Exhibit 10.1

 

Execution Copy

 

LOAN AGREEMENT dated as of May 24, 2013 (this Agreement) between EP FUNDING LLC,
a Delaware limited liability company (the Borrower), the financial institutions
and other lenders from time to time party hereto, as “Lenders” (the Lenders),
and Citibank, N.A., a national banking association, as administrative agent for
the Lenders (in such capacity, together with its successors in such capacity,
the Administrative Agent).

 

WHEREAS:

 

A.                                    The Borrower intends to acquire, hold and
dispose of one or more Debt Obligations (as hereinafter defined);

 

B.                                    The Borrower wishes to finance certain
Debt Obligations, whether upon the purchase thereof or after the prior
contribution thereof to the equity capital of the Borrower, in each case with
proceeds from the borrowing of a Loan (as hereinafter defined) hereunder, all on
the terms and conditions set forth herein; and

 

C.                                    The Borrower has requested that the
Lenders make the Loans to the Borrower, and the Lenders are willing to make the
Loans to the Borrower, all on the terms and conditions set forth herein.

 

INTERPRETATION

 

Defined Terms

 

1.1                               As used herein, the following terms shall have
the following meanings (all terms defined in this Section 1.1 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):

 

Account Control Agreement means the Account Control Agreement dated as of the
date hereof between the Borrower, the Security Agent, Citibank, N.A., as
intermediary, and Virtus Group, LP, as collateral administrator.

 

Additional Amount has the meaning given to such term in Section 3.9(a).

 

Administrative Agent has the meaning specified in the first paragraph of this
Agreement.

 

Administrative Questionnaire means, with respect to any Lender, an
Administrative Questionnaire completed by such Lender in a form supplied by the
Administrative Agent.

 

Affiliate means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

 

Agreement has the meaning specified in the first paragraph of this Agreement.

 

Alternate Base Rate means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1% and (c) LIBOR for a one month Interest
Period commencing on such day (or if such day is

 

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not a Business Day, the immediately preceding Business Day) plus 1%.  Any change
in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds
Effective Rate or LIBOR, shall be effective from and including the effective
date of such change in the Prime Rate, the Federal Funds Effective Rate or
LIBOR, respectively.  If for any reason the Administrative Agent shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Federal Funds Effective Rate specified in clause
(b) of the first sentence of this definition, for any reason, including the
inability or failure of the Administrative Agent to obtain sufficient quotations
in accordance with the terms hereof, the Alternate Base Rate shall be determined
without regard to clause (b) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist.

 

Approved Buyer means (a) any Person listed in Schedule II so long as its
long-term unsecured and unsubordinated debt obligations on the “trade date” for
the related submission of a Firm Bid contemplated hereby are rated at least “A2”
by Moody’s and at least “A” by S&P and (b) if a Person listed in Schedule II is
not the principal banking or securities Affiliate within a financial holding
company group, the principal banking or securities Affiliate of such listed
Person within such financial holding company group so long as such obligations
of such Affiliate have the rating indicated in clause (a) above.

 

Assignment Agreement means any assignment, asset contribution or similar
agreement (other than the Equity Contribution Framework Agreement) entered into
with respect to the purchase or other acquisition of any Debt Obligation (or any
portion thereof) held by the Borrower.

 

Assignment and Acceptance means an assignment and acceptance entered into by a
Lender and an assignee, and accepted by the Administrative Agent, in a form
customarily used by the Administrative Agent for such purpose.

 

Available Interest Proceeds means, with respect to any payment proposed to be
made pursuant to Section 3.8(b)(i) and any date of determination, (a) the sum of
(i) all proceeds of interest, fee or other amount (other than principal and
premium in respect of principal) owing on any Debt Obligation (or any portion
thereof), including any of the foregoing properly attributable to the sale of
any Debt Obligation (or any portion thereof), to the extent received by the
Borrower at least three Business Days prior to such date of determination and
(ii) all proceeds of any Eligible Investments acquired by the Borrower with any
proceeds referred to in the foregoing clause (a), and (without duplication) all
payments of interest on any Eligible Investments acquired by the Borrower, to
the extent received by the Borrower at least three Business Days prior to such
date of determination minus (b) the sum of (i) all investments in Debt
Obligations and Eligible Investments made by the Borrower at least three
Business Days prior to such date of determination from proceeds referred to in
the foregoing clause (a) plus (ii) all payments of interest, fees and other
amounts (other than principal) paid on or prior to such date of determination by
the Borrower hereunder or under any other Loan Document to the Administrative
Agent, the Security Agent or any Lender plus (iii) all other payments made by
the Borrower from Available Interest Proceeds on or prior to such date of
determination pursuant to Section 3.8(a) or 3.8(b)(i) (and, if made by the
Borrower on such date of determination pursuant to Section 3.8(b)(i), only to
the extent required under Section 3.8(b)(i) to be paid in priority to the
payment proposed to be made).

 

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Available Principal Proceeds means, with respect to any payment proposed to be
made pursuant to Section 3.8(b)(ii) and any date of determination, (a) the sum
of (i) all proceeds of principal and premium in respect of principal owing on
any Debt Obligation (or any portion thereof), including any of the foregoing
properly attributable to the sale of any Debt Obligation (or any portion
thereof), to the extent received by the Borrower at least three Business Days
prior to such date of determination and (ii) all proceeds of any Eligible
Investments (other than in respect of interest thereon) acquired by the Borrower
with any proceeds referred to in the foregoing clause (a), to the extent
received by the Borrower at least three Business Days prior to such date of
determination minus (b) the sum of (i) all investments in Debt Obligations and
Eligible Investments made by the Borrower at least three Business Days prior to
such date of determination from proceeds referred to in the foregoing clause
(a) plus (ii) all principal of the Loans paid or required to be paid on or prior
to such date of determination by the Borrower hereunder plus (iii) all other
payments made by the Borrower from Available Principal Proceeds on or prior to
such date of determination pursuant to Section 3.8(b)(ii) (and, if made by the
Borrower on such date of determination, only to the extent required under
Section 3.8(b)(ii) to be paid in priority to the payment proposed to be made).

 

Borrower has the meaning specified in the first paragraph of this Agreement.

 

Borrower Formation Documents means (a) the certificate of formation of the
Borrower and (b) the limited liability company agreement of the Borrower.

 

Borrower Investor means FS Energy and Power Fund, a Delaware statutory trust.

 

Borrowing Date has the meaning given to such term in Section 2.1.

 

Borrowing Notice Date has the meaning given to such term in Section 2.2(c).

 

Business Day means a day on which commercial banks and foreign exchange markets
settle payments in New York and London.

 

Cash means such coin or currency of the United States of America as at the time
shall be legal tender for payment of all public and private debts.

 

Change in Law means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any governmental authority after the
date of this Agreement or (c) compliance by any Lender with any request,
guideline or directive (whether or not having the force of law) of any
governmental authority made or issued after the date of this Agreement; provided
that, notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall
Street Reform and Consumer Protection Act and all requests, rules, guidelines or
directives thereunder or issued in connection therewith and (y) all requests,
rules, guidelines or directives promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States or foreign regulatory authorities, in
each case pursuant to Basel III, shall be deemed to be a “Change in “Law”,
regardless of the date enacted, adopted or issued.

 

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Change in Tax Law means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date that a Lender,
including Persons that shall have become party hereto pursuant to an Assignment
and Acceptance and Participants (as defined in Section 8.4(f)), shall have
become a party to this Agreement.

 

Closing Date means the first date on which each of the conditions set forth in
Schedule I are satisfied.

 

Code means the Internal Revenue Code of 1986.

 

Collateral has the meaning given to it in the Security Agreement.

 

Commitment means, as to any Lender, the obligation of such Lender to make Loans
to the Borrower pursuant to Section 2.1, as such amount may be reduced from time
to time pursuant to Section 3.7 or reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 8.4.  With
respect to the Initial Lender, the Commitment of the Initial Lender on the date
hereof is USD175,000,000.

 

Competitor means (a) any Person primarily engaged in the business of private
investment management as a mezzanine fund, private debt fund, hedge fund or
private equity fund, which is in direct or indirect competition with the
Borrower Investor or its investment adviser or any Affiliate thereof that is an
investment adviser, (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
adviser with discretionary investment authority; provided that in no event will
an Eligible Assignee be a “Competitor”.

 

Contractual Currency has the meaning given to such term in Section 3.14.

 

Contributed Debt Obligation means any Debt Obligation acquired in a Qualified
Purchase pursuant to Section 5.2(a)(ii).

 

Control means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through
the ability to exercise voting power, by contract or otherwise.  Controlling and
Controlled have meanings correlative thereto.

 

Covenant-Lite Obligation means, with respect to any Debt Obligation, the related
Debt Obligation Credit Agreement either (a) does not include a Financial
Covenant or (b) includes a Financial Covenant, but requires compliance therewith
not upon a continuous or periodic basis (such as the end of each financial
reporting period), but only upon the taking by an obligor on such Debt
Obligation or an Affiliate thereof of one or more specified actions (e.g., the
incurrence or assumption of debt, the creation of liens, the payment of a
dividend or other distribution or the consummation of a merger, consolidation or
sale of assets).

 

Current Price means, with respect to any Debt Obligation on any date of
determination, the Administrative Agent’s determination of the net cash proceeds
that would be received from the sale on such date of determination of such Debt
Obligation.  If the Borrower disputes the Administrative Agent’s determination
of the Current Price of such Debt Obligation, then the

 

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Borrower may, no later than three hours after the Borrower is given notice of
such determination, (a) designate two Dealers and (b) provide to the
Administrative Agent within such three-hour period with respect to each such
Dealer a Firm Bid with respect to not less than the Par Amount of such Debt
Obligation.  The highest of such two Firm Bids will be the Current Price for the
relevant date of determination.  Notwithstanding the foregoing, if the Borrower
disputes the Administrative Agent’s determination of the Current Price of an
Unquoted Debt Obligation, the Current Price of such Unquoted Debt Obligation
shall be equal to the Valuation Price then in effect, except that (a) at no time
may the Current Price of Unquoted Debt Obligations constituting more than 15% of
the aggregate Purchase Amount of all Debt Obligations then held by the Borrower
be determined by reference to their respective Valuation Prices then in effect
and (b) no Valuation Price may be used to determine the Current Price of any
Unquoted Debt Obligation if the effective valuation date for the relevant
valuation occurred more than three months prior to the first day of the calendar
month that includes the date of determination of such Current Price.  The
“Current Price” shall be expressed as a percentage of par and will be determined
exclusive of accrued interest and premium.

 

Dealer means (a) any entity (other than the Administrative Agent or any of its
Affiliates) designated by the Administrative Agent or its designated Affiliate
in its sole discretion as a “Dealer” for the purposes of this Agreement and
(b) to the extent designated by the Borrower pursuant to the definition of
“Current Price”, either (i) any Approved Buyer or (ii) any other entity approved
in advance by the Administrative Agent; provided that the Administrative Agent
or any Affiliate thereof may be a Dealer if more than one Dealer is otherwise
designated.

 

Debt Obligation means any obligation for the payment or repayment of borrowed
money that is documented by a term loan agreement, revolving loan agreement or
other similar credit agreement and includes any obligation, security or other
property (other than cash) received by the Borrower after its original
acquisition of such obligation in exchange for such obligation.

 

Debt Obligation Credit Agreement means, with respect to any Debt Obligation, any
term loan agreement, revolving loan agreement or other similar credit agreement
from time to time governing such Debt Obligation.

 

Debt Obligation Bankruptcy Event means, with respect to any Debt Obligation, the
occurrence of the following with respect to such Debt Obligation (or any portion
thereof):  Bankruptcy.  Capitalized terms used in this definition but not
defined in this Agreement shall have the meanings specified in the 2003 ISDA
Credit Derivatives Definitions.

 

Debt Obligation Failure to Pay Event means, with respect to any Debt Obligation,
the occurrence of the following with respect to such Debt Obligation (or any
portion thereof):  Failure to Pay.  For purposes of the determination of whether
a Debt Obligation Failure to Pay Event has occurred, the Reference Obligation
shall be such Debt Obligation, the Obligation Category will be Reference
Obligation Only, the Payment Requirement will be USD1,000,000 and no Obligation
Characteristics will be specified.  Capitalized terms used in this definition
but not defined in this Agreement shall have the meanings specified in the 2003
ISDA Credit Derivatives Definitions.

 

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Debt Obligation Acquired from a Related Party means any Debt Obligation acquired
by the Borrower from any Related Party (whether in a single transaction or in a
series of related transactions); provided that, for the avoidance of doubt,
“Debt Obligation Acquired from a Related Party” shall not include any Debt
Obligation listed in Schedule III and acquired (on a trade date basis) by the
Borrower on the Closing Date.

 

Default Rate means, with respect to any Interest Period, the Interest Rate for
such Interest Period plus 2.00%.

 

Defaulting Lender means any Lender that (a) has failed, within two Business Days
of the date required to be funded, to fund any portion of its Loans unless such
Lender notifies the Administrative Agent in writing that such failure is the
result of such Lender’s good faith determination that a condition precedent to
funding (specifically identified and including the particular default, if any)
has not been satisfied or (b) has notified the Borrower and the Administrative
Agent in writing, or has made a public statement to the effect, that it does not
intend or expect to comply with any of its funding obligations under this
Agreement (unless such writing or public statement indicates that such position
is based on such Lender’s good faith determination that a condition precedent
(specifically identified and including the particular default, if any) to
funding a loan under this Agreement cannot be satisfied) or generally under
other agreements in which it commits to extend credit.

 

Diversion Percentage means, on any date of determination, the excess, if any, of
(a) the Equity Percentage on such date of determination over (b) 5%.

 

Drawdown Period means the period from and including the date hereof to and
including the 18-month anniversary of the date hereof; provided that, if the
final day of the Drawdown Period would otherwise be a day that is not a Business
Day, then the final day of the Drawdown Period will instead be the immediately
preceding Business Day.

 

Eligible Assignee means any commercial bank, commercial finance company or
insurance company with, at the time of any proposed assignment to such entity,
(a) long-term senior unsecured credit ratings of at least A- by S&P and at least
A3 by Moody’s or (b) short-term senior unsecured ratings of at least A-2 by S&P
and P-2 by Moody’s.

 

Eligible Investments means (a) Cash, (b) deposit accounts issued or offered by
any domestic office of any commercial bank organized under the laws of the
United States of America or any State thereof which has a combined capital and
surplus and undivided profits of not less than USD1,000,000,000 and (c) money
market funds that have, at all times, credit ratings of “Aaa” and “MR1+” by
Moody’s and “AAAm” or “AAAm-G” by S&P, respectively.  Eligible Investments may
include investments described in clause (b) or (c) above made with or issued by
the Intermediary (as defined in the Account Control Agreement) or for which the
Intermediary or an Affiliate thereof provides services and receives
compensation.

 

Equity Advance Rate means, with respect to any Debt Obligation on any date of
determination, 100% minus the Loan Advance Rate with respect to such Debt
Obligation on such date of determination.

 

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Equity Amount means, on any date of determination, the sum, for all Debt
Obligations held by the Borrower on such date of determination (determined, for
this purpose, on a “settlement date” basis), of the products of (a) the Equity
Advance Rate in effect on such date with respect to such Debt Obligation
multiplied by (b) the Purchase Amount of such Debt Obligation on such date of
determination.

 

Equity Contribution Framework Agreement means the Equity Contribution Framework
Agreement between the Borrower Investor and the Borrower in substantially the
form of Exhibit B hereto.

 

Equity Coverage Ratio means, on any date of determination, (a) the sum of
(i) the aggregate amount of Eligible Investments held by the Borrower on such
date of determination plus (ii) the sum, for all Debt Obligations held by the
Borrower on such date of determination, of the products of (x) the Current Price
on such date of determination with respect to such Debt Obligation multiplied by
(y) the Par Amount of such Debt Obligation on such date of determination minus
(iii) the aggregate principal amount of the Loans outstanding on such date of
determination divided by (b) the aggregate of the Purchase Amounts of all Debt
Obligations held by the Borrower on such date of determination.

 

Equity Percentage means, on any date of determination, (a) the Equity Amount on
such date of determination divided by (b) the aggregate of the Purchase Amount
of all Debt Obligations held by the Borrower on such date of determination.

 

Equity Restricted Payment means any dividend or other distribution (whether in
cash, securities or other property) with respect to any ownership interest in
the Borrower, or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any
ownership interest in the Borrower or any option, warrant or other right to
acquire any ownership interest in the Borrower.

 

Events of Default has the meaning given to such term in Section 6.1.

 

Excess Concentration Obligation means, on any date, one or more Debt Obligations
of any single Obligor or any of its Affiliates as to which the aggregate
Purchase Amount thereof on such date exceeds 5% of the Portfolio Purchase Amount
on such date.

 

Excess Concentration Percentage means, on any date, with respect to any Excess
Concentration Obligation, a percentage equal to (a) the excess of (i) the
aggregate Purchase Amount on such date of the related Debt Obligation (or Debt
Obligations) of any single Obligor or any of its Affiliates referred to in the
definition of “Excess Concentration Obligation” over (ii) 5% of the Portfolio
Purchase Amount on such date divided by (b) the Portfolio Purchase Amount on
such date.

 

Excluded Taxes means Taxes (a) imposed on or with respect to a Lender or
required to be withheld or deducted from a payment to a Lender which taxes are
imposed on or measured by net income (however denominated), franchise taxes, and
branch profits taxes, in each case, (i) as a result of such Lender being
organized under the laws of, or having its principal office or its applicable
lending office located in, the jurisdiction imposing such tax (or any political

 

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subdivision thereof) or (ii) as a result of a present or former connection
between such Lender and the jurisdiction of the government or taxation authority
imposing such tax (other than connections arising from such Lender 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 this Agreement or any
Support Document, or sold or assigned an interest in the Loans, this Agreement
or any Support Document) or (b) imposed under FATCA.

 

FATCA means (a) 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), (b) any current or future
regulations or official interpretations thereof and (c) any agreements entered
into pursuant to Section 1471(b)(1) of the Code.

 

Federal Funds Effective Rate means, on any date of determination, the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.

 

Final Price means, with respect to any Debt Obligation (or any portion thereof),
the net proceeds received by the Borrower from the sale or repayment of such
Debt Obligation or such portion thereof (expressed as a percentage of par and
exclusive of accrued interest and fees, but inclusive of premium in respect of
principal).

 

Financed Debt Obligation has the meaning given to such term in Section 2.2(c).

 

Financial Covenant means, with respect to any Debt Obligation, any covenant,
agreement or other undertaking relating to information included or required to
be included in a balance sheet or statement of income, stockholders’ equity or
cash flows of any entity if the failure to comply with such covenant, agreement
or other undertaking, after giving effect to any required notice and the
expiration of any applicable grace period or both, would entitle one or more
lenders (or their agent or other representative) to declare that such Debt
Obligation shall become due and payable before the same would otherwise have
been due and payable or to terminate a commitment to extend credit under the
related Debt Obligation Credit Agreement before the same would otherwise have
been terminated.

 

Firm Bid means, with respect to any Debt Obligation, a good and irrevocable bid
for value, to purchase the Par Amount of such Debt Obligation, expressed as a
percentage of the Par Amount of such Debt Obligation and exclusive of accrued
interest and premium, for scheduled settlement substantially in accordance with
the then-current market practice in the principal market for such Debt
Obligation, as determined by the Administrative Agent, submitted as of
11:00 a.m. New York time or as soon as practicable thereafter.  The
Administrative Agent shall be entitled to disregard any Firm Bid submitted by a
Dealer (a) if, in the Administrative Agent’s commercially reasonable judgment,
(i) such Dealer may be ineligible to accept assignment or transfer of the

 

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Par Amount of such Debt Obligation substantially in accordance with the
then-current market practice in the principal market for such Debt Obligation,
as determined by the Administrative Agent, or (ii) such Dealer would not,
through the exercise of its commercially reasonable efforts, be able to obtain
any consent required under the related Debt Obligation Credit Agreement to the
assignment or transfer to such Dealer of the Par Amount of such Debt Obligation
or (b) if the Administrative Agent determines that such Firm Bid is not bona
fide, including, without limitation, due to (i) the insolvency of the bidder,
(ii) the inability, failure or refusal of the bidder to settle the purchase of
the Par Amount of such Debt Obligation or otherwise settle transactions in the
relevant market or perform its obligations generally or (iii) the Administrative
Agent not having pre-approved trading lines with the Dealer that would permit
settlement of the sale to such Dealer of the Par Amount of such Debt Obligation.

 

Foreign Lender means any Lender, including Persons that shall have become party
hereto pursuant to an Assignment and Acceptance and Participants, that is
organized under the laws of a jurisdiction other than the United States of
America or any state thereof, other than any such Lender that has provided a
validly executed IRS Form W-8ECI certifying that its income with respect to the
Loans is effectively connected with a trade or business in the United States of
America.

 

GAAP means generally accepted accounting principles in the United States of
America, consistently applied.

 

Indebtedness of any Person means, without duplication, (a) all obligations of
such Person for borrowed money or with respect to deposits or advances of any
kind, (b) all obligations of such Person evidenced by bonds, debentures, notes
or similar instruments, (c) all obligations of such Person upon which interest
charges are customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property
acquired by such Person, (e) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding current accounts
payable incurred in the ordinary course of business), (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, (g) all guarantees by such Person of Indebtedness of others,
(h) all capital lease obligations of such Person, (i) all obligations,
contingent or otherwise, of such Person as an account party in respect of
letters of credit and letters of guaranty and (j) all obligations, contingent or
otherwise, of such Person in respect of bankers’ acceptances.

 

Indemnitee has the meaning given to such term in Section 8.1.

 

Initial Lender means Citibank, N.A., a national banking association.

 

Interest Period means, with respect to each Loan, each period from and including
a Quarterly Date to but excluding the next succeeding Quarterly Date, provided
that (a) except as expressly set forth in the proviso to Section 2.1(c), the
first Interest Period for any Loan shall commence on the Borrowing Date for such
Loan and (b) the final Interest Period shall end on the Maturity Date.

 

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Interest Rate means, with respect to any Interest Period, LIBOR for such
Interest Period plus (a) during the Drawdown Period, 2.50% and (b) thereafter,
2.75%.

 

Investment Advisers Act means the U.S. Investment Advisers Act of 1940.

 

Investment Company Act means the U.S. Investment Company Act of 1940.

 

Investment Management Agreement means that certain Investment Management
Agreement, dated as of the date hereof, by and between the Borrower and the
Borrower Investor.

 

Lenders has the meaning specified in the first paragraph of this Agreement.

 

LIBOR means, with respect to any Interest Period, the rate for deposits in USD
for the period of three months that appears on the Reuters Screen LIBOR01
Page (or any successor page) as of 11:00 a.m., London time, on the day that is
two London Banking Days preceding the first day of such Interest Period;
provided that, with respect to any Interest Period that does not both commence
and end on a Quarterly Date, LIBOR shall be determined through the use of
straight-line interpolation by reference to two such rates, one of which shall
be determined as if the length of the period of such deposits were the period of
time for which the rate for such deposits are available is the period next
shorter than the length of such Interest Period and the other of which shall be
determined as if the period of time for which the rate for such deposits are
available is the period next longer than the length of such Interest Period.

 

Lien means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of
such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.

 

Loan has the meaning given to such term in Section 2.1.

 

Loan Advance Rate means, with respect to any Debt Obligation on any date of
determination, a percentage specified by the Administrative Agent to the
Borrower with respect to such Debt Obligation on or prior to the date on which
such Debt Obligation is purchased or otherwise acquired (including pursuant to
Section 5.2(b)(ii)) by the Borrower; provided that (i) subject to the following
clauses, if such Debt Obligation is an Excess Concentration Obligation, then the
“Loan Advance Rate” with respect to the Excess Concentration Percentage of such
Debt Obligation will be 0%; (ii) subject to the following clause (iii), if a
Debt Obligation ceases to satisfy the Obligation Criteria or ceases to be a
Specified Debt Obligation pursuant to the proviso at the end of the definition
thereof, then the “Loan Advance Rate” with respect to such Debt Obligation will
be determined from time to time in the sole discretion of the Administrative
Agent as specified to the Borrower (but in any event not later than 10 Business
Days after the Borrower gives notice of such event to the Administrative Agent);
and (iii) if a Debt Obligation Bankruptcy Event or Debt Obligation Failure to
Pay Event occurs with respect to such Debt Obligation, then, so long as such
event is continuing, the “Loan Advance Rate” with respect to such Debt
Obligation will be determined from time to time in the sole discretion of the
Administrative Agent as specified to the Borrower.

 

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Loan Compliance Test means a test that is satisfied on any date of determination
thereof if (a) the aggregate principal amount of Loans outstanding on such date
of determination does not exceed (b) the sum of (i) the aggregate amount of
Eligible Investments held by the Borrower on such date of determination plus
(ii) the sum, for all Debt Obligations held by the Borrower on such date of
determination, of the products of (x) the Loan Advance Rate on such date of
determination with respect to such Debt Obligation multiplied by (y) the
Purchase Amount of such Debt Obligation on such date of determination.

 

Loan Document means this Agreement and each Support Document.

 

London Banking Day means any day on which commercial banks are open for general
business (including dealings in foreign exchange and foreign currency deposits)
in London.

 

LSTA means The Loan Syndications and Trading Association, Inc. and any successor
thereto.

 

Material Adverse Effect means a material adverse effect on (a) the business,
assets, operations or condition, financial or otherwise, of the Borrower,
(b) the ability of the Borrower or any Support Obligor to perform any of its
obligations under this Agreement or any other Transaction Document to which it
is a party or (c) the rights of or benefits available to any of the Lenders, the
Administrative Agent or the Security Agent under this Agreement or any of the
other Transaction Documents.

 

Maturity Date means the earlier of (a) the Scheduled Maturity Date and (b) the
date on which the Loans are paid in full.

 

Maximum Aggregate Loan Amount has the meaning given to such term in
Section 3.2(c).

 

Monthly Date means the 10th day of each calendar month.

 

Monthly Reporting Period means each period from and including a Monthly Date to
but excluding the next succeeding Monthly Date, provided that (a) the first
Monthly Reporting Period shall commence on and include the date hereof and end
on but exclude the Monthly Date occurring in September 2013 and (b) the final
Monthly Reporting Period shall end on the Maturity Date.

 

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

 

Moody’s Industry Classification Groups means each of the groups set forth in the
table below:

 

Aerospace and Defense: Major Contractor, Subsystems, Research, Aircraft
Manufacturing, Arms, Ammunition

Automobile: Automotive Equipment, Auto-Manufacturing, Auto Parts Manufacturing,
Personal Use Trailers, Motor Homes, Dealers

Banking: Bank Holding, Savings and Loans, Consumer Credit, Small Loan, Agency,
Factoring, Receivables

Beverage, Food and Tobacco: Beer and Ale, Distillers, Wines and Liquors,
Distributors, Soft Drink Syrup, Bottling, Bakery, Mill Sugar, Canned Foods, Corn
Refiners, Dairy Products, Meat Products, Poultry Products, Snacks, Packaged
Foods, Distributors, Candy, Gum, Seafood, Frozen Food, Cigarettes, Cigars,
Leaf/Snuff, Vegetable Oil

Buildings and Real Estate: Brick, Cement, Climate Controls, Contracting,
Engineering,

 

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Construction, Hardware, Forest Products (building-related only), Plumbing,
Roofing, Wallboard, Real Estate, Real Estate Development, REITs, Land
Development

Chemicals, Plastics and Rubber: Chemicals (non-agriculture), Industrial Gases,
Sulfur, Plastics, Plastic Products, Abrasives, Coatings, Paints, Varnish,
Fabricating

Containers, Packaging and Glass: Glass, Fiberglass, Containers made of: Glass,
Metal, Paper, Plastic, Wood or Fiberglass

Personal and Non Durable Consumer Products (Manufacturing Only): Soaps,
Perfumes, Cosmetics, Toiletries, Cleaning Supplies, School Supplies

Diversified/Conglomerate Manufacturing

Diversified/Conglomerate Service

Diversified Natural Resources, Precious Metals and Minerals: Fabricating,
Distribution, Mining and Sales

Ecological: Pollution Control, Waste Removal, Waste Treatment, Waste Disposal

Electronics: Computer Hardware, Electric Equipment, Components, Controllers,
Motors, Household Appliances, Information Service, Communication Systems,
Radios, TVs, Tape Machines, Speakers, Printers, Drivers, Technology

Finance: Investment Brokerage, Leasing, Syndication, Securities

Farming and Agriculture: Livestock, Grains, Produce, Agricultural Chemicals,
Agricultural Equipment, Fertilizers

Grocery: Grocery Stores, Convenience Food Stores

Healthcare, Education and Childcare: Ethical Drugs, Proprietary Drugs, Research,
Health Care Centers, Nursing Homes, HMOs, Hospitals, Hospital Supplies, Medical
Equipment

Home and Office Furnishings, Housedress, and Durable Consumer Products: Carpets,
Floor Coverings, Furniture, Cooking, Ranges

Hotels, Motels, Inns and Gaming

Insurance: Life, Property and Casualty, Broker, Agent, Surety

Leisure, Amusement, Entertainment: Boating, Bowling, Billiards, Musical
Instruments, Fishing, Photo Equipment, Records, Tapes, Sports, Outdoor Equipment
(camping), Tourism, Resorts, Games, Toy Manufacturing, Motion Picture
Production, Theatres, Motion Picture Distribution

Machinery (Non-Agriculture, Non-Construction, Non-Electronic): Industrial,
Machine Tools, Steam Generators

Mining, Steel, Iron and Non-Precious Metals: Coal, Copper, Lead, Uranium, Zinc,
Aluminum, Stainless Steel, Integrated Steel, Ore Production, Refractories, Steel
Mill Machinery, Mini-Mills, Fabricating, Distribution and Sales

Oil and Gas: Crude Producer, Retailer, Well Supply, Service and Drilling

Personal, Food and Miscellaneous

Printing and Publishing: Graphic Arts, Paper, Paper Products, Business Forms,
Magazines, Books, Periodicals, Newspapers, Textbooks

Cargo Transport: Rail, Shipping, Railroads, Rail-car Builders, Ship Builders,
Containers, Container Builders, Parts, Overnight Mail, Trucking, Truck
Manufacturing, Trailer Manufacturing, Air Cargo, Transport

Retail Stores: Apparel, Toy, Variety, Drugs, Department, Mail Order Catalogue,
Showroom

Telecommunications: Local, Long Distance, Independent, Telephone, Telegraph,
Satellite, Equipment, Research, Cellular

Textiles and Leather: Producer, Synthetic Fiber, Apparel Manufacturer, Leather
Shoes

Personal Transportation: Air, Bus, Rail, Car, Rental

Utilities: Electric, Water, Hydro Power, Gas, Diversified

Broadcasting and Entertainment: Recording Industry, Motion Exhibition Theatres,
Motion Picture Production and Distribution, Radio, TV, Cable Broadcasting,
Broadcasting Equipment

 

Moody’s Rating means, with respect to any Debt Obligation, as of any date of
determination:

 

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(i)            if the Debt Obligation itself is rated by Moody’s (including
pursuant to any credit estimate), such rating,

 

(ii)           if the foregoing paragraph is not applicable, then, if the
related Obligor has a corporate family rating by Moody’s, the rating specified
in the applicable row of the table below under “Relevant Rating” opposite the
row in the table below that describes such Debt Obligation:

 

Debt Obligation

 

Relevant Rating

The Debt Obligation is a secured obligation, but is not a Second Lien Obligation
and is not Subordinate

 

The rating by Moody’s that is one rating subcategory above such corporate family
rating

The Debt Obligation is an unsecured obligation or is a Second Lien Obligation,
but is not Subordinate

 

The rating by Moody’s that is one rating subcategory below such corporate family
rating

The Debt Obligation is Subordinate

 

The rating by Moody’s that is two rating subcategories below such corporate
family rating

 

(iii)          if the foregoing paragraphs are not applicable, but there is a
rating by Moody’s on a secured obligation of the Obligor that is not a Second
Lien Obligation and is not Subordinate (the “other obligation”), the rating
specified in the applicable row of the table below under “Relevant Rating”
opposite the row in the table below that describes such Debt Obligation:

 

Debt Obligation

 

Relevant Rating

The Debt Obligation is a secured obligation, but is not a Second Lien Obligation
and is not Subordinate

 

The rating assigned by Moody’s to the other obligation

The Debt Obligation is an unsecured obligation or is a Second Lien Obligation,
but is not Subordinate

 

The rating by Moody’s that is one rating subcategory below the rating assigned
by Moody’s to the other obligation

The Debt Obligation is Subordinate

 

The rating by Moody’s that is two rating subcategories below the rating assigned
by Moody’s to the other obligation

 

(iv)          if the foregoing paragraphs are not applicable, but there is a
rating by Moody’s on an unsecured obligation of the Obligor (or, failing that,
an obligation that is a Second Lien Obligation) but is not Subordinate (the
“other obligation”), the rating specified in the applicable row of the table
below under “Relevant Rating” opposite the row in the table below that describes
such Debt Obligation:

 

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Debt Obligation

 

Relevant Rating

The Debt Obligation is a secured obligation, but is not a Second Lien Obligation
and is not Subordinate

 

The rating by Moody’s that is one rating subcategory above the rating assigned
by Moody’s to the other obligation

The Debt Obligation is an unsecured obligation or is a Second Lien Obligation,
but is not Subordinate

 

The rating assigned by Moody’s to the other obligation

The Debt Obligation is Subordinate

 

The rating by Moody’s that is one rating subcategory below the rating assigned
by Moody’s to the other obligation

 

(v)           if the foregoing paragraphs are not applicable, but there is a
rating by Moody’s on an obligation of the Obligor that is Subordinate (the
“other obligation”), the rating specified in the applicable row of the table
below under “Relevant Rating” opposite the row in the table below that describes
such Debt Obligation:

 

Debt Obligation

 

Relevant Rating

The Debt Obligation is a secured obligation, but is not a Second Lien Obligation
and is not Subordinate

 

The rating by Moody’s that is two rating subcategories above the rating assigned
by Moody’s to the other obligation

The Debt Obligation is an unsecured obligation or is a Second Lien Obligation,
but is not Subordinate

 

The rating by Moody’s that is one rating subcategory above the rating assigned
by Moody’s to the other obligation

The Debt Obligation is Subordinate

 

The rating assigned by Moody’s to the other obligation

 

(vi)          if a rating cannot be assigned pursuant to clauses (i) through
(v), the Moody’s Rating may be determined using any of the methods below:

 

(A)     for up to 5% of the Portfolio Purchase Amount, the Borrower may apply to
Moody’s for a shadow rating or public rating of such Debt Obligation, which
shall then be the Moody’s Rating (and the Borrower may deem the Moody’s Rating
of such Debt Obligation to be “B3” pending receipt of such shadow rating or
public rating, as the case may be); provided that (x) a Debt Obligation will not
be included in the 5% limit of the Portfolio Purchase Amount if the Borrower has
assigned a rating to such Debt Obligation in accordance with clause (B) below
and (y) upon receipt of a shadow rating or public rating, as the case may be,
such Debt Obligation will not be included in the 5% limit of the Portfolio
Purchase Amount; or

 

(B)     for up to 5% of the Portfolio Purchase Amount, if there is a private
rating of an obligor that has been provided by S&P to the Administrative Agent
and the

 

14

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                                Borrower, the Borrower may impute a Moody’s
Rating that corresponds to such private rating; provided that a Debt Obligation
will not be included in the 5% limit of the Portfolio Purchase Amount if the
Borrower has applied to Moody’s for a shadow rating.

 

For purposes of the foregoing, a “private rating” shall refer to a rating
obtained by the Administrative Agent, by the Borrower or by or on behalf of an
obligor on a Debt Obligation that is not disseminated publicly; whereas a
“shadow rating” shall refer to a credit estimate obtained (i) upon application
of the Borrower or a holder of a Debt Obligation or (ii) from the proper use of
the RiskCalc Plus probability of default model most recently made available by
Moody’s.  Any private rating or shadow rating shall be required to be refreshed
annually.  If the Borrower applies to Moody’s for a shadow rating or public
rating of a Debt Obligation, the Borrower shall provide evidence to the
Administrative Agent of such application and shall notify the Administrative
Agent of the expected rating.  The Borrower shall notify the Administrative
Agent of the shadow rating or public rating assigned by Moody’s to a Debt
Obligation.

 

Note means a promissory note made by the Borrower in favor of a Lender in
substantially the form of Exhibit A hereto.

 

Obligation Criteria will be satisfied with respect to any Debt Obligation if
such Debt Obligation satisfies each of the following requirements:

 

(i)

such Debt Obligation is denominated solely in USD;

 

 

(ii)

such Debt Obligation contains a representation and warranty by an Obligor that
such Debt Obligation constitutes the legal, valid, binding and enforceable
obligation of each Obligor thereon, enforceable against such Obligor in
accordance with its terms; and no Obligor has disaffirmed, disclaimed,
repudiated or rejected, in whole or in part, or challenged the validity of, such
Debt Obligation (in each case, in writing);

 

 

(iii)

such Debt Obligation does not require any future advance to be made to any
Obligor thereon after the date of purchase or other acquisition thereof by the
Borrower;

 

 

(iv)

such Debt Obligation provides for scheduled payments of interest (computed based
upon a generally recognized interest rate index) in cash no less frequently than
semi-annually;

 

 

(v)

such Debt Obligation is not Subordinate;

 

 

(vi)

such Debt Obligation is secured;

 

 

(vii)

transfers of such Debt Obligation on the date of purchase or other acquisition
thereof by the Borrower may be effected pursuant to the Standard Terms and
Conditions for Par/Near Par Trade Confirmations and not the Standard Terms and
Conditions for Distressed Trade Confirmations, in each case as published by the
LSTA and as in effect on the date of purchase or other acquisition thereof by
the Borrower;

 

 

(viii)

such Debt Obligation constitutes indebtedness for U.S. Federal income tax
purposes;

 

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(ix)

such Debt Obligation is capable of being assigned or novated to, at a minimum,
commercial banks or financial institutions (irrespective of their jurisdiction
of organization) that are not then a lender or a member of the relevant lending
syndicate, without the consent of Obligor or any agent;

 

 

(x)

the Borrower will be entitled to receive all payments on such Debt Obligation
without U.S. Federal or foreign withholding tax;

 

 

(xi)

the purchase or other acquisition by the Borrower of such Debt Obligation, and
the making of a Loan to finance a portion of such purchase price (if
applicable), will not violate any applicable law or regulation applicable to any
party to this Agreement;

 

 

(xii)

if any payment of interest on such Debt Obligation that would otherwise be
payable may be deferred or capitalized as additional principal (without default)
without the consent of each affected lender, such Debt Obligation shall provide
for payment of interest in cash (without deferral or capitalization) no less
frequently than semi-annually at a rate per annum not less than 2%; and

 

 

(xiii)

either (a) such Debt Obligation is the subject of at least two bid quotations
from nationally recognized independent dealers in the related Debt Obligation as
reported on a nationally recognized pricing service or (b) such Debt Obligation
is an Unquoted Debt Obligation.

 

Obligor means, with respect to any Debt Obligation, any obligor (whether as
primary obligor, guarantor or otherwise) on the Debt Obligation.

 

Par Amount means, with respect to any Debt Obligation (or any portion thereof)
held (or to be purchased or otherwise acquired) by the Borrower on any date of
determination, the principal amount of such Debt Obligation (or such portion
thereof) held (or to be purchased or otherwise acquired) by the Borrower
outstanding on such date of determination.

 

Participant has the meaning given to such term in Section 8.4(f).

 

Participant Register has the meaning given to such term in Section 8.4(f).

 

Payment Account means, with respect to payments to be made hereunder or under
any other Loan Document to any Lender, the account of such Lender for receiving
such payments most recently specified to the Borrower and the Administrative
Agent in a notice from such Lender.

 

Payment Dates means each of the days occurring ten Business Days following the
last day of an Interest Period.

 

Permitted Liens means (a) with respect to any Debt Obligation, any Eligible
Investments or any proceeds thereof, Liens arising under the Loan Documents and
(b) with respect to any other Property of the Borrower, Liens arising in the
ordinary course of the Borrower’s business that do not secure obligations in an
aggregate amount exceeding USD100,000 at any one time outstanding.

 

16

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Person means any natural person, corporation, limited liability company, trust,
joint venture, association, company, partnership or other entity or the
government of the United States of America or any other nation or any political
subdivision thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.

 

Portfolio Criteria will be satisfied if:

 

(i)

The sum of the Purchase Amounts for all Debt Obligations that are not Specified
Debt Obligations does not exceed 25% of the Portfolio Purchase Amount.

 

 

(ii)

The sum of the Purchase Amounts for all Debt Obligations that are Second Lien
Obligations does not exceed 10% of the Portfolio Purchase Amount.

 

 

(iii)

The sum of the Purchase Amounts for all Debt Obligations that are Unquoted Debt
Obligations does not exceed 15% of the Portfolio Purchase Amount.

 

 

(iv)

The sum of the Purchase Amounts for Debt Obligations of any single Obligor or
any of its Affiliates does not exceed 5% of the Portfolio Purchase Amount.

 

 

(v)

The sum of the Purchase Amounts for Debt Obligations of Obligors in any single
Moody’s Industry Classification Group does not exceed 25% of the Portfolio
Purchase Amount.

 

 

(vi)

The sum of the Purchase Amounts for Debt Obligations Acquired from a Related
Party does not exceed 20% of the Portfolio Purchase Amount.

 

 

(vii)

After the Ramp-Up Period, the Weighted Average Rating does not exceed (x) prior
to the end of the Drawdown Period, 3,000 and (y) thereafter, 3,490.

 

Portfolio Purchase Amount means on any date (a) during the Ramp-Up Period, the
greater of (i) USD320,000,000 and (ii) the Portfolio Purchase Amount on such
date and (b) thereafter, the sum of (i) the aggregate amount of Eligible
Investments held by the Borrower on such date of determination plus (ii) the
sum, for all Debt Obligations held by the Borrower on such date of
determination, of the Purchase Amounts of such Debt Obligations.

 

Potential Event of Default means any event or circumstance that, with the giving
of notice and/or the lapse of time, would become an Event of Default.

 

Prime Rate means the rate of interest per annum publicly announced from time to
time by the financial institution then serving as the Administrative Agent as
its prime rate in effect at its principal office in New York City, each change
in the Prime Rate shall be effective from and including the date such change is
publicly announced as being effective.

 

Pro Rata Share means, with respect to any Lender on any date of determination,
the percentage obtained by dividing the amount of such Lender’s Commitment on
such date by the aggregate of

 

17

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the Commitments of all Lenders on such date.  With respect to the Initial
Lender, the percentage referred to in the foregoing sentence is on the date
hereof equal to 100%.

 

Proceedings has the meaning given to such term in Section 8.5(b).

 

Property means any right or interest in or to property of any kind whatsoever,
whether real, personal or mixed and whether tangible or intangible.

 

Purchase Amount means, with respect to any Debt Obligation, (a) the Purchase
Price of such Debt Obligation multiplied by (b) the Par Amount of such Debt
Obligation.

 

Purchase Price means, with respect to any Debt Obligation, the aggregate
purchase price paid by the Borrower to purchase such Debt Obligation (which
(a) shall be expressed as a percentage of par and (b) shall be determined
exclusive of accrued interest and premium); provided that the Purchase Price
with respect to any Contributed Debt Obligation shall be as agreed in writing by
the Borrower and the Administrative Agent on or prior to the acquisition of such
Debt Obligation.

 

Qualifying Purchase has the meaning given to such term in Section 5.2(a).

 

Quarterly Date means each February 10, May 10, August 10 and November 10,
commencing with the first such date in November 2013.

 

Quarterly Period means each period from and including a Quarterly Date to but
excluding the next succeeding Quarterly Date, provided that (a) the first
Quarterly Period shall commence on the date hereof and (b) the final Quarterly
Period shall end on the Maturity Date.

 

Ramp-Up Period means the period from and including the Closing Date to but
excluding the date occurring 90 days after the Closing Date.

 

Register has the meaning given to such term in Section 8.4(e).

 

Related Party means (a) the Borrower Investor, (b) any investment advisor to the
Borrower Investor or any Affiliate thereof or (c) any account or portfolio as to
which any investment adviser to the Borrower Investor or any Affiliate thereof
(or any Affiliate of such investment adviser) serves as investment advisor.

 

Required Lenders means Lenders holding more than 50% of the aggregate
outstanding principal amount of the Loans.

 

Representation Date means the date hereof, the Closing Date and each Borrowing
Notice Date.

 

S&P means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, or any successor thereto.

 

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S&P Rating means, with respect to a Debt Obligation:

 

(i)            if the Debt Obligation itself is rated by S&P (including pursuant
to any credit estimate), such rating,

 

(ii)           if the foregoing paragraph is not applicable, then, if the
related Obligor has a corporate issuer rating by S&P, the rating specified in
the applicable row of the table below under “Relevant Rating” opposite the row
in the table below that describes such Debt Obligation:

 

Debt Obligation

 

Relevant Rating

The Debt Obligation is a secured obligation, but is not a Second Lien Obligation
and is not Subordinate

 

The rating by S&P that is one rating subcategory above such corporate issuer
rating

The Debt Obligation is an unsecured obligation or is a Second Lien Obligation,
but is not Subordinate

 

The rating by S&P that is one rating subcategory below such corporate issuer
rating

The Debt Obligation is Subordinate

 

The rating by S&P that is two rating subcategories below such corporate issuer
rating

 

(iii)          if the foregoing paragraphs are not applicable, but there is a
rating by S&P on a secured obligation of the Obligor that is not a Second Lien
Obligation and is not Subordinate (the “other obligation”), the rating specified
in the applicable row of the table below under “Relevant Rating” opposite the
row in the table below that describes such Debt Obligation:

 

Debt Obligation

 

Relevant Rating

The Debt Obligation is a secured obligation, but is not a Second Lien Obligation
and is not Subordinate

 

The rating assigned by S&P to the other obligation

The Debt Obligation is an unsecured obligation or is a Second Lien Obligation,
but is not Subordinate

 

The rating by S&P that is one rating subcategory below the rating assigned by
S&P to the other obligation

The Debt Obligation is Subordinate

 

The rating by S&P that is two rating subcategories below the rating assigned by
S&P to the other obligation

 

(iv)          if the foregoing paragraphs are not applicable, but there is a
rating by S&P on an unsecured obligation of the Obligor (or, failing that, an
obligation that is a Second Lien Obligation) but is not Subordinate (the “other
obligation”), the rating specified in the applicable row of the table below
under “Relevant Rating” opposite the row in the table below that describes such
Debt Obligation:

 

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Debt Obligation

 

Relevant Rating

The Debt Obligation is a secured obligation, but is not a Second Lien Obligation
and is not Subordinate

 

The rating by S&P that is one rating subcategory above the rating assigned by
S&P to the other obligation

The Debt Obligation is an unsecured obligation or is a Second Lien Obligation,
but is not Subordinate

 

The rating assigned by S&P to the other obligation

The Debt Obligation is Subordinate

 

The rating by S&P that is one rating subcategory below the rating assigned by
S&P to the other obligation

 

(v)           if the foregoing paragraphs are not applicable, but there is a
rating by S&P on an obligation of the Obligor that is Subordinate (the “other
obligation”), the rating specified in the applicable row of the table below
under “Relevant Rating” opposite the row in the table below that describes such
Debt Obligation:

 

Debt Obligation

 

Relevant Rating

The Debt Obligation is a secured obligation, but is not a Second Lien Obligation
and is not Subordinate

 

The rating by S&P that is two rating subcategories above the rating assigned by
S&P to the other obligation

The Debt Obligation is an unsecured obligation or is a Second Lien Obligation,
but is not Subordinate

 

The rating by S&P that is one rating subcategory above the rating assigned by
S&P to the other obligation

The Debt Obligation is Subordinate

 

The rating assigned by S&P to the other obligation

 

(vi)          if the foregoing paragraphs are not applicable, then the S&P
Rating shall be “CC”; provided that (x) if application has been made to S&P to
rate a Debt Obligation and such Debt Obligation has a Moody’s Rating, then the
S&P Rating with respect to such Debt Obligation shall, pending the receipt of
such rating from S&P, be equal to the S&P Rating that is equivalent to such
Moody’s Rating and (y) Debt Obligations constituting no more, by aggregate
Purchase Amount, than 10% of the Portfolio Purchase Amount may be given a S&P
Rating based on a rating given by Moody’s as provided in clause (x) (after
giving effect to the addition of the relevant Debt Obligation, if applicable).

 

Scheduled Maturity Date means May 24, 2015; provided that, if such day is not a
Business Day, then the Scheduled Maturity Date will be the immediately preceding
Business Day.

 

Second Lien Obligation means an obligation that is secured by collateral, but as
to which the beneficiary or beneficiaries of such collateral security agree for
the benefit of the holder or holders of other indebtedness secured by the same
collateral (First Lien Debt) as to one or more of the following:  (1) to defer
their right to enforce such collateral security either permanently or for a
specified period of time while First Lien Debt is outstanding, (2) to permit a
holder or

 

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holders of First Lien Debt to sell such collateral free and clear of the
security in favor of such beneficiary or beneficiaries, (3) not to object to
sales of assets by the obligor on such obligation following the commencement of
a bankruptcy or other insolvency proceeding with respect to such obligor or to
an application by the holder or holders of First Lien Debt to obtain adequate
protection in any such proceeding and (4) not to contest the creation, validity,
perfection or priority of First Lien Debt.

 

Security Agent means Citibank, N.A., as agent for the secured parties under the
Security Agreement, together with any successor in such capacity.

 

Security Agreement means the Security Agreement dated as of the date of this
Agreement between the Borrower and the Security Agent.

 

Senior Management Fee means the “Senior Management Fee” as defined in the
Investment Management Agreement.

 

Specified Debt Obligation means any Debt Obligation satisfying each of the
following requirements:

 

(i)                                     such Debt Obligation is not on the date
of purchase or other acquisition thereof by the Borrower subject to a Debt
Obligation Bankruptcy Event or Debt Obligation Failure to Pay Event;

 

(ii)                                  such Debt Obligation is on the date of
purchase or other acquisition thereof by the Borrower part of a fungible class
of debt obligations (as to issuance date and all economic terms) of at least
USD125,000,000;

 

(iii)                               such Debt Obligation has a Purchase Price of
at least 85%;

 

(iv)                              such Debt Obligation has on the date of
purchase or other acquisition thereof by the Borrower a Moody’s Rating of at
least B3 and an S&P Rating of at least B-;

 

(v)                                 such Debt Obligation is not a Second Lien
Obligation; and

 

(vi)                              such Debt Obligation is the subject of at
least two bid quotations from nationally recognized independent dealers in such
Debt Obligation as reported on a nationally recognized pricing service;

 

provided that a Debt Obligation need not satisfy the requirements in clauses
(iv) and (vi) above during the period of 30 days following the origination of
such Debt Obligation so long as such Debt Obligation satisfies such requirements
no later than the date 30 days after such origination.

 

Stamp Tax means any stamp, registration, documentation or similar tax.

 

Stamp Tax Jurisdiction has the meaning given to such term in Section 3.9(e).

 

Subordinate means, with respect to an obligation (the Subordinated Obligation)
and another obligation of the obligor thereon to which such obligation is being
compared (the Senior

 

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Obligation), a contractual, trust or similar arrangement (without regard to the
existence of preferred creditors arising by operation of law or to collateral,
credit support, lien or other credit enhancement arrangements or provisions
regarding the application of proceeds of any of the foregoing) providing that
(i) upon the liquidation, dissolution, reorganization or winding up of the
obligor, claims of the holders of the Senior Obligation will be satisfied prior
to the claims of the holders of the Subordinated Obligation or (ii) the holders
of the Subordinated Obligation will not be entitled to receive or retain
payments in respect of their claims against the obligor at any time that the
obligor is in payment arrears or is otherwise in default under the Senior
Obligation.

 

Subordinate Management Fee means the “Subordinate Management Fee” as defined in
the Investment Management Agreement.

 

Subsidiary means, with respect to any Person (the parent) at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be consolidated with those of the parent in the
parent’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, Controlled or held, or (b) that is, as of such date, otherwise
Controlled, by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent.

 

Support Document means each of the Security Agreement, the Account Control
Agreement and any other agreement or instrument pursuant to which any Person
guarantees, secures, margins or otherwise supports the obligations of the
Borrower under this Agreement.

 

Support Obligor means each Person, if any, other than the Borrower and any party
to the Account Control Agreement that executes and delivers a Support Document
for the benefit of the Administrative Agent, the Security Agent or any Lender in
connection with this Agreement.  There is no Support Obligor on the date hereof.

 

Tax has the meaning given to such term in Section 3.9(a).

 

Termination Percentage means, on any date of determination, the excess, if any,
of (a) the Equity Percentage on such date of determination over (b) 7.5%.

 

Transaction Documents means the Loan Documents, the Assignment Agreements, the
Equity Contribution Framework Agreement and the Investment Management Agreement.

 

Unquoted Debt Obligation means any Debt Obligation the market value of which
cannot be obtained from a nationally recognized pricing source or quotation
service that satisfies each of the following criteria:

 

(i)                                     it is not a Covenant-Lite Obligation;

 

(ii)                                  it provides for payment of interest in
cash no less frequently than quarterly;

 

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(iii)                               if any payment of interest on such Debt
Obligation that would otherwise be payable may be deferred or capitalized as
additional principal (without default) without the consent of each affected
lender, such Debt Obligation shall provide for payment of interest in cash
(without deferral or capitalization) no less frequently than quarterly at a rate
per annum not less than 2%;

 

(iv)                              it is not a loan made to a
debtor-in-possession pursuant to Section 364 of the U.S. Bankruptcy Code having
the priority allowed by either Section 364(c) or 364(d) of the U.S. Bankruptcy
Code; and

 

(v)                                 on the date of purchase or other acquisition
thereof by the Borrower, the ratio of (a) the aggregate principal amount of
Indebtedness of the Obligor thereon (or, if there is more than one Obligor
thereon, as determined on a consolidated basis with respect to the Obligor
having the greatest aggregate principal amount of Indebtedness on a consolidated
basis) to (b) net earnings before deduction of interest, taxes, depreciation and
amortization of the Obligor thereon (or, if there is more than one Obligor
thereon, as determined on a consolidated basis with respect to the Obligor
having the greatest aggregate principal amount of Indebtedness on a consolidated
basis) is less than 4.25.

 

U.S. Dollars and USD mean lawful money of the United States of America.

 

Valuation Price means, with respect to any Unquoted Debt Obligation on any date
of determination, the most recent valuation of such Unquoted Debt Obligation
provided to the Borrower (with a copy to the Administrative Agent) by any one of
the valuation firms set forth on Schedule IV or any other nationally recognized
valuation firm acceptable to the Administrative Agent; provided that:

 

(a)                                 subject to the following paragraph (b), for
the period from and including the “trade date” for the purchase or other
acquisition thereof to but excluding the date an initial valuation is received
as aforesaid, the Valuation Price of such Unquoted Debt Obligation shall be the
Purchase Price thereof; and

 

(b)                                 if the on-the-run MarkIt Cash LCDX index (or
any successor index) as published by MarkIt (or any successor publisher) on such
date of determination is less than the value of such index on the later of
(i) such “trade date” and (ii) the date of the most recent valuation received as
aforesaid by an amount (expressed in absolute and not percentage terms)
exceeding 5%, then on such date of determination, and solely for the period
until a subsequent valuation is received as aforesaid, the Valuation Price of
such Unquoted Debt Obligation will be equal to (x) a percentage, the numerator
of which shall be the value of such index on such date of determination and the
denominator of which shall be the value of such index on the later of such two
dates multiplied by (y) the Valuation Price that would apply in the absence of
this paragraph (b).

 

Weighted Average Rating means, as of any date of determination, the number
obtained by (a) multiplying the Purchase Amount of each Debt Obligation held by
the Borrower on such date by the applicable Rating Factor (as set forth in table
below); (b) summing the products obtained in clause (a) for all such Debt
Obligations; and (c) dividing the sum obtained in clause (b) by the aggregate of
the Purchase Amounts of all such Debt Obligations.

 

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RATING FACTORS

 

Moody’s Rating

 

Rating Factor

 

 

 

 

 

Aaa

 

1

 

Aa1

 

10

 

Aa2

 

20

 

Aa3

 

40

 

A1

 

70

 

A2

 

120

 

A3

 

180

 

Baa1

 

260

 

Baa2

 

360

 

Baa3

 

610

 

Ba1

 

940

 

Ba2

 

1,350

 

Ba3

 

1,766

 

B1

 

2,220

 

B2

 

2,720

 

B3

 

3,490

 

Caa1

 

4,770

 

Caa2

 

6,500

 

Caa3

 

8,070

 

Below Caa3

 

10,000

 

 

Interpretation

 

1.2                               Unless the context otherwise clearly requires:
(a) the definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined; (b) whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms;
(c) the words “include”, “includes” and “including” shall be deemed to be
followed by the phrase “without limitation”; (d) the word “will” shall be
construed to have the same meaning and effect as the word “shall”; (e) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein);
(f) any reference to any law, rule or regulation herein shall be construed as
referring to such law, rule or regulation as from time to time amended; (g) any
reference herein to any Person shall be construed to include such Person’s
successors and assigns; (h) the words “herein”, “hereof” and “hereunder”, and
words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof; and (i) all references
herein to Sections, Exhibits and Schedules shall be construed to refer to
Sections of, and Exhibits and Schedules to, this Agreement.

 

THE LOANS

 

2.1                               Subject to the terms and conditions set forth
herein, the Lenders severally agree to make their respective Pro Rata Shares of
a loan (each, a Loan) to the Borrower from time to time on any Business Day
(each, a Borrowing Date) during the Drawdown Period in order to finance (in
part) the purchase by the Borrower of a Debt Obligation or to refinance a Debt
Obligation

 

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previously contributed to the equity capital of the Borrower, in each case, with
the proceeds of such Loan.

 

2.2                               The advance of each Loan pursuant to
Section 2.1 shall be subject to:

 

(a)                                 the satisfaction on or prior to the first
Borrowing Date of each of the conditions precedent specified in Schedule I;

 

(b)                                 the first Borrowing Date occurring no later
than the date five Business Days after the date of this Agreement;

 

(c)                                  the receipt by the Administrative Agent of
a notice of borrowing (the date of such notice being the Borrowing Notice Date)
from the Borrower not less than three (and not more than five) Business Days
prior to the relevant Borrowing Date:

 

(i)              specifying the proposed Borrowing Date;

 

(ii)               specifying the principal amount of the proposed Loan (which
shall be an amount not less than USD1,000,000);

 

(iii)                  specifying the account to which the proceeds of the
proposed Loan are to be paid;

 

(iv)               specifying whether the proceeds of such proposed Loan are to
be used (x) to purchase a Debt Obligation pursuant to Section 5.2(a)(i) or
(y) to refinance a Contributed Debt Obligation previously acquired by the
Borrower (the Debt Obligation so purchased or previously acquired, the Financed
Debt Obligation);

 

(v)              if the proceeds of such Loan are to be used to purchase a
Financed Debt Obligation, identifying such Financed Debt Obligation and
specifying the related Par Amount and Purchase Price; and

 

(vi)               setting forth calculations demonstrating compliance with the
conditions set forth in paragraphs (g) through (i) of this Section 2.2 after
giving effect to the application of the proceeds of such Loan;

 

provided that (A) the initial notice of borrowing may be given on the date
hereof and (B) the Borrower shall be permitted to deliver a notice of borrowing
on the Borrowing Date that complies with the requirements of clauses (i) through
(vi) above so long as (1) such notice is received by the Administrative Agent no
later than 10:00 a.m. New York City time, (2) the proposed Loan to be made shall
bear interest for the period of two Business Days commencing on and including
the Borrowing Date as if the reference to “LIBOR” in the definition of “Interest
Rate” were instead a reference to the Alternate Base Rate (and, for purposes of
determining LIBOR immediately following such period, the first day of the
relevant Interest Period shall be the next succeeding Business Day) and (3) no
such borrowing shall be permitted if the aggregate principal amount of Loans
outstanding on any date and bearing interest at the Alternate Base Rate would
exceed USD40,000,000;

 

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(d)                                 in the case of a Financed Debt Obligation
being purchased pursuant to Section 5.2(a)(i), the Administrative Agent shall
have given its consent to such purchase (which consent the Administrative Agent
may give or withhold in its sole discretion);

 

(e)                                  the Financed Debt Obligation satisfies the
Obligation Criteria on the Borrowing Date;

 

(f)                                   in the case of a Financed Debt Obligation
being purchased pursuant to Section 5.2(a)(i), the Portfolio Criteria shall be
satisfied after giving effect to such purchase (or, in the case of Portfolio
Criterion that is not satisfied immediately prior to such purchase, the effect
of such purchase shall be to improve the extent of compliance with such
Portfolio Criterion);

 

(g)                                  after giving effect to the making of such
Loan, the aggregate principal amount of the Loans outstanding hereunder held by
any Lender does not exceed such Lender’s Commitment;

 

(h)                                the Loan Compliance Test shall be satisfied
after giving effect to such Loan and the application of the proceeds thereof;

 

(i)                                     the Equity Coverage Ratio after giving
effect to such Loan and the application of the proceeds thereof shall not be
less than the Diversion Percentage; and

 

(j)                                    each of the representations and
warranties of the Borrower set forth in this Agreement and the Support Documents
are true and correct in all material respects on and as of the related Borrowing
Notice Date (or, if expressly stated to be made as of any specific date, on and
as of such specific date) (and with each such representation and warranty being
made on and as of the related Borrowing Notice Date for all purposes of this
Agreement).

 

Subject to the satisfaction of such conditions, the Lenders shall make their
respective Pro Rata Shares of such Loan available on the related Borrowing Date
by wire transfer of immediately available funds by 2:00 p.m., New York City
time, to the account of the Administrative Agent most recently designated by it
for such purpose by notice to the Lenders.  In the case of a Financed Debt
Obligation referred to in Section 5.2(a)(i), the Administrative Agent will
promptly make such funds available to the Borrower by either (i) depositing the
same in the Custodial Account established (and as defined in) under the Security
Agreement (pending use thereof as provided in the following clause (ii)) or
(ii) applying such funds to the payment for the purchase by the Borrower of such
Financed Debt Obligation in accordance with instructions timely furnished by the
Borrower to the Administrative Agent.  In the case of a Financed Debt Obligation
that is a Contributed Debt Obligation, the Administrative Agent will promptly
make such funds available to the Borrower in order to permit the Borrower to
make an Equity Restricted Payment to the Borrower Investor on the related
Borrowing Date.

 

2.3                               The proceeds from each Loan shall be used by
the Borrower exclusively for (i) in the case of a Financed Debt Obligation
referred to in Section 5.2(a)(i), the purchase of the Debt Obligation identified
in the related notice of borrowing given pursuant to Section 2.2 (or, pending
such application, for deposit into the Custodial Account) and (ii) in the case
of a Financed Debt Obligation that is a Contributed Debt Obligation, the making
of an Equity

 

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Restricted Payment to the Borrower Investor on or as soon as practicable
following the related Borrowing Date.

 

2.4                               The Loans and other obligations of the
Borrower hereunder shall be secured as provided in the Security Agreement and
shall be entitled to the benefit of the other Support Documents.  The Lenders
hereby irrevocably appoint the Security Agent as their agent under the Security
Agreement and each other Support Document and authorize the Security Agent to
take such actions on their behalf and to exercise such powers as are delegated
to the Security Agent by the terms of the Security Agreement and each other
Support Document, together with such actions and powers as are reasonably
incidental thereto.

 

PAYMENTS OF PRINCIPAL, INTEREST AND FEES

 

Principal

 

3.1                               For value received, the Borrower hereby
unconditionally promises to pay to the Administrative Agent for account of the
Lenders on the Scheduled Maturity Date the entire unpaid aggregate principal
amount of the Loans.

 

Interest; Fees

 

3.2(a)                The Borrower hereby unconditionally promises to pay to the
Administrative Agent for account of the Lenders interest on the unpaid principal
amount of each Loan, for the period from and including the Borrowing Date for
such Loan to but excluding the date that such Loan shall be paid in full, at a
rate per annum equal to the Interest Rate.

 

(b)                                 The Borrower hereby unconditionally promises
to pay to the Administrative Agent for account of the Lenders a commitment fee
on the excess, if any, of (i) the aggregate amount of Commitments from time to
time in effect over (ii) the aggregate principal amount of Loans outstanding,
for each day during the Drawdown Period occurring after the Ramp-Up Period, at a
rate per annum equal to 0.50%.

 

(c)                                  The Borrower hereby unconditionally
promises to pay to the Administrative Agent for account of the Lenders an
upfront fee in an amount equal to 0.35% of the aggregate amount of the
Commitments of the Lenders as in effect on the date hereof (such aggregate
amount, the Maximum Aggregate Loan Amount).

 

(d)                                 If the aggregate amount of the Commitments
are reduced during the Drawdown Period, the Borrower shall pay to the
Administrative Agent for account of the Lenders a commitment reduction fee in an
amount equal to 0.50% of the aggregate amount of such reduction.

 

(e)                                  Interest and fees payable under this
Section 3.2 shall be paid on the dates specified in Section 3.4 (or, if
applicable, Section 3.3).

 

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Default

 

3.3                               Notwithstanding the foregoing, the Borrower
hereby unconditionally promises to pay to the Administrative Agent for account
of the Lenders interest on any principal of or interest on any Loan, or any fee
or other amount owing under this Agreement or the Security Agreement, that shall
not be paid in full when due (whether at stated maturity, by acceleration, upon
optional or mandatory prepayment or otherwise), for the period from and
including the due date of such payment to but excluding the date the same is
paid in full, at a rate per annum equal to the Default Rate.

 

Payment Dates

 

3.4(a)                Accrued interest on each Loan shall be payable (i) on each
Payment Date in an amount equal to interest accrued for the related Interest
Period, (ii) upon the prepayment pursuant to Section 3.7 of any principal of any
Loan in an amount equal to interest thereon accrued to but excluding the date of
such prepayment and (iii) in the case of interest payable at the Default Rate,
from time to time on demand of the Administrative Agent.

 

(b)                                 Commitment fee accrued pursuant to
Section 3.2(b) during any Interest Period (or portion thereof) shall be payable
on the related Payment Date.

 

(c)                                  The upfront fee payable pursuant to
Section 3.2(c) shall be payable on the date of execution and delivery of this
Agreement by the original parties hereto.

 

(d)                                 Any commitment reduction fee payable
pursuant to Section 3.2(d) shall be payable on the date of the related
commitment reduction.

 

Interest Computation Basis

 

3.5                               Interest accruing with respect to each Loan
for any Interest Period shall accrue for each day during such Interest Period
and shall be computed on the basis of a year of 360 days and actual days
elapsed.  Interest accruing with respect to any other amount for any period
shall accrue from and including the first day of such period to but excluding
the last day of such period and shall be computed on the basis of a year of 360
days and actual days elapsed.  Fee payable under Section 3.2(b) accruing with
respect to any period shall accrue for each day during such period and shall be
computed on the basis of a year of 360 days and actual days elapsed.

 

Manner of Payment

 

3.6(a)                The Borrower shall make each payment required to be made
by it hereunder (whether of principal, interest, fees or otherwise) or under any
Support Document (except to the extent otherwise provided therein) prior to
2:00 p.m., New York City time, on the date when due, in immediately available
funds, without set off or counterclaim.  Any amounts received after such time on
any date may, in the discretion of the Administrative Agent, be deemed to have
been received on the next succeeding Business Day for purposes of calculating
interest thereon.  All such payments shall be made to the Administrative Agent
at its offices at 399 Park Avenue, New York, New York  10043, except as
otherwise expressly provided herein or in any Support Document.  The
Administrative

 

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                                                Agent shall distribute any such
payments received by it for the account of any other Person to the appropriate
recipient through its Payment Account promptly following receipt thereof.

 

(b)                                 If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension.  All
payments hereunder or under the Security Agreement shall be made in USD.

 

(c)                                  Unless the Administrative Agent shall have
received notice from the Borrower prior to the date on which any payment is due
to the Administrative Agent for the account of the Lenders hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the Lenders the amount due.  In
such event, if the Borrower has not in fact made such payment, then each of the
Lenders severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender with interest thereon, for each
day from and including the date such amount is distributed to it to but
excluding the date of payment to the Administrative Agent, at a rate determined
by the Administrative Agent in accordance with banking industry rules on
interbank compensation.

 

(d)                                 Except to the extent otherwise provided
herein:  (i) each payment or prepayment of principal of any Loan (and of any fee
payable under Section 3.2(d)) by the Borrower shall be made for account of the
Lenders pro rata in accordance with the respective portions of the unpaid
principal amount of such Loan held by them; (ii) each payment of interest on any
Loan by the Borrower shall be made for account of the Lenders pro rata in
accordance with the amounts of interest on their respective portions of such
Loan then due and payable to the Lenders; (iii) each fee payable by the Borrower
under Section 3.2(b) or 3.2(c) shall be made for account of the Lenders pro rata
in accordance with their respective Pro Rata Shares; and (iv) each reduction of
Commitments shall be made for account of the Lenders pro rata in accordance with
their respective Pro Rata Shares.

 

(e)                                  Each Lender shall maintain in accordance
with its usual practice an account or accounts evidencing the indebtedness of
the Borrower to such Lender resulting from each Loan, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.  The entries made in such accounts shall be prima facie evidence of
the existence and amounts of the obligations recorded therein; provided that the
failure of any Lender to maintain such accounts or any error therein shall not
in any manner affect the obligation of the Borrower to repay any Loan, and to
pay interest thereon or any fee hereunder, in accordance with the terms of this
Agreement.

 

(f)                                   Any Lender may request that the portion of
the Loans owing to such Lender be evidenced by a Note.  In such event, the
Borrower shall prepare, execute and deliver to such Lender a Note payable to the
order of such Lender (or, if requested by such Lender, to such Lender and its
registered assigns).  Thereafter, the portion of the Loans evidenced by

 

29

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                                                such Note and interest on such
principal shall at all times (including after assignment pursuant hereto) be
represented by one or more Notes in such form payable to the order of the payee
named therein (or, if such Note is a registered note, to such payee and its
registered assigns).

 

(g)                                  If any Lender shall, by exercising any
right of set off or counterclaim or otherwise, obtain payment in respect of any
principal of or interest on any portion of any Loan owing to such Lender
resulting in such Lender receiving payment of a greater proportion thereof then
due than the proportion received by any other Lender, then the Lender receiving
such greater proportion shall purchase (for cash at face value) participations
in the amounts owing to the other Lenders to the extent necessary so that the
benefit of all such payments shall be shared by the Lenders ratably in
accordance with paragraph (d) above; provided that (i) if any such
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by the Borrower pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any portion of any Loan to any
assignee or participant, other than to the Borrower or any Subsidiary or
Affiliate thereof (as to which the provisions of this paragraph shall apply). 
The Borrower consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against the
Borrower rights of set off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrower in the amount
of such participation.

 

(h)                                 Any Lender may change the Payment Account
for receiving payments under this Agreement by giving notice of the new Payment
Account to the Borrower and the Administrative Agent at least three Business
Days prior to the first scheduled date for the payment to which such change
applies.

 

Optional and Mandatory Prepayments; Commitment Reductions

 

3.7(a)                The Borrower shall have the right upon any Business Day,
upon not less than three Business Days’ notice to the Administrative Agent and
each of the Lenders, to reduce permanently the aggregate amount of the
Commitments then in effect; provided that (i) any partial reduction shall be in
an aggregate amount not less than USD1,000,000 and (ii) no such reduction shall
reduce the aggregate amount of the Commitments to an amount less than the
aggregate principal amount of the Loans then outstanding.

 

(b)                                 The Borrower shall have the right upon any
Business Day, upon not less than three Business Days’ notice to the
Administrative Agent and each of the Lenders, to prepay all or any portion of
the Loans then outstanding; provided that any partial prepayment shall be in an
amount not less than USD1,000,000.

 

(c)                                  If the Equity Coverage Ratio at the close
of business in New York on any Business Day is less than the Termination
Percentage, then, on the next succeeding Business Day (i) the

 

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Borrower shall prepay the entire unpaid aggregate principal amount of the Loans
and (ii) the Commitments shall automatically be reduced to zero.

 

(d)                                 If the aggregate outstanding principal
amount of the Loans outstanding on the date occurring six months prior to the
Scheduled Maturity Date (or, if such date is not a Business Day, on the
immediately preceding Business Day) exceeds 75% of the Maximum Aggregate Loan
Amount, then (i) the Borrower shall on such Business Day prepay the Loans in an
aggregate principal amount necessary to eliminate such excess and (ii) the
aggregate amount of the Commitments shall on such Business Day be reduced
permanently to the aggregate principal amount of Loans outstanding after giving
effect to such prepayment.

 

(e)                                  If the aggregate outstanding principal
amount of the Loans outstanding on the date occurring three months prior to the
Scheduled Maturity Date (or, if such date is not a Business Day, on the
immediately preceding Business Day) exceeds 50% of the Maximum Aggregate Loan
Amount, then (i) the Borrower shall on such Business Day prepay the Loans in an
aggregate principal amount necessary to eliminate such excess and (ii) the
aggregate amount of the Commitments shall on such Business Day be reduced
permanently to the aggregate principal amount of Loans outstanding after giving
effect to such prepayment.

 

(f)                                   Any partial prepayment of the Loans shall
be applied to the Loans then outstanding pro rata in accordance with their
respective principal amounts outstanding immediately prior to such partial
prepayment.

 

Payment Timing

 

3.8                               The Borrower will not make any payment to any
Person (other than (i) payments required hereunder or any other Loan Document to
be made to the Administrative Agent, the Security Agent or any Lender (other
than payments made in connection with the execution and delivery of this
Agreement and other Loan Documents or the satisfaction of the conditions
specified in Schedule I), (ii) payments made to purchase a Debt Obligation
acquired by the Borrower in accordance with Section 2.2 and (iii) payments made
to purchase Eligible Investments), except for payments made as indicated below:

 

(a)                                 on any date, to the payment of expenses
owing by the Borrower in the ordinary course of business to any Person other
than a Related Party so long as the aggregate amount paid pursuant to this
paragraph (a) during any Quarterly Period does not exceed USD50,000; and

 

(b)                                 on any Payment Date and after the payment of
all principal, interest, fees and other amounts payable by the Borrower
hereunder or under any other Loan Document on or prior to such Payment Date, in
the priority indicated below and solely from the sources indicated below:

 

(i)              from Available Interest Proceeds:

 

(A)            first, to the payment of accrued and unpaid Senior Management
Fee;

 

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(B)            second, if the Equity Coverage Ratio on such Payment Date (after
giving effect to any such payment of principal, but prior to any payment
pursuant to Section 3.8(b)(ii) on such Payment Date) is less than the Diversion
Percentage or the Loan Compliance Test is not satisfied, to the payment of
outstanding principal of the Loans until the Equity Coverage Ratio is equal to
the Diversion Percentage and the Loan Compliance Test is satisfied, as
applicable;

 

(C)            third, to the payment of accrued and unpaid Subordinate
Management Fee;

 

(D)            fourth, to the payment of any remaining expenses owing by the
Borrower in the ordinary course of business to any Person (other than any
Related Person); and

 

(E)             fifth, to the payment of an Equity Restricted Payment to the
Borrower Investor so long as (1) the Borrower has given at least three Business
Days’ notice of the amount of such Equity Restricted Payment to the
Administrative Agent and (2) no Event of Default or Potential Event of Default
has occurred and is continuing or would result from such Equity Restricted
Payment.

 

(ii)                from Available Principal Proceeds:

 

(A)            first, if the Equity Coverage Ratio on such Payment Date (after
giving effect to any such payment of principal) is less than the Diversion
Percentage (after giving effect to any payment made pursuant to
Section 3.8(b)(i)(B) on such Payment Date) or the Loan Compliance Test is not
satisfied, to the payment of outstanding principal of the Loans until the Equity
Coverage Ratio is equal to the Diversion Percentage and the Loan Compliance Test
is satisfied, as applicable; and

 

(B)            second, to the payment of an Equity Restricted Payment to the
Borrower Investor so long as (1) the Loan Compliance Test is satisfied after
giving effect to such Equity Restricted Payment, (2) the Borrower has given at
least three Business Days’ notice of the amount of such Equity Restricted
Payment to the Administrative Agent, (3) the Equity Coverage Ratio is at least
equal to the Diversion Percentage after giving effect to such Equity Restricted
Payment and (4) no Event of Default or Potential Event of Default has occurred
and is continuing or would result from such Equity Restricted Payment.

 

(iii)             On or as soon as practicable following any Borrowing Date
(other than a Payment Date) on which a Loan is made with respect to the
aggregate of all Contributed Debt Obligations, the Borrower may use the proceeds
of such Loan to make an Equity Restricted Payment to the Borrower Investor so
long as (1) the Loan Compliance Test is satisfied after giving effect to such
Equity Restricted Payment, (2) all principal, interest, fees and other amounts
due and payable by the Borrower hereunder or under any other Loan Document on or
prior to such

 

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Borrowing Date have been paid, (3) the Equity Coverage Ratio is at least equal
to the Diversion Percentage after giving effect to such Equity Restricted
Payment and (4) no Event of Default or Potential Event of Default has occurred
and is continuing or would result from such Equity Restricted Payment.

 

(iv)            On any Business Day (other than a Payment Date), the Borrower
may make an Equity Restricted Payment to the Borrower Investor in the form of an
in kind distribution of all or any portion of a Debt Obligation then held by the
Borrower (such distribution to be made without recourse, representation or
warranty whatsoever) so long as (1) the Loan Compliance Test is satisfied after
giving effect to such Equity Restricted Payment, (2) all principal, interest,
fees and other amounts due and payable by the Borrower hereunder or under any
other Loan Document on or prior to the date of such Equity Restricted Payment
have been paid, (3) the Equity Coverage Ratio is at least equal to the Diversion
Percentage after giving effect to such Equity Restricted Payment, (4) no Event
of Default or Potential Event of Default has occurred and is continuing or would
result from such Equity Restricted Payment, (5) the aggregate Purchase Amount of
all Debt Obligations distributed pursuant to this Section 3.8(b)(iv) during any
period of 12 consecutive calendar months shall not exceed 10% of the average
daily aggregate Purchase Amount of all Debt Obligations held by the Borrower
during such 12-month period and (6) the Borrower has given at least three
Business Days’ notice of the amount of such Equity Restricted Payment to the
Administrative Agent; provided that (x) if the settlement of the contribution to
the Borrower of any Debt Obligation pursuant to Section 5.2(b) shall have
previously occurred on such Business Day, then compliance with the foregoing
tests shall be determined after giving effect to such contribution and (y) the
amount of any Equity Restricted Payment made pursuant to this
Section 3.8(b)(iv) shall be the Current Price on such Business Day of the Debt
Obligation to be distributed multiplied by the Par Amount of the Debt Obligation
to be distributed.

 

Taxes

 

3.9(a)                All payments under this Agreement for account of the
Administrative Agent or any Lender will be made without any deduction or
withholding for or on account of any present or future tax, levy, impost, duty,
charge, assessment or fee of any nature (a Tax) unless such deduction or
withholding is required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, then in effect.  If the Borrower is
required to withhold or deduct for or on account of any Tax in respect of this
Agreement for account of the Administrative Agent or any Lender, the Borrower
will:  (1) promptly notify the affected payee of such requirement; (2) pay to
the relevant authorities the full amount required to be deducted or withheld
promptly upon the earlier of determining that such deduction or withholding is
required or receiving notice that such amount has been assessed; (3) promptly
forward to the affected payee (with a copy to the Administrative Agent if it is
not the affected payee) an official receipt (or a certified copy) evidencing
such payment to such authorities; and (4) unless such Tax is an Excluded Tax pay
to such payee such additional amount (an Additional Amount) as is necessary to
ensure that the net amount actually received by such payee (free and clear of

 

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all Taxes other than Excluded Taxes, whether assessed against the Borrower or
such payee) will equal the full amount such payee would have received in respect
of this Agreement had no such deduction or withholding been required; provided
that the Borrower will not be required to pay any Additional Amount with respect
to any Tax that is:

 

(i)              imposed other than by withholding (except, for the avoidance of
doubt, any Tax assessed directly against a Lender or the Administrative Agent
for which the Borrower is required to indemnify the Lender or Administrative
Agent pursuant to Section 8.1);

 

(ii)               an estate, inheritance, gift, sale, transfer, personal
property or similar tax;

 

(iii)                  imposed by reason of the failure of such payee, or
beneficial owner of an interest in this Agreement if not such payee (after
reasonable notice by such payee), to comply with Section 3.9(b) (unless such
failure results from a Change in Tax Law or a change in a tax treaty to which
the United States of America is a party); or

 

(iv)               imposed by reason of any combination of clauses (i), (ii) and
(iii);

 

provided, further, that no Lender shall be entitled to receive Additional
Amounts in respect of any Tax required to be withheld under the laws of the
United States of America (including any tax treaties to which the United States
of America is a party) in effect on the date (x) such Lender becomes a party to
this Agreement or (y) such Lender changes its lending office, except, that
(X) consistent with Section 8.4(d), any Lender that is an assignee shall be
entitled to Additional Amounts if and only to the extent the assigning Lender
was entitled to such amounts immediately prior to the assignment, (Y) consistent
with Section 8.4(f), any Participant shall be entitled to Additional Amounts if
and only to the extent the Lender selling the participation was entitled to such
amounts immediately before the sale of the participation and (Z) if a Lender
changes its lending office, such Lender shall remain entitled to receive any
Additional Amounts if and only to the extent it was entitled to receive
immediately prior to changing its lending office.

 

(b)                                 Each payee or beneficial owner of an
interest in this Agreement if such payee (after reasonable notice by such payee)
shall, to the extent it is legally entitled to, deliver to the Borrower such
properly completed and executed documentation (including the applicable IRS
Form W-9 and applicable W-8 and any attachments or supplements thereto)
prescribed by applicable law or reasonably requested by the Borrower as will
permit such payments to be made without withholding or at a reduced rate of
withholding, provided that, with respect to any withholding under FATCA, only
the provisions of Section 3.9(c) shall apply to any documentation to be
delivered.

 

(c)                                  If a payment made to a Lender under any
Loan 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

 

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such time or times reasonably requested by the Borrower or the Administrative
Agent documentation necessary for the Borrower and the Administrative Agent to
comply with their obligations under FATCA or to determine the amount to deduct
and withhold from such payment.  Solely for purposes of this Section 3.9(b),
“FATCA” shall include any amendments made to FATCA after the date of this
Agreement.

 

(d)                                 Each Lender agrees that if any form or
certification provided pursuant to Section 3.9(b) or 3.9(c) expires or, to its
knowledge, 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.

 

(e)                                  If (i) Borrower is required to pay any
Additional Amount under this Section 3.9 to a Foreign Lender or (ii) a Change in
Tax Law would result upon the passage of time, in a payment of an Additional
Amount to a Foreign Lender, then such Foreign Lender shall take such steps as
may be reasonably available to it to mitigate the effects of such Change
in Tax Law (which shall include efforts to rebook this Agreement at another
lending office or through another branch or an affiliate of the Foreign Lender),
provided that such Foreign Lender shall not be required to take any step that
would be materially disadvantageous to its business or operations (as determined
by the Foreign Lender in its sole reasonable discretion).  If the Foreign Lender
does not promptly take the steps necessary to avoid the need for Additional
Amounts, the Borrower shall have the right to redomicile (in consultation with
the Initial Lender) in a jurisdiction that would not give rise to a withholding
obligation.

 

(f)                                   If the Borrower makes a payment of any
Additional Amount and the affected payee receives a refund, credit or other tax
benefit that is attributable to the Tax in respect of which the Additional
Amount is paid, such payee will promptly upon receipt of such refund, credit or
benefit, pay to the Borrower such amount as will in such payee’s reasonable
determination, leave such payee no better or worse off than if no payment of the
Additional Amounts had been required; provided that nothing herein will limit
the ability of such payee to prepare its tax returns in the manner it so
determines in its sole discretion.

 

(g)                                  The Borrower will pay any Stamp Tax levied
or imposed upon the Borrower or in respect of its execution or performance of
this Agreement by a jurisdiction in which it is incorporated, organized, managed
and controlled, or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located (Stamp
Tax Jurisdiction) and will indemnify the affected payee (and, to the extent it
has made any payment on behalf of the Borrower, the Administrative Agent)
against any such Stamp Tax levied or imposed upon such payee or in respect of
such payee’s execution or performance of this Agreement by any such Stamp Tax
Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to such
payee.

 

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Alternate Rate of Interest

 

3.10                        If prior to the commencement of any Interest Period:

 

(a)                                 the Administrative Agent determines (which
determination shall be conclusive absent manifest error) that adequate and
reasonable means do not exist for ascertaining LIBOR for such Interest Period;
or

 

(b)                                 the Administrative Agent is advised by the
Required Lenders that LIBOR for such Interest Period will not adequately and
fairly reflect the cost to the Lenders of making or maintaining their respective
portions of the Loans for such Interest Period;

 

then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders as promptly as practicable thereafter and, until the Administrative
Agent notifies the Borrower and the Lenders that the circumstances giving rise
to such notice no longer exist, the Loans shall bear interest at a rate per
annum equal to the Federal Funds Effective Rate on each day plus (i) during the
Drawdown Period, 2.25%. and (ii) thereafter, 2.50%.

 

Increased Costs

 

3.11(a)         If any Change in Law shall:

 

(i)              impose, modify or deem applicable any reserve, special deposit
or similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Lender (except any such reserve requirement reflected
in LIBOR); or

 

(ii)               impose on any Lender or the London interbank market any other
condition affecting this Agreement or the portion of the Loan made or maintained
by such Lender;

 

and the result of any of the foregoing shall be to increase the cost to such
Lenders of making or maintaining their respective portions of the Loans or to
reduce the amount of any sum received or receivable by such Lender hereunder
(whether of principal, interest or otherwise, but excluding increased costs or
reductions in the amount of any sum received or receivable resulting from (1) an
Excluded Tax or (2) a Tax to the extent Additional Amounts are required to be
paid under Section 3.9(a) (or would be but for clause (ii) or (iii) of the first
proviso to Section 3.9(a))), then the Borrower will pay to such Lender such
additional amount or amounts as will compensate such Lender for such additional
costs incurred or reduction suffered.

 

(b)                                 If any Lender determines that any Change in
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender’s capital or on the capital of such Lender’s
holding company, if any, as a consequence of this Agreement or the portion of
the Loans made or maintained by such Lender to a level below that which such
Lender or such Lender’s holding company could have achieved but for such Change
in Law (taking into consideration such Lender’s policies and the policies of
such Lender’s holding company with respect to capital adequacy), then from time
to time the Borrower

 

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will pay to such Lender such additional amount or amounts as will compensate
such Lender or such Lender’s holding company for any such reduction suffered.

 

(c)                                  A certificate of a Lender setting forth the
amount or amounts necessary to compensate such Lender or its holding company, as
the case may be, as specified in paragraph (a) or (b) of this Section shall be
delivered to the Borrower and shall be conclusive absent manifest error.  The
Borrower shall pay such Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.

 

(d)                                 Failure or delay on the part of any Lender
to demand compensation pursuant to this Section shall not constitute a waiver of
such Lender’s right to demand such compensation; provided that the Borrower
shall not be required to compensate a Lender pursuant to this Section for any
increased costs or reductions incurred more than six months prior to the date
that such Lender notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender’s intention to claim
compensation therefor; provided further that, if the Change in Law giving rise
to such increased costs or reductions is retroactive, then the six-month period
referred to above shall be extended to include the period of retroactive effect
thereof.

 

Break Funding Payments

 

3.12                        In the event that (a) the payment of any principal
of any Loan is made on any date other than a Payment Date (including as a result
of an Event of Default) or (b) the Borrower fails to borrow any Loan or a
portion thereof on the related Borrowing Date after giving notice of such
borrowing to the Administrative Agent, then, in any such event, the Borrower
shall compensate each Lender for an amount equal to the excess, if any, of
(i) the amount of interest that such Lender would pay for a deposit equal to the
principal amount of its portion of such Loan for the period from the date of
such payment to the last day of the then current Interest Period for such Loan
(or, in the case of a failure to borrow, equal to its portion of the amount of
such borrowing for the duration of the Interest Period that would have resulted
from such borrowing) if the interest rate payable on such deposit were equal to
LIBOR for such Interest Period over (b) the amount of interest that such Lender
would earn on such principal amount for such period if such Lender were to
invest such principal amount for such period at the interest rate that would be
bid by such Lender (or an affiliate of such Lender) for dollar deposits from
other banks in the eurodollar market at the commencement of such period.  A
certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section shall be delivered to the
Borrower and shall be conclusive absent manifest error.  The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.

 

Right of Set-Off

 

3.13                        The Borrower agrees that, in addition to (and
without limitation of) any right of set-off that the Administrative Agent or any
Lender may otherwise have, each of the Administrative Agent and the Lenders
shall be entitled, at its option, to offset amounts owing by the Administrative
Agent or such Lender, as the case may be, to the Borrower, in USD or in any
other currency (irrespective of the place of payment or booking office of the
obligation and

 

37

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regardless of whether such amounts are then due to the Borrower), against any
amount payable by the Borrower to the Administrative Agent or such Lender, as
the case may be, under this Agreement that is not paid when due.  For this
purpose, any amount owing by the Administrative Agent or any Lender to the
Borrower may be converted by the Administrative Agent or such Lender, as the
case may be, into the currency in which the amount payable by the Borrower to
the Administrative Agent or such Lender, as the case may be, under this
Agreement is denominated at the rate of exchange at which the Administrative
Agent or such Lender, as the case may be, would be able, acting in a reasonable
manner and in good faith, to purchase the relevant amount of such currency.

 

Contractual Currency

 

3.14                        To the fullest extent permitted by applicable law,
if any judgment or order expressed in a currency other than the currency in
which a payment is required by this Agreement is to be made by the Borrower (the
Contractual Currency) is rendered:

 

(a)                                 for the payment of any amount owing in
respect of this Agreement; or

 

(b)                                 in respect of a judgment or order of another
court for the payment of any amount described in the foregoing clause (a),

 

the recipient of such payment, after recovery in full of the aggregate amount to
which the recipient of such payment is entitled pursuant to the judgment or
order, will be entitled to receive immediately from the Borrower the amount of
any shortfall of the Contractual Currency received by the recipient of such
payment as a consequence of sums being paid in such other currency if such
shortfall arises or results from any variation between the rate of exchange at
which the Contractual Currency is converted into the currency of the judgment or
order for the purposes of such judgment or order and the rate of exchange at
which the recipient of such payment is able, acting in a reasonable manner and
in good faith in converting the currency received into the Contractual Currency,
to purchase the Contractual Currency with the amount of the currency of the
judgment or order actually received by the recipient of such payment. The term
“rate of exchange” includes any premiums and costs of exchange payable in
connection with the purchase of or conversion into the Contractual Currency.

 

To the fullest extent permitted by applicable law, the indemnities in this
Section constitute separate and independent obligations from the other
obligations in this Agreement and any related document, will be enforceable as
separate and independent causes of action, will apply notwithstanding any
indulgence granted by the recipient of such payment and will not be affected by
judgment being obtained or claim or proof being made for any other sums payable
in respect of this Agreement or any related document.  The Borrower hereby
waives the right to invoke any defense of payment impossibility.

 

Lender Replacement

 

3.15                        If any Lender requests compensation under
Section 3.11, or if the Borrower is required to pay any additional amounts to
any Lender or any governmental authority for the account of any Lender pursuant
to Section 3.9, or if any Lender becomes a Defaulting Lender, then the Borrower
may, at its sole expense and effort, upon notice to such Lender and the
Administrative

 

38

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Agent, require such Lender to assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in Section 8.4(c)),
all its interests, rights (other than its existing rights to payments pursuant
to Sections 3.9 and 3.11) and obligations under this Agreement to an assignee
that shall acquire and assume such interests, rights and obligations (which
assignee may be another Lender, if a Lender accepts such assignment); provided
that (i) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans, accrued interest thereon, accrued fees
(excluding, for the avoidance of doubt, any commitment reduction fee payable
under Section 3.2(d)) and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrower (in the case of all other amounts) and (ii) in the case of
any such assignment resulting from a claim for compensation under Section 3.11
or payments required to be made pursuant to Section 3.9, such assignment will
result in a reduction in such compensation or payments based on a certification
made in good faith by the Borrower and delivered to the Administrative Agent and
the Lender that has made a claim for compensation under Section 3.11 or a
request for payment under Section 3.9.  A Lender shall not be required to make
any such assignment and 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.

 

REPRESENTATIONS AND WARRANTIES

 

Borrower’s Representations and Warranties

 

4.1                               The Borrower hereby represents and warrants to
the Administrative Agent and the Lenders as follows:

 

(a)                                 Status.  It is duly formed and validly
existing as a limited liability company formed under the laws of the State of
Delaware.

 

(b)                                 Powers.  It has the power to execute this
Agreement and any Support Document to which it is a party, to deliver this
Agreement and any Support Document to which it is a party and to perform its
obligations under this Agreement and any obligations it has under any Support
Document to which it is a party and has taken all necessary action to authorize
such execution, delivery and performance.

 

(c)                                  No Violation or Conflict.  Such execution,
delivery and performance do not violate or conflict with any law applicable to
it, any provision of its constitutional documents, any order or judgment of any
court or other agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets.

 

(d)                                 Consents.  All governmental and other
consents that are required to have been obtained by it with respect to this
Agreement or any Support Document to which it is a party have been obtained and
are in full force and effect and all conditions of any such consents have been
complied with, except for any consents that, if not obtained, could not, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

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(e)                                  Obligations Binding.  This Agreement and
any Support Document to which it is a party constitute its legal, valid and
binding obligations, enforceable in accordance with their respective terms
(subject to applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors’ rights generally and subject, as to
enforceability, to equitable principles of general application (regardless of
whether enforcement is sought in a proceeding in equity or at law)).

 

(f)                                   Absence of Certain Events.  No Event of
Default or Potential Event of Default has occurred and is continuing and no such
event or circumstance would occur as a result of its entering into or performing
its obligations under this Agreement or any Support Document to which it is a
party.

 

(g)                                  Absence of Litigation.  There is not
pending or, to its knowledge, threatened against it or any of its affiliates any
action, suit or proceeding at law or in equity or before any court, tribunal,
governmental body, agency or official or any arbitrator that is likely to affect
the legality, validity or enforceability against it of this Agreement or any
Support Document to which it is a party or its ability to perform its
obligations under this Agreement or such Support Document.

 

(h)                                 Accuracy of Specified Information.  All
applicable information with respect to the Borrower or the Borrower Investor
that is furnished in writing by or on behalf of it to any of the Lenders, the
Administrative Agent or the Security Agent is, when taken as a whole as of the
date of the furnishing of such information, true, accurate and (except as
redacted) complete in all material respects.

 

(i)                                     Investment Company Act Status.  It is
not required to register as an investment company under the Investment Company
Act by reason of Section 3(c)(7) of the Investment Company Act.

 

(j)                                    Non-Reliance.  It is acting for its own
account, and it has made its own independent decisions to borrow each Loan and
to use the proceeds thereof to purchase a Debt Obligation as contemplated hereby
and as to whether each such borrowing and purchase are appropriate or proper for
it based upon its own judgment and upon advice from such advisers as it has
deemed necessary. It is not relying on any communication (written or oral) of
the Administrative Agent, any Lender or any of their respective Affiliates as
investment, tax, accounting or legal advice or as a recommendation to enter into
this Agreement, to borrow any Loan or to purchase any Debt Obligation, it being
understood that information and explanations related to the terms and conditions
of this Agreement or of any Loan or any such purchase will not be considered
investment advice or a recommendation to enter into this Agreement, to borrow
any Loan or to purchase any Debt Obligation.  No communication (written or oral)
received from the Administrative Agent, any Lender or any of their respective
Affiliates will be deemed to be an assurance or guarantee as to the expected
results of entering into this Agreement, borrowing any Loan or purchasing any
Debt Obligation.  It is capable of assessing the merits of and understanding (on
its own behalf or through independent professional advice), and understands and
accepts, the terms, conditions and risks of entering into this Agreement,
borrowing each Loan or purchasing the Debt Obligations.  None of the
Administrative

 

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Agent, the Lenders and their respective Affiliates is acting as a fiduciary for
or an adviser to the Borrower or any of its Affiliates in respect of this
Agreement or the use of the proceeds thereof.

 

(k)                                 Lenders May Deal with Obligors on the Debt
Obligations, etc.  It acknowledges that the Administrative Agent, any Lender or
any of their respective Affiliates may deal in any Debt Obligation and any other
obligations of any Obligor or any Affiliate thereof and may accept deposits
from, make loans or otherwise extend credit to, and generally engage in any kind
of commercial or investment banking or other business with any Obligor, any
Affiliate of any Obligor, any other person or entity having obligations relating
to any Obligor and may act with respect to such business in the same manner as
if this Agreement did not exist and may originate, purchase, sell, hold or
trade, and may exercise consensual or remedial rights in respect of,
obligations, securities or other financial instruments of, issued by or linked
to any Obligor, regardless of whether any such action might have an adverse
effect on such Obligor, the value of any Debt Obligation or otherwise.

 

(l)                                     Equity Contribution Framework
Agreement.  Each representation, warranty and statement made pursuant to the
Equity Contribution Framework is true and correct.

 

COVENANTS

 

Borrower’s Covenants

 

5.1                               The Borrower covenants and agrees with the
Administrative Agent and the Lenders that, until payment in full of the Loans
and all interest thereon and all other amounts payable by the Borrower under
this Agreement:

 

(a)                                 Information.  The Borrower will:

 

(i)              in connection with the purchase or other acquisition of any
Debt Obligation, furnish the Administrative Agent (x) no later than one Business
Day after the related “trade date”, with a notice setting forth the Par Amount
and Purchase Price applicable to such purchase or other acquisition and (y) no
later than one Business Day after the related “settlement date”, with a copy of
the related Assignment Agreement;

 

(ii)               promptly (and in any event within three Business Days after
receipt) deliver or cause to be delivered to the Administrative Agent the
following information and documentation, in each case, to the extent actually
received by the Borrower from the Obligor or its agents in respect of any Debt
Obligation:  all notices of any borrowings, prepayments and interest rate
settings, all financial statements, all compliance certificates, all amendments,
waivers and other modifications (whether final or proposed) in relation to the
terms of such Debt Obligation; and all notices given by the Obligor to the
lenders or their agent or by the lenders or their agent to the Obligor in
relation to the exercise of remedies;

 

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(iii)                promptly after the Borrower knows or should have known that
any Debt Obligation Bankruptcy Event or Debt Obligation Failure to Pay Event has
occurred in respect of any Debt Obligation, the Borrower will deliver to the
Administrative Agent and each Lender a notice thereof describing the same in
reasonable detail;

 

(iv)               promptly after the Borrower knows or should have known that
(x) any Specified Debt Obligation has ceased to be a Specified Debt Obligation
or (y) any Debt Obligation has ceased to satisfy the Obligation Criteria, the
Borrower will deliver to the Administrative Agent and each Lender a notice
thereof describing the same in reasonable detail;

 

(v)              promptly after the Borrower knows or should have known that any
Portfolio Criterion is not satisfied, the Borrower will deliver to the
Administrative Agent and each Lender a notice thereof describing the same in
reasonable detail;

 

(vi)               no later than the eight Business Day following the last day
of each Monthly Reporting Period, the Borrower will deliver to the
Administrative Agent a report of the Borrower certifying as to the information
described in Schedule V;

 

(vii)                no later than 1:00 p.m. New York time on the Business Day
prior to any Payment Date, the Borrower will deliver to the Administrative Agent
a report of the Borrower certifying as to the amount and nature of each payment
to be made pursuant to each of clauses (i) through (iv) of Section 3.8(b) (and
each subclause thereof, if any) on such Payment Date;

 

(viii)                   provide the Administrative Agent with such other
information in its possession regarding the business, assets, operations or
condition, financial or otherwise, of the Borrower as the Administrative Agent
may reasonably request (including on behalf of any Lender); and

 

(ix)               permit representatives of the Administrative Agent, during
normal business hours, to examine, copy and make extracts from its books and
records, to inspect any of its Property, and to discuss its business and affairs
with its officers, all to the extent reasonably requested by the Administrative
Agent (including on behalf of any Lender); provided that, unless an Event of
Default shall have occurred and be continuing, the Administrative Agent shall be
permitted to effect any of the foregoing (other than any such discussion) no
more frequently than three times during any period of 12 months commencing on
the date of this Agreement.

 

(b)                                 Notice of Default.  Promptly after the
Borrower knows or has reason to believe that any Event of Default or Potential
Event of Default has occurred, the Borrower will deliver to the Administrative
Agent and each Lender a notice thereof describing the same in reasonable detail
and, together with such notice or as soon thereafter as possible, a description
of the action that the Borrower has taken or proposes to take with respect
thereto; provided that the failure to deliver notice of the occurrence of a
Potential Event

 

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of Default shall not itself result in an Event of Default hereunder if any
applicable grace period or notice requirement shall not yet have been satisfied.

 

(c)                                  Conduct of Business, etc.  The Borrower
will:  (i) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises; (ii) comply with the requirements
of all applicable laws, rules, regulations and orders of governmental or
regulatory authorities; (iii) pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or profits or on
any of its Property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which adequate
reserves are being maintained; (iv) maintain all of its Property used or useful
in its business in good working order and condition, ordinary wear and tear
excepted; and (v) keep adequate records and books of account, in which complete
and consistent entries will be made, except to the extent that the failure to
comply with any of the foregoing would not, individually or in the aggregate,
result in a Material Adverse Effect.  Without the prior written consent of the
Administrative Agent, the Borrower will not amend, supplement or otherwise
modify, or give its consent to any amendment, supplement or other modification
of, any Transaction Document (other than (i) any of the foregoing entered into
in the ordinary course of business with respect to any Assignment Agreement or
(ii) any of the foregoing entered into with respect to any Loan Document in
accordance with Section 8.4 and any other applicable provisions of such Loan
Document).

 

(d)                                 Indebtedness.  The Borrower will not create,
incur, assume or permit to exist any Indebtedness, except Indebtedness arising
under this Agreement and the other Loan Documents.

 

(e)                                  Liens.  The Borrower will not create,
incur, assume or permit to exist any Lien on any property or asset now owned or
hereafter acquired by it, except for Permitted Liens.

 

(f)                                   Use of Proceeds.  The Borrower will not
use any proceeds of this Agreement except in compliance with Section 2.3.

 

(g)                                  Line of Business.  The Borrower will not
engage in any business other than (i) acquiring interests in the Debt
Obligations, (ii) entering into and performing its obligations under this
Agreement and the other Transaction Documents to which it is a party,
(iii) making Eligible Investments with the proceeds of any Debt Obligation or
any equity contribution made to the Borrower and (iv) other activities that are
incidental to activities specified in the foregoing clauses.  Prior to the date
hereof, the Borrower will not have engaged in any business other than
(i) transactions incidental to its formation and (ii) the negotiation of the
terms of the Transaction Documents.  The Borrower will not acquire any Debt
Obligation (or any portion thereof) other than pursuant to a Qualifying Purchase
and will use all commercially reasonable efforts to cause any such purchase to
settle (including of record with the relevant Obligor) no later than 30 days
after the applicable “trade date”.

 

(h)                                 Fundamental Changes.  The Borrower will not
merge into or consolidate with any other Person, or permit any other Person to
merge into or consolidate with it, or sell, transfer,

 

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lease or otherwise dispose of all or substantially all of its assets, or
liquidate or dissolve; provided that the foregoing will not limit any sale of
any Debt Obligation effected in accordance with Section 5.3.

 

(i)                                     Transactions with Related Parties.  The
Borrower will not sell, lease or otherwise transfer any property or assets to,
or purchase, lease or otherwise acquire any property or assets from, or
otherwise engage in any other transactions with, any Related Party, except for
(i) transactions expressly permitted by Section 5.1(j), 5.2 or 5.3 and (ii) the
payment of fees and expenses expressly contemplated by the Investment Management
Agreement.

 

(j)                                    Restricted Payments.  The Borrower will
not make any Equity Restricted Payment, except that the Borrower may make Equity
Restricted Payments to the extent expressly permitted by Section 3.8(b).

 

(k)                                 Investments in Subsidiaries.  The Borrower
will not own or acquire, and will not make any investment in, any Subsidiary.

 

(l)                                     Corporate Separateness.  The Borrower
will ensure that all corporate or other formalities necessary to maintain its
separate existence are followed.  In addition, the Borrower will not take any
action, or conduct its affairs in a manner, that is likely to result in its
separate existence being ignored or in its assets and liabilities being
substantively consolidated with any other Person in a bankruptcy, reorganization
or other insolvency proceeding.  Without limiting the foregoing, the Borrower
will not (i) commingle any of its funds or assets with those of any Related
Party or (ii) maintain its accounts, books, records, accounting records and
other entity documents together with those of any other Related Party (provided
that the foregoing will not prevent financial reporting on a consolidated basis
to the extent required by GAAP).  The Borrower will not permit the Borrower
Investor or any other Related Party to guarantee or otherwise support the
Borrower’s obligations under any Assignment Agreement.\\

 

(m)                             Equity Amount during Ramp-Up Period.  The
Borrower will not permit the Equity Amount on any date during the Ramp-Up Period
to be less than the aggregate of the Purchase Amounts of the six separate Debt
Obligations held by the Borrower on such date having the greatest respective
Purchase Amounts on such date (and such Debt Obligations shall be included in
such total in direct cardinal order and, in the event of Debt Obligations having
equal Purchase Amounts, in the direct order of their date of purchase).  For the
purpose of this Section 5.1(m), (i) Debt Obligations of an Obligor and its
Affiliates shall be treated as a single Debt Obligation and (ii) any Debt
Obligations so treated as a single Debt Obligation will be deemed to have been
purchased on the date of the first purchase of such Debt Obligations.

 

Acquisition of Debt Obligations

 

5.2(a)                The Borrower shall acquire each Debt Obligation in
accordance with one of the following (each, a Qualifying Purchase):  (i) by
direct purchase thereof in a purchase on arms’ length terms from one or more
sellers; or (ii) by transfer thereof by the Borrower Investor

 

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to the Borrower pursuant to an in kind contribution to the capital of the
Borrower in accordance with Section 5.2(b).

 

(b)                                 With respect to any Qualifying Purchase of a
Debt Obligation made pursuant to Section 5.2(a)(ii), the Borrower shall acquire
such Debt Obligation only if:

 

(i)                  except for any Debt Obligation listed in Schedule III (up
to the Par Amount thereof therein specified), the Administrative Agent shall
have given its consent to the acquisition by the Borrower of such Debt
Obligation (which consent the Administrative Agent may give or withhold in its
sole discretion);

 

(ii)               the Administrative Agent and the Borrower shall have agreed
in writing upon the Purchase Price to be applicable to such Debt Obligation;

 

(iii)                  the Debt Obligation satisfies the Obligation Criteria on
the date of acquisition thereof by the Borrower;

 

(iv)               the Portfolio Criteria shall be satisfied after giving effect
to such acquisition (or, in the case of Portfolio Criterion that is not
satisfied immediately prior to such acquisition, the effect of such acquisition
shall be to improve the extent of compliance with such Portfolio Criterion); and

 

(v)              the Debt Obligation is contributed in accordance with the
Equity Contribution Framework Agreement.

 

Sale of Debt Obligations to Related Parties

 

5.3                               The Borrower shall not sell any Debt
Obligation (or any portion thereof) to any Related Party; provided that this
Section 5.3 shall not prevent the Borrower from selling any Debt Obligation (or
any portion thereof) to a Related Party if (a) no Event of Default or Potential
Event of Default shall have occurred and be continuing and would not result
therefrom, (b) the condition in Section 5.4 is satisfied with respect to such
sale and (c) such Debt Obligation (or portion thereof) is being sold solely for
Cash and in a transaction at a sale price (expressed as a percentage of par and
will be determined exclusive of accrued interest and premium) not less than the
Current Price and otherwise on arms’ length terms; in each case, so long as
(i) such sale is effected in accordance with the requirements of the Investment
Advisers Act applicable to an investment adviser registered as such thereunder
and (ii) notice of such sale is given to the Administrative Agent and each
Lender no later than the date of such sale.

 

Sale of Debt Obligations

 

5.4                               The Borrower shall not sell any Debt
Obligation (or any portion thereof) if either immediately prior to or
immediately after giving effect to such sale (determined, in each case, on a
“trade date” basis), the Equity Coverage Ratio is or would be less than the
Termination Percentage; provided that the foregoing shall not apply to any
“trade date” if the aggregate proceeds to be received from all sales of Debt
Obligations with such or any earlier “trade date” will be sufficient to repay
all principal, interest, fees and other amounts payable by the Borrower
hereunder or under any other Loan Document.

 

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DEFAULT; REMEDIES

 

Events of Default

 

6.1                               If one or more of the following events (herein
called Events of Default) shall occur and be continuing:

 

(a)                                 the Borrower shall default in the payment of
any principal, interest or other amount owing under this Agreement when due
(whether at stated maturity, by acceleration, upon optional or mandatory
prepayment or otherwise) and such default shall continue for at least five
Business Days after notice thereof to the Borrower by the Administrative Agent
or any Lender; or

 

(b)                                 any representation, warranty or
certification made herein or pursuant hereto or in or pursuant to any Support
Document (or in any modification or supplement hereto or thereto) by the
Borrower or any Support Obligor shall prove to have been false or misleading as
of the time made in any material respect; or

 

(c)                                  the Borrower shall default in the
performance of any of its obligations under any of Sections 5.1(d), 5.1(e),
5.1(f), 5.1(g), 5.1(h), 5.1(i), 5.1(j), 5.1(k), 5.1(l), 5.2, 5.3 and 5.4; or the
Borrower or any Support Obligor shall default in the performance of any of its
other obligations hereunder or of any obligations under any Support Document and
such default (if remediable) shall continue unremedied for a period of at least
30 days after notice thereof to the Borrower by the Administrative Agent or any
Lender; or

 

(d)                                 the Borrower or any Support Obligor or the
Borrower Investor shall (1) be dissolved (other than pursuant to a
consolidation, amalgamation or merger); (2) become insolvent or unable to pay
its debts or fail or admit in writing its inability generally to pay its debts
as they become due; (3) make a general assignment, arrangement or composition
with or for the benefit of its creditors; (4) institute or have instituted
against it a proceeding seeking a judgment of insolvency or bankruptcy or any
other relief under any bankruptcy or insolvency law or other similar law
affecting creditors’ rights, or a petition shall be presented for its winding-up
or liquidation, and, in the case of any such proceeding or petition instituted
or presented against it, such proceeding or petition (A) results in a judgment
of insolvency or bankruptcy or the entry of an order for relief or the making of
an order for its winding-up or liquidation or (B) is not dismissed, discharged,
stayed or restrained in each case within 30 days of the institution or
presentation thereof; (5) have a resolution passed for its winding-up, official
management or liquidation (other than pursuant to a consolidation, amalgamation
or merger); (6) seek or become subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its assets; (7) have a
secured party take possession of all or substantially all its assets or have a
distress, execution, attachment, sequestration or other legal process levied,
enforced or sued on or against all or substantially all its assets and such
secured party shall maintain possession, or any such process shall not be
dismissed, discharged, stayed or restrained, in each case within 30 days
thereafter; (8) cause or become subject to any event with respect to it which,
under the applicable laws of any jurisdiction, has an analogous effect to any of
the

 

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events specified in clauses (1) to (7) (inclusive); or (9) take any action
authorizing, or in furtherance of, any of the foregoing acts; or

 

(e)                                  the Borrower or any Support Obligor shall
consolidate or amalgamate with, or merge with or into, or transfer all or
substantially all its assets to, another Person and, at the time of such
consolidation, amalgamation, merger or transfer:

 

(i)                  the resulting, surviving or transferee Person shall fail to
assume all the obligations of the Borrower or such Support Obligor under this
Agreement or any Support Document to which it or its predecessor was a party by
operation of law or pursuant to an agreement reasonably satisfactory to the
Administrative Agent and each Lender;

 

(ii)               the benefits of any Support Document shall fail to extend
(without the consent of the Administrative Agent and each Lender) to the
performance by such resulting, surviving or transferee Person of its obligations
under this Agreement; or

 

(iii)                  the creditworthiness of the resulting, surviving or
transferee Person shall be materially weaker than that of the Borrower or such
Support Obligor, as the case may be, immediately prior to such action; or

 

(f)                                   any Support Document shall cease to be in
full force or effect, or the Borrower or any Support Obligor shall disaffirm,
disclaim, repudiate or reject in writing, in whole or in part, or challenge in
writing the validity of, any Support Document to which it is a party; or

 

(g)                                  the Borrower Formation Documents shall be
amended, supplemented or otherwise modified, or shall be terminated, without the
prior written consent of the Administrative Agent and each Lender, except for
any amendment, supplement or other modification that would not have a Material
Adverse Effect; or

 

(h)                                 any Support Document shall be amended,
supplemented or otherwise modified, or shall be terminated, other than in
accordance with the terms hereof or thereof; or

 

(i)                                    on any date, all of the ownership
interests in the Borrower shall fail to be beneficially owned and controlled,
either directly or at one or more indirect levels of beneficial ownership, by
one or more persons that are Controlled by the Borrower Investor; or

 

(j)                                    on any date, the assets of the Borrower
shall fail to be managed on a discretionary basis by the Borrower Investor; or

 

(k)                                 on any date, the Borrower Investor shall
fail to maintain GSO Capital Partners LP, a Delaware limited partnership, any
Affiliate thereof or any other replacement therefor consented to in writing by
the Administrative Agent (which consent shall not be unreasonably withheld), as
its sub-adviser to assist the Borrower Investor in managing the investment and
reinvestment of the assets of the Borrower Investor; or

 

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(l)                                     the Borrower is required to register as
an investment company under the Investment Company Act;

 

THEREUPON:  (1) in the case of an Event of Default other than one specified in
clause (1), (3), (5), (6) or, to the extent analogous thereto, (8) of
Section 6.1(d), the Required Lenders may, by notice to the Borrower, (i) reduce
the aggregate amount of the Commitments to zero and (ii) declare the principal
of and interest on this Agreement and/or any other amount owing under this
Agreement to be forthwith due and payable, whereupon such amounts shall be
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Borrower; and (2) in the case of the occurrence of an Event of Default specified
in clause (1), (3), (5), (6) or, to the extent analogous thereto, (8) of
Section 6.1(d), (i) the aggregate amount of the Commitments shall be
automatically reduced to zero and (ii) the principal of and interest on this
Agreement and all other amounts owing under this Agreement shall automatically
become immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Borrower.

 

ADMINISTRATIVE AGENT

 

7.1                               Each of the Lenders hereby irrevocably
appoints the Administrative Agent as its agent hereunder and under the Support
Documents and authorizes the Administrative Agent to take such actions on its
behalf and to exercise such powers as are delegated to the Administrative Agent
by the terms hereof or thereof, together with such actions and powers as are
reasonably incidental thereto.

 

7.2                               The Person serving as the Administrative Agent
hereunder shall have the same rights and powers in its capacity as a Lender as
any other Lender and may exercise the same as though it were not the
Administrative Agent, and such Person and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of business with the
Borrower or any Subsidiary or other Affiliate thereof as if it were not the
Administrative Agent hereunder.

 

7.3                               The Administrative Agent shall not have any
duties or obligations except those expressly set forth herein and in the Support
Documents.  Without limiting the generality of the foregoing, (a) the
Administrative Agent shall not be subject to any fiduciary or other implied
duties, regardless of whether a Potential Event of Default has occurred and is
continuing, (b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby or by the Support Documents that
the Administrative Agent is required to exercise in writing by the Required
Lenders, and (c) except as expressly set forth herein and in the Support
Documents, the Administrative Agent shall not have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to the
Borrower or any of its Affiliates that is communicated to or obtained by the
bank serving as Administrative Agent or any of its Affiliates in any capacity. 
The Administrative Agent shall not be liable for any action taken or not taken
by it with the consent or at the request of the Required Lenders or in the
absence of its own gross negligence or willful misconduct.  The Administrative
Agent shall be deemed not to have knowledge of any Default unless and until
written notice thereof is given to the Administrative Agent by the Borrower or a
Lender, and the Administrative Agent shall not be responsible for or have any

 

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duty to ascertain or inquire into (i) any statement, warranty or representation
made in or in connection with this Agreement or any Support Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein or therein, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement, any Support Document or any other agreement,
instrument or document, or (v) the satisfaction of any condition set forth in
Schedule I or elsewhere herein or therein, other than to confirm receipt of
items expressly required to be delivered to the Administrative Agent.

 

7.4                               The Administrative Agent shall be entitled to
rely upon, and shall not incur any liability for relying upon, any notice,
request, certificate, consent, statement, instrument, document or other writing
believed by it to be genuine and to have been signed or sent by the proper
Person.  The Administrative Agent also may rely upon any statement made to it
orally or by telephone and believed by it to be made by the proper Person, and
shall not incur any liability for relying thereon.  The Administrative Agent may
consult with legal counsel (who may be counsel for an Obligor), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.

 

7.5                               The Administrative Agent may perform any and
all of its duties and exercise its rights and powers by or through any one or
more sub agents appointed by the Administrative Agent.  The Administrative Agent
and any such sub agent may perform any and all of its duties and exercise its
rights and powers through its Affiliates.  The exculpatory provisions of
Sections 7.3 and 7.4 shall apply to any such sub agent and to the Affiliates of
the Administrative Agent and any such sub agent, and shall apply to their
respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.

 

7.6                               Subject to the appointment and acceptance of a
successor Administrative Agent as provided in this Section 7.6, the
Administrative Agent may resign at any time by notifying the Lenders and the
Borrower.  Upon any such resignation, the Required Lenders shall have the right,
after prior written consent from the Borrower (not to be unreasonably withheld
and not to be required if an Event of Default has occurred and is continuing for
more than six months (or, if applicable, beyond any Event of Default referred to
in Section 6.1(d))), to appoint a successor.  If no successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may, on behalf of the
Lenders and with the prior written consent of the Borrower (not to be
unreasonably withheld and not to be required if an Event of Default has occurred
and is continuing for more than six months (or, if applicable, beyond any Event
of Default referred to in Section 6.1(d))), appoint a successor Administrative
Agent, which shall be a bank with an office in New York City or an Affiliate of
any such bank.  Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent and the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder.  The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise

 

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agreed between the Borrower and such successor.  After the Administrative
Agent’s resignation hereunder, the provisions of this Section 7.6 and
Section 8.1 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Administrative Agent.

 

7.7                               Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent or any other
Lender and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement.  Each
Lender also acknowledges that it will, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any Support Document or any related agreement or any document furnished
hereunder or thereunder.

 

7.8                               Except as otherwise provided in
Section 8.4(a) with respect to this Agreement, the Administrative Agent may,
with the prior consent of the Required Lenders (but not otherwise), consent to
any modification, supplement or waiver under any of the Loan Documents, provided
that, without the prior consent of each Lender, the Administrative Agent shall
not (except as expressly provided herein or in the Support Documents) release
any Collateral or otherwise terminate any Lien under any Support Document
providing for collateral security, agree to additional obligations being secured
by such collateral security (unless the Lien for such additional obligations
shall be junior to the Lien in favor of the other obligations secured by such
Support Document, in which event the Administrative Agent may consent to such
junior Lien provided that it obtains the consent of the Required Lenders
thereto), alter the relative priorities of the obligations entitled to the
benefits of the Liens created under the Security Agreement or release any
Support Obligor under any Support Document from its obligations thereunder,
except that no such consent shall be required, and the Administrative Agent is
hereby authorized, to release any Lien covering property that is the subject of
a sale, distribution or other disposition of property permitted hereunder.

 

MISCELLANEOUS

 

Expenses; Indemnification

 

8.1                               The Borrower will, on demand, indemnify and
hold harmless each of the Administrative Agent and the Lenders for and against
all reasonable and documented out-of-pocket expenses, including legal fees,
incurred by it by reason of the enforcement of its rights under this Agreement,
including, but not limited to, costs of collection.

 

The Borrower shall indemnify the Administrative Agent and each Lender, and each
Affiliate of any of the foregoing Persons and each of their respective officers,
directors and employees (each such Person being called an Indemnitee) against,
and to hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the reasonable and documented fees,
charges and disbursements of any counsel for any Indemnitee, in each case,
payable by any Indemnitee to any governmental authority or other third party
(other than any Affiliate of any Indemnitee) arising out of, in connection with,
or as a result of (i) the performance by the parties hereto of their respective
obligations hereunder or the consummation

 

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of the transactions contemplated hereby, (ii) any Loan or the use of the
proceeds therefrom or (iii) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a
party thereto; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Indemnitee.

 

To the extent that the Borrower fails to pay any amount required to be paid by
it to the Administrative Agent under either of the two preceding paragraphs of
this Section, each Lender severally agrees to pay to the Administrative Agent
such Lender’s Pro Rata Share (determined as of the date of the request for such
indemnification) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim, damage, liability or related expense, as the case
may be, was incurred by or asserted against the Administrative Agent Lender in
its capacity as such.

 

The Borrower will, on demand, reimburse the Administrative Agent and the Initial
Lender for and against all legal fees, charges and disbursements of counsel to
the Administrative Agent and the Initial Lender (other than the allocated costs
of internal counsel) incurred by reason of the execution and delivery of this
Agreement and the other Loan Documents and the other documents contemplated
hereby, in an aggregate amount not to exceed USD75,000.

 

This Section 8.1 shall not apply to any Tax that is the subject of Section 3.9,
except to the extent that the Borrower fails to deduct or withhold Taxes in
respect of which it would have been required to pay an Additional Amount, and
such Taxes are assessed directly against a Lender or the Administrative Agent
(excluding any penalties or interest in respect of such Taxes that result from
the gross negligence or willful misconduct of the Administrative Agent or such
Lender).

 

Waiver

 

8.2                               No failure on the part of the Administrative
Agent or any Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.  The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.

 

Notices

 

8.3                               All notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail (airmail, if overseas)
or the equivalent (return receipt requested) or sent by facsimile transmission,
as follows:

 

(a)                                 if to the Borrower, to it at EP FUNDING LLC,
c/o FS Energy and Power Fund, Cira Centre, 2929 Arch Street, Suite 675,
Philadelphia, PA 19104, Attention:  Ted Gallivan, Chief Financial Officer, and
Robert Haas, Vice President (Facsimile No. (215) 222-4649; Telephone No. (215)
495-1167);

 

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(b)                                 if to the Administrative Agent, to it at 390
Greenwich Street, 4th Floor, New York, New York  10013, Attention:  Mitali
Sohoni (Facsimile No. 646-291-5779; Telephone No. 212-723-6181); and

 

(c)                                  if to a Lender, to it at its address (or
facsimile number) set forth in its Administrative Questionnaire.

 

Any party hereto may change its address or facsimile number for notices and
other communications hereunder by notice to the other parties hereto (or, in the
case of any such change by a Lender, by notice to the Borrower and the
Administrative Agent).  All notices and other communications given to any party
hereto shall be deemed to be effective (i) if in writing and delivered by hand
or overnight courier service, on the date it is delivered; (ii) if sent by
facsimile transmission, on the date that a transmission report confirming
transmission is generated by the sender’s facsimile machine; or (iii) if sent by
certified or registered mail (airmail, if overseas) or the equivalent (return
receipt requested), on the date that mail is delivered or its delivery is
attempted, unless the date of that delivery (or attempted delivery) or that
receipt, as applicable, is not a Business Day or that communication is delivered
(or attempted) or received, as applicable, after the close of business on a
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Business Day.

 

Amendments; Successors and Assigns; Transfers; Replacement

 

8.4(a)                Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrower and the Required Lenders or by the Borrower
and the Administrative Agent with the consent of the Required Lenders; provided
that no such agreement shall (i) reduce the principal amount of any Loan or the
rate of interest thereon without the written consent of each Lender affected
thereby, (ii) postpone the scheduled date of payment of the principal amount of
any Loan or any interest thereon without the written consent of each Lender
affected thereby, (iii) alter the manner in which payments or prepayments of
principal, interest or other amounts hereunder shall be applied as among the
Lenders without the written consent of each Lender, (iv) change any of the
provisions of this Section or the definition of the term “Required Lenders” or
any other provision hereof specifying the number or percentage of Lenders
required to waive, amend or modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Lender, (v) release any Collateral (but without limiting Section 7.8) or
(vi) modify the commitment of any Lender to extend credit hereunder without the
written consent of each Lender; and provided further that no such agreement
shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent without the prior written consent of the Administrative
Agent.

 

(b)                                 The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that (i) the Borrower may not
assign or otherwise transfer any of its rights or obligations hereunder without
the prior written consent of each Lender (and any attempted assignment or
transfer by the Borrower without such consent shall be null and void) and

 

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(ii) no Lender may assign or otherwise transfer any of its rights or obligations
hereunder except in accordance with this Section (and any attempted assignment
or transfer by any Lender that is not in accordance with this Section shall be
null and void).  Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto and their
respective successors and assigns permitted hereby and any indemnitees referred
to herein) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

 

(c)                                  Any Lender may assign to one or more
assignees all or a portion of its rights and obligations under this Agreement),
subject to the requirements that:

 

(i)                  except in the case of an assignment to a Lender or an
Affiliate of a Lender or an assignment of the entire remaining amount of the
assigning Lender’s portion of the Loans shall not be less than USD5,000,000
unless each of the Borrower and the Administrative Agent otherwise consent,
provided that no such consent of the Borrower shall be required if an Event of
Default has occurred and is continuing;

 

(ii)               except in the case of an assignment to a Lender or an
Affiliate of a Lender, the Borrower shall consent to such assignment if the
assignee is not an Eligible Assignee (which consent the Borrower may give or
withhold in its sole discretion), provided that, unless such assignment is to a
Competitor, no such consent of the Borrower shall be required if an Event of
Default has occurred and is continuing;

 

(iii)                  the assigning Lender shall have given the Borrower at
least one Business Day’s notice of such assignment, provided that no such notice
shall be required if an Event of Default has occurred and is continuing;

 

(iv)               each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations under
this Agreement;

 

(v)              the assignee shall have certified to the Borrower that it is a
“qualified purchaser” (within the meaning given to such term in Section 2(a)(51)
of the Investment Company Act); and

 

(vi)               the assignee, if it shall not already be a Lender, shall
deliver to the Administrative Agent an Administrative Questionnaire.

 

(d)                                 Subject to acceptance and recording thereof
pursuant to paragraph (e) below and the payment of a processing and recordation
fee to the Administrative Agent by the Assignor in an amount equal to USD3,500
(provided that the Administrative Agent may, in its sole discretion, elect to
waive such processing and recordation fee in the case of any assignment), from
and after the effective date specified in each Assignment and Acceptance the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of a
Lender under this Agreement, and the assigning Lender thereunder shall, to the
extent of the interest assigned by such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance

 

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covering all of the assigning Lender’s rights and obligations under this
Agreement, such Lender shall cease to be a party hereto, but shall continue to
be entitled to the rights referred to in Sections 3.9, 3.11 and 8.1).  Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this Section shall be treated for purposes of this
Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (f) below.

 

(e)                                  The Administrative Agent, acting for this
purpose as an agent of the Borrower, shall maintain at one of its offices in New
York City a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders, and
respective principal amounts of (and stated interest on) the portions of the
Loans owing to, each Lender pursuant to the terms hereof from time to time (the
Register).  The entries in the Register shall be conclusive, and the Borrower,
the Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary.  The
Register shall be available for inspection by the Borrower and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.  Upon
its receipt of a duly completed Assignment and Acceptance executed by an
assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
Administrative Agent shall accept such Assignment and Acceptance and record the
information contained therein in the Register. No assignment shall be effective
for purposes of this Agreement unless it has been recorded in the Register as
provided in this paragraph (e).

 

(f)                                   Any Lender may, sell participations to one
or more banks or other entities (a Participant) in all or a portion of such
Lender’s rights and obligations under this Agreement; provided that (i) such
Lender’s obligations under this Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the Borrower, the Administrative Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement and (iv) each Participant shall be entitled to the benefits of
Sections 3.9 and 3.11 to the same extent as if it were a Lender and had acquired
its interest by assignment pursuant to paragraph (c) above, except that no
Participant shall be entitled to receive any greater amount pursuant to
Section 3.9 than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred by such transferor Lender
to such Participant had no such transfer occurred (such that the amount of
payments made by the Borrower pursuant to Section 3.9 shall be unaffected by the
sale of any such participation).  Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the first proviso to Section 8.4(a) that affects such Participant. 
To the extent permitted by law, each Participant also shall be entitled to the
benefits of Section 3.13 as though it were a Lender.  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

 

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stated interest) of each Participant’s interest in the Loans or other
obligations under this Agreement (the Participant Register); provided, however,
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 commitments, loans,
letters of credit or its other obligations under any Loan Document) except to
the extent that such disclosure is necessary to establish that such commitment,
loan letter of credit or other 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.

 

(g)                                  Any Lender may at any time pledge or assign
a security interest in all or any portion of its rights under this Agreement to
secure obligations of such Lender, including any such pledge or assignment to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such assignee for such Lender as a party hereto.

 

(h)                                 Anything in this Section to the contrary
notwithstanding, no Lender may assign or participate any interest in the portion
of the Loans held by it hereunder to the Borrower or any of its Affiliates or
Subsidiaries without the prior consent of each Lender.

 

(i)                                     The Initial Lender hereby certifies (and
agrees with) to the Borrower that the Initial Lender is a “qualified purchaser”
(within the meaning given to such term in Section 2(a)(51) of the Investment
Company Act).

 

(j)                                    Each of the Administrative Agent and the
Lenders agrees to be bound by the confidentiality provisions of each Debt
Obligation Credit Agreement with respect to all information and documentation in
relation to the Debt Obligation or an Obligor thereon delivered hereunder to the
Administrative Agent or such Lender, as the case may be.  Each of the
Administrative Agent and the Lenders acknowledges that such information may
include material non-public information concerning an Obligor on any Debt
Obligation or its securities and agrees to use such information in accordance
with applicable law, including Federal and State securities laws.

 

Governing Law; Submission to Jurisdiction; Etc.

 

8.5(a)                This Agreement shall be construed in accordance with, and
this Agreement and all matters arising out of this Agreement and the
transactions contemplated hereby (whether in contract, tort or otherwise) shall
be governed by, the law of the State of New York.

 

(b)                                 With respect to any suit, action or
proceedings relating to this Agreement (Proceedings), the Borrower irrevocably
(i) submits to the non-exclusive jurisdiction of the courts of the State of New
York and the United States District Court located in the Borough of Manhattan in
New York City and (ii) waives any objection which it may have at any time to the
laying of venue of any Proceedings brought in any such court, waives any claim

 

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that such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such court
does not have any jurisdiction over the Borrower.  Nothing in this Agreement
precludes the Administrative Agent or any Lender from bringing Proceedings in
any other jurisdiction, nor will the bringing of Proceedings by the
Administrative Agent or any Lender in any one or more jurisdictions preclude the
bringing of Proceedings by the Administrative Agent or any Lender in any other
jurisdiction.

 

(c)                                  The Borrower irrevocably consents to
service of process given in the manner provided for notices in Section 8.3. 
Nothing in this Agreement will affect the right of the Administrative Agent or
any Lender to serve process in any other manner permitted by law.

 

(d)                                 The Borrower irrevocably waives, to the
fullest extent permitted by applicable law, with respect to itself and its
revenues and assets (irrespective of their use or intended use), all immunity on
the grounds of sovereignty or other similar grounds from (i) suit,
(ii) jurisdiction of any court, (iii) relief by way of injunction, order for
specific performance or for recovery of property, (iv) attachment of its assets
(whether before or after judgment) and (v) execution or enforcement of any
judgment to which it or its revenues or assets might otherwise be entitled in
any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the
extent permitted by applicable law, that it will not claim any such immunity in
any Proceedings.

 

Limited Recourse

 

8.6(a)                None of the Borrower’s shareholders, officers, directors,
members and managers shall be liable for any of the obligations or agreements or
breach thereof or any covenant, representation or warranty of the Borrower under
this Agreement, and no recourse or action may be taken, directly or indirectly,
with respect to any of the obligations or agreements or breach thereof or any
covenant, representation or warranty of the Borrower under this Agreement
against any of the Borrower’s shareholders, officers, directors, members and
managers, except that the foregoing will not (i) prevent recourse to the
Collateral for the sums due or to become due under any security, instrument or
agreement which is part of the Collateral, (ii) relieve any Person from (A) any
liability for any unpaid consideration for stock, any unpaid capital
contribution or any unpaid capital call or other similar obligation, (B) any
liability arising under the Equity Contribution Framework Agreement or (C) any
obligation, agreement or liability under any agreement or instrument other than
this Agreement or (iii) limit service of process on the Borrower by delivery of
notice on its behalf to the Borrower.

 

(b)                                 The provisions of this Section 8.6 shall
survive any payment of this Agreement.

 

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Waiver of Jury Trial

 

8.7                               EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT
AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS LOAN AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the parties have executed and delivered this Loan Agreement
as of the date first above written.

 

EP FUNDING LLC

 

 

 

 

 

By:

/s/ Gerald F. Stahlecker

 

 

Name:

Gerald F. Stahlecker

 

 

Title:

Executive Vice President

 

 

 

 

 

 

 

CITIBANK, N.A., as Initial Lender

 

 

 

 

 

By:

/s/ Vincent Nocerino

 

 

Name:

Vincent Nocerino

 

 

Title:

Vice President

 

 

 

 

 

 

 

CITIBANK, N.A., as Administrative Agent

 

 

 

 

 

By:

/s/ Vincent Nocerino

 

 

Name:

Vincent Nocerino

 

 

Title:

Vice President

 

 

 

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