Exhibit 10.4

 

SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

NEW MOUNTAIN FINANCE HOLDINGS, L.L.C.

 

This SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (as
amended, restated, supplemented or modified from and after the date hereof, this
“Agreement”) of NEW MOUNTAIN FINANCE HOLDINGS, L.L.C., a Delaware limited
liability company (the “Company”), dated as of May 8, 2014, is entered into by
New Mountain Finance Corporation, a Delaware corporation, as the sole member of
the Company (the “Managing Member”), and Michael Bondar, in his capacity as an
Independent Manager (as defined in Section 2.1(b)).

 

Preliminary Statement

 

The Company was formed under the name “New Mountain Guardian (Leveraged) L.L.C.”
pursuant to a Certificate of Formation, dated as of October 29, 2008, and a
Limited Liability Company Agreement, dated as of October 29, 2008, which Limited
Liability Company Agreement was subsequently amended and restated on May 19,
2011 (as so amended and restated, the “Original Agreement”) in order for, among
other things, the Company to qualify as a “Business Development Company” (“BDC”)
under and as defined in the Investment Company Act. Concurrently with such
amendment and restatement, the Company changed its name to New Mountain Finance
Holdings, L.L.C.

 

Beginning on May 8, 2014, the Company and the Managing Member entered into an
agreement or series of agreements (collectively, the “Assignment Agreement”)
pursuant to which, among other transactions, the Company transferred certain
non-Collateral (as defined below) assets to the Managing Member, the Company
withdrew its election to be a BDC and the Managing Member assumed certain
operational obligations of the Company (the “BDC Transaction”).

 

In order to amend the Company’s Original Agreement to reflect certain changes
resulting from the BDC Transaction, the Managing Member wishes to amend and
restate the Original Agreement as hereinafter set forth:

 

ARTICLE I
NAME, PURPOSE, ETC.

 

Section 1.1  Name.  The name of the Company is NEW MOUNTAIN FINANCE HOLDINGS,
L.L.C.

 

Section 1.2  Certificates.  The Managing Member, as an authorized person, within
the meaning of the of the Act, may execute, deliver and file, or cause the
execution, delivery and filing of, all certificates (and any amendments and/or
restatements thereof) required or permitted by the Delaware Limited Liability
Company Act, 6 Del. C. § 18-

 

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101 et seq., as it may be amended from time to time, and any successor to such
statute (the “Act”).  The existence of the Company as a separate legal entity
shall continue until cancellation of the Certificate of Formation as provided in
the Act.

 

Section 1.3  Purpose.  Notwithstanding anything to the contrary in this
Agreement or in any other document governing the Company, the sole purpose for
which the Company is organized is to engage in the following activities:

 

(a)                                to originate and to acquire commercial loans
and notes (collectively, the “Loans”), including by way of purchase or capital
contribution, and to fund a portion of such origination or the purchase price
thereof by borrowing from the Lenders under the Loan and Security Agreement (as
defined below);

 

(b)                                to purchase Loans in the secondary market
directly from third parties, to the extent permitted by the Transaction
Documents;

 

(c)                                 upon originating or purchasing a Loan that
is a commercial loan, to become a party to any related agreements as a lender in
respect of such Loan, to the extent permitted by the Transaction Documents;

 

(d)                                to dispose of or contribute Loans from time
to time, to the extent permitted by the Transaction Documents;

 

(e)                                 to hold property ancillary to the Loans such
as related equity securities and proceeds thereof, to the extent permitted by
the Transaction Documents;

 

(f)                                  to enter into and to exercise its rights
and perform its obligations under (i) the Amended and Restated Loan and Security
Agreement, dated as of May 19, 2011, among the Company, as the borrower and as
the collateral administrator (in such capacity, the “Collateral Administrator”),
each of the Lenders from time to time party thereto, Wells Fargo Securities,
LLC, as the administrative agent (in such capacity, the “Administrative Agent”),
and Wells Fargo Bank, National Association, as the Collateral Custodian (as
amended, restated, modified or supplemented, the “Loan and Security Agreement”),
(ii) the Amended and Restated Account Control Agreement, dated as of May 19,
2011, among the Company, the Administrative Agent and Wells Fargo Bank, National
Association, as the Collateral Custodian and the Securities Intermediary,
(iii) the Safekeeping Agreement, dated as of May 19, 2011, among the Company and
Wells Fargo Bank, National Association, as the Collateral Custodian, (iv) the
Amended and Restated Indemnity Agreement, dated as of May 19, 2011, between the
Company and New Mountain Guardian AIV, L.P., (v) each Variable Funding Note,
(vi) any Joinder Supplement, (vii) any Transferee Letter, (viii) the Collateral
Custodian Fee Letter, (ix) the Amended and Restated Administration Agreement,
dated as of November 8, 2011, among the Company, the Managing Member, New
Mountain Financing AIV Holdings Corporation and New

 

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Mountain Financing Administration, L.L.C., (x) the Assignment Agreement and
(xi) the servicing and indemnity agreements between the Company and its
Independent Managers (each of the foregoing items set forth in clauses (i) —
(xi), each as amended, restated, modified or supplemented, the “Transaction
Documents”);

 

(g)                                 to grant a security interest to the
Administrative Agent in, for the benefit of the Secured Parties, all of the
Company’s right, title and interest in and to all of its assets, including the
Loans and the proceeds thereof (as more specifically described in the Loan and
Security Agreement, the “Collateral”) to secure all of its obligations under the
Loan and Security Agreement; provided, Collateral shall not include any equity
interests held by the Company in New Mountain Finance SPV Funding, L.L.C., New
Mountain Finance SBIC GP, L.L.C., New Mountain Finance SBIC, L.P. or any other
wholly-owned direct or indirect subsidiary established with the prior written
consent of the Administrative Agent (collectively, “SPVs”);

 

(h)                                to enter into and to exercise its rights and
perform its obligations under back up servicing and custody agreements as
required by the Loan and Security Agreement, to open and maintain all bank
accounts and securities accounts required by the Loan and Security Agreement and
to pay all fees and expenses in connection therewith;

 

(i)                                    to own the SPVs and to engage in
activities incidental to such ownership;

 

(j)                                   to exercise its rights and perform its
obligations with respect to the BDC Transaction and the consummation thereof;

 

(k)                                to preserve and maintain its limited
liability company existence; and

 

(l)                                    to engage in any activity and to exercise
powers permitted to limited liability companies under the laws of the State of
Delaware that are incidental to the foregoing and necessary or convenient to
accomplish the foregoing.

 

The limitations on the Company’s business and activities as set out in this
Section 1.3 may not be altered except upon the consent of the Managing Member
and the unanimous affirmative vote of all the Managers (as defined below) of the
Company.

 

Section 1.4  Powers of the Company; Initial Authorizations.  Subject to all of
the provisions of this Agreement, the Company shall have the power and authority
to take any and all actions necessary, appropriate, proper, advisable,
incidental or convenient to or for the furtherance of the purposes set forth in
Section 1.3.

 

The Company is hereby authorized to negotiate, enter into, execute, amend,
deliver and perform under, and the Managing Member and the Managers, with the

 

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exception of the Independent Managers, are hereby authorized to negotiate, enter
into, execute, amend and deliver, the Transaction Documents and all documents,
agreements, certificates or financing statements contemplated thereby or related
thereto, all without any further act, vote or approval of any other Person
notwithstanding any other provision of this Agreement.

 

Section 1.5  Registered Office.  The address of the registered office of the
Company in the State of Delaware is c/o The Corporation Trust Company, 1209
Orange Street, Wilmington, New Castle County, Delaware 19801.

 

Section 1.6  Registered Agent.  The name and address of the registered agent of
the Company for service of process on the Company in the State of Delaware is
The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801.

 

Section 1.7  Qualification in Other Jurisdictions.  The Company shall be
qualified or registered under foreign limited liability company statutes in any
jurisdiction in which the Company owns property or transacts business to the
extent, in the judgment of the Board, such qualification or registration is
necessary or advisable in order to protect the limited liability of the Members
or to permit the Company lawfully to own property or transact business. The
Board shall, to the extent necessary in the judgment of the Board, maintain the
Company’s good standing in each such jurisdiction. Any authorized person of the
Company may execute, deliver and file any certificates (and any amendments
and/or restatements thereof) necessary for the Company to qualify to do business
in a jurisdiction in which the Company may wish to conduct business.

 

Section 1.8  Fiscal Year.  The fiscal year of the Company (the “Fiscal Year”)
shall end on December 31.

 

Section 1.9  Separate Legal Entity.  Notwithstanding anything to the contrary in
this Agreement or in any other document governing the Company, the Company shall
be operated in such a manner that it would not be substantively consolidated in
the estate of any Person in the event of a bankruptcy or insolvency of such
Person and in such regard, the Company shall:

 

(a)                                not engage in any business or activity other
than a business or activity permitted by this Agreement, including entering into
and performing its obligations under the Transaction Documents and other
activities contemplated by the Transaction Documents, the purchase, receipt and
management of Collateral in accordance with the Transaction Documents, the
transfer and pledge of Collateral under the Transaction Documents, the sale and
disposition of Collateral and such other activities as are incidental thereto;

 

(b)                                not acquire or own any assets other than
(i) the Collateral, (ii) Permitted Investments, (iii) equity interests in the
SPVs, (iv) incidental property as may be necessary for the operation of the
Company and the

 

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performance of its obligations under the Transaction Documents and (v) any other
assets permitted to be acquired pursuant to the Loan and Security Agreement;

 

(c)                                 not merge into or consolidate with any
Person or dissolve, terminate or liquidate in whole or in part, or (other than
in accordance with the Loan and Security Agreement) transfer or otherwise
dispose of all or substantially all of its assets, without in each case first
obtaining the consent of the Administrative Agent, or except as permitted by the
Loan and Security Agreement, change its legal structure, or jurisdiction of
formation;

 

(d)                                (i) preserve its existence as an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization or formation, (ii) not amend, modify, terminate
or fail to comply with the provisions of this Agreement other than as permitted
by Section 6.1, or (iii) observe limited liability company formalities;

 

(e)                                 not own any Subsidiary (other than the SPVs)
other than as permitted by the Loan and Security Agreement;

 

(f)                                  not make any Future Funding Investment in
any Person other than as permitted by the Loan and Security Agreement;

 

(g)                                 not commingle its assets with the assets of
any of its Affiliates, or of any other Person;

 

(h)                                not incur any indebtedness, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than indebtedness permitted to be incurred by the Loan and Security Agreement or
indebtedness incurred to refinance the obligations outstanding under the Loan
and Security Agreement in full;

 

(i)                                    not become insolvent or fail to pay its
debts and liabilities from its assets as the same shall become due;

 

(j)                                   maintain its records, books of account and
bank accounts separate and apart from those of any other Person;

 

(k)                                enter into any contract or agreement with any
Person, except (i) the Transaction Documents, (ii) other contracts or agreements
that are upon terms and conditions that are commercially reasonable and
substantially similar to those that would be available on an arms-length basis
with third parties other than such Person and (iii) as otherwise permitted by
the Loan and Security Agreement;

 

(l)                                    not seek its dissolution or winding up in
whole or in part;

 

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(m)                            correct any known misunderstandings regarding the
separate identity of the Company or any principal or Affiliate thereof or any
other Person;

 

(n)                                guarantee, become obligated for, or hold
itself out to be responsible for the debt of another Person;

 

(o)                                hold itself out to the public as a legal
entity separate and distinct from any other Person and conduct its business
solely in its own name in order not (i) to mislead others as to the identity of
the Person with which such other party is transacting business, or (ii) to
suggest that it is responsible for the debts of any third party (including any
of its principals or Affiliates);

 

(p)                                maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations;

 

(q)                                except as may be required or permitted by
Code or any regulations or other applicable state or local tax law, not hold
itself out as or be considered as a department or division of (i) any of its
principals or Affiliates, (ii) any Affiliate of a principal or (iii) any other
Person;

 

(r)                                   maintain separate company records and
books of account; provided, however, that the Company’s assets and liabilities
may be included in a consolidated financial statement of its Affiliate so long
as the separateness of the Company from such Affiliate and that the Company’s
assets and credit are not available to satisfy the debts and other obligations
of such Affiliate are disclosed by such Affiliate within all public filings that
contain such consolidated financial statements;

 

(s)                                  pay its own liabilities and expenses only
out of its own funds;

 

(t)                                   pay the salaries of its own employees, if
any, in light of its contemplated business operations;

 

(u)                                not acquire the obligations or securities of
its Affiliates or stockholders (other than any SPV);

 

(v)                                not guarantee any obligation of any person,
including an Affiliate;

 

(w)                              allocate fairly and reasonably, subject to the
Administration Agreement, any overhead expenses that are shared with an
Affiliate, including paying for office space and services performed by any
employee of an Affiliate;

 

(x)                                not pledge its assets to secure the
obligations of any other Person;

 

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(y)                                not have any material contingent or actual
obligations not related to the Collateral (other than (i) pursuant to the
Administration Agreement, (ii) in its capacity as Collateral Administrator under
any credit or loan facility entered into by an SPV, (iii) obligations incidental
to its equity ownership of any SPV, (iv) obligations in connection with
compliance with federal securities laws or (v) as permitted by the Loan and
Security Agreement);

 

(z)                                 use separate checks bearing its own name;

 

(aa)                         not consent to substantive consolidation with the
Managing Member; and

 

(bb)                         at all times have at least one Independent Manager
whose consent shall be required for the Company to take any Material Action (as
hereinafter defined).

 

Failure of the Company, or the Managing Member on behalf of the Company, to
comply with any of the foregoing covenants or any other covenants contained in
this Agreement shall not affect the status of the Company as a separate legal
entity or the limited liability of the Managing Member or the Independent
Managers.

 

Section 1.10  Applicability of the Delaware Limited Liability Company Act.  To
the extent that a Member’s rights and obligations and the administration,
dissolution, liquidation and termination of the Company are not set forth in
this Agreement, such will be governed by the Act.  To the extent that this
Agreement contains a provision contrary to an Act provision that permits its
being overridden by an operating agreement, such Act provision is overridden by
such contrary provision in this Agreement.

 

ARTICLE II

 

BOARD OF MANAGERS

 

Section 2.1  Generally.  (a) Subject to Sections 1.9, the business and affairs
of the Company shall be managed by or under the direction of a committee of the
Company (the “Board”) consisting of at least three natural persons designated as
managers (the “Managers”) as provided below.  Each of the Managers is hereby
designated as a “manager” of the Company within the meaning of the Act.  The
Board shall have discretion to manage and control the business and affairs of
the Company, to make decisions affecting the business and affairs of the
Company, and to take actions as it deems necessary or appropriate to accomplish
the purposes of the Company and to exercise all of the power and authority that
limited liability companies may take under the Act and, except as otherwise
provided in this Agreement, the Managing Member shall not have authority to bind
the Company.  Except as otherwise modified by this Agreement, in exercising
their rights and performing their duties under this Agreement, the Managers
shall have fiduciary duty of loyalty and care similar to that of a director of

 

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a business corporation organized under the General Corporation Law of the State
of Delaware.

 

(b)                                 At all times the Board shall include at
least one Manager who is an Independent Manager.  An “Independent Manager” shall
be a Manager who is not at such time, and shall have not been at any time,
(i) an officer, employee or Affiliate of the Company or any major creditor, or a
manager, officer or employee of any such Affiliate (other than an Independent
Manager or similar position of the Company or an Affiliate), or (ii) the
beneficial owner of any limited liability company interests of the Company or
any voting, investment or other ownership interests of any Affiliate of the
Company or of any major creditor.  The term “major creditor” shall mean a
financial institution to which the Managing Member, the Company, any lender to
the Company or any of their respective subsidiaries or Affiliates has
outstanding indebtedness for borrowed money in a sum sufficiently large as would
reasonably be expected to influence the judgment of the proposed Independent
Manager adversely to the interests of the Company when its interests are adverse
to those of the Managing Member, any such lender or any of their Affiliates and
successors.

 

(c)                                  At any time during which there are less
than two Independent Managers, no resignation or removal of an Independent
Manager, and no appointment of a successor Independent Manager, shall be
effective until such successor shall have accepted his or her appointment as an
Independent Manager by a written instrument.  At any time during which there are
less than two Independent Managers, in the event of a vacancy in the position of
Independent Manager, the Managing Member shall, as soon as practicable, appoint
a successor Independent Manager.  The Company shall provide the Administrative
Agent (x) no less than five (5) Business Days prior written notice before
removing an Independent Manager and (y) notice of any resignation of an
Independent Manager no later than five (5) Business Days after the occurrence of
such resignation.

 

(d)                                 To the fullest extent permitted by law,
including Section 18-1101(c) of the Act, and notwithstanding any duty otherwise
existing at law or in equity, the Independent Managers shall consider only the
interests of the Company, including its respective creditors, in acting or
otherwise voting on the matters referred to in Section 2.6.  Except for duties
to the Company as set forth in the immediately preceding sentence (including
duties to the Managing Member and the Company’s creditors solely to the extent
of their respective economic interests in the Company but excluding (i) all
other interests of the Managing Member, (ii) the interests of other Affiliates
of the Company, and (iii) the interests of any group of Affiliates of which the
Company is a part), the Independent Managers shall not have any fiduciary duties
to the Managing Member, any Officer or any other Person bound by this Agreement;
provided, however, the foregoing shall not eliminate the implied contractual
covenant of good faith and fair dealing.  To the fullest extent permitted by
law, including Section 18-1101(e) of the Act, an Independent Manager shall not
be liable to the Company, the Managing Member or any other Person bound by this
Agreement for breach of contract or breach of duties (including fiduciary
duties), unless the Independent Manager acted in bad faith or engaged in willful
misconduct.  All right, power and authority of the Independent Managers shall be
limited to the extent necessary to exercise those rights and perform those
duties specifically set

 

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forth in this Agreement.  Notwithstanding any other provision of this Agreement
to the contrary, each Independent Manager, in its capacity as an Independent
Manager, may only act, vote or otherwise participate in those matters referred
to in Section 2.6 or as otherwise specifically required by this Agreement.

 

Section 2.2  Election of Board.  The Managers shall be chosen by the Managing
Member.  The initial Managers of the Company are set forth on Annex A hereto. 
Each Manager shall hold office until a successor is selected by the Managing
Member or until such Manager’s death, resignation or removal.

 

Section 2.3  Meetings of the Board.  The Board shall meet from time to time to
discuss the business of the Company.  The Board may hold meetings either within
or outside of the State of Delaware.  Meetings of the Board may be held without
notice at such time and at such place as shall from time to time be determined
by the Board or the Managing Member.  Any Manager may call a meeting of the
Board on three days’ notice to each other Manager, either personally, by
telephone, by facsimile or by any other similarly timely means of communication.

 

Section 2.4  Action Without a Meeting.  Any action required or permitted to be
taken at any meeting of the Board may be taken without a meeting and without
prior notice if the majority of the members of the Board consent thereto in
writing or by electronic transmission, and such writing or writings or
electronic transmissions are filed with the minutes of proceedings of the
Board.  Such filing shall be in paper form if the minutes are maintained in
paper form and shall be in electronic form if the minutes are maintained in
electronic form.

 

Section 2.5  Quorum and Acts of the Board.  At all meetings of the Board, a
majority of the Managers then in office shall constitute a quorum for the
transaction of business.  Except as otherwise provided in this Agreement, the
act of a majority of the Managers present at any meeting at which there is a
quorum shall be the act of the Board.  If a quorum shall not be present at any
meeting of the Board, the Managers present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.

 

Section 2.6  Unanimous Vote of Managers.  Notwithstanding any other provision of
this Agreement or any other document governing the formation, management or
operation of the Company and notwithstanding any provision of law that otherwise
so empowers the Company, the Managing Member, the Managers, or any other Person,
neither the Managing Member, the Managers nor any other Person shall be
authorized or empowered, nor shall they permit the Company, without the prior
unanimous written consent of all of the Managers, including each Independent
Manager (and no such actions shall be taken or authorized unless there is at
least one Independent Manager then serving in such capacity), take any of the
following actions with respect to the Company (each such action, a “Material
Action”): to institute proceedings to be adjudicated bankrupt or insolvent, or
consent to the institution of bankruptcy or insolvency proceedings against the
Company, or file a petition or consent to a petition seeking reorganization or
relief under any applicable federal or state law relating to bankruptcy or
insolvency, or to seek

 

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any relief under any law relating to the relief from debts or the protection of
debtors, or consent to the appointment of a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of the Company or a
substantial part of its property, or make any assignment for the benefit of
creditors, or, except as required by law, admit in writing its inability to pay
its debts generally as they become due, or take any action in furtherance of any
of the foregoing.

 

Section 2.7  Electronic Communications.  Members of the Board, or any committee
designated by the Board, may participate in a meeting of the Board, or any
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.

 

Section 2.8  Compensation of Managers.  The Board shall have the authority to
fix the compensation of Managers.  The Managers may be paid their expenses, if
any, of attendance at such meeting of the Board and may be paid a fixed sum for
attendance at each meeting of the Board or a stated salary as Manager.  No such
payment shall preclude any Manager from serving the Company in any other
capacity and receiving compensation therefor.  Members of special or standing
committees may be allowed like compensation for attending committee meetings. 
No Manager who is an employee of the Managing Member or the Company shall
receive compensation for his or her service as a Manager.

 

Section 2.9  Resignation.  Subject to Sections 2.1(b) and 2.1(c), any Manager
may resign at any time by giving written notice to the Company.  Subject to
Sections 2.1(b) and 2.1(c), the resignation of any Manager shall take effect
upon receipt of such notice or at such later time as shall be specified in the
notice; and, unless otherwise specified in the notice, the acceptance of the
resignation by the Company, the Managing Member or the remaining Managers shall
not be necessary to make it effective.

 

Section 2.10  Removal of Managers.  If at any time the Managing Member, in its
sole discretion, notwithstanding Sections 2.1(b), but subject to Section 2.1(c),
determines to remove, with or without cause, any Manager, the Managing Member
shall have the power to take all such actions promptly as shall be necessary or
desirable to cause the removal of such Manager.  Any vacancy caused by any such
removal may be filled in accordance with Section 2.11.

 

Section 2.11  Vacancies.  If any vacancies shall occur in the Board, by reason
of death, resignation, removal or otherwise, the Managers then in office shall
continue to act, and such vacancies may be filled by the Managing Member in its
sole discretion, subject to Sections 2.1(b) and 2.1(c).  A Manager selected to
fill a vacancy shall hold office until his or her successor has been selected
and qualified or until his or her earlier death, resignation or removal.

 

Section 2.12  Managers as Agents.  The Managers, to the extent of their powers
set forth in this Agreement, are agents of the Company for the purpose of the
Company’s

 

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business, and the actions of the Managers taken in accordance with such powers
shall bind the Company.

 

Section 2.13  Special Member.  Upon the occurrence of any event that causes the
Managing Member to cease to be a member of the Company (other than upon
continuation of the Company without dissolution upon (i) an assignment by the
Managing Member of all of its limited liability company interests in the Company
and the admission of the transferee pursuant to Sections 6.8, 6.9 and 6.10, or
(ii) the resignation of the Managing Member and the admission of an additional
member of the Company pursuant to Sections 6.8, 6.9 and 6.10), each Independent
Manager shall, without any action of any Person and simultaneously with the
Managing Member ceasing to be a member of the Company, automatically be admitted
to the Company as a Special Member (each, a “Special Member”) and shall continue
the Company without dissolution.  A Special Member may not resign from the
Company or transfer its rights as the Special Member unless (i) after giving
effect to such resignation at least one Special Member remains or (ii) a
successor Special Member has been admitted, with the consent of such resigning
Special Member, to the Company as Special Member by executing a counterpart to
this Agreement, and such successor has also accepted its appointment by such
resigning Special Member as an Independent Manager pursuant to Section 2.1(b);
provided, however, each Special Member shall automatically cease to be a member
(but not an Independent Manager) of the Company upon the admission to the
Company of a substitute Member.  Each Special Member shall be a member of the
Company that has no interest in the profits, losses and capital of the Company
and has no right to receive any distributions of Company assets.  Pursuant to
Section 18-301 of the Act, each Special Member shall not be required to make any
capital contributions to the Company and shall not have any limited liability
company interest in the Company.  A Special Member, in its capacity as a Special
Member, may not bind the Company.  Except as required by any mandatory provision
of the Act (and other than with respect to the admission of a substitute Member
or successor Special Member and the appointment of an Independent Manager
pursuant to this Section 2.13), the Special Members, in its capacity as Special
Members, shall have no right to vote on, approve or otherwise consent to any
action by, or matter relating to, the Company, including, without limitation,
the merger, consolidation or conversion of the Company.  In order to implement
the admission to the Company of the Special Members, a person acting as an
Independent Manager pursuant to Section 2.1(b) shall execute a counterpart to
this Agreement.  Prior to its admission to the Company as a Special Member, a
person acting as an Independent Manager pursuant to Section 2.1(b) shall not be
a member of the Company.  By signing this Agreement, each Independent Manager
agrees that should such Independent Manager become a Special Member he will be
subject to and bound by the provisions of this Agreement applicable to the
Special Members.

 

ARTICLE III
CAPITAL CONTRIBUTIONS, ALLOCATIONS AND DISTRIBUTIONS

 

Section 3.1  Limited Liability Company Interest.  The Company’s limited
liability company interests shall be in such forms as the Managing Member shall
determine in its sole discretion.

 

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Section 3.2  Additional Capital Contributions.  The Managing Member shall have
the right, but not the obligation, to make capital contributions to the Company
in the form of cash, services or otherwise, at the times and in the amounts as
it shall determine in its sole discretion.

 

Section 3.3  Allocations and Distributions.  Except as otherwise provided in
this Agreement, profits, losses and, to the extent necessary, individual items
of income, gain, loss or deduction, of the Company shall be made solely to the
Managing Member when and as determined by the Managing Member.  The Company
shall not declare or permit any distribution to the Managing Member other than
out of legally available funds or otherwise in accordance with the Transaction
Documents.

 

ARTICLE IV
DISSOLUTION

 

The Company shall be dissolved, and its affairs shall be wound up upon the first
to occur of the following:  (a) the termination of the legal existence of the
last remaining member of the Company or the occurrence of any other event which
terminates the continued membership of the last remaining member of the Company
in the Company unless the Company is continued without dissolution in a manner
permitted by this Agreement or the Act or (b) the entry of a decree of judicial
dissolution under Section 18-802 of the Act.  Upon the occurrence of any event
that causes the last remaining member of the Company to cease to be a member of
the Company or that causes the Managing Member to cease to be a member of the
Company (other than upon continuation of the Company without dissolution upon
(x) an assignment by the Managing Member of all of its limited liability company
interests in the Company and the admission of the transferee pursuant to
Sections 6.8, 6.9 and 6.10, or (y) the resignation of the Managing Member and
the admission of an additional member of the Company pursuant to Sections 6.8,
6.9 and 6.10), to the fullest extent permitted by law, the personal
representative of such member is hereby authorized to, and shall, within 90 days
after the occurrence of the event that terminated the continued membership of
such member in the Company, agree in writing (i) to continue the Company and
(ii) to the admission of the personal representative or its nominee or designee,
as the case may be, as a substitute member of the Company, effective as of the
occurrence of the event that terminated the continued membership in the Company
of such member in the Company.

 

In the event of dissolution, the Company shall conduct only such activities as
are necessary to wind up its affairs (including the sale of the assets of the
Company in an orderly manner), and the assets of the Company shall be applied in
the manner, and in the order of priority, set forth in Section 18-804 of the
Act.

 

The Company shall terminate when (i) all of the assets of the Company, after
payment of or due provision for all debts, liabilities and obligations of the
Company shall have been distributed to the Managing Member or Special Members in
the manner provided for in this Agreement and (ii) the certificate of formation
of the Company shall have been canceled in the manner required by the Act.

 

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ARTICLE V
LIABILITY, EXCULPATION, INDEMNIFICATION

 

Section 5.1  Limited Liability.

 

(a)                                Except as otherwise provided by the Act, the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liabilities of the
Company, and none of the Managing Member, Special Members nor any Manager shall
be obligated personally for any such debt, obligation or liability of the
Company solely by reason of being a member or manager of the Company.

 

(b)                                Neither the Managing Member nor any managers,
officers, employees, shareholders, agents or representatives of the Company or
any of the aforementioned entities (each, a “Covered Person”), shall be liable
to the Company or the Managing Member for any loss, liability, damage or claim
incurred by reason of any act or omission performed or omitted by such Covered
Person in good faith on behalf of the Company, except that a Covered Person
shall be liable for any loss, liability, damage or claim incurred by reason of
such Covered Person’s gross negligence or willful misconduct.

 

Section 5.2  Indemnification.  To the fullest extent permitted by applicable
law, a Covered Person shall be entitled to indemnification from the Company for
any loss, damage or claim incurred by such Covered Person by reason of any act
or omission performed or omitted by such Covered Person in good faith on behalf
of the Company, except that no Covered Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such Covered
Person by reason of such Covered Person’s gross negligence or willful misconduct
with respect to such acts or omissions; provided, that any indemnity under this
Section 5.2 shall be provided out of and to the extent of Company assets only,
and no Covered Person shall have any personal liability on account thereof.

 

Section 5.3  Expenses.  To the extent permitted by applicable law, expenses
(including reasonable attorneys’ fees, disbursements, fines and amounts paid in
settlement) incurred by a Covered Person in defending any claim, demand, action,
suit or proceeding relating to or arising out of their performance of their
duties on behalf of the Company may, from time to time and at the discretion of
the Board, be advanced by the Company prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the Company of an
undertaking by or on behalf of the Covered Person to repay such amount if it
shall ultimately be determined that the Covered Person is not entitled to be
indemnified as authorized in Section 5.2.

 

Section 5.4  Priority of Indemnification.  Notwithstanding the foregoing
provisions, any indemnification set forth herein shall be fully subordinate to
the Obligations and, to the fullest extent permitted by law, shall not
constitute a claim against the Company in the event that the Company’s cash flow
is insufficient to pay all

 

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its obligations to creditors.  This Section 5.4 shall survive any termination of
this Agreement.

 

Section 5.5  Indemnification From Company Assets.  Any indemnification under
this Article V shall be satisfied solely out of the assets of the Company, and
no Member shall be subject to personal liability or required to fund or cause to
be funded any obligation by reason of these indemnification provisions.

 

ARTICLE VI
MISCELLANEOUS

 

Section 6.1  Amendment, Waiver, Etc.  The Managing Member shall not, prior to
the date on which all Obligations (other than contingent indemnification and
reimbursement obligations) under the Loan and Security Agreement have been paid
in full, amend, alter, change or repeal the definition of “Independent Manager”,
Sections 1.3, 1.9, 2.1, 2.6, 2.13, 5.4, 6.1, 6.5, 6.7, 6.8, 6.9 or 6.10 or
Article IV (collectively, the “Special Purpose Provisions”) without the prior
written consent of each Independent Manager and without the prior written
consent of the Administrative Agent.  The Managing Member reserves the right to
amend, alter, change or repeal any provisions contained in this Agreement in
accordance with this Section 6.1. In the event of any conflict between any of
the Special Purpose Provisions and any other provision of this or any other
document governing the formation, management or operation of the Company, the
Special Purpose Provisions shall control.

 

Section 6.2  Severability.  The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision was omitted.

 

Section 6.3  Defined Terms.  Each capitalized term used herein without
definition shall have the same meaning specified in the Loan and Security
Agreement.

 

Section 6.4  Integration.  This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings pertaining thereto.

 

Section 6.5  No Third-Party Beneficiaries.  Except as provided in Article V with
respect to the exculpation and indemnification of Covered Persons and the
Administrative Agent with respect to the Special Purpose Provisions, nothing in
this Agreement shall confer any rights upon any Person other than the parties
hereto and their successors and permitted assigns.

 

Section 6.6  Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
UNDER, THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF.

 

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Section 6.7  Additional Special Purpose Entity Provisions.

 

(a)                                 Notwithstanding any other provision of this
Agreement, the Bankruptcy of the Managing Member or any Special Member shall not
cause the Managing Member or the Special Member to cease to be a member of the
Company and upon the occurrence of such an event, the Company shall continue
without dissolution.

 

For purposes of this section, “Bankruptcy” means, with respect to any Person, if
such Person (i) makes an assignment for the benefit of creditors, (ii) files a
voluntary petition in bankruptcy, (iii) is adjudged a bankrupt or insolvent, or
has entered against it an order for relief, in any bankruptcy or insolvency
proceedings, (iv) files a petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation or similar
relief under any statute, law or regulation, (v) files an answer or other
pleading admitting or failing to contest the material allegations of a petition
filed against it in any proceeding of this nature, (vi) seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator of the Person
or of all or any substantial part of its properties, or (vii) if 120 days after
the commencement of any proceeding against the Person seeking reorganization,
arrangement, composition, readjustment, liquidation or similar relief under any
statute, law or regulation, if the proceeding has not been dismissed, or if
within 90 days after the appointment without such Person’s consent or
acquiescence of a trustee, receiver or liquidator of such Person or of all or
any substantial part of its properties, the appointment is not vacated or
stayed, or within 90 days after the expiration of any such stay, the appointment
is not vacated. The foregoing definition of “Bankruptcy” is intended to replace
and shall supersede and replace the definition of “Bankruptcy” set forth in
Sections 18-101(1) and 18-304 of the Act.

 

(b)                                 Notwithstanding any other provision of this
Agreement, each of the Managing Member, the Special Members and any additional
member waive any right it might have to agree in writing to dissolve the Company
upon the Bankruptcy of the Managing Member, Special Members or additional
member, or the occurrence of an event that causes the Managing Member, Special
Member or additional member to cease to be a member of the Company.

 

(c)                               To the fullest extent permitted by law, each
of the Managing Member, the Special Members, and any additional member admitted
to the Company hereby irrevocably waives any right or power that such Person
might have to cause the Company or any of its assets to be partitioned, to cause
the appointment of a receiver for all or any portion of the assets of the
Company, to compel any sale of all or any portion of the assets of the Company
pursuant to any applicable law or to file a complaint or to institute any
proceeding at law or in equity to cause the dissolution, liquidation, winding up
or termination of the Company.

 

Section 6.8  Assignments.  Subject to Section 6.10 and any transfer restrictions
contained in the Transaction Documents, the Managing Member may assign all its
limited liability company interest in the Company, provided that the assignee of
such interests is able to satisfy and comply with all of the Managing Member’s
obligations and conditions of this Agreement upon admission as a member. 
Subject to Section 6.10, if the Managing Member transfers all of its limited
liability company interest in the Company pursuant to this Section 6.8, the
transferee shall be admitted to the Company as

 

15

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a member of the Company upon its execution of an instrument signifying its
agreement to be bound by the terms and conditions of this Agreement, which
instrument may be a counterpart signature page to this Agreement.  Such
admission shall be deemed effective immediately prior to the transfer and,
immediately following such admission, the transferor Member shall cease to be a
member of the Company.  Any successor to the Managing Member by merger or
consolidation in compliance with the Transaction Documents shall, without
further act, be the Managing Member hereunder, and such merger or consolidation
shall not constitute an assignment for purposes of this Agreement and the
Company shall continue without dissolution.

 

Section 6.9  Resignation. So long as any Obligation is outstanding (other than
contingent indemnification and reimbursement obligations), the Managing Member
may not resign, except as permitted under the Transaction Documents and if the
Administrative Agent consents in writing and if an additional member is admitted
to the Company pursuant to Section 6.10.  If the Managing Member is permitted to
resign pursuant to this Section 6.9, an additional member of the Company shall
be admitted to the Company, subject to Section 6.10, upon its execution of an
instrument signifying its agreement to be bound by the terms and conditions of
this Agreement, which instrument may be a counterpart signature page to this
Agreement.  Such admission shall be deemed effective immediately prior to the
resignation and, immediately following such admission, the resigning Member
shall cease to be a member of the Company.

 

Section 6.10.  Admission of Additional Members and Transfers of Indirect
Interests.  One or more additional members of the Company may be admitted to the
Company with the written consent of the Managing Member (or the Special Members
pursuant to Section 2.13); provided, however, that, notwithstanding the
foregoing, for so long as any Obligation remains outstanding (other than
contingent indemnification and reimbursement obligations), no additional Member
may be admitted to the Company pursuant to Sections 6.8, 6.9 or 6.10, without
the prior written consent of the Administrative Agent, other than pursuant to
Section 2.13 or Section 4 of this Agreement.

 

Section 6.11.  Counterparts and Signature.  This Agreement may be executed in
separate counterparts, each of which shall be deemed an original and all of
which, when taken together, shall constitute one and the same instrument. 
Delivery of an executed signature page of this Agreement by electronic
transmission, including by facsimile or electronic mail, shall be effective as
delivery of a manually executed counterpart hereof.

 

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IN WITNESS WHEREOF, the undersigned, being the Managing Member of the Company,
intending to be legally bound hereby, has duly executed this Agreement as of the
date first above written.

 

 

MANAGING MEMBER:

 

 

 

NEW MOUNTAIN FINANCE CORPORATION

 

 

 

 

 

 

 

By:

/s/ Robert A. Hamwee

 

Name:

Robert A. Hamwee

 

Title:

Chief Executive Officer and President

 

[Signature page of the Second Amended and Restated Limited Liability Company
Agreement of New Mountain Finance Holdings, L.L.C.]

 

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Acknowledged and Agreed:

 

 

 

 

 

/s/ Michael Bondar

 

 

Michael Bondar

 

 

Independent Manager

 

 

 

[Signature page of the Second Amended and Restated Limited Liability Company
Agreement of New Mountain Finance Holdings, L.L.C.]

 

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Annex A

 

Managers

 

Steven B. Klinsky

 

 

 

Robert A. Hamwee

 

 

 

Adam B. Weinstein

 

 

 

Michael Bondar (Independent Manager)

 

 

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