in respect of an Eligible Collateral Obligation acquired by the Borrower
either (1) prior to such Advance Date if such Eligible Collateral Obligation was
identified on the related Asset Approval Request as an asset with respect to
which the Borrower intends to make a future distribution pursuant to this
Section 10.16(C)(1) or (2) on such Advance Date.

 

(b)        Prior to foreclosure by the Administrative Agent upon any Collateral
pursuant to Section 13.3(c), nothing in this Section 10.16 or otherwise in this
Agreement shall restrict (i) the Investment Manager from exercising any Warrant
Assets issued to it by Obligors from time to time or (ii) the Borrower from
exercising any Warrant Assets issued to it by Obligors from time to time to the
extent funds are available to the Borrower under Section 8.3(a) or made
available to the Borrower.

 

Section 10.17        Performance of Borrower Assigned Agreements. The Borrower
shall (i) perform and observe in all material respects all the terms and
provisions of the Transaction Documents (including each of the Borrower Assigned
Agreements) to which it is a party to be performed or observed by it, maintain
such Transaction Documents in full force and effect, and enforce such
Transaction Documents in accordance with their terms, and (ii) upon reasonable
request of the Administrative Agent, make to any other party to such Transaction
Documents such demands and requests for information and reports or for action as
the Borrower is entitled to make thereunder.

 

Section 10.18        Material Modifications. The Borrower shall not consent to a
Material Modification with respect to any Collateral Obligation without the
express written consent of the Administrative Agent (in its sole discretion).

 

Section 10.19        Further Assurances; Financing Statements. (a)        The
Borrower agrees that at any time and from time to time, at its expense and upon
reasonable request of the Administrative Agent or the Collateral Agent (acting
at the request of the Administrative Agent), it shall promptly execute and
deliver all further instruments and documents, and take all reasonable further
action, that is necessary or desirable to perfect and protect the assignments
and security interests granted or purported to be granted by this Agreement or
to enable the Collateral Agent or any of the Secured Parties to exercise and
enforce its rights and remedies under this Agreement with respect to any
Collateral. Without limiting the generality of the foregoing, the Borrower
authorizes the filing of such financing or continuation statements, or
amendments thereto, and such other instruments or notices as may be necessary or
desirable or that the Collateral Agent (acting solely at the Administrative
Agent’s request) may reasonably request to protect and preserve the assignments
and security interests granted by this Agreement. Such financing statements
filed against the Borrower may describe the Collateral in the same manner
specified in Section 12.1 or in any other manner as the Administrative Agent may
reasonably determine is necessary to ensure the perfection of such security
interest (without disclosing the names of, or any information relating to, the
Obligors thereunder), including describing such property as all assets or all
personal property of the Borrower whether now owned or hereafter acquired.

 

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(b)        The Borrower and each Secured Party hereby severally authorize the
Collateral Agent, upon receipt of written direction from the Administrative
Agent, to file one or more financing or continuation statements, and amendments
thereto, relating to all or any part of the Collateral.

 

(c)        It shall furnish to the Collateral Agent and the Administrative Agent
from time to time such statements and schedules further identifying and
describing the Related Security and such other reports in connection with the
Collateral as the Collateral Agent (acting solely at the Administrative Agent’s
request) or the Administrative Agent may reasonably request, all in reasonable
detail.

 

Section 10.20        Obligor Payment Instructions. The Borrower acknowledges
that the power of attorney granted in Section 13.10 to the Collateral Agent
permits the Collateral Agent to send (at the Administrative Agent’s written
direction after the occurrence of a Facility Termination Event) Obligor
notification forms to give notice to the Obligors of the Collateral Agent’s
interest in the Collateral and the obligation to make payments as directed by
the Collateral Agent (at the written direction of the Administrative Agent).

 

Section 10.21        Delivery of Collateral Obligation Files. The Borrower (or
the Investment Manager on behalf of the Borrower) shall deliver to the
Collateral Custodian (with a copy to the Administrative Agent at the following
e-mail addresses (for electronic copies): kevin.a.tanzer@db.com,
amit.patel@db.com and nii.dodoo@db.com) the Collateral Obligation Files
identified on the related Document Checklist promptly upon receipt but in no
event later than three (3) Business Days of the related Funding Date; provided
that any file stamped document included in any Collateral Obligation File shall
be delivered as soon as they are reasonably available (even if not within three
(3) Business Days of the related Funding Date).

 

Section 10.22        Collateral Obligation Schedule. As of the end of each
January, April, July and October of each year, the Borrower shall deliver an
update of the Collateral Obligation Schedule to the Administrative Agent (with a
copy to the Collateral Agent), certified true and correct by each of the
Borrower and the Investment Manager. The Borrower hereby authorizes a UCC-3
amendment to be filed quarterly attaching each such updated Collateral
Obligation Schedule and shall file such UCC-3 amendment at the request of the
Administrative Agent. Upon filing, a copy of such UCC-3 shall be provided to the
Collateral Agent and Administrative Agent.

 

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Article XI

THE COLLATERAL AGENT

 

Section 11.1        Appointment of Collateral Agent. Wells Fargo Bank, National
Association is hereby appointed as Collateral Agent pursuant to the terms
hereof. The Secured Parties hereby appoint the Collateral Agent to act
exclusively as the agent for purposes of perfection of a security interest in
the Collateral and Collateral Agent of the Secured Parties to act as specified
herein and in the other Transaction Documents to which the Collateral Agent is a
party.

 

Section 11.2        Monthly Reports. The Collateral Agent shall prepare the
Monthly Report in accordance with Section 8.5 and distribute funds in accordance
with such Monthly Report in accordance with Section 8.3.

 

Section 11.3        Collateral Administration. The Collateral Agent shall
maintain a database of certain characteristics of the Collateral on an ongoing
basis, and provide to the Borrower, the Investment Manager and the
Administrative Agent certain reports, schedules and calculations, all as more
particularly described in this Section 11.3, based upon information and data
received from the Borrower and/or the Investment Manager pursuant to Section 7.7
or the Administrative Agent.

 

(a)        In connection therewith, the Collateral Agent shall:

 

(i)        within 15 days after the Effective Date, create a Collateral database
with respect to the Collateral that has been pledged to the Collateral Agent for
the benefit of the Secured Parties from time to time, comprised of the
Collateral Obligations credited to the Accounts from time to time and Permitted
Investments in which amounts held in the Accounts may be invested from time to
time, as provided in this Agreement (the “Collateral Database”);

 

(ii)       update the Collateral Database on a periodic basis for changes and to
reflect the sale or other disposition of assets included in the Collateral and
any additional Collateral granted to the Collateral Agent from time to time, in
each case based upon, and to the extent of, information furnished to the
Collateral Agent by the Borrower, the Investment Manager or the Administrative
Agent as may be reasonably required by the Collateral Agent from time to time or
based upon notices received by the Collateral Agent from the issuer, or trustee
or agent bank under an underlying instrument, or similar source);

 

(iii)      track the receipt and allocation to the Collection Account of
Principal Collections and Interest Collections and any withdrawals therefrom
and, on each Business Day, provide to the Investment Manager and Administrative
Agent daily reports reflecting such actions to the accounts as of the close of
business on the preceding Business Day and the Collateral Agent shall provide
any such report to the Administrative Agent or the Investment Manager upon its
request therefor;

 

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(iv)      prepare and deliver to the Administrative Agent, the Borrower and the
Investment Manager on each Reporting Date, (A) the Monthly Report and any update
pursuant to Section 8.5 when requested by the Investment Manager, the Borrower
or the Administrative Agent, on the basis of the information contained in the
Collateral Database as of the applicable Determination Date, the information
provided by each Lender and the Administrative Agent pursuant to Section 3.4 and
such other information as may be provided to the Collateral Agent by the
Borrower, the Investment Manager, the Administrative Agent or any Lender;

 

(v)       provide other such information with respect to the Collateral granted
to the Collateral Agent and not released as may be routinely maintained by the
Collateral Agent in performing its ordinary Collateral Agent function pursuant
hereunder, as the Borrower, the Investment Manager, the Administrative Agent or
any Lender may reasonably request from time to time;

 

(vi)       upon the written request of the Investment Manager on any Business
Day and within three hours after the Collateral Agent’s receipt of such request
(provided such request is received by 12:00 Noon (New York time) on such date
(otherwise such request will be deemed made on the next succeeding Business
Day), the Collateral Agent shall perform the following functions: as of the date
the Investment Manager commits on behalf of the Borrower to purchase Collateral
Obligations to be included in the Collateral, perform a pro forma calculation of
the tests and other requirements set forth in Sections 6.2(e) and (f), in each
case, based upon information contained in the Collateral Database and report the
results thereof to the Investment Manager in a mutually agreed format; and

 

(vii)      upon the Collateral Agent’s receipt on any Business Day of written
notification from the Investment Manager of its intent to sell (in accordance
with Section 7.10) Collateral Obligations, the Collateral Agent shall perform,
within three hours after the Collateral Agent’s receipt of such request
(provided such request is received by no later than 12:00 Noon (New York time)
on such date (otherwise such request will be deemed made on the next succeeding
Business Day) a pro forma calculation of the tests set forth in Sections
7.10(a)(i)(A), (B) and (C) based upon information contained in the Collateral
Database and information furnished by the Investment Manager, compare the
results thereof and report the results to the Investment Manager in a mutually
agreed format.

 

(viii)      track the Principal Balance of each Collateral Obligation and report
such balances to the Administrative Agent and the Investment Manager upon
request.

 

(b)        The Collateral Agent shall provide to the Investment Manager a copy
of all written notices and communications identified as being sent to it in
connection with the Collateral Obligations and the other Collateral held
hereunder which it receives from the related Obligor, participating bank and/or
agent bank. In no instance shall the Collateral Agent be under any duty or
obligation to take any action on behalf of the Investment Manager in respect of
the exercise of any voting or consent rights, or similar actions, unless it
receives specific written instructions from the Investment Manager, prior to the
occurrence of a Facility Termination Event or an Investment Manager Event of
Default or the Administrative Agent, after the occurrence of a Facility
Termination Event or an Investment Manager Event of Default, in which event the
Collateral Agent shall only vote, consent or take such other action in
accordance with such instructions.

 

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(c)        In addition to the above:

 

(i)        The Administrative Agent and each Secured Party further authorizes
the Collateral Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement and the other Transaction Documents as are
expressly delegated to the Collateral Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto. In furtherance,
and without limiting the generality of the foregoing, each Secured Party hereby
appoints the Collateral Agent (acting at the direction of the Administrative
Agent) as its agent to execute and deliver all further instruments and
documents, and take all further action (at the written direction of the
Administrative Agent) that the Administrative Agent deems necessary or desirable
in order to perfect, protect or more fully evidence the security interests
granted by the Borrower hereunder, or to enable any of them to exercise or
enforce any of their respective rights hereunder, including, without limitation,
the execution or filing by the Collateral Agent as secured party/assignee of
such financing or continuation statements, or amendments thereto or assignments
thereof, relative to all or any of the Collateral Obligations now existing or
hereafter arising, and such other instruments or notices, as may be necessary or
appropriate for the purposes stated hereinabove. Nothing in this
Section 11.3(c)(i) shall be deemed to relieve the Borrower or the Investment
Manager of their respective obligations to protect the interest of the
Collateral Agent (for the benefit of the Secured Parties) in the Collateral,
including to file financing and continuation statements in respect of the
Collateral in accordance with Section 10.1. It is understood and agreed that any
and all actions performed by the Collateral Agent in connection with this
Section 11.3(c)(i) shall be at the written direction of the Administrative
Agent, and the Collateral Agent shall have no responsibility or liability in
connection with determining any actions necessary or desirable to perfect,
protect or more fully secure the security interest granted by the Borrower
hereunder or to enable any Person to exercise or enforce any of their respective
rights hereunder.

 

(ii)        The Administrative Agent may direct the Collateral Agent in writing
to take any such incidental action hereunder. With respect to other actions
which are incidental to the actions specifically delegated to the Collateral
Agent hereunder, the Collateral Agent shall not be required to take any such
incidental action hereunder, but shall be required to act or to refrain from
acting (and shall be fully protected in acting or refraining from acting) upon
the written direction of the Administrative Agent; provided that the Collateral
Agent shall not be required to take any action hereunder at the request of the
Administrative Agent, any Secured Parties or otherwise if the taking of such
action, in the determination of the Collateral Agent, (x) shall be in violation
of any Applicable Law or contrary to any provisions of this Agreement or
(y) shall expose the Collateral Agent to liability hereunder or otherwise
(unless it has received indemnity which it reasonably deems to be satisfactory
with respect thereto). In the event the Collateral Agent requests the consent of
the Administrative Agent and the Collateral Agent does not receive a consent
(either positive or negative) from the Administrative Agent within 10 Business
Days of its receipt of such request, then the Administrative Agent shall be
deemed to have declined to consent to the relevant action.

 

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(iii)        Except as expressly provided herein, the Collateral Agent shall not
be under any duty or obligation to take any affirmative action to exercise or
enforce any power, right or remedy available to it under this Agreement that
might in its judgment involve any expense or liability unless it has been
furnished with an indemnity reasonably satisfactory to it (x) unless and until
(and to the extent) expressly so directed by the Administrative Agent or
(y) prior to the Facility Termination Date (and upon such occurrence, the
Collateral Agent shall act in accordance with the written instructions of the
Administrative Agent pursuant to clause (x)). The Collateral Agent shall not be
liable for any action taken, suffered or omitted by it in accordance with the
request or direction of any Secured Party, to the extent that this Agreement
provides such Secured Party the right to so direct the Collateral Agent, or the
Administrative Agent. The Collateral Agent shall not be deemed to have notice or
knowledge of any matter hereunder, including a Facility Termination Event,
unless a Responsible Officer of the Collateral Agent has knowledge of such
matter or written notice thereof is received by the Collateral Agent.

 

(d)        If, in performing its duties under this Agreement, the Collateral
Agent is required to decide between alternative courses of action, the
Collateral Agent may request written instructions from the Administrative Agent
as to the course of action desired by it. If the Collateral Agent does not
receive such instructions within two Business Days after it has requested them,
the Collateral Agent may, but shall be under no duty to, take or refrain from
taking any such courses of action. The Collateral Agent shall act in accordance
with instructions received after such two Business Day period except to the
extent it has already, in good faith, taken or committed itself to take, action
inconsistent with such instructions. The Collateral Agent shall be entitled to
rely on the advice of legal counsel and independent accountants in performing
its duties hereunder and shall be deemed to have acted in good faith if it acts
in accordance with such advice.

 

(e)        Concurrently herewith, the Administrative Agent directs the
Collateral Agent and the Collateral Agent is authorized to enter into the
Account Control Agreement and any other related agreements in the form delivered
to the Collateral Agent. For the avoidance of doubt, all of the Collateral
Agent’s rights, protections and immunities provided herein shall apply to the
Collateral Agent for any actions taken or omitted to be taken under the Account
Control Agreement and any other related agreements in such capacity.

 

Section 11.4        Removal or Resignation of Collateral Agent. The Collateral
Agent may at any time resign and terminate its obligations under this Agreement
upon at least 60 days’ prior written notice to the Investment Manager, the
Borrower and the Administrative Agent; provided, that no resignation or removal
of the Collateral Agent will be permitted unless a successor Collateral Agent
has been appointed which successor Collateral Agent, so long as no Unmatured
Investment Manager Event of Default, Investment Manager Event of Default,
Unmatured Facility Termination Event or Facility Termination Event has occurred
and is continuing, is reasonably acceptable to the Investment Manager. Promptly
after receipt of notice of the Collateral Agent’s resignation, the
Administrative Agent shall promptly appoint a successor Collateral Agent by
written instrument, in duplicate, copies of which instrument shall be delivered
to the Borrower, the Investment Manager, the resigning Collateral Agent and to
the successor Collateral Agent. In the event no successor Collateral Agent shall
have been appointed within 60 days after the giving of notice of such
resignation, the Collateral Agent may petition any court of competent
jurisdiction to appoint a successor Collateral Agent. The Administrative Agent
upon at least 60 days’ prior written notice to the Collateral Agent, may with or
without cause remove and discharge the Collateral Agent or any successor
Collateral Agent thereafter appointed from the performance of its duties under
this Agreement. Promptly after giving notice of removal of the Collateral Agent,
the Administrative Agent shall appoint, or petition a court of competent
jurisdiction to appoint, a successor Collateral Agent. Any such appointment
shall be accomplished by written instrument and one original counterpart of such
instrument of appointment shall be delivered to the Collateral Agent and the
successor Collateral Agent, with a copy delivered to the Borrower and the
Investment Manager.

 

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Section 11.5        Representations and Warranties. The Collateral Agent
represents and warrants to the Borrower, the Administrative Agent, the Lenders
and Investment Manager that:

 

(a)        the Collateral Agent has the corporate power and authority and the
legal rights to execute and deliver, and to perform its obligations under, this
Agreement, and has taken all necessary corporate action to authorize its
execution, delivery and performance of this Agreement;

 

(b)        no consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Official Body and no consent of any other Person
(including any stockholder or creditor of the Collateral Agent) is required in
connection with the execution, delivery performance, validity or enforceability
of this Agreement; and

 

(c)        this Agreement has been duly executed and delivered on behalf of the
Collateral Agent and constitutes a legal, valid and binding obligation of the
Collateral Agent enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors’ rights
generally and by general principles of equity (whether enforcement is sought in
proceedings in equity or at law).

 

Section 11.6        No Adverse Interest of Collateral Agent. By execution of
this Agreement, the Collateral Agent represents and warrants that it currently
holds and during the existence of this Agreement shall hold, no adverse
interest, by way of security or otherwise, in any Collateral Obligation or any
document in the Collateral Obligation Files. Neither the Collateral Obligations
nor any documents in the Collateral Obligation Files shall be subject to any
security interest, lien or right of set-off by the Collateral Agent or any third
party claiming through the Collateral Agent, and the Collateral Agent shall not
pledge, encumber, hypothecate, transfer, dispose of, or otherwise grant any
third party interest in, the Collateral Obligations or documents in the
Collateral Obligation Files, except that the preceding clause shall not apply to
the Collateral Agent or the Collateral Custodian with respect to (i) the
Collateral Agent Fees and Expenses or the Collateral Custodian Fees and
Expenses, and (ii) in the case of any accounts, with respect to (x) returned or
charged-back items, (y) reversals or cancellations of payment orders and other
electronic fund transfers, or (z) overdrafts in the Collection Account.

 

Section 11.7        Reliance of Collateral Agent. In the absence of bad faith on
the part of the Collateral Agent, the Collateral Agent may conclusively rely, as
to the truth of the statements and the correctness of the opinions expressed
therein, upon any request, instruction, certificate, opinion or other document
furnished to the Collateral Agent, reasonably believed by the Collateral Agent
to be genuine and to have been signed or presented by the proper party or
parties and conforming to the requirements of this Agreement; but in the case of
a request, instruction, document or certificate which by any provision hereof is
specifically required to be furnished to the Collateral Agent, the Collateral
Agent shall be under a duty to examine the same in accordance with the
requirements of this Agreement to determine that they conform on their face to
the form required by such provision. For avoidance of doubt, the Collateral
Agent may rely conclusively on the Officer’s Certificate of the Borrower and
Officer’s Certificate of the Investment Manager. The Collateral Agent shall not
be liable for any action taken by it in good faith and reasonably believed by it
to be within the discretion or powers conferred upon it, or taken by it pursuant
to any direction or instruction by which it is governed hereunder, or omitted to
be taken by it by reason of the lack of direction or instruction required hereby
for such action.

 

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Section 11.8        Limitation of Liability and Collateral Agent Rights.
(a)        The Collateral Agent may conclusively rely on and shall be fully
protected in acting upon any certificate, instrument, opinion, notice, letter,
telegram or other document delivered to it and that in good faith it reasonably
believes to be genuine and that has been signed by the proper party or parties.
The Collateral Agent may rely conclusively on and shall be fully protected in
acting upon (x) the written instructions of any designated officer of the
Administrative Agent or (y) the verbal instructions of the Administrative Agent.

 

(b)        The Collateral Agent may consult counsel satisfactory to it with a
national reputation in the applicable matter and the advice or opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.

 

(c)        The Collateral Agent shall not be liable for any error of judgment,
or for any act done or step taken or omitted by it, in good faith, or for any
mistakes of fact or law, or for anything that it may do or refrain from doing in
connection herewith except in the case of its willful misconduct, bad faith,
reckless disregard or grossly negligent performance or omission of its duties.

 

(d)        The Collateral Agent makes no warranty or representation and shall
have no responsibility (except as expressly set forth in this Agreement) as to
the content, enforceability, completeness, validity, sufficiency, value,
genuineness, ownership or transferability of the Collateral, and will not be
required to and will not make any representations as to the validity or value
(except as expressly set forth in this Agreement) of any of the Collateral. The
Collateral Agent shall not be obligated to take any action hereunder that might
in its judgment involve any expense or liability unless it has been furnished
with an indemnity reasonably satisfactory to it.

 

(e)        The Collateral Agent shall have no duties or responsibilities except
such duties and responsibilities as are specifically set forth in this Agreement
and the other Transaction Documents to which it is a party and no covenants or
obligations shall be implied in this Agreement against the Collateral Agent.

 

(f)        The Collateral Agent shall not be required to expend or risk its own
funds in the performance of its duties hereunder.

 

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(g)        It is expressly agreed and acknowledged that the Collateral Agent is
not guaranteeing performance of or assuming any liability for the obligations of
the other parties hereto or any parties to the Collateral.

 

(h)        In case any reasonable question arises as to its duties hereunder,
the Collateral Agent may, prior to the occurrence of a Facility Termination
Event, request instructions from the Investment Manager and may, after the
occurrence of a Facility Termination Event, request instructions from the
Administrative Agent, and shall be entitled at all times to refrain from taking
any action unless it has received written instructions from the Investment
Manager or the Administrative Agent, as applicable. The Collateral Agent shall
in all events have no liability, risk or cost for any action taken pursuant to
and in compliance with the instruction of the Administrative Agent. In no event
shall the Collateral Agent be liable for special, indirect or consequential loss
or damage of any kind whatsoever (including but not limited to lost profits),
even if the Collateral Agent has been advised of the likelihood of such loss or
damage and regardless of the form of action.

 

(i)        In the event that the Collateral Custodian is not the same entity as
the Collateral Agent, the Collateral Agent shall not be liable for the acts or
omissions of the Collateral Custodian under this Agreement and shall not be
required to monitor the performance of the Collateral Custodian.

 

(j)        Without limiting the generality of any terms of this section, the
Collateral Agent shall have no liability for any failure, inability or
unwillingness on the part of the Investment Manager, the Administrative Agent or
the Borrower to provide accurate and complete information on a timely basis to
the Collateral Agent, or otherwise on the part of any such party to comply with
the terms of this Agreement, and shall have no liability for any inaccuracy or
error in the performance or observance on the Collateral Agent’s part of any of
its duties hereunder that is caused by or results from any such inaccurate,
incomplete or untimely information received by it, or other failure on the part
of any such other party to comply with the terms hereof.

 

(k)        The Collateral Agent shall not be bound to make any investigation
into the facts or matters stated in any certificate, report or other document;
provided, however, that, if the form thereof is prescribed by this Agreement,
the Collateral Agent shall examine the same to determine whether it conforms on
its face to the requirements hereof. The Collateral Agent shall not be deemed to
have knowledge or notice of any matter unless actually known to a Responsible
Officer of the Collateral Agent. It is expressly acknowledged by the Borrower,
the Investment Manager and the Administrative Agent that application and
performance by the Collateral Agent of its various duties hereunder (including,
without limitation, recalculations to be performed in respect of the matters
contemplated hereby) shall be based upon, and in reliance upon, data,
information and notice provided to it by the Investment Manager, the
Administrative Agent, the Borrower and/or any related bank agent, obligor or
similar party with respect to the Collateral Obligation, and the Collateral
Agent shall have no responsibility for the accuracy of any such information or
data provided to it by such persons and shall be entitled to update its records
(as it may deem necessary or appropriate). Nothing herein shall impose or imply
any duty or obligation on the part of the Collateral Agent to verify,
investigate or audit any such information or data, or to determine or monitor on
an independent basis whether any issuer of the Collateral is in default or in
compliance with the underlying documents governing or securing such securities,
from time to time.

 

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(l)        The Collateral Agent may exercise any of its rights or powers
hereunder or perform any of its duties hereunder either directly or, by or
through agents or attorneys, and the Collateral Agent shall not be responsible
for any misconduct or negligence on the part of any agent or attorney appointed
hereunder with due care by it. Neither the Collateral Agent nor any of its
affiliates, directors, officers, shareholders, agents or employees will be
liable to the Investment Manager, Borrower or any other Person, except by reason
of acts or omissions by the Collateral Agent constituting bad faith, willful
misfeasance, gross negligence or reckless disregard of the Collateral Agent’s
duties hereunder. The Collateral Agent shall in no event have any liability for
the actions or omissions of the Borrower, the Investment Manager, the
Administrative Agent or any other Person, and shall have no liability for any
inaccuracy or error in any duty performed by it that results from or is caused
by inaccurate, untimely or incomplete information or data received by it from
the Borrower, the Investment Manager, the Administrative Agent or another Person
except to the extent that such inaccuracies or errors are caused by the
Collateral Agent’s own bad faith, willful misfeasance, gross negligence or
reckless disregard of its duties hereunder. The Collateral Agent shall not be
liable for failing to perform or delay in performing its specified duties
hereunder which results from or is caused by a failure or delay on the part of
the Borrower or the Investment Manager, the Administrative Agent or another
Person in furnishing necessary, timely and accurate information to the
Collateral Agent.

 

(m)       The Collateral Agent shall be under no obligation to exercise or honor
any of the rights or powers vested in it by this Agreement at the request or
direction of the Administrative Agent (or any other Person authorized or
permitted to direct the Collateral Agent hereunder) pursuant to this Agreement,
unless the Administrative Agent (or such other Person) shall have offered the
Collateral Agent security or indemnity reasonably acceptable to the Collateral
Agent against costs, expenses and liabilities (including any legal fees) that
might reasonably be incurred by it in compliance with such request or direction.

 

Section 11.9        Tax Reports. The Collateral Agent shall not be responsible
for the preparation or filing of any reports or returns relating to federal,
state or local income taxes with respect to this Agreement, other than in
respect of the Collateral Agent’s compensation or for reimbursement of expenses.

 

Section 11.10      Merger or Consolidation. Any Person (i) into which the
Collateral Agent may be merged or consolidated, (ii) that may result from any
merger or consolidation to which the Collateral Agent shall be a party, or
(iii) that may succeed to the properties and assets of the Collateral Agent
substantially as a whole, which Person in any of the foregoing cases executes an
agreement of assumption to perform every obligation of the Collateral Agent
hereunder, shall be the successor to the Collateral Agent under this Agreement
without further act of any of the parties to this Agreement.

 

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Section 11.11      Collateral Agent Compensation. As compensation for its
activities hereunder, the Collateral Agent (in each of its capacities hereunder)
shall be entitled to its fees from the Borrower as set forth in the Collateral
Agent and Collateral Custodian Fee Letter and any other accrued and unpaid
expenses (including reasonable attorneys’ fees, costs and expenses) and
indemnity amounts payable by the Borrower or the Investment Manager, or both but
without duplication, to the Collateral Agent under the Transaction Documents
(including, without limitation, Indemnified Amounts payable under Article XVI)
(collectively, the “Collateral Agent Fees and Expenses”). The Borrower agrees to
reimburse the Collateral Agent in accordance with the provisions of Section 8.3
for all reasonable, out-of-pocket, documented expenses, disbursements and
advances incurred or made by the Collateral Agent in accordance with any
provision of this Agreement or the other Transaction Documents or in the
enforcement of any provision hereof or in the other Transaction Documents.

 

Section 11.12       Anti-Terrorism Laws. In order to comply with the laws,
rules, regulations and executive orders in effect from time to time applicable
to banking institutions, including those relating to the funding of terrorist
activities and money laundering, the Collateral Agent and the Collateral
Custodian are required to obtain, verify and record certain information relating
to individuals and entities which maintain a business relationship with the
Collateral Agent and the Collateral Custodian. Accordingly, each of the parties
agrees to provide to the Collateral Agent and the Collateral Custodian, upon
their request from time to time such identifying information and documentation
as may be available for such party in order to enable the Collateral Agent and
the Collateral Custodian to comply with Applicable Laws as set forth above.

 

Article XII

GRANT OF SECURITY INTEREST

 

Section 12.1        Borrower’s Grant of Security Interest. As security for the
prompt payment or performance in full when due, whether at stated maturity, by
acceleration or otherwise, of all Obligations (including Advances, Yield, all
Fees and other amounts at any time owing hereunder), the Borrower hereby assigns
and pledges to the Collateral Agent for the benefit of the Secured Parties, and
grants to the Collateral Agent for the benefit of the Secured Parties, a
security interest in and lien upon, all of the Borrower’s personal property,
including the Borrower’s right, title and interest in and to the following
(other than Retained Interests), in each case whether now or hereafter existing
or in which Borrower now has or hereafter acquires an interest and wherever the
same may be located (collectively, the “Collateral”):

 

(a)        all Collateral Obligations;

 

(b)        all Related Security;

 

(c)        the Sale Agreement, the Investment Management Agreement and all
documents now or hereafter in effect to which the Borrower is a party
(collectively, the “Borrower Assigned Agreements”), including (i) all rights of
the Borrower to receive moneys due and to become due under or pursuant to the
Borrower Assigned Agreements, (ii) all rights of the Borrower to receive
proceeds of any insurance, indemnity, warranty or guaranty with respect to the
Borrower Assigned Agreements, (iii) claims of the Borrower for damages arising
out of or for breach of or default under the Borrower Assigned Agreements, and
(iv) the right of the Borrower to amend, waive or terminate the Borrower
Assigned Agreements, to perform under the Borrower Assigned Agreements and to
compel performance and otherwise exercise all remedies and rights under the
Borrower Assigned Agreements; notwithstanding anything contained herein to the
contrary, the Collateral shall not include the right of the Borrower to
terminate the Investment Manager or replace the Investment Manager under the
Investment Management Agreement;

 

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(d)        all of the following (the “Account Collateral”):

 

(i)        each Account, all funds held in any Account (other than Excluded
Amounts), and all certificates and instruments, if any, from time to time
representing or evidencing any Account or such funds,

 

(ii)       all investments from time to time of amounts in the Accounts and all
certificates and instruments, if any, from time to time representing or
evidencing such investments,

 

(iii)      all notes, certificates of deposit and other instruments from time to
time delivered to or otherwise possessed by the Collateral Agent or any Secured
Party or any assignee or agent on behalf of the Collateral Agent or any Secured
Party in substitution for or in addition to any of the then existing Account
Collateral, and

 

(iv)      all interest, dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any and all of the then existing Account Collateral;

 

(e)        all additional property that may from time to time hereafter be
granted and pledged by the Borrower or by anyone on its behalf under this
Agreement;

 

(f)        all Accounts, all Certificated Securities, all Chattel Paper, all
Documents, all Equipment, all Financial Assets, all General Intangibles, all
Instruments, all Investment Property, all Inventory, all Securities Accounts,
all Security Certificates, all Security Entitlements and all Uncertificated
Securities of the Borrower;

 

(g)        each Hedging Agreement, including all rights of the Borrower to
receive moneys due and to become due thereunder; and

 

(h)        all Proceeds, accessions, substitutions, rents and profits of any and
all of the foregoing Collateral (including proceeds that constitute property of
the types described in subsections (a) through (g) above) and, to the extent not
otherwise included, all payments under insurance (whether or not the Collateral
Agent or a Secured Party or any assignee or agent on behalf of the Collateral
Agent or a Secured Party is the loss payee thereof) or any indemnity, warranty
or guaranty payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Collateral.

 

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Section 12.2        Borrower Remains Liable. Notwithstanding anything in this
Agreement, (a) except to the extent of the Investment Manager’s duties under the
Transaction Documents, the Borrower shall remain liable under the Collateral
Obligations, Borrower Assigned Agreements and other agreements included in the
Collateral to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by a Secured
Party or the Collateral Agent of any of its rights under this Agreement shall
not release the Borrower or the Investment Manager from any of their respective
duties or obligations under the Collateral Obligations, Borrower Assigned
Agreements or other agreements included in the Collateral, (c) the Secured
Parties and the Collateral Agent shall not have any obligation or liability
under the Collateral Obligations, Borrower Assigned Agreements or other
agreements included in the Collateral by reason of this Agreement, and
(d) neither the Collateral Agent nor any of the Secured Parties shall be
obligated to perform any of the obligations or duties of the Borrower or the
Investment Manager under the Collateral Obligations, Borrower Assigned
Agreements or other agreements included in the Collateral or to take any action
to collect or enforce any claim for payment assigned under this Agreement.

 

Section 12.3        Release of Collateral. Until the Obligations have been paid
in full, the Collateral Agent may not release any Lien covering any Collateral
except for (i) Collateral Obligations sold pursuant to Section 7.10, (ii) any
Related Security identified by the Borrower (or the Investment Manager on behalf
of the Borrower) to the Collateral Agent so long as the Facility Termination
Date has not occurred or (iii) Repurchased Collateral Obligations or Substituted
Collateral Obligation pursuant to Section 7.11.

 

In connection with the release of a Lien on any Collateral permitted pursuant to
this Section 12.3 and conducted in the ordinary course of business consistent
with industry standards and practices (including the use of escrows), the
Collateral Agent, on behalf of the Secured Parties, will, at the sole expense of
the Borrower, execute and deliver to the Borrower any assignments, bills of
sale, termination statements and any other releases and instruments as the
Borrower may reasonably request in order to effect the release and transfer of
such Collateral; provided, that the Collateral Agent, on behalf of the Secured
Parties, will make no representation or warranty, express or implied, with
respect to any such Collateral in connection with such sale or transfer and
assignment.

 

Article XIII

FACILITY TERMINATION EVENTS

 

Section 13.1        Facility Termination Events. Each of the following shall
constitute a Facility Termination Event under this Agreement:

 

(a)        any default in the payment when due of (i) any principal of any
Advance or (ii) any other amount payable by the Borrower or the Investment
Manager hereunder, including any Yield on any Advance, any Undrawn Fee or any
other Fee, in each case, which default shall continue for two Business Days;

 

(b)        the Borrower or the Investment Manager shall fail to perform or
observe any other term, covenant or agreement contained in this Agreement, or
any other Transaction Document on its part to be performed or observed and,
except in the case of the covenants and agreements contained in Section 10.7,
Section 10.9, Section 10.11 and Section 10.16 as to each of which no grace
period shall apply, any such failure shall remain unremedied for a period of
thirty (30) days after the earlier to occur of (i) the date on which written
notice of such failure requiring the same to be remedied shall have been given
to the Borrower or the Investment Manager, and (ii) the date on which a
Responsible Officer of the Borrower or the Investment Manager acquires knowledge
thereof;

 

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(c)        any representation or warranty of the Borrower or the Investment
Manager made or deemed to have been made hereunder or in any other Transaction
Document or any other writing or certificate furnished by or on behalf of the
Borrower or the Investment Manager to the Administrative Agent or any Lender for
purposes of or in connection with this Agreement or any other Transaction
Document (including any Monthly Report) shall prove to have been false or
incorrect in any material respect when made or deemed to have been made and the
same continues unremedied for a period of thirty (30) days (if such failure can
be remedied) after the earlier to occur of (i) the date on which written notice
of such failure requiring the same to be remedied shall have been given to the
Borrower or the Investment Manager, and (ii) the date on which a Responsible
Officer of the Borrower or the Investment Manager acquires knowledge thereof;
provided, that no breach shall be deemed to occur hereunder in respect of any
representation or warranty relating to the “eligibility” of any Collateral
Obligation if the Borrower complies with its obligations in Section 7.11 with
respect to such Collateral Obligation;

 

(d)        an Insolvency Event shall have occurred and be continuing with
respect to either the Borrower, the Investment Manager or the Equityholder;

 

(e)        the aggregate principal amount of all Advances outstanding hereunder
exceeds the Borrowing Base and such condition continues unremedied for two
consecutive Business Days;

 

(f)        the Internal Revenue Service shall file notice of a lien pursuant to
Section 6323 of the Code with regard to any of the assets of the Borrower (other
than a Permitted Lien), or the PBGC shall file notice of a lien pursuant to
Section 4068 of ERISA with regard to any of the assets of the Borrower;

 

(g)        (i) any Transaction Document or any lien or security interest granted
thereunder by the Borrower shall (except in accordance with its terms), in whole
or in material part, terminate, cease to be effective or cease to be the legally
valid, binding and enforceable obligation of the Borrower; or (ii) the Borrower
or the Investment Manager or any other party shall, directly or indirectly,
contest in any manner the effectiveness, validity, binding nature or
enforceability of any Transaction Document; or (iii) any security interest
securing any Obligation shall, in whole or in part, cease to be a perfected
first priority security interest (except, as to priority, for Permitted Liens)
against the Borrower;

 

(h)        an Investment Manager Event of Default shall have occurred and be
continuing past any applicable notice or cure period provided in the definition
thereof;

 

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(i)         the Borrower or the Investment Manager shall fail to pay any
principal of or premium or interest on any Indebtedness having an aggregate
principal amount of $250,000 or greater (or in the case of the Investment
Manager $1,000,000 or greater), when the same becomes due and payable (whether
by scheduled maturity, required prepayment, acceleration, demand or otherwise)
and such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Indebtedness; or any
other default under any agreement or instrument relating to any such
Indebtedness of the Borrower or the Investment Manager, as applicable, or any
other event, shall occur and such default or event shall continue after the
applicable grace period, if any, specified in such agreement or instrument if
the effect of such default or event is to accelerate the maturity of such
Indebtedness; or any such Indebtedness shall be declared to be due and payable
or required to be prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased, or an offer to prepay, redeem,
purchase or defease such Indebtedness shall be required to be made, in each
case, prior to the stated maturity thereof; or any early amortization event, pay
out event or other similar event (other than as a result of a voluntary
prepayment) shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to any such Indebtedness if the effect
of such event is to cause the principal of such Indebtedness to be amortized on
an accelerated basis;

 

(j)        a Change of Control shall have occurred;

 

(k)       either (i) the Borrower shall become required to register as an
“investment company” within the meaning of the 1940 Act or the arrangements
contemplated by the Transaction Documents shall require registration as an
“investment company” within the meaning of the 1940 Act or (ii) FS Investment
Corporation III ceases to be a “business development company” within the meaning
of the 1940 Act;

 

(l)        failure on the part of the Borrower or the Investment Manager to
(i) make any payment or deposit (including, without limitation, with respect to
bifurcation and remittance of Principal Collections and Interest Collections or
any other payment or deposit required to be made by the terms of the Transaction
Documents, including, without limitation, to any Secured Party, Affected Person
or Indemnified Party) required by the terms of any Transaction Document in
accordance with Section 7.3(b) and Section 10.10 or (ii) otherwise observe or
perform any covenant, agreement or obligation with respect to the management and
distribution of funds received with respect to the Collateral;

 

(m)      (i) failure of the Borrower to maintain at least one Independent
Manager, (ii) the removal of any Independent Manager without cause or prior
written notice to the Administrative Agent (in each case as required by the
organization documents of the Borrower) or (iii) an Independent Manager of the
Borrower which is not pre-approved by the Administrative Agent shall be
appointed without the consent of the Administrative Agent; provided that, in the
case of each of clauses (i) and (ii), the Borrower shall have five (5) Business
Days to replace any Independent Manager upon the death or incapacitation of the
current Independent Manager;

 

(n)        the Borrower makes any assignment or attempted assignment of its
respective rights or obligations under this Agreement or any other Transaction
Document without first obtaining the specific written consent of the
Administrative Agent, which consent may be withheld in the exercise of its sole
and absolute discretion;

 

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(o)        any court shall render a final, non-appealable judgment against the
Borrower or the Investment Manager (i) in an amount in excess of $250,000 (or,
with respect to the Investment Manager, $1,000,000) which shall not be
satisfactorily stayed, discharged, vacated, set aside or satisfied within 60
days of the making thereof or (ii) for which the Administrative Agent shall not
have received evidence satisfactory to it that an insurance provider for the
Borrower or the Investment Manager, as applicable, has agreed to satisfy such
judgment in full subject to any deductibles not exceeding $250,000 (or, with
respect to the Investment Manager, $1,000,000); or the attachment of any
material portion of the property of the Borrower or the Investment Manager which
has not been released or provided for to the reasonable satisfaction of the
Administrative Agent within 30 days after the making thereof;

 

(p)        the Borrower shall fail to qualify as a bankruptcy-remote entity
based upon customary criteria such that Dechert LLP or any other reputable
counsel could no longer render a substantive nonconsolidation opinion with
respect to the Borrower;

 

(q)        failure to pay, on the Facility Termination Date, all outstanding
Obligations; or

 

(r)         during the Revolving Period, the Minimum Equity Condition is not
satisfied and such condition continues unremedied for two (2) consecutive
Business Days.

 

Section 13.2        Effect of Facility Termination Event.

 

(a)        Optional Termination. Upon notice by the Collateral Agent or the
Administrative Agent that a Facility Termination Event (other than a Facility
Termination Event described in Section 13.1(d)) has occurred, the Revolving
Period will automatically terminate and no Advances will thereafter be made, and
the Collateral Agent (at the direction of the Administrative Agent) may declare
all or any portion of the outstanding principal amount of the Advances and other
Obligations to be due and payable, whereupon the full unpaid amount of such
Advances and other Obligations which shall be so declared due and payable shall
be and become immediately due and payable, without further notice, demand or
presentment (all of which are hereby expressly waived by the Borrower) and the
Facility Termination Date shall be deemed to have occurred.

 

(b)        Automatic Termination. Upon the occurrence of a Facility Termination
Event described in Section 13.1(d), the Facility Termination Date shall be
deemed to have occurred automatically, and all outstanding Advances under this
Agreement and all other Obligations under this Agreement shall become
immediately and automatically due and payable, all without presentment, demand,
protest or notice of any kind (all of which are hereby expressly waived by the
Borrower).

 

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Section 13.3        Rights upon Facility Termination Event. If a Facility
Termination Event shall have occurred and be continuing, the Administrative
Agent may, in its sole discretion, direct the Collateral Agent to exercise any
of the remedies specified herein in respect of the Collateral and the Collateral
Agent shall promptly, at the written direction of the Administrative Agent, also
do one or more of the following (subject to Section 13.9):

 

(a)        institute proceedings in its own name and on behalf of the Secured
Parties as Collateral Agent for the collection of all Obligations, whether by
declaration or otherwise, enforce any judgment obtained, and collect from the
Borrower and any other obligor with respect thereto moneys adjudged due, for the
specific enforcement of any covenant or agreement in any Transaction Document or
in the exercise of any power granted herein, or to enforce any other proper
remedy or legal or equitable right vested in the Collateral Agent by Applicable
Law or any Transaction Document;

 

(b)        exercise any remedies of a secured party under the UCC and take any
other appropriate action to protect and enforce the right and remedies of the
Collateral Agent and the Secured Parties which rights and remedies shall be
cumulative; and

 

(c)        require the Borrower and the Investment Manager, at the Investment
Manager’s expense, to (1) assemble all or any part of the Collateral as directed
by the Collateral Agent (at the direction of the Administrative Agent) and make
the same available to the Collateral Agent at a place to be designated by the
Collateral Agent (at the direction of the Administrative Agent) that is
reasonably convenient to such parties and (2) without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at a
public or private sale, at any of the Collateral Agent’s or the Administrative
Agent’s offices or elsewhere in accordance with Applicable Law. The Borrower
agrees that, to the extent notice of sale shall be required by law, at least ten
days’ notice to the Borrower of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. The Collateral Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Collateral Agent
(at the direction of the Administrative Agent) may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned. All cash proceeds received by the Collateral Agent in respect
of any sale of, collection from, or other realization upon, all or any part of
the Collateral (after payment of any amounts incurred in connection with such
sale) shall be deposited into the Collection Account and to be applied against
all or any part of the outstanding Advances pursuant to Section 4.1 or otherwise
in such order as the Collateral Agent shall be directed by the Administrative
Agent (in its sole discretion).

 

Section 13.4        Collateral Agent May Enforce Claims Without Possession of
Notes. All rights of action and of asserting claims under the Transaction
Documents, may be enforced by the Collateral Agent without the possession of the
Notes or the production thereof in any trial or other proceedings relative
thereto, and any such action or proceedings instituted by the Collateral Agent
shall be brought in its own name as Collateral Agent and any recovery of
judgment, subject to the payment of the reasonable, out-of-pocket and documented
expenses, disbursements and compensation of the Collateral Agent each
predecessor Collateral Agent and their respective agents and attorneys, shall be
for the ratable benefit of the holders of the Notes and other Secured Parties.

 

Section 13.5        Collective Proceedings. In any proceedings brought by the
Collateral Agent to enforce the Liens under the Transaction Documents (and also
any proceedings involving the interpretation of any provision of any Transaction
Document), the Collateral Agent shall be held to represent all of the Secured
Parties, and it shall not be necessary to make any Secured Party a party to any
such proceedings.

 

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Section 13.6        Insolvency Proceedings. In case there shall be pending,
relative to the Borrower or any other obligor upon the Notes or any Person
having or claiming an ownership interest in the Collateral, proceedings under
the Bankruptcy Code or any other applicable federal or state bankruptcy,
insolvency or other similar law, or in case a receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar official shall
have been appointed for or taken possession of the Borrower, its property or
such other obligor or Person, or in case of any other comparable judicial
proceedings relative to the Borrower or other obligor upon the Notes, or to the
creditors of property of the Borrower or such other obligor, the Collateral
Agent irrespective of whether the principal of the Notes shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Collateral Agent shall have made any demand pursuant to the
provisions of this Section, shall be entitled and empowered but without any
obligation, subject to Section 13.9(a), by intervention in such proceedings or
otherwise:

 

(a)        to file and prove a claim or claims for the whole amount of principal
and Yield owing and unpaid in respect of the Notes, all other amounts owing to
the Lenders and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Collateral Agent (including any
claim for reimbursement of all expenses (including the fees and expenses of
counsel) and liabilities incurred, and all advances, if any, made, by the
Collateral Agent and each predecessor Collateral Agent except as determined to
have been caused by its own gross negligence or willful misconduct) and of each
of the other Secured Parties allowed in such proceedings;

 

(b)        unless prohibited by Applicable Law and regulations, to vote (with
the consent of the Administrative Agent) on behalf of the holders of the Notes
in any election of a trustee, a standby trustee or person performing similar
functions in any such proceedings;

 

(c)        to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Secured Parties on their behalf; and

 

(d)        to file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Collateral Agent or
the Secured Parties allowed in any judicial proceedings relative to the
Borrower, its creditors and its property;

 

and any trustee, receiver, liquidator, collateral agent or trustee or other
similar official in any such proceeding is hereby authorized by each of such
Secured Parties to make payments to the Collateral Agent and, in the event that
the Collateral Agent shall consent to the making of payments directly to such
Secured Parties, to pay to the Collateral Agent such amounts as shall be
sufficient to cover all reasonable expenses and liabilities incurred, and all
advances made, by the Collateral Agent and each predecessor Collateral Agent
except as determined to have been caused by its own negligence or willful
misconduct.

 

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Section 13.7        Delay or Omission Not Waiver. No delay or omission of the
Collateral Agent or of any other Secured Party to exercise any right or remedy
accruing upon any Facility Termination Event shall impair any such right or
remedy or constitute a waiver of any such Facility Termination Event or an
acquiescence therein. Every right and remedy given by this Section 13.7 or by
law to the Collateral Agent or to the other Secured Parties may be exercised
from time to time, and as often as may be deemed expedient, by the Collateral
Agent or by the other Secured Parties, as the case may be.

 

Section 13.8        Waiver of Stay or Extension Laws. The Borrower waives and
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force (including filing a voluntary petition under Chapter
11 of the Bankruptcy Code and by the voluntary commencement of a proceeding or
the filing of a petition seeking winding up, liquidation, reorganization or
other relief under any bankruptcy, insolvency, receivership or similar law now
or hereafter in effect), which may affect the covenants, the performance of or
any remedies under this Agreement; and the Borrower (to the extent that it may
lawfully do so) hereby expressly waives all benefits or advantages of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Collateral Agent, but will suffer and permit the
execution of every such power as though no such law had been enacted.

 

Section 13.9        Limitation on Duty of Collateral Agent in Respect of
Collateral. (a)        Beyond the safekeeping of the Collateral Obligation Files
in accordance with Article XIX, neither the Collateral Agent nor the Collateral
Custodian shall have any duty as to any Collateral in its possession or control
or in the possession or control of any agent or bailee or any income thereon or
as to preservation of rights against prior parties or any other rights
pertaining thereto and neither the Collateral Agent nor the Collateral Custodian
shall be responsible for filing any financing or continuation statements or
recording any documents or instruments in any public office at any time or times
or otherwise perfecting or maintaining the perfection of any security interest
in the Collateral. Neither the Collateral Agent nor the Collateral Custodian
shall be liable or responsible for any misconduct, negligence or loss or
diminution in the value of any of the Collateral, by reason of the act or
omission of any carrier, forwarding agency or other agent, attorney or bailee
selected by the Collateral Agent or the Collateral Custodian in good faith and
with due care hereunder.

 

(b)        Neither the Collateral Agent nor the Collateral Custodian shall be
responsible for the existence, genuineness or value of any of the Collateral or
for the validity, perfection, priority or enforceability of the Liens in any of
the Collateral, whether impaired by operation of law or by reason of any action
or omission to act on its part hereunder, or for insuring the Collateral or for
the payment of taxes, charges, assessments or Liens upon the Collateral or
otherwise as to the maintenance of the Collateral.

 

(c)        Neither the Collateral Agent nor the Collateral Custodian shall have
any duty to act outside of the United States in respect of any Collateral
located in any jurisdiction other than the United States.

 

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Section 13.10        Power of Attorney. (a)       The Borrower hereby
irrevocably appoints the Collateral Agent as its true and lawful attorney (with
full power of substitution) in its name, place and stead and at its expense, in
connection with the enforcement of the rights and remedies provided for (and
subject to the terms and conditions set forth) in this Agreement including
without limitation the following powers: (i) to give any necessary receipts or
acquittance for amounts collected or received hereunder, (ii) to make all
necessary transfers of the Collateral in connection with any such sale or other
disposition made pursuant hereto, (iii) to execute and deliver for value all
necessary or appropriate bills of sale, assignments and other instruments in
connection with any such sale or other disposition, the Borrower hereby
ratifying and confirming all that such attorney (or any substitute) shall
lawfully do hereunder and pursuant hereto, and (iv) to sign any agreements,
orders or other documents in connection with or pursuant to any Transaction
Document. Nevertheless, if so requested by the Collateral Agent (at the
direction of the Administrative Agent), the Borrower shall ratify and confirm
any such sale or other disposition by executing and delivering to the Collateral
Agent all proper bills of sale, assignments, releases and other instruments as
may be designated in any such request.

 

(b)        No person to whom this power of attorney is presented as authority
for the Collateral Agent to take any action or actions contemplated by clause
(a) shall inquire into or seek confirmation from the Borrower as to the
authority of the Collateral Agent to take any action described below, or as to
the existence of or fulfillment of any condition to the power of attorney
described in clause (a), which is intended to grant to the Collateral Agent
unconditionally the authority to take and perform the actions contemplated
herein, and the Borrower irrevocably waives any right to commence any suit or
action, in law or equity, against any person or entity that acts in reliance
upon or acknowledges the authority granted under this power of attorney. The
power of attorney granted in clause (a) is coupled with an interest and may not
be revoked or canceled by the Borrower until all obligations of the Borrower
under the Transaction Documents have been paid in full and the Collateral Agent
has provided its written consent thereto.

 

(c)        Notwithstanding anything to the contrary herein, the power of
attorney granted pursuant to this Section 13.10 shall only be effective after
the occurrence of a Facility Termination Event.

 

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Article XIV

THE ADMINISTRATIVE AGENT

 

Section 14.1        Appointment. Each Lender and each Agent hereby irrevocably
designates and appoints DBNY as Administrative Agent hereunder and under the
other Transaction Documents, and authorizes the Administrative Agent to take
such action on its behalf under the provisions of this Agreement and the other
Transaction Documents and to exercise such powers and perform such duties as are
expressly delegated to the Administrative Agent by the terms of this Agreement
and the other Transaction Documents, together with such other powers as are
reasonably incidental thereto. Each Lender in each Lender Group hereby
irrevocably designates and appoints the Agent for such Lender Group as the agent
of such Lender under this Agreement, and each such Lender irrevocably authorizes
such Agent, as the agent for such Lender, to take such action on its behalf
under the provisions of this Agreement and the other Transaction Documents and
to exercise such powers and perform such duties thereunder as are expressly
delegated to such Agent by the terms of this Agreement and the other Transaction
Documents, together with such other powers as are reasonably incidental thereto.
The Administrative Agent shall promptly deliver, but in any event no later than
the following Business Day, a copy of any notice, certificate, report or other
documents received by it in its capacity as Administrative Agent to each Agent.
Notwithstanding any provision to the contrary elsewhere in this Agreement,
neither the Administrative Agent nor any Agent (the Administrative Agent and
each Agent being referred to in this Article as a “Note Agent”) shall have any
duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against any Note Agent.

 

Section 14.2        Delegation of Duties. Each Note Agent may execute any of its
duties under this Agreement and the other Transaction Documents by or through
its subsidiaries, affiliates, agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. No Note
Agent shall be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.

 

Section 14.3        Exculpatory Provisions. No Note Agent (acting in such
capacity) nor any of its directors, officers, agents or employees shall be
(a) liable for any action lawfully taken or omitted to be taken by it or them or
any Person described in Section 14.2 under or in connection with this Agreement
or the other Transaction Documents (except for its, their or such Person’s own
gross negligence or willful misconduct), or (b) responsible in any manner to any
Person for any recitals, statements, representations or warranties of any Person
(other than itself) contained in the Transaction Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received under or in connection with, the Transaction Documents or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
the Transaction Documents or any other document furnished in connection
therewith or herewith, or for any failure of any Person (other than itself or
its directors, officers, agents or employees) to perform its obligations under
any Transaction Document or for the satisfaction of any condition specified in a
Transaction Document. Except as otherwise expressly provided in this Agreement,
no Note Agent shall be under any obligation to any Person to ascertain or to
inquire as to the observance or performance of any of the agreements or
covenants contained in, or conditions of, the Transaction Documents, or to
inspect the properties, books or records of the Borrower or the Investment
Manager.

 

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Section 14.4        Reliance by Note Agents. Each Note Agent shall in all cases
be entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including counsel to each of the Lenders),
Independent Accountants and other experts selected by such Note Agent. Each Note
Agent shall in all cases be fully justified in failing or refusing to take any
action under this Agreement, any other Transaction Document or any other
document furnished in connection herewith or therewith unless it shall first
receive such advice or concurrence of the Lenders, as it deems appropriate, or
it shall first be indemnified to its satisfaction (i) in the case of the
Administrative Agent, by the Lenders or (ii) in the case of an Agent, by the
Lenders in its Lender Group, against any and all liability, cost and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement, the other
Transaction Documents or any other document furnished in connection herewith or
therewith in accordance with a request of the Required Lenders, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders. The Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement, the other
Transaction Documents or any other document furnished in connection herewith or
therewith in accordance with a request of the Required Lenders, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders. Each Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement, the other Transaction Documents
or any other document furnished in connection herewith or therewith in
accordance with a request of the Lenders in its Lender Group holding greater
than 50% of the outstanding Advances held by such Lender Group, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders in such Lender Group.

 

Section 14.5        Notices. No Note Agent shall be deemed to have knowledge or
notice of the occurrence of any breach of this Agreement or the occurrence of
any Facility Termination Event unless it has received notice from the Investment
Manager, the Borrower or any Lender, referring to this Agreement and describing
such event. In the event that the Administrative Agent receives such a notice,
it shall promptly give notice thereof to each Agent, and in the event any Agent
receives such a notice, it shall promptly give notice thereof to the Lenders in
its Lender Group. The Administrative Agent shall take such action with respect
to such event as shall be reasonably directed in writing by the Required
Lenders, and each Agent shall take such action with respect to such event as
shall be reasonably directed by Lenders in its Lender holding greater than 50%
of the outstanding Advances held by such Lender Group; provided, that unless and
until such Note Agent shall have received such directions, such Note Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such event as it shall deem advisable in the best
interests of the Lenders or of the Lenders in its Lender Group, as applicable.

 

Section 14.6        Non-Reliance on Note Agents. The Lenders expressly
acknowledge that no Note Agent, nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any representations or
warranties to it and that no act by any Note Agent hereafter taken, including
any review of the affairs of the Borrower or the Investment Manager, shall be
deemed to constitute any representation or warranty by such Note Agent to any
Lender. Each Lender represents to each Note Agent that it has, independently and
without reliance upon any Note Agent or any other Lender, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, operations, property, financial and
other condition and creditworthiness of the Borrower, the Investment Manager,
and the Collateral Obligations and made its own decision to purchase its
interest in the Notes hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon any Note Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis, appraisals and
decisions in taking or not taking action under any of the Transaction Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrower, the Investment Manager, and the Collateral
Obligations. Except as expressly provided herein, no Note Agent shall have any
duty or responsibility to provide any Lender with any credit or other
information concerning the Collateral or the business, operations, property,
prospects, financial and other condition or creditworthiness of the Borrower,
the Investment Manager or the Lenders which may come into the possession of such
Note Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.

 

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In no event shall the Administrative Agent be liable for any indirect, special,
punitive or consequential loss or damage of any kind whatsoever, including, but
not limited to, lost profits, even if the Administrative Agent has been advised
of the likelihood of such loss or damage and regardless of the form of action.
In no event shall the Administrative Agent be liable for any failure or delay in
the performance of its obligations hereunder because of circumstances beyond its
control, including, but not limited to, acts of God, flood, war (whether
declared or undeclared), terrorism, fire, riot, embargo, government action,
including any laws, ordinances, regulations, governmental action or the like
which delay, restrict or prohibit the providing of the services contemplated by
this Agreement.

 

Section 14.7        Indemnification. The Lenders agree to indemnify the
Administrative Agent and its officers, directors, employees, representatives and
agents (to the extent not reimbursed by the Borrower or the Investment Manager
under the Transaction Documents, and without limiting the obligation of such
Persons to do so in accordance with the terms of the Transaction Documents),
ratably according to the outstanding amounts of their Advances from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including the reasonable fees and disbursements of counsel for the
Administrative Agent or the affected Person in connection with any
investigative, or judicial proceeding commenced or threatened, whether or not
the Administrative Agent or such affected Person shall be designated a party
thereto) that may at any time be imposed on, incurred by or asserted against the
Administrative Agent or such affected Person as a result of, or arising out of,
or in any way related to or by reason of, any of the transactions contemplated
hereunder or under the Transaction Documents or any other document furnished in
connection herewith or therewith (but excluding any such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the gross negligence or willful
misconduct of the Administrative Agent or such affected Person).

 

Section 14.8        Successor Note Agent. If the Administrative Agent shall
resign as Administrative Agent under this Agreement, then the Required Lenders
shall appoint a successor agent, whereupon such successor agent shall succeed to
the rights, powers and duties of the Administrative Agent, and the term
“Administrative Agent” shall mean such successor agent, effective upon its
acceptance of such appointment, and the former Administrative Agent’s rights,
powers and duties as Administrative Agent shall be terminated, without any other
or further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement. Any Agent may resign as Agent upon ten days’
notice to the Lenders in its Lender Group and the Administrative Agent (with a
copy to the Borrower) with such resignation becoming effective upon a successor
agent succeeding to the rights, powers and duties of the Agent pursuant to this
Section 14.8. If an Agent shall resign as Agent under this Agreement, then
Lenders in its Lender Group holding greater than 50% of the outstanding Advances
held by such Lender Group shall appoint a successor agent for such Lender Group.
After any Note Agent’s resignation hereunder, the provisions of this Article XIV
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was a Note Agent under this Agreement. No resignation of any Note Agent
shall become effective until a successor Note Agent shall have assumed the
responsibilities and obligations of such Note Agent hereunder; provided, that in
the event a successor Note Agent is not appointed within 60 days after such
notice of its resignation is given as permitted by this Section 14.8, the
applicable Note Agent may petition a court for its removal.

 

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Section 14.9        Note Agents in their Individual Capacity. Each Note Agent
and its Affiliates may make loans to, accept deposits from and generally engage
in any kind of business with the Borrower or the Investment Manager as though
such Note Agent were not an agent hereunder. Any Person which is a Note Agent
may act as a Note Agent without regard to and without additional duties or
liabilities arising from its role as such administrator or agent or arising from
its acting in any such other capacity.

 

Section 14.10      Borrower Procedural Review. The Administrative Agent shall,
at the Borrower’s expense, retain Protiviti, Inc. (or another nationally
recognized audit firm acceptable to the Administrative Agent in its sole
discretion) to conduct and complete a procedural review of the Collateral
Obligations in compliance with the standards set forth on Exhibit B hereto, (i)
within 120 days after the Effective Date and (ii) once during every six month
period at the request of the Administrative Agent thereafter. The Administrative
Agent shall promptly forward the results of such procedural review to the
Investment Manager.

 

Article XV

ASSIGNMENTS

 

Section 15.1        Restrictions on Assignments. Except as specifically provided
herein, the Borrower may not assign any of its rights or obligations hereunder
or any interest herein without the prior written consent of the Administrative
Agent and the Required Lenders in their respective sole discretion and any
attempted assignment in violation of this Section 15.1 shall be null and void.

 

Section 15.2        Documentation. In connection with any permitted assignment,
each Lender shall deliver to each assignee an assignment, in such form as such
Lender and the related assignee may agree, duly executed by such Lender
assigning any such rights, obligations, Advance or Note to the assignee; and
such Lender shall promptly execute and deliver all further instruments and
documents, and take all further action, that the assignee may reasonably
request, in order to perfect, protect or more fully evidence the assignee’s
right, title and interest in and to the items assigned, and to enable the
assignee to exercise or enforce any rights hereunder or under the Notes
evidencing such Advance.

 

Section 15.3        Rights of Assignee. Upon the foreclosure of any assignment
of any Advances made for security purposes, or upon any other assignment of any
Advance from any Lender pursuant to this Article XV, the respective assignee
receiving such assignment shall have all of the rights of such Lender hereunder
with respect to such Advances and all references to the Lender or Lenders in
Sections 4.3 or 5.1 shall be deemed to apply to such assignee.

 

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Section 15.4        Assignment by Lenders. So long as no Facility Termination
Event or Investment Manager Event of Default has occurred and is continuing, no
Lender may make any assignment, and no such assignment shall be permitted, other
than any proposed assignment (i) to an Affiliate of such Lender, (ii) to another
Lender hereunder or (iii) if (x) such Lender makes a reasonable determination
that its ownership of any of its rights or obligations hereunder (and under
other similar facilities (if any) held by such Lender) is prohibited by the
Volcker Rule and (y) to the extent such Lender is permitted by the applicable
documentation, such Lender is making commercially reasonable efforts to assign
its interest in other similar facilities in a manner similar to such proposed
assignment, to any Person other than a Competitor, without the prior written
consent of the Borrower (which consent, if such assignment is to a Person other
than a Competitor, shall not to be unreasonably withheld, delayed or
conditioned). Each Lender shall endorse the Notes to reflect any assignments
made pursuant to this Article XV or otherwise.

 

Section 15.5        Registration; Registration of Transfer and Exchange.
(a)        The Collateral Agent, acting solely for this purpose agent for the
Borrower (and, in such capacity, the “Note Registrar”), shall maintain a
register for the recordation of the name and address of each Lender (including
any assignees), and the principal amounts (and stated interest) owing to such
Lender pursuant to the terms hereof from time to time (the “Note Register”). The
entries in the Note Register shall be conclusive absent manifest error, and the
Borrower, the Collateral Agent, the Administrative Agent, each Agent and each
Lender shall treat each Person whose name is recorded in the Note Register
pursuant to the terms hereof as a Lender hereunder. The Note Register shall be
available for inspection by any Lender at any reasonable time and from time to
time upon reasonable prior notice.

 

(b)        Each Person who has or who acquired an interest in a Note shall be
deemed by such acquisition to have agreed to be bound by the provisions of this
Section 15.5. A Note may be exchanged (in accordance with Section 15.5(c)) and
transferred to the holders (or their agents or nominees) of the Advances and to
any assignee (in accordance with Section 15.1) (or its agent or nominee) of all
or a portion of the Advances. The Note Registrar shall not register (or cause to
be registered) the transfer of such Note, unless the proposed transferee shall
have delivered to the Note Registrar either (i) an Opinion of Counsel that the
transfer of such Note is exempt from registration or qualification under the
Securities Act of 1933, as amended, and all applicable state securities laws and
that the transfer does not constitute a non-exempt “prohibited transaction”
under ERISA or (ii) an express agreement by the proposed transferee to be bound
by and to abide by the provisions of this Section 15.5 and the restrictions
noted on the face of such Note.

 

(c)        At the option of the holder thereof, a Note may be exchanged for one
or more new Notes of any authorized denominations and of a like class and
aggregate principal amount at an office or agency of the Borrower. Whenever any
Note is so surrendered for exchange, the Borrower shall execute and deliver
(through the Note Registrar) the new Note which the holder making the exchange
is entitled to receive at the Note Registrar’s office, located at DB Services
Americas Inc., 5022 Gate Parkway, Suite 200, Jacksonville, Florida, 32256,
Attention: Transfer Unit.

 

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(d)        Upon surrender for registration of transfer of any Note at an office
or agency of the Borrower, the Borrower shall execute and deliver (through the
Note Registrar), in the name of the designated transferee or transferees, one or
more new Notes of any authorized denominations and of a like class and aggregate
principal amount.

 

(e)        All Notes issued upon any registration of transfer or exchange of any
Note in accordance with the provisions of this Agreement shall be the valid
obligations of the Borrower, evidencing the same debt, and entitled to the same
benefits under this Agreement, as the Note(s) surrendered upon such registration
of transfer or exchange.

 

(f)        Every Note presented or surrendered for registration of transfer or
for exchange shall (if so required by the Borrower or the Note Registrar) be
fully endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Note Registrar, duly executed by the holder thereof or his
attorney duly authorized in writing.

 

(g)        No service charge shall be made for any registration of transfer or
exchange of a Note, but the Borrower may require payment from the transferee
holder of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer of exchange of a
Note.

 

(h)        The holders of the Notes shall be bound by the terms and conditions
of this Agreement.

 

Section 15.6        Mutilated, Destroyed, Lost and Stolen Notes. (a)        If
any mutilated Note is surrendered to the Note Registrar, the Borrower shall
execute and deliver (through the Note Registrar) in exchange therefor a new Note
of like class and tenor and principal amount and bearing a number not
contemporaneously outstanding.

 

(b)        If there shall be delivered to the Borrower and the Note Registrar
prior to the payment of the Notes (i) evidence to their satisfaction of the
destruction, loss or theft of any Note and (ii) such security or indemnity as
may be required by them to save each of them and any agent of either of them
harmless, then, in the absence of notice to the Borrower or the Note Registrar
that such Note has been acquired by a bona fide Lender, the Borrower shall
execute and deliver (through the Note Registrar), in lieu of any such destroyed,
lost or stolen Note, a new Note of like class, tenor and principal amount and
bearing a number not contemporaneously outstanding.

 

(c)        Upon the issuance of any new Note under this Section 15.6, the
Borrower may require the payment from the transferor holder of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses connected therewith.

 

(d)        Every new Note issued pursuant to this Section 15.6 and in accordance
with the provisions of this Agreement, in lieu of any destroyed, lost or stolen
Note shall constitute an original additional contractual obligation of the
Borrower, whether or not the destroyed, lost or stolen Note shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Agreement equally and proportionately with any and all other Notes duly issued
hereunder.

 

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(e)        The provisions of this Section 15.6 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of a mutilated, destroyed, lost or stolen Note.

 

Section 15.7        Persons Deemed Owners. The Borrower, the Investment Manager,
the Administrative Agent, the Collateral Agent and any agent for any of the
foregoing may treat the holder of any Note as the owner of such Note for all
purposes whatsoever, whether or not such Note may be overdue, and none of
Borrower, the Investment Manager, the Administrative Agent, the Collateral Agent
and any such agent shall be affected by notice to the contrary.

 

Section 15.8        Cancellation. All Notes surrendered for payment or
registration of transfer or exchange shall be promptly canceled. The Borrower
shall promptly cancel and deliver to the Note Registrar any Notes previously
authenticated and delivered hereunder which the Borrower may have acquired in
any manner whatsoever, and all Notes so delivered shall be promptly canceled by
the Borrower. No Notes shall be authenticated in lieu of or in exchange for any
Notes canceled as provided in this Section 15.8, except as expressly permitted
by this Agreement.

 

Section 15.9        Participations; Pledge. (a)        At any time and from time
to time, each Lender may, in accordance with Applicable Law, at any time grant
participations in all or a portion of its Note and/or its interest in the
Advances and other payments due to it under this Agreement to any Person (each,
a “Participant”). Each Lender hereby acknowledges and agrees that (A) any such
participation will not alter or affect such Lender’s direct obligations
hereunder, and (B) none of the Borrower, the Investment Manager, the
Administrative Agent, any Lender, the Collateral Agent nor the Investment
Manager shall have any obligation to have any communication or relationship with
any Participant. The Borrower agrees that each Participant shall be entitled to
the benefits of Section 4.3 and Section 5.1 (subject to the requirements and
limitations therein, including the requirements under Section 4.3(f) (it being
understood that the documentation required under Section 4.3(f) shall be
delivered to the participating Lender)) to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to this Article XV;
provided that such Participant (A) agrees to be subject to the provisions of
Section 17.16 as if it were an assignee under this Article XV; and (B) shall not
be entitled to receive any greater payment under Section 4.3 or Section 5.1,
with respect to any participation, than its participating Lender would have been
entitled to receive, except to the extent that such entitlement to receive a
greater payment results from a change in any Applicable Law that occurs after
the Participant acquired the applicable participation. Each Lender that sells a
participation agrees, at the Borrower’s request and expense, to use reasonable
efforts to cooperate with the Borrower to effectuate the provisions of Section
17.16(b) with respect to any Participant. To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 17.1 as though it
were a Lender.

 

(b)        Notwithstanding anything in Section 15.9(a) to the contrary, each
Lender may pledge its interest in the Advances and the Notes to any Federal
Reserve Bank as collateral in accordance with Applicable Law without the prior
written consent of any Person.

 

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(c)        Each Lender that sells a participation shall, acting solely for this
purpose as an agent of the Borrower, maintain a register on which it enters the
name and address of each Participant and the principal amounts (and stated
interest) of each Participant’s interest in the obligations under the
Transaction Documents (the “Participant Register”); provided that no Lender
shall have any obligation to disclose all or any portion of the Participant
Register to any Person (including the identity of any Participant or any
information relating to a Participant’s interest in any obligations under any
Transaction Document) except to the extent that such disclosure is necessary to
establish that such obligation is in registered form under Section 5f.103-1(c)
of the United States Treasury Regulations. The entries in the Participant
Register shall be conclusive absent manifest error, and such Lender shall treat
each person whose name is recorded in the Participant Register as the owner of
such participation for all purposes of this Agreement notwithstanding any notice
to the contrary. For the avoidance of doubt, the Administrative Agent (in its
capacity as Administrative Agent) shall have no responsibility for maintaining a
Participant Register.

 

Article XVI

INDEMNIFICATION

 

Section 16.1        Borrower Indemnity. Without limiting any other rights which
any such Person may have hereunder or under Applicable Law, the Borrower agrees
to indemnify the Administrative Agent, the Agents, the Lenders, the Note
Registrar, the Collateral Custodian and the Collateral Agent and each of their
Affiliates, and each of their respective successors, transferees, participants
and assigns and all officers, directors, shareholders, controlling persons,
employees and agents of any of the foregoing (each of the foregoing Persons
being individually called an “Indemnified Party”), forthwith on demand, from and
against any and all damages (including punitive damages), losses, claims,
liabilities and related costs and expenses, including reasonable and documented
attorneys’ and accountants’ fees and disbursements (all of the foregoing being
collectively called “Indemnified Amounts”) awarded against or incurred by any of
them arising out of or relating to any Transaction Document or the transactions
contemplated hereby or thereby or the use of proceeds therefrom by the Borrower,
including in respect of the funding of any Advance or any breach of any
representation, warranty or covenant of the Borrower or the Investment Manager
in any Transaction Document or in any certificate or other written material
delivered by any of them pursuant to any Transaction Document, excluding,
however, Indemnified Amounts payable to an Indemnified Party (a) to the extent
determined by a court of competent jurisdiction to have resulted from gross
negligence, bad faith or willful misconduct on the part of any Indemnified Party
and (b) resulting from the performance of the Collateral Obligations. This
Section 16.1 shall not apply to Taxes, but shall be subject to Section 16.4.

 

Indemnification under this Section 16.1 shall survive the termination of this
Agreement and the resignation or removal of any Indemnified Party and shall
include reasonable fees and expenses of counsel and expenses of litigation.

 

Section 16.2        Reserved.

 

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Section 16.3        Contribution. If for any reason (other than the exclusions
set forth in the first paragraph of Section 16.1) the indemnification provided
above in Section 16.1 is unavailable to an Indemnified Party or is insufficient
to hold an Indemnified Party harmless, then the Borrower agrees to contribute to
the amount paid or payable by such Indemnified Party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by such Indemnified Party, on the one hand,
and the Borrower and its Affiliates, on the other hand, but also the relative
fault of such Indemnified Party, on the one hand, and the Borrower and its
Affiliates, on the other hand, as well as any other relevant equitable
considerations.

 

Section 16.4        Net After-Tax Basis. Indemnification under Section 16.1
shall be in an amount necessary to make the Indemnified Party whole after taking
into account any Tax consequences, on a net after-Tax basis (including, for
example, taking into account the deductibility of an applicable underlying
damage, cost or expense) to the Indemnified Party of the receipt of the
indemnity provided hereunder (or of the incurrence of such applicable underlying
damage, cost or expense), including the effect of such Tax or refund on the
amount of Tax measured by net income or profits that is or was payable by the
Indemnified Party.

 

Article XVII

MISCELLANEOUS

 

Section 17.1        No Waiver; Remedies. No failure on the part of any Lender,
the Administrative Agent, the Collateral Agent, any Indemnified Party or any
Affected Person to exercise, and no delay in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise by any of them of any right, power or remedy hereunder preclude
any other or further exercise thereof, or the exercise of any other right, power
or remedy. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law. Without limiting the foregoing, each Lender is hereby
authorized by the Borrower during the existence of a Facility Termination Event,
to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by it to or for the credit or the
account of the Borrower to the amounts owed by the Borrower under this
Agreement, to the Administrative Agent, the Collateral Agent, any Affected
Person, any Indemnified Party or any Lender or their respective successors and
assigns.

 

Section 17.2        Amendments, Waivers. This Agreement may not be amended,
supplemented or modified nor may any provision hereof be waived except in
accordance with the provisions of this Section 17.2. The Borrower and the
Administrative Agent may, upon written notice to the Investment Manager, from
time to time enter into written amendments, supplements, waivers or
modifications hereto for the purpose of adding any provisions to this Agreement
or changing in any manner the rights of any party hereto or waiving, on such
terms and conditions as may be specified in such instrument, any of the
requirements of this Agreement; provided, that no such amendment, supplement,
waiver or modification shall (i) reduce the amount of or extend the maturity of
any payment with respect to an Advance or reduce the rate or extend the time of
payment of Yield thereon, or reduce or alter the timing of any other amount
payable to any Lender hereunder, in each case without the consent of each Lender
affected thereby, (ii) amend, modify or waive any provision of this Section 17.2
or Section 17.11, or reduce the percentage specified in the definition of
Required Lenders, in each case without the written consent of all Lenders, (iii)
amend, modify or waive any provision adversely affecting the obligations or
duties of the Collateral Agent, in each case without the prior written consent
of the Collateral Agent, (iv) amend, modify or waive any provision adversely
affecting the obligations or duties of the Administrative Agent, in each case
without the prior written consent of the Administrative Agent, (v) amend, modify
or waive any provision adversely affecting the obligations or duties of the
Collateral Custodian, in each case without the prior written consent of the
Collateral Custodian or (vi) materially affects the rights or duties of the
Investment Manager unless the Investment Manager has consented thereto. Any
waiver of any provision of this Agreement shall be limited to the provisions
specifically set forth therein for the period of time set forth therein and
shall not be construed to be a waiver of any other provision of this Agreement.

 

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Section 17.3        Notices, Etc. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be personally delivered or sent by certified
mail, electronic mail, postage prepaid, or by facsimile, to the intended party
at the address or facsimile number of such party set forth under its name on
Annex A or at such other address or facsimile number as shall be designated by
such party in a written notice to the other parties hereto. All such notices and
communications shall be effective, (a) if personally delivered, when received,
(b) if sent by certified mail, three Business Days after having been deposited
in the mail, postage prepaid, (c) if sent by overnight courier, one Business Day
after having been given to such courier, and (d) if transmitted by facsimile,
when sent, receipt confirmed by telephone or electronic means, except that
notices and communications pursuant to Section 2.2, shall not be effective until
received.

 

Section 17.4        Costs and Expenses. In addition to the rights of
indemnification granted under Section 16.1, the Borrower agrees to pay on demand
all reasonable and documented out-of-pocket costs and expenses of the
Administrative Agent, the Collateral Agent, the Collateral Custodian, the Agents
and the Lenders in connection with the preparation, execution, delivery,
syndication and administration of this Agreement, any liquidity support facility
and the other documents and agreements to be delivered hereunder or with respect
hereto, in each case, subject to any cap on such costs and expenses agreed upon
in a separate letter agreement among the Borrower, the Investment Manager and
the Administrative Agent or the Collateral Agent and Collateral Custodian Fee
Letter, as applicable, and the Borrower further agrees to pay all reasonable and
documented out-of-pocket costs and expenses of the Administrative Agent in
connection with any amendments, waivers or consents executed in connection with
this Agreement, including the reasonable fees and out-of-pocket, documented
expenses of counsel for the Administrative Agent, the Collateral Agent, the
Collateral Custodian, the Agents and the Lenders with respect thereto and with
respect to advising the Administrative Agent and the Lenders as to its rights
and remedies under this Agreement, and to pay all reasonable, documented and
out-of-pocket costs and expenses, if any (including reasonable counsel fees and
expenses), of the Administrative Agent, the Collateral Agent, the Collateral
Custodian, the Agents and the Lenders, in connection with the enforcement
against the Investment Manager or the Borrower of this Agreement or any of the
other Transaction Documents and the other documents and agreements to be
delivered hereunder or with respect hereto; provided, that in the case of
reimbursement of (A) counsel for the Lenders other than the Administrative
Agent, such reimbursement shall be limited to one counsel for all the
Administrative Agent, the Agents and Lenders and (B) counsel for the Collateral
Agent and Collateral Custodian shall be limited to one counsel for such Persons.
For the avoidance of doubt, the costs and expenses described in this Section
17.4 shall not include Taxes.

 

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Section 17.5        Binding Effect; Survival. This Agreement shall be binding
upon and inure to the benefit of Borrower, the Lenders, the Administrative
Agent, the Collateral Agent, the Collateral Custodian and their respective
successors and assigns, and the provisions of Section 4.3, Article V, and
Article XVI shall inure to the benefit of the Affected Persons and the
Indemnified Parties, respectively, and their respective successors and assigns;
provided, nothing in the foregoing shall be deemed to authorize any assignment
not permitted by Article XV. This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its terms, and
shall remain in full force and effect until (subject to the immediately
following sentence) such time when all Obligations have been finally and fully
paid in cash and performed. The rights and remedies with respect to any breach
of any representation and warranty made by the Borrower pursuant to Article IX
and the indemnification and payment provisions of Article V. Article XVI and the
provisions of Section 17.10, Section 17.11 and Section 17.12 shall be continuing
and shall survive any termination of this Agreement and any termination of the
Investment Manager under the Investment Management Agreement.

 

Section 17.6        Captions and Cross References. The various captions
(including the table of contents) in this Agreement are provided solely for
convenience of reference and shall not affect the meaning or interpretation of
any provision of this Agreement. Unless otherwise indicated, references in this
Agreement to any Section, Schedule or Exhibit are to such Section of or Schedule
or Exhibit to this Agreement, as the case may be, and references in any Section,
subsection, or clause to any subsection, clause or subclause are to such
subsection, clause or subclause of such Section, subsection or clause.

 

Section 17.7        Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.

 

Section 17.8        GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK.

 

Section 17.9        Counterparts. This Agreement may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
but all of which shall constitute together but one and the same agreement.

 

Section 17.10       WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF THE BORROWER, THE INVESTMENT MANAGER, THE ADMINISTRATIVE
AGENT, THE AGENTS, THE INVESTORS OR ANY OTHER AFFECTED PERSON. EACH PARTY HERETO
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION
FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER TRANSACTION DOCUMENT
TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR ITS
ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER TRANSACTION DOCUMENT.

 

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Section 17.11       No Proceedings.

 

(a)        Notwithstanding any other provision of this Agreement, each of the
Collateral Agent, the Collateral Custodian, each Agent, each Lender and the
Administrative Agent hereby agrees that it will not institute against the
Borrower, or join any other Person in instituting against the Borrower, any
insolvency proceeding (namely, any proceeding of the type referred to in the
definition of Insolvency Event) so long as any Advances or other amounts due
from the Borrower hereunder shall be outstanding or there shall not have elapsed
one year plus one day since the last day on which any such Advances or other
amounts shall be outstanding. The foregoing shall not limit such Person’s right
to file any claim in or otherwise take any action with respect to any insolvency
proceeding that was instituted by any Person other than such Person.

 

(b)        Each of the parties hereto hereby agrees that it will not institute
against, or join any other Person in instituting against any Conduit Lender, any
insolvency proceeding (namely, any proceeding of the type referred to in the
definition of Insolvency Event) so long as any commercial paper note issued by
such applicable Conduit Lender shall be outstanding or there shall not have
elapsed one year plus one day since the last day on which any such commercial
paper notes shall be outstanding.

 

Section 17.12        Limited Recourse. No recourse under any obligation,
covenant or agreement of a Lender contained in this Agreement shall be had
against any incorporator, stockholder, officer, director, member, manager,
employee or agent of any Lender or any of their respective Affiliates (solely by
virtue of such capacity) by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise; it being expressly
agreed and understood that this Agreement is solely a corporate obligation of
each Lender, and that no personal liability whatever shall attach to or be
incurred by any incorporator, stockholder, officer, director, member, manager,
employee or agent of any Lender or any of their respective Affiliates (solely by
virtue of such capacity) or any of them under or by reason of any of the
obligations, covenants or agreements of a Lender contained in this Agreement, or
implied therefrom, and that any and all personal liability for breaches by a
Lender of any of such obligations, covenants or agreements, either at common law
or at equity, or by statute, rule or regulation, of every such incorporator,
stockholder, officer, director, member, manager, employee or agent is hereby
expressly waived as a condition of and in consideration for the execution of
this Agreement.

 

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Notwithstanding anything to the contrary in this Agreement or in any of the
Transaction Documents, the parties hereto acknowledge that the obligations of
any Conduit Lender arising hereunder are limited recourse obligations payable
solely from the unsecured assets of such Conduit Lender (the “Available Funds”)
and, following the application of such Available Funds or the proceeds thereof,
any claims of the parties hereto (and the obligations of such Conduit Lender)
shall be extinguished. No recourse shall be had for the payment of any amount
owing under this Agreement against any officer, member, director, employee,
security holder or incorporator of any Conduit Lender or its successors or
assigns, and no action may be brought against any officer, member, director,
employee, security holder or incorporator of any Conduit Lender personally;
provided that the foregoing shall not relieve any such Persons from any
liability they might otherwise have as a result of fraudulent actions taken or
omissions made by them. The parties hereto agree that they will not petition a
court, or take any action or commence any proceedings, for the liquidation or
the winding-up of, or the appointment of an examiner to, any Conduit Lender or
any other bankruptcy or insolvency proceedings with respect to such Conduit
Lender; provided that nothing in this sentence shall limit the right of any
party hereto to file any claim or otherwise take any action with respect to any
proceeding of the type described in this sentence that was instituted against
any Conduit Lender by any Person other than such party. The provisions of this
paragraph shall survive the termination of this Agreement.

 

Each Conduit Lender shall only be required to pay (a) any fees or liabilities
that it may incur under this Agreement only to the extent such Conduit Lender
has Excess Funds on the date of such determination and (b) any expenses,
indemnities or other liabilities that it may incur under this Agreement or any
fees, expenses, indemnities or other liabilities under any other Transaction
Document only to the extent such Conduit Lender receives funds designated for
such purposes or to the extent it has Excess Funds not required, after giving
effect to all amounts on deposit in its commercial paper account, to pay or
provide for the payment of all of its outstanding commercial paper notes as of
the date of such determination. In addition, no amount owing by any Conduit
Lender hereunder in excess of the liabilities that such Conduit Lender is
required to pay in accordance with the preceding sentence shall constitute a
“claim” (as defined in Section 101(5) of the Bankruptcy Code) against such
Conduit Lender.

 

Section 17.13        ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER TRANSACTION
DOCUMENTS EXECUTED AND DELIVERED HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

 

Section 17.14        Confidentiality. (a)        The Borrower, the Investment
Manager, the Collateral Custodian and the Collateral Agent shall hold in
confidence, and not disclose to any Person, the identity of any Lender or the
terms of any fees payable in connection with this Agreement except they may
disclose such information (i) to their officers, directors, employees, agents,
counsel, accountants, auditors, advisors, prospective lenders, equity investors
or representatives, (ii) with the consent of such Lender, (iii) to the extent
such information has become available to the public other than as a result of a
disclosure by or through such Person, or (iv) to the extent the Borrower, the
Investment Manager, the Collateral Custodian or the Collateral Agent or any
Affiliate of any of them should be required by any law or regulation applicable
to it (including securities laws) or requested by any Official Body to disclose
such information.

 

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(b)        The Administrative Agent, the Collateral Agent, the Collateral
Custodian, each Agent and each Lender, severally and with respect to itself
only, covenants and agrees that any information about the Borrower or its
Affiliates or the Obligors, the Collateral Obligations, the Related Security or
otherwise obtained by the Administrative Agent, the Collateral Agent or such
Lender pursuant to this Agreement shall be held in confidence (it being
understood that documents provided to the Administrative Agent hereunder may in
all cases be distributed by the Administrative Agent to the Lenders) except that
the Administrative Agent, the Collateral Agent, the Collateral Custodian or such
Lender may disclose such information (i) to its affiliates, officers, directors,
employees, agents, counsel, accountants, auditors, advisors or representatives,
(ii) to the extent such information has become available to the public other
than as a result of a disclosure by or through the Administrative Agent, the
Collateral Agent, the Collateral Custodian or such Lender, (iii) to the extent
such information was available to the Administrative Agent or such Lender on a
non-confidential basis prior to its disclosure to the Administrative Agent or
such Lender hereunder, (iv) with the consent of the Investment Manager, (v) to
the extent permitted by Article XV, or (vi) to the extent the Administrative
Agent or such Lender should be (A) required in connection with any legal or
regulatory proceeding or (B) requested by any Official Body to disclose such
information; provided, that in the case of clause (vi) above, the Administrative
Agent or such Lender, as applicable, will use reasonable efforts to maintain
confidentiality and will (unless otherwise prohibited by law) notify the
Investment Manager of its intention to make any such disclosure prior to making
any such disclosure.

 

Section 17.15        Non-Confidentiality of Tax Treatment. All parties hereto
agree that each of them and each of their employees, representatives, and other
agents may disclose to any and all Persons, without limitation of any kind, the
tax treatment and tax structure of the transaction and all materials of any kind
(including, without limitation, opinions or other tax analyses) that are
provided to any of them relating to such tax treatment and tax structure. “Tax
treatment” and “tax structure” shall have the same meaning as such terms have
for purposes of Treasury Regulation Section 1.6011-4; provided that with respect
to any document or similar item that in either case contains information
concerning the tax treatment or tax structure of the transaction as well as
other information, the provisions of this Section 17.15 shall only apply to such
portions of the document or similar item that relate to the tax treatment or tax
structure of the transactions contemplated hereby.

 

Section 17.16        Replacement of Lenders.

 

(a)        If any Lender requests compensation under Section 5.1, or requires
the Borrower to pay any Indemnified Taxes or additional amounts to any Lender or
Official Body for the account of any Lender pursuant to Section 4.3, then such
Lender shall (at the request of the Borrower) use reasonable efforts to
designate a different lending office for funding or booking the Obligations or
to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to Section 4.3
or Section 5.1, as the case may be, in the future, and (ii) would not subject
such Lender to any material unreimbursed cost or expense and would not otherwise
be materially disadvantageous to such Lender. The Borrower hereby agrees to pay
all reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.

 

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(b)        At any time there is more than one Lender, the Borrower shall be
permitted, at its sole expense and effort, to replace any Lender, except (i) the
Administrative Agent or (ii) any Lender which is administered by the
Administrative Agent or an Affiliate of the Administrative Agent, that
(a) requests reimbursement, payment or compensation for any amounts owing
pursuant to Section 4.3 or Section 5.1 or (b) has received a written notice from
the Borrower of an impending change in law that would entitle such Lender to
payment of additional amounts pursuant to Section 4.3 or Section 5.1, unless
such Lender designates a different lending office before such change in law
becomes effective pursuant to Section 17.16(a) and such alternate lending office
obviates the need for the Borrower to make payments of additional amounts
pursuant to Section 4.3 or Section 5.1 or (c) has not consented to any proposed
amendment, supplement, modification, consent or waiver, each pursuant to
Section 17.2 or (d) defaults in its obligation to make Advances hereunder;
provided, that (i) nothing herein shall relieve a Lender from any liability it
might have to the Borrower or to the other Lenders for its failure to make any
Advance, (ii) the replacement financial institution shall purchase, at par, all
Advances and other amounts owing to such replaced Lender on or prior to the date
of replacement, (iii) during the Revolving Period, the replacement financial
institution, if not already a Lender, shall be reasonably satisfactory to the
Administrative Agent, (iv) the replaced Lender shall be obligated to make such
replacement in accordance with the provisions of Section 15.5, (v) until such
time as such replacement shall be consummated, the Borrower shall pay all
additional amounts (if any) for Increased Costs or Indemnified Taxes, as the
case may be, (vi) any such replacement shall not be deemed to be a waiver of any
rights that the Borrower, the Administrative Agent or any other Lender shall
have against the replaced Lender, and (vii) if such replacement is being
effected as a result of a Lender requesting compensation pursuant to Section 4.3
or Section 5.1, such replacement, if effected, will result in a reduction in
such compensation or payment thereafter. Notwithstanding anything to the
contrary contained herein or in the Fee Letter, in the event that the
Administrative Agent or an Affiliate of the Administrative Agent takes any
action described in the foregoing clauses (a), (b) or (d), the Borrower may
elect to prepay all outstanding Advances and terminate the remaining Commitments
hereunder. Notwithstanding anything contained to the contrary in this Agreement,
no Lender removed or replaced under the provisions hereof shall have any right
to receive any amounts set forth in Section 2.5(b) in connection with such
removal or replacement. A Lender shall not be required to make any such
assignment or delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrower to require such
assignment and delegation cease to apply.

 

Section 17.17        Consent to Jurisdiction. Each party hereto hereby
irrevocably submits to the non-exclusive jurisdiction of any New York State or
Federal court sitting in New York City in any action or proceeding arising out
of or relating to the Transaction Documents, and each party hereto hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such New York State court or, to the extent permitted
by law, in such Federal court. The parties hereto hereby irrevocably waive, to
the fullest extent they may effectively do so, the defense of an inconvenient
forum to the maintenance of such action or proceeding. The parties hereto agree
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.

 

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Section 17.18        Option to Acquire Rating. Each party hereto hereby
acknowledges and agrees that the Administrative Agent (on behalf and at the
expense of the Lenders) may, at any time and in its sole discretion, obtain a
public rating for this loan facility. The Borrower and the Investment Manager
hereby agree to use commercially reasonable efforts, at the request of the
Administrative Agent, to cooperate with the acquisition and maintenance of any
such rating.

 

Article XVIII

COLLATERAL CUSTODIAN

 

Section 18.1        Designation of Collateral Custodian. The role of Collateral
Custodian with respect to the Collateral Obligation Files shall be conducted by
the Person designated as Collateral Custodian hereunder from time to time in
accordance with this Section 18.1. Wells Fargo Bank, National Association is
hereby appointed as, and hereby accepts such appointment and agrees to perform
the duties and obligations of, Collateral Custodian pursuant to the terms
hereof.

 

Section 18.2        Duties of the Collateral Custodian.

 

(a)        Duties. The Collateral Custodian shall perform, on behalf of the
Secured Parties, the following duties and obligations:

 

(i)        The Collateral Custodian, as the duly appointed agent of the Secured
Parties, for these purposes, acknowledges that the Borrower shall cause the
Investment Manager to deliver, on or prior to the applicable Funding Date (but
no more than five (5) Business Days after such Funding Date, except as set forth
in Section 10.22), the Collateral Obligation Files delivered to it for each
Collateral Obligation listed on the Schedule of Collateral Obligations attached
to the related Asset Approval Request. The Collateral Custodian acknowledges
that in connection with any Asset Approval Request, additional Collateral
Obligation Files (specified on an accompanying Schedule of Collateral
Obligations supplement) may be delivered to the Collateral Custodian from time
to time, and that the Collateral Custodian will credit each Collateral
Obligation File to the Collection Account in accordance with the terms hereof.
Promptly upon the receipt of any such delivery of Collateral Obligation Files
and without any review, the Collateral Custodian shall send notice of such
receipt to the Investment Manager and the Administrative Agent.

 

(ii)       With respect to each Collateral Obligation File which has been or
will be delivered to the Collateral Custodian, the Collateral Custodian is
acting exclusively as the custodian of the Secured Parties, and has no
instructions to hold any Collateral Obligation File for the benefit of any
Person other than the Secured Parties and undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement. In so taking
and retaining custody of the Collateral Obligation Files, the Collateral
Custodian shall be deemed to be acting for the purpose of perfecting the
Collateral Agent’s security interest therein under the UCC. Except upon
compliance with the provisions of Section 18.5, no Collateral Obligation File or
other document constituting a part of a Collateral Obligation File shall be
released from the possession of the Collateral Custodian.

 

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(iii)      The Collateral Custodian shall maintain continuous custody of all
items in its possession in secure facilities in accordance with customary
standards for such custody and shall reflect in its records the interest of the
Secured Parties therein. Each Collateral Obligation File which comes into the
possession of the Collateral Agent (other than documents delivered
electronically) shall be maintained in fire-resistant vaults or cabinets at the
office of the Collateral Custodian. Each Collateral Obligation File shall be
marked with an appropriate identifying label and maintained in such manner so as
to permit retrieval and access by the Collateral Custodian and the
Administrative Agent. The Collateral Custodian shall keep the Collateral
Obligation Files clearly segregated from any other documents or instruments in
its files.

 

(iv)      With respect to the documents comprising each Collateral Obligation
File, the Collateral Custodian shall (i) act exclusively as Collateral Custodian
for the Secured Parties, (ii) hold all documents constituting such Collateral
Obligation File received by it for the exclusive use and benefit of the Secured
Parties and (iii) make disposition thereof only in accordance with the terms of
this Agreement or with written instructions furnished by the Administrative
Agent; provided, that in the event of a conflict between the terms of this
Agreement and the written instructions of the Administrative Agent, the
Administrative Agent’s written instructions shall control.

 

(v)       The Collateral Custodian shall accept only written instructions of an
Executive Officer, in the case of the Borrower or the Investment Manager, or a
Responsible Officer, in the case of the Administrative Agent, concerning the
use, handling and disposition of the Collateral Obligation Files.

 

(vi)      In the event that (i) the Borrower, the Administrative Agent, the
Investment Manager, the Collateral Custodian or the Collateral Agent shall be
served by a third party with any type of levy, attachment, writ or court order
with respect to any Collateral Obligation File or a document included within a
Collateral Obligation File or (ii) a third party shall institute any court
proceeding by which any Collateral Obligation File or a document included within
a Collateral Obligation File shall be required to be delivered otherwise than in
accordance with the provisions of this Agreement, the party receiving such
service shall promptly deliver or cause to be delivered to the other parties to
this Agreement (to the extent not prohibited by Applicable Law) copies of all
court papers, orders, documents and other materials concerning such proceedings.
The Collateral Custodian shall, to the extent permitted by law, continue to hold
and maintain all the Collateral Obligation Files that are the subject of such
proceedings pending a final, nonappealable order of a court of competent
jurisdiction permitting or directing disposition thereof. Upon final
determination of such court, the Collateral Custodian shall dispose of such
Collateral Obligation File or a document included within such Collateral
Obligation File as directed by the Administrative Agent, which shall give a
direction consistent with such determination. Expenses of the Collateral
Custodian incurred as a result of such proceedings shall be borne by the
Borrower.

 

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(vii)      The Administrative Agent may direct the Collateral Custodian to take
any such incidental action hereunder. With respect to other actions which are
incidental to the actions specifically delegated to the Collateral Custodian
hereunder, the Collateral Custodian shall not be required to take any such
incidental action hereunder, but shall be required to act or to refrain from
acting (and shall be fully protected in acting or refraining from acting) upon
the direction of the Administrative Agent; provided that the Collateral
Custodian shall not be required to take any action hereunder at the request of
the Administrative Agent, any Secured Parties or otherwise if the taking of such
action, in the reasonable determination of the Collateral Custodian, (x) shall
be in violation of any Applicable Law or contrary to any provisions of this
Agreement or (y) shall expose the Collateral Custodian to liability hereunder or
otherwise (unless it has received indemnity which it reasonably deems to be
satisfactory with respect thereto). In the event the Collateral Custodian
requests the consent of the Administrative Agent and the Collateral Custodian
does not receive a consent (either positive or negative) from the Administrative
Agent within ten (10) Business Days of its receipt of such request, then the
Administrative Agent shall be deemed to have declined to consent to the relevant
action.

 

(viii)     The Collateral Custodian shall not be liable for any action taken,
suffered or omitted by it in accordance with the request or direction of any
Secured Party, to the extent that this Agreement provides such Secured Party the
right to so direct the Collateral Custodian, or the Administrative Agent. The
Collateral Custodian shall not be deemed to have notice or knowledge of any
matter hereunder, including a Facility Termination Event, unless a Responsible
Officer of the Collateral Custodian has knowledge of such matter or written
notice thereof is received by the Collateral Custodian.

 

Section 18.3        Delivery of Collateral Obligation Files. (a)        In
connection with each delivery of a Collateral Obligation File to the Collateral
Custodian, the Borrower shall represent, warrant and agree that the Collateral
Obligation Files delivered to the Collateral Custodian shall include all of the
documents listed in the related Document Checklist and all of such documents and
the information contained in the Schedule of Collateral Obligations are complete
in all material respects and correct pursuant to a certification in the form of
Exhibit H executed by or on behalf of the Borrower.

 

(b)        Reserved.

 

(c)        With respect to any documents comprising the Collateral Obligation
File that have been delivered or are being delivered to recording offices for
recording and have not been returned to the Borrower or the Investment Manager
in time to permit their delivery hereunder at the time required, in lieu of
delivering such original documents, the Borrower or the Investment Manager shall
indicate such on a Schedule of Collateral Obligations supplement and deliver to
the Collateral Custodian a true copy thereof. The Borrower or the Investment
Manager shall deliver such original documents to the Collateral Custodian
promptly when they are received.

 

Section 18.4        Collateral Obligation File Certification. (a)        On or
prior to each Funding Date, the Borrower shall cause the Investment Manager to
provide a Schedule of Collateral Obligations and related Document Checklist
dated as of such Funding Date to the Collateral Custodian and the Administrative
Agent (such information contained on the Schedule of Collateral Obligations
shall also be delivered to the Collateral Custodian and the Administrative Agent
simultaneously in Microsoft Excel format) with respect to the Collateral
Obligations to be delivered to the Collateral Agent on such Funding Date.

 

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(b)        In connection with (and as a part of) each Monthly Report, with
respect to the Collateral Obligation Files delivered at least three (3) Business
Days’ prior to the related Reporting Date, the Collateral Custodian shall
prepare a report (to be included as a part of each Monthly Report) in respect of
each of the Collateral Obligations, to the effect that, as to each Collateral
Obligation listed on the Schedule of Collateral Obligations attached to the
related Advance Request or Reinvestment Request, based on the Collateral
Custodian’s examination of the Collateral Obligation File for each Collateral
Obligation and the related Document Checklist, except for variances from the
documents identified in the Document Checklist with respect to the related
Collateral Obligation Files (“Exceptions”), (i) all documents required to be
delivered in respect of such Collateral Obligations pursuant to the Document
Checklist have been delivered and are in the possession of the Collateral
Custodian as part of the Collateral Obligation File for such Collateral
Obligation (other than those released pursuant to Section 18.5), and (ii) all
such documents have been reviewed by the Collateral Custodian and appear on
their face to be regular and to relate to such Collateral Obligation. The
Collateral Custodian shall also maintain records of the total number of
Collateral Obligation Files that do not have the documents provided on the
Document Checklist and will include such total in each Monthly Report.

 

(c)        Notwithstanding any language to the contrary herein, the Collateral
Custodian shall make no representations as to, and shall not be responsible to
verify, (i) the validity, legality, ownership, title, perfection, priority,
enforceability, due authorization, recordability, sufficiency for any purpose,
or genuineness of any of the documents contained in each Collateral Obligation
File or (ii) the collectability, insurability, effectiveness or suitability of
any such Collateral Obligation.

 

Section 18.5        Release of Collateral Obligation Files. (a)        Upon
satisfaction of any of the conditions set forth in Section 12.3, the Borrower
shall cause the Investment Manager to provide an Officer’s Certificate to such
effect to the Collateral Custodian (with a copy to the Collateral Agent) and
shall request in writing delivery to it of the Collateral Obligation File and a
copy thereof shall be sent concurrently by the Investment Manager to the
Administrative Agent. Upon receipt of such certification and request, unless it
receives notice to the contrary from the Administrative Agent, the Collateral
Custodian shall within three Business Days release the related Collateral
Obligation File to the Investment Manager and the Investment Manager will not be
required to return the related Collateral Obligation File to the Collateral
Custodian.

 

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(b)        From time to time and as appropriate for the management or
foreclosure of any of the Collateral Obligations, including, for this purpose,
collection under any insurance policy relating to the Collateral Obligations,
the Collateral Custodian shall, upon receipt of a Request for Release and
Receipt substantially in the form of Exhibit F-2 from an authorized
representative of the Investment Manager (as listed on Exhibit F-1, as such
exhibit may be amended from time to time by the Investment Manager with notice
to the Collateral Custodian and the Administrative Agent), release the related
Collateral Obligation File or the documents set forth in such Request for
Release and Receipt to the Investment Manager. In the event an Unmatured
Facility Termination Event, a Facility Termination Event, an Unmatured
Investment Manager Event of Default or an Investment Manager Event of Default
has occurred and is continuing, the Borrower shall not permit the Investment
Manager to make any such request with respect to any original documents unless
the Administrative Agent shall have consented in writing thereto (which consent
may be evidenced by an executed counterpart to such request). The Borrower shall
cause the Investment Manager to return each and every original document
previously requested from the Collateral Obligation File to the Collateral
Custodian when the need therefor by the Investment Manager no longer exists
unless (x) the Collateral Obligation File or such document has been delivered to
an attorney, or to a public trustee or other public official as required by law,
for purposes of initiating or pursuing legal action or other proceedings for the
foreclosure of the Related Security either judicially or non-judicially, and (y)
the Investment Manager has delivered to the Collateral Custodian a certificate
executed by an Executive Officer certifying as to the name and address of the
Person to which such Collateral Obligation File or such document was delivered
and the purpose or purposes of such delivery, in which case the Investment
Manager shall complete such return as soon as possible. Upon receipt of a
certificate of the Investment Manager substantially in the form of Exhibit F-3,
with a copy to the Administrative Agent, stating that such Collateral Obligation
was either (x) liquidated and that all amounts received or to be received in
connection with such liquidation that are required to be deposited have been so
deposited, or (y) sold pursuant to an Optional Sale in accordance with Section
7.10, the Collateral Custodian shall within three (3) Business Days release the
Request for Release and Receipt to the Investment Manager, or, in connection
with an Optional Sale, the requested Collateral Obligation File, and the
Investment Manager will not be required to return the related Collateral
Obligation File to the Collateral Custodian.

 

(c)        Notwithstanding anything to the contrary set forth herein, the
Borrower shall not permit the Investment Manager to, without the prior written
consent of the Administrative Agent, request any documents (other than copies
thereof) held by the Collateral Custodian if the sum of the unpaid Principal
Balances of all Collateral Obligations for which the Investment Manager is then
in possession of the related Collateral Obligation File or any document
comprising such Collateral Obligation File (other than for Collateral
Obligations then held by the Investment Manager which have been sold,
repurchased, paid off or liquidated in accordance with this Agreement)
(including the documents to be requested) exceeds 5% of the Adjusted Aggregate
Eligible Collateral Obligation Balance. The Investment Manager may hold, and
hereby acknowledges that it shall hold, any documents and all other property
included in the Collateral that it may from time to time receive hereunder as
Collateral Custodian for the Secured Parties solely at the will of the
Collateral Custodian and the Secured Parties for the sole purpose of
facilitating the management of the Collateral Obligations and such retention and
possession shall be in a custodial capacity only. To the extent the Investment
Manager, as agent of the Collateral Custodian and the Borrower, holds any
Collateral, the Borrower shall cause the Investment Manager to do so in
accordance with the Investment Management Standard as such standard applies to
investment managers acting as custodial agent. The Borrower shall cause the
Investment Manager to promptly report to the Collateral Custodian and the
Administrative Agent the loss by it of all or part of any Collateral Obligation
File previously provided to it by the Collateral Custodian and shall promptly
take appropriate action to remedy any such loss. In such custodial capacity, the
Borrower shall cause the Investment Manager to perform the following powers and
duties:

 

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(i)        hold the Collateral Obligation Files and any document comprising a
Collateral Obligation File that it may from time to time receive hereunder from
the Collateral Custodian for the benefit of the Collateral Custodian, on behalf
of the Secured Parties, maintain accurate records pertaining to each Collateral
Obligation to enable it to comply with the terms and conditions of this
Agreement, and maintain a current inventory thereof;

 

(ii)       implement policies and procedures consistent with the Investment
Management Standard and requirements of this Agreement so that the integrity and
physical possession of such Collateral Obligation Files will be maintained; and

 

(iii)      take all other actions, in accordance with the Investment Management
Standard, in connection with maintaining custody of such Collateral Obligation
Files on behalf of the Collateral Agent.

 

Acting as custodian of the Collateral Obligation Files pursuant to this
Section 18.5, the Borrower shall cause the Investment Manager to agree that it
does not and will not have or assert any beneficial ownership interest in the
Collateral Obligations or the Collateral Obligation Files.

 

Section 18.6        Examination of Collateral Obligation Files. Upon reasonable
prior notice to the Collateral Custodian, the Borrower, the Investment Manager
and their agents, accountants, attorneys and auditors will be permitted during
normal business hours to examine and make copies of the Collateral Obligation
Files, documents, records and other papers in the possession of or under the
control of the Collateral Custodian relating to any or all of the Collateral
Obligations. Prior to the occurrence of an Unmatured Facility Termination Event,
a Facility Termination Event, an Unmatured Investment Manager Event of Default
or an Investment Manager Event of Default, upon the request of the
Administrative Agent and at the cost and expense of the Borrower, the Collateral
Custodian shall promptly provide the Administrative Agent with the Collateral
Obligation Files or copies, as designated by the Administrative Agent, subject
to any applicable cap on costs and expenses, the Collateral Custodian shall
promptly provide the Administrative Agent with the Collateral Obligation Files
or copies, as designated by the Administrative Agent; provided, the Collateral
Custodian shall not be required to provide such copies if it does not receive
adequate assurance of payment.

 

Section 18.7        Lost Note Affidavit. In the event that the Collateral
Custodian fails to produce any original promissory note delivered to it related
to a Collateral Obligation that was in its possession pursuant to Section 10.22
within five (5) Business Days after required or requested by the Administrative
Agent and provided that (a) the Collateral Custodian previously certified in
writing to the Administrative Agent that it had received such original
promissory note and (b) such original promissory note is not outstanding
pursuant to a Request for Release and Receipt, then the Collateral Custodian
shall with respect to any missing original promissory note, promptly deliver to
the Administrative Agent upon request a lost note affidavit.

 

Section 18.8        Transmission of Collateral Obligation Files. Written
instructions as to the method of shipment and shipper(s) the Collateral
Custodian is directed to utilize in connection with the transmission of
Collateral Obligation Files in the performance of the Collateral Custodian’s
duties hereunder shall be delivered by the Borrower or the Investment Manager to
the Collateral Custodian prior to any shipment of any Collateral Obligation
Files hereunder. In the event the Collateral Custodian does not receive such
written instruction from the Borrower or the Investment Manager, the Collateral
Custodian shall be authorized and indemnified as provided herein to utilize a
nationally recognized courier service. The Borrower shall cause the Investment
Manager to arrange for the provision of such services at its sole cost and
expense (or, at the Collateral Custodian’s option, reimburse the Collateral
Custodian for all costs and expenses incurred by the Collateral Custodian
consistent with such instructions) and shall maintain such insurance against
loss or damage to the Collateral Obligation Files as the Investment Manager
deems appropriate.

 

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Section 18.9        Merger or Consolidation. Any Person (i) into which the
Collateral Custodian may be merged or consolidated, (ii) that may result from
any merger or consolidation to which the Collateral Custodian shall be a party,
or (iii) that may succeed to the properties and assets of the Collateral
Custodian substantially as a whole, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the
Collateral Custodian hereunder, shall be the successor to the Collateral
Custodian under this Agreement without further act of any of the parties to this
Agreement.

 

Section 18.10      Collateral Custodian Compensation. As compensation for its
Collateral Custodian activities hereunder and in its capacity as Securities
Intermediary under the Account Control Agreement, the Collateral Custodian shall
be entitled to its fees and expenses from the Borrower as set forth in the
Collateral Agent and Collateral Custodian Fee Letter and any other accrued and
unpaid fees, expenses (including reasonable attorneys’ fees, costs and expenses)
and indemnity amounts payable by the Borrower or the Investment Manager, or both
but without duplication, to the Collateral Custodian (including Indemnified
Amounts under Article XVI) under the Transaction Documents (which includes
amounts payable to the Securities Intermediary under the Account Control
Agreement) (collectively, the “Collateral Custodian Fees and Expenses”). The
Borrower agrees to reimburse the Collateral Custodian in accordance with the
provisions of Section 8.3 for all reasonable expenses, disbursements and
advances incurred or made by the Collateral Custodian in accordance with any
provision of this Agreement or the other Transaction Documents or in the
enforcement of any provision hereof or in the other Transaction Documents.

 

Section 18.11       Removal or Resignation of Collateral Custodian.
(a)        The Collateral Custodian may at any time resign and terminate its
obligations under this Agreement upon at least 60 days’ prior written notice to
the Investment Manager, the Borrower and the Administrative Agent; provided,
that no resignation or removal of the Collateral Custodian will be permitted
unless a successor Collateral Custodian has been appointed which successor
Collateral Custodian, so long as no Unmatured Investment Manager Event of
Default, Investment Manager Event of Default, Unmatured Facility Termination
Event or Facility Termination Event has occurred and is continuing, is
reasonably acceptable to the Investment Manager. Promptly after receipt of
notice of the Collateral Custodian’s resignation, the Administrative Agent shall
promptly appoint a successor Collateral Custodian by written instrument, in
duplicate, copies of which instrument shall be delivered to the Borrower, the
Investment Manager, the resigning Collateral Custodian and to the successor
Collateral Custodian.

 

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(b)        The Administrative Agent upon at least 60 days’ prior written notice
to the Collateral Custodian, may remove and discharge the Collateral Custodian
or any successor Collateral Custodian thereafter appointed from the performance
of its duties under this Agreement for cause. Promptly after giving notice of
removal of the Collateral Custodian, the Administrative Agent shall appoint, or
petition a court of competent jurisdiction to appoint, a successor Collateral
Custodian. Any such appointment shall be accomplished by written instrument and
one original counterpart of such instrument of appointment shall be delivered to
the Collateral Custodian and the successor Collateral Custodian, with a copy
delivered to the Borrower and the Investment Manager.

 

(c)        In the event of any such resignation or removal, the Collateral
Custodian shall, no later than five (5) Business Days after receipt of notice of
the successor Collateral Custodian, transfer to the successor Collateral
Custodian, as directed in writing by the Administrative Agent, all the
Collateral Obligation Files being administered under this Agreement. The cost of
the shipment of Collateral Obligation Files arising out of the resignation of
the Collateral Custodian pursuant to Section 18.11(a), or the termination for
cause of the Collateral Custodian pursuant to Section 18.11(b), shall be at the
expense of the Collateral Custodian. Any cost of shipment arising out of the
removal or discharge of the Collateral Custodian without cause pursuant to
Section 18.11(b) shall be at the expense of the Borrower.

 

Section 18.12        Limitations on Liability. (a)        The Collateral
Custodian may conclusively rely on and shall be fully protected in acting upon
any certificate, instrument, opinion, notice, letter, telegram or other document
delivered to it and that in good faith it reasonably believes to be genuine and
that has been signed by the proper party or parties. The Collateral Custodian
may rely conclusively on and shall be fully protected in acting upon (a) the
written instructions of any designated officer of the Administrative Agent or
(b) the verbal instructions of the Administrative Agent.

 

(b)        The Collateral Custodian may consult counsel satisfactory to it and
the advice or opinion of such counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the advice or opinion of such
counsel.

 

(c)        The Collateral Custodian shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it, in good faith, or
for any mistakes of fact or law, or for anything that it may do or refrain from
doing in connection herewith except in the case of its willful misconduct or
grossly negligent performance or omission of its duties and in the case of the
grossly negligent performance of its duties in taking and retaining custody of
the Collateral Obligation Files; provided that, the Collateral Custodian hereby
agrees that any failure of the Collateral Custodian to produce an original
promissory note satisfying the conditions described in clauses (a) and (b) of
Section 18.7 shall constitute negligence.

 

(d)        The Collateral Custodian makes no warranty or representation and
shall have no responsibility (except as expressly set forth in this Agreement)
as to the content, enforceability, completeness, validity, sufficiency, value,
genuineness, ownership or transferability of the Collateral, and will not be
required to and will not make any representations as to the validity or value
(except as expressly set forth in this Agreement) of any of the Collateral. The
Collateral Custodian shall not be obligated to take any action hereunder that
might in its judgment involve any expense or liability unless it has been
furnished with an indemnity reasonably satisfactory to it.

 

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(e)        The Collateral Custodian shall have no duties or responsibilities
except such duties and responsibilities as are specifically set forth in this
Agreement and no covenants or obligations shall be implied in this Agreement
against the Collateral Custodian.

 

(f)        The Collateral Custodian shall not be required to expend or risk its
own funds in the performance of its duties hereunder. In no event shall the
Collateral Custodian be liable for any failure or delay in the performance of
its obligations hereunder because of circumstances beyond its control,
including, but not limited to, acts of God, flood, war (whether declared or
undeclared), terrorism, fire, riot, embargo, government action (including any
laws, ordinances, regulations) or the like that delay, restrict or prohibit the
providing of services by the Collateral Custodian as contemplated by this
Agreement.

 

(g)        It is expressly agreed and acknowledged that the Collateral Custodian
is not guaranteeing performance of or assuming any liability for the obligations
of the other parties hereto or any parties to the Collateral.

 

(h)        In case any reasonable question arises as to its duties hereunder,
the Collateral Custodian may, prior to the occurrence of a Facility Termination
Event or the Facility Termination Date, request instructions from the Investment
Manager and may, after the occurrence of a Facility Termination Event or the
Facility Termination Date, request instructions from the Administrative Agent,
and shall be entitled at all times to refrain from taking any action unless it
has received instructions from the Investment Manager or the Administrative
Agent, as applicable. The Collateral Custodian shall in all events have no
liability, risk or cost for any action taken pursuant to and in compliance with
the instruction of the Administrative Agent. In no event shall the Collateral
Custodian be liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the
Collateral Custodian has been advised of the likelihood of such loss or damage
and regardless of the form of action.

 

(i)        Each of the protections, reliances, indemnities and immunities
offered to the Collateral Agent in Section 11.7 and Section 11.8 shall be
afforded to the Collateral Custodian.

 

Section 18.13        Collateral Custodian as Agent of Collateral Agent. The
Collateral Custodian agrees that, with respect to any Collateral Obligation File
at any time or times in its possession or held in its name, the Collateral
Custodian shall be the agent and custodian of the Collateral Agent, for the
benefit of the Secured Parties, for purposes of perfecting (to the extent not
otherwise perfected) the Collateral Agent’s security interest in the Collateral
and for the purpose of ensuring that such security interest is entitled to first
priority status under the UCC. For so long as the Collateral Custodian is the
same entity as the Collateral Agent, the Collateral Custodian shall be entitled
to the same rights and protections afforded to the Collateral Agent hereunder.

 

[signature pages begin on next page]

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized as of the day and year first
above written.

 

 DUNLAP FUNDING LLC, as Borrower     By:/s/ Gerald F. Stahlecker   Name: Gerald
F. Stahlecker   Title:   Executive Vice President

 

 

 

 

 WELLS FARGO BANK, NATIONAL ASSOCIATION,as Collateral Agent and as Collateral
Custodian     By:/s/ José M. Rodríguez   Name: José M. Rodríguez   Title:   Vice
President

 

 

 

 

 DEUTSCHE BANK AG, NEW YORK BRANCH, as Administrative Agent     By:/s/ Amit
Patel   Name: Amit Patel   Title:   Director      By:/s/ Shawn Rose   Name:
Shawn Rose   Title:   Vice President

 

 

 

 

 DEUTSCHE BANK AG, NEW YORK BRANCH, as an Agent and as a Committed Lender    
By:/s/ Amit Patel   Name: Amit Patel   Title:   Director      By:/s/ Shawn Rose
  Name: Shawn Rose   Title:   Vice President

 

 

 

 

ANNEX A

 

DUNLAP FUNDING LLC
c/o FS Investment Corporation III

2929 Arch Street, Suite 675

Philadelphia, PA 19104
Attention: Gerald F. Stahlecker, Executive Vice President
Telephone: (215) 495-1169
Facsimile: (215) 222-4649

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Collateral Agent and Collateral Custodian

 

Wells Fargo Bank, N.A.

9062 Old Annapolis Rd.

Columbia, Maryland 21045

Attn: CDO Trust Services—Dunlap Funding LLC

Fax: (410) 715 3748

Phone: (410) 884 2000

 

Deutsche Bank AG, New York Branch,
as Administrative Agent

 

60 Wall Street

New York, New York 10005

 

Attention: Asset Finance Department
Facsimile No.: 212-797-5160

 

Deutsche Bank AG, New York Branch,
as an Agent and as a Committed Lender

 

60 Wall Street

New York, New York 10005

 

Attention: Asset Finance Department

Facsimile No.: 212-797-5160

 

A-1

 

 

Annex B

 

Lender Commitment     Deutsche Bank AG, New York Branch $100,000,000

 

B-1